optimal production lot with imperfect production process under permissible delay in payments and complete backlogging abstract the traditional economic production quantity epq model assumes that the production products are all perfect it is not always true in the real production system due to imperfect production process or other factors imperfect quality items may be produced furthermore it is well known that the total production inventory costs can be reduced by reworking the imperfect quality items produced with a relatively smaller additional reworking and holding costs in addition the permissible delay in payments offered by the supplier is widely adopted in the practical business market in this study we explore the effects of the reworking imperfect quality items and trade credit on the epq model with imperfect production processes and complete backlogging a mathematical model which includes the reworking and shortage costs interest earned and interest charged is presented besides an arithmetic geometric mean inequality approach is employed and an algorithm is developed to find the optimal production policy furthermore some numerical examples and sensitivity analysis are provided to demonstrate the proposed model

nonparametric bounds on the returns to language skills this paper applies the theoretical literature on nonparametric bounds on treatment effects to the estimation of how limited english proficiency lep affects wages and employment opportunities for hispanic workers in the united states i analyse the identifying power of several weak assumptions on treatment response and selection and stress the interactions between lep and education occupation and immigration status i show that the combination of two weak but credible assumptions provides informative upper bounds on the returns to language skills for certain subgroups of the population adding age at arrival as a monotone instrumental variable also provides informative lower bounds copyright 2005 john wiley sons ltd

head start and the distribution of long term education and labor market outcomes we investigate the effect of head start on education and wage income for individuals in their 30s in the nlsy79 we contribute to the existing literature by examining effects across outcome distrib

financial aid debt management and socioeconomic outcomes post college effects of merit based aid abstract prior research has demonstrated that financial aid can influence both college enrollments and completions but less is known about its post college consequences this study is the first to link college and financial aid information to credit bureau data later in life enabling us to examine the impacts of grant aid on homeownership neighborhood characteristics and credit outcomes we use a regression discontinuity rd strategy to identify causal effects of the wv promise scholarship a broad based state merit aid program up to 10 years after college entry the rd is imperfect because our sample is limited to college students and the scholarship program increased enrollment but there is little evidence of selection on observables at the threshold we find that scholarship recipients near the test score cutoff for eligibility are more likely to earn a graduate degree are more likely to own a home and live in higher income neighborhoods effects on annual earnings and credit outcomes are similarly positive but imprecise these positive effects are primarily due to substantial reductions in time to degree rather than to reduced student debt upon graduation

identification issues in the public private wage gap with an application to italy this paper reviews some of the standard assumptions that are imposed in order to estimate the average public private wage gap and that are mainly related to the possible selection of the sector there are two contributions to the existing public private wage gap literature one is a better understanding of the identified parameters standard estimators identify a local effect late which in general cannot be generalized to the entire population as instead is almost always done the other is the partial identification of the population average treatment effect with an instrumental variable to the best of my knowledge this is the first paper in this literature that employs bounds the technique is applied to male workers in italy for compliers late estimates a wage advantage from working in the public sector greater than 30 this return is within the narrowest bounds on the population average treatment effect that are consistent even with a much smaller gap about 15 or more

graduated punishments in public good games a host of social situations feature graduated punishments we explain this phenomenon by studying a repeated public good game in which a social planner imperfectly monitors agents to detect shirkers agents cost of contributing is private information and administering punishments is costly a low punishment today imperfectly sorts agents by type only low cost agents contribute the planner uses this information optimally punishing tomorrow s alleged repeat shirkers harsher than rst time shirkers the threat of becoming branded as repeat oender allows the planner to use a very mild punishment for rst time shirkers attenuating the costs associated with administering punishments graduated punishments are consequently socially optimal as long as the population is not too homogeneous

generating skilled self employment in developing countries experimental evidence from uganda we study a government program in uganda designed to help the poor and unemployed become self employed artisans increase incomes and thus promote social stability young adults in uganda s conflict affected north were invited to form groups and submit grant proposals for vocational training and business start up funding was randomly assigned among screened and eligible groups treatment groups received unsupervised grants of 382 per member grant recipients invest some in skills training but most in tools and materials after four years half practice a skilled trade relative to the control group the program increases business assets by 57 work hours by 17 and earnings by 38 many also formalize their enterprises and hire labor we see no effect however on social cohesion antisocial behavior or protest effects are similar by gender but are qualitatively different for women because they begin poorer meaning the impact is larger relative to their starting point and because women s work and earnings stagnate without the program but take off with it the patterns we observe are consistent with credit constraints

monotone instrumental variables with an application to the returns to schooling for fifty years econometric analyses of treatment response have made extensive use of instrumental variable iv assumptions holding that mean response is constant across specified subpopulations of a population of interest 2 yet the credibility of mean independence conditions and other iv assumptions has often been a matter of considerable disagreement with much debate about whether some covariate is or is not a valid instrument in an application of interest there is therefore good reason to consider weaker but more credible assumptions to this end we introduce monotone instlumental variable miv assumptions holding that mean response varies weakly monotonically across specified subpopulations we study the identifying power of these miv assumptions and give an empirical application the findings reported here add to the literature developing nonparametric bounds on treatment effects 3 this paper uses the same formal setup as manski 1997 there is a probability space j x2 p of individuals each member j of population j has observable covariates xi e x and a response function yj t y mapping the mutually exclusive and exhaustive treatments t e t into outcomes yj t e y person j has a realized treatment zj e t and a realized outcome y 1 y zi both of which are observable the latent outcomes yj t

misreported schooling and returns to education evidence from the uk this paper aims to provide a number of contributions of policy practical and methodological interest to the study of the returns to educational qualifications first we derive estimates of the returns to different qualifications for the uk that allow for the possibility of misreported attainment using data from the british national child development survey to date any major empirical evidence on the importance of this issue is restricted to the us where it was shown that errors might indeed play a non negligible role second we aim to provide the academic and policy community with estimates of the accuracy of commonly used types of data on educational attainment administrative files self reported information close to the date of completion of the qualification and recall information ten years after completion third by using the unique nature of our data we assess how the biases from measurement error and from omitted ability and family background variables interact in the estimation of returns we intend to produce simple calibration rules to allow policymakers to use nationally representative data such as the labour force survey that totally rely on self reported information on qualifications and contain little or no information on individual ability and family background we rely throughout on a unified framework of general applicability to study the impact of misreported treatment status on the estimation of causal treatment effects jel codes c10 i20 j31

partial identification of counterfactual choice probabilities this article shows how to predict counterfactual discrete choice behavior when the presumed behavioral model partially identifies choice probabilities the simple general approach uses observable choice probabilities to partially infer the distribution of types in the population and then applies the results to predict behavior in unrealized choice settings two illustrative applications are given one assumes only that persons have strict preferences the other assumes strict preferences and utility functions that are linear in attribute bundles with no restrictions on the shape of the distribution of preference parameters

evaluating education programs that have lotteried admission and selective attrition we study the effectiveness of magnet programs in an urban district that ration excess demand by admission lotteries differential attrition arises since students who lose the lottery are more likely to pursue options outside the school district than students who win the lottery when students leave the district important outcome variables are often not observed the treatment effects are not point identified we exploit known quantiles of the outcome distribution to construct informative bounds on treatment effects we find that magnet programs improve behavioral outcomes but have no significant effect on achievement

anonymity or distance job search and labour market exclusion in a growing african city we show that helping young job seekers signal their skills to employers generates large and persistent improvements in their labour market outcomes we do this by comparing an intervention that improves the ability to signal skills the job application workshop to a transport subsidy treatment designed to reduce the cost of job search in the short run both interventions have large positive effects on the probability of finding a formal job the workshop also increases the probability of having a stable job with an open ended contract four years later the workshop significantly increases earnings job satisfaction and employment duration but the effects of the transport subsidy have dissipated gains are concentrated on individuals who generally have worse labour market outcomes overall our findings highlight that young people possess valuable skills that are unobservable to employers making these skills observable generates earnings gains that are far greater than the cost of the intervention

information mobile telephony and traders search behavior in niger information and communications technologies have spread rapidly in developing countries we investigate the impact of mobile phones on traders search behavior in niger by constructing a theoretical model of search in which traders engage in sequential search for the optimal sales price using a trader panel dataset spanning 2005 2007 we find empirical support for the model in that the duration of mobile phone coverage is associated with increased search activity this effect evolves dynamically over time and is stronger for larger traders who engage in arbitrage over longer distances results provide empirical evidence for the observed linkages between mobile telephony and price dispersion

set identification in models with multiple equilibria we propose a computationally feasible way of deriving the identified features of models with multiple equilibria in pure or mixed strategies it is shown that in the case of shapley regular normal form games the identified set is characterized by the inclusion of the true data distribution within the core of a choquet capacity which is interpreted as the generalized likelihood of the model in turn this inclusion is characterized by a finite set of inequalities and efficient and easily implementable combinatorial methods are described to check them in all normal form games the identified set is characterized in terms of the value of a submodular or convex optimization program efficient algorithms are then given and compared to check inclusion of a parameter in this identified set the latter are illustrated with family bargaining games and oligopoly entry games copyright 2011 oxford university press

recent two stage sample selection procedures with an application to the gender wage gap recently developed two stage estimation methods of sample selection models are used in the context of data from the 1989 labor market activity survey to examine labor supply decisions and wage outcomes for employed men and women recent hypothesis test procedures are used to test for no sample selection and to test for a parametric against a semiparametric selection correction procedure we conclude that selection is indeed an issue for the sample at hand and that the semiparametric specification is appropriate we also present the standard decomposition of the gender wage gap into its explained and unexplained portions

identification and asymptotic approximations three examples of progress in econometric theory in empirical economics the size and quality of datasets and computational power has grown substantially along with the size and complexity of the econometric models and the population parameters of interest with more and better data it is natural to expect to be able to answer more subtle questions about population relationships and to pay more attention to the consequences of misspecification of the model for the empirical conclusions much of the recent work in econometrics has emphasized two themes the first is the fragility of statistical identification the other related theme involves the way economists make large sample approximations to the distributions of estimators and test statistics i will discuss how these issues of identification and alternative asymptotic approximations have been studied in three research areas analysis of linear endogenous regressor models with many and or weak instruments nonparametric models with endogenous regressors and estimation of partially identified parameters these areas offer good examples of the progress that has been made in econometrics

the rand health insurance experiment three decades later we re present and re examine the analysis from the famous rand health insurance experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending we begin by summarizing the experiment and its core findings in a manner that would be standard in the current age we then examine potential threats to the validity of a causal interpretation of the experimental treatment effects stemming from different study participation and differential reporting of outcomes across treatment arms finally we re consider the famous rand estimate that the elasticity of medical spending with respect to its out of pocket price is 0 2 emphasizing the challenges associated with summarizing the experimental treatment effects from non linear health insurance contracts using a single price elasticity

optimal food price stabilization in a small open developing country in poor countries most governments implement policies aiming to stabilize the prices of staple foods which often include storage and trade measures insulating their domestic market from the world market it is of crucial importance to understand the precise motivations and efficiency of those interventions because they can have consequences worldwide this paper addresses those issues by analyzing the case of a small open developing country confronted by shocks to both the crop yield and foreign price in this model government interventions may be justified by the lack of an insurance market for food prices considering this market imperfection the authors design optimal public interventions through trade and storage policies they show that an optimal trade policy largely consists of subsidizing imports and taxing exports which benefits consumers at the expense of producers import subsidies alleviate the non negativity of food storage in other words when stocks are exhausted subsidizing imports prevents domestic price spikes one striking result an optimal storage policy on its own is detrimental to consumers since its stabilizing benefits leak into the world market and it raises the average domestic price by contrast an optimal combination of storage and trade policies results in a powerful stabilizing effect for domestic food prices

drought of opportunities contemporaneous and long term impacts of rainfall shocks on human capital higher wages are generally thought to increase human capital production particularly in the developing world we introduce a simple model of human capital production in which investments and time allocation differ by age using data on test scores and schooling from rural india we show that higher wages increase human capital investment in early life in utero to age 2 but decrease human capital from age 5 to 16 children switch out of school into productive work when rainfall is higher the opportunity cost of schooling even for fairly young children is an important factor in determining overall human capital investment

sensitivity to exogeneity assumptions in program evaluation in many empirical studies of the effect of social programs researchers assume that conditional on a set of observed covariates assignment to the treatment is exogenous or unconfounded aka selection on observables often this assumption is not realistic and researchers are concerned about the robustness of their results to departures from it one approach e g charles manski 1990 is to entirely drop the exogeneity assumption and investigate what can be learned about treatment effects without it with unbounded outcomes and in the absence of alternative identifying assumptions there are no restrictions on the set of possible values for average treatment effects this does not mean however that all evaluations are equally sensitive to departures from the exogeneity assumption in this paper i explore an alternative approach developed by paul rosenbaum and donald rubin 1983 where the assumption of exogeneity is explicitly relaxed by allowing for a limited amount of correlation between treatment and unobserved components of the outcomes the starting point of the sensitivity analysis is the assumption that the exogeneity assumption is satisfied only conditional on an additional unobserved covariate making assumptions about the effect of the unobserved covariate on the outcome and its correlation with the treatment i trace out the set of possible values for the treatment effect of interest by considering a sufficiently large set of possible correlations with outcomes and treatment one can recover the bounds on the treatment effect derived by manski 1990 the approach here in the spirit of rosenbaum and rubin 1983 and rosenbaum 1995 is to allow only a limited amount of correlation and to judge the sensitivity of average treatment effect estimates to such correlations there are two novel features of the proposed analysis first rather than formulate the sensitivity in terms of coefficients on the unobserved covariate the sensitivity results are presented in terms of partial r values which may be easier to interpret second the partial r values of the unobserved covariates are compared to those for the observed covariates in order to facilitate judgments regarding the plausibility of values necessary to substantially change results obtained under exogeneity the proposed sensitivity analysis is conceptually related to the practice of assessing sensitivity of estimates by comparisons with results obtained by discarding one or more observed covariates james heckman and v joseph hotz 1989 rajeev dehejia and sadek wahba 1999 jeffrey smith and petra todd 2001 the attraction of the sensitivity analysis is that it is more directly relevant one is not interested in what would have happened in the absence of covariates actually observed but in biases that are the result from not observing all relevant covariates

research needs and challenges in the few system coupling economic models with agronomic hydrologic and bioenergy models for sustainable food energy and water systems on october 12 13 a workshop funded by the national science foundation was held at iowa state university in ames iowa with a goal of identifying research needs related to coupled economic and biophysical models within the few system approximately 80 people attended the workshop with about half representing the social sciences primarily economics and the rest from the physical and natural sciences the focus and attendees were chosen so that findings would be particularly relevant to sbe research needs while taking into account the critical connectivity needed between social sciences and other disciplines we have identified several major gaps in existing scientific knowledge that present substantial impediments to understanding the few system we especially recommend research in these areas as a priority for future funding 1 economic models of decision making in coupled systems deliberate human activity has been the dominant factor driving environmental and land use changes for hundreds of years while economists have made great strides in modeling and understanding these choices the coupled systems modeling literature with some important exceptions has not reflected these contributions several paths forward seem fruitful first baseline economic models that assume rationality can be used much more widely than they are currently moreover the current generation of iams that include rational agents have emphasized partial equilibrium studies appropriate for smaller systems to allow this approach to be used to study larger systems the potential for and consequences of general equilibrium effects should be studied as well second it is important to address shortcomings in these models of economic decision making valuable improvements could be gained from developing coupled models that draw insights from behavioral economics many decision makers deviate systematically from actions that would be predicted by strict rationality but very few iams incorporate this behavior potentially leading to inaccurate predictions about the effects of policies and regulations improved models of human adaptation and induced technological change can also be incorporated into coupled models particularly for medium to long run models decisions about adaptation and technological change will have substantial effects on the conclusions and policy implications but more compelling methods for incorporating these changes into modeling are sorely needed in addition some economic decisions are intrinsically dynamic yet few coupled models explicitly incorporate dynamic models economic models that address uncertainty in decision making are also underutilized in coupled models of the few system 2 coupling models across disciplines despite much recent progress established models for one component of the few system often cannot currently produce outcomes that can be used as inputs for models of other components this misalignment makes integrated modeling difficult and is especially apparent in linking models of natural phenomena with models of economic decision making economic agents typically act to maximize a form of utility or welfare that is not directly linked to physical processes and they typically require probabilistic forecasts as an input to their decision making that many models in the natural sciences cannot directly produce we believe that an especially promising approach is the development of bridge models that convert outputs from one model into inputs for another such models can be viewed as application specific reduced form distillations of a richer and more realistic underlying model ideally these bridge models would be developed in collaborative research projects involving economists statisticians and disciplinary specialists and would contribute to improved understanding in the scientific discipline as well 3 model validation and comparison there is little clarity on how models should be evaluated and compared to each other both within individual disciplines and as components of larger iams this challenge makes larger integrated modeling exercises extremely difficult some potential ways to advance are by developing statistical criteria that measure model performance along the dimensions suitable for inclusion in an iam as well as infrastructure and procedures to facilitate model comparisons focusing on the models out of sample distributional forecasting performance as well as that of the iam overall is especially promising and of particular importance moreover applications of iams tend to estimate the effect of hypothetical future policy actions but there have been very few studies that have used these models to estimate the effect of past policy actions these exercises should be encouraged they offer a well understood test bed for the iams and also contribute to fundamental scientific knowledge through better understanding of the episode in question the retrospective nature of this form of analysis also presents the opportunity to combine reduced form estimation strategies with the iams as an additional method of validation

treatment effects with unobserved heterogeneity a set identification approach we propose the sharp identifiable bounds of the potential outcome distributions using panel data we allow for the possibility that statistical randomization of treatment assignments is not achieved until unobserved heterogeneity is properly controlled for we use certain stationarity assumptions to obtain the sharp bounds our approach allows for dynamic treatment decisions where the current treatment decisions may depend on the past treatments or the past observed outcomes as an empirical illustration we study the effect of smoking during pregnancy on infant birthweight we find that for the group of switchers the infant birthweight of a smoking mother is first order stochastically dominated by that of a nonsmoking mother

bounding causal effects using data from a contaminated natural experiment analysing the effects of teenage childbearing in this paper we consider what can be learned about causal effects when one uses a contaminated instrumental variable in particular we consider what inferences can be made about the causal effect of teenage childbearing on a teen mother s subsequent outcomes when we use the natural experiment of miscarriages to form an instrumental variable for teen births miscarriages might not meet all of the conditions required for an instrumental variable to identify such causal effects for all of the observations in our sample however it is an appropriate instrumental variable for some women namely those pregnant women who experience a random miscarriage although information from typical data sources does not allow one to identify these women we show that one can adapt results from horowitz and manski 1995 on identification with data from contaminated samples to construct informative bounds on the causal effect of teenage childbearing we use these bounds to re examine the effects of early chilbearing on the teen mother s subsequent educational and labour market attainment as considered in hotz mcelroy and sanders 1995a 1995b consistent with their study these bounds indicate that women who have births as teens have higher labour market earnings and hours worked compared to what they would have attained if their childbearing had been delayed

market structure and multiple equilibria in airline markets we provide a practical method to estimate the payoff functions of players in complete information static discrete games with respect to the empirical literature on entry games originated by bresnahan and reiss 1990 and berry 1992 the main novelty of our framework is to allow for general forms of heterogeneity across players without making equilibrium selection assumptions we allow the effects that the entry of each individual airline has on the profits of its competitors its competitive effects to differ across airlines the identified features of the model are sets of parameters partial identification such that the choice probabilities predicted by the econometric model are consistent with the empirical choice probabilities estimated from the data we apply this methodology to investigate the empirical importance of firm heterogeneity as a determinant of market structure in the u s airline industry we find evidence of heterogeneity across airlines in their profit functions the competitive effects of large airlines american delta united are different from those of low cost carriers and southwest also the competitive effect of an airline is increasing in its airport presence which is an important measure of observable heterogeneity in the airline industry then we develop a policy experiment to estimate the effect of repealing the wright amendment on competition in markets out of the dallas airports we find that repealing thewright amendment would increase the number of markets served out of dallas love

estimating the effect of financial aid offers on college enrollment a regression discontinuity approach an important problem faced by colleges and universities that of evaluating the effect of their financial aid offers on student enrollment decisions is complicated by the likely endogeneity of the aid offer variable in a student enrollment equation this article shows how discontinuities in an east coast college s aid assignment rule can be exploited to obtain credible estimates of the aid effect without having to rely on arbitrary exclusion restrictions and functional form assumptions semiparametric estimates based on a regression discontinuity rd approach affirm the importance of financial aid as an effective instrument in competing with other colleges for students

nonparametric continuous discrete choice models modeling choices that are both discrete and continuous is important in several settings the purpose of this article is to explore formulation and identification of such models when indirect utility functions are specified nonparametrically here we consider general nonseparable disturbances we give identification results for nonseparable sample selection models and use these to analyze identification of discrete continuous choice models

nonparametric bounds on treatment effects assume that each member of a population is characterized by values for the variables ya yb z x here x is a vector describing a person and z is a binary variable indicating which of two treatments this person receives the treatments are labelled a and b the variables ya and yb are scalar measures of the outcomes of the two treatments for example a cancer patient might be treated by a drug therapy or b surgery the relevant outcome y might be life span following treatment an unemployed worker might be given a vocational training or b job search assistance here the relevant outcome might be labor force status following treatment assume that a random sample is drawn and that one observes the realizations of z x and of the outcome under the treatment received thus ya is observed if treatment a is received but is a latent variable if treatment b is received similarly yb is either observed or latent suppose that one wants to learn the difference in expected outcome if all persons with attributes x were assigned to treatment a or b this treatment effect is

substitution and dropout bias in social experiments a study of an influential social experiment this paper considers the interpretation of evidence from social experiments when persons randomized out of a program being evaluated have good substitutes for it and when persons randomized into a program drop out to pursue better alternatives using data from an experimental evaluation of a classroom training program we document the empirical importance of control group substitution and treatment group dropping out evidence that one program is ineffective relative to close substitutes is not evidence that the type of service provided by all of the programs is ineffective although that is the way experimental evidence is often interpreted

what do instrumental variable models deliver with discrete dependent variables we study models with discrete endogenous variables and compare the use of two stage least squares 2sls in a linear probability model with bounds analysis using a nonparametric instrumental variable model 2sls has the advantage of providing an easy to compute point estimator of a slope coefficient which can be interpreted as a local average treatment effect late however the 2sls estimator does not measure the value of other useful treatment effect parameters without invoking untenable restrictions the nonparametric instrumental variable iv model has the advantage of being weakly restrictive so more generally applicable but it usually delivers set identification nonetheless it can be used to consistently estimate bounds on many parameters of interest including for example average treatment effects we illustrate using data from angrist evans 1998 and study the effect of family size on female employment

monopsony power in migrant labor markets evidence from the united arab emirates by exploiting a reform in the united arab emirates that relaxed restrictions on employer transitions we provide new estimates of the monopsony power of firms over migrant workers our results show that the reform increased incumbent migrants earnings and firm retention this occurs despite an increase in employer transitions and is driven by a fall in country exits while the outcomes of incumbents improved the reform decreased demand for new migrants and lowered their earnings these results are consistent with a model of monopsony in which firms face upward sloping labor supply curves for both new recruits in source countries and incumbent migrants