willingness to pay for quality improvements comparative statics and interpretation of contingent valuation results this paper extends variation function theory by examining the effects of changes in prices quality and income on willingness to pay for quality change comparative static effects are found for both on site users and nonusers of the resource these results are used to interpret contingent valuation empirical models for example the substitution and complementary relationships between trips to natural resource sites can be identified this paper also suggests tests for comparison of contingent valuation with recreation demand models and other tests of validity

black markets for currency hoarding activity and policy reforms abstract in emerging market economies under development of financial markets leads to goods hoarding and foreign currency accumulation as forms of investment in this paper an asset market model supplemented by explicit treatment of smuggling and second economy activity is used to study the paths of black market exchange rates second economy prices hoarding stocks and privately held dollar balances following policy reforms we discuss conditions for overshooting and related dynamics of exchange rates and prices following official exchange rate adjustments price reforms and altered risks of monetary confiscation or currency reforms the saddlepath trajectory of financial adjustment is simulated using data from recent russian experience 1997 elsevier science b v

monetary union in west africa and business cycles synchronicity new evidence in the light of the initiative of the west african monetary zone wamz to introduce a common currency by 2020 this paper investigates the intricacies of the business cycles synchronicity among the six countries given i the rising importance of trade and cooperation with china ii the consideration of the euro as a potential anchor currency and a vehicle for trade with the eurozone and iii the importance of nigeria as the largest country of the group and the main supplier of oil we investigate the relative importance of these three major players in having their business cycles linked with the group in addition we investigate the underlying determinants of the business cycles synchronicity among the wamz countries on a pairwise basis results show a clear dominance of china s business cycle synchronicity with the wamz over europe s and nigeria s trade integration emerges as the key underlying factor of the common cycle observed

public goods as characteristics of non market commodities in benefit cost analysis it is useful to model public goods as the quality of privately consumed nonmarketed goods this strategy is often pursued in valuing environmental amenities the theoretical foundations of this model have not been fully developed in this paper comparative statics results are derived for quality changes of nonmarket goods the results reveal some common misconceptions about welfare measurement of quality changes conditions are presented for a quality induced change in the marshallian consumer surplus of the nonmarket good to approximate the true compensated welfare measure the conditions are equally necessary for obtaining exact welfare measures copyright 1993 by royal economic society

islamic rule and the empowerment of the poor and pious does islamic political control affect women s empowerment several countries have recently experienced islamic parties coming to power through democratic elections due to strong support among religious conservatives constituencies with islamic rule often tend to exhibit poor women s rights whether this reflects a causal relationship or a spurious one has so far gone unexplored i provide the first piece of evidence using a new and unique data set of turkish municipalities in 1994 an islamic party won multiple municipal mayor seats across the country using a regression discontinuity rd design i compare municipalities where this islamic party barely won or lost elections despite negative raw correlations the rd results reveal that over a period of six years islamic rule increased female secular high school education corresponding effects for men are systematically smaller and less precise in the longer run the effect on female education remained persistent up to 17 years after and also reduced adolescent marriages an analysis of long run political effects of islamic rule shows increased female political participation and an overall decrease in islamic political preferences the results are consistent with an explanation that emphasizes the islamic party s effectiveness in overcoming barriers to female entry for the poor and pious

on the causal links between fdi and growth in developing countries we analyse the granger causal relationships between foreign direct investment fdi and gdp in a sample of 31 developing countries covering 31 years using estimators for heterogeneous panel data we find bi directional causality between the fdi to gdp ratio and the level of gdp fdi has a lasting impact on gdp while gdp has no longrun impact on the fdi to gdp ratio in that sense fdi causes growth furthermore in a model for gdp and fdi as a fraction of gross capital formation gcf we also find long run effects from fdi to gdp this finding may be interpreted as evidence in favour of the hypotheses that fdi has an impact on gdp via knowledge transfers and adoption of new technology

foreign exchange market reactions to sovereign credit news abstract we analyse the reaction of the foreign exchange spot market to sovereign credit signals by fitch moody s and s p during 1994 2010 we find that positive and negative credit news affects both the own country exchange rate and other countries exchange rates we provide evidence on unequal responses to the three agencies signals fitch signals induce the most timely market responses and the market also reacts strongly to s p negative outlook signals credit outlook and watch actions and multiple notch rating changes have more impact than one notch rating changes considerable differences in the market reactions to sovereign credit events are highlighted in emerging versus developed economies and in various geographical regions

the gains from self ownership and the expansion of women s rights throughout history wives have been the property of their husbands only in the past two centuries has this institution broken down in the world s most developed regions in america and england the doctrine of coverture restricted women s choices in virtually every aspect of their lives until the beginning of the 20th century a married woman a feme covert could not make contracts buy and sell property sue or be sued or draft wills joel p bishop 1875 john c wells 1878 john f kelly 1882 her husband owned any wages she earned and he controlled any property she brought to the marriage a husband also could control his wife s economic activities outside the home such as limiting a particular shopkeeper from selling to his wife marylynn salmon 1986 even in the rare case of divorce the children of the marriage fell under the father s custody today the doctrine of coverture is extinct in most developed countries women now control rights to themselves and the products of their labor no formal restrictions remain on a woman s ability to own or convey title to land or other forms of real property women are able to contract freely and enforce their contractual rights no formal restrictions remain on a woman s capacity to sue or be sued in tort rape is no longer a crime against a husband s property interest in his wife but a crime in which the woman is the sole victim no formal restrictions limit a woman s ability to alienate her labor and own the wages she earns whether married or single women today have practically all the rights of their male counterparts we use a property rights analysis to explain the demise of coverture in the united states we characterize the modern property rights structure to human beings as a system in which all adults are self owners men and women have essentially equal rights and are able to contract fully inside and outside of marriage so marriage is a share contract douglas w allen 1992 coverture in contrast to self ownership is characterized as a principal agent system in which the man husband legally owned his wife and her flow of value under coverture a wife was an agent severely constrained by the system of property rights which denied her the right to freely choose human capital investments and consumption as well as to capture the full returns from her actions the husband s economic ownership was imperfect however allowing the woman to deviate from the man s directives human ownership regimes are important because they affect incentives to acquire and develop human capital t w schultz 1968 stanley engerman 1973 in particular we argue that economic growth with attendant increases in wealth and specialized markets leads geddes department of policy analysis and management cornell university 107 mvr hall ithaca ny 14853 and hoover institution e mail rrg24 cornell edu lueck montana state university and university of virginia school of law e mail lueck virginia edu geddes was supported by the earhart foundation lueck was supported as john m olin faculty fellow at the yale law school cynthia powell hui ping chao and mary godfrey provided research assistance we have also benefited from comments from doug allen lee alston ian ayres david barker parantap basu gary becker mary beth combs lee craig joe ferrie andy hanssen gillian hamilton shawn kantor dean lillard robin lumsdaine steve margolis joel mokyr bart moore lee redding glen whitman paul zak two anonymous referees and participants in numerous seminars and conferences 1 while married women s property belonged to their husbands most single women were dependents of their male relatives although a single woman legally had the same property rights as a man powerful norms and private restrictions severely limited the rights of divorcees spinsters and widows mary beth norton 1980 2 we recognize a potential divergence between economic and purely legal rights because enforcement costs limit the application of legal doctrine yoram barzel 1977 here however we treat economic and legal rights as virtually synonymous since coverture codified customs and norms and because coverture s restrictions extended beyond the family into markets and society

does altruism undermine existence value abstract the debate over the use of contingent valuation for existence values or passive use values has failed to explore the validity of motives for such values one potential motive altruism has conflicting implications for benefit cost analysis depending on whether the altruist is paternalistic this paper constructs models of three types of altruism and shows how benefit cost analysis responds to each type of altruism how damage assessment and restoration depend on each type and the implications of a population of heterogeneous altruists

repressed inflation queuing and the resale of goods in a centrally planned economy abstract the barro grossman repressed inflation model is reformulated incorporating the goods rationing scheme widely observed in centrally planned economies the informal queue we assume there are two types of individual differntiated by work ability this enables inclusion of another feature found in practice the private resale of goods less able individuals queue to buy goods both to consume and to resell to more able individuals the latter spend their time working for a relatively high wage rather than queuing among the comparative statics results is that the supply multiplier is negative positive if goods and leisure are gross substitutes complements

on the effectiveness of exchange rate interventions in emerging markets we analyze the effectiveness of exchange rate interventions for a panel of 18 emerging market economies during the period 2003 2011 using an error correction model approach we find that on average intervention is effective in moving the real exchange rate in the desired direction controlling for deviations from the equilibrium and short term changes in fundamentals and global financial variables our results are robust to different samples and estimation methods we find little evidence of asymmetries in the effect of sales and purchases but some evidence of more effective interventions for large deviations from the equilibrium we also explore differences across countries according to the possible transmission channels and nature of some global shocks

real and monetary determinants of real exchange rate behavior theory and evidence from developing countries abstract this paper develops a dynamic model of real exchange rate rer behavior in developing countries a three goods economy exportables importables and non tradables is considered residents of this country hold domestic and foreign assets and there is a dual exchange rate regime there is a government that consumes importables and non tradables a distinction is made between equilibrium and disequilibrium movements of the rer the determinants of real exchange rate misalignment are studied with emphasis placed on the role of devaluations and balance of payments crises the implications of the model are tested using data for 12 developing countries the results obtained are generally favorable for the model the issue of rer stationarity is also analyzed

should central bankers talk to the foreign exchange markets in this paper we study the role of official statements and speeches given by central bank authorities in charge of foreign exchange policy we investigate the impact of statements that comment on and confirm such interventions on the day of the intervention on the two major foreign exchange markets over an extended period 1989 2003 we also study the impact in terms of policy effectiveness of central bank communication before the actual operations our results suggest that appropriate speeches clarifying the current intervention policy can have marginally virtuous effects both in terms of exchange rate level and exchange rate volatility this leads us to conclude that in general actual interventions on the market should still be employed provided that official statements are used to clarify the nature and purpose of these interventions c 2008 elsevier ltd all rights reserved

income distribution and price controls targeting a social safety net during economic transition abstract during the ongoing post communist economic transitions the relative well being of many people is changing rapidly and governments are not well positioned to accurately measure individual living standards under such circumstances continued price controls over basic consumer goods within the state sector and the associated queuing can form a serviceable device for targeting poor people for subsidies with a fixed price state sector and free price parallel markets rich people might choose to avoid queues and shop in the free markets while poor people would prefer to pay low nominal prices and queue in the state sector the targeting of subsidies through queues therefore can be accomplished even if the government has no information concerning individual income or living standards when the alternative to price controls is a poorly targeted explicit social safety net the resource cost of queues might be more than offset by an improvement in the targeting of subsidies

new evidence on the monetary approach of exchange rate determination in mexico 1994 2007 a cointegrated svar model abstract we provide empirical evidence supporting the validity of both short and long run versions of the monetary approach of exchange rate determination for the mexican peso u s dollar exchange rate from 1994 to 2007 using a cointegrated svar model we estimate not only the long run relationship between the variables of the monetary model for the exchange rate but also the very short run effects which have been often ignored in previous empirical work we show that there are robust short and long run relationships between the mexican monetary aggregates and the exchange rate which ultimately responds to what bilson s variant of maer predicts

the influence of black markets on a queue rationed centrally planned economy abstract in centrally planned economies in which prices are fixed and the rationing mechanism is waiting line queues we show that an equilibrium of waiting times exists we then introduce a black market in which individuals can trade commodities that they have acquired through the official economy an equilibrium of black market prices and waiting times is shown to exist further the economy with a black market is queue efficient however the introduction of black markets is not necessarily a pareto improvement over an economy without black markets even when we allow winners to compensate losers

external debt capital flight and political risk abstract this paper explains the simultaneous occurence of large external debts private capital outflows and low domestic capital formation we consider a general equilibrium model in which two government types with conflicting distributional goals randomly alternate in office uncertainty over the fiscal policies of future governments generates capital flight and small domestic investment and induces the government to overaccumulate external debt the model also predicts that left wing governments are more inclined to restrict capital outflows than right wing governments finally we examine how political uncertainty affects the risk premium and how debt repudiation may occur after a regime change

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

can political entrepreneurs solve the free rider problem abstract a solution of the problem of voluntary collective action employing an improved concept of political entrepreneurship is proposed this solution is consistent with large numbers of actors and pure public goods joint production of private goods and asymmetry are not assumed the importance of information imperfections in producing suboptimality in the provision of public goods is emphasized political entrepreneurship is made to parallel the knightian concept of the entrepreneur emphasizing the role of risk taking and information collecting

fluctuations in the dollar a model of nominal and real exchange rate determination abstract this paper develops a model of exchange rate determination that extends the dornbusch frankel model to allow for large and sustained changes in real exchange rates real exchange rate changes are related to movements in the current account both through changes in expectations about the long run equilibrium real exchange rate and through changes in the risk premium the model is estimated empirically for the dollar s weighted average exchange rate over the flexible rate period of the 1970s the results indicate that innovations to the current account have been a significant determinant of the exchange rate predominantly through changes in expectations

reform in eastern europe a general equilibrium model with distortions in relative prices and factor markets this paper presents an analysis of reforms using a simple general equilibrium model with production the model illustrates some of the distortions remaining in the eastern european countries as they adopt market oriented policies and it shows that price reforms should take priority if simultaneous reform is not possible specifically the authors examine reforms of relative prices of output goods and liberalization of the capital market the model is solved numerically showing that restrictions on capital mobility should be retained until after price distortions have been removed

valuing reduced morbidity a household production approach individuals frequently apply a household technology to combine public and private goods in the production of nonmarket commodities for final consumption hori 9 demonstrates that in these situations market prices of private goods together with production function parameters may encode enough information to value both public goods used as inputs and nonmarket final consumption commodities although this valuation methodology is objective and market based it seldom has been applied for three reasons first underlying technical relations either are unknown or data needed to estimate them are unavailable second even if relevant technical information is at hand the consumer s budget surface in commodity space may not be differentiable when joint production and other complicating factors are present as a consequence the commodity bundle chosen is consistent with an infinite number of marginal rates of substitution and values of public goods and nonmarket commodities remain unknown third joint production and nonconstant returns to scale also pose serious difficulties when taking the closely related valuation approach of estimating the area behind demand curves for private good inputs and final consumption commodities 2 this paper presents a unique application of the household production approach to valuing public goods and nonmarket commodities which allows for certain types of joint production and addresses key problems identified by previous authors technical relationships are estimated between health attributes private goods and air quality data used in the analysis are drawn from a special survey designed to implement the household production approach econometric estimates allow for censored dependent variables and cross equation error correlations in panel data using tobit models with individual specific variance components key results are 1 attempts

the advantages of contingent valuation methods for benefit cost analysis the preceding is a taxonomic discussion of some reasons why contingent market methods may often be a superior means of generating data with which to value non market commodities we have argued that economists have erred in viewing the situations these methods posit as necessarily fictional that the data generated by the methods may for non marketed goods and the activities with which they are associated accord more closely with the conditions of received economic theory that the methods can make it easier to remove the difficulties of estimation and interpretation introduced by confounding variables and that they often permit one to deal more readily with phenomena that have not been in the range of historical experience nevertheless whatever the advantages a major disadvantage remains until detailed analytical knowledge is acquired of the manner in which expectations are formed there exists no way to refute empirical propositions established from contingent markets nevertheless the previously mentioned south coast air basin experiment where the bids obtained for clean air conformed fairly closely to the values implied in a residential property value study suggest that contingent valuations have a basis in the real decision processes of consumers

choosing and reneging on exchange rate regimes we use data on announced and actual exchange rate arrangements to ask which countries follow de facto regimes different from their de iure ones that is do not do what they say our results suggest that countries with poor institutional quality have difficulty in maintaining pegging and abandon it often in contrast many countries with relatively good institutions display fear of floating that is they manage more than announced perhaps to signal their differences from those countries incapable of maintaining promises of monetary stability jel f3 o1

general equilibrium analysis of black and white markets a computational approach abstract this paper explores the inter relationship between black and white markets and presents a formulation in which equilibrium conditions hold separately for each type of market for each product with linking conditions across market types using a traditional goods and factor general equilibrium model the simultaneous operation of price controls on white markets and surveillance with penalties for those caught trading on black markets is modelled a numerical example of such an economy is presented using data for india and equilibria under coexistence are reported

the political costs of taxes and government spending the marginal political costs of different types of taxes and government spending as well as voter preferences over different fiscal variables are examined using two different specifications for political cost one based on the probability of incumbent defeat and the other based on the incumbent s percentage of the vote models associated with these two specifications in which voting behaviour depends on disaggregated taxes and government expenditures are estimated using clata from canadian provincial elections the empirical results which indicate that different types of taxes and expenditures have quite different marginal political costs have important implications for models that incorporate voter pref erences

the technology of decontrol some macroeconomic issues by the time east europe was being pressed into stalin s authoritarian mould as soviet troops took over the region at the end of the second world war there was little more to be said in western theorising about the subordination of markets to a central plan from barone s i908 ministry of production in a collectivist state to lerner s i944 economics of control the issue was the allocative efficiency of the state in maximising a social preference function by the late i 940s a communist party determined to assume that role was in power in nine european and three asian countries each having a long term objective to overtake and surpass the performance of capitalism but more immediately to use central planning as the economic expression of a political monopoly in i990 the east european parties have forfeited that monopoly and have patently failed in the competition with capitalism as successor governments turn to the market it is the economics of decontrol that must be formulated throughout the industrialised capitalist world during the i98os the state has been rolled back in favour of the market deregulation and privatisation took place within a well established environment of market clearing prices and profit seeking transactions not so in the ussr and eastern europe for four decades stretching to six for the soviet union administrative direction has eliminated or marginalised the market which now must be rebuilt virtually from scratch the history of the two countries which broke with stalin s form of control is of no help yugoslavia had too little of a central plan and hungary had too little of a market 1 when mikhail gorbachev launched perestroika in i985 hungary and china had begun to re establish market relations and to allow some private enterprise to compete with a dominant state there and elsewhere the process was impeded by the hold of the communist party2 on political and economic activity those countries in which by i990 that hold had been relaxed started the process of decontrol and the establishment of equilibria within which a normal market can operate section i of this paper describes the preconditions for dismantling the soviettype economy section ii sets out the institutional and structural characteristics of the economy which must be unmade the required changes are considered

observable preferences for public goods a note on the incentive compatibility of inferring demand for public goods from private goods demand abstract bradford and hildebrandt show that under certain conditions preferences for public goods can be inferred from the demand for complementary private goods they conjecture that their method overcomes consumers incentives to misrepresent their public goods preferences but this paper shows that in general this is not the case

the political temptations of rationing by insiders long waits for goods services and jobs to become available still exist in and to the east of europe this paper explores the political economy of what has made pervasive rationing an attractive way to cope with shocks in the past the explanation advanced lies not in the creation of shortage rents for the personal profit of corrupt insiders controlling the production and distribution process instead rationing with queuing is viewed as a populist scheme that allows a majority to keep its wages above levels that would clear the labor market while hiding the cost of such a policy increased unemployment

russian voting and the initial economic shock of hyperinflation this paper addresses the issue of economicvoting in transitional democracies using data from the russianfederal elections it argues that the shock of inflation thatfollowed the fundamental economic reform has a lastinginfluence on voters specifically it shows that in russia where inflationary policy led to hyperinflation and thewidespread loss of personal savings the magnitude of savingslost at that time continues to explain a significant portionof the variation in the regional support for the communistparty in parliamentary and presidential elections

revealed preference and household production abstract the paper deals with the possibilities of recovering the underlying preference ordering from observed behavior when nonmarket goods are employed in household production the problem is relevant for the evaluation of environmental goods and for the measurement of welfare in environmental policy it is shown that preferences can be recovered if and only if a corresponding mixed demand system can be integrated this system can be derived from observable behavior and the household production functions imposed the conditions for its integrability are presented and can be checked therefore the approach suggested is operational and allows to decide whether the behavior observed and the household production functions chosen as maintained hypothesis are consistent this result is important since the evaluation of nonmarket goods in this framework crucially depends on the choice of the household production functions

evaluation of nonmarket goods recovering unconditional preferences a new approach is proposed for the evaluation of nonmarket goods starting from a complete or incomplete conditional demand system for market goods which is observable and depends on nonmarket goods this information is not sufficient to recover the underlying preference ordering of the representative consumer the central idea is to employ additional marginal willingness to pay functions for the nonmarket goods since they can be estimated either together with the demand system or in a separate step they are less arbitrary than the assumptions or hypotheses usually made if the entire system is weakly integrable the underlying ordering and appropriate welfare measures can be derived in this article i investigate the relationship between conditional and unconditional demand systems present sufficient conditions for weak integrability and demonstrate the practicability of the procedure proposed by means of three examples

the impact of us sanctions on poverty abstract in this paper we analyze the effect of us economic sanctions on the target countries poverty gap during the period 1982 2011 econometrically we employ a matching approach to account for differences in the countries economic and political environment and the likelihood of being exposed to us sanctions our results indicate that us sanctions are adversely affecting those living in poverty as we observe a 3 8 percentage point pp larger poverty gap in sanctioned countries compared to a control group that is as close as possible in terms of observable pretreatment characteristics in addition we show that the impact of sanctions on poverty i increases with the severity of sanctions ii is larger for multilateral sanctions than for unilateral sanctions imposed by only the united states and iii is long lasting as the poverty gap increases over the first 21 years of a sanction regime

another theorem on using market demands to determine willingness to pay for non traded goods abstract this paper contains a proof of the following theorem let e1 and e1 denote an agent s expenditures on two groups of goods which are substitutes and complements to a non traded good suppose that both the agent s income and the quantity of the non traded good provided him have a positive effect on these two amounts then these effects can be used to place upper and lower bounds on the agent s marginal willingness to pay for the non traded good

nonmarket institutions for credit and risk sharing in low income countries the design credit and risk institutions in low income countries provides one of the most exciting testing grounds for theories of contracting with imperfect information and limited enforcement this paper reviews some of the recent literature with a special focus on nonmarket institutions that cope with risk and provide credit this literature attempts to bring together insights from economic theory especially information economics contract theory and mechanism design theory however it is also applied being motivated by the circumstance of the poor countries that their authors have visited and studied

pervasive shortages under socialism we present a new theory of pervasive shortages under socialism based on the assumption that the planners are self interested because the planners meaning bureaucrats in the ministries and managers offirms cannot keep the official profits that firms earn it is in their interest to create shortages of output and to collect bribes from consumers the theory implies that 1 an increase in the official price of a good might reduce output 2 market socialism is bound to fail even without computational complexities facing the planners and 3 price liberalization will succeed only iffirms get to keep their profits

an efficiency and welfare classification of rationing by waiting in the presence of bribery abstract governments often allocate commodities at low prices and on a first come first served basis rationing by waiting while bureaucrats who distribute the commodities usually take bribes a model is developed to classify the efficiency implications of bribery and socially optimal pricing schemes in rationing by waiting if the rationed good and individual income spent on other goods other income are complements then bribery may enhance allocative efficiency and a dual pricing scheme can augment social welfare however if the rationed commodity and other income are substitutes then bribery may not improve allocative efficiency and distributing the rationed commodity free is socially optimal

the application of laboratory experimental economics to the contingent valuation of public goods we have implicitly argued in the last section that a dynamic iterative survey mechanism may well need to be employed in the design of contingent valuation survey instruments in order to improve the accuracy of responses furthermore due to the current inaccuracy of hedonic and travel cost approaches for valuing public goods the least cost method in our view for establishing anchor or true individual values for testing alternative survey instruments is to use laboratory experiments the objective of these experiments should be the development of the most simple survey design which gives accurate responses subject to the budget of the investigator is a complex iterative voting procedure required how fast will such a procedure converge to true values what is the effect on incentives of relaxing the unanimity voting feature for large groups all of these operational questions can at least qualitatively be answered in an experimental laboratory setting

seigniorage and political instability the importance of seigniorage relative to other sources of government revenue differs markedly across countries this paper tries to explain this regularity by studying a political model of tax reform the model implies that countries with a more unstable and polarized political system will have more inefficient tax structures and thus will rely more heavily on seigniorage this prediction of the model is tested on cross sectional data for seventy countries the authors find that after controlling for other variables political instability is positively associated with seigniorage copyright 1992 by american economic association

human development and economic sustainability abstract this paper attempts to integrate the concern for human development in the present with that in the future in arguing for sustainable human development it appeals to the notion of ethical universalism an elementary demand for impartiality of claims applied within and between generations economic sustainability is often seen as a matter of intergenerational equity but the specification of what is to be sustained is not always straightforward the addendum explores the relationship between distributional equity sustainable development optimal growth and pure time preference

a positive theory of fiscal deficits and government debt this paper considers an economy in which policymakers with different preferences alternate in office as a result of elections government debt is used strategically by each policymaker to influence the choices of his successors if different policymakers disagree about the desired composition of government spending between two public goods the economy exhibits a deficits bias that is debt accumulation is higher than it would be with a social planner the equilibrium level of debt is larger the larger is the degree of polarization between alternating governments and the less likely it is that the current government will be re elected

do real exchange rate appreciations matter for growth the impact of exchange rate changes on growth a long standing key issue in international macroeconomics has received renewed attention in recent years owing to weaker growth rates and the debate on currency wars the connection between real exchange rates and growth remains however an unsettled question in the academic literature we fill this gap by providing an empirical assessment based on a broad sample of emerging and advanced economies we assess the impact of appreciations productivity booms and capital inflows surges using a propensity score matching approach to address causality issues appreciations associated with higher productivity have a larger impact on growth than those associated with capital inflows furthermore appreciations per se tend to have a negative impact on growth we provide a simple theoretical model that delivers a contrasted growth appreciation pattern depending on the underlying shock the model also implies adverse effects of shocks to international capital flows so concerns about an appreciation are not inconsistent with concerns about a depreciation while the presence of an externality through firms destruction leads to inefficient allocations addressing the inefficiency does not dampen exchange rate movements

capital flow management measures what are they good for abstract are capital controls and macroprudential measures related to international exposures successful in achieving their objectives assessing their effectiveness is complicated by selection bias countries which change their capital flow management measures cfms often share specific characteristics and are responding to changes in variables that the cfms are intended to influence this paper addresses these challenges by using a propensity score matching methodology we also create a new database with detailed information on weekly changes in controls on capital inflows capital outflows and macroprudential measures related to international transactions from 2009 to 2011 for 60 countries results show that these macroprudential measures can significantly reduce some measures of financial fragility most cfms do not significantly affect other key targets however such as exchange rates capital flows interest rate differentials inflation equity indices and different volatilities one exception is that removing controls on capital outflows may reduce real exchange rate appreciation therefore certain cfms can be effective in accomplishing specific goals but most popular measures are not good for accomplishing their stated aims

welfare measurement in the household production framework the household production approach to consumer behavior developed from the work of gary becker william gorman and kelvin lancaster has considerable descriptive appeal in modelling the decisions of households the approach derives from the observation that households frequently purchase market goods that do not yield utility directly but are combined to produce commodity service flows which the household values thus observed behavior is determined by household production technology as well as by tastes the advantage of this distinction is that we can pose reasonable hypotheses about characteristics of technology though we rarely possess useful a priori information regarding tastes the putative advantages of the household production approach are questioned on empirical and conceptual grounds by robert pollak and michael wachter 1975 they show that jointness in production or nonconstant returns to scale cause implicit commodity prices to depend on both tastes and technology raising serious econometric difficulties in the estimation of commodity demand functions in addition since commodity prices become functions of the commodity bundle consumed the analogy to traditional demand theory breaks down joint production occurs when a good enters several production processes simultaneously or equivalently when a good in one production process also enters directly into the individual s utility function the most common example is time which provides the context for all production processes and is often associated with the production of several commodities simultaneously since joint production in the household is likely to be pervasive the critique by pollak and wachter cannot be ignored in response to the comment by william barnett pollak and wachter 1977 suggest dispensing with the notion of commodity prices and treating the demand for commodities as a function of goods prices this approach confounds tastes and technology but it eliminates the troublesome concept of commodity prices as parameters when in fact they are likely to be endogenous in this paper we show that results from positive analysis such as the critique by pollak and wachter have implications for the use of the household production framework for welfare analysis the household production function approach has had considerable appeal for measuring welfare effects of public actions in the environmental and natural resource areas gardner brown john charbonneau and michael hay elizabeth wilman yet traditional approaches to welfare measurement are frequently inapplicable we argue that welfare measurement in this framework is complicated by the difficulties of unravelling tastes and technology we extend pollak and wachter s results by demonstrating that marshallian demand functions for commodities cannot be uniquely defined thus marshallian functions cannot be used to derive exact compensated functions in the manner of jerry hausman and of george mckenzie and i f pearce nor can compensating and equivalent variation measures be bounded by marshallian consumer s surplus estimates following robert willig in fact duality results that normally allow us to move between marshallian and hicksian functions are not assistant and associate professors respectively department of agricultural and resource economics university of maryland college park md 20742 this paper is scientific article no a3404 contribution no 6476 of the maryland agricultural experiment station we wish to thank darrell hueth james opaluch v kerry smith and elizabeth wilman for comments on an earlier draft

what s the use welfare estimates from revealed preference models when weak complementarity does not hold abstract in this paper we consider the theoretical and empirical ramifications of welfare measurement in revealed preference models when weak complementarity does not hold in the context of a kuhn tucker model of recreation demand we show that while it is possible to estimate preferences that do not appear to exhibit weak complementarity the calculation of welfare measurements from these models requires a cardinal interpretation of preferences that cannot be tested furthermore we reiterate the under appreciated fact that even traditional use value estimates require a cardinal restriction on preferences that while often intuitive also cannot be tested we demonstrate empirically that the choice of restrictions can have significant ramifications as use value estimates can vary based on the assumed preference structure

goods diversion and repressed inflation notes on the political economy of price liberalization most analyses of parallel markets in centrally planned systems focus on queue rationing as the mechanism whereby state sector goods become available for second economy resale this article takes into account employee diversion of goods as a second channel through which merchandise can move to private markets diversion of goods tends to temper the adverse distributional consequences of price liberalization as repressed inflation increases more goods are diverted out of the state sector and the likelihood that an individual will be made worse off by a transition of free prices is diminished

willingness to pay for ozone control inferences from the demand for medical care abstract the paper applies a discrete choice version of the household production approach to the valuation of nonmarket goods willingness to pay for tropospheric ozone control is estimated using medical care demand under assumptions of input necessity and weak complementarity in example calculations individuals living in high ozone areas are willing to pay over 170 annually for an environment in which ozone concentrations never exceed 12 pphm willingness to pay figures are two to four times larger than medical expense savings caused by the same ozone reductions estimates obtained are compared with results of previous studies and proposed ozone control measures are discussed

poverty and witch killing many observers have noted that poverty and violence go hand in hand there is a strong negative relationship between economic growth and crime across countries as well as across districts in india and a link between low income and the occurrence of civil war 1 yet existing studies are typically unable to resolve the key econometric identification issues of omitted variable bias and endogeneity to illustrate the unobserved quality of local government institutions may affect both income growth and crime rates and poverty could lead to violence if desperate people with nothing to lose commit more crimes but violence itself may in turn affect economic productivity this paper uses local rainfall variation to identify the impact of income shocks on murder in a rural tanzanian district 2 extreme rainfall resulting in drought or floods is exogenous and is associated with poor harvests and near famine conditions in the region and a large increase in the murder of witches there are twice as many witch murders in years of extreme rainfall as in other years the victims are nearly all elderly women typically killed by relatives these econometric results across 11 years in 67 villages provide novel evidence on the role of income shocks in causing violent crime and religious violence in particular and also provide insights into witchcraft an important social phenomenon in africa rarely studied by economists the view that economic conditions are a driving force behind witch murders is bolstered by the fact that most witch killing in tanzania takes place in poor rural areas largely dependent on rain fed agriculture and that most victims in our sample are from poor households however it is difficult to definitively disentangle this income shock theory from alternative socio cultural explanations the concentration of tanzanian witch murders in a region dominated by one particular ethnic group the sukuma and the especially high number of witch murders in villages where indigenous religious beliefs are strong both point to the important role of non economic factors economic theories and cultural theories are perhaps best viewed as complements the empirical findings demonstrate the power of economics to rationalize a phenomenon that has previously been understood almost solely through a socio cultural lens 3

a note on privileges in a queue rationed cpe with black markets abstract in a centrally planned economy with fixed prices rationing by waiting in queues black markets and different waiting times for each agent existence of an equilibrium is demonstrated also welfare characteristics of equilibrium allocations are discussed non uniform waiting times decrease the allocative efficiency of black markets and may lead to pareto inferior in a compensated sense equilibria compared to a model with uniform waiting times

on measuring the value of a nonmarket good using market data we use line integral theory to lay out in a more general theoretical framework the conditions under which it is possible to measure with market data the welfare effects of a change in a nonmarket good we present in detail a numerical method of measuring the value of nonmarket goods using market data under either weak neutrality or weak complementarity our numerical method is more flexible than the existing analytical method because it can be used with any well behaved marshallian demand function and can be used even when the willig condition does not hold

the stahl alexeev paradox a note abstract we offer a simple proof of the paradox discovered by stahl and alexeev that the introduction of black markets in a fixed price economy with a rationing mechanism consisting of waiting line queues is not necessarily a pareto improvement we show that the paradoxical result arises from the fact that queue length is endogenous and illustrates the general principle that permitting an additional market may be undesirable in an economy which has other distortions

the enfranchisement of women and the welfare state abstract we offer a rationale for the decision to extend the franchise to women within a politico economic model where men are richer than women women display a higher preference for public goods and women s disenfranchisement carries a societal cost men and women are matched within households which are the center of the decision process we derive the optimal tax rate under two alternative regimes a males only enfranchisement regime and a universal enfranchisement regime the latter is associated with a higher tax rate but as industrialization raises the reward to intellectual labor relative to physical labor women s relative wage increases thus decreasing the difference between the tax rates when the cost of disenfranchisement becomes higher than the cost of the higher tax rate which applies under universal enfranchisement the male median voter is better off extending the franchise to women a consequent expansion of the size of government is only to be expected in societies with a relatively high cost of disenfranchisement we empirically test the implications of the model over the 1870 1930 period we proxy the gender wage gap with the level of per capita income and the cost of disenfranchisement with the presence of catholicism which is associated with a more traditional view of women s role and thus a lower cost the gender gap in the preferences for public goods is proxied by the availability of divorce which implies marital instability and a more vulnerable economic position for women consistently with the model s predictions women s suffrage is correlated positively with per capita income and negatively with the presence of catholicism and the availability of divorce while women s suffrage increases the size of government only in non catholic countries

precision guided or blunt the effects of us economic sanctions on human rights this study analyzes the consequences of economic sanctions for the target country s human rights situation we offer a political economy explanation for different types of human rights infringements or improvements in reaction to economic shocks caused by sanctions based on that explanation we derive hypotheses linking sanctions to four types of human rights economic rights political and civil rights basic human rights and emancipatory rights we use endogenous treatment regression models to test those hypotheses by estimating the causal average treatment effect of us economic sanctions on each type of human rights within a uniform empirical framework unlike previous studies we find no support for adverse effects of sanctions on economic rights or basic human rights once the endogenous selection of sanctioned countries is modelled with respect to women s rights our findings even indicate a positive effect of sanctions that is associated with improvements in women s economic rights only our results for political rights and civil liberties suggest significant deterioration under economic sanctions we conclude that it is important to account for the potential endogeneity of economic sanctions and to distinguish different dimensions of human rights as the effects of economic sanctions along those dimensions may vary considerably

bounds on the willingness to pay for non traded goods a possibility theorem abstract this note contains a proof of the following theorem if an agent s preferences for traded goods are known and if the quantity of a non traded good provided him alters his demand for traded goods then it is possible to place bounds on his willingness to pay for increments in this quantity

fan welfare maximization as a club objective in a professional sports league abstract motivated by aspects of european soccer club governance members clubs supporters trusts a first formal analysis of fan welfare maximization as a club objective in a sports league is provided with comparisons to objectives studied previously profit and win maximization positive comparisons focus on team qualities ticket prices attendances and the impact of capacity crowds empirically observed ticket black markets and inelastic pricing are consistent only with fan welfare maximization normatively social welfare aggregate league surplus is well served by a league of fan welfare maximizers or sometimes win maximizers but not profit maximizers leagues should not normally make profits

does foreign direct investment reduce poverty in africa and are there regional differences summary this paper re examines the relationship between foreign direct investment fdi inflows and welfare or poverty reduction in africa using fdi net inflows per capita and the united nations development program s human development index as the principal variables our analyses confirm the positive and strongly significant relationship between fdi net inflows and poverty reduction in africa but find significant differences among african regions we also find that fdi has a greater impact on welfare in poorer countries than it does in wealthier countries for instance while the relationship between fdi and poverty reduction is positive and significant for economic communities in central and east africa it is non significant in northern and southern africa furthermore the relationship was found to be ambiguous in west africa our results are robust to many model specifications

does foreign direct investment promote growth exploring the role of financial markets on linkages abstract do multinational companies generate positive externalities for the host country the evidence so far is mixed varying from beneficial to detrimental effects of foreign direct investment fdi on growth with many studies that find no effect in order to provide an explanation for this empirical ambiguity we formalize a mechanism that emphasizes the role of local financial markets in enabling fdi to promote growth through backward linkages using realistic parameter values we quantify the response of growth to fdi and show that an increase in the share of fdi leads to higher additional growth in financially developed economies relative to financially under developed ones

economic crisis in a shortage economy it is not unusual for reforming socialist economies to relax wage controls without hardening budget constraints on enterprises or freeing consumer goods prices this policy can be dangerously destabilizing while higher wages permit workers to purchase more of some goods they also tend to exacerbate shortages and to breed waste and corruption beyond a certain level economywide wage hikes will worsen worker welfare this is true regardless of whether deficit goods are strictly rationed are sold randomly at official prices to queuing workers or are offered to workers by insiders only at black market prices however the form of allocation does influence the levels of output and welfare

rationing queues and black markets several types of rationing and queue mechanisms are compared in a framework of general equilibrium type models under gross substitutability and normality assumptions about consumers walrasian demand during transition from rationing and queues to a market system a group of low income people loses the transition involves larger losses for this group if black markets prevail under rationing or queues while a group of high income consumers gains some other comparative statics results are developed for a queue model with black markets copyright 1993 by the econometric society

the political economy of growth a critical survey of the recent literature this article reviews the recent literature on the political economy of growth focusing on the research that has developed at the intersection of the endogenous growth literature and the new political economy it explores the relationship among four key variables economic growth and capital accumulation political instability political freedom and democratic institutions and income inequality

fdi and financial market development in africa the literature on the relationship between foreign direct investment fdi financial market development fmd and economic growth focuses mainly on two aspects the relationship between fdi and economic growth and the role played by fmd in that linkage the literature is almost silent on the relationship and the direction of causality between fdi and fmd although it has been established that fdi contributes more to growth in countries with a more developed financial market it is not clear how fdi and fmd interact with each other the aim of this paper is to fill this gap in the african context particularly in africa where stock markets experience low liquidity and less transparency fdi can be an impetus for financial market reforms and serve as a mechanism to improve the transparency and the depth of the financial markets also well functioning financial markets can help channel foreign investments more efficiently into productive sectors and therefore create more value for investors hence making the countries more attractive to fdi in short both fdi and fmd will impact each other simultaneously which is confirmed by our findings we document a bidirectional causality between fdi and fmd furthermore the multivariate regression results of the system of simultaneous equations also confirm the positive relationship between fdi and fmd in africa we also find that fdi contributes to economic growth in africa after controlling for endogeneity between fdi fmd and economic growth

rationed and walrasian markets for the same good a rational expectations determination of the relative prices abstract consumers purchase a good on either a rationed or an equilibrating market on the former for price p1 the good is obtained instantly or with delay with probabilities and 1 respectively on the latter the good is obtained instantly for p2 w define and derive the conditions for a rational expectations equilibrium for this problem

further results on willingness to pay for nonmarket goods abstract some implications of substitution relationships between private and public goods for measuring the value of changes in nonmarket goods such as environmental quality are explored if a market good is hicks neutral to quality for some price vector the total value of discrete changes in quality consisting of both use and nonuse value can be measured from empirical demand coefficients a plausible motivation for neutrality is developed in the contexts of specifying incomplete demand systems for weak complements to quality and measuring nonuse value when the consumption of weak complements is held at zero previous results on bounding marginal willingness to pay for nonmarket goods are also strengthened

does fdi improve economic development in north african countries this article examines the relationship between fdi inflows and welfare improvement in north african countries using net per capita fdi inflows and the united nations development program s human development index as the principal variables our analyses confirm the positive and strongly significant relationship between net fdi inflows and welfare improvement in north africa although we do find significant differences among the countries in the region this relationship holds even after we control for government size country indebtedness macroeconomic instability infrastructural development institutional quality political risk openness to trade education and financial market development hence at the aggregate level fdi contributes to economic growth in north africa in turn generating additional revenues for governments and populations in the region through fiscal policies and jobs creation we also found that fdi received by countries in the region are mainly concentrated in very few industries

revealed preference for public goods the most serious problem for the modern theory of optimal public expenditure is that although it has to be based on some social welfare function individual preferences for public goods which constitute the elements of any individualistic social welfare function are hard to assess it is argued that since every individual can freely participate in the consumption of a public good there is an incentive for him to either underreport or overreport his preferences depending on how the reported preferences are used in the financing process of the public good i this argument will be correct if an individual s preferences for public goods can be expressed only directly in many cases however the consumption of a public good has some technical or objective relationship with the consumption of some private goods thus the benefit an individual derives from free highways depends on how much he spends on a car and gasoline even the benefit an individual derives from the judicial system depends on how much he spends to hire the services of lawyers also an individual can enjoy the same security police provide by hiring private guards and installing locks and so on in these cases if we know the technical relationships between the consumption of private goods and the consumption of public goods then from the market data relating the amounts of private goods bought to prices and the data on the existing amounts of public goods we might be able to infer i the amounts of final goods consumed say the number of trips from one point to another the degree of justice the security from robbery etc and ii their opportunity costs which the individual was willing to pay but if we succeed in this inference then all that remains to be done in order to find the individual s utility function will be to integrate back the relationship between the amounts of final goods consumed and their opportunity costs a trivial example can be provided by assuming that each public good is perfectly substitutable with a private good let yi be the quantity of the ith public good and xi be the quantity of a private good which is a perfect substitute for the ith public good then the benefit derived from the ith public good and its perfect substitute can be measured by xi yi suppose we have ascertained an individual consumer s demand functions for private good when all the yi are zero we know from the revealed preference theory that if these demand functions satisfy a certain condition namely the symmetry of the slutsky matrix then there exists a utility function unique up to a monotone transformation

do economic sanctions destabilize country leaders do economic sanctions destabilize the governments they target a form of foreign pressure sanctions are typically meant to alter the policies of other countries there is much pessimism on whether they ever work this article shows that economic pressure works in at least one respect it destabilizes the leaders it targets i present a theoretical argument that explains why destabilization is a necessary condition for successful coercion i find evidence that pressure destabilizes in a large panel of cross country time series data the destabilization finding indicates that sanctions may be more effective at altering policies than we think i conclude by noting that greater optimism regarding the effectiveness of sanctions should be balanced by a careful consideration of the policy s real and sizeable costs for those caught in the middle

pro poor growth and sustainable development framework evidence from two step gmm estimator abstract the environmental sustainability agenda is not easy to be achieved without implementing pro growth and pro poor growth policies across the globe pakistan s economy is no exception that strive hard to managed environmental resource capital and pro poor growth expenditures in order to reduce poverty incidence and carbon mitigation policies while many efforts need more sustainable instruments to be achieved united nation s assigned sustainable development target till 2030 the study selected an annual time series data from 1975 to 2016 and employed two step generalized method of moments gmm estimator for robust inferences the results show that higher economic growth decreases poverty incidence through social reforms while deforestation under 5 mortality rate trade openness carbon emissions and fdi inflows largely increases poverty incidence in a country the study confirmed environmental kuznets curve ekc hypothesis of carbon emissions in relation of per capita income and public spending on education while pollution haven hypothesis is confirmed due to high involvement of dirty polluting industries in country s economic transformation process the fossil fuel combustion and high population density increases carbon emissions that sabotage the process of sustainable development in a country thus it is imperative to device sustainable policies for mitigating carbon fossil emissions with cleaner production techniques and improves the quality of life of poor people through increase social expenditures that trickle down to the poor as compared to the non poor

voting on the budget deficit this paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending all voters agree that a balanced budget is ex ante optimal however if there is disagreement between current and future majorities a balanced budget is not a political equilibrium under majority rule under certain conditions a majority of the voters favors a budget deficit and the equilibrium deficit is larger the greater is the polarization among voters copyright 1990 by american economic association

democratization or repression abstract regimes controlled by a rich elite often collapse and make way for democracy amidst widespread social unrest such regime changes are often followed by redistribution to the poor at the expense of the former elite we argue that the reason why the elite may have to resort to full scale democratization despite its apparent costs to themselves may be that lesser concessions would be viewed as a sign a weakness and spur further unrest and more radical demands the elite may therefore be forced to choose between repression and the most generous concession a transition to full democracy

the mirage of exchange rate regimes for emerging market countries this paper argues that much of the debate on choosing an exchange rate regime misses the boat it begins by discussing the standard theory of choice between exchange rate regimes and then explores the weaknesses in this theory especially when it is applied to emerging market economies it then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits the conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal financial and monetary institutions in producing macroeconomic success in emerging market countries this suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable and more on these deeper institutional arrangements a focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years

when higher incomes reduce welfare queues labor supply and macro equilibrium in socialist economies starting from a micro model of consumer behavior under rationing by queuing that utilizes gary becker s allocation of time framework we develop a simple macroeconomic model of a socialist economy the length of the queue is the key endogenous variable that equilibrates aggregate supply and aggregate demand comparative statics analysis shows that an increase in wages over money prices brings about longer queues that reduce labor supply output and welfare when shortages grow beyond a certain critical level queues fail to sustain aggregate equilibrium in the economy

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