how to beat the random walk an empirical model of real exchange rates abstract an econometric model is developed for all possible bilateral real exchange rates between the united states the united kingdom germany and japan for the period february 1977 to june 1987 we extend the standard dornbusch frankel type of models using an error correction approach with an observable macro economic determinant of the long run real exchange rate for the econometric analysis we develop an efficient estimator by pooling the data for all currencies contrary to previous empirical tests on the long run behaviour of real exchange rates we find a notable and significant mean reversion component

control rights in complex partnerships this paper develops a theory of the allocation of authority between two players who are in a complex partnership that is a partnership which produces impure public goods we show that the optimal allocation depends on technological factors the parties valuations of the goods produced and the degree of impurity of these goods when the degree of impurity is large control rights should be given to the main investor irrespective of preference considerations there are some situations in which this allocation is optimal even if the degree of impurity is very low as long as one party s investment is more important than the other party s if the parties investments are of similar importance and the degree of impurity is large shared authority is optimal with a greater share going to the low valuation party if the importance of the parties investments is similar but the degree of impurity is neither large nor small the low valuation party should receive sole authority we analyze an extension in which side payments are infeasible we check for robustness of our results in several dimensions such as allowing for multiple parties or for joint authority and apply our results to interpret a number of complex partnerships including those involving schools and child custody jel d02 o23 h41 l31

capital utilization economies of scale and technical change in the growth of total factor productivity an explanation of south korean manufacturing growth abstract this paper presents a method of interpreting the growth of total factor productivity directly linking the productivity growth to key parameters of a specific cost function it shows that the productivity index can be decomposed into effects due to a technical change b non constant returns to scale and c change in capital utilization the decomposition framework was applied to data on south korean manufacturing during the 1961 1980 period in south korean manufacturing the total factor productivity was found to have grown at 3 per annum scale economies contributed about 38 of the growth of tfp the technical change 45 and the change in the capital utilization rate 17 the results of this study support of the view that for growing less developed economies the growth in capital utilization rate is a source of growth in total productivity that is too significant to be ignored

rational household labor supply traditionally household behavior is derived from the maximization of a unique utility function in this paper we propose an alternative approach in which the household is modeled as a two member collectivity taking pareto efficient decisions the consequences of this assumption are analyzed in a three good model in which only total consumption and each member s labor supply are observable if the agents are assumed egoistic i e they are only concerned with their own leisure and consumption it is possible to derive falsifiable conditions upon household labor supplies from both a parametric and nonparametric viewpoint if alternatively agents are altruistic restrictions obtain in the nonparametric context useful interpretation stems from the comparison with the characterization of aggregate demand for a private good economy

children as collective goods and divorce settlements the failure of many divorced fathers to comply with court mandated child support awards has been identified as a major reason why a growing number of children live in poverty in female headed households this paper presents a model that seeks to explain why so many divorced fathers allow their children s welfare to suffer as a consequence of divorce the point of departure is the recognition that children are collective consumption goods from the point of view of the father and mother within marriage proximity and altruism serve to overcome the free rider problem associated with the provision of public goods however on divorce the noncustodial parent suffers a loss of control over the allocative decisions of the custodial parent and it is not feasible for the couple to achieve a pareto optimal allocation of their joint resources a model of optimal marriage contracts is constructed in which a couple decides on the allocation of resources within marriage and on the terms of a settlement in the event

are the discounts on closed end funds a sentiment index in investor sentiment and the closed end fund puzzle charles lee andrei shleifer and richard thaler 1991 claim to solve not one but two longstanding puzzles discounts on closed end funds and the small firm effect both according to lee et al are driven by the same waves of small investor sentiment killing two such elusive birds with one stone would be a neat trick indeed if lee et al could bring it off but they can t measured properly the comovement between fund discounts and small firm returns is neither strong enough nor robust enough to support their common sentiment story the case of lee et al rests mainly on their key table iv in which monthly returns for 10 separate size grouped portfolios are regressed on monthly changes in the discount of a value weighted portfolio of closed end funds avwd and the monthly return on a value weighted portfolio of nyse firms vwny for their twenty year sample period running from july 1965 to december 1985 lee et al find changes in the value weighted discount holding market returns constant to be positively related to the returns of the largest firms decile 10 but negatively related to those of all other size deciles the negative coefficient is largest for the very small firms in decile 1 leading lee et al to conclude that when individual investors become optimistic about closed end funds and smaller stocks these stocks do well and discounts narrow and when individual investors become pessimistic about closed end funds and smaller stocks smaller stocks do badly and discounts widen pp 94 95 could the observed relation between fund discounts and small firm returns be just a chance sampling fluctuation lee et al checked for robustness by dividing their sample in half and rerunning their regressions on each half separately their table vii they found the coefficient of avwd in the decile 1 regression dropped in the second subperiod by 80 percent and in absolute size fell to barely one standard error from zero similar attenuation in size and significance was noted for all other size groups the virtual disappearance of the relation between the discounts and small firm returns after 1975 might have led other researchers to abandon a common sentiment hypothesis but not lee shleifer and thaler they see

equilibrium real exchange rates closed form theoretical solutions and some empirical evidence abstract this paper generates closed form theoretical solutions for the relationships among the real exchange rate relative per capita consumption and relative wealth in a stochastic dynamic general equilibrium model of two countries representative consumers the solutions offer insight into the robust cross sectional relationship between relative per capita gdps and relative national price levels established in kravis and lipsey 1983 1987 1988 in a manner consistent with equilibrium exchange rate theories and the productivity differentials model of balassa 1964 and samuelson 1964 application of panel data from summers and heston 1988 to the model s structural equations yields economically plausible estimates of the elasticity of intertemporal substitution the relative importance of nondashtradables in consumption and the rate of time preference in several oecd countries relative to that in the united states

industrialisation catching up and economic growth a comparative study across the world s capitalist economies various hypotheses are examined seeking to explain inter country convergence at the upper end but divergence at the lower end of the world income rankings a model of disequilibrium growth with sector specific technological progress and spillover is developed and then estimated on two samples of capitalist economies 1960 85 it is found that the degree of disequilibrium between agriculture and industry is greatest in the least developed economies but their rate of labor transfer has been slow technological spillover has stimulated productivity growth in less developed agricultural sectors but not in the industrial sectors of the least developed economies copyright 1991 by royal economic society

a note on the antipoverty effectiveness of child support among mother only families the current population survey is used to examine the antipoverty effectiveness of child support social insurance and welfare among motheronly families in 1995 child support brought about 6 7 percent of pretransfer poor mother only families over the poverty line an effect similar to that of social insurance and welfare a brief trend analysis shows that child support s antipoverty effectiveness has been growing some potential reasons why child support s effect is still so small in the face of substantial changes in child support policy are hypothesized

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

rationalizing child support decisions the authors provide a framework within which the child support compliance decisions of noncustodial fathers and the child support awards set by institutional agents can be coherently interpreted the model of child support transfers is able to capture qualitatively the features of the monthly payment distribution estimated parental decision rules are used to infer the implicit weights given by institutional agents to the postdivorce welfare of parents and children the authors find that the weight attached to the combined welfare of the custodial mother and child is significantly less than the weight given to the father s welfare in most sample cases copyright 1995 by american economic association

the effect of child support policies on visitations and transfers recent research on child support issues has been concerned with normative problems involvingthe distribution of welfare between divorced parents and their children as well as with the assess ment of the behavioral responses of parents to child support orders and custody arrangements see e g del boca and flinn 1995 gar nkel and klawitter 1990 bartfeldt and gar nkel 1996 del boca 1996 del boca and ribero 1998 and flinn 2000 while there is bynow an extensive literature analyzing the e ects of child support policies on monetary transfersof noncustodial parents and the extent of compliance with child support orders little researchhas been done on the relationship between monetary transfers between parents and the divisionof the child s time while income transfers to the custodial parent are no doubt importantfor the child s consumption and general well being there exists considerable empirical evidencesuggesting that the division of the child s time between the parents has important e ects on thechild s welfare beller and graham 1993 there have been few analyses of this relationship weiss and willis 1985 provide one theoretical motivation for the positive relationship betweenthe noncustodial parent s contact time with the child and their level of transfers they claimthat increased contact time allows better monitoring of the custodial parent s expenditures onthe child which induces higher levels of transfers to the custodial parent we have developed a model del boca and ribero 1999 in which visitations and childsupport are the outcomes of a negotiation process whereby the father exchanges income forvisitation time institutional agents such as judges state legislatures etc can impact thewelfareofthemembersofthenonintactfamilybyalteringtheendowmentsofeachofthe1

what do saving investment relationships tell us about capital mobility abstract this paper re examines the tests of international capital mobility based on saving investment regressions originated by feldstein while analyses of various measures of capital controls provide some support for the feldstein hypothesis it is shown that the existence of nontraded goods can independently lead to a saving investment correlation this theoretical critique is supported empirically an analysis of the stability of the coefficients resolves the oft reported puzzle in the literature that economies appear to have become increasingly closed financially over time

transfers among divorced couples evidence and interpretation we analyze divorce settlements made by a cohort of whites who graduated from high school in 1972 the effects of spouses incomes on the divorce transfer are estimated and used to simulate the welfare effects of divorce on husbands wives and children under alternative assumptions about marriage contracts and the ability of a couple to continue coordinating resources in the aftermath of divorce we find a positive negative relationship between divorce transfers and the growth of husband s wife s earnings during marriage the estimated expenditure on children in the divorce state is only half the accustomed level during marriage

the response of exchange rates to permanent and transitory shocks under floating exchange rates abstract using the joint behavior of inflation and real exchange rates we develop an empirical model to uncover the sources of the fluctuations in the real dollar exchange rates of four major industrial countries under the current float this model allows us to construct two time series for each country pair one representing the permanent component of each real exchange rate and the other the purely transitory component over the period as a whole transitory shocks played a relatively small but statistically significant role real dollar exchange rates therefore did not simply evolve in response to permanent shocks instead there are instances in which temporary shocks made a substantial contribution we conclude that the random walk model though an approximate statistical description of real exchange rate behavior is a poor guide to model structure jel f31

how are stock prices affected by the location of trade abstract we examine pairs of large siamese twin companies whose stocks are traded around the world but have different trading and ownership habitats twins pool their cash flows so with integrated markets twin stocks should move together however the difference between the prices of twin stocks appears to be correlated with the markets on which they are traded most i e a twin s relative price rises when the market on which it is traded relatively intensively rises we examine several explanations of this phenomenon including the discretionary use of dividend income by parent companies differences in parent expenditures voting rights currency fluctuations ex dividend date timing issues and tax induced investor heterogeneity only the last hypothesis can explain some but not all of the empirical facts we conjecture that a country specific sentiment shocks might affect share intensity b investors are rational but markets are segmented by frictions other than international transactions costs such as agency problems

the wisconsin child support assurance system estimated effects on poverty labor supply caseloads and costs the economic impact of a child support assurance system csas is simulated with microdata on custodial families in wisconsin the csas includes a uniform child support standard automatic wage withholding a minimum child support benefit and wage subsidy for eligible families the simulation incorporates a model of the labor supply decision representing the custodial parent s choice of whether to participate in csas or in the current afdc system the results suggest that csas can significantly reduce poverty as well as welfare caseloads if child support collections increase by one half of the difference between estimated ability to pay child support and current collections csas will be less costly than the current system

comparative productivity of korean manufacturing 1967 1987 this paper compares productivity levels in south korean manufacturing with those in the usa for 13 manufacturing branches the comparison is based on specific industry of origin purchasing power parities value added per hour worked in korean manufacturing rose from only 4 5 percent of the us level in 1967 to more than 18 percent in 1987 total factor productivity rose from only 9 percent in 1967 to 26 percent of the us level in 1987 at a more detailed level especially the leather metals and machinery industries have reached high productivity levels some of which approach levels in european manufacturing the considerable labour productivity gap between korea and the united states can partly be explained by capital intensity structural effects size effects and levels of education

explaining the relative decline of agriculture a supply side analysis for indonesia the relative decline of agriculture in growing economies is a central feature of economic development and a major influence on agricultural policies the literature on the causes of this decline has focused on the relative price effects arising from demand factors especially engel s law rather than on supply side influences such as changes in relative factor endowments and differential rates of technical change this article develops a simple structural model of the transformation of the indonesian economy applying an error correction mechanism to capture the dynamics resulting from disequilibria and the costs of adjustment the decline in agriculture s share of gross domestic product is found to be caused much less by the relative price effects typically emphasized in the literature than by capital accumulation and rapid technical change in agriculture

exchange rate regimes and national price levels this paper explores the role of exchange rate regimes in explaining deviations from the classic theory of purchasing power parity examining a broad panel of countries i find that developing countries with fixed exchange rate regimes have national price levels that are 20 percent higher than those with flexible regimes for industrial countries the relation between regimes and price levels is qualitatively similar but weaker i investigate several explanations for this pattern and find that exchange rate overshooting in floats inflation inertia in pegs and expansionary policies can explain only 5 percentage points of the observed differences i also show that even though the observed pattern could be the outcome of a class of open economy models pioneered by obstfeld and rogoff the data provides limited empirical support for the predictions of this model

price index convergence among united states cities we study the dynamics of price indices for major u s cities using panel econometric methods and find that relative price levels among cities mean revert at an exceptionally slow rate in a panel of 19 cities from 1918 to 1995 we estimate the half life of convergence to be approximately nine years the surprisingly slow rate of convergence can be explained by a combination of the presence of transportation costs differential speeds of adjustment to small and large shocks and the inclusion of nontraded goods prices in the overall price index do price indices in major u s cities share a common trend and if so how quickly do they revert to that trend following a local shock to the price index to answer this question we study the dynamics of consumer price indices for 19 major u s cities over the period from 1918 to 1995 the panel time series methods we employ are now commonly used for studying real output growth rates and levels of real exchange rates across countries we estimate that price index divergences across u s cities are temporary but surprisingly persistent with a half life of nearly nine years our research has two primary motivations first we hope to gain a better understanding of the sources of persistence in the deviations from purchasing power parity ppp found in studies of national price indices and exchange rate data second and more importantly we see the european monetary union as having many similarities to the united states and believe that studying the behavior of prices across u s cities will help us in understanding the likely nature of inflation convergence in the euro area the european central bank s stated inflation objective is a year on year change in the harmonized index of consumer prices hicp of not more than 2 but how large might we expect regional deviations from this euro area wide average to be and how long are they likely to persist the lack of data prevents us from answering this question directly using european prices under monetary union instead we look to the united states a mature common currency area of similar regional diversity size and industrial development

further evidence on closed end country fund prices and international capital flows using cointegration analysis i establish a long run relationship between country fund premiums and international capital flows in six out of 10 emerging markets and in two out of seven developed markets examined this relationship is explored to derive an intuitive measure of capital market segmentation that accounts for investment barriers and does not rely on a specific asset pricing model i find that most emerging markets are segmented but some exhibit a clear trend toward integration whereas most developed countries exhibit no evidence of segmentation the segmentation measure reveals that the process toward integration is gradual and can be reversed

intra household allocation of resources inferences from non resident fathers child support payments a large proportion of divorced and separated fathers form new partnerships the new partner s preferences are not likely to put much weight on expenditures on the man s children from his previous union thus his own and his partner s income would have different impacts on his child support payments if partners relative incomes affect bargaining power in household decisions this article exploits within father variation in the british household panel survey 1991 2005 to estimate the impacts of the intra household income distribution on child support payments and the father s welfare we find that a higher share of father s income in household income increases the probability of paying child support and its amount relative to household income

trends in european real exchange rates we study a newly created panel data set of relative prices for a large number of consumer goods among 31 european countries over a 15 year period the data set includes eurozone members both before and after the inception of the euro floating exchange rate countries of western europe and emerging market economies of eastern and southern europe we find that there is a substantial and continuing deviation from purchasing power parity ppp at all levels of aggregation both for traded and non traded goods even among eurozone members real exchange rates rer exhibit two clear properties in the sample a they are closely tied to gross domestic product gdp per capita relative to the european average at all levels of aggregation and for both cross country time series variation b they are highly positively correlated with variation in the relative price of non traded goods we then construct a simple two sector endowment economy model of real exchange rate determination which exhibits these two properties calibrated to match the data simulating the model using the historical relative gdp per capita for each country we find that for most countries there is a close fit between the actual and simulated real exchange rate in terms of policy relevance the model can offer suggestions of the degree to which real exchange rates in europe both in and out of the eurozone have been overvalued by approximately 15 in greece and portugal and 6 in italy and spain martin berka and michael b devereux

are international monetary fund quotas unfavorable to less developed countries a normative historical analysis abstract the international monetary fund criterion of economic size receives normative justification as the determinant of quotas but size must be represented by appropriately measured income reserves and trade the fund s income measure is deficient because it uses exchange rates rather than purchasing power parities to convert figures to a common currency if a favourable quota disparity is defined as an actual quota above the quota predicted by economic size less developed countries had adverse disparities early in imf history but increasingly favorable disparities over time given the inertia of relative quotas members would do well to maximize their initial quota

parental responses to child support obligations evidence from administrative data abstract we study parental responses to child support obligations using rich administrative data from denmark and variation in the child support formula we estimate that a 1000 dkk 160 increase in a father s obligation is associated with a 273 dkk 45 increase in his payment a higher obligation reduces father child co residence pointing to substitution between financial and non pecuniary investments further obligations increase post separation fertility among remarried fathers but have no impacts on maternal fertility or either parent s labor supply our findings suggest that government efforts to increase child investments through mandates on parents can be complicated by their behavioral responses to them

domestic violence and divorce law when divorce threats become credible the cost of divorce influences the bargaining position of spouses and thus their behavior within the marriage this study takes advantage of a major and unexpected reduction in divorce costs in spain to estimate the causal effects on domestic violence results suggest a 30 decline in spousal conflict as a consequence of the reform spousal violence is found to have decreased among couples who remained married after the modification in the law which suggests an important role for changes in bargaining within the marriage when divorce becomes a more credible cheaper option

on why agriculture declines with economic growth abstract when economic growth is characterised by a slow rise in the demand for food and rapid growth in farm relative to non farm productivity it is understandable that agriculture in a closed economy declines in relative terms as that economy develops but why should agriculture decline in virtually all open growing economies as well including those able to retain a comparative advantage in agricultural products a key part of the answer is that the demand for non tradable goods tends to be income elastic so resources are diverted to their production even in open economies

an analysis of short run response of export and domestic agriculture in sub saharan africa abstract short run responses of export and domestic shares of total agricultural output to changes in stocks of domestic savings sav development assistance oda private foreign commercial capital pfx and other variables is investigated a profit function approach is used time series data for 19 sub saharan african countries are pooled into three panels using similarities in changes in economic policy regime statistical evidence suggests that for the panel of countries that were undertaking liberalized economic reforms the slope coefficients of some of the variables in the models have changed significantly between 1970 1980 and 1981 1993 for the 1981 1993 period the impacts of oda pfx and sav on export and domestic shares were different for this panel the effect of increases in agricultural labor was different across the three panels there is also evidence that productivity growth in the export agriculture sub sector is negative in all the groups it is recommended that to halt the decline in export share of agricultural output in the group of countries that have undertaken substantial improvements in economic policy environment efforts must be made to reduce the negative impact of domestic savings and agricultural labor while at the same time working to reduce the bias of development assistance against food security

explaining service price differences in international comparisons this paper reexamines observed international differences in the price of services and the positive correlation of these with per capita gdp differences using a general trade model with a nontraced sector the authors find that differences in countries factor endowments populations trade policies and trade balances will have ambiguous and sometimes opposite effects on their service prices and real incomes estimating the service price equation using recent data suggests that larger endowments of agricultural land minerals and capital larger trade deficits and higher prices for tradables increase service prices conversely larger populations and labor forces reduce service prices copyright 1991 by american economic association

single moms and deadbeat dads the role of earnings marriage market conditions and preference heterogeneity why do some men father children outside of marriage without providing support why do some women have children outside of marriage when they receive little support from fathers why is this behavior more common among blacks than whites we estimate a dynamic equilibrium model of marriage employment fertility and child support decisions we consider the extent to which low earnings marriage market conditions and preference heterogeneity explain nonmarital childbearing deadbeat fatherhood and racial differences in these outcomes we find the black white earnings gap and preference heterogeneity explain a substantial portion of racial differences whereas marriage market conditions are less important

divorce risk wages and working wives a quantitative life cycle analysis of female labour force participation this article develops a quantitative life cycle model to study the increase in married women s labour force participation lfp we calibrate the model to match key life cycle statistics for the 1935 cohort and use it to assess the changed environment faced by the 1955 cohort we find that a higher divorce probability and changes in wage structure are each able to explain a large proportion of the lfp increase higher divorce risk increases lfp not because the latter contributes to higher marital assets or greater labour market experience however instead it is the result of conflicting spousal preferences towards the adjustment of marital consumption in the face of increased divorce risk the dramatic increase in the second half of the twentieth century in married women s labour force participation lfp has given rise to a large and growing literature that explores the roles of the multiple forces that led to this evolution some explanations have emphasised technological change in the household greenwood et al 2005 or in medical contraceptive technology goldin and katz 2002 albanesi and olivetti 2009a b knowles 2007 other explanations have emphasised changes in the wage

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

investor mood and financial markets abstract numerous studies in recent decades have linked investor mood and financial market behavior but most works have been empirical investigations this paper bridges the gap between empirical findings and financial theory by slightly modifying the lucas lucas r e 1978 asset prices in an exchange economy econometrica 46 1429 1445 model this study shows how investor mood variations affect equilibrium asset prices and expected returns analysis results indicate that both equity and bill prices correlate positively with investor mood with higher asset prices associated with better mood conversely expected asset returns correlate negatively with investor mood further the mood effect on asset prices increases when investors are in a good mood and mood variations exhibit a greater influence on equity markets than on bill markets results of this study suggest that investor mood is a vital factor in equilibrium asset prices and returns and integrating investor mood into asset pricing models helps to interpret the growing body of seemingly anomalous evidence regarding investor behavior

sources of fluctuations in real and nominal exchange rates this paper attempts to distinguish empirically real versus nominal sources of fluctuations in real and nominal exchange rates the distinction is obtained by imposing the following restriction on the bivariate vector autoregression of real and nominal exchange rates over the current flexible rate period nominal shocks are required to have no permanent effect on the level of the real exchange rate given this identification scheme the author analyzes the dynamic effects and relative importance of real and nominal shocks with regards to exchange rates the findings indicate that real shocks dominate nominal shocks for both exchange rate series over short and long frequencies copyright 1992 by mit press

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

optimal trading with mean reverting prices switching between foreign stocks and closed end country funds we develop a model based on options theory which shows the optimal trading strategy for switching between two similar assets when the difference in their prices is mean reverting statistical tests indicate that most closed end country funds discounts are mean reverting using empirical estimates of the volatility and rate of mean reversion of these funds we derive the optimal switch points and simulate the trading profits associated with switching between country funds and their foreign equities and vice versa whenever the optimal switch points are reached

child support and partnership dissolution this article studies the determinants of partnership dissolution and focuses on the role of child support we exploit the variation in child support liabilities and entitlements driven in part by the introduction of a new set of complex rules that determined child support liability in the uk and by their interaction with welfare rules our panel has the virtue that the post 1993 variation in child support liability for all couples in partnerships formed prior to 1993 is unanticipated we find strong evidence that the resulting large child support liabilities significantly reduced dissolution risks

an aggregator model of canadian export supply and import demand responsiveness the aggregate canadian technology is modeled by a gnp function with four export and four import components included by the use of aggregator functions and a two stage estimation process the recently developed symmetric generalized mcfadden functional form is used at both the aggregator and gnp function levels the aggregate export own price elasticity is found to be 1 67 in 1970 while the import own price demand elasticity is 1 62 increases in the prices of both imports and labor are found to decrease the supply of exports while exports are found to be complementary to the output of domestic sales supply

an equilibrium model of exchange rate determination and asset pricing with nontraded goods and imperfect information this paper presents a two country model with maximizing households stochastic production stochastic money growth and perfect capital mobility because of the presence of nontraded goods households in different countries consume different goods analytic solutions are presented for the nominal exchange rate the real exchange rate nominal interest rates and real interest rates it is shown that the model is compatible with some important features of the real world behavior of exchange rates when households are imperfectly informed about the distribution of money growth the exchange rate exhibits patterns of overshooting and is more volatile than the ratio of the money stocks copyright 1987 by university of chicago press

differentials at firm level productive capacity realization in bangladesh food manufacturing an empirical analysis this article empirically estimates the firm specific productive capacity realization pcr indices using the stochastic frontier production function and analyses a number of variables explaining realization rates across firms and over time following battese and coelli 1995 the stochastic frontier production function is used to estimate capacity output and thereby pcr using the firm level panel data from bangladesh food manufacturing the results show that capacity realization rates widely vary across firms and over time the average rate of realization is about 65 implying that most of the firms are producing away from their full production capacity this article also identifies several firm specific and policy related variables explaining capacity realization the results show that firm size sze and outward orientation opn have positive while capital intensity cnsty market structure mstre and effective rate of assistance era have negative impact on realization rates strikingly both poli

yours mine and ours do divorce laws affect the intertemporal behavior of married couples divorce laws establish spouses individual property rights over household resources and determine when divorce is allowed this paper examines how such laws inuence the intertemporal behavior and the welfare of u s married couples i build a model of household choice about consumption labor supply and divorce under multiple divorce law regimes and i estimate it using exogenous variation in u s divorce laws from the 1970s to the 1990s couples responded to equal division of property and unilateral divorce by increasing tangible assets up to 19 which suggests the presence of a strong income eect for the primary earner and by reducing female employment by over 5 percentage points because the threat of divorce granted additional bargaining power to married woman the bargaining weight of women implied by these responses in the model corresponds to a third of the weight of men this indicates that equal division of assets beneted women when it was

do incentives matter managerial contracts for dual purpose funds we examine the contracts used to compensate the managers of the seven dual purpose investment companies that existed between 1967 and 1985 to determine whether financial incentives in fluence real behavior in the predicted way the compensation contracts for these funds provided explicit incentives for the production of both capital gains and current income we model the behavior that an expected compensation maximizing agent would exhibit when faced with such contracts and derive several testable implications our empirical results are consistent with the theoretical predictions and so we are able to use this relatively clean setting to contribute to the growing literature concerned with determining the impact of incentive contracts on behavior a unique and interesting aspect of this study is that the nature of these organizations allows us to provide evidence that the market understood and priced the behavior induced by these contracts

welfare child support and strategic behavior do high orders and low disregards discourage child support awards qualitative research has documented strategic behavior in response to child support policy parents of children on welfare have an incentive to avoid formal child support since most states limit the amount of formal child support that women on welfare can receive the disregard and have relatively high child support orders for low income fathers this pa per develops a simple model to make several predictions about how the disregard and order might interact to influence formal child support or ders using data from the cps css merged with state child support vari ables i find some evidence that higher orders and lower disregards are associated with fewer child support orders

exchange rate mean reversion from real shocks within an intertemporal equilibrium model abstract the post bretton woods era has been characterized by real exchange rates that exhibit mean reversion with mixed evidence as to whether this reversion is partial ppp never holds or essentially complete this paper generates these stylized facts theoretically by synthesizing a simple intertemporal open economy model with the elasticities approach to the current account a central feature of the model is the existence of non traded goods the model can generate partial or approximately complete mean reversion for the real exchange rate depending on parameter values if innovations in output are made up of permanent and temporary components in addition temporary output shocks generate a type of hysteresis wherein the short run path for the exchange rate permanently alters its long run equilibrium value

on the dual characteristics of closed end country funds abstract in a mildly segmented world market closed end country fund cecf returns and premiums or discounts would be determined by factors due mainly to market segmentation and investor sentiment the role of these two types of factors has been debated we reexamine this issue by examining the relative importance of us market returns and foreign market returns in determining cecf returns by employing time series empirical methods we find that cecf returns are more heavily influenced by their local foreign market returns than by us market returns which implies that there remains a substantial diversification benefit from investing in cecfs

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

an assessment of the united nations scale of assessments from a developing country standpoint abstract the united nations apportionment of its expenses among its member countries is examined in a public choice context the special nature of un produced public goods the un voting rules and its zero sum method of allocating expenses all act to reduce the size of un output and to exacerbate country group conflict the developing country groups throw a disproportionate burden of un financing on the developed countries this result is captured by a model of un burden sharing both more rational and simpler than the un practice jel f33 h41

national price levels and the prices of tradables and nontradables this paper examines changes in national price levels and prices of tradables and nontradables and relates them to changes in variables found earlier to be associated with price level differences among countries across countries national price levels increase systematically with the level of a country s per capita income and the ratios of tradables to nontradables prices decrease over time increases in per capita income are generally associated with increases in price levels in the industrial countries although the opposite relationship tended to prevail among developing countries increases in income are associated with declines in the ratio of tradables to nontradables price levels more consistently than with the increases in general price levels increases in the exchange value of a currency are also associated with declines in the price levels for tradablesrelative to nontradables countries with price levels that were high or low relative to those predicted by the structural equations tended to move toward those predicted levels this abstract was borrowed from another version of this item

capital accumulation and the current account in a two country model abstract this paper examines the joint determination of international debt and capital accumulation in a two country model national rates of time preference are endogenous adjusting along an optimal path to come into equality with one another in the steady state the characteristics of short run current account dynamics are crucially linked to world capital accumulation and to a country s long run net external asset position steady state creditor countries tend to have current account surpluses during episodes of world output growth and vice versa for debtor countries this gives rise to possible non monotonic adjustment in the current account and consumption

fiscal policy the terms of trade and the external balance abstract the effects of fiscal policies on the terms of trade and the external balance are analysed the external balance is decomposed into changes in the ownership of world wealth across residents of each country and changes in the distribution of world wealth represented by assets located in each country it is shown that a rise of government expenditure on the foreign good deteriorates the home country s terms of trade but improves its net foreign asset position whether a reduction in equity taxes improves or deteriorates the external balance depends upon the magnitude of a fiscal transmission effect

unilateral divorce the decreasing gender gap and married women s labor force participation married women s labor force participation lfp increased dramatically in the united states between the 1940 and 1960 cohort the two cohorts lived under different divorce regimes unilateral divorce rather than mutual consent the 1960 cohort also had a lower gender wage gap we use a quantitative dynamic life cycle model of endogenous marital status calibrated to key statistics for the 1940 cohort to study the effects of these two changes we find that both drivers combined are able to account for over 50 percent of the increase in married women s lfp and also generate large movements in marriage and divorce rates

personality traits intra household allocation and the gender wage gap abstract a model of how personality traits affect household time and resource allocation decisions and wages is developed and estimated in the model households choose between two behavioral modes cooperative or noncooperative spouses receive wage offers and allocate time to supplying labor market hours and to producing a public good personality traits measured by the so called big five traits can affect household bargaining weights and wage offers model parameters are estimated by simulated method of moments using the household income and labor dynamics in australia hilda data personality traits are found to be important determinants of household bargaining weights and of wage offers and to have substantial implications for understanding the sources of gender wage disparities

real exchange rates under the gold standard purchasing power parity is one of the most important equilibrium conditions in international macroeconomics empirically it is also one of the most hotly contested numerous recent studies for example have sought to determine the validity of purchasing power parity using data from the post bretton woods float and have reached different conclusions we assert that most such studies are flawed for two reasons first the post 1973 data contain by definition only a very limited amount of the low frequency information relevant for examination of long run parity second the dynamic econometric techniques used to model deviations from parity are typically quite crude with respect to admissible low frequency dynamics both deficiencies are rectified in the present paper with dramatic results we construct a new data set of 16 real exchange rates covering more than a century of the classic gold standard period and we study deviations from parity using long memory models that allow for subtle forms of mean

quantifying the evolution of world trade 1870 1949 abstract the typical narrative regarding the evolution of world trade prior to world war ii refers to a secular rise starting around 1870 and a subsequent collapse beginning in 1914 this narrative however is based on measures of trade openness that do not fully take into account purchasing power differences across countries due to lack of alternative data the measures employed in the existing literature are typically based on non ppp adjusted trade data denominated by ppp adjusted gdp data the present paper seeks to resolve this inconsistency by constructing new trade share estimates for 62 countries representing 90 of world gdp for the period from 1870 to 1949 our estimates combine historical import and export figures with non ppp adjusted gdp values that we estimate via the short cut method our estimates confirm qualitatively the narrative of a dramatic rise and fall of world trade over this period yet they indicate that this rise and fall was quantitatively much more pronounced we find that trade shares were on average 38 higher than previously documented and the world s level of trade openness in 1913 was comparable to that in 1974

testing among models of intrahousehold resource allocation households are the locus for much economic decision making households function as producers investors in human and physical capital managers of risk and as consumers many resources are allocated within households and the effects of many policies depend on the dynamics of household decision making for example household decisions about allocating food among individual household members may determine who benefits from programs to improve health nutrition or welfare in many microeconomic studies the household is treated as an individual for analytical purposes in other words it is assumed that a household acts as a single entity with a single set of preferences recently however a number of economists have recognized that households are sites of conflict as well as cooperation and have begun to use new classes of models to explain how resources are allocated among household members this literature has especially improved our understanding of households in which income is not completely pooled in such a setting standard household models may offer misleading conclusions about the effects of policies on individual household members i this paper goes beyond recent surveys of intrahousehold issue by explicitly examining the assumptions predictions and empirical implications of different intrahousehold models in particular it analyzes empirical tests that distinguish among competing models by clarifying the similarities and differences among alternative models this paper also clarifies what has actually been demonstrated and what has not been demonstrated by previous empirical studies in so doing the paper points to specific topics in need of further research this paper is organized as follows section 2 analyzes the assumptions and predictions of each of the five main classes of intrahousehold resource allocation models section 3 describes empirical tests of these assumptions along with an analysis of empirical work that has been generated sections 4 and 5 discuss the questions that remain unanswered and directions for future research

can adequate child support be legislated responses to guidelines and enforcement i introduction in response to the high levels of poverty faced by children of divorced parents federal and state governments adopted a number of policies during the 1980s aimed at increasing child support awards and payments these laws required all states to have numerical child support guidelines to be used by parents who could not agree on their own and to increase state enforcement of delinquent child support awards implicit in much of the policy discussion about divorce is the assumption that within marriage parents will jointly act in the best interest of their children but that after divorce children may not be adequately provided for and legislative action is required in the extreme this view is represented by the stereotype of the deadbeat dad a term that describes a father who doesn t care enough about his children to continue any involvement with them either in terms of time or money similarly economic models often assume a noncooperative outcome in which the non custodial father will not provide what he did during marriage e g weiss and willis 1985 our article makes several contributions to the literature on the determinants of child support by absent fathers in contrast to almost all of the work on this topic that has been based on noncooperative models we develop a theoretical model in which some families may be able to achieve a cooperative outcome which increases the total resources available to children in particular our model identifies three different types of outcomes 1 cooperative and self enforcing 2 noncooperative and self enforcing and 3 noncooperative and state enforced each of these outcomes has different implications for the well being of children and for the level of government involvement in divorce settlements we then derive the conditions under which families can achieve each of these outcomes and we specifically model how policy variables affect whether or not a particular outcome is achieved the levels of payments and levels of compliance conditional on the type of outcome our empirical work provides reduced fo rm evidence that is consistent with a model that distinguishes these different types of outcomes and we find that policies can affect the type of outcome as well as the level of child support awards and payments section ii of this article provides background and motivations for our topic we develop a general theoretical framework in section iii and compare outcomes under assumptions of symmetric versus asymmetric information section iv incorporates the legal environment by modeling the impact of guidelines and state enforcement efforts on the probability the custodial parent cp will impose the guidelines the level of child support awards and the noncustodial parent s ncp s compliance in section v we interpret comparative statics section vi examines the determinants of reduced form models of the probability of a court ordered child support award and shows that the predictions of the model are consistent with data on the characteristics of divorce settlements and parental behavior for those with voluntary versus court ordered settlements a summary of the findings and policy implications concludes ii background and motivation in contrast to the marriage literature which predominately uses cooperative bargaining models the literature on divorce generally assumes that divorcing parents are unable to reach cooperative agreements for example weiss and willis 1985 model parental expenditures on children after divorce as a principal agent problem in which the absent father cannot verify the child expenditures made by the mother this problem of asymmetric information leads to an inefficient noncooperative outcome del boca and flinn 1995 also use a noncooperative model to examine the government s choice of compliance outcomes others have analyzed compliance with child support awards using an economics of crime framework beron 1988 beller and graham 1991 chambers 1979

interactions between unmarried fathers and their children the role of paternity establishment and child support policies nonmarital childbearing has increased substantially over the last few decades comprising almost one third of all births in the united states in 1995 u s department of health and human services 1997 poverty rates for these children are high and many rely on public assistance reducing nonmarital childbearing and increasing responsibility of absent fathers were important goals of the 1996 welfarereform legislation and earlier state and federal child support legislation although there is some evidence that paternity establishment efforts increase the likelihood of child support awards cynthia miller and irwin garfinkel 1999 argys et al 2001 until recently microdata to assess the determinants and consequences of paternity were not available we use the national longitudinal survey of youth 1997 cohort nlsy97 to explore the determinants of paternity and the relationship between paternity and father involvement such as child support awards and contact between fathers and children our data show that paternity is associated with increases in all types of involvement however if the correlation is due solely to unobserved heterogeneity then paternity policies would not have a causal effect on involvement in this paper we model the paternity and father involvement decisions jointly our results suggest that welfare child support and paternity policies do alter the probability of establishing paternity and that exogenous increases in paternity can affect father child interactions i background

factor proportions relative efficiency and developing countries trade abstract this study attempts to assess the extent to which ldc trade in manufactures can be explained by the factor proportions theory and the economies of scale account on the one hand and by commodity characteristics that affect relative efficiency on the other among the relative efficiency characterictics that affects trade patterns are r d intensity total factor productivity in the more developed countries factory size and some input output measures of the degree to which the industry interacts with the rest of the economy

child support welfare dependency and women s labor supply this study evaluates the potential effectiveness of alternative child support policies in reducing welfare program participation employing longitudinal data from the panel study of income dynamics the analysis addresses the simultaneity of women s decisions regarding welfare participation labor force participation and annual hours of work following marital breakup the estimation framework accounts for the endogeneity of child support payments with female labor supply and for the selection bias due to differential rates of remarriage among divorced separated women results show that higher child support payments would i decrease welfare participation and ii increase average hours of work the empirical estimates are used to assess the potential effects of adopting alternative child support policies such as the wisconsin child support assurance system these results suggest that large potential welfare cost savings are attainable but significant reductions in welfare participation rates would only be achieved through substantial improvements in child support enforcement or through government assured child support payments

long run determinant of korean economic growth empirical evidence from manufacturing this paper challenges the recent contrarian view that the phenomenal growth of east asian nics is fuelled mainly by the accumulation of production inputs not by tfp growth to appraise this view we investigated and re evaluated south korean manufacturing growth 1973 q1 1993 q4 using johansen s cointegrating analysis our results show that south korean manufacturing appears to have increasing returns to scale in production technology the learning by doing effect defined by lucas 1988 is empirically supported this effect appears to be observed as a long run determinant of south korean manufacturing growth consequently south korean manufacturing growth can be described by an endogenous economic growth model such as the lucas 1988 model contradicting the contrarian view

divorce and the cognitive achievement of children children of divorced parents exhibit lower test scores and educational attainment have these correlations a causal interpretation parents who divorce may be less likely to invest in their children while together or they may divorce to shield their children from the effects of marital conflict i study the relationship between children s achievement and the marital status of their parents within a dynamic framework in which partners decide on whether to remain married how to interact with or without conflict and child investments i then assess whether a child whose parents divorced would have been better off had divorce not occurred

a stackelberg model of child support and welfare this article models the child support and welfare decisions of never married parents on welfare as a stackelberg game the mother chooses whether to exit welfare report paternity and to obtain a formal child support order if a child support order is obtained the father chooses whether to comply with the order simulation results from the structural parameters indicate that increasing the child support disregard increases paternal compliance slightly and affects maternal paternity reporting more significantly effects are limited however by low paternal incomes results also indicate that high award amounts can decrease expected child support payments to women on welfare

agricultural incentives in developing countries measuring the effect of sectoral and economywide policies the impact of sector specific direct and economywide indirect policies on agricultural incentives for 18 developing countries for the period 1975 84 are estimated the direct effect is measured by the proportional difference between the producer price and the border price adjusting for distribution storage transport and other marketing costs the indirect effect has two components 1 the impact of the unsustainable portion of the current account deficit and of industrial protection policies on the real exchange rate and thus on the price of agricultural commodities relative to nonagricultural nontradables and 2 the impact of industrial protection policies on the relative price of agricultural commodities to that of nonagricultural tradable goods the authors found that a in almost all cases the direct effect is equivalent to a tax on exportable goods and to a subsidy for importables b the indirect effect also taxes agriculture and dominates the direct effect and c the direct policies for both importables and exportables stabilize domestic producer prices

determinants of agriculture s relative decline thailand during economic development agriculture declines as a proportion of aggregate national output a number of theoretical explanations for this phenomenon have been advanced in the economic literature but their relative historical significance has not been clear this paper develops an econometric methodology to analyze this issue and applies it to time series data for thailand the study investigates the importance of relative commodity prices factor endowments and technical progress as explanations for changing sectoral gdp shares of agriculture manufacturing and services it is concluded that the movement in thailand s aggregate factor endowment relative to labor was the most important determinant of agriculture s relative decline

accounting for agricultural decline with economic growth in taiwan abstract in this paper we propose an empirical model to decompose the evolution of the agricultural gdp share of taiwan into three components price changes factor endowment changes and technological change the full sample period is 1967 to 1997 the data were first tested to assess whether the time series are nonstationary and cointegrated after confirming their nonstationarity and cointegrated relation ship we then employ an error correction model ecm in the empirical estimation to capture the dynamic as well as long run equilibrium relationship among those economic variables the results suggest that relative prices have a positive influence on the share of agriculture in gdp in both the long run and the short run an increase in capital per unit of labor on the other hand is associated with a smaller agricultural share this result is consistent with the rybczynski theorem technical change has been biased in favor of this sector the strong negative impact of the change in factor endowments seems to dominate any possible positive effect of relative prices and technical change this result makes a strong case for a heckscher ohlin type model as a basis of understanding the development of the taiwanese economy

nontradable goods prices and per caita income an application to regional korean data pooled time series cross sectional regional data for korea over the period 1985 1991 are used to investigate points which emerged from the united nations international comparison project the results based on a regional analysis are opposite to those of the icp the prices of services do not increase more rapidly in fast growing than in slow growing regions this regional analysis provides constradictory evidence to the widely recognized stylized fact that the prices of nontradables increase with real per capital income by a larger margin than the prices of tradables increase

china s regional agricultural productivity growth in 1985 2007 a multilateral comparison1 in this study we estimate total factor productivity tfp growth as well as multilateral tfp index for 25 contiguous china provinces over the 1985 2007 period agricultural output growth for each province was decomposed into tfp growth and input growth where input growth was further disaggregated into contributions from growth of labor capital land and intermediate goods over the study period tfp growth contributed 2 7 percentage points to output growth annually which was slightly higher than the input growth contribution of 2 4 percentage points per annum on average the annual rate of productivity growth peaked during 1996 2000 at 5 1 it slowed in 2000 2005 to a rate of 3 2 per annum and declined in the most recent years 2005 2007 to 3 7 differences in productivity among regions persisted over the entire period the tendency toward faster tfp growth in relatively well off coastal regions may imply a widening of regional inequality

child support welfare dependency and poverty female headed families have among the highest poverty rates of any major demographic group in the united states the purpose of this paperis to investigate empirically the effectiveness of current child support enforcement policies and to determine their role in reducing poverty and welfare dependency a special supplement to the april 1982 current population survey provides the data for the analysis the results indicate that child support enforce ment may represent an effective means for re ducing welfare program costs but isunlikely to have a dramatic effect on either welfare de pendency or poverty copyright 1986 by american economic association

transfers to households with children and child development in this paper we utilize a model of household investments in the development of children to explore the impact of various transfer policies on the distribution of child outcomes we develop a cost criterion that can be used to compare the cost effectiveness of unrestricted restricted and conditional cash transfer systems and find that an optimally chosen conditional cash transfer program is the most cost efficient way to attain any given gain in average child quality we explore several design elements for the conditional cash transfer system and discuss the role of production function uncertainty and measurement error

yes discounts on closed end funds are a sentiment index chen kan and miller 1993 best pronounced chek m provide a detailed critique of our earlier paper lee shleifer and tlialer 1991 ckm accuse lee et al of trying to kill two birds the closed end fund puzzle and the small firm effect with one stone and missing both their approach is to throw at lee et al every stone they can presumably hoping that one will hit this reply shows that none does ckm focus on four empirical issues 1 the role of utilities in the lee et al sample of small institutional ownership firms 2 the robustness of the relationship between fund discounts and the returns on high versus low ownership firms their table i 3 the appropriate way to specify the regression in table iv of lee et al their table ii and 4 the regressions using one closed end fund tricontinental their table iii we address these criticisms in turn ckm begin with the finding of lee et al that even during the second half of their sample when the relationship between closed end fund discounts and small firm returns weakens there is a significant relationship between return on stocks with low institutional ownership and changes in discounts ckm describe as a concession the finding of lee et al that most of these low ownership stocks are public utilities however this finding makes even more vivid the main claim of lee et al that stocks with similar ownership structures but very different fundamentals move together in the market after all what do public utilities have in common with closed end funds other than a similar ownership structure the one plausible common factor that might similarly affect closed end fund discounts and prices of public utility stocks is small investor sentiment ckm also say that they tested a portfolio of nyse public utility firms with more than 10 percent institutional ownership and that their results were essentially the same as for the sample with less than 10 percent ownership they do not report these results but have kindly provided us with their data to investigate their claim we divided all utilities into three groups of equal numbers of firms with high low and medium institutional ownership we then ran regressions like those in table viii of lee et al for each group the results in table i of this paper show that low institutional

testing a present value model of the current account evidence from us and canadian time series abstract this paper presents a simple model of current account determination based upon the permanent income hypothesis of private consumption behavior under rational expectations the model employs a representative national agent who is forward looking and can borrow and lend at a constant world interest rate a present value relationship for the current account is derived and its implications are tested on post war data for the united states and canada testing is done using the framework developed by campbell and shiller 1987 which allows the forcing variables in the model to be difference rather than trend stationary our empirical results indicate the most stringent restrictions of the present value model are strongly rejected by the us and canadian data however less formal procedures suggest the consumption smoothing model has some ability to track the dynamic behavior of the us current account jel f32

convergence of south korean productivity on west german levels 1966 1978 abstract south korean labor productivity in manufacturing converged rapidly on the productivity level in west german manufacturing during the period 1966 1978 achieving two thirds of the german level by 1978 this convergence was more rapid at the industry level than for all manufacturing the capital labor ratio and total factor productivity in south korean manufacturing also converged on west german levels during this period with the former accounting for two thirds and the latter one third of the labor productivity convergence the source of labor productivity convergence however differed greatly across industries with capital deepening the dominant source in heavy industries and total factor productivity tfp convergence the main source in light industries

the effects of in work benefit reform in britain on couples theory and evidence this paper examines the effects of the working families tax credit wftc on couples in britain we develop a simple model of household decisions which explicitly accounts for the role played by the tax and benefit system its main implications are then tested using panel data from the british household panel survey collected between 1991 and 2002 overall the financial incentives of the reform had negligible effects on a wide range of married mothers decisions such as eligible working at least 16 hours per week and full time employment working at least 30 hours per week employment transitions childcare use and divorce rates women s responses however were highly heterogeneous depending on their partners labour supply and earnings mothers married to low income men showed larger responses in employment especially if they had younger children they were more likely to remain in the labour force and had higher rates at which they entered it while more likely to receive the tax credit they also experienced a greater risk of divorce we find virtually no effect for women with higher income husbands likewise there are no statistically significant responses among married men