macroeconomic consequences of the russian mortality crisis abstract this paper examines macroeconomic consequences of the russian mortality crisis life expectancy in russia decreased from 70 to 65 years during the first half of the 1990s which we estimate accounts for approximately 1 6 million excess deaths during 1990 1995 coupled with its disproportionate impact on working age males the large number of excess deaths suggests the crisis may have had a significant negative impact on the level and growth of russia s per capita income we estimate the economic cost of the crisis using two alternative approaches first we estimate the capitalized value of the income forgone due to the crisis which represents between 1 8 and 2 7 of russia s 1990 gdp there are however both theoretical and empirical problems with this approach to estimating the cost of the crisis second we estimate the parameters of a macroeconomic growth model and use it to calculate the effect of the crisis on russia s rate of economic growth our calculations suggest that the net effect of the drop in life expectancy the decline in the rate of total population growth and the even larger decline in the rate of growth of the working age population have been to lower the annual rate of growth of income per capita in russia by roughly one third of one percentage point given that russia s per capita income fell at an average annual rate of 9 during 1990 1995 we conclude that the mortality crisis which has unquestionably been catastrophic in human terms has been at most a small contributor to russia s poor macroeconomic performance the paper also discusses the effects of the crisis on other macroeconomic variables such as income inequality and the fiscal balance of the pension system the paper concludes with a discussion of possible new approaches to modeling the two way linkages between health status and economic growth

the roles of risk and ambiguity in technology adoption we study the impacts of risk and ambiguity aversion on the adoption of new technologies specifically genetically modified gm corn and soy seeds we conduct experiments measuring risk and ambiguity aversion with midwestern grain farmers risk aversion has only a small impact on the timing of adoption of gm soy while ambiguity aversion has a large impact speeding up farmer adoption of gm corn we hypothesize that this unusual finding is due to the fact that gm corn often contains an insect resistance trait which reduces the ambiguity of pest damages for adopters gm soy never contains this insect resistance trait this highlights the importance of distinguishing between risk and ambiguity when studying the effects of aversion to uncertainty on adoption of new technologies

life expectancy and human capital investments evidence from maternal mortality declines longer life expectancy should encourage human capital accumulation since a longer time horizon increases the value of investments that pay out over time previous work has been unable to determine the empirical importance of this life expectancy effect due to the difficulty of isolating it from other effects of health on education we examine a sudden drop in maternal mortality risk in sri lanka between 1946 and 1953 which creates a sharp increase in life expectancy for school age girls without contemporaneous effects on health and which also allows for the use of boys as a control group using additional geographic variation we find that the 70 reduction in maternal mortality risk over the sample period increased female life expectancy at age 15 by 4 1 female literacy by 2 5 and female years of education by 4 0 authors

risk aversion and incentive effects new data without order effects holt and laury 2002 used a menu of ordered lottery choices to make inferences about risk aversion under various payment conditions the main results of that paper were a subjects are risk averse even for relatively small payments of less than 5 b risk aversion increases sharply with large increases in the scale of cash payoffs and c there is no significant effect from increasing the scale of hypothetical payment with a few exceptions noted in the paper all treatments began with a low payment choice followed by a choice with hypothetical payments that had been scaled up by 20 50 or 90 followed by a real cash decision with the same high payment scale 20 50 or 90 followed by a single final low 1 real payment choice those in the 90 treatment could earn amounts ranging from 9 00 to 346 50 in this task as glenn w harrison et al 2004 correctly note this design confounds order and treatment effects since the high real payment choice was always completed after the low real and high hypothetical payment tasks in a new experiment reported below we first seek to replicate harrison et al s finding that the order effect participating in a low payment choice before making a high payment choice magnifies the scale effect in a second treatment each subject completes the menu of lottery choices under just one payment condition 1 or 20 real or hypothetical thereby eliminating any order effects i new data

does schooling cause growth a number of economists find that growth and schooling are highly correlated across countries a model is examined in which the ability to build on the human capital of one s elders plays an important role in linking growth to schooling the model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on mincerian returns to education the upshot is that the impact of schooling on growth explains less than one third of the empirical cross country relationship the ability of reverse causality to explain this empirical relationship is also investigated

eliciting subjective probabilities with binary lotteries abstract we evaluate a binary lottery procedure for inducing risk neutral behavior in a subjective belief elicitation task prior research has shown this procedure to robustly induce risk neutrality when subjects are given a single risk task defined over objective probabilities drawing a sample from the same subject population we find evidence that the binary lottery procedure also induces linear utility in a subjective probability elicitation task using the quadratic scoring rule we also show that the binary lottery procedure can induce direct revelation of subjective probabilities in subjects with popular non expected utility preference representations that satisfy weak conditions

farmers subjective probabilities in northern thailand an elicitation analysis the ability of agricultural decision makers to formulate logical expectations about the outcome of risky events in crop production and marketing is investigated measures of northern thailand farmers perceptions of yield price and net income are attempted using an elicitation approach which includes a significant monetary reward this approach is found to be feasible the expectations derived are logical and consistent when compared to harvest results and farmers actual production practices farmers expectations about sources of risk and the correlation of socioeconomic characteristics with expectation accuracy are analyzed economic decision theory recognizes the importance of decision makers expectations about future uncertain events these expectations often are expressed as subjective probability distributions dillon roumasset however they have not been widely used in empirical analyses because they are difficult to observe and measure this paper discusses an empirical elicitation approach the accuracy and consistency of the elicited expectations and various relationships in the results specifically the paper reports an experiment in thailand to elicit farmers subjective probability distributions of price yield and net income of selected crops first the concept of subjective probability is discussed followed by a description of the study area and the elicitation procedure then elicited expectations are compared to the actual harvest results using the stochastic dominance criterion we analyze the elicited net income distributions to determine if actual production plans were consistent with stated beliefs third we hypothesize and test the following relationships using expected values and variance measures of the distributions a the correlation between the expected value of prices and yields b comparison of the coefficients of variation of expected prices and yields c correlation between the expected values and variances of the distributions and d comparison of the sample cross section variance of actual prices and yields with the average variance of the price and yield distributions finally the absolute difference between the actual results and the expected value of rice prices and yields are regressed on socioeconomic characteristics of the decision

childhood preventive care adult healthcare and economic growth the role of healthcare financing we analyze the impact of healthcare financing on economic growth focusing on the issue of the joint public private financing of healthcare co payment we use an overlapping generations model with endogenous growth based on health human capital accumulation where families pay for childhood preventive care and the government can either fully finance or co finance adulthood curative care from a growth maximizing perspective distortionary taxes give an advantage to co financing nevertheless we prove that if agents are assumed to be heterogeneous in preferences full financing can become the best option

is infrastructure capital productive a dynamic heterogeneous approach this paper offers an empirical evaluation of the output contribution of infrastructure drawing from a large data set on infrastructure stocks covering 88 countries and spanning the years 1960 2000 and using a panel time series approach the paper estimates a long run aggregate production function relating gdp to human capital physical capital and a synthetic measure of infrastructure given by the first principal component of infrastructure endowments in transport power and telecommunications tests of the cointegration rank allowing it to vary across countries reveal a common rank with a single cointegrating vector which is taken to represent the long run production function estimation of its parameters is performed using the pooled mean group estimator which allows for unrestricted short run parameter heterogeneity across countries while imposing the testable restriction of long run parameter homogeneity the long run elasticity of output with respect to the synthetic infrastructure index ranges between 0 07 and 0 10 the estimates are highly significant both statistically and economically and robust to alternative dynamic specifications and infrastructure measures there is little evidence of long run parameter heterogeneity across countries whether heterogeneity is unconditional or conditional on their level of development population size or infrastructure endowments

risk learning and technology adoption this article explores how decision makers learn and use information with an application to the adoption of biotechnology in agriculture the empirical analysis relies on experimental and survey data measuring risk preferences learning processes and the adoption of genetically modified gm seeds among u s grain farmers while controlling for risk aversion we link individual learning rules with the cognitive abilities of each decision maker and their actual gm adoption decisions we find evidence that very few individuals are bayesian learners and that the population of farmers is quite heterogeneous in terms of learning rules this suggests that bayesian learning as commonly assumed in the analysis of agricultural technology adoption is not an appropriate characterization in addition we do not find a strong relationship between observed learning styles and the timing of gm seed adoption to the extent that learning is a key part of the process of technology adoption this suggests the presence of much unobserved heterogeneity in learning among farmers

industrialization and resource allocation in a developing country the case of recent experiences in tanzania abstract this paper examines the problem of allocation of resources in the industrial sector in tanzania during the balance of payments crises since the mid 1970s it is argued that the slow growth of industrial output in the 1970s was aggravated by the failure to shift the utilization of foreign exchange away from capital goods imports for capacity expansion in favour of intermediate inputs for capacity utilization consequently society benefited only moderately from considerable new investments of the 1970s this aspect of misallocation of resources is explained in terms of the role of foreign finance on the one hand and the weak link between macro level and micro level planning on the other

wealthier is healthier we estimate the effect of income on health using cross country timeseries data on health infant and child mortality and life expectancy and income per capita we use instrumental variables estimates using exogenous determinants of income growth to identify the pure income effect on health isolated from reverse causation or incidental association the long run income elasticity of infant and child mortality in developing countries lies between 0 2 and 0 4 using these estimates we calculate that over a half a million child deaths in the developing world in 1990 alone can be attributed to the poor economic performance in the 1980s

consistency of risk premium measures this research uses the results of a series of within sample experiments to elicit risk premium measures from agricultural producers results show that there is little consistency between measures in different contexts and using different elicitation methods suggesting that underlying risk preferences are not consistent these results highlight some of the difficulty with expected utility theory and risk measurement

production risk risk aversion and the determination of risk attitudes among spanish rice producers agricultural production is subject to risk and the attitudes of producers toward risk will influence input choices insofar as these affect production risk risk attitudes in turn may be affected by certain socioeconomic characteristics of producers using 2004 survey data from a cross section of 130 spanish rice farms we estimate risk aversion coefficients of farmers and investigate the influence of a series of socioeconomic variables on their risk attitudes our results show that farmers exhibit risk averse behavior and that risk attitudes are related to a series of socioeconomic characteristics in particular the belief that the farm will continue after the producer retires is found to increase the degree of risk aversion while age is found to have nonlinear effects on risk aversion off farm income especially from nonagricultural activities is found to reduce risk aversion neither the educational level of the producer nor the presence of dependents on the household is found to have an effect on risk preferences regarding the production technology we find that land labor and fitosanitary products are risk reducing inputs whereas capital seeds and fertilizer all increase risk

growth and welfare under endogenous lifetime we study the role of endogenous healthcare choices by households to extend their expected lifetimes on economic growth and welfare in a decentralized overlapping generations economy with the realistic feature that households savings are held in annuities we characterize healthcare spending in the decentralized market equilibrium and its effects on economic growth we then identify the moral hazard effect in healthcare investments when annuity rates are conditioned on average mortality and explain the conditions under which it will lead to over investment in healthcare moreover we specify the general equilibrium effects and macroeconomic repercussions associated with this moral hazard effect calibrating our model to oecd data we find that the moral hazard effect may be substantial and implies sizeable welfare losses of approximately 1 5 at a more general level our study suggests that welfare improvements from longevity increases may be quite lower than sometimes assumed when considered in planner economies

the rich domain of uncertainty source functions and their experimental implementation we often deal with uncertain events for which no probabilities are known several normative models have been proposed descriptive studies have usually been qualitative or they estimated ambiguity aversion through one single number this paper introduces the source method a tractable method for quantitatively analyzing uncertainty empirically the theoretical key is the distinction between different sources of uncertainty within which subjective choice based probabilities can still be defined source functions convert those subjective probabilities into willingness to bet we apply our method in an experiment where we do not commit to particular ambiguity attitudes but let the data speak

health nutrition and economic development the relationship between health and economic development is explored focusing on nutrition based health indicators the spotlight is placed on the inter related feedbacks between the influence of health on productivity on one hand and the influence of income on health status on the other disentangling causality in these relationships has preoccupied much of the literature we evaluate different empirical strategies that have been adopted and assess the results there is now a body of evidence based on careful empirical studies that demonstrates a causal relationship between health and labor productivity there is also evidence that at least among the very poor additional income is spent on improved nutrition there are two issues that have received little attention although we argue they are likely to be very important first measurement of health is discussed in detail evidence is presented on how taking into account differences in the extent of measurement error is critical for interpreting the impact of health on wages the same theme emerges in studies of the effect of income on health specifically calorie intake the key role of non linearities in these relationships is highlighted and we demonstrate that a good deal of the variation in estimates of income elasticities of demand for calories can be ascribed to the role of measurement and functional form authors

the effect of health on economic growth a production function approach abstract we estimate a production function model of aggregate economic growth including two variables that microeconomists have identified as fundamental components of human capital work experience and health our main result is that good health has a positive sizable and statistically significant effect on aggregate output even when we control for experience of the workforce we argue that the life expectancy effect in growth regressions appears to be a real labor productivity effect and is not the result of life expectancy acting as a proxy for worker experience

risk aversion and land allocation between annual and perennial crops in semisubsistence farming a stochastic optimization approach this article analyzes the effect of production uncertainty on farmland allocation decisions between perennial and annual crops focusing on a representative farmer s attitude toward risk a dynamic stochastic optimization model that considers net planting the difference between new plantings and removals of perennial crops that achieve full production cycle is used the effect of uncertainty on the representative farmer s decisions to increase or decrease perennial crops acreage on the optimal path is examined our results reveal that the response of optimal path of net planting to uncertainty related to perennial crop production is highly affected by the farmer s attitude toward risk a risk averse or a low risk loving farmer tends to reduce land allocation to perennial crops under uncertainty while a high risk loving farmer will do exactly the opposite also due to disutility of farming the farmer tends to reduce land allocation to perennial crops when prices are high enough for him to attain a desired income level expectation one implication of this research is the need for mechanization in sub saharan countries in particular that increases per acreage yield and output in semisubsistence agriculture

risk aversion and incentive effects comment charles a holt and susan k laury 2002 develop an experimental design to determine the risk attitude of an individual they use their observations to argue that increased incentives appear to change risk attitudes leading to greater risk aversion popular utility functions that do not allow for such effects are therefore misspecified building on this finding they estimate a flexible utility function that characterizes their aggregate data well but that does not assume constant absolute or relative risk aversion the basic holt and laury 2002 hl design should become an important tool for the interpretation and design of experiments in which risk attitudes could play a role however their most important result showing the effect of scaling up the stakes of the lottery choice task is confounded by a possible order effect an order effect occurs when prior experience with one task affects behavior in a subsequent task the primary methodological contribution of experiments in economics is to enhance control ideally such control makes the explanatory variables of interest in this case scale orthogonal to other explanatory variables such as order allowing clearer inferences about behavior than one could get from field econometric data we argue that not controlling for order effects results in a misspecification of utility functions that is as important as that of scale the subjects in the hl design were given sequences of three or four tasks as shown in table 1 task 1 involved choices over lotteries with a baseline level of prizes which we will refer to as the 1 scale task 2 involved hypothetical choices over prizes with a scaled up level of prizes either 20 50 or 90 task 3 repeated task 2 but with choices that involved real payoffs task 4 was a return to the baseline task with real 1 prizes in some sessions subjects were not given task 2 or task 3 what could one infer from the comparison of measured risk attitudes in the 1 and 20 tasks in hl unfortunately any observed difference could be due either to the scale of the prizes involved or the task order or some combination of both thus the effect of scale is intrinsically confounded with the possible effect of task order this is a logical flaw in their design which

time to change what to sow risk preferences and technology adoption decisions of cotton farmers in china this paper examines the role of individual risk attitudes in the decision to adopt a new form of agricultural biotechnology in china i conducted a survey and a field experiment to elicit the risk preferences of chinese farmers who faced the decision of whether to adopt genetically modified bt cotton a decade ago in my analysis i expand the measurement of risk preferences beyond expected utility theory to incorporate prospect theory i find that farmers who are more risk averse or more loss averse adopt bt cotton later farmers who overweight small probabilities adopt bt cotton earlier

risk aversion experimental evidence from south african fishing communities we estimate the risk attitudes of a large sample of individuals from various fishing communities along the west coast of south africa female fishers and rights holders are found to be more risk averse than their male counterparts while rights holders are found to be less risk averse relative to subjects without fishing rights risk attitudes are found to be correlated with compliance with fisheries regulations in particular a greater degree of risk aversion translates into a reduction in compliance furthermore in the case of gender female fishers and rights holders are more likely to comply with fisheries regulations

assessing foreign aid s long run contribution to growth in development this paper confirms recent evidence of a positive impact of aid on growth and widens the scope of evaluation to a range of outcomes including proximate sources of growth e g physical and human capital indicators of social welfare e g poverty and infant mortality and measures of economic transformation e g share of agriculture and industry in value added focusing on long run cumulative effects of aid in developing countries and taking due account of potential endogeneity a coherent and favorable pattern of results emerges aid has over the past forty years stimulated growth promoted structural change improved social indicators and reduced poverty

income productivity in china on the role of health this study provides empirical evidence regarding the income productivity of health human capital in china we appeal to concepts from human capital theory to support a basic model that treats health as a form of human capital in the income production process our model examines the economic return at the household level from the health of its individual members we estimate this with a longitudinal sample drawn from the china health and nutrition survey chns allowing us to exploit within variation in health and income to address possible unobservables biasing estimates of the impact of health on income in the simple cross sectional setting household income is strongly influenced by the health of its members particularly in rural areas these findings could have important implications for health and economic policy making aimed at reducing the long standing urban rural economic gap and more comprehensively insuring the rural population against health and economic risk

the rise in life expectancy and economic growth in the 20th century this research exploits conditional exogenous variation in mortality from the diffusion of modern medicine to study the effect of growth in life expectancy on the growth in gdp per capita the empirical analysis establishes that countries that obtained higher growth rates of life expectancy due to this shock to mortality in the mid twentieth century experienced lower growth rates of gdp per capita in the second half of the twentieth century in addition a negative relationship between initial level of life expectancy and the subsequent growth rate of gdp per capita is found

modeling the effects of health on economic growth abstract this paper investigates the effects of health indicators such as adult survival rates asr on gdp growth rates at 5 year intervals in several countries panel data were analyzed on gdp series based on purchasing power adjustments and on exchange rates first we developed a framework for modeling the inter relationships between gdp growth rates and explanatory variables by re examining the life expectancy income relationship second models for growth rates were estimated taking into account the interaction between asr and lagged gdp level issues of endogeneity and reverse causality were addressed lastly we computed confidence intervals for the effect of asr on growth rate and applied a test for parameter stability the results showed positive effects of asr on gdp growth rates in low income countries

accounting for the effect of health on economic growth i use microeconomic estimates of the effect of health on individual outcomes to construct macroeconomic estimates of the proximate effect of health on gdp per capita i employ a variety of methods to construct estimates of the return to health which i combine with cross country and historical data on height adult survival rates and age at menarche using my preferred estimate eliminating health differences among countries would reduce the variance of log gdp per worker by 9 9 percent and reduce the ratio of gdp per worker at the 90th percentile to gdp per worker at the loth percentile from 20 5 to 17 9 while this effect is economically significant it is also substantially smaller than estimates of the effect of health on economic growth that are derived from cross country regressions

are risk preferences stable it is ultimately an empirical question whether risk preferences are stable over time the evidence comes from diverse strands of literature covering the stability of risk preferences in panel data over shorter periods of time life cycle dynamics in risk preferences the possibly long lasting effects of exogenous shocks on risk preferences as well as temporary variations in risk preferences individual risk preferences appear to be persistent and moderately stable over time but their degree of stability is too low to be reconciled with the assumption of perfect stability in neoclassical economic theory we offer an alternative conceptual framework for preference stability that builds on research regarding the stability of personality traits in psychology the definition of stability used in psychology implies high levels of rank order stability across individuals and not that the individual will maintain the same level of a trait over time preference parameters are considered as distributions with a mean that is significantly but less than perfectly stable plus some systematic variance this framework accommodates evidence on systematic changes in risk preferences over the life cycle due to exogenous shocks such as economic crises or natural catastrophes and due to temporary changes in self control resources emotions or stress we note that research on the stability of risk preferences is conceptually at the heart of microeconomics and systematic changes in risk preferences have vital real world consequences

risk preferences are not time preferences risk and time are intertwined the present is known while the future is inherently risky this is problematic when studying time prefer ences since uncontrolled risk can generate apparently present biased behavior we systematically manipulate risk in an intertemporal choice experiment discounted expected utility performs well with risk but when certainty is added common ratio predictions fail sharply the data cannot be explained by prospect theory hyperbolic discounting or preferences for resolution of uncertainty but seem consistent with a direct preference for certainty the data suggest strongly a difference between risk and time preferences jel c91 d81 d91 understanding individual decision making under risk and over time are two foundations of economic analysis 1 in both areas there has been research to suggest that standard models of expected utility eu and exponential discounting are flawed or incomplete regarding time experimental research has uncovered evidence of a present bias or hyperbolic discounting frederick loewenstein and o donoghue 2002 regarding risk there are number of well documented departures from eu such as the allais 1953 common consequence and common ratio paradoxes an organizing principle behind expected utility violations is that they seem to arise as so called boundary effects where certainty and uncertainty are combined camerer 1992 harless and camerer 1994 and starmer 2000 indicate that violations of expected utility are notably less prevalent when all choices are uncertain this observation is especially interesting when considering decisions about risk taking over time in particular certainty and uncertainty are combined in intertemporal decisions the present is known and certain while the future is inherently risky this observation is problematic if one intends to study time preference in isolation from