testing for asymmetric information in insurance markets the first goal of this paper is to provide a simple and general test of the presence of asymmetric information in contractual relationships within a competitive context we also argue that insurance data are particularly well suited to such empirical investigations to illustrate this claim we use data on contracts and accidents to investigate the extent of asymmetric information in the french market for automobile insurance using various parametric and nonparametric methods we find no evidence for the presence of asymmetric information in this market

gathering information before signing a contract a screening perspective a principal has to choose among several agents to fulfill a task and then provide the right incentives to perform it agents do not a priori know how competent they are for the task it is shown that the principal should propose a contract that leads the agents to gather information about their competence prior to signing the contract this insight is in sharp contrast with cremer and khalil j cremer f khalil gathering information before signing a contract american economic review 82 1992 566 578 who consider a setup with one agent or alternatively a setup with several agents in which the private information commonly applies to all agents it emerges because in our private value setup information acquisition accompanied by a proper screening device increases the chance that the principal will pick a competent agent c 2006 elsevier b v all rights reserved

financial liberalization and house price dynamics in europe this article investigates the determinants of house prices in a sample of european countries over the period 1970 to 2004 focusing on the role of financial liberalization we find that it has mainly affected the short term dynamics of residential prices in particular the impulse effects on house prices of income and mortgage debt have become smaller on the other hand the effects of interest rates past house prices and to a lesser degree stock market have strengthened in other words there seems to have been a certain de linking of short term house price dynamics from income whereas the housing market may have become more similar to a financial asset market with interest rates and expectations of capital gains playing a more prominent role

the household response to persistent natural disasters evidence from bangladesh we examine the short run economic impacts of recurrent flooding on bangladeshi households surveyed in 2000 2005 and 2010 in 2010 household income and expenditure survey hies households answered a set of questions on whether they were affected by flood and its likely impacts we identify two treatment affected groups by using the self reported data and historical rainfall data based flood risk index we estimate a difference indifference did model to quantify the impacts on income expenditure asset and labour market outcomes and further extend our analysis to different income and expenditure brackets overall we find robust evidence of negative impacts on agricultural income and expenditure intriguingly the extreme poor i e the bottom 15th quintile experience significant positive impacts on agricultural income in the self reported treatment case

weighing what s practical proxy means tests for targeting food subsidies in egypt abstract despite achieving a significant cost reduction over the past two decades the absolute cost of food subsidies in egypt is still high relative to the benefits received by the poor there is scope for better targeting these food subsidies in particular for targeting cooking oil and sugar ration cards both because reforms in this area are perceived to be far less politically sensitive than adjusting subsidy policy for bread and wheat flour and because higher income groups presently receive a significant percentage of the benefits targeting the high subsidy green ration cards to the poor and the low subsidy red ration cards to the nonpoor will require identification of both poor and nonpoor households an international food policy research institute research team in egypt in collaboration with the egyptian ministry of trade and supply developed a proxy means test for targeting ration cards the paper describes the process of moving from the optimal income predicting model to the final model that was both administratively and politically feasible an ex ante evaluation of the levels of accuracy of the proxy means testing model indicates that the model performs quite well in predicting the needy and nonneedy households an effective and full implementation of this targeting method would increase the equity in the ration card food subsidy system and at the same time the total budgetary costs of rationed food subsidies would decline moreover the experience gained under this reform would facilitate targeting future social interventions to reduce and prevent poverty in egypt

can markets stimulate rights on the alienability of legal claims the alienability of legal claims holds the promise of increasing access to justice and fostering development of law i develop a principal agent framework where litigation funders provide expertise in reducing uncertainty in agents disutility of production the model leads to the counterintuitive prediction that litigation funders prefer cases with novel issues and social surplus is positively correlated with legal uncertainty consistent with the model court backlog court expenditures and a slowing in average time to completion are associated with third party funding cases with third party funding receive more citations and are reversed less often than comparable cases without such arrangements

on measuring child costs with applications to poor countries the theoretical basis for measuring child costs is discussed and detailed consideration is given to two straightforward procedures for calculation engel s food share method and rothbarth s adult good method each of these methods embodies different definitions of child costs so that the same empirical evidence can generate quite different estimates depending on the method used it is shown that true costs are generally overstated by engel s method and understated by rothbarth s procedure although the latter unlike the former can provide a sensible starting point for cost measurement our estimates from sri lankan and indonesian data suggest that children cost their parents about 30 40 percent of what they spend on themselves

booms and busts in the uk housing market the often volatile behaviour of uk house prices between 1957 and 1994 is analysed in an annual econometric model theory suggests that financial liberalisation of mortgage markets in the 1980s should have led to notable shifts in house price behaviour the evidence supports the predictions of theory suggesting shifts took place in wealth effects as in the consumption function and that real interest rates and income expectations became more important the presence of transactions costs suggests important nonlinearities in house price dynamics the paper also contains an explicit econometric treatment of expectations demography supply spillovers from the rented sector and of composition biases in the official house price index

poverty and household size the widely held view that larger families tend to be poorer in developing countries has influenced research and policy the scope for size economies in consumption cautions against this view we find that the correlation between poverty and size vanishes in pakistan when the size elasticity of the cost of living is about 0 6 this turns out to be the elasticity implied by a modified version of the food share method of setting scales by contrast some measures of child nutritional status indicate an elasticity of unity consideration of the weight attached to child versus adult welfare may help resolve the non robustness of demographic profiles of poverty excerpt

equivalence scale relativities and the extent of inequality and poverty most inequality and poverty theory analyzes equivalent income distributions for homogeneous populations incomes are assumed to be deflated by an equivalence scale that accounts for differences in needs between households yet in practice there is no consensus about what the appropriate equivalence scale is the authors analyze how the choice of equivalence scale affects inequality and poverty measures and show that there is a systematic relationship between equivalence scale generosity and the extent of inequality and poverty they consider most of the measures in common use and provide some empirical illustrations copyright 1992 by royal economic society

non linearities and equivalence scales this paper focuses on the estimation and testing of equivalence scales in the context of a demand system with nonline ar logarithmic expenditure effects in its budget share equations the authors show that such nonlinearity enables one to identify the scal es without demographic separability restrictions on preferences and to avoid false rejection of the hypothesis that the scales are independ ent of the base utility level the empirical analysis is based on micro data drawn from the u k family expenditure survey copyright 1993 by royal economic society

legal fee restrictions moral hazard and attorney rents abstract when attorney effort is unobservable and certain other simplifying assumptions such as risk neutrality hold it is efficient for an attorney to purchase the rights to a client s legal claim however the american bar association model rules of professional conduct prohibit this arrangement we show that this ethical restriction which is formally equivalent to requiring a minimum fixed fee of zero can create economic rents for attorneys even though they continue to compete along the contingent fee dimension the contingent fee is not bid down to the zero profit level because such a fee does not induce sufficient attorney effort we thereby provide a political economy explanation for these restrictions

modelling uk house prices using cointegration an application of the johansen technique this paper provides an econometric analysis of the long term equilibrium determination of uk house prices using the relatively recent johansen cointegration procedure this long term equilibrium specification is then utilized in order to estimate a parsimonious dynamic model for uk house prices

estimating utility consistent poverty lines with applications to egypt and mozambique abstract a fundamental premise of absolute poverty lines is that they represent the same level of utility through time and space disturbingly a series of recent studies in middle and low income economies show that even carefully derived poverty lines rarely satisfy this premise this article proposes an information theoretic approach to estimating cost of basic needs cbn poverty lines that are utility consistent applications to date illustrate that utility consistent poverty measurements derived from the proposed approach and those derived from current cbn best practices often differ substantially with the current approach tending to systematically overestimate underestimate poverty in urban rural zones

the developing world is poorer than we thought but no less successful in the fight against poverty a new data set on national poverty lines is combined with new price data and almost 700 household surveys to estimate absolute poverty measures for the developing world we find that 25 of the population lived in poverty in 2005 as judged by what poverty typically means in the world s poorest countries this is higher than past estimates substantial overall progress is still indicated the corresponding poverty rate was 52 in 1981 but progress was very uneven across regions the trends over time and regional profile are robust to various changes in methodology though precise counts are more sensitive

the evolution of common law we present a model of lawmaking by appellate courts in which judges influenced by policy preferences can distinguish precedents at some cost we find a cost and a benefit of diversity of judicial views policy motivated judges distort the law away from efficiency but diversity of judicial views also fosters legal evolution and increases the law s precision we call our central finding the cardozo theorem even when judges are motivated by personal agendas legal evolution is on average beneficial because it washes out judicial biases and renders the law more precise our paper provides a theoretical foundation for the evolutionary adaptability of common law

gathering information before signing a contract after being offered a contract an agent has the possibility to observe the state of nature this enables him to refuse the contract in unfavorable states but burdens him with an observation cost the authors show that the principal offers a contract in which the agent has no incentive to observe the state of nature and they explore its terms later they show that the principal finds it profitable to organize competition between several agents even though he has monopoly power and can push a single agent down to his reservation utility copyright 1992 by american economic association

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

accounting for selectivity and duration dependent heterogeneity when estimating the impact of emigration on incomes and poverty in sending areas the impacts of international emigration and remittances on incomes and poverty in sending areas are increasingly studied with household survey data but comparing households with and without emigrants is complicated by a triple selectivity problem first households self select into emigration second in some emigrant households everyone moves while others leave members behind and third some emigrants choose to return to the origin country allowing for duration dependent heterogeneity introduces a fourth form of selectivity one must now worry not just about whether households migrate but also when they do so this paper clearly sets out these selectivity issues and their implications for existing migration studies and then addresses them by using survey data designed specifically to take advantage of a randomized lottery that determines which applicants to the over subscribed samoan quota may immigrate to new zealand the analysis compares incomes and poverty rates among left behind members in households in samoa that sent samoan quota emigrants with those for members of similar households that were unsuccessful in the lottery policy rules control who can accompany the principal migrant providing an instrument to address the second selectivity problem while differences among migrants in which year their ballot was selected allow for estimation of duration effects the authors find that migration reduced poverty among former household members but they also find suggestive evidence that this effect may be short lived as both remittances and agricultural income are negatively related to the duration that the migrant has been abroad

adverse selection in insurance markets policyholder evidence from the u k annuity market in this paper we investigate the importance of adverse selection in insurance markets we use a unique data set consisting of all annuity policies sold by a large u k insurance company since the early 1980s to analyze mortality differences among individuals who purchased different types of policies we find systematic relationships between ex post mortality and annuity policy characteristics such as whether the annuity will make payments to the estate in the event of an untimely death and whether the payments from the annuity rise over time these mortality patterns are consistent with the presence of asymmetric information in the annuity market we find no evidence of substantive mortality differences however across annuities of different size even though models of insurance market equilibrium with asymmetric information would predict such differences we also find that the pricing of various features of annuity contracts is consistent with the self selection patterns we find in mortality rates our results therefore suggest that selection may occur across many specific features of insurance contracts and that the absence of selection on one contract dimension does not preclude its presence on others this highlights the importance of considering the detailed features of insurance contracts when testing theoretical models of asymmetric information

an alternative method for identifying booms and busts in the euro area housing market this article develops a model based method to detect booms and busts in the euro area housing market a model is constructed and tested whereby the user cost rate a demographic variable unemployment rate disposable income debt to income ratio and housing stock are fundamental variables significantly explaining house price hp developments booms busts are identified as episodes when the hp index exceeds the levels implied by those economic fundamentals furthermore a cross check with boom bust episodes based on other methods is carried out to substantiate the results while the ability of the model in predicting booms busts in real time is also tested

how robust is a poverty profile comparison of poverty such as when poverty is greatest typically matter far more for policy choices than do aggregate measures of poverty such as how many people are deemed poor the authors examine alternative methods for constructing poverty profiles focusing on their internal consistency and appropriateness for guiding policy none is perfect but some methods appear to be preferable to others when the aim is to inform policies for fighting absolute consumption poverty a case study on indonesia reveals that the country s regional and sectoral poverty profile is highly sensitive to some aspects of measurement but quite robust to others

the political economy of food subsidy reform the case of egypt abstract this paper examines the political economy of food subsidy reform efforts in egypt egypt provides a case of a country with a large food subsidy program that has been relatively effective as a social safety net but a program that is also expensive and poorly targeted to the needy policy discussions about strategies to improve the system s performance run into the extreme political sensitivity of the issue of food subsidies in egypt food subsidies are perceived to be important in promoting political stability and providing some legitimacy to a political system where civil liberties are limited egypt therefore illustrates the dilemmas facing policymakers and others contemplating food subsidy reform in developing countries where there are concerns that reform may spark political unrest this paper argues that even in cases where food subsidy reform is a highly politicized issue there are still a number of pragmatic policy steps that can be taken that meet the twin goals of reforming the system in ways that better target the poor while functioning more efficiently

household equivalence scales theory versus policy researchers agree that household equivalence scales are intended to measure the variation in income needed to bring households of different composition to the same welfare level researchers do not agree however about how the term household welfare is to be defined this article traces the historical and philosophical development of three distinct definitions when the conceptual bases of several popular methods for the estimation of equivalence scales are explored it becomes clear that advances in theoretical rigor have not always worked to bring the literature closer to answering questions of policy concern

issues in measuring and modeling poverty economists have relied heavily on household incomes or expenditures normalized for differences in household specific prices and demographics in their research and policy advice related to poverty and inequality recognizing the conceptual and empirical problems that confound such measures does not mean that they should be ignored instead it indicates the need for supplementary measures to capture the missing items implementing a genuinely multidimensional approach will often make the welfare rankings of social states more difficult but that fact points to the nonrobustness of low dimensional rankings this may have its own policy ramifications with the possibility of correspondence between policy instruments and welfare objectives the model types used to understand the poverty and inequity determination processes will be affected not only will there be more dependent variables to consider but variables will have potentially complex relationships these relationships will often be hard to empirically disentangle despite richer integrated and longitudinal data sets such data open rich and relevant agenda for research into the dynamics of poverty along multiple dimensions a simultaneous attack on these issues from all three fronts measurement modeling and data offers hope of establishing a credible empirical foundation for public action in fighting poverty

poverty transition and persistence in ethiopia 1994 2004 summary this study analyzes the persistence of poverty in both rural and urban areas in ethiopia during 1994 2004 the key finding is that households move frequently in and out of poverty but the difficulty of exiting from poverty like the chance of avoiding slipping back increases with the time spent in that state and varies considerably between male and female headed households our results imply that it is important to design anti poverty policies both to hinder households from slipping into extreme poverty and to minimize the length of the poverty spell for households once they have fallen into it

children and household economic behavior this paper looks at some of the methodological issues that arise in modeling the effects of children on household behavior and presents some estimates for selected areas for our purposes household behavior will be taken to refer to household decisions on labor supply the allocation of expenditure to different periods and the decision as to what to do with the difference between income and expenditure i shall be concerned mainly with the effects of dependent children and i restrict attention largely to western societies excerpt

measuring poverty and differences in family composition the equivalence scales used to adjust for differences in family composition when measuring poverty exhibit considerable variation this paper suggests an alternative approach that allows for differences in social judgements regarding the treatment of different types of family and examines the relation with the choice of poverty measure the resulting dominance criteria cannot provide a complete ranking but allow the extent of disagreement to be identified their application is illustrated by the example of changes in child benefits copyright 1992 by the london school of economics and political science

community targeting for poverty reduction in burkina faso this article develops a method for targeting antipoverty programs and public projects to poor communities in rural and urban areas the method calls for constructing an extensive data set from a large number of sources and then integrating the entire set into a geographic information system the data set includes demographic data from the population census household level data from a variety of surveys community level data on local road infrastructure public facilities water points and so on and department level data on agro climatic conditions an econometric model that estimates the impact of household community and department level variables on household consumption is used to identify the key explanatory variables that determine the standard of living in rural and urban areas this model is then applied to predict poverty indicators for 3 871 rural and urban communities in burkina faso and to map the spatial distribution of poverty in the country a simulation analysis assesses the effectiveness of village level targeting based on these predictions the results show that such targeting is an improvement over regional targeting in that it reduces leakage and under coverage

investigating the determinants of household welfare in cote d ivoire to predict the effect of economic policies on household welfare one should first understand which characteristics of households and of the localities in which they live enable them to raise their welfare levels this paper outlines a simple procedure for investigating the determinants of household welfare and demonstrates its use with recent data from cote d ivoire despite the relative simplicity much information is obtained from its use on cross sectional survey data results specific to cote d ivoire include high low returns to education in urban rural areas high benefits from cocoa land relative to coffee land a significant impact on economic welfare from the availability of medical services and no apparent benefits from agricultural extension services

household economies of scale in consumption theory and evidence household economies of scale arising from the existence of househo ld public goods increasing returns in household production and or bulk discounts are incorporated into a utility theoretic model of household demands individuals are assumed to be identical and symmetrically treated within households economies of scale parameters for five goods are estimated using the quadratic expenditu re system and data from the u s consumer expenditure survey on expenditures by all adult households results suggest the existence o f significant economies of scale in the consumption of all of the included goods with economies being especially pronounced in the consumption of shelter copyright 1988 by the econometric society

poverty in egypt modeling and policy simulations abstract poverty profiles are a useful way of summarizing information on the levels of poverty and the characteristics of the poor in a society but they are limited by the bivariate nature of their informational content using the 1997 egypt integrated household survey eihs this article estimates models of household consumption in the first stage and then predicts poverty rates corresponding to changes in potential policy variables the key results of the study point to the important instrumental role of education parental background land redistribution and access to health facilities in alleviating poverty in egypt

on the measurement of poverty official statistics in the united states and the united kingdom show a rise in poverty between the 1970 s and the 1980 s but scepticism has been expressed with regard to these findings in particular the methods employed in the measurement of poverty have been the subject of criticism this paper re examines three basic issues in measuring poverty the choice of the poverty line the index of poverty and the relation between poverty and inequality one general theme running through the paper is that there is a diversity of judgments which enter the measurement of poverty and that it is necessary to recognize these explicitly in the procedures adopted there is likely to be disagreement about the choice of poverty line affecting both its level and its structure in this situation we may only be able to make comparisons and not to measure differences and the comparisons may lead only to a partial rather than a complete ordering the first section of the paper discusses the stochastic dominance conditions which allow such comparisons illustrating their application by reference to data for the united states the choice of poverty measure has been the subject of an extensive literature and a variety of measures have been proposed in the second section of the paper a different approach is suggested considering a class of measures satisfying certain general properties and seeking conditions under which all members of the class which includes many of those proposed give the same ranking those sceptical about measures of poverty often assert that poverty and inequality are being confounded the third section of the paper distinguishes four different viewpoints and relates them to theories of justice and views of social welfare

generating disaggregated poverty maps an application to vietnam abstract previous research shows that geographic targeting in poverty programs is not accurate unless the geographic units are small household surveys however can rarely estimate poverty rates for more than 5 10 regions this study uses data from vietnam to illustrate a method for generating disaggregated poverty maps first the relationship between poverty and household indicators is estimated using survey data then census data on those same indicators are used to estimate poverty rates for each of the 543 rural districts the results indicate that vietnamese poverty is concentrated in the north and in districts furthest from the coast and cities

do lower mortgage rates mean higher housing prices much research has shown that mortgage rates exert a negative influence on housing prices this study analyses the long and short run relationships between housing prices and mortgage rates using advanced nonstructural estimation methods as expected a bivariate specification and a four variable housing demand specification both show that these variables have a long run relationship and that there is a rather inelastic response of housing prices to changes in mortgage rates however contrary to previous research the results from granger non causality tests impulse response functions and variance decompositions reveal that there is virtually no short run influence from mortgage rates to housing prices

testing for persistence in housing price to income and price to rent ratios in 16 oecd countries housing price to income and price to rent ratios are among the most widely monitored indicators of housing market conditions while these ratios tend to fluctuate around a constant level or a mild trend over the long term they also tend to deviate from these benchmarks for protracted periods traditional unit root tests often indicate the presence of a unit root this article uses the framework of fractional integration to test the persistence of price to income and price to rent ratios in a sample of 16 oecd countries spanning four decades the results indicate that the ratios are highly persistent the possibility that persistence estimates may be affected by structural breaks in the series is also considered but evidence of such breaks is found only in a very limited number of cases policy action may be required if high price to income and price to rent ratios have adverse social and economic consequences policies should be guided by a careful analysis of the factors behind high ratios

the robustness of poverty profiles reconsidered poverty measures and profiles are used increasingly to guide antipoverty policies in low income countries an essential element in these analyses is the specification of a poverty line however there are many different methods for setting poverty lines and different methods can yield strikingly different results with correspondingly different policy implications using recent household survey data from mozambique this paper explores the differences that occur using the most common poverty line methodologies the food energy intake fei and the cost of basic needs cbn methods over different levels of geographic specificity we find that regional and provincial rankings of foster greer and thorbecke poverty indices are not robust to the method of poverty line determination but that the characteristics of the poor are reasonably similar under all methods the fei poverty lines often yield counterintuitive results whereas the family of cbn poverty lines was more robust food consumption patterns of the poor show a high degree of substitution among basic staples from one region to another which is consistent with observed differences in relative food prices indicating that cbn poverty lines that allow for regional variation in the food consumption bundle may be most appropriate in these settings