are contributions of time and money substitutes or complements abstractthis article empirically investigates the relationship between donations of time and money using canadian tax policy reforms that changed the tax price of charitable donations the 1988 reform where a charitable tax deduction was converted to a credit and the 2000 reform in provincial income taxes provide tax price variations plausibly exogenous to individuals unobserved heterogeneity our estimates on cross price effects imply that individuals make more time donations as the tax price of charitable donations increases and hence money and time donations are substitutes as some theories would imply this contrasts with earlier findings using cross sectional data

the role of feelings in investor decision making abstract this paper surveys the research on the influence of investor feelings on equity pricing and also develops a theoretical basis with which to understand the emerging findings of this area the theoretical basis is developed with reference to research in the fields of economic psychology and decision making recent advancements in understanding how feelings affect the general decision making of individuals especially under conditions of risk and uncertainty e g loewenstein et al 2001 psychological bulletin 127 267 286 are covered by the review the theoretical basis is applied to analyze the existing research on investor feelings e g kamstra et al 2000 american economic review forthcoming hirshleifer and shumway 2003 journal of finance 58 3 1009 1032 this research can be broadly described as investigating whether variations in feelings that are widely experienced by people influence investor decision making and consequently lead to predictable patterns in equity pricing the paper concludes by suggesting a number of directions for future empirical and theoretical research

are church and state substitutes evidence from the 1996 welfare reform abstract churches provide community services similar to those provided by the government but there has been no convincing analysis of the extent to which church activity can substitute for government activity to address this important issue this paper uses a new panel data set of presbyterian church usa congregations to regress both church member donations and a church s community spending on a number of variables including government welfare expenditures a provision of the 1996 welfare law that decreased the availability and use of welfare services by non citizens serves as an instrument to identify the causal effect of government spending on church activity the results show that church activities substitute for government activities extrapolating the findings to all denominations the estimated crowd out effect lies between 20 and 38 cents on the dollar the results are subjected to a number of robustness tests

garp for kids on the development of rational choice behavior in this paper we examine the extent to which consumption choices by 7 and 11 year old children and college undergraduates satisfy the axioms of revealed preference we find that choices by even the 7 year olds are considerably more likely to obey revealed preference axioms than would be true if they were choosing randomly 11 year olds do better still while college students do no better than 11 year old children we also find that mathematical ability is not correlated with choosing rationally we argue that this evidence suggests that the ability to choose rationally is not innate but that it does develop quickly

widows waiting to wed re marriage and economic incentives in social security widow benefits in this paper we focus on an age restriction for remarriage in the social security system to determine if individuals respond to economic incentives for marriage aged widow er benefits are paid by the federal government to persons whose deceased spouses worked in social security covered employment a widow er is eligible to receive benefits if she or he is at least age 60 if a widow er remarries before age 60 he or she forfeits the benefit and therefore faces a marriage penalty under current law there is no penalty if the remarriage occurs at 60 years of age or later we investigate whether this rule affects the marriage behavior of widows specifically we examine the rates of remarriage of women around age 60 under current as well as past social security eligibility rules using data from the vital statistics our results provide compelling evidence that this group of women respond to economic incentives when considering the decision to remarry first the 1979 law change that eliminated the marriage penalty for those at least age 60 resulted in a large increase in the marriage rate for widows at

do new york dairy farmers maximize profits or minimize costs the weak axiom of profit maximization and weak axiom of cost minimization were used to determine whether each of forty nine new york dairy farms displayed behavior consistent with profit maximization or cost minimization these were tested for each farm across eleven years of data correcting for technological change using previously estimated nonparametric malmquist productivity indices the results indicate that some were moderately successful in maximizing profits but more came closer to minimizing costs over half of the observations were within 10 of minimum costs

choice by sequential procedures article history we propose a rule of decision making the sequential procedure guided by routes and show that three influential boundedly rational choice models can be equivalently understood as special cases of this rule in addition the sequential procedure guided by routes is instrumental in showing that the three models are intimately related we show that choice with a status quo bias is a refinement of rationalizability by game trees which in turn is also a refinement of sequential rationalizability thus we provide a sharp taxonomy of these choice models and show that they all can be understood as choice by sequential procedures

eliciting welfare preferences from behavioural data sets an individual displays various preference orderings in different payoff irrelevant circumstances it is assumed that the variation in the observed preference orderings is the outcome of some cognitive process that distorts the underlying preferences of the individual we introduce a framework for eliciting the individual s underlying preferences in such cases and then demonstrate it for two cognitive processes satisficing and small assessment errors

conversation information and herd behavior experimental evidence shows that an important reason why people tend to imitate others to exhibit herd behavior is that they assume that the others have information that justifies their actions the information cascade models of banerjee 1992 and bikhchandani et al 1992 are significant developments in showing some general equilibrium and welfare effects of such rational imitative behavior but these models as specified may be of limited applicability since they assert that differences across groups in herd behavior can be attributed to the random decisions of first movers differences across groups in herd behavior might be explained more often in terms of different modes of interpersonal information transmission patterns of human conversation imply great selectivity to the kinds of information transmitted within groups this abstract was borrowed from another version of this item

measuring permanent responses to capital gains tax changes in panel data the authors use panel data and information about differences in state tax rates to separate the effects of transitory and permanent tax rate changes on capital gains realizations behavior the estimated effect of permanent change is substantially smaller than the effect of transitory change the difference is even larger than differences between estimates from past micro data studies which have primarily measured the transitory effect and time series studies which have primarily measured the permanent effect the authors results resolve a long standing conflict between micro data and time series studies of how marginal tax rates affect capital gains realizations behavior copyright 1994 by american economic association

an econometric analysis of charitable giving with interdependent preferences in practice we are in a situation where one s own contribution is expected to influence the contributions of others a will expect that b and c may also be induced by his gifts to the same or similar objectives vickrey 1962 p 40 the estimates provide no support for the view that the total amount that an individual contributes is a function of the amount that is given by others although these results are clearly not definitive evidence against the notion of such interdependence among individuals we believe that the burden of proof now rests with those who support a theory of interdependent giving feldstein and clotfelter 1976 p 19 i introduction it is widely believed that one person s charitable contributions can be significantly influenced by the contributions of others the national survey of philanthropy for instance indicates that a sizable fraction of the population believes that people pay attention to what others give when determining their own contribution 1 fundraisers also feel that large leadership contributions by wealthy individuals can be influential in encouraging more and larger contributions by others bakal 1979 moreover interdependence among givers is central to social scientists outside of economics who study altruistic or charitable behavior psychologists for instance have learned that those who have recently witnessed an altruistic act are more likely to be altruistic and that people will be more altruistic the more others contribute 2 sociologists studying reference groups have shown that choices individuals make often depend on the choices of others who are similar in age education social status and other characteristics and that such reference groups appear to be important in determining altruistic and charitable activity 3 economic theorists have also made interdependent preferences the focus of their theoretical models of giving in some of the earliest writing on philanthropy vickrey 1962 gives an extensive discussion of the role of neighborhood effects on contributions formal models of altruism beginning with becker 1974 also assume any one contributor s choice depends on the contributions of all others largely because of the public goods aspect of charity 4 other models have generalized becker s approach to include impurely altruistic motives for giving such as a desire for acclaim status or simply a warm glow from giving where the impure altruism also depends on the contributions of others andreoni 1989 1990 outside of the literature on charity there is a long history beginning with duesenberry 1949 of economic models that assume the consumption choices of one agent are directly affected by the choices and characteristics of other agents 5 yitzhaki 1982 stark 1990 and stark and yitzhaki 1988 have shown the importance of relative deprivation in understanding economic phenomena and in related reasoning frank 1984 1985a b has shown that there is a theoretical and empirical basis for assuming that individuals care about how their consumption ranks relative to some group of peers in addition manski 1993a has shown the importance of role models and reference groups in the study of dynamic choice despite this emphasis on interdependent preferences elsewhere the empirical literature on charitable giving has been unsuccessful at finding any empirical relevance of interdependence feldstein and clotfelter 1976 are the only economists who have attempted to include variables to capture the interdependence of preferences their effort was unsuccessful as a result a large literature has developed in which equations for charitable contributions have been estimated without accounting for interdependence this method has led to a consensus that the tax price of charitable contributions and donor s income are both important in determining gifts

an experiment on the pure theory of consumer s behaviour by checking whether consumer demand satisfies the axioms of revealed preference one can test the empirical validity of the neoclassical theory of consumer behaviour however applying the axioms to actual consumer purchase data is difficult if not impossible since it poses serious problems of both a methodological and a practical nature after commenting on the few existing empirical studies in this field we summarise the results from an experimental approach to revealed preference theory data were obtained through a controlled experiment that involved real consumption of the goods chosen we find that most subjects violated the axioms

nonparametric test of the expected utility hypothesis a nonparametric test of the expected utility hypothesis is developed in this paper the expected utility hypothesis is shown to hold if there exists a feasible solution to a particular system of linear inequalities furthermore when a feasible solution exists boundaries on the coefficient of absolute risk aversion can be calculated explicitly the test is applied to data on land allocations modeled as choices over lottery sets results contrary to those obtained in many laboratory experiments show that in most cases the expected utility hypothesis cannot be rejected

time inconsistency and alcohol sales restrictions restrictions on alcohol sales hours or days are commonly used tools in order to reduce alcohol consumption however a forward looking consumer can buy in advance thereby mostly undo the impact of the restriction i study whether time inconsistent consumer preferences can provide a justification for restrictions on alcohol sales time i estimate a demand model which allows a fraction of consumers to be time inconsistent using scanner data of beer purchases and other shopping behavior according to the estimation results 20 of consumers are time inconsistent and they account for 64 of beer consumption i find that sunday sales restriction decreases weekend consumption by the same amount as a sales tax increase by 21 percentage points in terms of consumer welfare the sales restriction is preferable to the tax increase

life cycle prices and production we use scanner data and time diaries to document how households substitute time for money through shopping and home production we document substantial heterogeneity in prices paid for identical goods for the same area and time with older households shopping the most and paying the lowest prices doubling shopping frequency lowers a good s price by 7 to 10 percent we estimate the shopper s price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1 8 the observed life cycle time allocation implies a consumption series that differs markedly from expenditures

donations in a recursive dynamic model this paper studies how donations respond to unexpected permanent changes in income and tax rates in a recursive dynamic model the dynamic approach yields several interesting insights if marginal tax rates are progressive a permanent jump in a household s income increases its consumption and donations in the short run but has no effect in the long run the permanent income elasticity of current donations is likely to exceed one if the marginal tax rate is flat the jump in income raises consumption and donations in both the short and the long run a permanent marginal tax rate cut raises consumption and donations in the long run if marginal tax rates are progressive while it reduces donations in the short run if it has little direct impact on tax payments if the marginal tax rate is flat a tax cut has a positive effect on consumption in both the short and the long run but has an ambiguous effect on donations jel classification e20 j24 015 041 dons dans un modele dynamique recursif ce memoire etudie comment les dons repondent a des changements non anticipes dans le niveau de revenu et les taux d imposition dans un modele dynamique recursif l approche dynamique revele des resultats interessants si les taux marginaux d imposition sont progressifs un saut permanent dans le revenu du menage accroit sa consommation et ses dons a court terme mais il n a aucun effet a long terme l elasticite des dons par rapport au revenu permanent est vraisemblablement plus grande que l unite si le taux marginal d imposition est plat le saut dans le revenu entraine une augmentation de la consommation et des dons a court et a long termes une reduction permanente dans le taux d imposition augmente consommation et dons a long terme si les taux d imposition sont progressifs alors qu elle reduit les dons si cela n a que peu d effet sur les paiements d impots si le taux marginal d imposition est plat une reduction d impot a un effet positif sur la consommation a la fois a court et a long termes mais a un effet ambigu sur les dons

measuring rationality with the minimum cost of revealed preference violations abstract we introduce a new measure of how close a set of choices is to satisfying the observable implications of rationality and apply it to a large balanced panel of household level consumption data this new measure the minimum cost index is the minimum cost of breaking all revealed preference cycles found in choices from budget sets unlike existing measures of rationality it responds to both the number and severity of revealed preference violations

non parametric tests of consumer behaviour the neoclassical model of consumer behaviour postulates that a consumer s choice behaviour can be described as deriving from utility maximization subject to a budget constraint one is then naturally led to ask what this model implies about observed behaviour this question has been addressed from two quite distinct approaches the first approach originating in the work of slutsky 1915 and antonelli 1886 derives necessary and sufficient conditions involving the derivatives of the demand functions the second approach originating in the work of samuelson 1938 1947 1948 derives algebraic conditions on the demand functions implied by maximizing behaviour

how demanding is the revealed preference approach to demand a well known problem with revealed preference methods is that when data are found to satisfy their restrictions it is hard to know whether this should be viewed as a triumph for economic theory or a warning that these conditions are so undemanding that almost anything goes this paper allows researchers to make this distinction our approach uses an axiomatic characterization of a measure of predictive success due to selten 1991 we illustrate the idea using a panel dataset the results show that this approach can lead us to radically reassess our view of the empirical performance of economic theory

who is more rational we report on the results of a large scale field experiment that enables us to test for consistency with utility maximizing behavior and to investigate the correlation between individual behavior and demographic and economic characteristics we conducted the experiment with the centerpanel a representative sample of over 2 000 dutch households using procedures similar to those used by choi et al 2007b in a setting with risk we find a high level of consistency in the individual level decisions there is also considerable heterogeneity in subjects consistency scores high income and high education subjects display greater levels of consistency men are more consistent than women and young subjects are more consistent than those who

the optimal treatment of tax expenditures abstract this paper analyzes the optimal treatment of tax expenditures it develops an optimal tax model where individuals derive utility from spending on a contribution good such as charitable giving the contribution good has also a public good effect on all individuals in the economy the government imposes linear taxes on earnings and on the contribution good so as to maximize welfare the government may also finance directly the contribution good out of tax revenue optimal tax and subsidy rates on earnings and the contribution good are expressed in terms of empirically estimable parameters and the redistributive tastes of the government the optimal subsidy on the contribution good is increasing in the size of the price elasticity of contributions the size of the crowding out effect of public contributions on private contributions and the size of the public good effect of the contribution good numerical simulations show that the optimal subsidy on contributions is fairly sensitive to the size of these parameters but that in most cases it should be lower than the earnings tax rate

energy price shocks household location patterns and housing crises theory and implications abstract the u s housing collapse in 2007 is widely blamed for inducing a financial crisis that spread to the real economy and caused a severe and prolonged downturn this paper develops a model to investigate the role of gasoline price shocks in triggering the housing market collapse and identifies a new channel through which energy price shocks affect the financial market and the macro economy results suggest that unanticipated gasoline price shocks increase the cost of work commutes lower the value of homes away from the city center and increase foreclosure rates as homeowners either cannot afford mortgage payments amid elevated gas expenditures or seek to abandon underwater homes the model predicts that gasoline price shocks disproportionately affect suburban households that face greater exposure due to longer commutes and lower incomes empirical evidence from the 2007 08 housing collapse is presented to corroborate this theory

taxes and the timing of births because the tax savings of having a child are a realized only if the birth takes place before midnight january 1 the incentives for the marginal birth are substantial using a sample of children from the national longitudinal survey of youth we find that the probability that a child is born in the last week of december rather than the first week of january is positively correlated with tax benefits we estimate that increasing the tax benefit of having a child by 500 raises the probability of having the child in the last week of december by 26 9 percent

how basic are behavioral biases evidence from capuchin monkey trading behavior behavioral economics has demonstrated systematic decision making biases in both lab and field data do these biases extend across contexts cultures or even species we investigate this question by introducing fiat currency and trade to a colony of capuchin monkeys and recovering their preferences over a range of goods and gambles we show that capuchins react rationally to both price and wealth shocks but display several hallmark biases when faced with gambles including reference dependence and loss aversion given our capuchins inexperience with money and trade these results suggest that loss aversion extends beyond humans and may be innate rather than learned

good day sunshine stock returns and the weather psychological evidence and casual intuition predict that sunny weather is associated with upbeat mood this paper examines the relationship between morning sunshine in the city of a country s leading stock exchange and daily market index returns across 26 countries from 1982 to 1997 sunshine is strongly significantly correlated with stock returns after controlling for sunshine rain and snow are unrelated to returns substantial use of weather based strategies was optimal for a trader with very low transactions costs however because these strategies involve frequent trades fairly modest costs eliminate the gains these findings are difficult to reconcile with fully rational price setting

pay or pray the impact of charitable subsidies on religious attendance abstract the economic argument for subsidizing charitable giving relies on the positive externalities of charitable activities particularly from the religious institutions that are the largest recipients of giving but the net external effects of subsidies to religious giving will also depend on a potentially important indirect effect as well impacts on religious participation religious participation can be either a complement to or a substitute with the level of charitable giving understanding these spillover effects of charitable giving may be quite important given the existing observational literature that suggests that religiosity is a major determinant of well being among americans in this paper i investigate the impact of charitable subsidies on a measure of religious participation attendance at religious services i do so by using data over three decades from the general social survey as well as confirming the impact of such subsidies on religious giving using the consumer expenditure survey i find strong evidence that religious giving and religious attendance are substitutes larger subsidies to charitable giving lead to more religious giving but less religious attendance with an implied elasticity of attendance with respect to religious giving of as much as 1 1 these results have important implications for the debate over charitable subsidies they also serve to validate economic models of religious participation

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

intergenerational conflict and the political economy of school spending abstract in this paper we use survey data to examine support among voters from different age cohorts for public school spending the survey asked potential voters in california how they intended to vote on two initiatives one a statewide initiative that would increase spending on public schools throughout the state and the other a local initiative that would increase spending only in the respondent s local school district we find that support for school spending generally declines with age but that older voters are more willing to support local spending on schools than state spending we examine two explanations for this voting pattern the capitalization of local spending into housing values and intergenerational altruism our results do not strongly favor one explanation over the other suggesting that both factors probably play important roles in sustaining support among older voters for local school spending

nonparametric engel curves and revealed preference this paper applies revealed preference theory to the nonparametric statistical analysis of consumer demand knowledge of expansion paths is shown to improve the power of nonparametric tests of revealed preference the tightest bounds on indifference surfaces and welfare measures are derived using an algorithm for which revealed preference conditions are shown to guarantee convergence nonparametric engel curves are used to estimate expansion paths and provide a stochastic structure within which to examine the consistency of household level data and revealed preference theory an application is made to a long time series of repeated cross sections from the family expenditure survey for britain the consistency of these data with revealed preference theory is examined for periods of consistency with revealed preference tight bounds are placed on true cost of living indices

an accurate measurement of the crowd out effect income effect and price effect for charitable contributions in the past empirical research on charitable contributions has focused on two issues estimating the income and price elasticities of contributions and estimating the extent to which government funding crowded out private contributions the two fundamental problems in all these studies are the differences in the underlying conceptual models and the use of imperfect data for empirical analysis this paper addresses both of these problems

rational contagion and the globalization of securities markets this paper argues that globalization may promote contagion by weakening incentives for gathering costly information and by strengthening incentives for imitating arbitrary market portfolios in the presence of short selling constraints the gain of gathering information at a fixed cost may diminish as markets grow moreover if a portfolio manager s marginal cost for yielding below market returns exceeds the marginal gain for above market returns there is a range of optimal portfolios in which all investors imitate arbitrary market portfolios and this range widens as the market grows numerical simulations suggest that these frictions can have significant implications for capital flows in emerging markets

information aggregation in debate who should speak first abstract privately informed individuals speak openly in front of other members of a committee about the desirability of a public decision each individual wishes to appear well informed for any given order of speech committee members may herd by suppressing their true information with individuals of heterogeneous expertise optimizing over the order of speech can improve the extraction of information but not perfectly so it is not always optimal to use the common anti seniority rule whereby experts speak in order of increasing expertise a committee with more able experts may be afflicted by greater herding problems yielding a worse outcome

has regulation of charitable foundations thrown the baby out with the bath water abstract regulations to curb tax avoidance and evasion through charitable foundations have been in place since the tax reform act of 1969 newly compiled longitudinal data makes it possible to estimate the effects of these regulations by comparing affected and unaffected foundations before and after the reform donations and entry dropped precipitously proxy variables suggest significant deterrence of abuses but half of the decline in donations can be explained by the increased cost of running a foundation the results highlight the potential for large reductions in the benefits of regulation when the cost of compliance affects externality producing actions such as charitable giving

a household based nonparametric test of demand theory a nonparametric test of demand theory determining the consistency of price expenditure data with the generalized axiom of revealed preference is applied to household macroeconomic data for the first time the fraction of consumption bundle comparisons that violate the generalized axiom of revealed preference is proposed as a summary statistic to indicate the consistency of a data set with revealed preference axioms this violation rate is calculated among consumption pairs with similar expenditures to increase the power of the test the results suggest that similar households consumption choices and budget constraints are generally consistent with the joint hypotheses of optimizing behavior and common preferences copyright 1995 by mit press

dynamic income progressive taxes and the timing of charitable contributions using an econometric model of charitable giving and a 10 year panel of tax return data i find that previous studies have underestimated the effects of permanent income and overestimated the effects of permanent changes in tax prices the significant statutory tax changes that occurred during the 1980s especially in 1986 serve to identify the key model parameters my results imply that people smooth their giving when transitory income changes but also time their giving to exploit transitory changes in tax prices the results also raise questions about how effectively the tax incentives permanently influence the level rather than just the timing of charitable giving by individuals

the welfare economics of default options in 401 k plans default contribution rates for 401 k pension plans powerfully influence choices potential causes include opt out costs procrastination inattention and psychological anchoring using realistically parameterized models we show how the optimal default the magnitude of the welfare effects and the degree of normative ambiguity depend on the behavioral model the scope of the choice domain deemed welfare relevant the use of penalties for passive choice and other 401 k plan features while results are theory specific our analysis provides reasonably robust justifications for setting the default either at the highest contribution rate matched by the employer or contrary to common wisdom at zero jel d14 d91 j26 j32

beyond revealed preference choice theoretic foundations for behavioral welfare economics we propose a broad generalization of standard choice theoretic welfare economics that encompasses a wide variety of nonstandard behavioral models our approach exploits the coherent aspects of choice that those positive models typically attempt to capture it replaces the standard revealed preference relation with an unambiguous choice relation roughly x is strictly unambiguously chosen over y written xp y iff y is never chosen when x is available under weak assumptions p is acyclic and therefore suitable for welfare analysis it is also the most discerning welfare criterion that never overrules choice the resulting framework generates natural counterparts for the standard tools of applied welfare economics and is easily applied in the context of specific behavioral theories with novel implications though not universally discerning it lends itself to principled refinements

a nonparametric test of the life cycle rational expectations hypothesis in a world of perfect certainty and perfect capital markets agents allocate expenditure in such a way that the marginal utility of discounted expenditure is the same in each period in this paper we present a test of whether any particular series of discounted prices and quantities can be exactly reconciled with a utility function and marginal utility of discounted expenditure that do not change from period to period we find that uk us and canadian postwar aggregate data all reject our condition although it is not rejected for long sub periods we show that our results for the uk suggest particular modifications to the strong form of the rational expectations hypothesis that our condition tests in fact these data are exactly consistent with a number of alternative hypotheses from this we argue that time series data are ill suited to parametric testing of any of the competing hypotheses on the inter temporal allocation of expenditure the pure theory of the inter temporal allocation of goods and time with perfect capital markets and perfect foresight is identical to the static demand case there is a single lifetime budget constraint and the allocation of expenditure to each period is made so that the marginal utility of discounted expenditure is the same in each period bewley 1977 and hall 1978 have identified the life cycle rational expectations hypothesis under uncertainty reh with the proposition that expected utility maximising consumers will allocate expenditures and time in such a way as to try and keep the marginal utility of discounted money constant given a set of time series on prices purchases wages and labor supply we can ask whether these realised plans are consistent with the life cycle hypothesis in this paper we propose a test that requires no ad hoc specification of functional forms or error processes but rather gives an answer yes or no based on finite mathematical techniques the specific hypothesis we test is a strong form of the reh viz that the marginal utility of discounted expenditure is constant over the period of observation for long time series this seems to be an absurdly strong hypothesis since it is effectively equivalent to assuming perfect capital markets and perfect foresight with regard to all important variables if however we can accept this strong hypothesis for a particular data set then any test of the weaker forms of the life cycle rational expectations hypothesis on this data set must be interpreted

the collective model of household consumption a nonparametric characterization we provide a nonparametric characterization of a general collective model for household consumption which includes externalities and public consumption next we establish testable necessary and sufficient conditions for data consistency with collective rationality that only include observed price and quantity information these conditions have a similar structure as the generalized axiom of revealed preference for the unitary model which is convenient from a testing point of view in addition we derive the minimum number of goods and observations that enable the rejection of collectively rational household behavior

charitable bequests and taxes on inheritances and estates aggregate evidence from across states and time this paper examines the impact of wealth transfer taxes on charitable bequests we exploit the fact that federal and state taxes on estates and inheritances vary over time states and real wealth levels the effects of taxes are estimated using pooled cross sectional data spanning several decades based on aggregated information from federal estate tax returns under several different specifications we find evidence of a strong incentive effect of estate and inheritance taxes on charitable bequests

capital market liberalization economic growth and instability summary this paper reviews briefly the arguments for capital market liberalization and identifies their theoretical and empirical weaknesses this provides the foundations for the argument for intervention in short term capital flows the paper concludes with a brief discussion of the various ways in which such interventions may be implemented 2000 elsevier science ltd all rights reserved

more giving or more givers the effects of tax incentives on charitable donations in the uk abstract this paper estimates the effects of tax incentives on charitable contributions in the uk using the universe of self assessment income tax returns between 2005 and 2013 we exploit variation from a large reform in 2010 to estimate intensive and extensive margin tax price elasticities of giving using a predicted tax rate instrument for the price of giving relative to consumption we find an intensive margin elasticity of about 0 2 and an extensive margin elasticity of 0 1 yielding a total elasticity of about 0 3 to further explore the extensive margin response we propose a model with a fixed cost of declaring donations and obtain a structural estimate of that cost of around 47 we also study the welfare effects of tax incentives extending the theoretical literature to allow for extensive margin giving and for a fixed cost of declaring donations taking into account these factors there is a case for increasing the subsidy on charitable giving in the uk

do tax incentives affect charitable contributions evidence from public charities reported revenues this paper estimates the effect of the charitable contribution tax deduction on charities donation revenue from charities tax filings a one percent increase in the tax cost of giving causes charitable receipts to fall by about four percent an effect three times larger the consensus in the literature further analysis reveals substantial heterogeneity in the tax response by subsector health care and home care are more tax sensitive than other charities while higher education and arts are less tax sensitive the results are consistent with substantial tax response heterogeneity within the sample and between sampled and unsampled charities implying that the mean tax elasticity of charitable contributions is a poor predictor of tax incentive effects for individual charities

one quarter of gdp is persuasion economists view talk as cheap and culture as insignificant yet humans are talking animals talking in their markets the talk probably matters why else would the human animals bother doing it the usual economic view of the talk is that it issues orders and conveys information workers at gm are ordered to report for work tomorrow credit ratings are conveyed economic analysis takes these parts of the talk into account without fuss production theory can be viewed as the theory of one mind issuing orders much of game theory is concerned in one way or another with information though game theory as joseph farrell 1995 and others have found requires more than bits of information but issuing the orders and conveying the information does not account for all of the talk the third part of the economic talk is persuasion

nature or nurture what determines investor behavior abstract using data on identical and fraternal twins complete financial portfolios we decompose the cross sectional variation in investor behavior we find that a genetic factor explains about one third of the variance in stock market participation and asset allocation family environment has an effect on the behavior of young individuals but this effect is not long lasting and disappears as an individual gains experience frequent contact among twins results in similar investment behavior beyond a genetic factor twins who grew up in different environments still display similar investment behavior our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs we attribute the genetic component of asset allocation the relative amount invested in equities and the portfolio volatility to genetic variation in risk preferences

a measure of rationality and welfare evidence showing that individual behavior often deviates from the classical principle of preference maximization has raised at least two important questions 1 how serious are the deviations 2 what is the best way to analyze choice behavior in order to extract information for the purpose of welfare analysis this paper addresses these questions by proposing a new way to identify the preference relation that is closest in terms of welfare loss to the revealed choice

charitable giving in the german welfare state fiscal incentives and crowding out there are two ways that government activities influence private charitable giving 1 government spending on the provision of public goods may cause crowding out of private charitable contributions and 2 tax incentives may boost private charitable giving from a sample of german income tax returns we estimate the elasticity of charitable giving relative to tax incentives income and government spending using censored quantile regression analysis we derive results for different points of the underlying distribution of charitable giving evaluating overall treasury efficiency the tax deductibility of charitable donations fosters enough private giving to offset foregone tax revenues

choice and individual welfare we propose an abstract method of systematically assigning a rational ranking to non rationalizable choice data our main idea is that any method of ascribing welfare to an individual as a function of choice is subjective and depends on the economist undertaking the analysis we provide a simple example of the type of exercise we propose namely we define an individual welfare functional as a mapping from stochastic choice functions into weak orders a stochastic choice function or choice distribution gives the empirical frequency of choices for any possible opportunity set framing factors may also be incorporated into the model we require that for any two alternatives x and y if our individual welfare functional recommends x over y given two distinct choice distributions then it also recommends x over y for any mixture of the two choice distributions together with some mild technical requirements such an individual welfare functional must weight every opportunity set and assign a utility to each alternative x which is the sum across all opportunity sets of the weighted probability of x being chosen from the set it therefore requires us to have a prior view about how important or representative a choice of x at a given situation is

what happens when you tax the rich evidence from executive compensation this paper examines the responsiveness of taxable income to changes in marginal tax rates using detailed compensation data on several thousand corporate executives from 1991 to 1995 the data confirm that the higher marginal rates of 1993 led to a significant decline in taxable income indeed this small group of executives may account for as much as 20 percent of the aggregate change in wage and salary income for approximately the one million richest taxpayers over this time period one person alone can account for more than 2 percent the decline however is almost entirely a short run shift in the timing of compensation rather than a permanent reduction in taxable income the short run elasticity of taxable income with respect to the net of tax share exceeds one in this sample but the elasticity after one year is at most 0 4 and probably closer to zero breaking out the tax responsiveness of different types of compensation shows that the large short run responses come almost entirely from a large inc

revealed preference analysis of characteristics models characteristics models have been found to be useful in many areas of economics however their empirical implementation tends to rely heavily on functional form assumptions in this paper we develop a revealed preference approach to characteristics models we derive the necessary and su cient empirical conditions under which data on the market behaviour of heterogeneous price taking consumers are nonparametrically consistent with the consumer characteristics model where these conditions hold we show how information may be recovered on individual consumer s marginal valuations of product attributes in some cases marginal valuations are point identi ed and in other cases we can only recover bounds where the conditions fail we highlight the role which the introduction of unobserved product attributes can play in rationalising the data we implement these ideas using consumer panel data on the danish milk market

predictive power in behavioral welfare economics when choices appear inconsistent duet obehavioral biases there is a theoretical debate about whether or not it is necessary to impose the structure of a model in order to provide meaning ful welfare guidance based on such choices to address this question empirically we evaluate the predictive power of the model free and non parametric approach to welfare analysis proposed by bernheim and rangel 2009 in two standard choice settings we show that for most hypothetical demands this approach does not offer clear welfare guidance however we find that for most observed demands this approach can be used to make tight predictions even though these demand functions exhibit inconsistencies for the experimental choices of manzini and mariotti 2010 we show that the welfare guidance provided by these predictions is consistent with delaya version eventhough the guidance provided by revealed preferences is more ambiguous

an epidemic model of investor behavior i test whether social influence affects individual investors trading and stock returns in each of the 20 most active stocks in finland over 9 years the number of owners in a municipality multiplied by the number of investors who do not own a stock a measure of the rate of transmission of diseases and rumors through social contact predicts individual investor trading i control for known determinants of trade including daily news and show that competing explanations for the relation are unlikely socially motivated trades predict stock returns and the effects are not reversed suggesting that individuals share useful information individuals susceptibility to social influence has declined during the period but the opportunities for social influence have increased

the impact of charitable subsidies on religious giving and attendance evidence from panel data the literature documents that charitable giving is responsive to tax subsidies but often ignores the spillover effects of such policies this paper investigates the spillover effects of charitable subsidies on religious participation using individual level panel data the results show that religious giving and participation are complements the implied cross price elasticity of religious participation with respect to the after tax price of giving is 0 27 furthermore a 1 increase in the amount of religious contributions is associated with a 0 4 increase in religious attendance these results are robust under several different specifications and highlight the positive externalities created by charitable subsidies

herding among security analysts the paper shows that the buy or sell recommendations of security analysts have a signi cant positive in uence on the recommendations of the next two analysts this in uence can be traced to short lived information in the most recent revisions in contrast the in uence of the prevailing consensus is not stronger if the consensus accurately forecasts subsequent stock price movements this indicates consensus herding consistent with models in which analysts herd based on little information the consensus also has a stronger in uence when market conditions are favorable the resulting poorer information aggregation could cause bull markets to be intrinsically more fragilea e g bikhchandani et al j political economy 100 5 1992 992 1026 2000 elsevier science s a all rights reserved jel classixcation g11 g14 g24

information and diffusion of new prescription drugs this article examines the role of different product information flows on the diffusion of new pharmaceuticals given the innovative nature of pharmaceutical drugs and their impact on health care expenditure there is a surprisingly small literature devoted to this topic some information flow mechanisms have been examined individually in the literature but very few have captured the simultaneous impact of these mechanisms on up take and diffusion this article uses the up take of statins as an example diffusion of this therapeutical group is expressed as a function of four specific informational channels self experience consumption externalities scientific evidence and marketing in addition to this the influence of economic factors is tested to examine whether they have any role in drug diffusion prescription data from over 130 general practitioners gp practices in the uk during 1991 2004 are used to test the econometric specification applying dynamic panel data methods results suggest individual self experience and clinical evidence are major factors promoting diffusion while there is an inverse relationship with gp practice size and diffusion having controlled for these factors financial incentives and marketing appear to play little role

the impact of separate taxation on the intra household allocation of assets evidence from the uk abstract the income tax system in the united kingdom moved from joint to independent taxation of husbands and wives income in 1990 one interesting aspect of independent taxation is the ability for households to choose the division of household assets between the two spouses this tax reform therefore creates an opportunity for households to engage in a form of tax avoidance by shifting their investment income to the spouse with the lower marginal tax rate we use family expenditure survey fes data to examine the impact of this tax reform on the magnitude of investment income shifting between spouses with different marginal tax rates we find a sizeable shift in the share and incidence of asset income claimed by wives who typically have lower marginal tax rates as well as in the incidence of the wife claiming all the household asset income indicating that households responded to this policy change by reallocating asset ownership

consistency and heterogeneity of individual behavior under uncertainty by using graphical representations of simple portfolio choice problems we generate a very rich dataset to study behavior under uncertainty at the level of the individual subject we test the data for consistency with the maximization hypothesis and we estimate preferences using a two parameter utility function based on faruk gul 1991 this specification provides a good interpretation of the data at the individual level and can account for the highly heterogeneous behaviors observed in the laboratory the parameter estimates jointly describe attitudes toward risk and allow us to characterize the distribution of risk preferences in the population

persistence and reversal in herd behavior theory and application to the decision to go public we model rational herd behavior when the underlying value changes over time with payoffs that are either dependent or independent of the underlying value we show that herding does not last forever and is not monotone in signal quality high correlation among agents actions does not necessarily imply herding this suggests alternative empirical methods are needed to detect herding the model has many applications including the ipo decision in which payoffs are state dependent the model implies that the decision to go public is more likely associated with herding than the decision to delay an ipo copyright 2002 oxford university press

consume now or later time inconsistency collective choice and revealed preference this paper develops a revealed preference methodology for exploring whether time inconsistencies in household choice are the product of nonstationarities at the individual level or the result of individual heterogeneity and renegotiation within the collective unit an empirical application to household level microdata highlights that an explicit recognition of the collective nature of choice allows the vast majority of household behaviour to be rationalised by theory that assumes preference stationarity at the individual level for our particular short panel data set simply permitting limited intrahousehold heterogeneity in time preferences allows the choices of 98 4 of the sample to be rationalised by a model that assumes exponential discounting at the individual level we also find that couples characterized by lower divergence in spousal discount rates are older more likely to have children and wealthier which we take as indications of experiencing higher match quality

public goods provision and redistributive taxation abstract this paper studies the relationship between redistributive taxation and tax deductible charitable contributions redistribution has two opposite effects on voluntary giving the price of charitable giving decreases with the degree of redistribution and this has a positive effect on the total amount of giving substitution effect however redistribution leads to lower consumption for the contributors and therefore has a negative effect on contributions to the charity income effect the theoretical model developed in this paper demonstrates that under a general class of utility functions the substitution effect dominates the income effect hence charitable giving increases with the tax rate in purely egalitarian societies the public good is provided efficiently and the total welfare is maximized independent of the ex ante income inequality however the positive impact of taxation on charitable giving and welfare may disappear if individuals generate their income levels in anticipation of taxation and redistribution does not take into account the cost of effort

a breed apart security analysts and herding behavior herding behavior occurs when security analysts ignore their private opinions and issue public forecasts that mimic the earnings forecasts of others joining the consensus provides cover for analysts reputations we question the ethics of this practice when the motive to protect one s reputation takes precedence over the forecast accuracy motive while seemingly predictable behavior from a self interested perspective herding behavior has subtle but long term ramifications for the efficient pricing of securities and the preservation of the public trust in the financial services profession we call upon each individual analyst as well as the profession to exercise the moral courage necessary to cultivate a climate of personal and public integrity personal resistance and pro active policies are prescribed as actions to assist analysts to become more cognizant of their motivations as well as to promote a more ethical professional context