the motivation and bias of bureaucrats many individuals are motivated to exert effort because they care about their jobs rather than because there are monetary consequences to their actions the intrinsic motivation of bureaucrats is the focus of this paper and three primary results are shown first bureaucrats should be biased second sometimes this bias takes the form of advocating for their clients more than would their principal while in other cases they are more hostile to their interests for a range of bureaucracies those who are biased against clients lead to more efficient outcomes third self selection need not produce the desired bias instead selection to bureaucracies is likely to be bifurcated in the sense that it becomes composed of those who are most preferred by the principal and those who are least preferred

persistence of interindustry wage differentials a reexamination using matched worker firm panel data we estimate interindustry wage differentials using new french longitudinal data that allow a tracking of workers and their firms over time we find that when measured on a cross sectional basis they primarily reflect the interindustry variations in unmeasured labor quality however interindustry wage differentials are only a minor component of interfirm wage differentials the average differential in wages paid to the same workers by different firms is about 20 30 in a given industry wage policies are more favorable to workers in large capital intensive firms

financial decision making and cognition in a family context in this paper we studied the association of cognitive traits and in particular numeracy of both spouses on financial outcomes of the family we found significant effects particularly for numeracy for financial and non financial respondents alike but much larger effects for the financial decision maker in the family we also examined who makes these financial decisions in the family and why once again cognitive traits such as numeracy were an important component of that decision with larger effects of numeracy for husbands compared to wives

compensating differentials and self selection an application to lawyers this paper models individual choice between two types of jobs as dependent on the difference in potential earnings and on preferences for nonpecuniary the model leads to simultaneous estimation of earnings and job choice functions in a manner that takes account of self selection of individuals into the sector of highest utility an application to lawyers choosing between private and public interest law casts doubt on the notion that public interest lawyers are accepting substantially lower earnings by virtue of their choice an impression derived from estimation of earnings functions without accounting for self selection the estimation technique also takes proper account of the choice based nature of the sample which appears to be important

financial knowledge and financial literacy at the household level there is evidence of a relation between numeracy and wealth held outside of pensions and social security with pensions and social security accounting for half of wealth at retirement and evidence that those with pensions save more in other forms one would expect to find knowledge of pensions and social security influencing retirement saving yet we find no evidence that knowledge of pensions and social security is related to nonpension non social security wealth to numeracy or that it plays an intermediate role in the numeracy wealth relation our findings raise questions about policies that would enhance numeracy to increase retirement saving

privatization liberalization wages and employment theory and evidence for the uk most agency based privatization models are of the owner manager relation and ignore the labour market yet in the 1980s there were profound changes in public sector and privatized firms to wages and employment we develop a bargaining model of the manager workforce relation that explains employment and wages when firms are privatized government objectives become more commercial and markets are liberalised using data on 14 uk companies 1972 1988 that were publicly owned in 1972 we find a employment fell following the change to more commercial objectives b wages were only slightly affected by this but fell if the firm lost market power

space time approach to commercial property prices valuation there exists three ways of approaching real estate prices the cost approach the market data approach and the income capitalization approach in this article we propose an improvement of the market data approach that takes into account the spatial component in particular we propose a modified market data approach based on interpolation being the structure of the spatial correlation between the prices of properties the main factor to obtain the weights interpolation methods have been widely used for estimating real estate prices but they do not take into account the structure of their spatial dependence although this drawback is overcome by kriged estimation in the case of the prices of commercial properties they do not provide good estimates because the scarceness of the market information this is why auxiliary information is needed and cokriging methods are used to obtain estimates that are more accurate the aim of this article is the comparison of cokriged estimation of premises prices in tw

locus of control and savings abstract this paper analyzes the relationship between individuals locus of control and their savings behavior i e wealth accumulation savings rates and portfolio choices locus of control is a psychological concept that captures individuals beliefs about the causal relationship between their own behavior and life events we find that households with an internal reference person a main respondent who believes that he she can generally control relevant aspects of life save more in terms of levels and in some cases as a percentage of their permanent incomes although the locus of control gap in savings rates is largest among rich households the gap in wealth accumulation is particularly large for poor households finally our findings indicate that households with an internal reference person are in a better position to save in forms that are harder to access such as pension wealth than otherwise similar households with an external reference person

distribution of ability and earnings in a hierarchical job assignment model we examine the mapping of the distribution of ability onto earnings in a hierarchical job assignment model workers are assigned to a continuum of jobs in fixed proportions ordered by sensitivity to ability the model implies a novel marginal productivity interpretation of wages we derive comparative statics for changes in technology and in the distribution of ability we find conditions under which a more unequal distribution of ability maps onto a more less unequal distribution of earnings we also analyze an assignment model with variable proportions and find that in the cobb douglas case a rise in the inequality of ability always narrows the range of earnings

spatial estimation of housing prices and locational rents summary this work stems from the widely accepted hypothesis that housing price is determined by two types of characteristic structural and locational under this hypothesis a methodology is presented for the spatial estimation of housing prices and locational rents the iterative residual kriging irk method the methodological aspects are complemented by the presentation of an application of this methodology to the case of housing in granada spain

public service motivation as an argument for government provision a public service motivation psm inclines employees to provide effort out of concern for the impact of that effort on a valued social service though deemed to be important in the literature on public administration this motivation has not been formally considered by economists when a psm exists this paper establishes conditions under which government bureaucracy can better obtain psm motivated effort from employees than a standard profit maximizing firm the model also provides an efficiency rationale for low powered incentives in both bureaucracies and other organizations producing social services 2000 elsevier science s a all rights reserved

worker allocation hierarchies and the wage distribution economists have traditionally viewed the allocation of workers among jobs through the concept of comparative advantage this paper investigates hierarchical production models which display an absence of comparative advantage in order to demonstrate that for hierarchical production there is a second allocating factor which plays an important role two results are found first the allocation of workers among jobs tends to match high ability workers with positions which value ability highly second despite the fact that the models display an absence of comparative advantage i e the standard theoretical explanation for why wage distributions might be skewed the models wage distributions are skewed to the right relative to the underlying ability distributions

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

signaling and screening of workers motivation abstract this paper develops a model in which workers are heterogeneous in their intrinsic motivation to work at a firm we characterise optimal incentive schemes and examine how the firm can attract and select highly motivated workers to fill a vacancy when workers motivation is private information while posting a higher wage increases the probability of filling the vacancy it decreases the expected average quality of job applicants because less motivated workers are induced to apply the optimal wage scheme entails a trade off between the probability of filling the vacancy the rents left to the worker and the expected worker s motivation

racial and ethnic differences in wealth in the health and retirement study this paper examines wealth data in the health and retirement study hrs in comparison with asset data in other major surveys the quality of hrs asset data is high missing asset data does remain a problem however to which future hrs analysts must remain sensitive evidence is presented showing that it is no accident that asset data are missing and solutions for imputing missing data are developed finally racial and ethnic wealth disparities are large these minority wealth disparities are due in part to differential inheritances and desired bequests as inequities perpetuate themselves across generations the disparities are also due to lower minority incomes poorer health and an excessively narrow definition of wealth that excludes social security and employer pensions authors

does everyone use probabilities the role of cognitive skills what is the role of cognitive skills in decision making under uncertainty we address this question by examining the relationship between responses to survey questions about subjective probabilities of stock market returns and stock holding decisions based on data from the health and retirement study hrs we find that for individuals with lower cognitive skills the association between measured probabilities and decisions is weaker than for individuals with higher cognitive skills additional evidence suggests that individuals with lower cognitive skills are more likely to give heuristic answers to questions about stock return probabilities a likely explanation is that individuals with lower cognitive skills have a fuzzier mental representation of stock returns that cannot be captured by a unique well defined probability distribution in contrast individuals with higher cognitive skills are more likely to act as if subjective probabilities are meaningful measures of uncertainty we discuss whether or not the behavior of the latter can be seen as more rational

incentives wages and promotions theory and evidence i study an incentive problem that has been largely ignored in the agency literature incentives for repeated human capital investment the optimal contract is very simple but still provides rich implications for incentive and wage structures in large organizations the empirical evidence is presented using personnel records of health insurance claim processors in a large u s insurance company these processors are white collar nonmanagerial female service industry workers a rapidly growing but rarely studied labor group the empirical findings are consistent with the main features of the optimal contract

competition and incentives with motivated agents a unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission as opposed to profit as an organizational goal such mission oriented organizations are frequently staffed by motivated agents who subscribe to the mission this paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency matching economizes on the need for high powered incentives it can also however entrench bureaucratic conservatism and resistance to innovations the framework developed in this paper is applied to school competition incentives in the public sector and in private nonprofits and the interdependence of incentives and productivity between the private for profit sector and the mission oriented sector through occupational choice jel d23 d73 h41 l31 the late twentieth century witnessed a historic high in the march of market capitalism with unbridled optimism in the role of the profit motive in promoting welfare in the production of private goods moreover this generated a broad consensus on the optimal organization of private good production through privately owned competitive firms when it comes to the provision of collective goods no such consensus has emerged debates about the relative merits of public and private provision still dominate this paper suggests a contracting approach to the provision of collective goods it focuses on two key issues how to structure incentives and the role of competition between providers at its heart is the idea that organizations that provide collective goods cohere around a mission 2 thus production of collective goods can be viewed as mission oriented

modelling house price volatility states in the uk by switching arch models this article analyses investment risk in the housing market by examining volatility properties of house prices for the uk we use both arch and garch models to estimate price conditional heteroscedasticity and find evidence of a time varying property in the volatilities of the house price series we then use the swarch model and find there are three volatility states in the price series our estimations suggest the uk housing markets are relatively stable and different states do not switch very often the magnitude of high price volatility is as high as 20 99 times of the low volatility for the older housing market and 14 times of the low volatility for the new housing market in addition the older housing market is less efficient than the new housing market since the impacts of events on the volatility state of the older house prices is more lasting than in new housing market

managerial talent motivation and self selection into public management the quality of public management is a recurrent concern in many countries calls to attract the economy s best and brightest managers to the public sector abound this paper studies self selection into managerial and non managerial positions in the public and private sector using a model of a perfectly competitive economy where people differ in managerial ability and in public service motivation we find that if demand for public sector output is not too high the equilibrium return to managerial ability is always highest in the private sector as a result relatively many of the more able managers self select into the private sector since this outcome is efficient our analysis implies that attracting a more able managerial workforce to the public sector by increasing remuneration to private sector levels is not cost efficient

cognitive ability and bidding behavior in second price auctions an experimental study behavioral biases are more pronounced for individuals with lower cognitive abilities this paper examines what connection if any there is between cognitive ability and bidding strategy in second price auctions despite truthful revelation being a weakly dominant strategy previous experiments have consistently observed overbidding which makes use of such auctions for inferring homegrown value problematic examining the effect of cognitive ability is important as it may help identify when one can reliably recover values from bids the results indicate that more cognitively able subjects behave in closer accordance with theory and that cognitive ability partially explains heterogeneity in bidding behavior

nonprofit and proprietary sector behavior wage differentials among lawyers this paper focuses on earnings differentials in the for profit and private nonprofit sectors with specific reference to lawyers an earnings equation for private lawyers is estimated and is used to predict what the nonprofit sector public interest lawyers could earn in the private sector the finding is that the public interest lawyers are paid substantially less that they know this and that the financial sacrifice is permanent next a job choice equation is estimated which suggests that those lawyers who choose public interest work have different preferences from those who choose private law practices the difference may help to account for the willingness of the public interest lawyers to accept lower monetary rewards further research is needed to determine whether the differences found for lawyers in the two sectors are also found in other industries and whether such differences are found only at the level of management or at lower levels the goal is improved understanding of behavioral diff

cycles and steps in british commercial property values this paper examines cyclical behaviour in commercial property values over the period 1956 to 1996 using a structural times series unobserved components approach the influence of the transition to short rent reviews during the late 1960s and the short and long term impacts of the 1974 and 1990 property crashes are also incorporated into the analysis via dummy variables it is found that once these variables are taken into account a fairly regular cyclical pattern can be discerned with a period of about 7 8 years furthermore the 1974 and 1990 property crashes are shown to have had a major long term impact on property value growth presumably via their influence on investors expectations

enriching a theory of wage and promotion dynamics inside firms in previous work we showed that a model that integrates job assignment human capital acquisition and learning can explain several empirical findings concerning wage and promotion dynamics inside firms in this article we extend that model in two ways first we incorporate schooling and derive further testable implications that we then compare with the available empirical evidence second and more important we show that introducing task specific human capital allows us to produce cohort effects we further argue that task specific human capital is a realistic concept and may have many important implications we also discuss limitations of our extended approach

for richer for poorer assortative mating and savings preferences do couples share the same values the social sciences have mainly concentrated on comparing the socioeconomic characteristics of spouses but rarely consider their attitudes to risk and time in this paper we use conventional measurements and an original method of scoring we find that spouses are very similar in their savings preferences even when we control for the individual characteristics our results suggest that most of this relationship comes from marital sorting these conclusions are decisive in explaining the decision process within households and its implications for wealth inequalities between households since homogamy causes a divide in the population

environmental variables and real estate prices the aim of this paper is to compare various real estate valuation models and the manner in which they take into account environmental variables the reference model is taken to be a standard linear regression model including ordinal variables to measure environmental quality this type of model is widely used it is first compared with linear models which incorporate environmental quality notes extracted from the urban habitat database of a geographic information system gis which has been developed recently for geneva switzerland we also incorporate these quality notes in a single input parameter a so called geo index the price indices constructed in this way are quite similar to the more traditional hedonic model we additionally find that artificial neural network ann models which are non linear per se exhibit a similar general form of the price indices but that the detailed price behaviours of different models feature notable differences depending on the input choice of environmental variables

on the price of land and the value of amenities a house represents not only a bundle of structural characteristics but also a set of location specific characteristics adding locational coordinates and site area to other house characteristics makes it possible to estimate a land rent surface as well as thle hedonic prices attached to local patterns of land use and other neighbourhood characteristics one can then estimate how the value of such location specific characteristics are capitalized into land prices this analysis illustrated with estimates based on data from two british towns has a number of wider implications it generates a more parsimonious method of estimating amenity values it also reveals likely systematic biases produced by conventional hedonic studies which exclude land and location finally it clarifies the conceptual definition of land and suggests that monocentric models can perform well despite recent criticism

how does household portfolio diversification vary with financial literacy and financial advice household investment mistakes are an important concern for researchers and policymakers alike portfolio underdiversification ranks among those mistakes that are potentially most costly however its roots and empirical importance are poorly understood i estimate quantitatively meaningful diversification statistics and investigate their relationship with key variables nearly all households that score high on financial literacy or rely on professionals or private contacts for advice achieve reasonable investment outcomes compared to these groups households with below median financial literacy that trust their own decision making capabilities lose an expected 50 bps on average all group differences stem from the top of the loss distribution