credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

vintage technologies and skill constraints evidence from u s exports of new and used machines when countries import production machinery they must choose between new and used equipment this article looks at that choice in the presence of labor saving technical progress and complementarity between technologies and skills within the firm it develops a theoretical model of the market for used machines it then analyzes data on united states u s exports of metalworking machine tools by country of destination classifying machines according to their vintage and their technological characteristics the data show that the share of used equipment imported is higher if the importing country has a lower level of development as measured by income per capita econometric estimation of the determinants of this share shows that it also is higher the greater is the technological change embodied in the machine or the greater is the change in the skills required to run the machine efficiently these results indicate that technological factors and skill constraints may be as important as factor prices in determining the choice of technique in developing countries the policy recommendation emerging from this work avoid constraints on imports of used equipment is similar to that in the existing literature but the reasoning is different instead of emphasizing inappropriate capital labor ratios for low wage countries the results indicate that investment in advanced technologies is effective only if importing countries have the skills to use them

consumption vulnerability to risk in rural pakistan abstract as one of the dimensions of vulnerability this paper empirically investigates the inability of rural dwellers to cope with negative income shocks a variable coefficient regression model is applied to a two period household panel dataset collected in the north west frontier province pakistan an area with high incidence of income poverty and low human development the empirical model allows for a different ability to smooth consumption approximated by a linear function of households attributes and controls for the endogeneity of observed changes in income using qualitative information on subjective risk assessment estimation results show that the ability to cope with negative income shocks is lower for households that are aged landless and do not receive remittances regularly

testing the response of consumption to income changes with noisy panel data this paper tests the rational expectations lifecycle model of consumption against i a keynesian model and ii the rational expectations lifecycle model with imperfect capital markets the tests are based upon the relative responsiveness of consumption to income changes that can be predicted from past information and income changes that cannot he predicted the tests allow for measurement error in income the results reject the keynesian model and generally support the lifecycle model but the results are not sufficiently precise to rule out the possibility that some households are liquidity constrained measurement error has a strong influence on the relationship between consumption and income

a quantitative analysis of the used car market we quantitatively investigate the allocative and welfare effects of secondary markets for cars an important source of gains from trade in these markets is the heterogeneity in the willingness to pay for higher quality newer goods but transaction costs are an impediment to instantaneous trade calibration of the model successfully matches several aggregate features of the u s and french used car markets counterfactual analyses show that transaction costs have a large effect on volume of trade allocations and the primary market aggregate effects on consumer surplus and welfare are relatively small but the effect on lower valuation households can be large

did us safeguards resuscitate harley davidson in the 1980s abstract this paper examines us safeguards applied to the motorcycle market in the 1980s after receiving temporary protection by means of a maximum tariff of over 45 harley davidson sales recovered dramatically simulations based on structural demand and supply estimates indicate that while safeguard tariffs did benefit harley davidson they only account for a fraction of its increased sales this is primarily because consumers perceived that harley davidson and japanese large motorcycles were poorly matched substitutes for each other our results provide little evidence that safeguard provisions triggered restructuring in harley davidson

economic relationship between access to land and rural poverty in nepal in the present socio economic structure of nepal land is the main source of income and consumption for the majority of nepalese this study analyses the economic relationship between access to land and poverty in nepal by establishing the link between land and consumption as well as land and income a generalised additive model gam and ordinary least squares ols demonstrate that greater access to land increases income and consumption of the household and thereby reduces poverty the significant marginal value of land for both consumption and income implies that an effective land reform policy could well be an effective approach to alleviate rural poverty however land reform must come as part of a larger overhaul cluster analysis shows that land reform should target appropriate subgroups within the community in order to differentiate those who would make use of the extra land from those who would not and apply appropriate strategies to each subgroup it reveals the importance of subgroups in determining an appropriate strategy for tackling poverty

combining quantitative and qualitative methods in assessing chronic poverty the case of rwanda this paper addresses the issue of chronic poverty in rwanda an issue which has not been addressed specifically in the policy debate despite the fact that it is likely to be widespread in part this has reflected lack of available evidence in that the conventional sources used to analyze chronic poverty are not available we argue in this paper that by judicious combination of existing qualitative a high quality nationwide participatory poverty assessment and quantitative sources a household survey it is possible to identify and characterize a clearly distinct group of chronically poor households whose characteristics are different from the poor as a whole

the welfare analysis of product innovations with an application to computed tomography scanners the main goal of this paper is to put forward a methodology for the measurement of product innovations using a value metric that is equating the magnitude of innovations with the welfare gains they generate this research design is applied to the case of computed tomography scanners a revolutionary innovation in medical technology the econometric procedure centers on the estimation of a discrete choice model the nested multinominal logit which yields the parameters of a utility function defined over the changing quality dimensions of the innovative product the estimated flow of social gains from innovation is used to compute a social rate of return to r d to explore the interrelation between innovation and diffusion and to trace the time profile of benefits and costs the latter suggesting the possible occurrence of technological cycles

simulating the impact of policy upon chronic and transitory poverty in rural pakistan anti poverty programmes often seek to improve their impact by targeting households for assistance according to welfare measures in a single time period however a growing literature shows the importance to poor households of fluctuations in their welfare from month to month and year to year this study uses a five year panel of 686 households from rural pakistan to investigate the magnitude of chronic or transitory poverty making an explicit adjustment for measurement error the impact of two types of policies those designed to smooth incomes and those designed to promote income growth on the severity of chronic and transitory poverty is examined since the largest part of the squared poverty gap in our sample is transitory large reductions in poverty can be achieved by interventions designed to smooth incomes but reducing chronic poverty in the long term requires large and sustained growth in household incomes the level and variability of incomes is then modelled as a function of household char

an empirical test of the inequality trap concept abstract the paper uses a gmm estimation to prove the impact of equity on inequality persistence which suggests the presence of inequality trap and underline the significant influence of the credit market wealth and education access initial levels

saving and economic shocks in rural pakistan abstract this paper adapts the recent methodology of paxson to study saving rates in rural pakistan particular attention is paid to differences in marginal rates of financial and physical saving and how these vary across income groups and by direction of income shocks households exhibit more difficulty in smoothing consumption after successive shocks than with a single shock the study also observes marginal rates of saving out of international remittances and lump sum pensions unlike domestic remittances international remittances appear to be treated much as transitory income shocks

assessing the extent and nature of chronic poverty in low income countries issues and evidence discussions of chronic poverty have mostly considered its monetary dimensions with current evidence suggesting that such poverty is much more transient than chronic but chronic poverty is a real and important phenomenon potentially more important quantitatively than it first appears once account is taken of different methodological approaches and inevitable measurement difficulties the chronic poor have distinctive characteristics such as lack of assets or high dependency rates which may account for their persistent poverty the paper argues that it is also necessary to develop concepts of chronic poverty further covering relevant nonmonetary dimensions and not just relying on panel data

nonmarket institutions for credit and risk sharing in low income countries the design credit and risk institutions in low income countries provides one of the most exciting testing grounds for theories of contracting with imperfect information and limited enforcement this paper reviews some of the recent literature with a special focus on nonmarket institutions that cope with risk and provide credit this literature attempts to bring together insights from economic theory especially information economics contract theory and mechanism design theory however it is also applied being motivated by the circumstance of the poor countries that their authors have visited and studied

microeconomic determinants of income inequality in rural pakistan abstract inequality matters for poverty reduction however it is often unclear what policy could do to change the distribution of income as to date there is little quantitative evidence about the household characteristics that determine the level of income inequality and its changes over time this paper sets out to identify these determinants by adapting a regression based inequality decomposition technique and applying it to panel data from rural pakistan land ownership is key to explaining the level of inequality but not its changes in contrast higher education drives changes but not the level of inequality household location affects both reflecting growing differences in market access across regions

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

chronic and transitory poverty evidence from egypt 1997 99 abstract this paper uses a panel data of 347 households in egypt to measure changes in household consumption during 1997 99 and to identify causes behind the changes per capita consumption has decreased for the households during this time the decrease has not been dramatic but it has occurred at all points along the distribution over the two year period the number of households who have fallen into poverty is over twice as large as the number of households who have climbed out of poverty about two thirds of overall poverty is chronic average consumption over time is below the poverty line and almost half of all poor are always poor we use quantile regression methods to identify the factors that explain total chronic and transitory poverty while our analysis is able to document the extent of transitory poverty it performs relatively poorly in explaining the determinants of this type of poverty the predominantly chronic nature of poverty in our sample and our ability to identify associated characteristics strengthens the case for targeting antipoverty interventions such as food subsidies

consumption insurance an evaluation of risk bearing systems in low income economies the hypothesis of full risk sharing can be taken to data from low income countries and evaluate formal and informal financial systems in many contexts idiosyncratic risks are high so credit insurance arrangements could be beneficial statistical tests reveal that households in southern india take advantage of these possibilities villages in cote d ivoire and countries in thailand do not do as well the paper includes an empirical description of the devices used to smooth consumption and a theoretical discussion of private information and incentives on ideal operating systems the full information and mechanism design frameworks provide benchmarks for policy analysis

durable goods oligopoly with secondary markets the case of automobiles we study the effects of durability and secondary markets on equilibrium firm behavior in the car market we construct a dynamic oligopoly model of a differentiated product market to incorporate the equilibrium production dynamics that arise from the durability of the goods and their active trade in secondary markets we derive an econometric model and estimate its parameters using data from the automobile industry over a 20 year period our estimates are used to provide a measure of the competitive importance of the secondary market

used clothing donations and apparel production in africa this article examines the importance of one possible explanation for the failure of african countries to step onto the bottom rung of the manufacturing sophistication ladder that is to produce apparel used clothing donations to thrift shops and other organisations in industrialised countries typically end up being sold to consumers in africa since used clothing is initially provided as a donation it shares characteristics with food aid which always assists consumers but at times harms african food producers used clothing imports are found to have a negative impact on apparel production in africa explaining roughly 40 of the decline in production and 50 of the decline in employment over the period 1981 2000

assessing the effect of microfinance on vulnerability and poverty among low income households we empirically investigate whether participation in the indian self help group shg microfinance programme has helped reduced poverty and household vulnerability using cross sectional shg rural household survey data the potential selection bias is eliminated by propensity score matching to estimate the average treatment on treated effect using nearest neighbour matching and a local linear regression algorithm we find that vulnerability in shg members is not significantly higher than in non shg members even though the shg members have a high incidence of poverty however vulnerability declines significantly for those that have been shg members for more than one year these results are found to be robust using sensitivity analysis and the rosenbaum bounds method

expected poverty under risk induced welfare variability two of the most widely accepted stylised facts about agriculture in south asia sub saharan africa and elsewhere are that income is highly uncertain from one year to another and that deep and widespread poverty exists and yet there has been very little analysis of the joint problems of poverty and risk this paper offers a methodological approach to the issue of how risk affects poverty and applies it to household level data for dry areas of rural india the following questions are addressed under what conditions can one expect an increase in the riskiness of an income or consumption stream to increase poverty how should one measure the contribution of risk to poverty and what long term benefits in terms of reduced poverty can be expected from policies aimed at stabilising incomes of the poor such policies have been widely discussed in the indian subcontinent of late and their effect on rural

trade in used equipment with heterogeneous firms this paper examines the pattern of trade in used asset markets where firms have differing factor prices and utilization rates of capital goods depreciation is modeled as an increase in down time as machines age and a measure of comparative advantage is derived that will explain the pattern of trade when there are two types of firms it is shown that with heterogeneous firms the price of used machines will reflect the characteristics of firms as well as the productivity of used machines and the implications of this result for the study of depreciation are discussed finally the relationship between firm characteristics and choice between purchasing new and used truck tractors is presented as an illustration of the predictions of the model

gains from trade in used goods evidence from automobiles abstract i investigate the welfare effects of trade liberalization by exploiting a natural policy experiment in the economy of cyprus a 1993 law relaxed import restrictions on used vehicles and enabled the importation of second hand japanese automobiles into the country this led to a dramatic shift of consumer purchases from new to used cars and a substantial expansion of the overall market welfare gains computed from a structural demand system average 2000 per purchaser per year over a four year period after the policy change the findings are suggestive of the potential for substantial gains from liberalizing trade in used goods

saving in developing countries theory and review in the literature on economic development much of the interest in saving has been focused on the relation between saving and growth but saving is not only about accumulation it is about smoothing consumption in the face of volatile and unpredictable income and helping to ensure the living standards of poor people whose lives are difficult and uncertain this paper develops a model of households which cannot borrow but which accumulate assets as a buffer stock to protect consumption when incomes are low such households dissave as often as they save do not accumulate assets over the long term and have on average very small asset holdings but their consumption is markedly smoother than their income much of the evidence is as consistent with this view of saving as it is incosistent with standard views of smoothing over the life cycle and with explanations of the link between saving and growth in terms of life cycle saving behavior consumption smoothing is also a useful way of thinking about government policy where volatility in the world prices of taxed commodities can generate sharp fluctuations in government revenues as well as reallocations of revenue between the private and public sectors many important policy issues in developing countries hinge on issues of consumption and smoothing and research on these issues is currently likely to be more productive than work on the relation between saving and growth

quality standards for used durables an indirect subsidy abstract we construct a theoretical framework to study the impact of quality standards for used durable goods on trade ows pro ts and consumer welfare we show that asymmetric quality standards generate trade in used goods from high to low standard countries while at the same time reducing trade in new goods producers in the exporting country bene t from this change while consumers lose in the importing country consumers are better off but domestic industry is hurt these ndings suggest that quality standards on used goods may be a powerful policy tool whose use should be monitored by the wto

pathways out of rural poverty a case study in socio economic mobility in the rural philippines exploiting unique household panel data covering a 30 year period this paper attempts to analyse the patterns of poverty exits by examining socio economic mobility in a philippines village macroeconomic growth was a major factor explaining poverty exit probabilities until the early 1980s after the 1980s poverty exit paths through agricultural ladder narrowed schooling and growth became equally important factors owing to the increased returns to schooling and labour endowments also became important for the lower but not upper social strata providing an economic incentive to have more children for the poor surprisingly we find no evidence of state dependence in poverty spells once observable factors are taken into account copyright 2007 oxford university press

do epa defendants prefer republicans evidence from the 2000 election i introduction there is an extensive body of literature documenting the effects of political interference in bureaucratic agencies much of this deals with the enforcement of antitrust disputes as mediated by the federal trade commission a corresponding literature on the political control of the environmental bureaucracy does not exist however there is a perception that the aggressiveness of environmental protection agency epa enforcement could vary from one administration to the next 1 the present article aims to subject these anecdotal impressions to empirical tests it uses the change in the price of publicly quoted companies that have civil judicial litigation outstanding with the epa when a political event takes place such as a presidential election to assess the market s reaction to this event ii literature review the biggest problem in doing empirical studies of the effect of political and legislative changes on stock market valuations is the fact that these changes happen slowly over a period of months or years given the assumption of efficient markets stock markets should immediately reflect all available information including the possibility of political changes this is the reason why studies of the effect of legislation and political change on market valuations have generally found insignificant results as in binder 1985 cutler 1988 downs and tehranian 1988 and graddy et al 1992 2 this article uses a better measure of the probability of a political event the measure of the probability of the outcome of an election is obtained from the iowa electronic market iem only herron et al 1999 and knight forthcoming have used this data source for similar purpose before 3 the iem is a set of continuous double auction markets operated by the university of iowa henry b tippie school of business most of the existing literature in this field has used opinion poll data such as brander 1991 the disadvantages of this are well known they are usually conducted over several days and so do not represent the probability of the election of a candidate on a single day they do not represent probabilities of election but rather expected vote shares they are not usually released daily and finally they have wide margins of error especially long before an election when many people have not yet made up their minds who to support herron et al 1999 pp 58 59 these are also some of the reasons that economists are generally skeptical of surveys preferring to rely instead on revealed preferences the only other possibility is the use of bookmaker s odds as used by roberts 1990b this still has the disadvantage that odds are not quoted daily and so must be interpolated also the present study attempts to measure the importance of political control of the environmental bureaucracy the existing literature focused on a variety of other federal agencies and industries iii data and empirical model data the dependent variable used here is the abnormal daily returns to the stock market price of a company that has environmental litigation outstanding on the day of an election the idea is that if the market considers the company to be politically sensitive then the returns to the company s shares should respond to changes in the probability of a political event as reported by the iem the stock market data comes from the center for research in security prices cr sp 4 the article uses individual company returns as opposed to the construction of portfolios of stocks that are then combined with data on returns to the portfolio as used by roberts 1990b and herron et al 1999 the present paper uses interaction terms between the likelihood of political events and individual characteristics of the companies such as the industry that they are in and the number of times they have been sued before this is not possible when aggregate portfolio returns are used because that would not allow the isolation of disaggregated individual company effects

earnings mobility and measurement error a pseudo panel approach the degree of mobility in incomes is often seen as an important measure of the equality of opportunity in a society and of the flexibility and freedom of its labor market but estimation of mobility using panel data is biased by the presence of measurement error and non random attrition from the panel this paper shows that dynamic pseudo panel methods can be used to consistently estimate measures of absolute and conditional mobility in the presence of non classical measurement errors these methods are applied to data on earnings from a mexican quarterly rotating panel absolute mobility in earnings is found to be very low in mexico suggesting that the high level of inequality found in the cross section will persist over time however the paper finds conditional mobility to be high so that households are able to recover quickly from earnings shocks these findings suggest a role for policies which address underlying inequalities in earnings opportunities