monetary policy asset prices and liquidity in over the counter markets we develop a model where agents can allocate their wealth between a liquid asset which can be used to purchase consumption goods and an illiquid asset which represents a better store of value should a consumption opportunity arise agents may visit a frictional over the counter secondary asset market where they can exchange illiquid for liquid assets we characterize how monetary policy affects both the issue price and the secondary market price of the asset we also show that in contrast to conventional wisdom search and bargaining frictions in the secondary asset market can improve welfare if inflation is low

the role of local nonfarm activities and migration in reducing poverty evidence from ethiopia kenya and uganda by using cross sectional data from ethiopia kenya and uganda this article estimates the determinants of the participation in local nonfarm activities and migration at the individual level and then estimates the determinants of farm and nonfarm income the results indicate that schooling and local language ability increase participation in local nonfarm activities and migration schooling also is found to increase nonfarm income at the household level but not farm income we also find that farm household members from low potential agricultural areas are more likely to participate in local nonfarm activities and migration than those from high potential agricultural areas thus the results suggest that local nonfarm activities and migration offer employment opportunities for workers from low potential agricultural areas indeed the nonfarm activities and migration is likely to provide an important pathway to reduce poverty in low potential agricultural areas in east africa

rural income dynamics and poverty reduction in thai villages from 1987 to 2004 this article aims to examine the factors contributing to the increase in household income and the corresponding reduction in poverty in rural thai villages from 1987 to 2004 by employing household panel data it is found that there has been a significant structural shift of household income away from farm to nonfarm income sources as well as a reduction in the income gap and the difference in poverty incidence between favorable and unfavorable regions such decreases in poverty and its regional gap have been associated with the declining importance of income accrued to farm land measured by farm size and the availability of irrigation and with the increasing importance of human capital measured by the proportion of working members who have graduated from post lower secondary schools such findings indicate that the success in rural poverty reduction in thailand has resulted from the development of the rural nonfarm sector coupled with the improvement of the schooling levels of the rural population

economic mobility and poverty dynamics in developing countries this study provides an introduction to this special issue of the journal of development studies on economic mobility and poverty dynamics in developing countries in addition to providing a conceptual framework it outlines how the contributions fit into the extant literature a series of regularities emerge across these studies the poor consist of those who are always poor poor at all dates and those who move in and out of poverty with the latter group tending to be strikingly large such movements in and out of poverty are apparent when looking at poverty in either absolute or relative terms changes in returns to endowments can be a potent source of increased incomes finally seemingly transitory shocks can have long term consequences the study concludes by drawing out the policy implications of these regularities

lottery or waiting line auction abstract this paper studies the efficiencies of the two most widely used non price allocation mechanisms lotteries and waiting line auctions as our analysis suggests in addition to the fairness of the mechanism the use of lotteries in lieu of waiting line auctions can be also justified from an efficiency point of view in particular we show that the less dispersed consumers time valuations are the more efficient is a lottery relative to a waiting line auction in addition we identify four conditions under which a lottery dominates a waiting line auction in expected social surplus preserving furthermore the numerical simulations we conduct indicate that over a predominantly wide range of circumstances a lottery is more socially efficient than a waiting line auction as an allocative mechanism in the absence of a conventional price system

green revolution land reform and household income distribution in the philippines income of agricultural households consists of returns to labor capital and land from farming supplemented mainly by labor earnings from nonfarm sources agricultural technology affects farmers income through its effect on factor demands and factor prices which in turn induce changes in the allocation of farmers own resources to different uses income from farming is also affected by village institutions such as land tenure which governs the distribution of income between landlords and tenants as well as resource allocations

monetary policy and distribution a segmented markets model of monetary policy is constructed in which a novel feature is goods market segmentation and its relationship to conventional asset market segmentation the implications of the model for the response of prices interest rates consumption labor supply and output to monetary policy are determined as well optimal monetary policy is studied as are the costs of inflation the model features persistent nonneutralities of money relative price effects of increases in the money supply persistent liquidity effects and a negative fisher effect from a money supply increase a friedman rule is in general suboptimal

incentive feasible deflation abstract for competitive economies in which the real rate of return on money is too low the standard prescription is to engineer a deflation that is to operate monetary policy according to the friedman rule implicit in this recommendation is the availability of a lump sum tax instrument in this paper i view lump sum tax obligations as a form of debt subject to default while individuals may want to honor such obligations ex ante a lack of commitment the sine qua non of modern monetary theory may prevent them from the following through on their promises ex post when this is the case there may exist an incentive induced limit to deflationary policy

the societal benefit of a financial transaction tax we provide a novel justification for a financial transaction tax for economies where agents face stochastic consumption opportunities a financial transaction tax makes it more costly for agents to readjust their portfolios of liquid and illiquid assets in response to liquidity shocks which increase both the demand for and the price of liquid assets the higher price improves liquidity insurance and welfare for other market participants we calibrate the model to u s data and find that the optimal financial transaction tax is 1 6 and that it reduces the volume of financial trading by 17

on the optimality of the friedman rule in a new monetarist model we study a monetary model in which buyers choose search intensity and prices are considered as given in a decentralized market we indicate that the friedman rule may not be optimal

money in search equilibrium in competitive equilibrium and in competitive search equilibrium we compare three market structures for monetary economies bargaining search equilibrium price taking competitive equilibrium and price posting competitive search equilibrium we also extend work on the microfoundations of money by allowing a general matching technology and entry we study how equilibrium and the effects of policy depend on market structure under bargaining trade and entry are both inefficient and inflation implies first order welfare losses under price taking the friedman rule solves the first inefficiency but not the second and inflation may actually improve welfare under posting the friedman rule yields the first best and inflation implies second order welfare losses

the associations of soil fertility and market access with household income evidence from rural uganda abstract this study attempts to identify the major factors affecting farm and nonfarm income by using panel data of 894 rural households interviewed in 2003 and 2005 in rural uganda we supplement the panel data with household level soil fertility data and road distance data to the nearest urban center on three road types tarmac loose surface and dirt roads the results suggest that soil fertility measured by the soil organic matter som content is positively associated with crop income but not with livestock and nonfarm income we also find that the total road distance to the nearest urban center and the road quality have strong negative associations with the crop income

transformation of the rural economy in the philippines 1988 2006 abstract this research explores the changing structure of the rural economy in the philippines from 1988 to 2006 we found that the expansion and upgrade of infrastructure such as electricity and roads and investment in secondary and tertiary education are important factors that induced the economic transformation of the rural economy the importance of higher education as an entry requirement to the nonfarm labor market has declined over time indicating that the rural nonfarm sector has been increasingly providing employment opportunities to the unskilled and the uneducated who form the bulk of the rural poor

waiting line auctions if prizes are to be awarded simultaneously at a specified time on a first come first served basis then individuals who queue for them will choose different waiting times through their arrivals at the queue this choice of arrival time at a queue is similar to the choice of a sealed tender in an auction an equilibrium for this waiting line auction is obtained here using methods for analyzing sealed tender auctions when individuals are risk neutral it is shown that several alternative waiting line allocation procedures result in the same transactions cost associated with waiting in line

the role of trading frictions in financial markets abstract we develop a dynamic general equilibrium model to analyze the role of trading frictions in over the counter markets in our model agents face idiosyncratic preference shocks and a financial market allows them to rebalance their portfolio composed of money and bonds in response to these shocks we disentangle the effects of search and bargaining on welfare and study each one of them we show that bargaining is generally welfare improving while search frictions are not this is because search frictions do not only affect the demand for the respective assets but also their allocation

cash crop choice and income dynamics in rural areas evidence for post crisis indonesia in this article we investigate the factors affecting levels and growth of incomes in rural indonesia following the crisis of 1997 1998 in particular we investigate the relative roles of nonfarm incomes and productivity improvements achieved via changes in crops versus improvements on the same crops on income dynamics framing the article in the context of an optimal labor allocation model relying on unique household panel data from central sulawesi and using advanced panel econometric methods we find that local innovations related to the adoption and intensification of new cash crop varieties more specifically the shift from coffee to cocoa production can explain a substantial part of the observed post crisis developments causal estimates of the effect of growing cocoa suggest that households were on average able to achieve about 14 higher income levels during the post crisis period compared to the planting of other crops most notably coffee also our results demonstrate the importance of engagement in nonfarm activities for household income growth comparative analyses using a nationally representative survey suggest that similar processes are at play in other parts of indonesia

the rural non farm sector issues and evidence from developing countries abstract the rural non farm sector has traditionally been viewed as a low productivity sector which produces low quality goods it is often expected to wither away as a country develops recent years have seen a shift away from this position towards recognition that the rural non farm sector can and often does contribute to economic growth rural employment poverty reduction and a more spatially balanced population distribution this paper reviews the literature on the conceptual and empirical underpinnings of this more recent perspective focussing on the experience in developing countries the paper documents the size and heterogeneity of the sector pointing to evidence that in many countries the sector is expanding rather than declining the issues associated with measuring the sector s economic contribution are discussed followed by empirical assessments for several countries and regions the distributional impact of non farm earnings is examined and it is found that a pro poor impact while by no means inevitable can be considerable the sector s trajectory over time in different settings is reviewed and the scope for and experience of various policy interventions is discussed

liquidity monetary policy and the financial crisis a new monetarist approach a model of public and private liquidity integrates financial intermediation theory with a new monetarist monetary framework nonpassive fiscal policy and costs of operating a currency system imply that an optimal policy deviates from the friedman rule a liquidity trap can exist in equilibrium away from the friedman rule and there exists a permanent nonneutrality of money driven by an illiquidity effect financial frictions can produce a financial crisis phenomenon that can be mitigated by conventional open market operations working in an unconventional manner private asset purchases by the central bank are either irrelevant or they reallocate credit and redistribute income jel e13 e44 e52 e62 g01 liquidity is a class of assets that is useful in exchange some of these liquid assets are government liabilities federal reserve notes treasury bills and treasury notes some are private liabilities the deposit liabilities of banks and some asset backed securities for example conventional wisdom holds that the main role of a central bank is to manage public liquidity in a manner that controls inflation and enhances the provision of private liquidity and credit however the mechanism by which central bank actions work to perform this role still appears to be poorly understood as has been highlighted by the financial crisis and the ensuing policy responses the purpose of this paper is to build a model of public and private liquidity that captures the features of modern economies essential to the analysis of monetary policy and that can be used to shed light on some current monetary policy problems and questions what is a liquid asset and what roles do privately provided and publicly provided liquid assets play in exchange in a model where we capture these roles for liquid assets what are the implications for monetary policy under what circumstances can a liquidity trap occur how does monetary policy work when there is a positive quantity of excess reserves held by banks what does a financial crisis do to the supply of private liquidity and what should monetary policy do in response

introduction to the special issue on the role of nonfarm income in poverty reduction evidence from asia and east africa in this special issue we present seven studies that collectively attempt to investigate the role of non farm income in long term and short term poverty reduction in asia and africa the first four studies out of the seven use long term panel data over two decades in the philippines thailand bangladesh and india these studies show drastic increases in non farm income shares and corresponding declines in poverty levels over time especially in the philippines and thailand education levels of household members and returns to education also increased significantly in these countries the remaining three studies use cross sectional and short term panel data from ethiopia kenya and uganda these african studies show high proportions of poor households and low shares of non farm income that are somewhat comparable to the situation in the 1980s described in the asian studies without the green revolution that provided stable farm income and potential financial resources to invest in children education in asia it is not clear if african farm households can follow the asian examples

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

allocation of goods by lottery i introduction many goods such as hunting permits oil drilling leases cellular telephone licenses and rights to fishing berths as well as some buds such as the military draft jury duty and who is to be thrown overboard on a sinking life raft are or have been allocated by lotteries in neo classical welfare economics the random distribution of property rights does not affect allocative efficiency as long as transferability is allowed and the transactions costs are non prohibitive lottery allocations however are generally not transferable thus lottery allocations are inefficient since the goods are not ultimately allocated to the users who value them the most a number of authors such as aubert 1959 fienberg 1971 eckhoff 1989 and elster 1989 36 122 have argued that lotteries are chosen as the allocative instrument because it represents a fair or just means of allocating the goods rawls 1971 374 and eckhoff 1989 have noted that where it is impractical to divide the goods equally among those who desire them a lottery serves to satisfy both the requirement that the process be fair and that the allocation problem be resolved relatively costlessly elster 1989 113 however notes that lotteries are not the only fair allocation mechanism for example he points out that in jewish ethics the problem of allocating an indivisible good such as life saving resources is resolved by denying it to everyone even economists would probably prefer a lottery to this resolution the fairness hypothesis has a rich history in the old testament lotteries are deemed a fair way of allocating goods such as the inheritance of land numbers 33 54 lotteries are also used to allocate bads in perhaps the most famous biblical example of use of lots jonah was chosen by lot to be sacrificed to appease god who had brought a storm that threatened to wreck the ship the story goes that the lot selected jonah because he was shirking his duties elsewhere and should not have even been on the vessel jonah 1 6 1 notice that fair here is taken to mean just given this theological foundation it is not surprising that the lottery has seen frequent use in legal history as well one of the most interesting cases occurred in swedish and finnish trials in the 17th and 18th centuries in cases where a man was murdered by a mob lotteries were used to allocate punishment since the law required an eye for an eye no more and no less eckhoff says that if it was impossible to ascertain which of them had dealt the mortal blow the courts determined that one of the responsible parties be sentenced to death and that the person be selected by lottery 1989 19 a similar use of lotteries occurs in military history to deal with cases of mass desertion in roman armies every tenth man was executed decimated and the remainder pardoned in more modern times the lottery has been used in u s law 2 first of course is the use of a lottery to decide who shall sit on a jury a connection between fairness and lotteries however has also appeared in the common law in an 1842 case u s v holmes which has been discussed by fienberg 1971 eckhoff 1989 and elster 1989 a ship sank in a heavy storm and the lone surviving life raft was in grave danger of sinking the crew threw overboard fourteen male passengers in an effort to save the rest when back in port after being rescued a crewman named holmes the only crew member who had not disappeared upon arrival to port was brought to trial for the deaths of the passengers the court ruled that the non essential members of the crew should have been thrown overboard before any passengers and if that was not sufficient then passengers should have been selected by lot which is the fairest mode elster 1989 65 the fact that a human life presumably a large cost was at stake ex post did not affect the decision 3 the environmental economics literature contains a number of references to the social preferences for and benefits of lottery allocations

nonfarm employment agricultural shocks and poverty dynamics evidence from rural uganda this article examines the role of off farm employment in poverty reduction over a short period of time by using panel data from 894 rural ugandan households in 2003 and 2005 taking advantage of the unique off farm labor supply and income data we analyzed how households respond to negative agricultural shocks especially through off farm labor supply and income to mitigate crop income loss our analysis indicates that the flexibility of labor time allocation varies across off farm jobs and that only low skilled and low wage jobs tend to be used to mitigate negative shocks especially among the asset poor

jobs off the farm wealth human capital and social group in rural eastern india abstractthis study examines the effects of wealth human capital and social group on the occupational choice and income of farm households to gain an understanding of the mechanism underlying the

the optimal quantity of money and partially liquid assets abstract in a monetary economy a la williamson 2012 in which a competitive financial sector insures agents facing idiosyncratic liquidity risk on interest bearing assets we introduce a competitive market for liquidity reallocation and study optimal policy we show that at any inflation rate above the friedman rule the market is a welfare improving risk sharing mechanism over williamson s 2012 deposit contract the optimal policy requires real asset scarcity which increases the demand for money and shrinks consumption inequality between asset and money users also we demonstrate that the equilibrium deposit contract with re trading opportunities in the asset market replicates the market allocations

friedman meets hosios efficiency in search models of money this article studies optimal monetary policy in an economy with endogenous search decisions we show that the same frictions that give fiat money a positive value generate an inefficient quantity of goods in each trade and an inefficient number of trades the friedman rule eliminates the first inefficiency and the hosios rule the second a monetary equilibrium attains the social optimum if and only if both rules are satisfied when they cannot be satisfied simultaneously optimal monetary policy achieves only the second best we analyse the conditions under which the second best monetary policy exceeds the friedman rule

non farm activity household expenditure and poverty reduction in rural vietnam 2002 2008 summary diversifying into non farm activities has been suggested as an effective way out of poverty for rural households in developing countries using the vietnamese household living standards surveys of 2002 2004 2006 and 2008 we test this claim and investigate the effect of non farm sector involvement on poverty and expenditure growth our endogeneity corrected estimates show that an additional household member involved with non farm activity reduces the probability of poverty by 7 12 and increases the household expenditure by 14 over a two year period our findings also indicate that non farm involvement reduces the hours worked on farm but not the household agricultural income

liquidity a new monetarist perspective this essay surveys the new monetarist approach to liquidity work in this literature strives for empirical and policy relevance plus rigorous foundations questions include what is liquidity is money essential in achieving desirable outcomes which objects can or should serve in this capacity when can asset prices differ from fundamentals what are the functions of commitment and collateral in credit markets how does money interact with credit and intermediation what can and should monetary policy do the research summarized emphasizes the micro structure of frictional transactions and studies how institutions like monetary exchange credit arrangements or intermediation facilitate the exchange process

open market operations abstract in an open market operation the central bank swaps currency for bonds we show how injecting money in this way is different from transfers the way policy is usually formulated the model captures liquidity explicitly by modeling the roles of assets in frictional exchange under various specifications for market structure and the acceptability or pledgeability of assets we discuss implications for the fisher and quantity equations the possibility of negative nominal yields liquidity traps and market segmentation when liquidity is endogenized using information theory multiple equilibria emerge with different policy predictions interest on reserves and quantitative easing are discussed