expense neglect in forecasting personal finances abstractthis article examines how consumers forecast their future spare money or financial slack although consumers generally think that both their income and expenses will rise in the future they underweight the extent to which their expected expenses will cut into their spare money a phenomenon the authors term expense neglect the authors test and rule out several possible explanations for this phenomenon and conclude that expense neglect is due in part to insufficient attention toward expectations about future expenses relative to future income tightwad consumers who are chronically attuned to costs show less severe expense neglect than spendthrifts who are less attuned to costs the authors further find that expectations regarding changes in income and not changes in expenses predict responses to the michigan index of consumer sentiment a leading macroeconomic indicator finally the authors conduct a meta analysis of their entire file drawer 27 studies 8 418 participants and fi

dilemmas of local governance under the development zone fever in china a case study of the suzhou region this article aims to explore the mechanisms of the development zone fever in the suzhou region located in the fast growing yangtze river delta and investigates from an institutional perspective the practice of relevant intragovernmental governance in the context of rapid industrialisation since the 1990s a specific mode of governance the evaluative economic indicators scheme inherited from the earlier socialist planning system combined with the party state s promotion evaluation system plays an essential role in this transformation of farmland property rights however this model of development is not necessarily helpful for local financial conditions and it results in the disclacement of peasants and the loss of land resources based on the resulting dilemmas of governance it is argued that in addition to the economic paradigm which focuses on consequences of fiscal reforms and devolution scholars should pay more attention to factors such as the party state s promotion evaluation system and

new evidence on labor supply employment versus hours elasticities by sex and marital status using the tri annual micro panel data of the survey of income and program participation we estimate fixed effects labor supply models separating the extensive and intensive margins the employment elasticity is 0 6 for single men versus 1 1 for married men the employment elasticity is 2 4 for single women versus 1 8 for married women the compensated hours worked elasticity is 0 4 for employed single and married men and 0 7 for employed single and married women the implied aggregate employment elasticity of 1 5 and hours per employee elasticity of 0 5 indicate employment fluctuations account for three fourths of wage induced variation in labor hours

the surprising power of age dependent taxes this paper provides a new empirically driven application of the dynamic mirrleesian framework by studying a feasible and potentially powerful tax reform age dependent labour income taxation i show analytically how age dependence improves policy on both the intratemporal and intertemporal margins i use detailed numerical simulations calibrated with data from the u s panel study of income dynamics to generate robust policy implications age dependence 1 lowers marginal taxes on average and especially on high income young workers and 2 lowers average taxes on all young workers relative to older workers when private saving and borrowing are restricted finally i calculate and characterize the welfare gains from age dependence despite its simplicity age dependence generates a welfare gain equal to between 0 6 and 1 5 of aggregate annual consumption and it captures more than 60 of the gain from reform to the dynamic optimal policy the gains are due to substantial increases in both efficiency and equity when age dependence is restricted to be pareto improving the welfare gain is nearly as large

effects of social security policies on benefit claiming retirement and saving abstract an enhanced version of a structural model jointly explains benefit claiming wealth and retirement including reversals from states of lesser to greater work the model is estimated with health and retirement study data alternative beliefs about the future of social security affect claiming behavior effects of three potential policies are also examined increasing the early entitlement age increasing the full retirement age and eliminating the payroll tax for seniors predicted responses to increasing the full entitlement age are sensitive to beliefs

market transition and the persistence of power the changing stratification system in urban china research on transitional socialist societies has explored trends in income inequality and issues concerning who gains and who loses during market reforms we find that income inequality in a major chinese city declined only slightly during the first decade of reform policies it then increased dramatically in the subsequent five years strategic position in the state bureaucracy continues to be an important determinant of income although connections to the market system are becoming alternate sources of advantage we interpret these findings in light of the historical and institutional context of urban china

the effect of taxes on male and female labor supply in sweden this paper estimates labor supply functions for married men and women in sweden using data from 1980 taking account of the complete form of individuals budget constraints both linear and quadratic supply functions are estimated with and without random preferences a novel feature is that for women the wage rate and labor supply functions are estimated simultaneously using a full information maximum likelihood method this method yields substantially larger wage and income elasticities than does the previously used two step methods another result is that the quadratic supply function wage elasticities for men and women are virtually the same if the elasticities are evaluated at the same net wage rate and hours of work for men and women the estimated functions are used to calculate the effect of tax reforms

a theory of market transition from redistribution to markets in state socialism state socialist redistributive economies are characterized by the allocation and distribution of goods through central planning this paper develops a theory of market transition which argues that in reforming socialist economies the transition from redistributive to market coordination shifts sources of power and privilege to favor direct producers relative to redistributors the shit improves incentives for direct producers stimulates the growth of private markets and provides to entrepreneurs an alternative path for socioeconomic mobility a set of hypotheses test the market transition theory with householdand village level data

opportunity cost neglect to properly consider the opportunity costs of a purchase consumers must actively generate the alternatives that it would displace the current research suggests that consumers often fail to do so even under conditions promoting cognitive effort various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options sensitivity to such cues varies with chronic dispositional differences in spending attitudes we discuss the implications of these results for the marketing strategies of economy and premium brands

financial deprivation prompts consumers to seek scarce goods consumers assess their well being subjectively largely by comparing the present state of their lives to the state of comparable others and to their own state earlier in time the authors suggest that consumers similarly assess their financial wellbeing and when these evaluations highlight a deficit in their financial position they pursue strategies that mitigate the associated sense of financial deprivation specifically consumers counteract the relative deficit in their financial resources by acquiring goods that are consequently unavailable to other consumers in their environment the results from five studies suggest that the inferiority and unpleasant affect associated with financial deprivation motivates consumers to attend to choose and consume scarce goods rather than comparable abundant goods these effects diminish when scarce goods are limited because other people have already obtained them and when consumers attribute their unpleasant feelings to a source unrelated to financial deprivation

a structural model of multiple welfare program participation and labor supply work on estimating the labor supply effects of high marginal tax rates in welfare programs has been hindered by the difficulty of estimating the effects of participation in multiple welfare programs simultaneously the authors solve this problem by applying methods of simulation estimation to a model of labor supply and multiple program participation the results show asymmetric wage and tax rate effects with fairly large wage elasticities of labor supply but very inelastic responses to moderate changes in cumulative marginal tax rates implying that high welfare tax rates do not necessarily induce major reductions in work effort copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

how longer work lives ease the crunch of population aging population aging is not a looming crisis of the future it is already here populations age when life expectancy rises and fertility declines economic challenges arise when the increase in people surviving to old age and the decline in the number of young people alive to support them cause the growth in society s consumption needs to outpace growth in its productive capacity the ultimate impact of population aging on our standard of living in the future depends a great deal on how long people choose to work before they retire from the labor force here there is reason for optimism the end of the twentieth century witnessed a profound change in retirement behavior for over a century the labor force participation rate of men over age 65 declined falling steadily from 75 percent in the late 1800s to just 16 percent in 1990 moen 1994 costa 1998 at the end of the twentieth century however the labor force participation rate of older men began to rise quinn 2002 the labor force participation rate of older women rose as well following a remarkable increase in labor force participation among younger women over many decades a constellation of forces some just now gaining momentum has raised labor force participation at older ages at just the time it is needed age related health declines and the reluctance of employers to hire and retain older workers present challenges but the outlook for future gains in labor force participation at older ages is promising the labor market is accommodating older workers to some degree and older men and women are themselves adapting on a number of fronts which could substantially lessen the economic impact of population aging the paper begins by documenting the striking shift in the population age distribution well under way the slowdown in labor force growth and the corresponding rise in the economic dependency ratio which can be viewed as a measure of society s consumption needs relative to its productive capacity we document the historic turnaround in labor force participation and show how future increases in participation could significantly dampen the rise in the economic dependency ratio in the second section we turn to the most important factors behind the increase in labor force participation realized to date the shift in the skill composition of the workforce and technological change in the third section we argue that forces such as changes in the structure of employer provided pensions and social security are likely to propel future increases in labor force participation at older ages the fourth section illustrates the diversity of adaptations already at play in the labor market as older men and women seek to extend their working lives finally we discuss the relatively less dramatic population aging in the united states compared to other high income countries and how the united states is better poised than many countries to attain further gains in labor force participation at older ages

toward obtaining a consistent estimate of the elasticity of taxable income using difference in differences abstract the elasticity of taxable income eti is a central parameter for tax policy debates this paper shows that mean reversion prevents most estimators employed in the literature from obtaining consistent estimates of the eti a new method is proposed that will resolve inconsistency due to mean reversion under testable assumptions regarding the degree of serial correlation in the error term using this procedure i estimate an eti of 0 858 which is about twice as large as the estimates found in the most frequently cited paper on this subject 13 the corresponding elasticity of broad income is 0 475

labor supply and taxes a survey i survey the male and female labor supply literatures focusing on implications for effects of wages and taxes for males i describe and contrast results from three basic types of model static models especially those that account for nonlinear taxes life cycle models with savings and life cycle models with both savings and human capital for women more important distinctions are whether models include fixed costs of work and whether they treat demographics like fertility and marriage and human capital as exogenous or endogenous the literature is characterized by considerable controversy over the responsiveness of labor supply to changes in wages and taxes at least for males it is fair to say that most economists believe labor supply elasticities are small but a sizeable minority of studies that i examine obtain large values hence there is no clear consensus on this point in fact a simple average of hicks elasticities across all the studies i examine is 0 30 several simulation studies have shown that such a value is large enough to generate large welfare costs of income taxation for males i conclude that two factors drive many of the differences in results across studies one factor is use of direct vs ratio wage measures with studies that use the former tending to find larger elasticties another factor is the failure of most studies to account for human capital returns to work experience i argue that this may lead to downward bias in elasticity estimates in a model that includes human capital i show how even modest elasticities as conventionally measured can be consistent with large welfare costs of taxation

a generalizable scale of propensity to plan the long and the short of planning for time and for money planning has pronounced effects on consumer behavior and intertemporal choice we develop a six item scale measuring individual differences in propensity to plan that can be adapted to different domains and used to compare planning across domains and time horizons adaptations tailored to planning time and money in the short run and long run each show strong evidence of reliability and validity we find that propensity to plan is moderately domain specific scale measures and actual planning measures show that for time people plan much more for the short run than the long run for money short and long run planning differ less time and money adaptations of our scale exhibit sharp differences in nomological correlates short run and long run adaptations differ less domain specific adaptations predict frequency of actual planning in their respective domains a very long run money adaptation predicts fico credit scores low planners thus face materially higher cost of credit

the global and local dimensions of place making remaking shanghai as a world city shanghai the largest socialist industrial city in china is now experiencing dramatic restructuring under global and local forces this paper provides a preliminary account of remaking this city into a world city the case study suggests the tremendous and pervasive impact of globalisation on the city in transitional economies although it is still not comparable with a truly global city the growth of inward investment particularly its penetration into real estate development has exerted direct impacts on the urban structure it is argued that however that this global influence can only be realised through the coincidence of indigenous changes in the political economy system specifically the willingness of the central government to give more autonomy to local governments the new policy to set up a window for china s open policy the incentive for making money from selling the space the injection of public money into infrastructure and fierce promotional development strategies all contributed to the process of urban restructuring the effect of combined global and local changes has led to an extremely optimistic growth atmosphere and a building boom since the mid 1990s shanghai highlights the local as well as the global dimensions of urban change in the post socialist economies

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

decoding urban land governance state reconstruction in contemporary chinese cities in the rapidly growing literature on urban development in china many authors have emphasised the salient features of economic decentralisation and the increasingly significant role of the local state however such arguments neglect a counter trend in which the central state has deterritorialised and rehierarchised some key functions using the case of land governance this paper argues that facing the complication of changing urban conditions there is a resurgence of the state s regulatory power the decentralisation of economic governance is now counter balanced by the rise of state strategies to control the articulation of scales through which a more centrally consolidated power can be achieved the central government still serves as an important level of economic regulation in this sense new interpretations of commoditised urban transformation especially commoditised production of the built environment should be understood by underscoring the interplay between trends of decentralisation and terr

the econometrics of nonlinear budget sets traditional empirical analysis of consumer demand has usually made the assumption of linear budget sets that is the consumer is assumed to purchase any desired quantity at a constant price subject to a budget constraint the major exception to this framework is the analysis of demand when some goods are rationed 2 in the rationed case the price is constant up to a quantity limit in contrast to the rationed case here i consider the situation where the price varies with the amount of the good purchased empirical situations with nonconstant prices come readily to mind and of course they have received much recent attention from theorists since mirrlees 44 paper on optimal nonlinear taxation the following examples are meant to give a partial listing of cases when nonlinear budget sets occur i electricity prices many electric utilities engage in declining block pricing that is the marginal price of successive kwh s of electricity decrease at a given number of points determined by total demand thus the budget set is piecewise linear houthakker 36 was the first to propose an approach to this problem taylor 51 analyzes the problem at length and hausman kinnucin and mcfadden 31 use an instrumental variables estimator to provide consistent estimates of the demand function

the effect of income taxes on household income research on the distribution of income during the 1980s has identified a trend towards increasing inequality which may be the continuation and acceleration of trends spanning several decades this paper explores to what extent behavioral responses to the tax changes during the 1980s may also explain the rising inequality the 1986 tax reform act is used as a natural experiment to explore the roles played by both taxes and a variety of nontax factors our principal finding is that both tax rates and nontax factors appear to have had significant effects on relative income growth during the late 1980s

china s changing urban governance in the transition towards a more market oriented economy china s changing urban development processes and urban landscapes in the transition towards a more market oriented economy have received extensive research attention in recent years relatively the governing of chinese cities is still underresearched this article aims to analyse the forces released both inside and outside the formal socialist state system and the impacts on phenomenal restructuring of urban governance especially at local levels marketisation has created new elements beyond the reach of state work units that represent the state s hierarchical control the pillars of the socialist governing structure the party state the work units system and household registration are shaken by these forces the changes in the organisation of people capital production materials infrastructure and space fundamentally demand new urban governance territorial organisations such as the municipality urban districts street office and residents committees are reinvented and consolidated to restore a governable society the devolution towards the base level and the reinvention of local communities reflect the state s attempt to reconsolidate its power to create a governable society as well as to cope with practical pressures such as the provision of social assistance to poor and aged residents re employment of laid off workers and the management of floating immigrants the combination of new market elements and decentralised state apparatus has given rise to the entrepreneurial endeavour of china s governance this research highlights the micro foundation of the new urban governance in addition to the globalisation capital mobility city competitiveness thesis

the process of commercialisation of urban housing in china the role of the state in housing has been the subject of controversial debate recently in china more and more decision makers consider that the supply of housing should be left to market forces of demand and supply various new policies have been introduced from as early as 1979 designed to commercialise and reform the public sector dominated housing system this paper provides a review of housing reforms and a systematic account of the key features of the commercialisation process it focuses principally on the attempts to privatise public sector housing in urban areas in the context of the major characteristics and problems of the urban housing system the development of reform policies and legislation and current reform practice

discounting time and time discounting subjective time perception and intertemporal preferences abstract consumers often make decisions about outcomes and events that occur over time this research examines consumers sensitivity to the prospective duration relevant to their decisions and the implications of such sensitivity for intertemporal trade offs especially the degree of present bias i e hyperbolic discounting the authors show that participants subjective perceptions of prospective duration are not sufficiently sensitive to changes in objective duration and are nonlinear and concave in objective time consistent with psychophysical principles more important this lack of sensitivity can explain hyperbolic discounting the results replicate standard hyperbolic discounting effects with respect to objective time but show a relatively constant rate of discounting with respect to subjective time perceptions the results are replicated between subjects experiment 1 and within subjects experiments 2 with multiple time horizons and multiple descriptors and with different measurement ord

squeezed coping with constraint through efficiency and prioritization when consumers perceive that a resource is limited and may be insufficient to accomplish goals they recruit and enact plans to cope with the shortage we distinguish two common strategies efficiency planning yields savings by stretching the resource whereas priority planning does so by sacrificing less important goals using a variety of methods to explore both financial and time planning we investigate how the two types of planning differ how they vary with constraint and how they interrelate relative to efficiency planning priority planning is perceived as yielding larger one time savings but it feels more costly because it requires trade offs within resource e g money for money as opposed to cross resource e g time for money as constraint increases and greater resource savings are required prioritization becomes more likely however the shift to prioritization is often insufficient and consumers tend to react to insufficient prioritization dysfunctionally making a bad situation worse budgeting helps consumers behave more adaptively budgeters respond to constraint with more priority planning than nonbudgeters and they report fewer dysfunctional behaviors like overspending and impulsive shopping

the employment effects of the social security earnings test we investigate the impact of the social security annual earnings test aet on the employment decisions of older americans the aet reduces social security benefits by one dollar for every two dollars earned above the exempt amount using a differences in differences design we find that the employment rate of those predicted to become subject to the aet decreases substantially relative to those not predicted to become subject to it the point estimates suggest that the aet reduces the employment rate of americans aged 63 64 by at least 1 2 percentage points

consumption retirement and social security evaluating the efficiency of reform that encourages longer careers abstract this paper proposes and analyzes a social security reform in which individuals no longer face the oasi payroll tax after say age 54 or a career of 34 years and their subsequent earnings have no bearing on their benefits we first estimate parameters of a life cycle model our specification includes non separable preferences and possible disability it predicts a consumption expenditure change at retirement we use the magnitude of the expenditure change together with households retirement age decisions to identify key structural parameters the estimated magnitude of the change in consumption expenditure depends importantly on the treatment of consumption by adult children of the household simulations indicate that the reform could increase retirement ages one year or more equivalent variations could average more than 4000 per household and income tax revenues per household could increase by more than 14 000

the incredible shrinking elasticities married female labor supply 1978 2002 this paper demonstrates the extent to which married women s labor supply elasticities have changed over the past quarter century estimates from march current population survey data suggest that these elasticities have decreased substantially by 60 percent for the hours wage elasticity from 0 36 to 0 14 70 percent for the hours income elasticity from 0 053 to 0 015 95 percent for the participation wage elasticity from 0 66 to 0 03 and 60 percent for the participation income elasticity from 0 13 to 0 05 changing demographic characteristics explain little of the drop in these elasticities suggesting that preferences toward work have changed across birth cohorts

local governments as industrial firms an organizational analysis of china s transitional economy despite widespread skepticism about government ownership in transitional economies china s rapid industrial growth has been led by public enterprises kornai s theory of soft budbet constraints born of the failure of earlier hungarian reforms fosters such skepticism but it assumes as fixed organizational characteristics that in fact vary widely across government jurisdictions local governments with smaller industrial bases have clearer financial incentives and constraints fewer nonfinancial interests in enterprises and a greater capacity to monitor them in china s vast public sector the fastest growth in output and productivity has occurred where government ownership rights are clearest and most easily enforced which enables officials to manage public industry as a diversified market oriented firm

residential redevelopment and the entrepreneurial local state the implications of beijing s shifting emphasis on urban redevelopment policies the entrepreneurial nature of local government activities has significantly influenced socioeconomic and spatial changes in urban china it is against this backdrop that property led redevelopment projects were implemented in beijing after 1990 guided by a programme whose very success depended on the participation of real estate capital for financial contributions in 2000 however a new policy was put in practice which aimed at supplying affordable housing on government provided land to increase the rehousing rate this paper analyses the implications of this shifting emphasis on beijing s redevelopment policy and examines whether the local government has become less entrepreneurial and more socially inclusive in its redevelopment approach based on the case study of two redevelopment projects the paper argues that the local state s entrepreneurial nature has persisted and that this is largely due to its power to dispose of urban land use rights effectively making local governments de facto landlords