the incentive effects of medicaid on women s labor supply this paper investigates medicaid s impact on women s labor supply behavior while taking into account medicaid s link to the afdc program the data were extracted from the 1986 current population survey a majorfinding is that medicaid valued as government provided health insurance has a significant negative impact on an average female head s probability of working for instance a i0 percent increase in medicaid would reduce a head s probability of working by 9 to 1 3 percentage points contrary to expectations medicaid is found to have a generally insignificant effect on hours worked

an analysis of the impact of negative csr forced labour parameter on the profitability of supply chain contracts abstract this paper provides a mathematical model to analyse the impact of a negative corporate social responsibility csr parameter that for forced labour on supply chain profitability based on coordination contracts four types of supply chain coordination contract are developed and benchmarked against set performance indices employing sensitivity analysis and non linear optimization techniques nash static and stackelberg dynamic models are employed to represent the gameplay between the manufacturer and retailer in a supply chain the key inputs are average demand and forced labour ratios whereas key performance indicators are advertising inventory and pricing costs our results indicate that by reducing the proportion of forced labour for both members of the supply chain the overall profitability increases in a nash static gaming context however the contractual relationships in a stackelberg dynamic situation provide a different picture here if the retailer assumes the leadership role cost sharing contracts increase the profitability for both partners however if the manufacturer assumes the leader the profit sharing contract leads to the highest overall profit furthermore sensitivity analysis confirms that an ideal situation is one in which the forced labour ratio approaches zero where the profitability of the retailer is usually higher than that of the manufacturer previous researchers have used survey based methods to develop proportional or mediating relationships to measure the impact of csr on supply chain profitability this paper addresses the associated gap by providing a game theoretic based non linear mathematical model to assess the direct impact of negative csr on supply chain profitability and benchmarks the performance of different supply chain contracts

the measurement and trend of inequality comment in a recent article in this review morton paglin proposes a measure of concentration which he claims will correct the gini ratio for overstatement in populations where each individual may be expected to vary his income or wealth over his life cycle the paglin measure suggests that the gini ratio overstates income concentration in the united states by a third and does not reveal a 23 percent decline in concentration which has occurred between 1947 and 1972 these results are based on an improper decomposition of the gini ratio in this note i decompose the gini ratio to derive the paglin measure it is shown to correct for neither demographic nor life cycle income effects and to understate intracohort income or wealth inequality if properly normalized the paglin measure shows that the gini overstates u s income concentration by 7 percent or less and indicates a decline in u s interfamily income concentration of less than 12 percent four percentage points of this decline are the result of demographic change while less than 7 points comparable to the 5 percent decline of the gini are the result of decreased income concentration within cohorts of family heads decomposition further reveals major changes in the division of income among cohorts and in concentration of income within cohorts these changes compensate each other in the paglin measure the use of which as a measure of income or wealth concentration is not recommended the gini concentration ratio

labour supply effects of unemployment insurance benefits data from the 1976 wave of the panel study of income dynamics are employed to study the effect of unemployment insurance ui benefits on weeks worked ols regressions to model labour supply behaviour are estimated for both recipients and nonrecipients of ui benefits we find some inteesting differences between the labour supply behaviour of ui recipients and nonrecipients

loss aversion and rationality in the newsvendor problem under recourse option abstract risk neutral assumption in the newsvendor problem under recourse option predicts the order quantity insensitive to the selling price and risk aversion modeled through common utility functions gives decreasing order quantity with increasing selling price in this paper we consider loss aversion to model the choice preference of the decision maker in the newsvendor problem under recourse option and prove that loss aversion predicts the rational ordering behavior of the newsvendor with respect to the changes in price and cost parameters further we find that loss aversion can significantly improve the performance of utility function based models in predicting the rational behavior we extend the analysis to a supply chain setting and establish coordinating contract between a loss averse retailer facing a newsvendor problem and a risk neutral supplier under recourse option we find that the contract parameter does not depend on the loss aversion hence the same contract can be implemented with retailers with different levels of loss aversion

us federal redistributive income policies the purpose of this paper is to present a statiscial model of inequality that allows us to analyse simultaneously the impact of several major redistributive expenditure policies as well as analysing the impact of income taxation on inequality the paper includes multivariate exogeeity tests to determine whether the policies have caused the observed income distribution or if there is feedback i e inequality in the distribution has lead to enhanced or diminished redistributive policies the direction of causality for these policies has not to ourr knowledge been previously examined this paper examines the usual redistributive vehicles of transfer payments social security medicare and medicaid as well as analysing the impact of the personal income tax system on inequality using time series analysis we can allow for lagged effects of these policies as well as current period effects this lagged effects specification may be sugggestive of behavioural responses to policy changes

the factor content of foreign trade in the factor proportions trade theory the heckscher ohlin theory the factor content of the pattern of trade plays a major role both in theoretical and in empirical investigations it is therefore valuable to identify restrictions on permissible vectors of the factor content of trade which necessarily hold in equilibrium if certain restrictions are empirically testable they can be used for preliminary testing of the theory before a more thorough examination is undertaken or they can be used to reject the theory it is my intention to develop in this paper a set of restrictions on the vectors of the factor content of trade which can be used for these purposes it is well known that autarky commodity prices impose restrictions on possible patterns of trade these restrictions provide a precise prediction of the pattern of trade for a two country two commodity world in the sense that the exporter of a good is readily identifiable from autarky price data as the country with the lower relative price of the good i will start by showing that in the presence of factor price equalisation autarky factor rewards impose restrictions on the factor content of trade patterns which are completely analogous to the restrictions imposed by autarky commodity prices on the commodity patterns of trade this result is in line with the view that in the factor proportions model trade in commodities represents indirect trade in factor services unfortunately these restrictions rely on autarky information and they are therefore not very useful for empirical work in order to overcome this difficulty i explore an alternative approach i argue that common predictions of the factor content of trade flows which are based on post trade observable data the data relevant for empirical studies rely on unnecessarily restrictive assumptions i e the assumption that preferences are homothetic and identical across countries and the assumption of factor price equalisation the assumption of identical homothetic preferences seems to be necessary when factor price equalisation is assumed because in this case there is an indeterminancy in the pattern of production nevertheless the two assumptions taken together imply the same factor content of a country s net import vector from the rest of the world for every equilibrium production pattern however in a many country world the factor content of bilateral trade flows depends on the realised production patterns and they cannot therefore be predicted i will show that in the absence of factor price equalisation which many

the medicaid notch labor supply and welfare participation evidence from eligibility expansions i assess the impact of losing public health insurance on labor market decisions of women by examining a series of medicaid eligibility expansions targeted toward young children these targeted expansions severed the historical tie between afdc and medicaid eligibility the reforms allowed a mother s earnings to increase without losing public health insurance for her young children increasing the income limit for medicaid resulted in a decrease in afdc participation and an increase in labor force participation among these women the effects were large for ever married women and negligible for never married women

means testing versus universal provision in poverty alleviation programs this paper contrasts the use of means tested and universal schemes in the alleviation of poverty using a class of poverty measures the authors illustrate the trade off from the fact that means testing is costly to both the government and the claimant while universal provision entails a leakage to the nonpoor the paper provides numerical as well as analytical results copyright 1990 by the london school of economics and political science

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

time limits and welfare use time limits represent a substantial departure from previous welfare policy theory suggests that their effects should vary according to the age of the youngest child of the family i test this prediction using data from the current population survey and find that time limits indeed have larger effects on families with younger children i further estimate that anticipatory responses to time limits have decreased welfare use by 6 to 7 percent accounting for 12 to 13 percent of the decline in welfare use during the late 1990s

reference points in revenue sharing contracts how to design optimal supply chain contracts abstract coordinating supply chains is an important goal for contract designers because it enables the channel members to increase their profits recently many experimental studies have shown that behavioral aspects have to be taken into account when choosing the type of contract and specifying the contract parameters in this paper we analyze behavioral aspects of revenue sharing contracts we extend the classical normative decision model by incorporating reference dependent valuation into the decision model and show how this affects inventory decisions we conduct different lab experiments to test our model as a result human inventory decisions deviate from classical normative predictions and we find evidence for reference dependent valuation of human decision makers we also show how contract designers can use the insights we gained to design better contracts

designing price contracts for boundedly rational customers does the number of blocks matter when designing price contracts one of the major questions confronting managers is how many blocks there should be in the contract we investigate this question in the setting of a manufacturer retailer dyad facing a linear deterministic consumer demand theoretical marketing models predict that the manufacturer s profits rise dramatically when the number of blocks in the contract is increased from one to two because both channel efficiency and its share of channel profits increase however increasing the number of blocks to three yields no incremental profits we test these predictions experimentally and find that increasing the number of blocks from one to two raises channel efficiency but not the manufacturer s share of profits surprisingly having three blocks in the contract increases channel efficiency even further and also gives the manufacturer a slightly higher share of profits we show that these results can be explained by a quantal response equilibrium model in which the manufacturer accounts for noisy best response due to nonpecuniary payoff components in the retailer s utility we also show that the retailer is sensitive to the counterfactual profits it could have earned if it were charged a lower marginal price for earlier blocks in the multiple block contract

welfare recipient work choice and in kind benefits in washington state we analyze the work choice of welfare recipients potential welfare recipients compare their on and off welfare utility from after tax income and in kind benefits via employment or welfare and choose whether to work our null hypothesis which we reject is that benefits affect only the decision to work or not not the hours worked which will depend on wages using temporary assistance for needy families tanf administrative data from washington state we find that employer provided health insurance and child care subsidies significantly raise exit rates of tanf recipients and induce greater work effort other work inducing factors include wages and the earned income tax credit while increased levels of medicaid food stamps and the income guarantee increase welfare dependency

precautionary savings a panel study theoretical literature shows that income uncertainty boosts saving yet empirical work is incomplete i test for the precautionary motive for saving using panel data knowing this motive s size is important for gauging the responsiveness of saving to government programs that reduce uncertainty and for comparison to other motives such as bequests most empirical studies of precautionary saving use either aggregate time series or cross sectional data which cannot capture the effects of individual income uncertainty i derive measures of total permanent and transitory income uncertainty from panel data the national longitudinal survey and find a strong precautionary motive a doubling of uncertainty increases the ratio of wealth to permanent income by 29

an evaluation of active and passive labour market policy this paper reports results of an empirical study on the effectiveness of labour market policy data from austria france germany great britain sweden and the united states are used to apply a simultaneous equation model with wages and employment being the endogenous variables in order to explain employment the amount of unemployment benefits per unemployed passive labour market policy and payment for wage subsidies and training per employed and unemployed person active labour market policy are used in addition to real wages and output wages and output have their expected impact on total employment it turns out that passive labour market policy has a negative and active labour market measures a positive effect on the number of persons employed

cross state variation in medicaid programs and female labor supply john c navin using a pooled cross section data set from the 1980 through 1993 current population survey march supplements we test if different medicaid benefit levels across states impact the labor supply behavior of female heads of households the ordinary least square ols results support the prediction that medicaid expenditures reduce labor supply controlling for state fixed or random effects alters the effect of both afdc and medicaid on the decision to participate as well as the number of hours worked we also find that while the effects of program generosity are sensitive to the inclusion of state effects those of variation in eligibility thresholds are not jel j22 i introduction the issue of the design and effects of government policies aimed at providing support for children is at the center of an ongoing national debate social scientists policy makers and the public at large have all focused their attention on the benefits and perhaps even more so the costs to society of this support network these costs are perceived to take not just monetary forms but also to have adverse incentive effects in terms of work out of wedlock births divorce etc much of this debate has focused on the adverse effects of the cash components of welfare aid for families with dependent children afdc and food stamps but recently other programs have become embroiled in this debate as the costs of health care have risen government provided medicaid benefits have also come under increasing scrutiny medicaid expenditures are one of the fastest rising components of state budgets state medicaid spending rose by 80 in real terms between 1980 and 1990 rising from 19 1 billion to 33 7 billion further state medicaid expenditures increased even more dramatically in the past few years rising about 19 in 1990 91 and 22 5 in 1991 92 up until the mid 1980s medicaid coverage was primarily limited to recipients of afdc and indigent senior citizens over the last ten years however medicaid coverage has been altered to include individuals with incomes above the afdc maximum primarily pregnant women or children whose parents have incomes at or slightly above the poverty line despite the fact that medicaid is a federally mandated program there is a large amount of latitude as to the number and types of individuals and services that each state can choose to cover this state freedom implies that there are basically 51 different medicaid programs in the united states washington d c also participates in medicaid because of this there is a large variance in per recipient medicaid expenditures across states in 1992 for example annual per recipient medicaid expenditures for afdc adults ranged from a high of 2 937 in louisiana to a low of 575 in mississippi 1 recently economists and other social scientists have used the cross state variation in these programs as a form of natural experiment that allows them to access the effectiveness and adverse incentive effects of these programs in this article we use this approach to add to the literature on the effects of these programs on labor supply first we construct three new measures of the value of medicaid benefits to adults children and families which vary across states and time these alternate measures will allow us to test for the sensitivity of the conclusions from previous studies to the measure of medicaid value used previous work on medicaid and female labor supply has used measures of state level medicaid spending which included spending on the elderly and disabled since these groups account for a substantial share of all medicaid expenditures and they are not randomly distributed across states this has the potential to bias the reported results second because there is substantial variation acr oss states in their labor market characteristics demographic mixes and other factors which are potentially correlated with both labor supply and benefit generosity our analysis checks for the sensitivity of the results to the inclusion of state fixed and random effects

impulse balance in the newsvendor game abstract one striking behavioral phenomenon is the pull to center bias in the newsvendor game facing stochastic demand subjects tend to order quantities between the expected profit maximizing quantity and mean demand we show that the impulse balance equilibrium which is based on a simple ex post rationality principle along with an equilibrium condition predicts the pull to center bias and other more subtle observations in the laboratory newsvendor game

welfare dynamics under time limits among the most important changes brought about by the personal responsibility and work opportunity reconciliation act of 1996 are time limits which provide consumers with an incentive to conserve their welfare benefits for future use among forward looking expected utility maximizing consumers who face liquidity constraints and earnings uncertainty economic theory predicts that the incentive to conserve should be strongest among families with the youngest children we test this prediction using data from florida s family transition program a randomized welfare reform experiment our estimates generally exhibit the predicted age dependence which suggests that time limits affect welfare use before they become binding our estimates indicate that in the absence of other reforms that increased welfare use ftp s time limit would have reduced welfare receipt by 16 percent

the factor content of international trade without factor price equalization abstract within the basic two factor multi commodity model of a two country world the present paper shows that international factor price equalization is unnecessary for deriving the heckscher ohlin theorem in its factor content version according to which the bundle of goods exported by the capital abundant country will use more capital and less labour than the bundle exported from the labour abundant country the factor content version remains valid when the model is generalized to include trade impediments intermediate goods or additional countries except perhaps if the first of these extensions is combined with either of the other two

a measure of horizontal inequity politicians academicians and the general public alike have perceived that the status quo tax and transfer legislation creates inequities among living units tax laws create numerous situations in which living units with seemingly equal abilities to pay are taxed quite different amounts state by state differences in welfare eligibility rules benefit schedules and administrative procedures the general unavailability of cash welfare to childless nonaged healthy couples and single individuals and other features of transfer programs similarly provide vastly different levels of income support to units with equal needs advocates of major tax and welfare reform have marshalled such evidence into a central argument in favor of their proposals while there is wide agreement that the process of redistributing incomes abounds with inequities there have been few attempts to quantify their extent 2 this paper develops a measure of horizontal inequity and illustrates its use section ii discusses the concept of horizontal equity then builds upon familiar lorenz curve gini coefficient analysis to derive the inequity index the third part considers some problems of implementing the measure and illustrates it section iv provides a short conclusion

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

local labor markets and welfare spells do demand conditions matter this paper examines the impact of changes in labor market conditions on participation in the aid to families with dependent children afdc program in california transitions off welfare and transi

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

coordination via cost and revenue sharing in manufacturer retailer channels abstract the problem of establishing efficiency in a manufacturer retailer channel channel coordination is extensively discussed in the industrial economics the marketing and the operations research literature however studies considering consumer demand to be simultaneously affected by price and non price variables are scarce one subset of models investigates efficient contracts with non linear tariffs but requires mechanisms which are rarely observed in managerial practice the other subset analyses channel efficiency effects of alternative royalty payments but omits to design an efficient contract we contribute to this literature by investigating a contract of royalty payments that is sufficient for channel coordination based on the analysis of the underlying vertical externalities we show that channel coordination requires cost and revenue sharing via a revenue sharing rate and marketing effort participation rates on both manufacturer and retailer level some surprising findings are highlighted there exists a continuum of efficient contracts efficiency requires a retailer s participation of at least 50 in the manufacturer s cost of marketing effort moreover the elimination of double marginalisation is not necessary for channel coordination manufacturer and retailer can choose an efficient contract via bargaining over the wholesale price the main challenge for managers will be to create acceptance of new types of royalty payments based on a trustful manufacturer retailer relationship we also discuss the cases of the apple iphone market launch and of innovative restaurant franchising to further illustrate and underline the relevance of our results

cash welfare as a consumption smoothing mechanism for divorced mothers abstract while there has been considerable research on the disincentive effects of cash welfare under the aid to families with dependent children afdc program there is little evidence on the benefits of the program for single mothers and their children one potential benefit of this program is that it provides short run consumption insurance for women at the point that they become single mothers this is only true however to the extent that the program is not crowding out other sources of support such as own savings labor supply or transfers from others i assess the importance of this insurance mechanism by measuring the extent to which afdc smooths the consumption of women who transition to single motherhood through marital dissolution i use longitudinal data on family structure and consumption expenditures on food and housing from the panel study of income dynamics psid matched to information on the welfare benefits available in each state and year over the 1968 1985 period i find that raising potential benefits by one dollar raises the food and housing consumption of women who get divorced and their families by 28 cents this estimate implies that for each dollar of afdc received by this population their consumption of these categories of goods rises by up to 51 cents this is roughly the share of food and housing in the consumption bundle of divorced mothers and their families suggesting little crowdout of other sources of support

trade policy preferences and factor abundance abstract this paper provides a theoretical and empirical analysis of public opinion towards free trade investigating cleavages both between and within countries we study the distributional effects of trade policy in a neoclassical heckscher ohlin economy with not just two but many input factors in production we demonstrate that the factor price changes induced by trade policy are negatively associated with the factor content of free trade and therefore factor abundance using large scale international survey data we test whether these predicted distributional effects are reflected in the trade policy preferences of workers with different labor market skills in order to isolate the effects of factor abundance from other skill related confounding factors we employ a within skill group estimator that exploits the cross country variation in factor abundance in line with theory the data show that individuals whose skills are in more abundant domestic supply have significantly more positive attitudes towards trade

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

labor supply response to welfare programs a dynamic analysis previous static analyses of the work disincentive effects of welfare programs are extended to a dynamic context using a sample of continuous longitudinal labor market histories estimates are derived for welfare nonwelfare differences in labor market flows among the states of employment unemployment and nonparticipation the estimates are used to identify the main sources of the lower employment and labor force participation rates and higher unemployment rate of welfare recipients the findings indicate that welfare programs have substantial effects on virtually every labor market transition examined but that the primary source of the static work disincentive effect is slower entry into employment

does unemployment compensation affect unemployment duration abstract we use a flexible hazard rate model with unrestricted spell duration and calendar timeeffects to analyse a dataset including all norwegian unemployment spells during the1990 s the dataset provides a unique access to conditionally independent variation inunemployment compensation we find that a marginal increase in compensation re duces the escape rate from unemployment significantly irrespective of business cycleconditions and spell duration the escape rate rises sharply in the months just prior tobenefit exhaustion while men are more responsive than women with respect to mar ginal changes in compensation women are most responsive with respect to benefitexhaustion keywords unemployment spells business cycles unemployment compensation non parametric duration analysis jel classification c41 j64 the ragnar frisch centre for economic research oslo we wish to thank the re search council of norway for financial support and christian brinck harald goldstein costas meghir espen moen steinar strom rolf aaberge and three anonomyous referees for helpful comments cor respondence to knut roed the ragnar frisch centre for economic research gaustadalleen 21 0349oslo norway e mail knut roed frisch uio no

multiple cones factor price differences and the factor content of trade abstract this paper examines the theoretical predictions of the multi cone heckscher ohlin model and the empirical evidence for it i extend helpman 1984 by identifying additional restrictions that characterize the free trade equilibrium i illustrate that the complete set of restrictions are the building blocks of a multi cone factor content specification which is the factor content dual to alan deardorff s 1979 well known chain of comparative advantage goods prediction the theoretical analysis implies that the existing tests of helpman are incomplete applying the complete set of restrictions to choi and krishna s data set of 8 oecd countries i find limited empirical support this is compatible with previous studies suggesting that oecd countries do not occupy different cones

contract preferences and performance for the loss averse supplier buyback vs revenue sharing prior theory claims that buyback and revenue sharing contracts achieve equivalent channel coordinating solutions when applied in a dyadic supplier retailer setting this suggests that a supplier should be indifferent between the two contracts however the sequence and magnitude of costs and revenues i e losses and gains vary significantly between the contracts suggesting the supplier s preference of contract type and associated contract parameter values may vary with the level of loss aversion we investigate this phenomenon through two studies the first is a preliminary study investigating whether human suppliers are indeed indifferent between these two contracts using a controlled laboratory experiment with human subjects taking on the role of the supplier having to choose between contracts we find that contract preferences change with the ratio of overage and underage costs for the channel i e the newsvendor critical ratio in particular a buyback contract is preferred for products wit

the behavioral effects of welfare time limits time limits are among the most fundamental of recent welfare reforms whereas welfare benefits were an entitlement under the old aid to families with dependent children afdc program the personal responsibility and work opportunity reconciliation act of 1996 prwora which replaced afdc with the temporary aid to needy families tanf program restricts most families to 60 months of federally funded benefits although the states are free to extend benefits further using their own funds almost all have incorporated some sort of time limit into their tanf programs time limits may affect welfare receipt in two distinct ways the most obvious effect is mechanical reducing welfare use once recipients exhaust their benefits however time limits may also reduce welfare receipt before recipients reach the limit if families are forwardlooking they may reduce their current welfare use in order to preserve their benefits for the future the purpose of this paper is to provide evidence on such anticipatory or behavioral effects of time limits i use data from the survey of income and program participation sipp to replicate my earlier estimates based on the current population survey cps i also exploit the sipp to relax some of the restrictive assumptions that were implicit in my previous work

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

the effects of time limits the eitc and other policy changes on welfare use work and income among female headed families of all of the welfare reforms that were implemented during the 1990s time limits may represent the single greatest break from past policy this paper expands on what is known about this important welfare reform measure by exploiting the predictions from grogger and michalopoulos 2003 to estimate the effects of time limits on welfare use employment labor supply earnings and income among female headed families results based on data from the march current population survey suggest that time limits have had important effects on welfare use and work accounting for about one eighth of the decline in welfare use and about 7 of the rise in employment since 1993 they have had no significant effect on earnings or income however the analysis also shows that the collective effects of other reforms have had important impacts on employment and labor supply furthermore it identifies the earned income tax credit eitc as a particularly important contributor to both the recent decrease in welfare use and t

measurement of the factor content of foreign trade with traded intermediate goods abstract in a recent article helpman 1984 develops readily testable bilateral restrictions in a model of international trade which preserves the spirit of heckscher ohlin trade theory important in any empirical exploration of the heckscher ohlin model is the decision of whether to employ direct or direct plus indirect calculations in determining the factor content of trade this paper extends helpman s analysis to a world of freely traded intermediate goods and shows that direct factor content calculations are the theoretically appropriate measure for use in evaluating these empirical implications of the heckscher ohlin model

a specification test of the heckscher ohlin theory abstract under strong assumptions the heckscher ohlin model predicts not only that factor endowment differences alone determine trade patterns but that they do so in a particularly simple way the factor content of trade should be a linear function of national and world factor endowments the evident empirical shortcomings of this simple relationship need not however imply the more general empirical failure of endowment based trade theories this paper provides empirical evidence consistent with a more general endowment based model by showing that the strong heckscher ohlin relationship excludes important additional channels through which factor endowments affect the pattern of trade

designing pricing contracts for boundedly rational customers does the framing of the fixed fee matter the format of pricing contracts varies substantially across business contexts a major variable being whether a contract imposes a fixed fee payment this paper examines how the use of the fixed fee in pricing contracts affects market outcomes of a manufacturer retailer channel standard economic theories predict that channel efficiency increases with the introduction of the fixed fee and is invariant to its framing we conduct a laboratory experiment to test these predictions surprisingly the introduction of the fixed fee fails to increase channel efficiency moreover the framing of the fixed fee does make a difference an opaque frame as quantity discounts achieves higher channel efficiency than a salient frame as a two part tariff although these two contractual formats are theoretically equivalent to account for these anomalies we generalize the standard economic model by allowing the retailer s utilities to be reference dependent so that the up front fixed fee payment is perceived as a loss and the subsequent retail profits as a gain we embed this reference dependent utility function in a quantal response equilibrium framework where the retailer is allowed to make decision mistakes due to computational complexity the key prediction of this behavioral model is that channel efficiency decreases with loss aversion for sufficiently nash rational retailers consistent with this prediction the estimated loss aversion coefficient is 1 37 in the two part tariff condition significantly higher than 1 27 in the quantity discount condition at the same time loss aversion dominates contract complexity in explaining the data lastly we conduct a follow up experiment to confirm the central role of loss aversion as a behavioral driver in one condition the retailer becomes less loss averse when we temporally compress the fixed fee payment and the realization of retail profits which supports the loss aversion theory in the other condition the retailer s contract acceptance rate does not decline when we reward the manufacturer a higher cash payment for each experimental point earned which rules out the competing hypothesis that the retailer rejects contract offers due to fairness concerns

female labor supply with a discontinuous nonconvex budget constraint incorporation of a part time full time wage differential this paper incorporates the well documented part time full time wage differential into an empirical labor supply model with both a heterogeneity and a random error term and estimates that model fo

contracting in supply chains a laboratory investigation the coordination of supply chains by means of contracting mechanisms has been extensively explored theoretically but not tested empirically we investigate the performance of three commonly studied supply chain contracting mechanisms the wholesale price contract the buyback contract and the revenue sharing contract the simplified setting we consider utilizes a two echelon supply chain in which the retailer faces the newsvendor problem the supplier has no capacity constraints and delivery occurs instantaneously we compare the three mechanisms in a laboratory setting using a novel design that fully controls for strategic interactions between the retailer and the supplier results indicate that although the buyback and revenue sharing contracts improve supply chain efficiency relative to the wholesale price contract the improvement is smaller than the theory predicts we also find that although the buyback and revenue sharing contracts are mathematically equivalent they do not generally result in equivalent supply chain performance

linkages among welfare food assistance programmes and labour supply evidence from the survey of programme dynamics at the centre of the debate on welfare reform is whether incentives based systems help poor families move out of poverty into jobs recent data from the first survey of programme dynamics longitudinal and the 1998 experimental data files allow evaluation of the interaction among the food stamp programme fsp temporary assistance for needy families tanf programme and labour force participation under different programme design and economic conditions a model that incorporates jointly determined programmes participation and work decisions is applied to a sample of working age lower income and asset households participation in tanf increases the probability of fsp participation and decreases the probability of being in the work force working decreases the probability of receiving food stamps work tanf and fsp participation are related and tanf and fsp participation rates among poor households who are potentially eligible for tanf are sensitive to changes in programme parameters as expected labou

public transfers family socioeconomic traits and the job search behavior of the unemployed evidence from puerto rico abstract this paper explores the theoretical and empirical associations between the job search efforts of the unemployed and the socioeconomic characteristics of the family it takes as a point of reference that certain supply side phenomena may contribute to puerto rico s high open unemployment rate the statistical analyses carried out indicate that there does exist what can be labeled luxury unemployment in other words government provided transfer payments generate disincentive effects with respect to the job market behavior of the unemployed moreover the dependency status of the individual within the family group also leads to lower job search effort

replacement income duration of unemployment and the migration of unemployed prime age males the relationship between the interstate migration of unemployed males of prime working age i e 25 44 years of age the level of unemployment replacement income and the duration of unemployment spells is addressed through the use of a relatively untapped data source the us census s survey of income and program participation sipp the rich set of details that are provided in this database allows a more precise empirical analysis of the above relationships than has been possible with psid cps and other previously used databases by restricting the sample to a relatively homogeneous segment of the work force its is possible to isolate better the effects of unemployment replacement income and job search duration on the migration decision of unemployed workers without the confounding effects of the variety of demographic factors that previous studies have shown to influence labour force migration the results suggest that for unemployed prime working age males the probability of migration is negativel

should social security benefits be means tested social security retirement benefits distort the saving decisions of workers who are rational enough to save for their future since the implicit rate of return in an unfunded social security program is less than the marginal product of capital the resulting decline in saving causes a welfare loss the present paper examines the conditions under which the welfare loss could be reduced by replacing the current universal social security program with a means tested program that pays benefits only to those individuals with little or no other retirement income or assets every society must solve the problem of supporting those individuals who become too old to work but have not made adequate provision for their own old age by saving when they were young at the present time the major industrial countries of the world have responded to this problem by creating social security programs that tax the working population and use the proceeds to provide a universal benefit to all retirees regardless of their financial condition this universal provision of social security benefits distorts the saving decisions of those workers who are rational enough to plan for the future since the implicit rate of return that taxpayers get on their this research is part of the nber study of the government budget and the private economy a more complete version of this paper with some numerical calculations is available as nber working paper no 1775 feldstein 1985b i am grateful to gilbert metcalf for assistance with the calculations presented in this paper and for helpful discussions for a discussion of the effect of promised retirement benefits on the savings of employees see feldstein 1974 1982 barro 1974 1978 has discussed an interesting

american federalism welfare policy and residential choices the relationship between welfare benefit levels and the residential choices of the poor raises two issues for federalism in the united states do state benefit levels affect the residential choices of the poor do residential choices of the poor affect the level at which a state sets its benefit levels empirical studies have seldom studied the interconnection between these two issues this research estimates simultaneously the mutual effects of welfare benefits and poverty rates while controlling for other economic and political variables when benefit levels become high the size of the poverty population increases conversely when poverty rates become high benefit levels are cut the findings are consistent with the claim that state determined benefit levels distort policy and residential choices

a test of the heckscher ohlin vanek theorem the leontief commonplace abstract this paper provides a logically complete empirical test of the hov theorem for the united states by comparing measures of factor intensities trade and factor endowments under the appropriate computations of the factor contents of trade and production u s data are shown to diverge often from their values as predicted by hov as a result it appears that paradoxical outcomes may be common in empirical applications of the theorem

statistical testing of bounded rationality with applications to the newsvendor model abstract in this paper we define bounded rationality in terms of probabilistic cost efficiency this establishes a framework where bounded rationality can be examined rigorously by statistical methods we apply this theory to data from laboratory experiments on the newsvendor model we enter into a theoretical discussion of the classical pull to center effect and explain why underorders are typically larger than overorders

labour supply impacts of effective welfare programme parameters a reanalysis we quantify the impact of effective welfare programme parameters on the labour supply of single female household heads the primary group of welfare recipients in the usa our panel of data is derived from the us census bureau s current population survey for the years 1979 to 1990 inclusive behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory we find that effective welfare gurantee levels and the effective tax rate on earned income both significantly decrease labour supply the marginal effects of these welfare programme parameters are economically small a us 1000 increase in the expected welfare guarantee level reduces annual labour supply by about 36 hours a 10 percentage point increase in the effective tax rate on earned income reduces annual labour supply by about 7 5 hours

reference dependence in multilocation newsvendor models a structural analysis we propose a behavioral theory to predict actual ordering behavior in multilocation inventory systems the theory rests on a well known stylized fact of human behavior people s preferences are reference dependent we incorporate reference dependence into the newsvendor framework by assuming that there are psychological costs of leftovers and stockouts we also hypothesize that the psychological aversion to leftovers is greater than the disutility for stockouts we then experimentally test the proposed theory in both the centralized and decentralized inventory structures using subjects motivated by substantial financial incentives consistent with the proposed theory actual orders exhibit the so called pull to center bias and the degree of bias is greater in the high profit margin than in the low profit margin condition these systematic biases are shown to eliminate the risk pooling benefit when the demands across store locations are strongly correlated because the proposed model nests the standard inventory and ex post inventory error minimization theories as special cases one can systematically evaluate the predictive power of each alternative using the generalized likelihood principle we structurally estimate all three theories using the experimental data and the estimation results strongly suggest that the proposed behavioral theory captures actual orders and profits better we also conduct two experiments to validate the behavioral model by manipulating the relative salience of the psychological costs of leftovers versus that of stockouts to alleviate the pull to center bias

was it the economy or reform that precipitated the steep decline in the us welfare caseload objectives of the 1996 overhaul of the us welfare system included reducing dependency raising employment and de incentivizing out of wedlock fertility using public use state level panel data from 1990 to 2005 i analyse how state implementation of welfare reform simultaneously affects the caseload employment and out of wedlock births henceforth temporary assistance for needy families tanf objectives because endogeneity and simultaneity could not be rejected i use three stage least squares 3sls method results indicated that most of the steep decline in the caseload is attributed to welfare reform while the economy s overall effect paled in comparison however lagged and contemporaneous unemployment individually ranked second and third behind the hispanic share of state population the conservative tilt over the period studied ranked forth followed in declining order by full family sanctions earned income tax credit eitc payments time limits lagged by length access to abortion clinics

uncertain lifetime consumption and dissaving in retirement this paper asks whether the continued accumulation or mild dissaving observed among the retired can be explained by uncertain lifetime in the absence of annuities after an initial period influenced by borrowing constraints under constant relative risk aversion uncertain lifetime depresses consumption by a proportion increasing with age if the elasticity of intertemporal substitution in consumption is small illustrative computations based on actual income and survival data show that plausible elasticities are sufficiently small to give this effect the reduction in consumption is large enough to explain much of the lack of decumulation by the elderly

the 1993 eitc expansion and low skilled single mothers welfare use decision previous studies on low skilled single mothers focus generally either on the binary welfare use or work decision however work among welfare participants has increased steadily since the mid 1990s this study estimates the role of the 1993 earned income tax credit eitc expansion on the decline of welfare caseloads using a bivariate probit model using monthly survey of income and program participation sipp information i find that the 1993 eitc expansion has at least the same effect on reducing welfare use as the welfare reform initiatives moreover the elasticity estimates indicate that single mothers especially those who were not employed and dependent solely on welfare before the expansion were the most responsive to the policy initiatives finally the increase in work among welfare participants is due to the relative ineffectiveness of the policies in reducing the net population of those who are on welfare and work simultaneously

decision bias in the newsvendor problem with a known demand distribution experimental evidence in the newsvendor problem a decision maker orders inventory before a one period selling season with stochastic demand if too much is ordered stock is left over at the end of the period whereas if too little is ordered sales are lost the expected profit maximizing order quantity is well known but little is known about how managers actually make these decisions we describe two experiments that investigate newsvendor decisions across different profit conditions results from these studies demonstrate that choices systematically deviate from those that maximize expected profit subjects order too few of high profit products and too many of low profit products these results are not consistent with risk aversion risk seeking preferences prospect theory preferences waste aversion stockout aversion or the consequences of underestimating opportunity costs two explanations are consistent with the data one subjects behave as if their utility function incorporates a preference to reduce ex post inventory error the absolute difference between the chosen quantity and realized demand two subjects suffer from the anchoring and insufficient adjustment bias feedback and training did not mitigate inventory order errors we suggest techniques to improve decision making

technology endowments and the factor content of bilateral trade we derive testable restrictions relating the factor content of bilateral trade to bilateral differences in technology and endowments this departs from the heckscher ohlin vanek theorem which compares the factor content of net trade with factor abundance we test the theoretical restrictions using a unique dataset that covers 41 developed and developing countries with disparate endowments and technology we find evidence supporting the predictions in addition 1 the factor content predictions perform best for country pairs with larger endowment differences and 2 for trade between capital abundant countries ricardian international technology differences matter more than heckscher ohlin factor endowment differences

when do women use aid to families with dependent children and food stamps the dynamics of eligibility versus participation this paper investigates dynamic patterns in the relationship between eligibility and participation in the aid to families with dependent children afdc and food stamp programs using monthly longitudinal data from the survey of income and program participation the results indicate that there are many relatively short eligibility spells that do not result in program participation and end with increases in income participation is most likely to occur among women with lower current and future earnings opportunities and is affected by locational and policy parameters those who elect to participate in these programs tend to start receiving benefits almost immediately upon becoming eligible a substantial number of women exit these programs before their eligibility ends among at least some of these women it is likely that unreported changes in income are occurring in 1989 if all eligible single parent families had participated in afdc and food stamps benefit payments in these programs would have been 13 5 billion higher

manufacturer s revenue sharing contract and retail competition this paper investigates a revenue sharing contract for coordinating a supply chain comprising one manufacturer and two competing retailers the manufacturer as a stackelberg leader offers a revenue sharing contract to two competing retailers who face stochastic demand before the selling season under the offered contract terms the competing retailers are to determine the quantities to be ordered from the manufacturer prior to the season and the retail price at which to sell the items during the season the process of pricing and ordering is expected to result in an equilibrium as in the bayesian nash game on the basis of anticipated responses and actions of the retailers the manufacturer designs the revenue sharing contract adopting the classic newsvendor problem model framework and using numerical methods the study finds that the provision of revenue sharing in the contract can obtain better performance than a price only contract however the benefits earned under the revenue sharing contract by different supply chain partners differ because of the impact of demand variability and price sensitivity factors the paper also analyses the impact of demand variability on decisions about optimal retail price order quantity and profit sharing between the manufacturer and the retailers lastly it investigates how the competition between retailers factor influences the decision making of supply chain members in response to uncertain demand and profit variability