aging and inequality in income and health in our earlier work we used data from the national health interview survey nhis to examine life cycle patterns in health status and in the joint distribution of health status and income deaton and paxson 1998 in this paper we summarize and extend those results and provide new evidence from the panel study of income dynamics psid both surveys contain a measure of household income and collect information on an ordinal measures of self reported health status srhs that ranges from 1 excellent to 5 poor section i concerns problems related to the measurement of inequality in health section ii presents evidence from the two surveys on health and income inequality this abstract was borrowed from another version of this item

learning and wage dynamics we develop a dynamic model of learning about worker ability in a competitive labor market the model produces three testable implications regarding wage dynamics 1 although the role of schooling in the labor market s inference process declines as performance observations accumulate the estimated effect of schooling on the level of wages is independent of labor market experience 2 timeinvariant variables correlated with ability but unobserved by employers such as certain test scores are increasingly correlated with wages as experience increases and 3 wage residuals are a martingale we present evidence from the nlsy that is broadly consistent with the model s predictions

risk aversion and the intertemporal behavior of asset prices in this article we characterize economies in which both cash flows and forward prices follow random walks we show in the case of geometric random walks that the preferences of the representative investor are of the constant proportional risk aversion type we also show the conditions under which spot prices follow random walks and under which the equivalent martingale measure is non state dep endent

a theory of socio economic disparities in health over the life cycle motivated by the observation that medical care explains only a relatively small part of the ses health gradient we present a life cycle model that incorporates several additional behaviours that potentially explain jointly a large part of observed disparities as a result the model provides not only a conceptual framework for the ses health gradient but more generally an improved framework for the production of health we derive novel predictions from the theory by performing comparative dynamic analyses more generally our comparative dynamic method can be applied to models of similar form e g human capital health deficits firm investment to name a few

the well being of the elderly and wage arrears in russia about one third of households with elderly were not paid their wages during the mid 1990s in russia applying matching estimations to a nationally representative survey the study shows that wage arrears had detrimental effects on the well being of the elderly in these families salaries in households with wage arrears dropped by almost two thirds income fell by more than one third and poverty doubled behavioral responses were only partly effective the net revenue loss amounted to five sixths of the wage shock for men and nine tenths of the wage shock for women the elderly cut back on food expenses by reducing food purchases and adjusting their diet towards cheaper calories economising on expenses equal to around one quarter of the wage reduction caloric and protein intakes dropped although less than income and the nutritional content of food consumption with regard to vitamins and minerals deteriorated wage arrears worsened male health more than female health even though the decline in income was comparable functional limitations rose by 8 for men and 3 for women and self rated health declined by 2 5 for men and 0 5 for women old age men with arrears were almost twice as likely to die before the next survey round and functional limitations of surviving men rose by more than 10 by contrast there was no impact on the next round s health status of old age women a rich data set is used to discount alternative explanations including feedback from health to income other economic factors health service access health behavior and environmental conditions jel i12 i30 j14 j30

family income and child health in the uk recent studies examining the relationship between family income and child health in the uk have produced mixed findings we re examine the income gradient in child general health and its evolution with child age in this country using a very large sample of british children we find that there is no correlation between income and child general health at ages 0 1 that the gradient emerges around age 2 and is constant from age 2 to age 17 in addition we show that the gradient remains large and significant when we reduce the endogeneity of income furthermore our results indicate that the gradient in general health reflects a greater prevalence of chronic conditions among low income children and a greater severity of these conditions taken together these findings suggest that income does matter for child health in the uk and may play a role in the intergenerational transmission of socioeconomic status

setting standards for credible compliance and law enforcement in this paper we examine the setting of optimal legal standards to simultaneously induce parties to invest in care and to motivate law enforcers to detect violators of the law the strategic interaction between care providers and law enforcers determines the degree of efficiency achieved by the standards our principal finding is that some divergence between the marginal benefits and marginal costs of providing care is required to control enforcement costs further the setting of standards may effectively substitute for the setting of fines when penalties for violation are fixed in particular maximal fines may be welfare reducing when standards are set optimally nous considerons dans cet article la determination en information incomplete de normes legales optimales pour a la fois inciter les citoyens a faire preuve de diligence prevention et motiver les agents de la paix a veiller au respect des lois l interaction strategique entre citoyens et agents de la paix determine l efficacite des normes choisies notre resultat principal est a l effet qu un ecart entre benefices marginaux et couts marginaux de la diligence est necessaire afin de reduire les couts d application des lois de plus les normes peuvent etre un substitut aux amendes lorsque les penalites pour infraction sont fixes des amendes maximales peuvent en particulier etre contre indiquees lorsque les normes sont optimalement determinees

attitudes toward risk and the risk return paradox prospect theory explanations this study attempted to explain bowman s risk return paradox in terms of recent research in behavioral decision theory and prospect theory the research emphasized the role of reference or target

joint confidence intervals for income shares and lorenz curves in a recent paper beach and davidson 1983 extended the principles of statistical inference to lorenz curves and income shares by establishing the asymptotic distribution and covariance structure of a vector of lorenz curve ordinates corresponding to a set of quantile abscissae one can thus use the lorenz curve and income shares no longer just as descriptive devices for summarizing distribution information but now also as analytical tools for comparing alternative distributions and carrying out conventional statistical inference on them it would clearly be desirable however to extend and complement this work by providing a method for computing a set of joint confidence intervals about these income shares and for illustrating graphically a joint confidence band about a set of estimated lorenz curve ordinates the present paper provides a new and simple technique for doing this when analyzing differences between sets of income shares or lorenz curves one typically wants to elicit more detailed information than is provided by a standard joint chi square test on the overall set of shares that is when the hypothesis of two sets of shares being the same is rejected we generally want to know further which particular differences in shares are different from zero and of these nonzero differences which are positive and which negative savin 1980 a natural way of providing such information is through multiple comparison procedures developed in this paper in a recent work richmond 1982 has developed a general method of finding multiple comparison intervals that is particularly suited to the present problem and in this situation appears to dominate other conventional alternatives in contrast for example to scheff s s projection method richmond s approach focuses on a set of primary points of interest income shares among a more general set of points including the lorenz curve ordinates and optimizes the joint confidence interval lengths on this primary set of points since estimated lorenz curve ordinates are built up from underlying income shares these shares perhaps further supplemented are natural choices for the primary set the method however also provides a joint confidence band that geometrically bounds the set of lorenz curve ordinates and interpolated segments between them the present

legal principles in antitrust enforcement we study antitrust enforcement to channel price fixing incentives of cartels through setting fine schedules and detection levels fines obey legal principles punishments fit the crime proportionality bankruptcy considerations and minimum fines bankruptcy considerations limit maximum fines ensure abnormal cartel profits and impose a challenge for optimal antitrust enforcement we derive the fine schedule and detection level that are constrained optimal under legal principles and sustainability of cartel prices this fine schedule lies below the maximum fine makes collusion on lower prices more attractive than on higher prices and hence relates to marginal deterrence literature this article is protected by copyright all rights reserved

the effect of income on mortality evidence from the social security notch abstract legislation in the 1970s created a notch in social security payments with those born after january 1 1917 receiving sharply lower benefits using restricted use versions of the national mortality detail file combined with census data we use this quasi experiment to examine the income mortality link in an elderly population estimates from difference in difference and regression discontinuity models show the higher income group has a statistically significantly higher mortality rate contradicting the previous literature we also found that younger cohorts responded to lower incomes by increasing postretirement work effort suggesting that moderate employment has beneficial health effects for the elderly

the causal effect of income on health evidence from german reunification we investigate whether there was a causal effect of income changes on the health satisfaction of east and west germans in the years following reunification our data source is the german socio economic panel gsoep between 1984 and 2002 and we fit a recently proposed fixed effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition we find evidence of a significant positive effect of income changes on health satisfaction but the quantitative size of this effect is small this is the case with respect to current income and a measure of permanent income

the long term impact of military service on health evidence from world war ii and korean war veterans during the world war ii and korean war era the u s military freely distributed cigarettes to overseas personnel and provided low cost tobacco products on domestic military bases in fact even today the military continues to sell subsidized tobacco products on its bases using a variety of instrumental variables approaches to deal with nonrandom selection into the military and into smoking we provide substantial evidence that cohorts with higher military participation rates subsequently suffered more premature mortality more importantly we show that a large fraction 35 to 79 percent of the excess veteran deaths due to heart disease and lung cancer are attributable to military induced smoking

prospect theory and the risk return relation some belgian evidence in this study fiegenbaum and thomas s application of prospect theory to empirically derived risk return relations was replicated and extended with belgian accounting data four profitability varia

estimating the effect of income on health and mortality using lottery prizes as an exogenous source of variation in income a vast literature has established a strong positive relation between income and health status and a negative relation with mortality this paper studies the effects of income on health and mortality using only the part of income variation due to a truly exogenous factor monetary lottery prizes of individuals the findings are that higher income causally generates good health and that this effect is of a similar magnitude as when traditional estimation techniques are used a 10 percent income increase improves health by about 4 5 percent of a standard deviation

equity in the finance of health care some international comparisons this paper presents the results of a ten country comparative study of health care financing systems and their progressivity characteristics it distinguishes between the tax financed systems of denmark portugal and the u k the social insurance systems of france the netherlands and spain and the predominantly private systems of switzerland and the u s it concludes that tax financed systems tend to be proportional or mildly progressive that social insurance systems are regressive and that private systems are even more regressive out of pocket payments are in most countries an especially regressive means of raising health care revenues

income related inequalities in mental health in great britain analysing the causes of health inequality over time using regression techniques this paper estimates the level of income related health inequality in gb in 1992 and 1998 inequality is decomposed to investigate which socio demographic factors are important contributors to health differences the paper includes a range of measured and subjective income variables to control for absolute income a relative deprivation measure is included to test the impact of income inequality on health inequality it is found that subjective financial status is a major determinant of ill health and makes a major contribution to income related inequalities in health relative deprivation is an important contributor for women but not for men

mixed markets and crime abstract this paper specifies and solves a two stage game theoretic model of a mixed market for crime control in the first stage of the model private targets and the government choose levels of policing in the second stage criminals choose targets and the severity of the crimes that they commit the paper s key results are as follows first private policing can both divert crime to targets that lack private protection and also increase the severity of the crime that these less protected targets suffer second an increase in private policing reduces the aggregate expenditure on traditional policing this is an instance of a political incentive externality where private policing affects the objective function of the government specifically it reduces the level of traditional policing that is consistent with the samuelson condition for efficient provision of a public good third the substitution of private for public policing carries with it a change in the technology of policing in effect private policing leads to a shift from enforcement and punishment towards monitoring and target hardening this in turn may lead to an increase in the severity of crime fourth the mixed policing equilibrium is inefficient and in some situations mixing may reduce the utility of all targets

incentives to innovate and social harm laissez faire authorization or penalties abstract when firms research can lead to potentially harmful innovations public intervention may thwart their incentives to undertake research by reducing its expected profitability average deterrence and may guide the use of innovation marginal deterrence we compare four policy regimes laissez faire ex post penalties and two forms of authorization lenient and strict if fines are unbounded laissez faire is optimal if the social harm from innovation is sufficiently unlikely otherwise regulation should impose increasing penalties as innovation becomes more dangerous if fines are bounded by limited liability for intermediate levels of expected social harm it is optimal to adopt indifferently penalties or lenient authorization while strict authorization becomes optimal if social harm is sufficiently likely

rising mortality and life expectancy differentials by lifetime earnings in the united states are mortality and life expectancy differences by socioeconomic groups increasing in the united states using a unique data set matching administrative and survey data this study explores trends in these differentials by lifetime earnings for the 1983 2003 period results indicate a consistent increase in mortality differentials across sex and age groups the study also finds a substantial increase in life expectancy differentials by lifetime earnings the top to bottom quintile premium increased 30 percent for men and almost doubled for women these results complement recent research to point to almost five decades of increasing differential mortality in the united states

equity and equality in health and health care this paper explores four definitions of equity in health care equality of utilization distribution according to need equality of access and equality of health we argue that the definitions of need in the literature are inadequate and propose a new definition we also argue that irrespective of how need and access are defined the four definitions of equity are in general mutually incompatible in contrast to previous authors we suggest that equality of health should be the dominant principle and that equity in health care should therefore entail distributing care in such a way as to get as close as is feasible to an equal distribution of health

inequalities in health some international comparisons there have been many attempts to compare various dimensions of inequality between different countries including particularly those relating to income and wealth however there have been relatively few international studies of inequalities in health 2 given that as has been noted by economists as eminent as kenneth arrow and amartya sen 3 individuals states of health are contributors to welfare comparable in impact to income or wealth holdings this relative poverty of health studies is surprising it cannot be explained by lack of data such studies of health inequality as do exist generally concern mortality and the data situation here is significantly better than that for other welfare indicators such as income there are extensive data available for a large number of countries although the quality varies see united nations 1982 it is likely to be generally higher than that for income data moreover there are fewer methodological problems associated with the data for obvious reasons mortality is easier to define than income and there is no problem equivalent to that of defining the income unit

the dynamics of health in the british household panel survey this paper considers the dynamics of a categorical indicator of self assessed health using eight waves 1991 1998 of the british household panel survey bhps our analysis has three focal points the relative contributions of state dependence and heterogeneity in explaining the dynamics of health the existence and consequences of health related sample attrition and the investigation of the effects of measures of socioeconomic status with a particular focus on educational attainment and income to investigate these issues we use dynamic panel ordered probit models there is clear evidence of health related attrition in the data but this does not distort the estimates of state dependence and of the socioeconomic gradient in health the models show strong positive state dependence and heterogeneity accounts for around 30 of the unexplained variation in health copyright 2004 john wiley sons ltd

real options with constant relative risk aversion real options problems have recently attracted much attention worldwide one such problem is how to deal with claims on non traded assets often there is another traded asset which is correlated to the non traded asset and this traded asset is used as a proxy for hedging purposes we introduce a second non traded log brownian asset into the well known merton investment model with power law utility the investor has a claim on units of the non traded asset and the question is how to price and hedge this random payoff the presence of the second brownian motion means that we are in the situation of incomplete markets we propose an approximation to the solution for the optimal reservation price and hedge which is accurate when the position is small in comparison to wealth the resulting loss when a suboptimal proxy strategy is followed is shown to be approximately quadratic in 1

decomposing world health inequality this study explores global inequality in health status and decomposes it into within and between country inequality we rely on standardized height as our health indicator since it avoids the measurement pitfalls of more traditional measures of health such as morbidity mortality and life expectancy it also avoids measurement problems associated with using monetary variables such as income or expenditure across time or place to compare welfare our calculation of world height inequality indicates that in contrast with similar research on income inequality within country variation is the source of most inequality rather than the differences between countries

economic status and health in childhood the origins of the gradient the well known positive association between health and income in adulthood has antecedents in childhood not only is children s health positively related to household income but the relationship between household income and children s health becomes more pronounced as children age part of the relationship can be explained by the arrival and impact of chronic conditions children from lower income households with chronic conditions have worse health than do those from higher income households the adverse health effects of lower income accumulate over children s lives part of the intergenerational transmission of socioeconomic status may work through the impact of parents income on children s health

breaking the law when others do a model of law enforcement with neighborhood externalities abstract a standard assumption in the economics of law enforcement is that the probability of a violator being punished depends only on the resources devoted to enforcement however it is often true that the productivity of enforcement resources decreases with the number of violators in this paper an individual who violates the law provides a positive externality for other offenders because the probability of being punished decreases with the number of individuals violating the law this externality explains the existence of correlation between individuals decisions to break a law the model evaluates the implications when determining the socially optimal enforcement expenditure focusing specifically on the case of neighborhood crime in particular using a parametrized functional form i show that neighborhood externalities will enhance or impede enforcement depending on the crime rate

enforcement costs and the optimal magnitude and probability of fines whenever the government uses fines to control harmful activities it incurs certain costs in connection with the enforcement process this article will show how these costs affect the optimal magnitude of fines and the optimal degree of enforcement effort that is the optimal probability of detection of those who commit harmful acts we will distinguish between two types of enforcement costs fixed enforcement costs are costs that do not depend on the number of individuals who commit harmful acts these costs would include for example the expenses borne by a pollution control agency in testing water quality in a lake variable enforcement costs are costs that do depend on the number of individuals who commit harmful acts such as the costs of prosecuting and penalizing polluters in our basic model we assume that the fixed enforcement costs are the costs of maintaining the probability of detection at a certain level and that the variable enforcement costs are the costs of fining individuals the main conclusions of this article may be summarized as follows the optimalfine equals the harm properly inflatedfor the chance of not being detected plus the variable enforcement cost of imposing the fine if the fine is of this magnitude the expected fine will equal the harm caused by the harmful act plus the expected increase in enforcement costs occasioned by it for instance suppose that the probability of detecting a

income related inequality in life years and quality adjusted life years abstract we estimate the income related inequality in sweden with respect to life years and quality adjusted life years qalys we use a large data set from sweden with over 40 000 individuals followed up for 10 16 years to estimate the survival and quality adjusted survival in different income groups for both life years and qalys we discover inequalities in health favouring the higher income groups for men women in the youngest age group 20 29 years the number of qalys is 43 7 45 7 in the lowest income decile and 47 2 49 0 in the highest income decile

health and wealth of elderly couples causality tests using dynamic panel data models a positive relationship between socio economic status ses and health the health wealth gradient is repeatedly found in many industrialized countries this study analyzes competing explanations for this gradient causal effects from health to wealth health causation and causal effects from wealth to health wealth or social causation using six biennial waves of couples aged 51 61 in 1992 from the us health and retirement study we test for causality in panel data models incorporating unobserved heterogeneity and a lag structure supported by specification tests in contrast to tests relying on models with only first order lags or without unobserved heterogeneity these tests provide no evidence of causal wealth health effects on the other hand we find strong evidence of causal effects from both spouses health on household wealth we also find an effect of the husband s health on the wife s mental health but no other effects from one spouse s health to health of the other spouse

optimal antitrust policy under different regimes of fines abstract this paper shows how antitrust laws against price fixing can be enforced efficiently in the presence of asymmetric information between the authorities and the industry and under different regimes of pecuniary punishment we consider two regimes of fines that are often used in practice the first involves a fine based on revenues of the industry while the second is related to the damage caused to consumers the analysis shows that since investigation is costly it is optimal from a welfare point of view to tolerate some degree of collusion in both cases comparing the deterrence levels we show that no regime is a priori better than the other in addition we show that for industries where the possibilities of collusion are small the first system dominates the second in terms of efficiency conversely for high possibilities of collusion the second system is better

testing for marginal changes in income distributions with lorenz and concentration curves asymptotically distribution free statistical tests for comparing absolute and relative lorenz and concentration curves are provided the procedures do not require independent samples and can be used to test for marginal changes in income distributions the tests are illustrated using a large sample of tax returns that have been randomly selected for audit by the internal revenue service the tests reveal the marginal effects of systematic underreporting of income and tax liabilities on the u s income distribution copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

socio economic inequality in ill health amongst the elderly should one use current or permanent income in belgium income related inequality in ill health among the 65 is present but reduces significantly as soon as one restricts the analysis to the 65 the main goal of this paper is to check whether these findings based on current income are robust to the income concept used the analysis is repeated using estimates of permanent income measured inequality among the 65 remains very limited suggesting that the observed findings are not heavily dependent upon the income concept finally i suggest an explanation for the observed difference in inequality between the 65 and the 65 i argue that this difference is likely to be correlated with differences across income groups of 1 sample attrition and 2 mortality

inequality aversion health inequalities and health achievement this paper addresses two issues the first is how health inequalities can be measured in such a way as to take into account policymakers attitudes towards inequality the gini coefficient and the related concentration index embody one particular set of value judgements by generalising these indices alternative sets of value judgements can be reflected the other issue addressed is how information on health inequality can be used together with information on the mean of the relevant distribution to obtain an overall measure of health achievement

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

infant mortality relative income and public policy do health outcomes depend on relative income as well as on an individual s absolute level of income we use infant mortality as a health status indicator and find a significant and positive link between infant mortality and income inequality using cross national data for 93 countries holding constant the income of each of the three poorest quintiles of a country s population we find that an increase in the income of the upper 20 of the income distribution is associated with higher not the lower infant mortality our results are robust and not just caused by the concave relationship between income and health the estimates imply a decrease in infant mortality by 1 5 for a one percentage point decrease in the income share of the richest quintile the overall results are sensitive to public policy public health care expenditure educational outcomes and access to basic sanitation and safe water can explain the inequality health relationship thus our findings support the hypothesis of public disinves

inference tests for gini based tax progressivity indexes distribution free statistical inference procedures for changes in lorenz and gini based indexes of tax progressivity are developed and applied related but distinct tests for the reynolds smolensky index of residual progression and the kakwani index of liability progression are provided the inference procedures are illustrated by applying them to luxembourg income study microdata for sweden the united kingdom and the united states before and after periods of tax reform in each country a finding of significant change depends on the choice among progressivity indexes no single index exhibits a consistent pattern of significant change in all countries across time

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

the distributional impact of health financing in europe a review this article summarises extends and updates previous empirical work on the distributional implications of alternative health care financing arrangements in a selection of european countries and the us on the one hand total health care payments are almost proportional to ability to pay in most countries this is predominantly driven by a high reliance on public financing on the other hand private payments out of pocket payments as well as private insurance premiums are highly regressive more extended reliance on private financing may therefore endanger the equitable nature of financing systems in addition private payments put a heavy burden on unfortunate households

health and income a robust comparison of canada and the us abstract this paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time it is the first application of which we are aware of methods to compare multidimensional distributions of income and health using procedures that are robust to aggregation techniques the paper s approach is more general than comparisons of health gradients and does not require the estimation of health equivalent incomes we illustrate the approach by contrasting canada and the us using comparable data canada dominates the us over the bottom part of the bi dimensional distribution of health and income though not generally over the uni dimensional distributions of health or income the paper also finds that welfare for both canadians and americans has not unambiguously improved during the last decade over the joint distribution of income and health in spite of the fact that the uni dimensional distributions of income have clearly improved during that period

an economic analysis of the optimal information security investment in the case of a risk averse firm abstract this paper presents an analysis of information security investment from the perspective of a risk averse decision maker following common economic principles using the expected utility theory we find that for a risk averse decision maker the maximum security investment increases with but never exceeds the potential loss from a security breach and there exists a minimum potential loss below which the optimal investment is zero our model also shows that the investment in information security does not necessarily increase with increasing level of risk aversion of the decision maker relationships between vulnerability and investment effectiveness and two broad classes of security breach probability functions are examined leading to interesting insights that can be used as guidelines for managers to determine the optimal level of security investment for certain types of security threats faced by risk averse firms future research directions are discussed based on the limitations and possible extensions of this study

equity in health care finance in palestine the triple effects revealed this paper presents an application of the urban and lambert upgraded ajl decomposition approach that was designed to deal with the problem of close income equals in equity analysis and as applied to the area of health care finance contrary to most previous studies vertical and horizontal inequities and the triple effects of inter groups intra group and entire group reranking of various financing schemes are estimated with statistical significance calculated using the bootstrap method application is made on the three financing schemes present in the case of the occupied palestinian territory results demonstrate the relative importance of the three forms of reranking in determining overall inequality the paper offers policy recommendations to limit the existing inequalities in the system and to enhance the capacity of the governmental insurance scheme

salaries and piece rates compensation can take many forms remuneration can come as pecuniary payments as fringes such as health and pension benefits or as a nonpecuniary reward such as plush office furniture that costs the firm less than it benefits the worker a significant literature has examined the trade offs between pecuniary and nonpecuniary compensation the modern work having been pioneered by rosen 1974 more recently another body of literature has examined the selection of method of total compensation ignoring the distinction between pecuniary and nonpecuniary payment this work has focused on risk and incentive factors it has resulted in comparisons of compensation based on absolute output levels to that based on relative performance it has also led to explorations of the relation of compensation to experience over the work life 2 little attention has been paid to what may be among the most important and obvious distinction in methods of compensation namely the choice between a fixed salary for some period of time that is paying on the basis of input and some workers receive compensation that is specified in advance and not directly contingent on performance instead it depends on an input measure such as hours worked for others compensation is directly related to output this essay is an attempt to predict a firm s choice of compensation method piece rates are defined more rigorously among the more important factors discussed are worker heterogeneity incentives sorting considerations monitoring costs and asymmetric information one result is that salary workers tend to be of lower quality and more homogeneous than are their piece rate counterparts numerous additional results are provided helpful comments by victoria lazear and yoram weiss are gratefully acknowledged support was provided by the department of labor and the national science foundation 1 see lazear and rosen 1981 stiglitz 1981 holmstrom 1982 green and stokey 1983 2 see lazear 1979 1981 and harris and holmstrom in press

marginal deterrence in enforcement of law we characterize optimal enforcement in a setting in which individuals can select among various levels of some activity all of which are monitored at the same rate but may be prosecuted and punished at varying rates for less harmful acts marginal expected penalties ought to fall short of marginal harms caused indeed some range of very minor acts should be legalized for more harmful acts whether marginal expected penalties should fall short of or exceed marginal harms depends on the balance between monitoring and prosecution punishment costs we also explore how the optimal enforcement policy varies with changes in these costs

avoidance screening and optimum enforcement a standard assumption in the economic literature on crime and punishment is that fines are costless transfers given this assumption several economists have argued that it is optimal to set the fine for engaging in a proscribed activity as high as possible the argument is a simple one raising the probability of a fine is costly since it requires devoting more resources to monitoring and apprehending individuals in contrast raising the magnitude of a fine is costless therefore the least costly way to achieve a given expected fine is to set the fine as high as possible presumably equal to the offender s wealth and adjust its probability so that the desired expected fine is obtained

effects of income inequality on population health new evidence from the european community household panel this study provides new evidence in order to explore the relationship between income inequality and health in the european union countries using new data from the european community household panel echp a variety of different specifications were tried using diverse dependent variables such as life expectancy at birth and child mortality the results show new support to the influence of income inequality on health indicators using aggregate data and panel techniques

accidental bequests a curse for the rich and a boon for the poor when accidental bequests signal otherwise unobservable individual characteristics such as productivity and longevity the population should be partitioned into two groups those who do not receive an inheritance and those who do the first tagged group receives a mirrlees second best tax schedule the second group when its type is fully revealed faces a first best tax schedule receiving an inheritance makes high ability types worse off and low ability types better off high ability individuals face a bequest tax of more than 100 percent while low ability types face a bequest tax that can be smaller as well as larger than 100 percent and it might even be negative

statistical inference of progressivity dominance an application to health care financing distributions this paper employs a distribution free statistical test suitable for comparisons based on dependent samples to analyse changes in health care financing distributions on finnish data in distinction to the more general summary index approach used in most studies of progressivity measurement the difference between the lorenz curve of income inequality and the concentration curves of various taxes and payments is used to evaluate progressivity dominance and changes in progressivity sample weights are applied to account for the effect of sampling design and non response the analysis demonstrates that the dominance approach can be successfully applied to various types of distributional problems besides comparisons concerning differences in income distributions as an empirical application the paper presents estimation results for the progressivity of various health care financing sources using data from the 1987 and 1996 finnish health care surveys

reasonable doubt and the optimal magnitude of fines should the penalty fit the crime models of the enforcement compliance relationship have assumed that both the probability and magnitude of fines are independent choice variables of policy makers these models indicate that it may be optimal to monitor with lowfrequency but to inflict uniformly maximal penalties for all infractions detected this article shows that if the judicial system is built on the reasonable doubt test then the penalty and the probability of conviction are not independent in particular as the penalty increases the probability of conviction falls as a result uniformly maximal penalties may actually encourage crime rather than deter it this article shows that optimal fines should rise with the severity of the infraction that is the penalty should fit the crime models of the enforcement compliance relationship generally treat both the probability and magnitude of fines as independent choice variables of the government this approach has led becker 1968 and others to conclude that it is optimal to set uniformly maximal penalties for all crimes and to set the probability of conviction at the minimum level necessary to enforce compliance with the law while this normative prescription is natural and intuitive there still remains a larger positive question of why in most nations of the world penalties are not uniformly high but rather rise with the severity of the crime one possible resolution of the positive and normative questions may lie in the fact that penalties and probabilities of conviction are not generally independent convictions are typically determined by judges or jurors who are instructed to convict only if the evidence convinces them beyond a reasonable doubt that the accused is guilty psychologists however have found that a juror s willingness to convict may be influenced by more than just the evidence jurors are very sensitive to the potential penalties that defendants may pay

the impact of income shocks on health evidence from cohort data we study the eect of permanent income innovations on health for a prime aged population using information on more than half a million individuals sampled over a twenty five year period in three dierent cross sectional surveys we aggregate data by date of birth cohort to construct a synthetic cohort dataset with details of income expenditure socio demographic factors health outcomes and selected risk factors we then exploit structural and arguably exogenous changes in cohort incomes over the eighties and nineties to uncover causal eects of permanent income shocks on health we find that such income innovations have little eects on health but do aect health behaviour and mortality

assessing equitable health financing for universal health coverage a case study of south africa abstractthis article argues that an assessment of progressivity over time can provide an indication of progress towards a more progressive or a less regressive health financing system and can be useful to policymakers it introduces a framework to characterize shifts in progressivity in health financing between two time periods using the popularly known kakwani index of progressivity and other associated indices it also decomposes the shifts in progressivity into the relative contributions of the changes in income distribution and the changes in the distribution of health payments further it proposes graphics that statistically analyses how the shifts in progressivity vary along the distribution of income a pro poor pro rich shift implies that the health financing mechanism is becoming more less progressive or less more regressive between two time periods a proportional shift means that progressivity is constant between the two periods this framework is applied to nationally represen

statistical inference for the measurement of the incidence of taxes and transfers we establish the asymptotic sampling distribution of general functions of quantile based estimators computed from samples that are not necessarily independent the results provide the statistical framework within which to assess the progressivity of taxes and benefits their horizontal inequity and the change in the inequality of income which they cause by the same token these findings characterise the sampling distribution of a number of popular indices of progressivity horizontal inequity and redistribution they can also be used to assess welfare and inequality changes using panel data and to assess poverty when it depends on estimated population quantiles we illustrate these results using micro data on the incidence of taxes and benefits in canada

health and financial strain evidence from the survey of consumer finances using data from the survey of consumer finances this study examines the relationship between health status and financial strain controlling for the dual endogeneity between the two factors simultaneous two stage probit models are estimated for self reported health status and three measures of financial strain the results from all three models indicate that poor health significantly increases the probability of financial strain there is little evidence that financial strain contributes to poor health the findings suggest that severe health conditions may result in larger financial burdens while large financial burdens are unlikely to accelerate a decline in health status in the end health may be contributing to widening financial disparities especially among the poor who are in poor health

natural resource abundance and healthcare efficiency in appalachia a robust conditional approach abstract this study investigates the role of natural resource abundance on healthcare efficiency in appalachia unconditional efficiency measures are calculated from a production process where health inputs are turned into health outcomes we utilize a non parametric robust order m estimator where we condition our efficiency measures on secondary environmental variables that do not directly impact health in a production process unlike the unconditional estimation procedure which impacts the shape of the production frontier as well as the distance to the frontier the secondary environmental variables alter the location of the production frontier with corresponding effects on efficiency we find that taking into account the relatively worse socioeconomic and healthcare conditions in appalachia improves healthcare efficiency by 1 6 and 1 9 percentage points respectively the presence of natural resource extraction measured by oil natural gas or coal production worsens healthcare efficiency by 0 14 percentage points another vehicle of the resource curse regressing the conditional efficiency estimates on secondary environmental variables shows that counties with natural resource production are further from the production frontier and therefore more inefficient findings suggest that policymakers can improve health efficiency by incentivizing positive health behaviors such as reduced obesity and smoking rates which would mimic health improving inputs in a production process

healthy bodies and thick wallets the dual relation between health and economic status there is abundant evidence of a quantitatively large association between many measures of economic status including income and wealth and a variety of health outcomes such as mortality or morbidity however considerable and often heated debate remains especially across disciplines about the direction of causation and about why the association arises although medical scientists are often convinced that the dominant if not exclusive pathway is that variation in socioeconomic status produces health disparities they are increasingly debating among themselves about why low economic status might lead to poor health at least for modern industrial countries 1 the old standby arguments the less well to do have access to less or lower quality medical care or a stronger pattern of deleterious personal behaviors have been rejected as insufficient instead a series of intriguing competing theories have arisen that emphasize long term impacts of early childhood or even inter uterine environmental factors the cumulative effects of prolonged exposures to individual stressful events or reactions to macro societal factors such as rising levels of income inequality a common link is that each theory attempts to document the physiological processes through which low economic status leads to poorer health while these scientific questions are extremely important this research has taken place with little input from economists economists are now making contributions about the alternative pathway the impact poor health may have on economic resources poor health may restrict a family s capacity to earn income or to accumulate assets by limiting work or by raising medical expenses at a minimum this work should provide a caution against exaggerating the magnitude of causation from economic status to health outcomes but the potential contribution runs deeper as people age the evolving variation in individual health outcomes may offer additional statistical information to estimate parameters of household savings and consumption behavior that so far have proven to be somewhat elusive thus incorporating health uncertainty and risk into economic models should eventually enrich our understanding of basic tenets of household behavior the first section of this paper documents the size of the association between health and one prominent economic status measure household wealth section two deals with how health influences economic status by sketching out reasons why health may alter household savings and eventually wealth and then providing estimates of the empirical magnitude of these effects section three shifts attention to the alternative pathway the links between economic status and health and summarizes 2major controversies and evidence surrounding these issues

on allocative distortions in problems of self selection this article considers the general structure of self selection models by imposing conditions which permit the ordering of agents by their preferences we provide a characterization of the distortions inherent in the sorting process

persistence in health limitations a european comparative analysis this paper investigates the persistence in health limitations for individuals within the member states of the european union we use the full eight waves of data available in the european community household panel echp to explore the relative contributions of state dependence unobserved heterogeneity and socioeconomic characteristics in particular income education and activity status and how these vary across countries we focus on binary measures of health limitations constructed from the answers to the question are you hampered in your daily activities by any physical or mental health problem illness or disability dynamic non linear panel data models are specified and estimated using both pooled and random effects probit and logit models together with complementary log log models the random effects probit specifications are preferred results reveal high state dependence of health limitations which remains after controlling for measures of socioeconomic status there is heterogeneity in the socioeconomic gradient across countries

why zero tolerance of misconduct is undesirable in contests competition can foster misconduct in any circumstance where the organizer of a contest cannot perfectly monitor contestants actions or when doing so is prohibitively costly although misconduct comprises all actions that are contrary to the interest of the organizer it is not necessarily the case that it is optimal to prohibit all such behavior in this paper we determine the equilibrium level of misconduct chosen by players in a symmetric rank order tournament between two competitors in which the organizer tolerates some level of misconduct in addition to showing that zero tolerance may not minimize the level of misconduct in equilibrium we show that there exists a range of tolerated misconduct where a symmetric mixed strategy equilibrium exists with players cheating i e misconduct above the tolerated level with some probability when the gain from misconduct is uncertain and unknown the contest organizer faces a tradeoff tolerating more misconduct will reduce such behavior when the state of temptation is high but increase it when temptation is low jel j33 k42

self assessed health reference levels and mortality the paper studies the relationship between self assessed health and subsequent mortality in the german socio economic panel specifically i examine whether socio economic characteristics of respondents have an effect on mortality conditional on self assessed health such conditional effects are shown to exist for various covariates including age income and wealth these findings question the comparability of self assessed health across different socio economic groups

optimising criminal behaviour and the disutility of prison we use rich microdata on bank robberies to estimate individual level disutilitiesities of imprisonment the identification rests on the money versus apprehension trade off that robbers face inside the bank when deciding whether to leave or collect money for an additional minute the distribution of the disutility of prison is not degenerate generating heterogeneity in behaviour our results show that unobserved heterogeneity in robber ability is important for explaining outcomes in terms of haul and arrest furthermore higher ability robbers are found to have larger disutilities suggesting that increased sentence lengths might effectively target these more harmful criminals

fair retirement under risky lifetime a premature death unexpectedly brings a life and a career to their end leading to substantial welfare losses we study the retirement decision in an economy with risky lifetime and compare the laissez faire with egalitarian social optima we consider two social objectives 1 the maximin on expected lifetime welfare allowing for a compensation for unequal life expectancies and 2 the maximin on realized lifetime welfare allowing for a compensation for unequal lifetimes the latter optimum involves in general decreasing lifetime consumption profiles as well as raising the retirement age this result is robust to the introduction of unequal life expectancies and unequal productivities

equity in the finance of health care some further international comparisons this paper presents further international comparisons of progressivity of health care financing systems the paper builds on the work of wagstaff et al wagstaff a van doorslaer e et al 1992 equity in the finance of health care some international comparisons journal of health economics 11 pp 361 387 but extends it in a number of directions we modify the methodology used there and achieve a higher degree of cross country comparability in variable definitions we update and extend the cross section of countries and we present evidence on trends in financing mixes and progressivity

public financing of health expenditures insurance and health outcomes the effects of public financing of health expenditures insurance coverage and other factors on health outcomes are examined within health production models estimated using 1960 1992 data across 20 oecd countries mortality rates are found to depend on the mix of health care expenditures and the type of health insurance coverage increases in the publicly financed share of health expenditures are associated with increases in mortality rates increases in inpatient and ambulatory insurance coverage are associated with reduced mortality the effects of gdp health expenditures and age structure on mortality are similar to those in previous studies tobacco use alcohol use fat consumption female labour force participation and education levels are also significantly related to overall mortality rates increases in income inequality are associated with lower mortality rates suggesting that the negative relationship between inequality and health outcomes suggested by some previous studies does not remain w

marginal deterrence at work abstract the marginal deterrence principle of law enforcement implies that penalties must be scaled according to the severity of crimes in order to deter individuals from committing more severe offenses in this paper we test whether the us legal system is consistent with the rational economic model of marginal deterrence to this purpose we use novel and unique data on sentence length for a large sample of inmates in us correctional facilities combined with an official ranking of crimes by severity and with proxies for the maximum possible punishment and for the cost of monitoring criminals specifically the cost of policing in each us state over a period spanning up to 50 years we find that sentences are on average longer in states where maximum punishment is higher and monitoring cost is lower we document that these relations are systematically stronger in states where the private benefits from crime are more heterogeneous finally we show that sanctions increase relatively faster with the severity of crimes in states with higher maximum punishment and lower monitoring cost overall these results point to the rational economic model of marginal deterrence as providing a reasonable description of the actual enforcement policies chosen by regulators

the optimal use of fines and imprisonment abstract this paper examines the use of fines and imprisonment to deter individuals from engaging in harmful activities these sanctions are analyzed separately as well as together first for identical risk neutral individuals and then for two groups of risk neutral individuals who differ by wealth when fines are used alone and individuals are identical the optimal fine and probability of apprehension are such that there is some underdeterrence if individuals differ by wealth then the optimal fine for the high wealth group exceeds the fine for the low wealth group when imprisonment is used alone and individuals are identical the optimal imprisonment term and probability may be such that there is either underdeterrence or overdeterrence if individuals differ by wealth the optimal imprisonment term for the high wealth group may be longer or shorter than the term for the low wealth group when fines and imprisonment are used together it is desirable to use the fine to its maximum feasible extent before possibly supplementing it with an imprisonment term the effects of risk aversion of these results are also discussed

marginal deterrence when offenders act sequentially marginal deterrence concerns the incentives created by criminal penalties for offenders to refrain from committing more harmful acts we show that when offenders act sequentially it is often optimal for the level of the sanction not just the expected sanction to rise with the severity of the act even when enforcement is specific

competition and equity in health care markets we provide a model where hospitals compete on quality under fixed prices to investigate how hospital competition affects i quality differences between hospitals and as a result ii health inequalities across hospitals and patient severities the answer to the first question is ambiguous and depends on factors related to both demand and supply of health care whether competition increases or reduces health inequalities depends on the type and measure of inequality health inequalities due to the postcode lottery are more likely to decrease if the marginal health gains from quality decrease at a higher rate whereas health inequalities between high and low severity patients decrease if patient composition effects are sufficiently small we also investigate the effect of competition on health inequalities as measured by the gini and the generalised gini coefficients and highlight differences compared to the simpler dispersion measures

optimal environmental taxation and enforcement policy abstract we study the optimal environmental taxation and enforcement policy when i the regulator does not know the firms abatement costs ii penalties for tax evasion are limited and iii monitoring of pollution is costly we show that the threat of being audited alter the usual firms incentives to over estimate their abatement costs in particular depending on the firms abatement costs the optimal policy may involve over or under deterrence compared to the full information outcome we then investigate the properties of a pollution standard we show that this policy comes close to an environmental tax once the economic incentives of the accompanying enforcement policy are considered