marriage bequest and assortative matching in rural ethiopia abstract this article examines the determinants of human and physical capital at marriage using detailed data from rural ethiopia we find that assets brought to marriage are distributed in a highly unequal manner for first unions assets brought to marriage are positively associated with parents wealth indicating that a bequest motive affects assets at marriage parental wealth affects the inheritance of neither groom nor bride sibling competition from brothers affects grooms inheritance but sisters have no effect the marriage market is a major conduit for rural and gender inequality although avenues do exist for couples to accumulate wealth over their life cycle

the gender gap fertility and growth changes in fertility have long been recognized as important correlates of economic growth with the relationship between the level of fertility and the level of income per capita being one of the strongest observable correlations in cross country data this paper examines the linkages between fertility and growth theory the structure of the model is presented in sections on production couples decision making system dynamics and steady state equilibria the first component of the model is that increases in capital per worker raise womens relative wages since capital is more complementary to womens labor input than to mens the second component is that increasing womens relative wages reduces fertility by raising the cost of children more than household income finally lower fertility raises the level of capital per worker a positive feedback loop generates demographic transition a rapid decline in fertility accompanied by accelerated output growth

regulating stock externalities under uncertainty abstract using a simple analytical model incorporating benefits of a stock costs of adjusting the stock and uncertainty in costs we uncover several important principles governing the choice of price based policies e g taxes relative to quantity based policies e g tradable permits for controlling stock externalities as in weitzman rev econom stud 41 4 1974 477 the relative slopes of the marginal benefits and costs of controlling the externality continue to be critical determinants of the efficiency of prices relative to quantities with flatter marginal benefits and steeper marginal costs favoring prices but some important adjustments for dynamic effects are necessary including correlation of cost shocks across time discounting stock decay and the rate of benefits growth applied to the problem of greenhouse gases and climate change we find that a price based instrument generates several times the expected net benefits of a quantity instrument

women s schooling home teaching and economic growth the hypothesis that increases in the schooling of women enhance the human capital of the next generation and thus make a unique contribution to economic growth is assessed on the basis of data describing green revolution india estimates are obtained that indicate that a component of the significant and positive relationship between maternal literacy and child schooling in the indian setting reflects the productivity effect of home teaching and that the existence of this effect combined with the increase in returns to schooling for men importantly underlies the expansion of female literary following the onset of the green revolution

simple contracts renegotiation under asymmetric information and the hold up problem abstract in this article it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non trivial it is argued that the default decision may be interpreted as a simple contract that the parties have written ex ante this result is used in order to show that simple unconditional contracts which are renegotiated may allow the hold up problem to be solved even if the parties valuations are private information

contractual solutions to the hold up problem this paper considers a general version of the hold up problem where n agents first make relation specific investments and then must agree on some collective action it is shown that first best solutions exist under a variety of different assumptions about the nature of information asymmetries

a defense of compulsive measures against child labor abstract this research characterizes policies likely to trigger the onset of a growth enhancing fertility transition even for an economy with initially a low per capita income the environment considered is one where children s time has an economic value and schooling and child labor are the main competing claims on a child s time using a one parent family overlapping generations model i argue that compulsive measures against child labor are justifiable as an integral part of an intervention that combines incentives and regulations in order to eliminate child labor the analysis highlights fertility and child labor dynamics as shaped by the relative cost of children

on the informational superiority of quantities over prices in the presence of an externality in this study we investigate the convexity of the profit function of a regulated firm with respect to the random shocks in the marginal costs and the demand intercept and its implications regarding information disclosure when these shocks are revealed to the firm at a future stage we illustrate that information disclosure is attained when the firm is regulated through the use of a quantity rather than a price instrument to do so we argue that increased convexity obtained under complete information is a sufficient condition as a policy implication we suggest a new argument which favors the use of quantities over prices these implications are more pronounced once we allow for multiple firms

conditional cash transfers schooling and child labor micro simulating brazil s bolsa escola program a growing number of developing economies are providing cash transfers to poor people that require certain behaviors on their part such as attending school or regularly visiting health care facilities a simple ex ante methodology is proposed for evaluating such programs and used to assess the bolsa escola program in brazil the results suggest that about 60 percent of poor 10 to 15 year olds not in school enroll in response to the program the program reduces the incidence of poverty by only a little more than one percentage point however and the gini coefficient falls just half a point results are better for measures more sensitive to the bottom of the distribution but the effect is never large

you are close to your rival and everybody hates a winner a study of rivalry in college football we use a recent survey of college american football fans to study rivalry where we find the most intense rivalries occur between in state teams relatedly within a conference fans are more likely to target rivalrous feelings toward the winningest teams and in bowl championship series conferences teams who have been conference members for a longer proportion of time while the stakes are different from other settings such as warring nations college football teams compete for resources and often have loyal followings with strong emotional ties thus examining rivalrous feeling in this setting provides insights into rivalry more generally besides being of interest in its own right as college football is a multi billion dollar industry jel l22 l83 i introduction for millions of americans saturdays in the fall are synonymous with college american football college football has a pageantry all its own as people gather in groups sometimes in excess of 100 000 to cheer for their team and socialize even though many fans have no real connection to the university on the field the teams compete to win games and over the course of a season teams compete to win their conference title however many fans do not view all opponents in the conference in the same way games against some opponents are considered more important irrespective from their impact on conference standings for example the university of arizona and arizona state university have played for the territorial cup for over 100 years 1 similarly the university of wisconsin and the university of minnesota compete for paul bunyan s axe while the university of alabama and the university of tennessee play on the third saturday in october 2 sanford and scott 2014 find that fans are willing to pay higher ticket prices for rivalry games and these games generate significant television revenue despite the amateur status of the players college football is an 8 billion industry 3 several high profile teams are valued at over 100 million dollars each brewer et al 2011 team revenue comes from a variety of sources television rights merchandising fan support etc and on the field success and profit are connected through these channels in addition teams find themselves repeatedly battling over the resources needed to compete on the field namely players and coaches in this sense football rivalries are similar to rivalries between siblings firms or nations sibling rivalries form when children compete for scarce resources financial attention etc from their parents garg and morduch 1998 morduch 2000 the cola wars between coke and pepsi and the diaper wars between kimberly clark and procter gamble arise because these comparable companies offer slightly differentiated products in the same markets rivalries between warring nations also often involve prolonged competition over scarce resources goertz and diehl 1993 klein goertz and diehl 2006 rivalry is a subjective phenomenon kilduff elfenbein and staw 2010 but it has an identifiable set of antecedents geographical proximity is typically an important determinant of conflict even in the context of firm level rivalries as argued for instance in yu and canella 2007 identity also plays an important role in the creation of a rivalry menon thompson and choi 2006 finally history and the outcomes of previous interactions are another key determinant of rivalries kahneman and miller 1986 miller and chen 1996 all three of these factors are at play in college football conferences are typically comprised of comparable schools in a particular region fans identify with their team by wearing certain clothes and in more extreme cases with body paint and other adornments despite periodic conference realignment many teams play each other year after year thus we believe that in addition to being interesting in its own right examining what drives rivalrous feelings in college football can provide insight into rivalry more generally

renegotiation design with unverifiable information this paper considers a buyer seller relationship with observable but unverifiable investments and or random utility parameters in such situations it is known that contract renegotiation may prevent the implementation of first best outcomes in this paper we show however that efficient investments and optimal risk sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process specifically we focus on the following two features of renegotiation design first default options in case renegotiation breaks down second the allocation of all bargaining power to either contracting party moreover we show that these two features can be obtained in standard rubinstein bargaining games through contractual provisions such as specific performance clauses and penalties for delay or equivalently financial hostages refundable without interest

the economics of child labor if child labor as a mass phenomenon occurs not because of parental selfishness but because of the parents concern for the household s survival the popular argument for banning child labor loses much of its force however this assumption about parental decision making coupled with the assumption of substitutability in production between child and adult labor could result in multiple equilibria in the labor market with one equilibrium where children work and another where adult wage is high and children do not work the paper establishes this result and discusses its policy implications copyright 1998 by american economic association

climate policy design with correlated uncertainties in offset supply and abatement cost emission offsets within cap and trade systems are widely believed to contain system costs and stabilize allowance prices however trends in offsets supply are uncertain may be persistent and may be correlated with other sources of uncertainty in a dynamic stochastic model we find total costs increase as does variability in allowance prices and emissions as uncertainty in offsets becomes more persistent and to a lesser extent becomes negatively correlated with uncertainty in abatement costs these results are amplified with risk sensitivity larger annual offset limits and competitive offset purchasing imposing an allowance price collar can mitigate cost increases and price variability jel q54 q58

contracting with imperfect commitment and noisy communication abstract this paper provides new analytical tools for studying principal agent problems with adverse selection and limited commitment by allowing the principal to use general communication devices we overcome the literature s common but overly restrictive focus on one shot direct communication in addition general communication devices solve two fundamental problems of contracting with imperfect commitment first they allow us to identify the local downward incentive constraints as the relevant ones if the agent s preferences satisfy a single crossing property second we show how one may restrict the cardinality of the message spaces of the communication device an example illustrates our arguments and the suboptimality of one shot direct communication

hidden child labor determinants of housework and family business work of children in 16 developing countries summary two forms of hidden child labor housework and family business work are studied for 178 000 children in 16 african and asian countries about 30 of african children and 11 of asian children work over 15 h a week in hidden child labor girls are more involved in housework and boys more in family business work but this division is not strict most 80 90 of variation is due to household factors children work less in urban less traditional and more educated areas gender differences are larger in asia probably due to a stricter form of patriarchy

cooperative investments and the value of contracting recent articles have shown that contracts can support the efficient outcome for bilateral trade even in the face of specific investments and incomplete contracting these studies typically considered selfish investments that benefit the investor e g the seller s investment reduces her production costs the authors find very different results for cooperative investments that directly benefit the investor s partner e g the seller s investment improves the buyer s value of the good most importantly if committing not to renegotiate the contract is impossible then contracting has no value i e the parties cannot do better than to abandon contracting altogether in favor of ex post negotiation

contract renegotiation a simple framework and implications for organization theory this paper provides a unifying framework for studying renegotiation of contracts in the presence of asymmetric information we show that interim renegotiation does not constrain the set of contracts attainable with full commitment regardless of whether renegotiation offers are made by the informed or the uninformed agent ex post renegotiation however does constrain the set of attainable contracts these constraints depend on the identity of the agent making the renegotiation offer we then show how the theory of contract renegotiation can provide insights for organization theory specifically we show how decentralization of decision making can be an optimal response to the threat of ex post renegotiation finally we show that our framework can be used to analyse the trade off between internal and external markets

on countervailing incentives abstract this paper extends and unifies previous work on optimal contracts under countervailing incentives shedding light in particular on the relation between countervailing incentives and pooling inflexible rules our main result is that the nature of the optimal contract depends crucially on whether the agent s utility is quasiconcave or quasiconvex in the private parameter the optimal contract is separated in the former case and it may entail pooling in the latter case journal of economic literature classification number d82

child labor cause consequence and cure with remarks on international labor standards although the literature on child labor is enormous it lacks a common theoretical foundation in this paper analytical survey of this field is provided keeping in mind that this is an area where the primary reason for theorizing is ultimately to influence policy overall it is noted that the literature on child labor is an illustration of abundance and anarchy although empirical writings on child labor are numerous they are not usually founded on theory it is argued that there is much that can be done in curbing the issue of child labor several theories were studied in this paper including collaborative intervention such efforts include public action which alters the economic environment such that the parents of their own accord prefer to withdraw the child from labor force another strategy involves the government a legal intervention is enforcing a total ban on the subject although such interventions have good intentions some of them may not be feasible in general it is better to take economy wide measures against child labor and if there is to be a sector specific ban it should be based on the working conditions of that sector rather than the destination of the goods

information and the hold up problem we examine situations in which a party must make a sunk investment prior to contracting with a second party to purchase an essential complementary input we study how the resulting hold up problem is affected by the seller s information about the investing party s likely returns from its investment our principal focus is on the effects of the investment s being observable by the non investing party contrary to popular intuition we find that an improvement in the seller s information e g the investment s being observable rather than not can benefit the buyer and harm the seller we also find that other popular intuitions about this problem are either false incomplete or require strong assumptions to be valid

prices versus quantities versus hybrids in the presence of co pollutants we investigate the optimal regulation of a pollutant given its abatement interaction with another pollutant under asymmetric information about firms abatement costs we take a policy relevant second best approach by assuming that the co pollutant is regulated exogenously but perhaps not efficiently our focus is on optimal policy choice in this setting and we derive rules for determining whether a pollutant should be regulated with an emissions tax an emissions market or a market with price controls given the regulation of its co pollutant we find that the policy choice for a pollutant is unaffected by its interaction with a co pollutant that is controlled with a fixed number of tradable permits because changes in emissions of the primary pollutant do not affect aggregate emissions of the co pollutant however when a co pollutant is controlled with a tax the policy choice for the primary pollutant must account for its effect on expected co pollutant damage through changes in the variance of co pollutant emissions consequently standard conclusions about the environmental policy choice problem must be modified in this case our results have important implications for designing policies for greenhouse gases under uncertainty

targeting child labor in debt bondage evidence theory and policy implications despite recent multilateral efforts to single out child labor in debt bondage as one of the worst forms of child labor several important questions have yet to be addressed how pervasive is the phenomenon are there systematic correlations between the incidence of children in debt bondage and the economic legislative and financial development indicators of the economy how does an understanding of these correlates affect the way national and international policy measures aimed at targeting this form of child labor are perceived this article addresses each of these questions the empirical findings suggest strong correlation between the likelihood of the incidence of child labor in debt bondage with the stage of development of an economy the stage of financial development and enforcement of core labor rights building on this evidence the article presents a theoretical model that highlights the drawbacks and merits of a number of policies aimed at putting checks on child labor in debt bondage

the effect of sibling sex composition on women s education and earnings this paper documents the impact of siblings on the education of men and women born in the united states between 1920 and 1965 we examine the effect of the number and sex composition of a boy or girl s siblings on that child s educational attainment we find that throughout the century women s educational choices have been systematically affected by the sex composition of her siblings and that men s choices have not women raised only with brothers have received on average significantly more education than women raised with any sisters controlling for household size since sibling sex composition affects women s educational attainment and plausibly may be unrelated to other determinants of earnings it may provide a useful instrument for education in earnings functions for women our results suggest that standard estimates significantly underestimate the return to schooling for women

pollution control by options trading abstract for pollution control with imperfect information about aggregate abatement costs we propose a combination consisting of free permits and a menu of call options for additional permits with different striking prices by appropriately choosing permits and corresponding striking prices the regulator can approximate the marginal damage function arbitrarily well

child labor and coordination failures abstract in this note we show that a technology based coordination failure may explain the emergence of laws restricting child labor child labor may arise because of the lack of a coordination mechanism between parental decisions to invest in the human capital of their children and firms decisions to invest in skill biased technologies legislative intervention in many cases helps coordinate expectations towards a pareto superior outcome with investments both in human capital and in skill biased technologies

holdups standard breach remedies and optimal investment in bilateral trading problems the parties may be hesitant to make relationship specific investments without adequate contractual protection we postulate that the parties can sign noncontingent contracts prior to investing and can freely renegotiate them after information about the desirability of trade is revealed we find that such contracts can induce one party to invest efficiently when courts impose either a breach remedy of specific performance or expectation damages moreover specific performance can induce both parties to invest efficiently if a separability condition holds expectation damages on the other hand is poorly suited to solve bilateral investment problems forthcoming the american economic review please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

the race to the bottom from the bottom the dominant perspective in discussions of labour and environmental standards and globalization is that of north south competition and its impact on northern standards this paper presents an alternative perspective that of south south competition to export to the north and its impact on southern standards it develops a simple model of southern competition and demonstrates that whether a southern race to the bottom is possible depends intricately on the northern demand curve the size of large exporters relative to each other and the relative size of the competitive fringe of small exporters the possibility that northern trade protectionism may undermine southern standards is also examined

procurement and renegotiation parties bound by an incomplete contract have an incentive to renegotiate after acquiring new information the issue of the parties investment in the relationship before renegotiation is analyzed in a simple two period procurement model the firm invests in the first period it then learns its production cost and the sponsor learns its value for the project williamson s underinvestment presumption is shown to hold under very general assumptions about bargaining and about the ex post asymmetry of information as long as the firm s investment is not observable by the sponsor the introduction of a cancellation fee may well lead to even less investment contrary to what is sometimes argued the role of ex ante price fixing as an alternative way to reintroduce some form of commitment and the problem of cost overruns are discussed last it is shown that if investment is observable by the sponsor andthus may become a joint decision variable the two parties may choose to under or overinvest

adverse selection and renegotiation in procurement as was shown by dewatripont optimal long term contracts are generally not sequentially optimal the parties ex post renegotiate them to their mutual advantage this paper fully characterizes the equilibrium of a simple two period procurement situation and studies the extent to which renegotiation reduces ex ante welfare i a central result is that like in the non commitment case the second period allocation is optimal for the principal conditionally on his posterior beliefs about the agent ii the first period allocation exhibits an increasing amount of pooling when the discount factor grows iii with a continuum of types it is never optimal to induce full separation the paper also analyzes whether renegotiated long term contracts yield outcomes resembling those under either unnegotiated long term contracts or a sequence of short term contracts and it links the analysis with the multiple unit durable good monopoly problem

contract design and non cooperative renegotiation abstract we study a contract design setting in which the contracting parties cannot commit not to renegotiate previous contract agreements in particular we characterize the outcome functions that are implementable for an uninformed principal and an informed agent if having observed the agent s contract choice the principal can offer a new menu of contracts in its place an outcome function can be implemented in this setting if and only if it is optimal for the principal for some belief over agent types which is more pessimistic in the sense of the likelihood ratio order than the prior furthermore the outcome function cannot be too sensitive to variations in the agent s type we show that the direct revelation mechanism which implements such a function when renegotiation can be prevented will also implement it in any equilibrium when it cannot so the standard contract is robust to renegotiation

moral hazard and the property rights approach to the theory of the firm abstract in the grossman hart moore property rights theory there are no frictions ex post i e after non contractible investments have been sunk in contrast in transaction cost economics ex post frictions play a central role we bring the property rights theory closer to transaction cost economics by allowing for ex post moral hazard as a consequence central conclusions of the grossman hart moore theory may be overturned in particular even though only party a has to make an investment decision b ownership can yield higher investment incentives moreover ownership matters even when investments are fully relationship specific i e when they have no impact on the parties disagreement payoffs

participation constraints in adverse selection models abstract this paper characterizes the optimal contract offered by an uninformed principal to an informed agent when the latter s reservation utility depends on his type the informational rent is nonmonotonic so that interior types may have a vanishing rent or be excluded from trade the paper identifies conditions for the optimal contract to be separating to be nonstochastic and to induce full participation it also discusses the nature of the solution when bunching occurs the results are applied to nonlinear pricing under price cap regulation and bypass competition and to competition in nonlinear pricing journal of economic literature classification numbers d82 d42 d23 d78 l51 l15

ends against the middle determining public service provision when there are private alternatives abstract public provision of a service coexists with private market provision the quality of public provision is determined by majority vote preferences are not single peaked owing to the presence of private alternatives we identify two cases in one majority voting equilibrium always exists and the median income voter is pivotal in the other a necessary condition for equilibrium indentifies the pivotal voter who must have income below the median when equilibrium exists a coalition of middle income households who consume the public alternative will be opposed by a coalition of rich and poor households with the rich choosing private consumption

carbon markets and technological innovation this paper examines the effects of firm level innovation in carbon abatement technologies on optimal cap and trade schemes with and without price controls we characterize optimal cap and trade regulation with a price cap and a price floor and compare it to the special cases of pure taxation and a simple emissions cap innovation shifts the tradeoff between price and quantity based instruments towards quantitybased emissions trading schemes more specifically an increase in innovation effectiveness lowers the optimal emissions cap and leads to relaxed price controls unless the slope of the marginal environmental damage curve is small because of the decrease in the emissions cap innovation in abatement technologies can lead to a higher expected carbon price so as to provide sufficient incentives for private r d investments the expected carbon price decreases once innovative technologies are widely used

marriage institutions and sibling competition evidence from south asia using data from south asia this article examines how arranged marriage cultivates rivalry among sisters during marriage search parents with multiple daughters reduce the reservation quality for an older daughters groom rushing her marriage to allow sufficient time to marry off her younger sisters relative to younger brothers younger sisters increase a girls marriage risk relative to younger singleton sisters younger twin sisters have the same effect these effects intensify in marriage markets with lower sex ratios or greater parental involvement in marriage arrangements in contrast older sisters delay a girls marriage because girls leave school when they marry and face limited earning opportunities when they reach adulthood the number of sisters has well being consequences over the life cycle younger sisters cause earlier school leaving lower literacy a match to a husband with less education and a less skilled occupation and marginally lower adult economic status data from a broader set of countries indicate that these cross sister pressures on marriage age are common throughout the developing world although the schooling costs vary by setting

school inputs and educational outcomes in south africa we examine the relationship between educational inputs primarily pupilteacher ratios and school outcomes in south africa immediately before the end of apartheid government black households were severely limited in their residential choice under apartheid and attended schools for which funding decisions were made centrally by white controlled entities over which they had no control the allocations resulted in marked disparities in average class sizes controlling for household background variables we find strong and significant effects of pupilteacher ratios on enrollment on educational achievement and on test scores for numeracy

enforcement and price controls in emissions trading this paper examines how enforcement affects the structure and performance of emissions trading programs with price controls under uncertainty about firms abatement costs the analysis highlights how an enforcement strategy can cause abatement cost risk to be transmitted to enforcement costs via the price of permits when this occurs accommodating the effect of abatement cost risk with an optimal policy results in higher expected emissions and lower expected permit price than their second best optimal values however it is possible to design an enforcement strategy that shields enforcement costs from abatement cost risk by tying sanctions directly to permit prices this enforcement strategy stabilizes enforcement effort the optimal permit supply and price controls are independent of enforcement costs and the policy produces the second best optimal outcome

contracting with imperfect commitment and the revelation principle the single agent case this paper extends the revelation principle to environments in which the mechanism designer cannot fully commit to the outcome induced by the mechanism we show that he may optimally use a direct mechanism under which truthful revelation is an optimal strategy for the agent in contrast with the conventional revelation principle however the agent may not use this strategy with probability one our results apply to contracting problems between a principal and a single agent by reducing such problems to well defined programming problems they provide a basic tool for studying imperfect commitment

the global child labor problem the problem of child labor has moved from a matter of regional and national concern to one of international debate and possible global persuasion and policy intervention in crafting policy for mitigating this enormous problem of our times it is important to start with a proper theoretical and empirical understanding of the phenomenon what gives rise to child labor and what are its consequences what interventions might end child labor without hurting children a well meaning but poorly designed policy can exacerbate the poverty in which these laboring children live even leading to starvation the article surveys the large and rapidly growing literature on this subject focusing mainly on the new literature based on modern economic theory and econometrics it also looks at some of the broad policy implications of these new findings with the objective of contributing to better informed discussion and policy design

inequality as a determinant of child labor abstract this paper analyzes the relationship between the phenomenon of child labor and public education under majority voting it shows that under unequal income distribution public schooling is not supported by the majority and the amount of child labor becomes enormous

the economics of child labor comment in a recent paper kaushik basu and pham hoang van bv 1998 develop an important and very interesting model in which a fairly productive economy exhibits multiple equilibria with children working in at least one they identify two assumptions as essential to this result the first which they call the luxury axiom is that a family sends its children to the labor market only if its income from sources other than child labor is very low the second is embodied in their substitution axiom which states that from the point of view of firms child labor is substitutable for adult labor in this comment we show that in addition to these two assumptions about the micro level behavior of households and firms there is also an essential macro level assumption that may be termed the distribution axiom income or wealth from non labor sources must be sufficiently concentrated in the hands of a few agents we establish that if non labor income is distributed with sufficient equality a market equilibrium with child labor cannot exist in the bv model beyond their contribution as an extension of bv s theory our results formalize a proposition implicit in recent policy discussions of child labor christiaan grootaert and ravi kanbur 1995 note that as household level poverty is well known to be the major cause of child labor g eneral economic development equitably distributed is the best and most sustainable way of reducing child labor p 198 emphasis added policy documents from the international labor organization ilo have long conveyed this view and now the world bank appears to as well peter fallon and zafiris tzannatos 1998 there is a growing recognition that while economic development and development policies are necessary to eliminating child labor they are not always sufficient on their own distributional considerations matter indeed in the case in which bv s model yields multiple equilibria th this abstract was borrowed from another version of this item

asymmetric information and the property rights approach to the theory of the firm abstract in the grossman hart mooreproperty rights approach to the theory of the firm it is usually assumed that information is symmetric ownership matters for investment incentives provided that investments are partly relationship specific we study the case of completely relationship specific investments i e the disagreement payoffs do not depend on the investments it turns out that if there is asymmetric information then ownership matters for investment incentives and for the expected total surplus specifically giving ownership to party b can be optimal even when only party a has to make an investment decision and even when the owner s expected disagreement payoff is larger under a ownership

investment and screening under asymmetric endogenous information this article provides an analysis of screening contracts in a complete but imperfect information environment as opposed to the usual incomplete information bayesian environment an agent faces a hold up situation while making a cost reducing specific investment that is not observed by the principal to prevent the hold up the agent randomizes his investment strategy and the principal offers a screening contract the informational rents provided by the equilibrium contract finance the investment for a large class of cost functions the randomization is such that the marginal surplus follows a power distribution

unobservable investment and the hold up problem we study a two person bargaining problem in which the buyer may invest and increase his valuation of the object before bargaining we show that if all offers are made by the seller and the time between offers is small then the buyer invests efficiently and the seller extracts all of the surplus hence bargaining with frequently repeated offers remedies the hold up problem even when the agent who makes the relation specific investment has no bargaining power and contracting is not possible we consider alternative formulations with uncertain gains from trade or two sided investment

information and bargaining in the hold up problem this article incorporates an information structure with partial information into the canonical hold up problem the optimal information structure balances the tradeoff between ex ante efficiency the information rent effect and ex post efficiency the bargaining disagreement effect with one shot bargaining it occurs at an intermediate level of information asymmetry when there is repeated bargaining it is attained with perfect asymmetry asymmetric information the parameter that is frequently ignored in the literature turns out to be an important welfare instrument for the hold up problem our results therefore provide a basis for institutional design regarding the optimal control of information flow

on a fundamental advantage of permits over taxes for the control of pollution we extend the tax versus permits literature by considering permit supply functions and pollution tax functions that are generalizations of the usual constant permit supply and constant pollution tax rate in our model pollution is not uniformly mixed and the regulator is uncertain about the polluting firms abatement costs we determine the optimal permit supply functions and the optimal pollution tax functions using these functions we show that permits lead unambiguously to lower total expected costs than taxes we analyze the magnitude of this difference for a simple model of climate change by relating the optimal permit supply functions to weitzman am econ rev 68 683 691 1978 we provide a new interpretation of his results

is there a child labor trap intergenerational persistence of child labor in brazil this article examines the intergenerational persistence of child labor empirically by looking at household survey data from brazil previous empirical work on child labor has focused primarily on isolating the determinants of child labor using survey data we take a different approach by asking does the child labor status of parents affect the child labor incidence of their children we look at this question in two ways our working assumption is that financial need creates this generational link but we also ask if there exists an intergenerational link over and above that which is transmitted through the production of income perhaps through norms we find strong evidence that this link exists and that it appears to persist even when income is held constant moreover we find that children who did not work as child laborers command higher salaries later in life which suggests that the potential human capital gains through apprenticeship as children are outweighed by the human capital gains children receive through schooling excerpt

does child labour displace schooling evidence on behavioral responses to an enrollment subsidy this brief summarizes the results of a gender impact evaluation study entitled does child labour displace schooling evidence on behavioral responses to an enrollment subsidy conducted between 1995 and 1996 in bangladesh the study observed that the subsidy increases schooling but its effect on child labour is ambiguous the subsidy increased schooling by far more than it reduced child labour substitution effects helped protect current incomes from the higher school attendance induced by the subsidy substitution effects helped protect current incomes from the higher school attendance induced by the subsidy the reduction in the incidence of child labour by boys girls represents about one quarter eighth of the increase in their school enrollment rate

risk financial markets and human capital in a developing country this paper explores the link between financial market incompleteness and human capital accumulation we examine how child school attendance responds to seasonal fluctuations in the income of agrarian households using panel data from rural india to pinpoint market imperfections we study responses to aggregate and idiosyncratic as well as to anticipated and unanticipated income shocks our main finding is that seasonal fluctuations in school attendance are a form of self insurance but one which does not result in a substantial loss of human capital on average

a note on correlated uncertainty and hybrid environmental policies this note examines the effects of correlated uncertainty between abatement costs and pollution damage on hybrid emissions control policies in particular i show how correlated uncertainty affects the structure and performance of control policies that combine permit trading with price controls moreover i show how correlated uncertainty affects the choice between a simple emissions tax versus a hybrid policy under correlated uncertainty constant marginal damage is no longer necessary or sufficient for a tax to be an optimal policy

countervailing incentives in agency problems abstract we analyze countervailing incentives in agency problem countervailing incentives exist when the agent has an incentive to understate his private information for some of its realizations and to overstate it for others when countervailing incentives arise pooling generally characterizes the equilibrium contract furthermore performance is distorted both above and below efficient levels in addition the agent s rents generally increase with the realization of his private information over some ranges and decrease over other ranges we demonstate that the creation of countervailing incentives can enhance aggregate welfare

optimal information transmission in a holdup problem this article examines the optimal contract in a bilateral trade model with unobservable relationship specific investment and renegotiation in such a setting a contract plays an additional role that it does not have in the standard holdup model namely that of transmitting information between the parties the article shows that a partial disclosure contract may be optimal and describes the optimal contract if the investment is cooperative and the information between the trading parties is asymmetric the optimal contract generally cannot result in the first best but dispensing with either of these assumptions makes the first best achievable

alternative approaches to cost containment in a cap and trade system we compare several emissions reduction instruments including quantity policies with banking and borrowing price policies and hybrid policies safety valve and price collar using a dynamic model with stochastic baseline emissions the instruments are compared under the design goal of obtaining the same expected cumulative emissions across all options based on simulation analysis with the model parameterized to values relevant to proposed us climate mitigation policies we find that restrictions on banking and borrowing including the provision of interest rates on the borrowings can severely limit the value of the policy depending on the regulator chosen allowance issuance path although emissions taxes generally provide the lowest expected abatement costs a cap and trade system combined with either a safety valve or a price collar can be designed to provide expected abatement costs near those of a tax but with lower emissions variance than a tax consistently a price collar is more cost effective than a safety valve for a given expected cumulative emissions outcome because it encourages inexpensive abatement when abatement costs decline

incomplete contracts specific investments and risk sharing an optimal contract design problem is considered contracts which are incomplete and simple are used to investigate the extent to which constrained revisions can mitigate inefficiencies resulting from contractual incompleteness an optimal contract is characterized in two cases first when a contract is being used to facilitate trade between two risk neutral parties who must make relationship specific investments it is possible to implement the first best by a simple contract second when a contract is being used to share risk it is generally not possible to implement the first best when one party is risk neutral however it is possible to implement the first best by assigning all the ex post decision rights to that party

an economic analysis of child labor abstract this paper shows how poverty in combination with credit constraints can give rise to the phenomenon of child labor in developing countries it further shows how banning child labor can reduce the welfare of the households intending to send their children to work and suggests some alternative policies

managing permit markets to stabilize prices the political economy of environmental policy favors the use of quantity based instruments over price based instruments e g tradable permits over green taxes at least in the united states with cost uncertainty however there are clear efficiency advantages to prices in cases where the marginal damages of emissions are relatively flat such as with greenhouse gases the question arises therefore of whether one can design flexible quantity policies that mimic the behavior of price policies namely stable permit prices and abatement costs we explore a number of quantity plus policies that replicate the behavior of a price policy through rules that adjust the effective permit cap for unexpectedly low or high costs they do so without necessitating any monetary exchanges between the government and the regulated firms which can be a significant political barrier to the use of price instruments

sibling rivalry endowment and intrahousehold allocation in gansu province china abstractthis article evaluates the strategies employed by households in rural china to allocate educational expenditure to children of different physical endowments examining whether parents use educational funding to reinforce or compensate for these differences climatic shocks are employed as an instrument for endowment measured as height for age allowing for the identification of the impact of quasi exogenous variation in endowment on parental allocations conditional on household fixed effects the results suggest that educational expenditure is directed to the relatively weaker child in response to the mean difference in height for age between siblings parents redirect around 25 of discretionary educational spending to the child with the lower height for age and this effect is robust to the potentially confounding effects of gender and birth order there is some evidence that time allocation may also be a relevant margin of compensation but no evidence that medical expenditure responds to diff

cropping pattern mechanization child labor and fertility behavior in a farming economy rural egypt tractor and the use of mechanical irrigation is increasing in the countryside the significant policy issue is the role of government in encouraging or discouraging continued labor saving mechanization present policy substantially encourages mechanization diesel oil is available at prices considerably lower than those in many other countries village banks provide farmers with equipment loans at rates below commercial levels machinery is imported at favorable foreign exchange rates and is exempted from import duties the most telling impact of these policies has been on the rapidly growing use of tractors and irrigation pumps both of which are believed to displace labor especially that of children this article addresses the question of whether such changes have indeed had the desired effect on child employment and family size recent developments in the egyptian agricultural sector also reveal significant changes in crop patterns these favor fruit and vegeta

harvest efficiency and fishery discards under harvest uncertainty and trading restrictions abstract we study harvesting efficiency and the problem of discards under harvest uncertainty in a fishery that is managed with quotas with only idiosyncratic harvest uncertainty we show that frictionless post harvest quota trade can achieve full efficiency and eliminate quota overage discards completely in the absence of such trade we deduce an ad valorem tax subsidy that eliminates discards while delivering a desired aggregate harvest target alternatively we show that a hybrid policy i e a combined quota and landings fee can implement a manager s aggregate target harvest level efficiently and without discards when harvest shocks in addition have a fishery wide common component post harvest quota trading per se cannot eliminate discards policy intervention in the form of either landing taxes or a hybrid scheme is needed given the prevalence of trading restrictions in many quota managed fisheries worldwide our paper offers important policy advice

ex post efficient permit markets a detailed analysis this paper provides a detailed analysis of ex post efficient permit markets after a short review of institutional designs that can achieve ex post efficiency under uncertainty and asymmetric information we analyze the effects of an ex post efficient regulation on the expected costs of the regulated firms on their investment behavior and on the incentives for strategic behavior on imperfectly competitive permit markets also we inquire about the budget effects of the regulation our results show that ex post efficient permit markets have considerable benefits beside the direct increase in expected social welfare

inheritance patterns in migration prone communities of the peruvian highlands abstract on the basis of detailed information on inheritance practices collected in the course of an in depth survey of three andean communities of peru and unlike most empirical studies which rely on remittance functions we have been able to estimate an inheritance function with a view to identifying the main factors associated with particular patterns of land bequests a central result is that the positive relationship between caring and a favourable access to land bequest indeed exists yet is only observed for migrant children whether urban or rural long distance or short distance migrants combined with other findings and observations this result strengthens the case for an interpretation based on an active role of potential heirs in the determination of inheritance outcomes it therefore calls into question the strategic bequest theory which presumes that parents are the ultimate decision makers in this matter in addition our study shows that inheritance patterns are complex besides migration and caring behavior personal characteristics of potential heirs such as gender birth order and family status having children or not do appear to influence division of parental land