where has all the bias gone detecting gender bias in the intrahousehold allocation of educational expenditure abstract the reliability of the household consumption based engel curve methodology in detecting gender bias has been called into question because it has generally failed to confirm bias even where it exists this article seeks to find explanations for this failure by exploiting a data set that has educational expenditure information at the individual level and also by aggregation at the household level i find that in the basic education age groups the discriminatory mechanism in education is via differential enrollment rates for boys and girls education expenditure conditional on enrollment is equal for boys and girls the engel curve method fails for two reasons first it models a single equation for the two stage process second even when we make individual and household level expenditure equations as similar as possible the household level equation still fails to pick up gender bias in about one third of the cases where the individual level equation shows significant bias this article

economic valuation of environmental damages due to the prestige oil spill in spain this paper presents a parametric and non parametric analysis of data from a contingent valuation study cvm conducted to estimate environmental use and passive use losses due to the prestige oil spill this is the first cvm study conducted in europe after a large oil spill the cvm survey was implemented using in person interviews mean willingness to pay wtp values were computed with both a parametric and non parametric approach parametric wtp estimation indicates that respondents in the sample are willing to pay about 40 51 per household to avoid a similar future oil spill in spain this implies that on average the spanish society places a value of the environmental losses caused by the prestige oil spill around 574 million non parametric estimates are slightly higher at 58 08 per household wtp results are similar to those obtained in the exxon valdez study

credible spatial preemption it is often argued that incumbent firms may deter entry by preemptive investment in new goods we show that these conclusions are reversed when multiproduct incumbentfirms may exit in response to entry once entrants are in an industry an incumbent will often want to withdraw some goods to prevent competition with the entrant from reducing profits on other goods such a reaction makes entry more attractive to a potential entrant the equilibrium industry structure is less likely to be monopolistic as the goods are better substitutes as exit costs are low and as the competition between producers of the same good is more intense

can there be a market for cheap talk information an experimental investigation abstract this paper reports on experiments testing the viability of markets for cheap talk information we find that the level of trade in these markets is very small and eventually vanishes sellers provide low quality information even when doing so does not increase their monetary payoff this contributes to the low demand in the market for information moreover we observe the same very low level of activity in the market for information when sellers face no conflict of interest and the noise in the quality of the transmitted information is much lower hence we argue that the collapse of the market for information is a demand phenomenon and even small uncertainty over the quality of information seems to have a large impact

sustainability limited substitutability and non constant social discount rates abstract the paper shows how limited substitutability in consumption between different classes of goods affects the magnitude and time development of social discount rates it decomposes the discount rates into an absolute growth and a relative growth or substitutability effect the paper relates between good and intertemporal substitutability to the notions of weak and strong sustainability it analyzes under which circumstances low as opposed to high between good substitutability increases the weights given to long run environmental services

reconciling sustainability and discounting in cost benefit analysis a methodological proposal abstract the incorporation of the intergenerational equity objective has rendered the traditional cost benefit analysis cba approach obsolete for the evaluation of projects presenting an important number of environmental externalities and for those whose impacts extend throughout a long period of time based on the assumption that applying a discount rate rewards current consumption and therefore that it is only possible to introduce a certain intergenerational equity in a cost benefit analysis in this work we propose an approach to discounting based on a different rationale for tangible and intangible effects we designed two indicators of environmental profitability a the intergenerational transfer amount ita which quantifies in monetary units what the current generation is willing to pass on future generations when an environmental restoration project is carried out and b the critical environmental rate cer measures the implicit environmental profitability these concepts were tested through an empirical case study pertaining to the assessment of an erosion control project in the southeast of spain the results yield traditional profitability indicators that are higher and probably closer to the real values set by the contemporary society the information provided by the environmental profitability indicators proposed renders more transparency to the quantification of the levels of intergenerational equity applied thereby facilitating the difficult reconciliation of the cba technique with the objective of sustainability

valuing the future recent advances in social discounting the perplexing issue of discounting prescriptive economics requires that unless there are very good reasons to the contrary economic policy should be based on the principle that individuals preferences should count indeed the entire body of welfare economics centres round the formal identity of the statement x prefers a to b and the statement x has higher welfare in a rather than b this combination of a seemingly innocuous and democratic value judgement preferences should count and a formal definition about the meaning of welfare improvement involves many complications the entire history of policy analysis focuses on those complications whose preferences should count over what time period what constitutes a legitimate attenuation of the basic value judgement one of the problem areas concerns timediscounting the process whereby society places a lower value on a future gain or loss than on the same gain or loss occurring now the rationale for time discounting follows logically from the basic value judgement of welfare economics if people s preferences count and if people prefer now to the future those preferences must be integrated into social policy formulation time discounting is thus universal in economic analysis but it remains as it always has controversial the controversy has a parallel in another form of discounting spatial discounting when translated into economic terms the ethical principle

obstacles to school progression in rural pakistan an analysis of gender and sibling rivalry using field survey data abstract this paper aims to identify the obstacles to school progression by using field surveys that were conducted in twenty five pakistani villages the full information maximum likelihood fiml estimation of the sequential schooling decision model reveals important dynamics of the gender difference in educational attainment intrahousehold resource allocation patterns and transitory income and wealth effects in the descriptive statistics as well as the econometric analyses we find a high educational retention rate and observe that school progression rates between male and female students after secondary school are comparable in particular we find gender specific and schooling stage specific birth order effects on education our overall findings are consistent with the implications of optimal schooling behavior under binding credit constraints and the self selection of education friendly households finally we find serious supply side constraints which might arise from a village level lack of demand for primary schools for girls

intra household gender disparity in school choice evidence from private schooling in india abstractthis paper explores gender inequality within households in the decision of private versus government school choice in india using a three period longitudinal dataset on rural households from uttar pradesh a northern state of india this paper estimates a household fixed effects model and finds that there is an intra household gender bias of 6 percentage points in private school enrolment among children aged 6 16 years contrary to the trend in overall enrolment the gender gap in private school choice is rising over time and is more pronounced in villages with a larger cost difference between private and government schooling this finding remains robust even after controlling for average school quality and considering potential endogeneity of the cost variables

executive effort and selection of risky projects this article examines the incentives of executives to adopt risky projects the agency problem considered is that of motivating the executive to expend effort to generate information about the profitability of projects and to select the best project conditional upon the information that his effort generates we show that the executive and the principal will not always agree regarding which project is best we provide conditions under which this conflict of interest leads from the principal s perspective to either an underinvestment or an overinvestment in risky projects

how liable should a lender be the case of judgment proof firms and environmental risk comment recently u s environmental law has shown a tendency toward increased lender liability a model of a potentially judgment proof owner of a firm a lender and a potential victim is developed in which this policy can increase accident frequency and reduce efficiency full partial and zero lender liability rules and a minimum equity requirement are analyzed partial lender liability and an equivalent minimum equity requirement deliver the highest level of efficiency although the former can deliver a higher contribution by the lender to the victim than the latter policy and empirical implications are also discussed copyright 1995 by american economic association

misselling through agents this paper analyzes the implications of the inherent conflict between two tasks performed by direct marketing agents prospecting for customers and advis ing on the product s suitability for the specific needs of customers when structuring salesforce compensation firms trade off the expected losses from misselling unsuitable products with the agency costs of providing market ing incentives we characterize how the equilibrium amount of misselling and thus the scope of policy intervention depends on features of the agency problem including the internal organization of a firm s sales process the transparency of its commission structure and the steepness of its agents sales incentives jel m31 m37 m52 when purchasing unfamiliar products consumers often rely on information and advice pro vided by representatives of the seller this creates the possibility of misselling the question able practice of a salesperson selling a product that may not match a customer s specific needs 1 this problem is particularly severe in markets for technically complex products such as con sumer electronics auto repairs medical care and retail financial services including securities pensions insurance policies and mortgages an important feature of these markets is that the seller often deals with the customer through an agent rather than directly for example financial brokers typically recommend purchase of a specific product after inquiring about their customers particular circumstances and needs the possibility of abuse has led to regulation in some of these markets most notably for securities transactions the financial industry regulatory authority finra the major self regulatory organization for securities firms operating in the united states mandates that broker dealers make a reasonable effort to obtain information about the individual characteristics of their noninstitutional cus tomers and to ensure that their recommendations are suitable to customers financial situations

costly search and mutual fund flows this paper studies the flows of funds into and out of equity mutual funds consumers base their fund purchase decisions on prior performance information but do so asymmetrically investing disproportionately more in funds that performed very well the prior period search costs seem to be an important determinant of fund flows high performance appears to be most salient for funds that exert higher marketing effort as measured by higher fees flows are directly related to the size of the fund s complex as well as the current media attention received by the fund which lower consumers search costs

women empowerment and economic development women empowerment and economic development are closely related in one direction development alone can play a major role in driving down inequality between men and women in the other direction empowering women may benefit development does this imply that pushing just one of these two levers would set a virtuous circle in motion this paper reviews the literature on both sides of the empowerment development nexus and argues that the interrelationships are probably too weak to be self sustaining and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women

informative advertising and product match abstract this paper studies informative advertising in a variety of market structures for which some consumers are informed about two differentiated products while other consumers are uninformed we characterize a unique symmetric subgame perfect nash equilibrium in advertising and pricing and analyze the welfare properties of the equilibrium remarkably total surplus is non monotonic in advertising in a duopoly market the equilibrium level of advertising may be more or less than socially optimal we also study the effect of a trade association and compare these results with the first best solution and a multiproduct monopolist

global warming discounting is not the issue but substitutability is the cost benefit study of nordhaus 1994 is representative for the neoclassical approach towards global warming nordhaus found that no substantial emission cuts are warranted most of his critics have concentrated on the issue of discounting and demanded that a lower discount rate should be applied these criticisms first miss the point and second lead to ethically dubious inconsistent conclusions and inefficient policy choices they miss the point because the real problem of nordhaus s methodology is his implicit underlying assumption of perfect substitutability between natural and other forms of capital given the validity of this assumption lowering the rate of discount is inconsistent with current savings behaviour is ethically dubious because future generations will be much richer than the current one anyway and is inefficient because scarce financial resources are channelled into emissions abatement that exhibits rates of return far inferior to alternative public investments any call for aggressive emission abatement must therefore directly attack the perfect substitutability assumption of neoclassical economics the real disagreement is about whether consumption growth can compensate for environmental degradation caused by global warming discounting is not the issue but substitutability is

second opinions and price competition inefficiency in the market for expert advice we consider a market in which an expert must exert costly but unobservable effort to identify the service that meets the consumer s need in our model experts offer competing contracts and the consumer may gather multiple opinions we explore the incentives that a competitive sampling of prices and opinions provides for experts to exert effort and find that there is a tension between price competition and the equilibrium effort in particular the equilibrium fails to realize the second best welfare optimum an intervention that limits price competition via price control increases welfare

transferring environmental value estimates issues and alternatives abstract environmental value transfer needs to be understood in the context of scientific information use in general this provides a different perspective upon the reasons why benefit transfer in particular appears so controversial and raises concerns over the limited types of validity testing being undertaken by those supporting such applications as ecosystem services valuation another key issue which we emphasise is the unintentional challenge to standard economic theory raised by the models used to conduct value transfers existing value transfer practice reveals the need for a more inclusive approach if environmental values are to be addressed we argue that there are robust alternative means for including multiple environmental values in decision processes these cannot be dismissed out of hand and analysts should be expanding their understanding of the available approaches which include attitude and norm measures multi criteria analysis and participatory deliberative institutions

strategic information revelation we analyze the problem in which agents have non public information and are to play an asymmetric information game the agents may reveal some or all of their information to other agents prior to playing this game revelation is via exogenously specified certifiable statements the equilibria resulting from various revelation strategies are used to determine equilibrium revelation of information sufficient conditions are provided for complete revelation of all private information a number of examples are provided illustrating when revelation will or will not occur in commonly analyzed games many economic problems are characterized by the presence of both strategic behaviour on the part of individuals and by asymmetric information models encompassing both of these characteristics have been used successfully to examine questions in many fields usually using the concept of bayesian nash equilibrium as the solution concept typically the agents information is given exogenously and is fixed throughout the analysis modelling the information structure as static is appropriate for some problems but not for all in particular situations that are inherently dynamic most economic encounters allow for some interchange between the agents before the outcome is settled irrevocably in such circumstances it is possible that at least one or more of the agents possessing non public information may be able to reveal part or all of his information to one or all of the other agents in the economy during the course of their contact to the extent that such a communication is believed by the other agents the priors of the other agents will change and we will have what is in essence a new asymmetric information game new in

empirical and public choice evidence for hyperbolic social discount rates and the implications for intergenerational discounting the derivation of the correct discount rate for intergenerational projects in cost benefit analysis is particularly contentious public choice has resulted in lower discretionary exponential discount rates for many intergenerational projects in britain and the usa this is shown to be strong indirect evidence that the true social discount rate may be a hyperbolic rather than an exponential function there is also empirical evidence for this hypothesis the hyperbolic nature of discounting is also a standard finding in the behavioural sciences for intergenerational time frames hyperbolic discount rates should be employed together with exponential discount rates in cost benefit sensitivity analyses

misselling financial products the limits for internal compliance abstract a firm advises customers through an agent such as a mortgage broker who is incentivized through commissions and the threat of firing we show that this implies an upper boundary for the feasible standard of advice up to which the standard increases with commissions

why the far distant future should be discounted at its lowest possible rate abstract a critical feature of the distant future is currently unresolvable uncertainty about what will then be the appropriate rate of return on capital to use for discounting this paper shows that there is a well defined sense in which the lowest possible interest rate should be used for discounting the far distant future part of any investment project some implications are discussed for evaluating long term environmental projects or activities like measures to mitigate the possible effects of global climate change

honesty in a model of strategic information transmission we consider the following simple model of consumer fraud consumers need one of two possible repairs an expensive repair denoted e or an inexpensive repair denoted i the exogenous probability that a consumer needs the more costly remedy is r each consumer is assumed to know r an expert can observe with certainty which of the two repairs is needed and can offer to sell either to the consumer in a simple extension we allow for uncertainty with respect to the expert s observation we assume that selling the expensive remedy to a consumer who needs only the inexpensive one is more profitable than selling the inexpensive one thus h eii h1 iji where h denotes profit and i denotes conditional on needing the profit functions are increasing in the price of the respective repairs for convenience we suppress the dependence of h on prices in our notation we also assume that a consumer prefers to obtain the appropriate repair to the inappropriate one thus u eie u ije and u iii u eii where u is the consumer s payoff lastly we assume that the functions u eje and u e i are decreasing in the price of the expensive repair and that u iie and u iii are decreasing in the price of the inexpensive repair we also assume that u iie is decreasing in the price of the expensive repair since the consumer ultimately buys the expensive repair in this case see below for further assumptions regarding the repairs we are interested in the equilibrium levels of honesty in this model how honest is the expert at the equilibrium do consumers always follow the expert s advice does the level of honesty increase as the interests of the agents become more similar in a sense to be defined below our assumptions are similar to those in the abstract strategic information transmission models of vincent crawford and joel sobel 1982 and jerry green and nancy stokey 1980 we follow the former paper which asks whether the signals sent become less noisy as the agents preferences become more similar despite the similarity of our model to crawford sobel s we arrive at some different conclusions with respect to the expert s honesty vis a vis the agents closeness of interests we explain this in detail in section iii in addition we allow that the expert may be uncertain about the true state of the world we also explicitly model the level of expert honesty which extends crawford sobel the outline of the paper is as follows in section i we provide the details of the model and show that a unique equilibrium exists comparative static results and a simple extension incorporating the assumption of the incompetent expert are given in section ii we draw comparisons with crawfordsobel in section iii in section iv we conclude with a brief summary

information management in incentive problems we extend the standard procurement model to examine how an agent is optimally induced to acquire valuable planning information before he choose an unobservable level of cost reducing effort concer

the aggregate effect of school choice evidence from a two stage experiment in india we present experimental evidence on the impact of a school choice program in the indian state of andhra pradesh that provided students with a voucher to finance attending a private school of their choice the study design featured a unique two stage lottery based allocation of vouchers that created both student level and market level experiments which allows us to study the individual and the aggregate effects of school choice including spillovers after two and four years of the program we find no difference between test scores of lottery winners and losers on telugu native language math english and science social studies suggesting that the large cross sectional differences in test scores across public and private schools mostly reflect omitted variables however private schools also teach hindi which is not taught by the public schools and lottery winners have much higher test scores in hindi furthermore the mean cost per student in the private schools in our sample was less than a third of the cost in public schools thus private schools in this setting deliver slightly better test score gains than their public counterparts better on hindi and same in other subjects and do so at a substantially lower cost per student finally we find no evidence of spillovers on public school students who do not apply for the voucher or on private school students suggesting that the positive effects on voucher winners did not come at the expense of other students jel codes c93 h44 h52 i21 o15

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

the organization and scope of agents regulating multiproduct industries abstract a mechanism design problem with two dimensional uncertainty is solved to derive the optimal policy for regulating a monopolist with private information about the marginal cost of producing two different goods the paper establishes that informational economies of scope or incentive complementarities arise when one firm produces both goods the regulator should weigh these economies against the benefits of relative performance incentives when choosing between integrated and decentralized organizations unless the marginal costs of the two products are sufficiently positively correlated the optimal ex ante policy gives control of both markets to a single firm journal of economic literature classification number s d82 l22 l51

markets for information of inefficient firewalls and efficient monopolies in this paper we study market environments where information is costly to acquire and is also useful to potential competitors agents may sell or buy reports over the information acquired and choose their trades in the market on the basis of what they learnt reports are unverifiable cheap talk messages hence the quality of the information transmitted depends on the conflicts of interest faced by the senders we find that when information has a prevalent horizontal differentiation component in equilibrium information is acquired when its costs are not too high and in that case it is also sold though reports are typically noisy the market for information is in most cases a monopoly and there is underinvestment in information acquisition we also show that regulatory interventions in the form of firewalls only make the inefficiency worse efficiency can be attained with a monopolist selling differentiated information provided entry is blocked

competition through commissions and kickbacks in markets for retail financial products and health services consumers often rely on the advice of intermediaries to decide which specialized offering best fits their needs product providers in turn compete to influence the intermediaries advice through hidden kickbacks or disclosed commissions motivated by the controversial role of these widespread practices we formulate a model to analyze competition through commissions from a positive and normative standpoint the model highlights the role of commissions in making the advisor responsive to supply side incentives we characterize situations when commonly adopted policies such as mandatory disclosure and caps on commissions have unintended welfare consequences jel d21 d82 d83 g21 l15 l25

how not to pay for advice a framework for consumer financial protection abstract this paper investigates the determinants of the compensation structure for brokers who advise customers regarding the suitability of financial products our model explains why brokers are commonly compensated indirectly through contingent commissions paid by product providers even though this compensation structure could lead to biased advice when customers are wary of the adviser s incentives contingent commissions can be an effective incentive tool to induce the adviser to learn which specialized product is most suitable for the specific needs of customers if instead customers naively believe they receive unbiased advice high product prices and correspondingly high commissions become a tool of exploitation policy intervention that mandates disclosure of commissions can protect naive consumers and increase welfare however prohibiting or capping commissions could have the unintended consequence of stifling the adviser s incentive to acquire information more vigorous competition benefits consumers and reduces exploitation but firms have limited incentives to educate naive customers

self regulation and government oversight self regulation is a feature of a number of professions for example in the u s the government delegates aspects of financial market regulation to self regulatory organizations sros like the new york stock exchange and the national association of securities dealers we analyse one regulatory task of an sro enforcing antifraud rules so agents will not cheat customers specifically we model contracting enforcement as a two tier problem an sro chooses its enforcement policy the likelihood that an agent is investigated for fraud and a penalty schedule given an enforcement policy agents compete by offering contracts that maximize customers expected utility we assume that the sro s objective is to maximize the welfare of its members the agents we show that the sro chooses a more lax enforcement policy meaning less frequent investigations than what customers would choose a general conclusion is that control of the enforcement policy governing contracts confers substantial market power to a group of otherwise competitive agents we also investigate government oversight of the self regulatory process the threat of government enforcement leads to more enforcement by the sro just enough to pre empt any government enforcement copyright 2005 wiley blackwell

discounting the distant future how much do uncertain rates increase valuations abstract we demonstrate that when the future path of the discount rate is uncertain and highly correlated the distant future should be discounted at significantly lower rates than suggested by the current rate we then use two centuries of us interest rate data to quantify this effect using both random walk and mean reverting models we compute the certainty equivalent rate that summarizes the effect of uncertainty and measures the appropriate forward rate of discount in the future under the random walk model we find that the certainty equivalent rate falls continuously from 4 to 2 after 100 years 1 after 200 years and 0 5 after 300 years at horizons of 400 years the discounted value increases by a factor of over 40 000 relative to conventional discounting applied to climate change mitigation we find that incorporating discount rate uncertainty almost doubles the expected present value of mitigation benefits

renewable resources and economic sustainability a dynamic analysis with heterogeneous time preferences abstract in recent years there has been increasing interest in the study of economic sustainability and its relationship with natural resources this paper attempts to shed some light on the issue by taking into account the individual variations in time preferences for consumption and resource amenity we characterize the long run steady state analyze its asymptotic stability and explore the transational dynamics from any initial state the welfare implications of the optimal path are also discussed

what is sustainable development this paper introduces two axioms that capture the idea of sustainable development and characterizes the welfare criterion that they imply the axioms require that neither the present nor the future should play a dictatorial role in society s choices over time theorems 1 and 2 show there exist sustainable preferences which satisfy these axioms and provide a full characterization theorems 3 5 study a standard dynamical system representing the growth of a renewable resource economy give a turnpike theorem and exhibit the differences between sustainable optima and the ones according to discounted utilitarianism

limited liability and incentive contracting with multiple projects i examine a principal agent model with multiple projects where a risk neutral manager is protected by limited liability the analysis has several interesting implications i incentive problems are shown to be a natural source of economies of scope as combining multiple projects under the management of a single manager relaxes the limited liability constraint ii as a result managers may be overloaded with work and exert inefficiently high effort and iii the analysis has implications for the optimal allocation of projects to different managers copyright 2001 by the rand corporation

traders vs relationship managers reputational conflicts in full service investment banks we present a model that explains why investment bankers struggle to manage conflicts of interest banks can build a type reputation for technical competence by performing complex deals that may not serve their clients interest on the other hand banks can sustain a behavioral reputation by refraining from doing so a behavioral reputation is a luxury reserved for banks that have proven their abilities the model sheds light on conflicts between the trading and advisory divisions of investment banks as well as the consequences of technological change for time variation in the relative strength of behavioral and type reputation concerns

ratings shopping and asset complexity a theory of ratings inflation abstract many identify inflated credit ratings as one contributor to the recent financial market turmoil we develop an equilibrium model of the market for ratings and use it to examine possible origins of and cures for ratings inflation in the model asset issuers can shop for ratings observe multiple ratings and disclose only the most favorable before auctioning their assets when assets are simple agencies ratings are similar and the incentive to ratings shop is low when assets are sufficiently complex ratings differ enough that an incentive to shop emerges thus an increase in the complexity of recently issued securities could create a systematic bias in disclosed ratings despite the fact that each ratings agency produces an unbiased estimate of the asset s true quality increasing competition among agencies would only worsen this problem switching to an investor initiated ratings system alleviates the bias but could collapse the market for information

the demand for primary schooling in madagascar price quality and the choice between public and private providers abstract we estimate a discrete choice model of primary schooling and simulate policy alternatives for rural madagascar among school quality factors the results highlight the negative impacts on schooling demand of poor facility quality and the use of multigrade teaching several grades being taught simultaneously by one teacher in public schools simulations indicate the feasibility of reducing multigrade in public schools by adding teachers and classrooms a policy that would lead to modest improvements in overall enrollments and would disproportionately benefit poor children given much higher price elasticities for poorer households raising school fees to cover some of the additional costs would strongly counteract these favorable distributional outcomes an alternative policy of consolidation of primary schools combined with multigrade reduction or other quality improvements is likely to be ineffective because of the strongly negative impact of distance to school

the adviser effect on insurance disclosures abstractan examination of personal and medical disclosures made by retail customers to a commercial life insurer reveals that customers screened for insurance with the assistance of a financial adv

conflicts of interest information provision and competition in the financial services industry abstract in some markets sellers have better information than buyers over which products best serve a buyer s needs depending on the market structure this may lead to conflicts of interest in the provision of information by sellers this paper studies this issue in the market for financial services the analysis presents a new model of competition between banks where price competition influences the ensuing incentives for truthful information revelation we also compare conflicts of interest in two different firm structures specialized banking and one stop banking

using privileged information to manipulate markets insiders gurus and credibility access to private information is shown to generate both the incentives and the ability to manipulate asset markets through strategically distorted announcements the fact that privileged information is noisy interferes with the public s attempts to learn whether such announcements are honest it allows opportunistic individuals to manipulate prices repeatedly without ever being fully found out this leads us to extend sobel s 1985 model of strategic communication to the case of noisy private signals our results show that when truthfulness is not easily verifiable restrictions on trading by insiders may be needed to preserve the integrity of information embodied in prices

description prescription and the choice of discount rates abstract the choice of discount rates is a key issue in the analysis of long term societal issues in particular environmental issues such as climate change approaches to choosing discount rates are generally placed into two categories the descriptive approach and the prescriptive approach the descriptive approach is often justified on grounds that it uses a description of how society discounts instead of having analysts impose their own discounting views on society this paper analyzes the common forms of the descriptive and prescriptive approaches and finds that in contrast with customary thinking both forms are equally descriptive and prescriptive the prescriptions concern who has standing i e who is included in society how the views of these individuals are measured and how the measurements are aggregated such prescriptions are necessary to choose from among the many possible descriptions of how society discounts the descriptions are the measurements made given a choice of measurement technique thus the labels descriptive approach and prescriptive approach are deeply misleading as analysts cannot avoid imposing their own views on society

credence goods monopolists abstract with a credence good consumers never discover how much of the good they actually need therefore the seller acts as the expert determining the customers requirements this information asymmetry creates strong incentives for the seller to cheat on services we analyze whether the market mechanism may induce non fraudulent seller behavior we consider four scenarios differing in the amount of information consumers have at hand to infer the seller s incentives to be honest in three constellations the profit maximizing credence goods monopolist provides honest services only in one scenario there is no trade

product differentiation search costs and competition in the mutual fund industry a case study of s p 500 index funds we investigate the role that non portfolio fund differentiation and information search frictions play in creating two salient features of the mutual fund industry the large number of funds and the sizeable dispersion in fund fees in a case study we find that despite the financial homogeneity of s p 500 index funds this sector exhibits the fund proliferation and fee dispersion observed in the broader industry we show how extra portfolio mechanisms explain these features these mechanisms also suggest an explanation for the puzzling late 1990s shift in sector assets to more expensive and often newly entered funds an influx of highinformation cost novice investors

a component based approach to discounting for natural resource damage assessment abstract the paper proposes a component based approach to guide the choice of the social discount rate in natural resources damage assessment where time and discounting are key features it is a multi rate discounting scheme which draws on concepts from dual rate and time declining approaches each damage component is discounted at a component specific constant rate related to its time trajectory assuming a normatively defined declining schedule of rates as a starting reference components with longer time profiles generally represented by welfare losses are discounted at lower rates than short term damage components mainly remedial costs the rationale behind this choice is that the longer the duration of the damage component the higher the related nonincident specific uncertainty on the resource values and the more relevant the equity issues when estimating the total damage the resulting implicit average discount rate depends on the duration of each component and its relative relevance in the total damage in each moment from an operational point of view anchoring the rates to government prescriptions would support the robustness of the damage estimates in a court of law whereas the dual based environmental discount rate is based on ad hoc assumptions that are more difficult to justify

market opportunities genetic endowments and intrafamily resource distribution child survival in rural india the authors examine how intrafamily resource allocations respond to changes in economic conditions and to genetic differences in children by estimating the determinants of variations in the sex specific survival differentials of rural indian children based on standard census and household survey data they explore in particular the hypothesis that such differences are related to the relative returns to survival with households selectively allocating resources to children in response to variation in sex differences in their expected earnings opportunities as adults data are from the 1961 census and a 1971 household survey excerpt

valuing the future one of the most controversial areas of economics is the practice of discounting attaching a lower weight to future costs and benefits than present costs and benefits discounting appears to offend notions of sustainable development and the interests of future generations recent advances in the theory of discounting hold out strong hope that the tyranny of discounting can be avoided through the use of time varying discount rates tvdrs this paper reviews the recent rationales for tvdrs and applies the results to issues such as nuclear power and global warming control

declining discount rates the long and the short of it the last few years have witnessed important advances in our understanding of time preference and social discounting in particular several rationales for the use of time varying social discount rates have emerged these rationales range from the ad hoc to the formal with some founded solely in economic theory while others reflect principles of intergenerational equity while these advances are to be applauded the practitioner is left with a confusing array of rationales and the sense that almost any discount rate can be justified this paper draws together these different strands and provides a critical review of past and present contributions to this literature in addition to this we highlight some of the problems with employing ddrs in the decision making process the most pressing of which may be time inconsistency we clarify their practical implications and potential pitfalls of the more credible rationales and argue that some approaches popular in environmental economics literature are ill conceived finally we illustrate the impact of different approaches by examining global warming and nuclear power investment this includes an application and extension of newell and pizer discounting the benefits of climate change mitigation how much do uncertain rates increase valuations journal of environmental economics and management 46 2003 52 to uk interest rate data

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

exploring welfare implications of resource equivalency analysis in natural resource damage assessments abstract resource equivalency analysis rea has become the dominant method for calculating natural resource damages for biological injuries from pollution incidents this methodology compares resources lost as a result of an incident to benefits that can be gained from a habitat or wildlife restoration project compensation is evaluated in terms of resource services instead of market currency recently this approach has been questioned regarding its ability to provide adequate compensation based on economic welfare principles the following paper examines these critiques and develops a model to quantify the welfare implications of using rea when some of its implicit assumptions are violated we focus on the situation where compensatory restoration projects provide services that are comparable to those lost as a result of an incident we examine simulation scenarios where the public has heterogeneous preferences for resources and where resource values change over time using the hicks kaldor criterion we find that the traditional rea provides an acceptable approximation of aggregate compensation for a reasonably wide range of economic and biological parameter combinations

what policies will reduce gender schooling gaps in developing countries evidence and interpretation summary this paper considers evidence for the effects of policies on gender gaps in education distinguishing between policies that are ostensibly gender neutral and those that explicitly target girls the demand for girls schooling is often more responsive than boys to gender neutral changes in school distance price and quality patterns which can be explained in a human capital investment model through assumptions about girls and boys schooling costs and returns among policies that target girls enrollments price incentives to households or schools and the provision of female teachers appear to be effective other interventions hold promise but have not been the subject of rigorous evaluation pointing to an important agenda for future research