a dynamic tiebout theory of voluntary vs involuntary provision of public goods this paper considers a dynamic model of tiebout like migration between communities that utilize distinct allocation procedures for public goods at issue is whether voluntary or compulsory procedures are more likely to prevail over time we model infinitely lived individuals who make repeated sequential location decisions over one of two communities each community uses a distinct mechanism for allocating public goods the first is one in which contributions are given voluntarily by the citizenry of the community the second is a compulsory scheme by which individuals are taxed proportionately to wealth with the tax determined by a majority vote opportunities to accumulate wealth exist via accumulation of public capital the markov perfect equilibria of the dynamic game are studied our main result shows that when accumulated wealth converges to a steady state individuals locational choices eventually select the involuntary provision mechanism this holds despite the fact that unanimous location in the voluntary provision community may in many cases remain as a nash equilibrium of the static game each period we also describe conditions under which voluntary provision survives these conditions require that accumulation of capital fails to decrease wealth dispersion over time the results are shown to be consistent with findings relating inequality to school choice

male interracial wage differentials competing explanations persistent interracial wage differentials present a challenge for neoclassical models of discrimination which claim that long rung competition is not consistent with persistent discrimination this study provides an empirical examination of the missing variable and job competition models of interracial wage inequality the results argue strongly against the missing variables approach and strongly in favor of the job competition model specifically this study finds that about one half of the male african american white and latino white interracial wage differentials are due to market discrimination against african americans and latinos in addition the positive and significant coefficients on the race gender employment density variables strongly affirm the job competition model s contention that access to white especially male dominated jobs increases an individual s wage rate regardless of race racial job segregation then is an important explanatory variable for racial wage discrimination copyright 1999 by oxford university press

schooling fertility and the labour market experience of married women a model of career path choice is constructed for a sample of women taken from the 1991 us national household education survey this allows for simultaneity and selection effects in the relationship between regime choice and earning it is established that inter alia expected earnings have a significant impact on the career path and the hours of work chosen by american women the role played by formal schooling and by childrearing in the determination of carrier path is highlighted and implications are discussed

the median voter according to garp this paper adapts the generalized axiom of revealed preference garp empirical method to the public goods problem to test whether observed municipal public spending can be explained as if the city governments maximize the utility of the median income voter it applies the test procedure for medium size municipal governments in five midwest states the data are consistent with garp and reveal that the local governments in the sample behave as if they maximize median voter utility once we control for the state specific effects government management structure and population density the median voter hypothesis is the proposition that local governments behave as if they maximize the utility of the median income voter in the jurisdiction although an important tool in public economic analysis there has been no conclusive direct test of the maximization hypothesis to date revealed preference theory shows that any finite set of price and quantity observations satisfying the generalized axiom of revealed preference garp can be rationalized by the constrained maximization of an increasing continuous concave utility function afriat 1967 1973 varian 1982 this paper adapts the revealed preference method to the public goods problem in order to test municipal spending data for consistency under garp thereby providing the first direct test of whether or not the local governments behave as if they maximize median voter utility the median voter hypothesis represents a simple tool that is the most widely used characterization of local government behavior given its prominence in the literature it is not surprising that the hypothesis itself has become the subject of scrutiny the framework assumes direct or representative democracy without strategic behavior in which competition among politicians ensures that the public sector bureaucracy responds efficiently to voters desires public sector decision making reduces to an as if constrained maximization problem a simplified picture of the outcome of collective action still much of the empirical testing literature is motivated by concerns over whether the model is too simplistic nonetheless it can be argued that given its depiction as an as if outcome the median voter hypothesis should be judged not by its descriptive accuracy of the public sector decision process but instead by how well it explains observed local fiscal choices on this basis the existing empirical evidence although mixed reveals a surprising amount of indirect support for the framework one approach taken in the literature is to evaluate the median voter hypothesis by testing the predictive power of regression equations with median income and tax price terms for explaining state or local fiscal behavior in this line of the

micro estimates of public spending demand functions and tests of the tiebout and median voter hypotheses responses to questions given to a random sample of michigan households are used to estimate public spending demand functions while income and price elasticities are similar to those obtained from aggregate data positive income elasticities appear to arise because public services are distributed in a prorich manner a relatively small variance in spending demands among urban and suburban communities in metropolitan areas with substantial public service variety suggests that the tiebout mechanism works this interpretation is supported by the fact that actual spending conforms substantially to desired levels in urban areas but less so in rural areas with little public sector choice

understanding the family gap in pay for women with children as the gender gap in pay between women and men has been narrowing the family gap in pay between mothers and nonmothers has been widening one reason may be the institutional structure in the united states which has emphasized equal pay and opportunity policies but not family policies in contrast to other countries that have implemented both the authors now have evidence on the links between one such family policy and women s pay recent research suggests that maternity leave coverage by raising women s retention after childbirth also raises women s levels of work experience job tenure and pay

consistency of risk preference measures an artefactual field experiment from rural china a variety of measures have been developed to elicit individual risk preferences how these measures perform in the field in particular in developing countries with non student subjects is still a

tiebout with politics capital tax competition and constitutional choices this paper examines how capital tax competition affects jurisdiction formation we describe a non cooperative locational model of public goods provision choices where the levels of taxation and the local public good varieties provided within jurisdictions are selected by majority voting and where equilibrium jurisdictions consist of consumers with similar tastes we show that interjurisdictional tax competition results in an enlargement of jurisdictional boundaries and even in the absence of intrajurisdictional transfers can raise welfare for all members of a jurisdiction

a test that discriminates between two models of the dutch first auction non isomorphism abstract previous experiments reject the hypothesis that the dutch and first auctions are isomorphic two alternatives to the standard normal form analysis of the dutch auction are formalized 1 bidders violate bayes rule 2 bidders experience a utility of suspense that is additive with the utility of monetary reward paired comparisons of bidding behavior between groups in which the treatment is to triple the payoff of the baseline group yields no significant effect of this treatment we therefore reject the utility of suspense model

labor economics problems in analyzing labor markets introduction i unemployment 1 keynes cambridge and the new keynesian economics m s lawlor 2 labor economics and unemployment an historian s perspective a keyssar ii how labor markets really work 3 the impact of formal on the job training on unemployment and the influence of gender race and working life cycle position on accessibility to on the job training a j field a h goldsmith 4 empirical tests of labor market equilibrium an evaluation j heckman t macurdy 5 labor market segmentation theory reconsidering the evidence w t dickens k lang iii race discrimination and competition 6 labor markets and racial inequality j cotton 7 racial inequality and racial conflict recent developments in radical theory r williams iv culture ethnicity and poverty 8 culture and human capital theory and evidence or theory versus evidence s a woodbury 9 labor economics and public policy dominance of constraints on preferences m foster index

an alternate test of the tiebout hypothesis this paper has presented an indirect test of the tiebout hypothesis that does not require explicit consideration of the interaction between the markets for housing and local public services the results suggest that at least in the case of elementary and secondary education when allowed to choose from a selection of jurisdictions individuals locate so as to minimize the allocative inefficiency that results from collective provision of local services

altruism or diminishing marginal utility abstract we challenge a commonly used assumption in the literature on social preferences and show that this assumption leads to significantly biased estimates of the social preference parameter using monte carlo simulations we demonstrate that the literature s common restrictions on the curvature of the decision makers utility function can dramatically bias the altruism parameter we show that this is particularly problematic when comparing altruism between groups with well documented differences in risk aversion or diminishing marginal utility i e men versus women giving motivated by pure versus warm glow motives and wealthy versus poor we conclude by proposing two approaches to address this bias

are you risk averse over other people s money decisions with uncertain outcomes are often made by one party in settings where another party bears the consequences whenever an individual is delegated to make decisions that affect others such as in the typical corporate structure does the individual make decisions that reflect the risk preferences of the party bearing the consequences we examine this question in two simple settings lottery choices and sealed bid auctions using controlled laboratory experiments we find that when an individual makes a decision for an anonymous stranger there is a tendency to exhibit less risk aversion this reduction in risk aversion is relative to his or her own preferences and it is also relative to his or her belief about the preferences of others this result has significant implications for the design of contracts between principals and agents

women and affirmative action abstract this paper reviews evidence indicating that as it has been enforced so far affirmative action has contributed negligibly to women s progress in the workplace affirmative action can be modeled as a tax on employers whose female employment growth falls below a certain rate clearly if labor supply shifts result in female employment growth greater than the regulatory standard the tax constraint will not be binding as we shall see this may help explain an affirmative action program that is generally ineffective for women although it has been effective for minorities federal anti bias policies in general and the system of affirmative action goals in particular have been accused of instituting employment quotas this paper reviews evidence on the homogenization of the workplace predicted by the quota theory as well as considering more direct evidence on whether affirmative action goals are really quotas in lambs clothing i shall also review the slim evidence on the most fundamental and co

the impact of psychological and human capital on wages historically economists have taken the position that psychological capital is either unobservable or immeasurable thus heretofore little evidence has been available on the contribution of psychological capital to wages using data drawn from two different waves of the national longitudinal survey of youth we offer evidence that psychological capital has both a direct effect via self esteem and an indirect effect through locus of control on an individual s real wage we find a person s wage is more sensitive to changes in self esteem than to comparable alterations in human capital both relative wages and human capital contribute to self esteem

group and individual risk preferences a lottery choice experiment with self employed and salaried workers abstract this paper focuses on decision making under risk comparing group and individual risk preferences in a lottery choice experiment in the individual treatment subjects make choices individually in the group treatment each subject placed in a group made lottery choice via voting in the choice treatment subjects choose whether to be on their own or in a group the originality of this research lies in the fact that we introduced variability in socio demographic characteristics by recruiting salaried and self employed workers our main findings indicate that groups are more likely than individuals to choose safe lotteries our results also show that individuals risk attitude is correlated with both the type and the sector of employment

voting with ballots and feet existence of equilibrium in a local public good economy abstract this paper proves a general existence theorem for equilibrium in a local public good economy with free mobility by extending greenberg and shitovitz s j econ theory46 1988 223 236 approach each jurisdiction s collective choice rule is the d majority voting rule proposed by greenberg econometrica47 1979 627 636 spillover effects of local public goods externalities due to the population distribution and snob effects are all allowed we need transitivity and completeness of preferences these assumptions are not used by greenberg and shitovitz because they do not permit consumers to move free mobility of consumers causes disconnections in consumption sets a problem addressed here journal of economic literatureclassification numbers c62 d72 h72 r13

risk aversion and the nash solution in stochastic bargaining experiments abstract it has been shown theoretically that the utility which the nash solution assigns agents in a bargaining game with stochastic outcomes depends in a predictable manner on the risk attitudes of the agents we control explicitly for the risk aversion of subjects in laboratory experiments designed to test these predictions our results provide support for the predicted risk sensitivity of the nash solution

inequality income growth and mobility the basic facts during the 1950s and 1960s mean wages in the united states grew rapidly and the dispersion around this growing mean changed very litde starting in the 1970s and continuing into the 1980s and 1990s these patterns were reversed mean wages grew slowly and inequality increased rapidly these changes in labor markets were reflected in changes in the distribution of family income the mean of the distribution of family income did increase after 1973 in spite of the near constancy of mean real wages as family members increased the number of hours they worked however the increase in inequality of wages was mirrored by an increase in the dispersion of family income a large descriptive literature has documented the rise in inequality while a smaller behavioral literature has sought to delineate the causes of this rise these changes in the distribution of family income a fected rates of poverty directly during the 1950s and 1960s temporary increases in poverty during recessions were more than offset by declines in poverty during economic expansions as long as the poor gained along with everyone else fi om the secular growth in the mean one could be confident that poverty rates would ratchet down this is exactly what happened as poverty rates fell from 22 4 percent in 1959 to 11 1 percent in 1973

tests of a heterogeneous bidders theory of first price auctions abstract this paper reports the results of eight first price sealed bid auction market experiments using cash motivated subjects to test a constant relative risk averse model crram of equilibrium bidding behavior of heterogeneous bidders

subjective probabilities in games an application to the overbidding puzzle this article illustrates how the joint elicitation of subjective probabilities and preferences may help us understand behavior in games we conduct an experiment to test whether biased probabilistic beliefs may explain overbidding in first price auctions the experimental outcomes indicate that subjects underestimate their probability of winning the auction and indeed overbid when provided with feedback on the precision of their predictions subjects learn to make better predictions and to curb significantly overbidding the structural estimation of different behavioral models suggests that biased probabilistic beliefs are a driving force behind overbidding and that risk aversion plays a lesser role than previously believed

economic influences on the structure of local government in u s metropolitan areas abstract there is a large degree of variation in the number of general purpose local governments and school districts per square mile and per person among united states metropolitan areas using data from 1982 this paper provides an empirical test of whether economic factors especially variation in demand for local government services partly account for these differences the empirical findings show that after controlling for political historic and institutional factors variations in the characteristics that affect demand for local government services do influence the number of local governments this result is consistent with the hypothesis first put forth by tiebout

optimal timing in the problem of family farm transfer from parent to child an option value approach abstract the optimal time for transferring the family farm from parent to child is modeled in an option value framework it is assumed that parents have the ability to wait and enrich their information set before making the decision when to transfer the farm to a succeeding child rather than making a prompt decision the results indicate that the optimal timing depends on the wedge between the parents critical level of utility and disutility from the farm transfer to a succeeding child the arguments of parents utility function are country culture and family specific

race competition and differential wages this paper develops a competitive model of racial wage and employment discrimination discrimination is a persistent outcome of the interaction of two phenomena the first is the adverse effect of racial conflict on the organisational strength of workers which in turn affects the formation of wage differentials this is a class struggle effect the second is the negative correlation between the interracial employment ratio and the wage differential within occupations arid across all capitals this is a racial exclusion effect the interaction of the class struggle and racial exclusion effects implies persistent discrimination

risk aversion and the winner s curse this article analyzes an auction in which bidders see independent components of a common prize value the nash equilibrium for two rational bidders is shown to be independent of risk attitudes the information structure allows explicit calculation of an alternative equilibrium in which naive bidders do not correctly discount the value of the prize contingent on winning and thus they suffer the winner s curse subjects in a laboratory experiment clearly fall prey to the winner s curse the data conform most closely to the predictions of the naive model moreover the level of risk aversion implied by fitting the naive model is similar to an independent risk aversion measure obtained in a separate private value bidding exercise

gender differences in the cost of displacement an empirical test of discrimination in the labor market there are two competing explanations of why women workers earn less than men with equivalent education work experience and job tenure the human capital explanation and the discrimination explanation the human capital explanation argues that sex differences in human capital investment which arise from sex differences in expectations surrounding labor force participation account for the wage differential women workers are expected to invest less in jobspecific human capital than otherwise comparable men workers because women expect to spend less time on the job furthermore even for men and women workers with equal ex post levels of job tenure and or work experience women have invested less in onthe job training because their a priori expectations of job tenure and or work experience were less than those of men who now have the same tenure and or experience therefore in this view women workers earn less than comparable men because they have invested less in specific human capital women earn less because they are less productive the sex wage differential is economically efficient the discrimination explanation argues that sex differences in labor market opportunities that is sex discrimination in the labor market account for the sex wage differential in this view women workers earn less than comparable men because they are the victims of sex discrimination in the labor market women do not earn less because they are less productive the sex wage differential is economically inefficient while the economic implications of these two explanations of the sex wage differential are enormously different both explanations are consistent with empirical studies simply because both resort to nonmeasurables to explain the sex wage differential empirical studies cannot measure directly either discrimination or job specific human capital therefore the problem with these two competing explanations of the sex wage differential is that neither has been empirically sorted from the other both explanations are consistent with data which show a wage differential by sex after controlling for education work experience and job tenure newly available data on displaced workers provide an opportunity to empirically disentangle these two competing explanations of the sex wage differential displaced workers are workers who have lost their jobs either because their workplaces have closed or because they were permanently laid off due to slack demand for the outputs of their firms displaced workers represent a special case of worker mobility unlike voluntary job movers that is workers who have voluntarily quit their prior jobs the job mobility of displaced workers is not the result of their own expectations that better jobs are available a worker who voluntarily changes jobs does so because there is another job which offers higher wages or other improvements in the conditions of employment the worker moves precisely because his or her productivity and wages is higher on the subsequent job the wage change is endogenous unlike workers who are fired or involuntarily laid off because their personal productivity is lower than that of other tdiscussants rebecca blank princeton university elyce rotella indiana university

discrete choice with social interactions this paper provides an analysis of aggregate behavioural outcomes when individual utility exhibits social interaction effects we study generalized logistic models of individual choice which incorporate terms reflecting the desire of individuals to conform to the behaviour of others in an environment of noncooperative decisionmaking laws of large numbers are generated in such environments multiplicity of equilibria in these models which are equivalent to the existence of multiple self consistent means for average choice behaviour will exist when the social interactions exceed a particular threshold local stability of these multiple equilibria is also studied the properties of the noncooperative economy are contrasted with the properties of an economy in which a social planner determines the set of individual choices finally a likelihood function based on the theoretical model is given and conditions for the econometric identifiability of the model are established

where has all the education gone cross national data show no association between increases in human capital attributable to the rising educational attainment of the labor force and the rate of growth of output per worker this implies that the association of educational capital growth with conventional measures of total factor production is large strongly statistically significant and negative these are on average results derived from imposing a constant coefficient however the development impact of education varied widely across countries and has fallen short of expectations for three possible reasons first the institutional governance environment could have been sufficiently perverse that the accumulation of educational capital lowered economic growth second marginal returns to education could have fallen rapidly as the supply of educated labor expanded while demand remained stagnant third educational quality could have been so low that years of schooling created no human capital the extent and mix of these three phenomena vary from country to country in explaining the actual economic impact of education or the lack thereof

a classroom exercise voting by ballots and feet this classroom experiment illustrates the efficiency enhancing property of a tiebout system in which local public goods decisions are determined by a political process students are given playing cards that induce diverse preferences for expenditures on alternative public goods and are initially assigned to specific communities then those in each community vote on the type and level of public goods provision which determine the tax cost after the provision and tax results are announced students are free to move to a location where the prior results are more consistent with their preferences this process continues for several rounds with a new vote taken at each location after moves have been made the exercise demonstrates that the combination of voting with feet and ballots tends to increase the total net benefit for all communities the voting on provision levels is structured to facilitate a discussion of the median voter theorem

monopoly behaviour decentralized regulation and contestable markets an experimental evaluation this study provides a comparative experimental evaluation of several alternative approaches to the single product monopoly problem we contrast incentive compatible decentralized regulatory mechanisms with notions of market contestability in a decreasing cost environment the decentralized regulatory mechanisms are found to be significantly more effective at restraining monopoly power than is allowing direct contestability but the regulatory mechanisms examined require that the regulatory agency know the market demand curve though not the industry cost curve since this is significantly more information than is required to implement direct contestability an interesting tradeoff is suggested does the greater efficiency in monopoly restraint provided by the regulatory mechanism relative to direct contestability outweigh the former s greater informational requirements

real options and demographic decisions abstract the theory of real options is used to incorporate the influence of uncertainty on demographic decision making the decision to have children is formulated as an investment using portfolio theory the timing of the decision to have a child is modelled as a real options decision with uncertainty affecting a woman s ability to exercise the option to wait in order to delay or space births an increase and reduction in uncertainty on this option is explored compared to the widely used net present value npv framework the real options approach roa better explains the process of demographic decision making in poor countries

income and employment effects of micro credit programmes village level evidence from bangladesh micro credit programmes having made their mark in providing credit and other development services to the poor in a non traditional way are able to make significant changes in a rural economy this article attempts to quantify the village level impacts of the three most important micro credit programmes of bangladesh namely grameen bank bangladesh rural advancement committee brac and bangladesh rural development board s brdb rd 12 project descriptive and econometric analyses show that these programmes have positive impacts on income production and employment particularly in the rural non farm sector also growth in self employment has been achieved at the expense of wage employment which implies an increase in rural wages the article emphasises that an upward shift in the labour demand curve is required for both improved productivity and wage gains on a sustainable basis which can only be supported through a structural transformation of the rural economy

the effect on black white wage differences of differences in the quantity and quality of education using data from the national longitudinal survey of youth for the years 1979 88 the author examines the extent to which black white differences in educational attainment educational quality and unmeasured individual ability can explain black white wage differences an analysis that corrects for both selectivity and ability biases inherent in estimating the education wage relationship shows that the main source of the black white wage differential is the racial difference in the quality rather than quantity of schooling in fact the author concludes closing the racial gap in the basic skills learned in school could reduce the wage differential by two thirds

evidence on discrimination in employment codes of color codes of gender there is substantial racial and gender disparity in the american economy as we will demonstrate discriminatory treatment within the labor market is a major cause of this inequality the evidence is ubiquitous careful research studies that estimate wage and employment regressions help wanted advertisements audit and correspondence studies and discrimination suits that are often reported by the news media yet there appear to have been periods of substantial reductions in economic disparity and discrimination for example donohue and heckman provide evidence that racial discrimination declined during 1965 1975 1 gottschalk has produced statistical estimates that indicate that discrimination against black males dropped most sharply between 1965 and 1975 and that discrimination against women declined during the interval 1973 1994 2 but some unanswered questions remain why did the movement toward racial equality stagnate and eventually decline after the mid 1970s what factors are most responsible for the remaining gender inequality what is the role of the competitive process in the elimination or reproduction of discrimination in employment

orchestrating impartiality the impact of blind auditions on female musicians a change in the audition procedures of symphony orchestras adoption of blind auditions with a screen to conceal the candidate s identity from the jury provides a test for sex biased hiring using data from actual auditions in an individual fixed effects framework we find that the screen increases the probability a woman will be advanced and hired although some of our estimates have large standard errors and there is one persistent effect in the opposite direction the weight of the evidence suggests that the blind audition procedure fostered impartiality in hiring and increased the proportion women in symphony orchestras

sex discrimination in restaurant hiring an audit study in an audit study of sex discrimination in hiring comparably matched pairs of men and women applied for jobs as waiters and waitresses at restaurants in philadelphia in high price restaurants where earnings are higher job applications from women had an estimated probability of receiving a job offer that was lower by about 0 4 and an estimated probability of receiving an interview that was lower by about 0 35 both estimated differentials are statistically significant additional evidence suggests that customer discrimination partly underlies the hiring discrimination

real options as a component of the market value of stocks evidence from the spanish stock market this paper aims to examine how investors expectations about the value of a firm s real options are reflected in the price of its stocks if the real option approach is correct then the efficient

real options and demographic decisions empirical evidence from east and west germany iyer and velu 2006 have convincingly argued that contemporary analyses of fertility behaviour fail to explain why a woman or a couple will choose to postpone childbirth and in particular to consider the role of uncertainty in this regard they have addressed this lacuna in the literature by using a real options approach to model fertility decisions by relating uncertainty experienced by individuals to the likelihood of childbirth however they did not present empirical evidence since the theory implies the existence of two offsetting effects of uncertainty on fertility decisions a positive insurance effect and a negative option value effect it is not easy to reject the theory on the basis of empirical analysis when one of these effects offsets the other we construct such a test for east and also west germany during that country s reunification which takes advantage of the fact that because of the country s strong welfare system the insurance effect should be dominated by the option value effect thereby suggesting that the net relationship should be negative the results provide rather strong support for the real options link especially for eastern germany

individual behavior of first price auctions the importance of information feedback in computerized experimental markets abstract this article reports the results of an individual choice experiment designed to test the nash equilibrium predictions of the first price sealed bid auction a subject faced in 100 auctions always the same resale value and competed with computer simulated bids the design used between subjects variation and involved information feedback as the treatment variable earlier experimental work on first price auctions has frequently reported an overbidding relative to the risk neutral nash equilibrium our data provide evidence that overbidding can be fostered by the standard information feedback in auction experiments which after each auction reveals the winning bid only by means of learning direction theory we explain the individual bidding dynamics in our experiment finally we apply impulse balance theory and make long run predictions of individual bidding behavior

income uncertainty and optimal redistribution 1 introduction redistribution policy under a utilitarian criterion aims to transfer dollars from one group in the population to another if the weighted utility gain to the recipients exceeds the utility cost to the donors under diminishing marginal utility of income part of any exogenous change in one group s income should be shared with the other group for example if taxpaying workers suffer a negative shock to their mean earnings then part of this utility shock should be spread to nonworkers in the form of lower transfer payments and vice versa for the case of a positive shock this article demonstrates the counterintuitive result that under reasonable preference representations a policymaker may respond optimally to a negative utility shock by redistributing income away from the harmed group thus exacerbating the group s utility loss in particular under risk aversion a mean preserving increase in the variance of income typically has an effect on well being analogous to a decrease in mean income 1 it may nevertheless be welfare enhancing to transfer income away from those suffering an increase in income uncertainty even though this policy compounds their welfare loss the main ideas can be demonstrated in a simple framework for illustration the analysis will focus on redistribution from taxpaying workers to nonworkers the central result is that a meanpreserving increase in earnings uncertainty among taxpayers can increase optimal transfer amounts to nonworkers increasing optimal income replacement rates even though the redistribution exacerbates the taxpayers utility loss from the increase in uncertainty 2 model footnote 1 many factors in the economy affect earnings uncertainty even conditional on being employed such as the form of compensation e

a critique of tiebout s theory of local public expenditures the last section of this paper presents a rigorous version of tiebout s theory of local public goods it is shown that equilibria exist and are pareto optimal this rigorous theory follows closely the more rigorous part of tiebout s work this rigorous theory makes a number of very special assumptions which make local public goods essentially private the body of this paper presents a series of examples which show that if one tries to generalize the rigorous version of tiebout s theory in a number of interesting directions then equilibria may no longer exist or may not be pareto optimal the conclusion is that tiebout s idea does not lead to a satisfactory general theory of local public goods the goal of this paper is to point out that tiebout s notion of equilibrium with local governments does not have the nice properties of general competitive equilibrium except under very restrictive assumptions tiebout 39 suggested that there are competitive forces which tend to make local governments allocate resources in a pareto optimal fashion consumers choose to live in those towns with the mix of taxes and public goods they prefer local governments choose this mix so as to attract inhabitants this idea may seem intriguing for it suggests that the invisible hand solves an important part of samuelson s perplexing public goods problem 32 tiebout in fact makes an argument which is nearly rigorous i give a rigorous version of his argument at the end of the paper however in this rigorous version so many restrictive assumptions are made that public goods become essentially private in the body of the paper i give a series of examples with which i try to convince the reader that one is forced to adopt tiebout s restrictive assumptions the idea is that if one changes any of his assumptions then either equilibria may not exist or may not be pareto optimal my examples are presented in the context of a general class of tiebout models i consider several subclasses one of which is the special case considered by tiebout in each of the subclasses except that considered by tiebout i give a counterexample either to the existence of equilibrium or to its pareto optimality the subclasses are so chosen that the difficulties they reveal would be shared by any reasonable tiebout model which differed from his special case i believe that my examples controvert tiebout s suggestion 39 last paragraph that his theory compares favorably with competitive equilibrium theory most of the examples in this paper have already appeared in the literature i cite related work as i go along what is new here is that i assemble the examples in a unified argument

tiebout bias and the demand for local public schooling institute of university of ii business and california economic research berkeley center for real estate and urban economics working paper series working paper 86 109 tiebout bias and the demand for local public schooling by daniel l rubinfeld perry shipiro judith roberts these papers are preliminary in nature th urpose 39 to stimulate 39 ussion comment therefore they are not t cited or quoted 39 ny p ation wit express permissio the author graduate school of business administration

long term risk management of nuclear waste a real options approach in this paper we investigate the optimal timing for deep geological disposal of nuclear waste our model is based on the real options approach to investment under uncertainty in this context the problem is similar to the optimal exercise policy for a perpetual american spread option the potential usefulness of such a model for actual decision making on a sensitive issue is illustrated by some numerical simulations

household location and tiebout do families sort according to preferences for locational amenities abstract if households sort efficiently across locations then at a given location families receive the same marginal benefit from the locational amenities we test for such sorting by imposing cross equation restrictions on hedonic regressions that difference away location versus house specific effects estimates are obtained using a unique subset of the american housing survey in which adjacent housing units are grouped together and observed in both 1985 and 1989 rejection of the cross equation restrictions unambiguously implies an inefficient sorting of households in contrast the data support the cross equation restrictions which is a necessary but not sufficient condition for efficient sorting

the role of human capital in earnings differences between black and white men d uring the past 50 years the earnings of black men have increased substantially both in absolute terms and relative to those of white men as shown in figure 1 in 1940 the black white weekly earnings ratio among men ages 25 34 was 49 percent by 1980 it had increased to 79 percent during the 1980s however the overall black white earnings gap did not narrow and at younger ages the gap actually widened although the 1980s is not the first decade since 1940 in which black men made little or no gains in relative earnings the 1950s was another the lack of progress in the 1980s is nevertheless puzzling and a source of concern this article examines the factors underlying the differential in earnings between black men and white men with a focus on the role of human capital since 1940 successive generations of black men entering the labor force have been increasingly more educated relative to white men both in terms of years of school completed and in the quality of schooling obtained as the education and income levels of black parents increased racial differences in the transmission of human capital in the home were also likely to have narrowed this convergence in educational differences combined with the migration of blacks out of the south contributed to the narrowing in the racial gap in earnings over the 1940 80 period particularly in the first half of the period but human capital factors education and migration were not the only source of convergence in black white differences in earnings the patterns of change in the earnings gap support the contention that declining labor market discrimination against blacks has also contributed to the rise in the black white earnings ratio moreover the acquisition of human capital itself has been strongly affected by societal and governmental discrimination since blacks were long provided with greatly inferior schooling resources

naturally occurring markets and exogenous laboratory experiments a case study of the winner s curse we examine the relevance of experimental findings from laboratory settings that abstract from the field context of the task that theory purports to explain using common value auction theory as our guide we identify naturally occurring settings in which one can test the theory experienced agents bidding in familiar roles do not fall prey to the winner s curse yet experienced agents fall prey to the winner s curse when bidding in an unfamiliar role we conclude that the theory predicts field behaviour well when one is able to identify naturally occurring field counterparts to the key theoretical conditions

peddlers forever culture competition and discrimination contemporary economic theory has all but completed the burial of the idea that market discrimination explains racial wage differentials or differences in general pecuniary accomplishments across ethnic groups under competitive conditions we need only await the eulogy interment began with the failure of the model premised on employers taste for discrimination the preferences of employers for members of one group over another could not sustain wage differentials under competition if the individuals from each group were equally able although the initial argument was made under the assumptions of neoclassical perfect competition it was beaten back by the austrian process view of competition see israel kirzner 1973 a latent reservoir of alert entrepreneurs presumably would seize the profit opportunities generated by the discriminatory wage gap drive discriminating employers from the market and erode the wage differentials valiant efforts emerged subsequently to raise from the dead the idea that competition might eliminate market discrimination these efforts involved the development of market discrimination models under the states of affairs characteristic of neoclassical imperfect competition or so called statistical discrimination neither case precluded the possibility of ingenious entrepreneurship nor the entrepreneurial capacity to smell profits kirzner p 229 as a result in neither case could the existence of wage or earnings differentials be maintained by employer decisions in the first case the inventive entrepreneur could circumvent or bring down the barrier that was the source of the imperfection similarly in the second case the clever entrepreneur could devise new procedures for overcoming existing informational discrepancies that might exist about the abilities of the members of each of the ascriptively distinct groups see darity 1982 the application of the austrian process view of competition to the problem of racial and ethnic wage differences stripped market discrimination of its analytic significance however the empirical persistence of such wage differentials in the u s economy is well established the demise of the theory of market discrimination under competitive conditions has led to increasing use of the human capital explanation for differences in economic achievement across ascriptively distinct groups after many years and scores of statistical studies that revealed that convergence in observable human capital characteristics especially years of formal education did not lead to the anticipated abolition of black white wage gaps see williams 1984 there is now a shift underway that identifies the source of the alleged human capital differences as unobservable cultural differences between ascriptively distinct groups cultural variation is accorded primacy in explaining ethnic and racial differences in economic achievement in light of the death of the market discrimination explanation the culturalogical explanation is given added force by the observation that certain ethnic groups japanese and jewish americans to name but two have managed to succeed despite discrimination see barry chiswick 1983a b the themes of culture and competition thus are the focus of this essay we first provide substantive and historical critiques of the new cultural variant of the human capital theory second we argue that the existence of ongoing market discrimination can be revived by employing an alternative university of north carolina chapel hill nc 27514 and university of texas austin tx 78712 respectively we are grateful to art goldsmith bobbie horn steve steib and david swinton for helpful comments research support was provided by the southern center for public policy studies at clark college in atlanta

school quality and black white relative earnings a direct assessment the wage differential between black and white men fell from 40 percent in 1960 to 25 percent in 1980 it has been argued that this convergence reflects improvements in the relative quality of black schools to test this hypothesis we assembled data on pupil teacher ratios annual teacher pay and term length for black and white schools in the eighteen segregated states from 1915 to 1966 these data are linked to estimated returns to education for southern born men from different cohorts and states in 1960 1970 and 1980 improvements in the relative quality of black schools explain 20 percent of the narrowing of the black white earnings gap between 1960 and 1980

risk attitudes in first price auction experiments a bayesian analysis non cooperative bidding theory for sealed bid auctions generally implies testable predictions that are conditioned on the risk attitudes of agents received laboratory experiments that purport to test this theory do not generally control for the risk attitudes of subjects those experiments exhibit behavior inconsistent with popular bidding models that assume that agents have the same aversion to risk or are all risk neutral this paper constructs an explicit bayesian prior distribution for the risk attitudes of experimental subjects and reconsiders the experimental results it finds that observed bidding behavior is still inconsistent with the nash predictions when explicit prior weights are attached to alternative assumptions about subject risk attitudes thus one cannot account for observed bidding anomalies by appealing to uncontrolled nuisance variables such as risk attitudes non cooperative bidding theory for sealed bid auctions generally implies testable predictions that are conditioned on the risk attitudes of agents archetypical of this result is the nash equilibrium prediction for first price auctions for an object that is valued by agents in an independent and private manner received laboratory experiments that purport to test this theory do not generally control for the risk attitudes of subjects those experiments exhibit behavior inconsistent with popular bidding models that assume that agents have the same aversion to riskor are all risk neutral in this paper we construct an explicit prior distrlbution for the risk attitudes of experimental subjects and reconsider the experimental results we find that observed bidding behavior is indeed consistent with the nash predictions when explicit prior weights are attached to alternative assumptions about subject risk aversion however when one allows for risk loving subjects as well observed behavior is inconsistent with nash predictions thus one cannot account for observed bidding anomalies by appealing to uncontrolled nuisance variables such as risk attitudes in section i we consider a specific nash equilibrium ne bidding model due to cox roberson and smith 1982 and cox smith and walker 1988 that clearly illustrates the risk sensitivity of the theoretical predictions in section ii we provide independent evidence of the risk attitudes of experimental subjects in a test for risk attitudes developed by harrison 1986a this evidence allows us to construct an explicit prior probability density function over the coefficient of constant relative risk attitudes employed in the specific bidding model of section i in section iii we reconsider the evidence from the first price fp experiments reported in cox roberson and smith 1982 and cox smith and walker 1983a 1983b i a specific bidding model cox roberson and smith 1982 hereafter crs present a model based on a power function utility specification for agent i ui y y 1 received for publication august 31 1987 revision accepted for publication december 18 1989 university of south carolina i am grateful to two anonymous referees for helpful comments although they are not responsible for my conclusions

tiebout economies with differential genetic types and endogenously chosen crowding characteristics abstract we consider a tiebout economy with differential crowding and public projects in which agents are distinguished by their tastes and genetic endowments agents choose which crowding characteristic for example a skill they wish to express and this affects their value to other members of their jurisdiction club firm etc an agent s choice is influenced both by his genetic endowment which affects his cost of acquiring crowding characteristics and by his preferences over which crowding characteristic he expresses we show that if small groups are strictly effective the core is equivalent to the set of anonymous competitive equilibrium outcomes but that the core generally contains taste homogeneous jurisdictions journal of economic literature classification numbers h41 h72

star shaped probability weighting functions and overbidding in first price auctions there is a debate about whether risk aversion is the main source of overbidding in a first price independent private values auction as an alternative we adopt a non expected utility framework and identify an interpretable property on the probability weighting function which always induces overbidding

the wage earnings impact of historically black colleges and universities author affiliation elton mykerezi department of applied economics university of minnesota twin cities 231 classroom office building 1994 buford avenue st paul mn 55108 6040 usa e mail myker001 umn edu corresponding author bradford f mills department of agricultural and applied economics virginia polytechnic and state university 314 hutcheson hall blacksburg va 24060 usa e mail bfmills vt edu acknowledgment the authors thank george norton julie hotchkiss and two anonymous referees for helpful comments and suggestions funding from the national research initiative competitive grants program usda cress grant number 2003 35401 12915 is also gratefully acknowledged 1 introductionhistorically black colleges and universities hbcus were originally founded to provide postsecondary educational opportunities to blacks since the end of de jure segregation in public education under the supreme court brown v the board of education of topeka 1954 ruling the hbcu mandate has become the subject of considerable debate the supreme court ruling in united states v fordice 1992 may be interpreted to indicate that continued state and federal support of hbcus as racially distinct institutions must be justified by educational benefits beyond the provision of a low cost educational alternative moore 2000 differential post college labor market success is an important indicator of the value of unique hbcu benefits and thus is of considerable interest in terms of postsecondary education policy previous studies by ehrenberg and rothstein 1994 and constantine 1995 1998 use data from the national longitudinal study of the high school class of 1972 to examine the impact of hbcu attendance relative to attendance of other colleges on the wages of blacks however the findings of these studies are somewhat conflicting ehrenberg and rothstein 1994 find a 0 12 wage loss for hbcu attendees relative to their counterparts who attended other four year colleges or universities constantine 1995 on the other hand finds that hbcu attendees realize 38 higher wages than black college attendees at other four year institutions constantine 1998 finds that black males who attend hbcus realize 7 higher wages than black attendees at other four year colleges and universities and that wages would be 25 higher for the general college attendee population of black males with hbcu attendance black females who attend an hbcu show 15 higher wages relative to black females who attended other four year colleges but there are no significant wage gains from hbcu attendance for the general population of black females the conflicting findings in these studies potentially arise from changes in the differential return on hbcu education with post college experience in the labor market as the median age in the ehrenberg and rothstein 1994 sample is 25 years compared to 32 years in the constantine 1995 1998 sample this paper augments the existing literature on the wage earnings impact of blacks hbcu attendance in two important ways first the age earnings profiles of hbcu attendees and other college educated blacks are examined using data from a more recent cohort of blacks in the 1979 national longitudinal survey of youth specifically the current study examines the impact of hbcu attendance on the initial post college wage on the most recent survey wage observation and on the average annual growth rate in wages measuring labor market success by the age earnings profiles of individuals over time provides more complete information about patterns of labor market success than does a wage observation at a single point in time second the study explicitly accounts for the impact of location of hbcus of particular note the distance from one s residence at age 14 years to the nearest hbcu and to other colleges and universities is controlled for in the college selection decision as are the local economic conditions for the individual s place of residence at age 14

swimming upstream trends in the gender wage differential in the 1980s using michigan panel study of income dynamics data for 1979 and 1988 we analyze how a falling gender wage gap occurred despite changes in wage structure unfavorable to low wage workers the decrease is traced to gender specific factors which more than counterbalanced changes in measured and unmeasured prices working against women supply shifts net of demand were unfavorable for women generally and hurt high skilled more than middle and low skilled women by analyzing wages we find support for the notion of a gender twist in supply and demand having its largest negative effect on high skilled women