rational household labor supply traditionally household behavior is derived from the maximization of a unique utility function in this paper we propose an alternative approach in which the household is modeled as a two member collectivity taking pareto efficient decisions the consequences of this assumption are analyzed in a three good model in which only total consumption and each member s labor supply are observable if the agents are assumed egoistic i e they are only concerned with their own leisure and consumption it is possible to derive falsifiable conditions upon household labor supplies from both a parametric and nonparametric viewpoint if alternatively agents are altruistic restrictions obtain in the nonparametric context useful interpretation stems from the comparison with the characterization of aggregate demand for a private good economy

decomposition of moral hazard this study seeks to simulate the portion of moral hazard that is due to the income transfer contained in the coinsurance price reduction healthcare spending of uninsured individuals from the meps with a priority health condition is compared with the predicted counterfactual spending of those same individuals if they were insured with either 1 a conventional policy that paid off with a coinsurance rate or 2 a contingent claims policy that paid off by a lump sum payment upon becoming ill the lump sum payment is set to be equal to the insurer s predicted spending under the coinsurance policy the proportion of moral hazard that is efficient is calculated as the proportion of total moral hazard that is generated by this lump sum payment we find that the efficient proportion of moral hazard varies from disease to disease but is the highest for those with diabetes and cancer

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

a theoretical analysis of altruism and decision error in public goods games abstract we formalize an equilibrium model in which altruism and decision error parameters determine the distribution of contributions for linear and quadratic public goods games the equilibrium density is exponential for linear games and normal for quadratic games our model implies i contributions increase with the marginal value of the public good ii total contributions increase with the number of participants iii mean contributions lie between the nash prediction and half the endowment these predictions which are not implied by a nash analysis are consistent with laboratory data maximum likelihood estimates of altruism and error parameters are significant and plausible

child allowances and allocative decisions in romanian households in this paper it is tested whether increasing child allowances will affect the intra household allocation of consumption measured by child and adult goods holding total household resources constant the analysis is based on household survey data collected in romania where cash payments are made to families according to the number and age of children selectivity is controled for since there is the potential for self selection bias in terms of the level of child allowances received the findings suggest that holding total household resources constant child allowances increase demand for child goods and calories and reduce demand for adult goods

two stage residual inclusion estimation addressing endogeneity in health econometric modeling the paper focuses on two estimation methods that have been widely used to address endogeneity in empirical research in health economics and health services research two stage predictor substitution 2sps and two stage residual inclusion 2sri 2sps is the rote extension to nonlinear models of the popular linear two stage least squares estimator the 2sri estimator is similar except that in the second stage regression the endogenous variables are not replaced by first stage predictors instead first stage residuals are included as additional regressors in a generic parametric framework we show that 2sri is consistent and 2sps is not results from a simulation study and an illustrative example also recommend against 2sps and favor 2sri our findings are important given that there are many prominent examples of the application of inconsistent 2sps in the recent literature this study can be used as a guide by future researchers in health economics who are confronted with endogeneity in their empirical work

collective decisions and competitive markets in a general equilibrium model we allow for households with several typically heterogeneous members households that make efficient collective consumption decisions where different households may use different collective decision mechanisms yet households that operate within a competitive market environment the interaction of two allocation mechanisms collective decisions and competitive markets is investigated with a focus on the efficiency properties and decentralization possibilities of the dual allocation mechanism

private insurance selection and health care use observed differences in medical utilization between the privately insured and uninsured reflect the combined effects of self selection and insurance incentives moral hazard this article provides a bayesian framework for decomposing the disparity into incentive and selection components the effect of self selection in private insurance on the number of doctor visits is estimated using a multiyear sample of the u s adult non medicare population obtained from the medical expenditure panel survey we use a flexible econometric framework based on the roy model and develop a markov chain monte carlo algorithm we estimate the distribution of treatment effects and find strong evidence indicating selection which accounts on average for 50 or more of the observed disparity in doctor visits

subjective performance measures in optimal incentive contracts objective measures of performance are seldom perfect in response incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures this paper explores the combined use of subjective and objective performance measures in respectively implicit and explicit incentive contracts naturally objective and subjective measures often are substitutes sometimes strikingly so we show that if objective measures are sufficiently close to perfect then no implicit contracts are feasible because the firm s fallback position after reneging on an implicit contract is too attractive we also show however that objective and subjective measures can reinforce each other if objective measures become more accurate then in some circumstances the optimal contract puts more weight on subjective measures because the improved objective measures increase the value of the ongoing relationship and so reduce the firm s incentive to renege we also analyze the use of subjective weights on objective performance measures and provide case study evidence consistent with our analyses

determinants of the intrahousehold allocation of food in the rural philippines this study shows that the opportunity cost of time for husbands and wives can affect the intrahousehold distribution of food in a developing country equations which explain the relative allocation of calories within households were estimated for husbands wives and children with data for the rural philippines the estimating equation is derivable from both a joint household utility function and a bargaining model because the same households were included in the four survey rounds the various observations for a given individual were averaged for each variable in the estimation procedure wages were estimated using the heckman approach

does the balance of power within a family matter the case of the retirement equity act abstract this paper studies within family decision making regarding investment in income protection for surviving spouses using a simple and tractable nash bargaining model a change in us pension law the retirement equity act of 1984 is used as an instrument to derive predictions from the bargaining model about the household demand for survivor annuities and life insurance and to contrast these with the predictions of the classical single utility function model of the household in the empirical part of the paper the predictions of the classical model are rejected in favor of the predictions of the nash bargaining model

the role of cooperation and reciprocity in structuring carbon sequestration contracts in developing countries the reduction of emissions from deforestation and forest degradation redd presents a key opportunity for developing countries to mitigate global warming and to help meet long term global climate objectives however the success of a redd strategy in a post kyoto protocol regime depends primarily on the design and implementation of a financial mechanism that is feasible and effective in providing the right incentives to land holders to manage forests in a sustainable manner that contributes to climate goals optimal redd contracts must not only properly reward agents who reduce emissions from deforestation and degradation dd but also account for technical issues such as permanence and additionality of carbon offsets in many countries national authorities may not have the institutional capacity and the proper technology for measuring the delivery of carbon offsets furthermore contract enforcement becomes complex because the effort and outcomes described in such contracts are difficult for a third party to monitor and verify therefore contracts need to provide sufficient incentives to all parties to participate and perform in the long term i e to be self enforcing however the structure of the contracts may vary depending on the presence of selfish and altruistic agents this paper studies the role of cooperation and reciprocity on the structure of carbon sequestration contracts in the context of developing countries where legal enforcement may be impractical we examine if the optimal structure of self enforcing contracts differs if the paula cordero salas is a ph d candidate and brian roe is the mccormick professor of agricultural marketing and policy aede department the ohio state university this project was supported by the world bank s development research group energy and environment team under the contract a mechanism for reducing emissions from deforestation and degradation redd a framework to design cost effective contracts

nash bargained household decisions reply pierre andre chiappori s 1988 claim that the nash bargaining model is of weak empirical relevance and neither convenient nor really restrictive is incorrect nash bargained household behavior implies a rich set of empirical implications extending well beyond the pareto efficiency of intrafamily distributions by systematically accounting for the impact of opportunities outside the family on resource distribution within the family nash bargained demand theory considerably expands the scope of neoclassical demand theory such expansion can elucidate issues ranging from the impact of alimony and child support laws in developed societies to the intrafamily distribution of nutrition in less developed countries copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

household labor supply what kind of data can tell us how many decision makers there are although in empirical work the neoclassical assumption of the household as a homogeneous decision making unit is still predominant there appears to be an increasing interest in models of household labor supply based on game theoretic notions examples are ashworth and ulph 1981 bjorn and vuong 1984 1985 brown and chuang 1981 brown and manser 1978 horney and mcelroy 1988 mcelroy and horney 1981 mcelroy 1990 schultz 1990 thomas 1990 quite a few of these papers also attempt to test the assumption of one decision maker against the more general bargaining framework typically these take the form of tests for certain restrictions on the data that should hold if the neoclassical model were valid and which need not hold in the game theoretic framework chiappori 1988b argues that a truly valid test of a bargaining model should leave from the notion that observed data are the result from some cooperative game being played by the household members without specifying the solution concept he then goes on to argue that the restrictions placed on the data by such an assumption are quite mild indeed in a separate paper chiappori 1988a derives restrictions on observed labor supply functions based on this notion however his main result is based on rather special assumptions in this note we put the various results in perspective our basic obser

much ado about two reconsidering retransformation and the two part model in health econometrics in health economics applications involving outcomes y and covariates x it is often the case that the central inferential problems of interest involve e y x and its associated partial effects or elasticities many such outcomes have two fundamental statistical properties y 0 and the outcome y 0 is observed with sufficient frequency that the zeros cannot be ignored econometrically this paper 1 describes circumstances where the standard two part model with homoskedastic retransformation will fail to provide consistent inferences about important policy parameters and 2 demonstrates some alternative approaches that are likely to prove helpful in applications

relational incentive contracts standard incentive theory models provide a rich framework for studying informational problems but assume that contracts can be perfectly enforced this paper studies the design of self enforced relational contracts i show that optimal contracts often can take a simple stationary form but that self enforcement restricts promised compensation and affects incentive provision with hidden information it may be optimal for an agent to supply the same inefficient effort regardless of cost conditions with moral hazard optimal contracts involve just two levels of compensation this is true even if performance measures are subjective in which case optimal contracts terminate following poor performance jel c73 d82 l14

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

the economics of moral hazard revisited pauly s 1968 pauly m 1968 the economics of moral hazard comment american economic review 58 531 537 analysis of the welfare loss from insurance assumes that medical care consumption is not determined by income but recent studies suggest it is this study argues that 1 pauly s analysis overstates the welfare loss because it includes the effect of income on consumption 2 the relevant income effect is derived from income transfer from the healthy to the ill that occur when the probability of illness is less than 1 and 3 the welfare loss can be considered the transaction cost of insurance

conservation payments under uncertainty the decision of whether to retain forest or convert to another land use is affected by uncertainty over future land use returns this paper examines the design of conservation payments to landowners under uncertainty payments are either indexed to the returns from deforestation agriculture or to a market value associated with forest nonuse benefits payment size depends on the degree of correlation between payments and agricultural returns and their relative volatility market based payments for reducing emissions from deforestation and degradation redd are simulated for brazilian soybean growers payments indexed to carbon prices are larger than those indexed to international soybean prices

moral hazard vs liquidity and optimal unemployment insurance this paper presents new evidence on why unemployment insurance ui benefits affect search behavior and develops a simple method of calculating the welfare gains from ui using this evidence i show that 60 percent of the increase in unemployment durations caused by ui benefits is due to a liquidity effect rather than distortions on marginal incentives to search moral hazard by combining two empirical strategies first i find that increases in benefits have much larger effects on durations for liquidity constrained households second lump sum severance payments increase durations substantially among constrained households i derive a formula for the optimal benefit level that depends only on the reduced form liquidity and moral hazard elasticities the formula implies that the optimal ui benefit level exceeds 50 percent of the wage the exact identification approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives

economic and social status in household decision making evidence relating to extended family mobility summary models of the allocation of household resources use as a decision rule either the maximisation of a household utility function or the solution to a nash bargaining game the literature on residential mobility has exclusively used the former to analyse the household s decision to change location this is despite the strong empirical evidence that allocations in other areas are more consistent with the bargaining model in this paper micro data from taipei taiwan are used to determine which approach is most appropriate for studying housing mobility decisions the mobility decisions of nuclear and different types of extended family household are compared to test whether the social and economic roles of different generations affect the household decision process as is consistent with the bargaining approach thus household mobility is analysed with a richer description of household structure than is found in the current literature which implicitly treats households as either a nuclear family or some smaller unit the results support the bargaining model of household decision making conditional probabilities differ between nuclear and extended families when a member of the eldest generation in an extended household is the household head and when a member of the eldest generation contributes to household earnings of these it is found that economic status is paramount to social status

collective household models principles and main results in the traditional approach to consumer behaviour it is assumed that households behave as if they were single decision making units this approach has methodological empirical and welfare economic deficiencies a valuable alternative to the traditional model is the collective approach to household behaviour the collective approach explicitly takes account of the fact that multi person households consist of several members which may have different preferences among these household members an intrahousehold bargaining process is assumed to take place in addition to providing an introduction to the collective approach this survey intends to show how different collective household models each with their own aims and assumptions are connected

learning from a piece of pie we investigate the empirical content of the nash solution to two player bargaining games the bargaining environment is described by a set of variables that may affect agents preferences over the agreement sharing the status quo outcome or both the outcomes i e whether an agreement is reached and if so the individual shares and the environment including the size of the pie are known but neither are the agents utilities nor their threat points we consider both a deterministic version of the model in which the econometrician observes the shares as deterministic functions of the variables under consideration and a stochastic one in which because of latent disturbances only the joint distribution of incomes and outcomes is recorded we show that in the most general framework any outcome can be rationalized as a nash solution however even mild exclusion restrictions generate strong implications that can be used to test the nash bargaining assumption stronger conditions further allow to recover the underlying structure of the bargaining and in particular the cardinal representation of individual preferences in the absence of uncertainty an implication of this finding is that empirical works entailing nash bargaining could and should use much more general and robust versions than they usually do copyright 2012 oxford university press

child farm labor the wealth paradox this article is motivated by the remarkable observation that children of land rich households are often more likely to be in work than the children of land poor households the vast majority of working children in developing economies are in agricultural work predominantly on farms operated by their families land is the most important store of wealth in agrarian societies and it is typically distributed very unequally these facts challenge the common presumption that child labor emerges from the poorest households this article suggests that this apparent paradox can be explained by failures of the markets for labor and land credit market failure will tend to weaken the force of this paradox these effects are modeled and estimates obtained using survey data from rural pakistan and ghana the main result is that the wealth paradox persists for girls in both countries whereas for boys it disappears after conditioning on other covariates

noncooperative household demand we study noncooperative household models with two agents and several voluntarily contributed public goods deriving the counterpart to the slutsky matrix and demonstrating the nature of the deviation of its properties from those of a true slutsky matrix in the unitary model we provide results characterising both cases in which there are and are not jointly contributed public goods demand properties are contrasted with those for collective models and conclusions drawn regarding the possibility of empirically testing the collective model against noncooperative alternatives and the noncooperative model against a general alternative

intertemporal substitution in labor supply micro evidence from rural india abstract this paper tests the hypothesis of intertemporal substitution in labor supply using time allocation data on adult male and female members of agricultural households in india the robustness of the results with respect to functional form specification and credit constraints is examined the female intertemporal elasticity of substitution is found to be significant but low similar to estimates from the us elasticity estimates for males are negative or zero tests of symmetry and additive separability proved inconclusive as they are quite sensitive to functional form in addition the empirical analysis revealed significant differences in the elasticity of substitution of females depending on land ownership and whether the period of reference falls during planting and harvesting or after harvesting these differences suggest that credit constraints limit the possibilities of substitution of labor supply across time

motivation and markets many workers receive pay based on subjectively assessed performance yet the shirking model of efficiency wages excludes it this paper incorporates such pay with the following results performance pay is more efficient than efficiency wages when the costs of having a job vacant are low and qualified workers in short supply more capital intensive industries pay more than less capital intensive industries as observed in studies of interindustry wages differentials sustaining an efficient outcome requires a social convention similar to the notion of a fair wage the model also makes predictions about the relationship between turnover wages growth and unemployment copyright 1998 by american economic association

health insurance the tradeoff between risk pooling and moral hazard choosing optimal health insurance coverage involves a trade off between the gain from risk reduction and the deadweight loss from moral hazard this paper examines this trade off empirically by estimating both the demand for health insurance and the demand for health services it relies on data from a randomized controlled trial of cost sharing s effects on the use of health services and on the health status for a general non elderly population

the empirical content of nash bargained household behavior in households whose allocation decisions can be represented as nash bargained household decisions extrahousehold environmental parameters eeps serve as pure shifters of the threat points the comparative statics of changes in demands due to changes in these eeps are given these are incorporated into a comprehensive statement of the empirical content of nash bargained household behavior including a nash generalization of barten s 1966 fundamental matrix equation of the theory of consumer demand estimation and data requirements are discussed along with nested testing of the following structure the neoclassical model is nested in the nash bargained model which in turn is nested in an unrestricted model of household demands emphasized throughout is the enriched menu of explanatory variables for demand analysis provided by the nash model as well as the model s ability to jointly analyze i household formation and ii intrahousehold allocation decisions

do workers accept lower wages in exchange for health benefits compensating wage theory predicts that workers receiving more generous fringe benefits are paid a lower wage than comparable workers who prefer fewer fringe benefits this study tests this prediction for employer provided health insurance by modeling the wages of married women employed full time in the labor market husband s union status husband s firm size and husband s health coverage through his job are used as instruments for his wife s own employer health insurance benefits the estimates suggest wives with own employer health insurance accept a wage about 20 lower than what they would have received working in a job without benefits

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

family policy with non cooperative families we consider a non cooperative model of a family s time allocation between market work and providing a home produced family public good such as child care or care for the elderly the model predicts underprovision of the public good because of crowding out this does not necessarily warrant public provision in contrast to other approaches in family economics we find that attempts to redistribute between spouses may alter the final distribution within the marriage and that such a policy may be pareto improving we also find that some degree of progressivity of the income tax can be welfare improving

implicit contracts incentive compatibility and involuntary unemployment this paper considers the enforceability of employment contracts when employees performance cannot be verified in court so that piece rate contracts are not legally enforceable part i shows that there exists a variety of self enforcing implicit contracts modelled as perfect equilibria in a repeated game and characterizes all the wage and performance outcomes that can be implemented implementation requires a strictly positive surplus from employment the form of the contract depending on how this surplus is divided between firm and employee piece rate contracts and contracts with an informally agreed bonus can be made self enforcing but the use of severance pay and bonding does not extend the set of implementable allocations the resulting contracts resemble actual labor contracts more than do the contracts in standard principal agent models part ii analyses market equilibrium with these contracts also modelled as perfect equilibria in a repeated game and shows that many such equilibria exist unfilled vacancies and unemployed workers can co exist despite the existence of contracts that are potentially mutually beneficial for those jobs that are filled any division of the potential surplus is possible so that the market can have at the same time involuntary unemployment and vacancies that are unfilled despite filled jobs earning positive profits as a criterion for selecting equilibria a notion of renegotiation proofness is applied then either all workers are employed or all jobs filled but any division of the potential surplus is still possible the paper explores what further restrictions on beliefs give rise to a walrasian outcome in which all the potential surplus goes to the short side of the market and to an efficiency wage type outcome in which the potential surplus goes to the long side

health insurance coverage and the macroeconomy this paper investigates the relationship between the macroeconomy and health insurance coverage for non elderly americans we find that for men state unemployment rate is positively correlated with the probability of health insurance coverage in general and through an employer in particular and that these correlations are only partly explained by changes in employment status in contrast the insurance coverage of women and children appears to be insulated from fluctuations in the unemployment rate by public health insurance programs like medicaid and state children s health insurance program schip we estimate that 984 000 americans nearly all of whom were adult men lost health insurance due to macroeconomic conditions alone during the 2001 recession

additionality when redd contracts must be self enforcing this paper examines self enforcing contracts as a financial mechanism for reducing carbon emissions from deforestation and forest degradation when the opportunity cost of the land i e landholder type is private information and is imperfectly correlated over time i e partially persistent types because self enforcement limits the feasible incentives the conservation levels are constrained by the surplus created regardless of the degree of persistence of such opportunity costs across contracting periods a first best self enforcing contract can deliver additional carbon sequestration beyond the business as usual scenario only if the value of forest conservation is sufficiently high otherwise self enforcing contracts can induce some suboptimal level of carbon sequestration the degree of persistence of opportunity costs across periods does not affect the amount of total payments provided in the optimal menu of contracts but greater persistence of opportunity cost types leads to contracts that feature more of the total payment as a bonus in contracts for landholders with a high opportunity cost for their land and more of the total payment as an upfront fixed payment for landholders with a low opportunity cost