benefit entitlement and unemployment duration the role of policy endogeneity abstract the potential duration of benefits is generally viewed as an important determinant of unemployment duration this paper evaluates a unique policy change that prolonged entitlement to regular unemployment benefits from 30 weeks to a maximum of 209 weeks for elderly individuals in certain regions of austria in the evaluation we explicitly account for the fact that the program was an endogenous policy response to deteriorating labor market conditions for older workers in certain regions and sectors the main results are i rebp reduced the transition rate to jobs by 17 ii accounting for endogenous policy adoption is important and quantitatively significant

the commons as a natural barrier to entry why there are so few fish farms a competitive industry which overuses a common access resource may create a barrier to entry similar to spence s example of a cartel that uses excess capacity to prevent entry in most industries when a new firm enters existing firms find that their demand curves have fallen so they reduce their output to accommodate the new entrant in spence s model the cartel disintegrates upon entry so that the output of existing firms increases which may make entry unprofitable in an open access fishery the supply curve bends backward thus a fall in price created by the entry of a fish farm increases rather than decreases supply in the backwardbending portion of the supply curve an important implication of this theory is that fish farms are more likely to be unprofitable the more heavily overharvested is a species in a common property competitive market this natural barrier to entry may explain why true mariculture is barely in its infancy bardach ryther and mclarney

financial wealth consumption smoothing and income shocks arising from job loss one of the reasons for setting up an unemployment insurance scheme is to allow job losers to smooth consumption we test for the impact of unemployment benefits on changes in household food expenditure of individuals who have recently experienced a job loss we also study the relationship between unemployment benefits and the financial wealth of the unemployed from our empirical analysis we conclude that for households without financial wealth at the time of job loss unemployment benefits help to smooth food consumption for households running debt before job loss there is evidence that lower replacement rates lead to a postponement of debt repayment

environmental policy and international trade when governments and producers act strategically some environmentalists express concern that trade liberalization may damage the environment by giving governments incentives to relax environmental policies to give domestic producers a competitive advantage support for such concern may be given by models of imperfectly competitive trade where there may be rent shifting incentives for governments to relax environmental policies but there are also incentives for producers to act strategically e g through their investment in rd ii allowing governments to act strategically increases the incentive for producers to act strategically iii welfare is lower when both parties act strategically and iv strategic behavior by producers and governments is greater when governments use emission taxes than when they use emission standards

precautionary savings and self selection evidence from the german reunification experiment in the absence of complete insurance expected future income shocks lead prudent individuals to build up precautionary savings in order to avoid wide fluctuations in the consumption path the reaction of savings to expected future shocks is stronger the more risk averse an individual is risk aversion might influence not only the savings behavior of an individual facing a stochastic income path but it can also affect occupational choice in the first place in particular risk averse individuals might choose occupations that are associated with less risky income paths while less risk averse individuals might prefer occupations with higher income risk assessing the importance of self selection of individuals into occupations according to their risk aversion is difficult since risk aversion is usually unobserved yet failing to control for unobserved risk aversion in regressions of wealth on measures of labor income risk will lead to a bias if selfselection takes place since measures of labor income risk will be negatively correlated with the error term that is capturing the unobserved risk aversion this could lead to a rejection of the theory of precautionary savings even if individuals act according to the theory

evolution of the infant health production function michael grossman s seminal publication on the demand for health and health production grossman 1972 has spawned a substantial body of research focusing on the production of infant health this article provides a systematic review of the published literature to date on infant health production and how it has evolved over the past 3 4 decades as data have become more available computing has improved and econometric methods have become more sophisticated while empirical research in most fields has expanded in corresponding ways the infant health production research has become an important part of the broader and inherently multidisciplinary literature on intergenerational health the strongest and most robust findings are that policies matter for infant health particularly those affecting access to health care and that prenatal smoking and other chemical exposures substantially compromise infant health promising directions for future research include elucidating relevant pathways reconciling the largely inconsistent estimated effects of nutrition and education and exploring the roles of preconceptional and lifetime health care paternal factors social support housing complementarity and substitutability of inputs factors that modify effects of inputs and evolving medical technologies

temporary income taxes and consumer spending both economic theory and casual empirical observation of the u s economy suggest that spending propensities from temporary tax changes are smaller than those from permanent ones but neither provides much guidance about the magnitude of this difference this paper offers new empirical estimates of this difference and finds it to be quite substantial the analysis is based on an amendment of the standard distributed lag version of the permanent income hypothesis that distinguishes temporary taxes from other income on the grounds that the former are more transitory this amendment which is broadly consistent with rational expectations leads to a nonlinear consumption function though the standard error is unavoidably large the point estimate suggests that a temporary tax change is treated as a 50 50 blend of a normal income tax change and a pure windfall over a 1 year planning horizon a temporary tax change is estimated to have only a little more than half the impact of a permanent tax change of equ

using maimonides rule to estimate the effect of class size on scholastic achievement the twelfth century rabbinic scholar maimonides proposed a maximum class size of 40 this same maximum induces a nonlinear and nonmonotonic relationship between grade enrollment and class size in israeli public schools today maimonides rule of 40 is used here to construct instrumental variables estimates of effects of class size on test scores the resulting identiecation strategy can be viewed as an application of donald campbell s regression discontinuity design to the class size question the estimates show that reducing class size induces a signiecant and substantial increase in test scores for fourth and efth graders although not for third graders when asked about their views on class size in surveys parents and teachers generally report that they prefer smaller classes this may be because those involved with teaching believe that smaller classes promote student learning or simply because smaller classes offer a more pleasant environment for the pupils and teachers who are in them mueller chase and walden 1988 social scientists and school administrators also have a longstanding interest in the class size question class size is often thought to be easier to manipulate than other school inputs and it is a variable at the heart of policy debates on school quality and the allocation of school resources in many countries see e g robinson 1990 for the united states ofsted 1995 for the united kingdom and moshel ravid 1995 for israel this broad interest in the consequences of changing class size

impartiality priority and solidarity in the theory of justice the ethic of priority is a compromise between the extremely compensatory ethic of welfare equality and the needs blind ethic of income equality we propose an axiom of priority and characterize resource allocation rules that are impartial prioritarian and solidaristic they comprise a class of rules which equalize across individuals some index of resources and welfare consequently we provide an ethical rationalization for the many applications in which such indices have been used e g the human development index index of primary goods etc

testing the response of consumption to income changes with noisy panel data this paper tests the rational expectations lifecycle model of consumption against i a keynesian model and ii the rational expectations lifecycle model with imperfect capital markets the tests are based upon the relative responsiveness of consumption to income changes that can be predicted from past information and income changes that cannot he predicted the tests allow for measurement error in income the results reject the keynesian model and generally support the lifecycle model but the results are not sufficiently precise to rule out the possibility that some households are liquidity constrained measurement error has a strong influence on the relationship between consumption and income

a new method of estimating risk aversion i show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model i derive a formula for the coefficient of relative risk aversion in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor i bound the degree of complementarity using data on consumption choices when labor supply varies across states using labor supply elasticity estimates i find a mean estimate of 1 then show generating 2 requires that wage increases cause sharper labor supply reductions jel d81 j22

the economics of wildlife farming and endangered species conservation abstract there is growing concern that the traditional protectionist approach to conservation is expensive and insufficient to deliver the desired environmental outcomes supply side policies to conserve endangered species have drawn support by generating supplies from captive bred animals wildlife commodity prices are expected to fall thereby lowering the incentive to poach species in the wild supply side policies however often neglect the institutional framework within which the wildlife trade takes place and ignore the potential strategic responses of economic agents adopting a model that captures imperfect competition between traders and farmers we analyze the effect of supply side policies and conclude that under some circumstances these policies may contribute to further devastation of wild stocks we derive conditions under which captive breeding contributes to conservation and discuss implications for policy makers

a common ground for resource and welfare egalitarianism resource egalitarianism and welfare egalitarianism are two focal conceptions of distributive justice we show in this paper that they share a solid common ground to do so we analyze a simple model of resource allocation in which agents abilities to transform the resource into an interpersonally comparable outcome and starting points may differ both conceptions of egalitarianism are naturally modeled in this context as two allocation rules the two rules are jointly characterized by the combination of three appealing axioms no domination solidarity and composition

the macro effects of unemployment benefit extensions a measurement error approach by how much does an extension of unemployment benefits affect macroeconomic outcomes such as unemployment answering this question is challenging because u s law extends benefits for states experiencing high unemployment we use data revisions to decompose the variation in the duration of benefits into the part coming from actual differences in economic conditions and the part coming from measurement error in the real time data used to determine benefit extensions using only the variation coming from measurement error we find that benefit extensions have a limited influence on state level macroeconomic outcomes we apply our estimates to the increase in the duration of benefits during the great recession and find that they increased the unemployment rate by at most 0 3 percentage point

consumer response to the timing of income evidence from a change in tax withholding in 1992 the income tax withholding tables were adjusted so that withholding was reduced a typical worker received an extra 28 80 in take home pay per month in march through december 1992 to be offset by a lower tax refund in 1993 the change in withholding amounted to 0 5 percent of gdp president bush who proposed this change in his state of the union address intended that it provide a temporary stimulus to demand but the policy change involved only the timing of income so under the life cycle permanent income model it would be predicted to have a negligible effect on consumption and aggregate demand this paper reports consumers responses to the change in withholding the results are based on a survey taken shortly after it went into effect forty three percent of consumers report spending the extra take home pay substantially more than the zero percent predicted by the standard models but substantially less than the one hundred percent upon which the policy was predicated the decision to save the income is not explained by expected income growth therefore while behavior of many households is not fully consistent with the life cycle permanent income model liquidity constraints do not appear to account for this behavior this abstract was borrowed from another version of this item

the long term effects of job search requirements evidence from the uk jsa reform this paper investigates long term returns from unemployment compensation exploiting variation from the uk jsa reform of 1996 which implied a major increase in job search requirements for eligibility and in the related administrative hurdle search theory predicts that such changes should raise the proportion of non claimant nonemployed with consequences on search effort and labor market attachment and lower the reservation wage of the unemployed with negative effects on post unemployment wages i test these ideas on longitudinal data from social security records llmdb using a difference in differences approach i find that individuals who start an unemployment spell soon after jsa introduction as opposed to six months earlier are 2 5 3 more likely to move from unemployment into incapacity benefits spells and 4 5 less likely to have positive earnings in the following year this latter employment effect only vanishes four years after the initial unemployment shock also annual earnings for the treated individuals are lower than for the non treated these results suggest that while tighter search requirements were successful in moving individuals off unemployment benefits they were not successful in moving them onto long lasting or better jobs with fairly long lasting unintended consequences on a number of labor market outcomes

household saving micro theories and micro facts in this survey we review the recent theoretical and empirical literature on household saving and consumption the discussion is structured around a list of motives for saving and how well the standard theory captures these motives we show that almost all of the motives for saving that have been suggested in the informal saving literature can be captured in the standard optimizing model particular attention is given to recent work on the precautionary motive and its implications for saving and consumption behavior we also discuss the behavioral or psychological approach that eschews the use of standard optimization techniques and focuses instead on direct consideration on saving we provide a section on facts who save and how much we then discuss informally the recent decline in the u s saving rate and whether the theory is of much use in understanding this and other changes in aggregate saving rates over time we do not find any convincing explanation for the change in saving rates we also discuss some analyses of saving behavior over the life cycle addressing such questions as whether households save enough for retirement and whether the consumption patterns of older households can be rationalized within a simple life cycle model we also review a great number of studies of the consumption euler equations based on our analysis of the studies cited we conclude that there is still mixed evidence that consumption is excessively sensitive to income we also examine in depth the recent empirical literature on the precautionary motive we conclude that although some households do seem to have a significant precautionary motive at some points in their life cycle this motive is not so strong empirically as some investigators suggest

does prenatal wic participation improve birth outcomes new evidence from florida we study the effects of prenatal receipt of nutritional and educational services provided by the supplemental nutrition program for women infants and children wic on birth outcomes our identification strategy consists of two elements 1 identifying families in a very tight income range surrounding the wic eligibility threshold and 2 exploiting a policy change that differentially influenced the wic takeup rates of the families on each side of the eligibility threshold we conduct this analysis by merging three large statewide administrative datasets from florida concerning all births during the period 1997 2001 we match the birth records of infants and the school records of their older siblings in order to relatively precisely identify marginally eligible and marginally ineligible families that are very similar in their observable characteristics we find that wic participation has no effect on mean birth weight and gestational age but substantially reduces the likelihood of adverse birth outcomes e g birth weights below 2500 g

unemployment insurance and job quits we investigate an unexplored avenue through which unemployment insurance increases unemployment as unemployment insurance benefits rise workers lose incentive to preempt impending layoffs by changing jobs we formalize this prediction in a job search model and investigate it empirically by estimating a proportional hazard model with data from the 1979 national longitudinal survey of youth using state and year specific algorithms to compute each worker s expected unemployment insurance benefits our estimates reveal that an exogenous increase in benefits deters job quits by a small but statistically significant amount

can targeted transfers improve birth outcomes evidence from the introduction of the wic program abstract the goal of federal food and nutrition programs in the united states is to improve the nutritional well being and health of low income families a large body of literature evaluates the extent to which the supplemental program for women infants and children wic has accomplished this goal but most studies have been based on research designs that compare program participants to non participants if selection into these programs is non random then such comparisons will lead to biased estimates of the program s true effects in this study we use the rollout of the wic program across counties to estimate the impact of the program on infant health we find that the implementation of wic led to an increase in average birth weight and a decrease in the fraction of births that are classified as low birth weight we find no evidence that these estimates are driven by changes in fertility or selection into live births our preferred estimates suggest that wic initiation raised average birth weight by 2 g or by 7 g among infants born to mothers with low education levels these translate into estimated birth weight increases among participating mothers of approximately 18 to 29 g estimated treatments on the treated impacts among infants born to participating mothers with low education are of similar magnitude

priority rules and other asymmetric rationing methods in a rationing problem each agent demands a quantity of a certain commodity and the available resources fall short of total demand a rationing method solves this problem at every level of resources and individual demands we impose three axioms consistency with respect to variations of the set of agents upper composition and lower composition with respect to variations of the available resources in the model where the commodity comes in indivisible units the three axioms characterize the family of priority rules where individual demands are met lexicographically according to an exogeneous ordering of the agents in the more familiar model where the commodity is divisible these three axioms plus scale invariance independence of the measurement unit characterize a rich family of methods it contains exactly three symmetric methods giving equal shares to equal demands these are the familiar proportional uniform gains and uniform losses methods the asymmetric methods in the family partition the agents into priority classes within each class they use either the proportional method or a weighted version of the uniform gains or uniform losses methods

the general equilibrium impacts of unemployment insurance evidence from a large online job board abstract during the great recession u s unemployment benefits were extended by up to 73 weeks theory predicts that extensions increase unemployment by discouraging job search a partial equilibrium effect using data from the large job board careerbuilder com i find that a 10 increase in benefit duration decreased state level job applications by 1 but had no robust effect on job vacancies job seekers thus faced reduced competition for jobs a general equilibrium effect calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 39

the impact of the potential duration of unemployment benefits on the duration of unemployment abstract this paper examines the impact of the potential duration of unemployment insurance ui benefits on unemployment in the united states first we use a large sample of household heads to examine differences in the unemployment spell distributions of ui recipients and nonrecipients sharp increases in the escape rate from unemployment both through recalls and new job acceptances are apparent for ui recipients around the time of benefits exhaustion such increases are not apparent at similar points of spell duration for nonrecipients second our analysis of accurate administrative data from 12 states indicates that a one week increase in potential benefit duration increases the average duration of the unemployment spells of ui recipients by 0 16 to 0 20 weeks

the response of expenditures to anticipated income changes panel data estimates standard models of intertemporal allocation predict that the time path of expenditures should be independent of the time path of income recently two papers parker 1999 and souleles 1999 have suggested that u s households have a high marginal propensity to spend within year anticipated income changes we use an expenditure survey panel from spain to re examine this issue we exploit two important features of the spanish data first we have quarterly panel data that follows households for more than four quarters second we use the fact that workers are exogenously sorted into one of two payment schemes some receive the same amount each month of the year and others receive an extra payment in june and december the extra payment is large and predictable we examine the detailed pattern of expenditures over the year to see whether they differ between the two groups we fail to find even weak differences we complement this with a conventional euler equation analysis of excess sensitivity our predicting equation for quarterly earnings growth is much better than usual and is likely to give a powerful test of the hypothesis that predictable changes in income do not lead to changes in expenditure patterns the results of this analysis confirm the graphical analysis we find no evidence of excess sensitivity we conclude that households in normal times do smooth consumption over the year we suggest a reconciliation of our results with those of parker and souleles

the ivory trade ban is it effective abstract this paper examines the effectiveness of the ivory trade ban when producer and consumer states have different incentives to comply with such a ban the paper distinguishes between two types of producer states those with stable elephant population and those with declining elephant population we compare the independent enforcement level of each of these producer states and a consumer state and show the suboptimality of these levels compared to optimal enforcement level that would result from a cooperative effort the costliness and imperfectness of enforcing constraints on the private taking of elephants creates intergovernmental externalities thus in the absence of binding international law regulation would have to be supplemented with incentives

household expenditure and the income tax rebates of 2001 using questions expressly added to the consumer expenditure survey we estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis we exploit the unique randomized timing of rebate receipt across households households spent 20 to 40 percent of their rebates on nondurable goods during the three month period in which their rebates arrived and roughly two thirds of their rebates cumulatively during this period and the subsequent three month period the implied effects on aggregate consumption demand are substantial consistent with liquidity constraints responses are larger for households with low liquid wealth or low income

fair allocation of disputed properties we model problems of allocating disputed properties as generalized exchange economies in which agents have preferences and claims over multiple goods and the social endowment of each good may not be sufficient to satisfy all individual claims in this context we investigate procedural and end state principles of fairness their implications and relations to do so we explore procedural allocation rules represented by a composition of a rights assignment mechanism to assign each profile of claims individual property rights over the endowment and walrasian or other individually rational exchange rule using variants of fairness based on no envy as end state principles we provide axiomatic characterizations of the three focal egalitarian mechanisms known in the literature on rationing problems as constrained equal awards constrained equal losses and proportional mechanisms our results are connected to focal contributions in political philosophy and also provide rationale for market based environ mental policy instruments such as cap and trade schemes and personal carbon trading and moral foundation for the three proposals to allocate ghg emission rights known as the equal per capita sharing the polluter pays principle and the equal burden sharing the victims pay principle

the reaction of household consumption to predictable changes in social security taxes the key implication of rational expectations and the basic life cycle permanent income hypothesis that predictable changes in income have no effect on the growth rate of consumption expenditures is examined this implication is important for understanding the effectiveness and optimal timing of fiscal policy the causes and propagation of business cycles and the effects of income fluctuations on the growth rate of the economy using household level consumption data from the consumer expenditure survey whether expenditures on nondurable goods increase contemporaneously with predictable changes in social security tax withholding is tested it is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the social security tax system

household search and the aggregate labor market we develop a theoretical model with labour market frictions incomplete financial markets and with households which have two members households face unemployment risks but their members adjust their labour supplies to insure against unemployment we use the model to explain the cyclical properties of aggregate employment and participation as in the u s data the model predicts that the participation rate the fraction of individuals that want jobs is not strongly correlated with aggregate economic activity this property is in sharp contrast to the strongly procyclical participation predicted by both neoclassical models and models with search frictions when we assume bachelor households or households with infinitely many members complete markets in the two member household model and in the data primary earners are always in the labour force secondary earners have a mildly countercyclical participation rate and a mildly procyclical employment rate their behaviour insures the household against unemployment risks

do consumers react to anticipated income changes evidence from the alaska permanent fund a central implication of the life cycle permanentincome hypothesis lc pih is that consumers should not respond to predictable changes in their income to test this hypothesis a number of recent papers have exploited natural experiments to identify anticipated income changes in particular recent work by parker 1999 uses the change in after tax income due to the cap on earnings subject to the social security tax and a related paper by souleles 1999 examines the response of consumption to income tax refunds surprisingly parker and souleles find that even when income is expected to change within the year expenditure is excessively sensitive to the timing of the income change while their results can be interpreted as evidence that our canonical model of consumption is inadequate an alternative explanation is that the anticipated income changes they exploit are small and irregular and that households will not bother to change their consumption paths when the computational costs involved are large relative to the utility gains in support of this interpretation browning and collado 2001 find that the seasonal consumption patterns of spanish households that work in sectors that provide regular bonus payments do not differ from those of households that do not receive bonus payments this paper adds to this evidence by exploiting a natural experiment provided by annual payments from the state of alaska s permanent fund to every resident in the state of alaska that should yield an unusually powerful test of the lc pih these payments are large and clearly anticipated by alaskan residents using the variation in the size of the payments over time and in the amount received by families of different sizes to identify the response of consumption to payments from the permanent fund i find no evidence that the consumption of alaskan households reacts to these payments in addition i find no evidence that the seasonal pattern of consumption in alaska differs from that in the other 49 states or that households in alaska are subject to fewer liquidity constraints engage in less buffer stock saving or spend a smaller fraction of their income on semidurable goods than households in the rest of the united states however although households in alaska do not overreact to payments from the permanent fund i find that the consumption of the very same households is excessively sensitive to their income tax refunds this evidence suggest that households will take anticipated income changes into account in their consumption decisions when the income changes are large regular and easy to predict but will not do so when they are small and irregular the paper proceeds as follows the next section of the paper presents details on the department of economics princeton university princeton nj 08544 and national bureau of economic research e mail chsieh princeton edu i am very grateful to the bureau of labor statistics bls for providing access to the data from the consumer expenditure survey and to its staff particularly steven henderson walter vandeheide and wolf weber for their generous assistance during my visits to the bls i also thank nanci jones for providing data and patiently answering questions on the operation of the alaska permanent fund anne case angus deaton jonathan parker and two referees provided useful comments the views expressed in this paper are personal and should not be attributed to the bls 1 i refer to the certainty equivalent version of the lc pih or one in which the expected variance of consumption is constant as is well known without these assumptions the lc pih only implies smoothing of marginal utility not necessarily of consumption 2 see christina h paxson 1992 john shea 1995 jonathan a parker 1999 nicholas s souleles 1999 martin browning and m dolores collado 2001 also see ronald a bodkin 1959 for an early example of the use of a natural experiment to test for excess sensitivity for comprehensive reviews of the large literature on empirical tests of the lc pih see angus deaton 1992 browning and annamaria lusardi 1996 and browning and thomas f crossley 2001 3 in 1998 for example the permanent fund paid 1 541 to every resident of the state of alaska

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

delaying retirement to pay for college does sending children to college affect the contemporaneous labor supply of older workers drawing on biennial waves of the health and retirement survey from 1992 2006 the author tracks the labor supply of parents before and after they send their children to college and shows that parents delay retirement while they are financing their children s college education controlling for the total number of children who ever attend college and the total number of those whose college expenses are paid for by older parents she finds that mothers and fathers are more likely to be working by 10 5 percentage points for fathers and by 6 9 percentage points for mothers less likely to be collecting social security benefits and less likely to report that they are retired if they are currently paying for a child s college education of those working there is little evidence that paying for a child s education has any impact on work intensity

economic impacts of new unionization on private sector employers 1984 2001 economic impacts of unionization on employers are difficult to estimate in the absence of large representative data on establishments with union status information estimates are also confounded by selection bias because unions could organize at highly profitable enterprises that are more likely to grow and pay higher wages using multiple establishment level data sets that represent establishments that faced organizing drives in the united states during 1984 1999 this paper uses a regression discontinuity design to estimate the impact of unionization on business survival employment output productivity and wages essentially outcomes for employers where unions barely won the election e g by one vote are compared with those where the unions barely lost the analysis finds small impacts on all outcomes that we examine estimates for wages are close to zero the evidence suggests that at least in recent decades the legal mandate that requires the employer to bargain with a certified union has had little economic impact on employers because unions have been somewhat unsuccessful at securing significant wage gains

are consumers forward looking evidence from fiscal experiments how changes in current and future income affect consumer spending is a perennial question in macroeconomics and public finance theoretical constructs such as the permanent income hypothesis are of limited assistance in resolving this issue because they neglect borrowing constraints and other market imperfections that can significantly affect the marginal propensity to spend out of current income recent empirical work has also proven inconclusive since whether consumption responds to income fluctuations by more or less than the permanent income hypothesis predicts turns critically upon whether disposable income follows a random walk or is stationary around a longrun trend see john campbell and angus deaton 1987 this controversy is unlikely to be resolved conclusively because it is notoriously difficult to distinguish a stationary but highly persistent time series from one that is nonstationary these difficulties suggest the importance of searching for natural experiments income shocks with predictable and well understood effects on future income to test models of consumer behavior changes in federal tax and transfer policy during the last two decades provide several episodes of this type analyzing the effects of these tax changes is also central to understanding the role of fiscal policy in affecting national saving this paper examines two aspects of consumer response to tax changes section i argues that consumption responds to temporary income tax shocks by more than the permanent income hypothesis would suggest results from the 1975 tax rebate in particular suggest that a 1 increase in transitory income raises spending by about 20 cents section ii examines consumption responses to tax announcements although the results are not conclusive they suggest that some consumers do not adjust consumption in anticipation of tax changes the final section sketches some implications for analyzing fiscal policy

an assessment of alternative methods of estimating the effect of the ivory trade ban on poaching effort the ban on international trade in ivory introduced by the international community in 1989 was intended to protect the declining stock of african elephant loxodonta africana by providing a barrier between the range state and the principal consuming nations if there is a residual trade then the efficiency of the ban is determined by the decline in the price paid to poachers and the responsiveness of poaching effort to changing prices this paper concentrates on the latter issue and provides a review of a number of alternative approaches to modelling poaching effort with extensions it is found that even low residual prices would induce a level of effort that would significantly depress elephant numbers

unemployment insurance design inducing moving and retraining evidence suggests that unemployed individuals can sometimes aect their job prospects by undertaking a costly action like deciding to move or retrain realistically such an opportunity only arises for some individuals and the iden tity of those may be unobservable ex ante the problem of characterizing con strained optimal unemployment insurance in this case has been neglected in previous literature we construct a model of optimal unemployment insurance where multiple incentive constraints are easily handled the model is used to analyze the case when an incentive constraint involving moving costs must be respected in addition to the standard constraint involving costly unobserv able job search in particular we derive closed form solutions showing that when the moving retraining incentive constraint binds unemployment bene ts should increase over the unemployment spell with an initial period with low bene ts and an increase after this period has expired

distributive justice in taxation abstract a classical criterion for apportioning taxes is that all should sacrifice equally in loss of utility suppose that a method of apportioning taxes is continuous and has the following four properties i the way that taxpayers split a given tax total depends only on their own taxable incomes ii an increase in the tax total implies that everyone pays more iii every incremental increase in tax is apportioned according to taxpayers current after tax incomes iv the ordering of taxpayers by pre tax income and after tax income is the same then there exists a utility function relative to which all sacrifice equally

the role of unemployment insurance in an economy with liquidity constraints and moral hazard the potential welfare benefits of unemployment insurance along with the optimal replacement ratio are studied using a quantitative dynamic general equilibrium model to provide a role for unemployment insurance agents in our economy face exogenous idiosyncratic employment shocks and are unable to borrow or insure themselves through private markets in the absence of moral hazard replacement ratios as high as 65 are optimal and the welfare benefits of unemployment insurance are quite large however if there is moral hazard and the replacement ratio is not set optimally but is instead set to an empirically plausible value the economy can be much worse off than it would be without unemployment insurance

economics and electronic commerce for economists who study markets whether wholesale or retail goods or services commodities or highly differentiated products these are extraordinary times the internet and related technologies have caused the costs of many kinds of market interactions to plummet as with any dramatic technological change the most obvious and earliest effects are incremental we find easier and less costly ways of doing the things we are already doing over time however the shifts are more drastic we discover that we can do entirely new things or completely restructure the way in which certain business activities are carried out such long term impacts of technological change are always hard to forecast but that task is especially difficult in the case of e commerce where markets are currently very far from equilibrium in the land rush to secure internet real estate to gain first mover market position and other advantages many firms are pursuing strategies that are properly interpreted as the payment of one time largely sunk entry costs in some cases the focus of these expenditures is on customer acquisition through pricing that is not likely to be sustainable while in others it is building infrastructure to achieve minimum efficient scale these expenditures fueled by inflows of venture capital may represent reasonable investments for a chance of a future stream of profits that might accrue to the

unemployment fears and deflationary spirals the interaction of incomplete markets and sticky nominal wages is shown to magnify business cycles even though these two features in isolation dampen them during recessions fears of unemployment stir up precautionary sentiments which induces agents to save more the additional savings may be used as investments in both a productive asset equity and an unproductive asset money but even a small rise in money demand has important consequences the desire to hold money puts deflationary pressure on the economy which provided that nominal wages are sticky increases wage costs and reduces firm profits lower profits repress the desire to save in equity which increases the fear of unemployment and so on this is a powerful mechanism which causes the model to behave differently from both its complete markets version and a version with incomplete markets but without aggregate uncertainty in contrast to previous results in the literature agents uniformly prefer non trivial levels of unemployment insurance

reservation wages and unemployment insurance this paper argues that a risk averse worker s after tax reservation wage encodes all the relevant information about her welfare this insight leads to a novel test for the optimality of unemployment insurance based on the responsiveness of reservation wages to unemployment benefits some existing estimates imply significant gains to raising the current level of unemployment benefits in the united states but highlight the need for more research on the determinants of reservation wages our approach complements those based on baily s 1978 test

the spike at benefit exhaustion leaving the unemployment system or starting a new job in this paper we review the literature on the spike in unemployment exit rates around benefit exhaustion and present new evidence based on administrative data for a large sample of job losers in austria we find that the way unemployment spells are measured has a large effect on the magnitude of the spike at exhaustion both in existing studies and in our austrian data spikes are typically much smaller when spell length is defined by the time to next job than when it is defined by the time spent on the unemployment system in austria the exit rate from registered unemployment rises by over 200 at the expiration of benefits while the hazard rate of re employment rises by only 20 the difference between the two measures arises because many individuals leave the unemployment register immediately after their benefits expire without returning to work the modest spike in re employment rates implies that most job seekers do not wait until their ui benefits are exhausted to return to work fewer than 1 of jobless spells have an ending date that is manipulated to coincide with the expiration of ui benefits this abstract was borrowed from another version of this item

an open access fishery with rational expectations explain the evolution of the fish stock and the boat fleet as well as determine their equilibrium levels 2 while the changes in the fish stock are described by a biological rule entry and exit from the fishing industry are determined by how expectations are formed we examine a general model in which entry and exit are proportional to the present value of expected profits and compare two special cases of adaptive myopic expectations and rational expectations although both expectations mechanisms lead to the same equilibrium values they lead to different adjustment paths where expectations solely depend on current values myopic expectations it is well known that boats enter the fishery only when the fish stock is greater than its steady state stock 3 with rational expectations however boats may enter when the fish stock is much lower than its steady state value provided the boat fleet is sufficiently small this difference in adjustment is observable and in principle leads to an obvious test on how agents form expectations section 2 develops a general dynamic model for studying fisheries in section 3 we show that the model standardly used in the literature is equivalent to a myopic adaptive expectations model a rational expectations model is analyzed in section 4 the standard and rational expectations models are compared in section 5 section 6 illustrates this comparison using a simulation based on a schaefer model of the pacific halibut fishery section 7 presents the conclusions

the complex interactions of markets for endangered species products economic models of trade in endangered species products often do not incorporate four focal arguments in the policy debate over trade bans 1 law abiding consumers may operate in another market separate from illegal consumers that trade would bring online 2 legal trade reduces stigma which affects demand of law abiding consumers 3 laundering may bring illegal goods to legal markets when trade is allowed 4 legal sales may affect illegal supply costs this paper analyzes systematically which aspects of these complicated markets separately or in combination are important for determining whether limited legalized trade in otherwise illegal goods can be helpful for achieving policy goals like reducing poaching

erratum moral hazard versus 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 c 2008 by the university of chicago all rights reserved this abstract was borrowed from another version of this item

job search and savings wealth effects and duration dependence this article studies a risk averse worker s optimal savings and job search behavior as she moves back and forth between employment and unemployment we show that job search effort is negatively related to wealth under the assumption of additively separable utility consequently job search exhibits positive unemployment duration dependence because wealth is drawn down to smooth consumption as the spell progresses finally given optimal search savings still provide imperfect insurance against income fluctuations precautionary savings are built up during employment spells and run down during unemployment spells but the consumption path will not be perfectly smooth over states

how changes in financial incentives affect the duration of unemployment this paper studies how changes in the two key parameters of unemployment insurance the benefit replacement rate rr and the potential benefit duration pbd affect the duration of unemployment to identify such an effect we exploit a policy change introduced in 1989 by the austrian government which affected various unemployed workers differently a first group experienced an increase in rr a second group experienced an extension of pbd a third group experienced both a higher rr and a longer pbd and a fourth group experienced no change in the policy parameters we find that unemployed workers react to the disincentives by an increase in unemployment duration and our empirical results are consistent with the predictions of job search theory we use our parameter estimates to split up the total costs to unemployment insurance funds into costs due to changes in the unemployment insurance system with unchanged behaviour and costs due to behavioural responses of unemployed workers our results indicate that costs due to behavioural responses are substantial

benefit duration and unemployment entry a quasi experiment in austria apart from being an important aspect of job search behavior of individuals potential bene t duration can also have e2ects on unemployment entry rates in this paper the causal connection between the two is investigated for the case of austria using a quasi experimental situation that arose following the enactment of a law that extended bene t duration for older workers in speci c regions of the country unemployment entry is found to have risen between 4 and 11 percentage points due to the new law several robustness checks are presented to see if a causal interpretation of this result is possible preliminary analysis shows that this increase in unemployment entry can be best understood not as voluntary quits but layo2s by rms who want to get rid of high tenured and expensive older workers c

the sensitivity of consumption to transitory income estimates from panel data on households we investigate the stochastic relation between income and consumption specifically consumption of food within a panel of about 2 000 households our major findings are 1 consumption responds much more strongly to permanent than to transitory movements of income 2 the response to transitory income is nonetheless clearly positive 3 a simple test independent of our model of consumption rejects a central implication of the pure life cycle permanent income hypothesis the observed covariation of income and consumption is compatible with pure life cycle permanent income behavior on the part of80 percent of families and simple proportionality of consumption and income among the remaining 20 percent as a general matter our findings support the view that families respond differently to different sources of income variations in particular temporary income tax policies have smaller effects on consumption than do other more permanent changes in income of the same magnitude this abstract was borrowed from another version of this item

the life cycle model of consumption and saving a central implication of life cycle models is that agents smooth consumption we review the empirical evidence on smoothing at frequencies from within the year up to across a lifetime we find that life cycle models particular those which incorporate realistic features of markets and goods have more empirical successes than failures we also show that some apparent deviations from theoretical predictions imply very small welfare losses for agents finally we emphasize that the coherence of life cycle models imposes an important discipline when incorporating new features into models

sharing the cost of a public good an incentive constrained axiomatic approach we study the problem of provision and cost sharing of a public good in large economies where exclusion complete or partial is possible we search for incentive constrained efficient allocation rules that display fairness properties population monotonicity says that an increase in population should not be detrimental to anyone demand monotonicity states that an increase in the demand for the public good in the sense of a first order stochastic dominance shift in the distribution of preferences should not be detrimental to any agent whose preferences remain unchanged under suitable domain restrictions we give an explicit characterization of all incentive constrained efficient allocation rules we then show that there exists a unique incentive constrained efficient and demand monotonic allocation rule the so called serial rule in the binary public good case the serial rule is also the only incentive constrained efficient and population monotonic rule

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

liquidity and insurance for the unemployed we study the optimal design of unemployment insurance for workers sampling job opportunities over time we focus on the optimal timing of benefits and the desirability of allowing workers to freely access a riskless asset when workers have constant absolute risk aversion preferences it is optimal to use a very simple policy a constant benefit during unemployment a constant tax during employment that does not depend on the duration of the spell and free access to savings using a riskless asset away from this benchmark for constant relative risk aversion preferences the welfare gains of more elaborate policies are minuscule our results highlight two largely distinct roles for policy toward the unemployed a ensuring workers have sufficient liquidity to smooth their consumption and b providing unemployment benefits that serve as insurance against the uncertain duration of unemployment spells

equality of resources implies equality of welfare if one is an egalitarian should one try to equalize resources available to agents or to equalize their welfares with a suitably general conception of what resources are these two conceptions cannot be distinguished an allocation mechanism is defined on a space of economies and is required to satisfy various axioms that are necessary conditions for equalizing resources among a population the unique mechanism satisfying these axioms on a large domain of economies is the one that allocates commodities so as to equalize utilities of the agents methodologically the theorem is a generalization of bargaining theory because the mechanisms are defined on commodity space

location search costs and youth unemployment experimental evidence from transport subsidies do high search costs affect the labour market outcomes of jobseekers living far away from jobs i randomly assign transport subsidies to unemployed youth in urban ethiopia treated respondents increase job search intensity and are more likely to find good permanent jobs subsidies also induce a short term reduction in temporary work i use a high frequency phone call survey to track the trajectory of search behaviour over time to show that the subsidies significantly increased job search intensity and the use of formal search methods the evidence suggests that cash constraints cause young people to give up looking for good jobs too early

the match quality gains from unemployment insurance this paper assesses the benefits of unemployment insurance ui by measuring its effect in match quality we note that ui generosity should affect the decision to match or not and should therefore have some effect on match quality using nlsy data we analyze the relationship between postunemployment job tenure and measures of the state level ui generosity and the unemployment rate at the time the job is started we show that greater ui generosity leads to longer job tenure furthermore we find some evidence that this effect is more pronounced during busts ui having a limited dampening effect on the cyclical variation in match quality

issues and concerns in developing regulated markets for endangered species products the case of rhinoceros horns a proposal for addressing rhinoceros poaching is to legalise the trade in rhino horn and adopt a regulated market approach rma overturning the current trade ban this orthodox economic prescription aims to reduce incentives to poach endangered wildlife by driving down the market price of their products via auctioned stockpile releases biologists are clear however that securing a stockpile for some species needs biological success in captive breeding programmes cbps which varies markedly across species and habitats rhinoceros herds in a cbp would need spatially extensive terrain and costly permanent security measures and this only appears feasible for the less aggressive white rhino we argue that market price would actually need to be sustained at a high level to cover protection costs over the longer reproduction cycles in cbps and that without extensive monitoring and the correct institutional structures being in place legalising trade may encourage rather than prevent poaching supplementary policy measures that differentiate among consumer groups would also likely prove necessary

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

wic in your neighborhood new evidence on the impacts of geographic access to clinics a large body of evidence indicates that conditions in utero and health at birth matter for individuals long run outcomes suggesting potential value in programs aimed at pregnant women and young children this paper uses a novel identification strategy and data from birth and administrative records over 2005 2009 to provide causal estimates of the effects of geographic access to the special supplemental nutrition program for women infants and children wic my empirical approach uses within zip code variation in wic clinic presence together with maternal fixed effects and accounts for the potential endogeneity of mobility gestational age bias and measurement error in gestation i find that access to wic increases food benefit take up pregnancy weight gain birth weight and the probability of breastfeeding initiation at the time of hospital discharge the estimated effects are strongest for mothers with a high school education or less who are most likely eligible for wic services

axiomatic bargaining theory on economic environments abstract axiomatic bargaining theory is reexamined by focusing upon the economic exhange environment instead of the traditional utility possibility set it is argued that the axioms of the traditional theory impose stronger restrictions than can be supported by their motivating economic intuitions weaker alternative axioms making explicit use of economic information are used to characterize the standard bargaining solutions a key idea is to impose consistency of the solution with respect to changes in the dimension of the commodity space even these weaker economic axioms however may be unrealistic restrictions to impose on the bargaining solution in the context of many economic bargaining problems

how effective are unemployment benefit sanctions looking beyond unemployment exit this paper provides a comprehensive evaluation of benefit sanctions i e temporary reductions in unemployment benefits as punishment for noncompliance with eligibility requirements in addition to the effects on unemployment durations we evaluate the effects on post unemployment employment stability on exits from the labor market and on earnings in our analysis we use a rich set of swiss register data which allow us to distinguish between ex ante effects the effects of warnings and the effects of enforcement of benefit sanctions adopting a multivariate mixed proportional hazard approach to address selectivity we find that both warnings and enforcement increase the job finding rate and the exit rate out of the labor force warnings do not affect subsequent employment stability but do reduce post unemployment earnings actual benefit reductions lower the quality of post unemployment jobs both in terms of job duration as well as in terms of earnings the net effect of a benefit sanction on post unemployment income is negative over a period of two years after leaving unemployment workers who got a benefit sanction imposed face a net income loss equivalent to 30 days of full pay due to the ex post effect in addition to that stricter monitoring may reduce net earnings by up to 4 days of pay for every unemployed worker due to the ex ante effect

optimal institutional arrangements for transboundary pollutants in a second best world evidence from a differential game with asymmetric players abstract this paper uses a dynamic model with asymmetric players to explore the question in a second best world should environmental regulations for transboundary pollutants be carried out locally or centrally we find that combined payoffs are larger with decentralized control if payoffs are sufficiently heterogeneous and initial pollution stocks are sufficiently small this result is obtained because the central authority applies one shadow price to pollution i e it uses uniform standards whereas local authorities use different shadow prices and therefore different standards

the effect of medicaid premiums on enrollment a regression discontinuity approach abstract this paper estimates the effect that premiums in medicaid have on the length of enrollment of program beneficiaries whether and how low income families will participate in the exchanges and in states medicaid programs depends crucially on the structure and amounts of the premiums they will face i take advantage of discontinuities in the structure of wisconsin s medicaid program to identify the effects of premiums on enrollment for low income families i use a 3 year administrative panel of enrollment data to estimate these effects i find an increase in the premium from 0 to 10 dollars per month results in 1 4 fewer months enrolled and reduces the probability of remaining enrolled for a full year by 12 percentage points but other discrete changes in premium amounts do not affect enrollment or have a much smaller effect i find no evidence of program enrollees intentionally decreasing labor supply in order to avoid the premiums

a reconciliation of two alternative approaches towards buffer stock saving this paper shows that the two main models in the buffer stock saving literature can be nested in a model that varies the level of available social insurance equivalently the assumption about the time series process for labor income and social insurance during unemployment is crucial in determining the level but not the shape of optimal consumption as a function of liquid wealth

the optimal number of firms in the commons a dynamic approach we consider a common property resource sold in imperfectly competitive markets there is a dynamic externality current harvests lower future stocks raising future harvest costs and a static crowding externality increasing industry size raises costs but lowers prices thus it has ambiguous welfare effects the optimal industry size typically changes over time so that a first best outcome cannot be obtained with a fixed number of firms single firm exploitation is optimal only under special circumstances the socially optimal open loop steady state industry size corresponds to the static optimum both generally differ from the closed loop steady state optimum

a general formula for the optimal level of social insurance in an influential paper baily 1978 showed that the optimal level of unemployment insurance ui in a stylized static model depends on only three parameters risk aversion the consumption smoothing benefit of ui and the elasticity of unemployment durations with respect to the benefit rate this paper examines the key economic assumptions under which these parameters determine the optimal level of social insurance i show that a baily type expression with an adjustment for precautionary saving motives holds in a general class of dynamic models subject to weak regularity conditions for example the simple reduced form formula derived here applies with arbitrary borrowing constraints durable consumption goods private insurance arrangements and search and leisure benefits of unemployment

unemployment insurance benefit levels and consumption changes abstract we use a canadian survey of the unemployed to examine how household expenditures after a job loss respond to the level of income replacement provided by ui we isolate a liquidity constraint or transitory income effect from the permanent income shock of job loss and from the costs of working we find significant effects of varying the replacement ratio among the third of the sample who did not have assets at the job loss we conclude that the consumption smoothing benefit of ui is concentrated wholly on a sub group of the unemployed

equity in exchange economies abstract let be a fair choice correspondence i e associates to every economy in some initial position a set of final allocations at which the gains from trade have been fairly distributed we propose to declare equitable any final allocation which is invariant under arbitrary permutations among the agents of the components of the initial allocation followed by the operation of we also formulate a series of other criteria patterned on this model and we investigate the existence of allocations satisfying these criteria for several natural choices of

cash on hand and competing models of intertemporal behavior new evidence from the labor market this paper presents new tests of the permanent income hypothesis and other widely used models of household behavior using data from the labor market we estimate the excess sensitivity of job search behavior to cash on hand using sharp discontinuities in eligibility for severance pay and extended unemployment insurance ui benefits in austria analyzing data for over one half million job losers we obtain three empirical results 1 a lump sum severance payment equal to two months of earnings reduces the job finding rate by 8 12 on average 2 an extension of the potential duration of ui benefits from 20 weeks to 30 weeks similarly lowers job finding rates in the first 20 weeks of search by 5 9 and 3 increases in the duration of search induced by the two programs have little or no effect on subsequent job match quality using a search theoretic model we show that estimates of the relative effect of severance pay and extended benefits can be used to calibrate and test a wide set of intertemporal models our estimates of this ratio are inconsistent with the predictions of a simple permanent income model as well as naive rule of thumb behavior the representative job searcher in our data is 70 of the way between the permanent income benchmark and credit constrained behavior in terms of sensitivity to cash on hand

wages and the value of nonemployment nonemployment is often posited as a worker s outside option in wage setting models such as bargaining and wage posting the value of nonemployment is therefore a key determinant of wages we measure the wage effect of changes in the value of nonemployment among initially employed workers our quasi experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance ui benefit levels in austria we document that wages are insensitive to ui benefit changes point estimates imply a wage response of less than 0 01 per 1 00 ui benefit increase and we can reject sensitivities larger than 0 03 the insensitivity holds even among workers with low wages and high predicted unemployment duration and among job switchers and recently unemployed workers the insensitivity of wages to the nonemployment value presents a puzzle to the widely used nash bargaining model which predicts a sensitivity of 0 24 0 48 our evidence supports wage setting models that insulate wages from the value of nonemployment

on the job search and precautionary savings in this paper i develop and estimate a model of on the job search in which risk averse workers choose search effort and can borrow or save using a single risk free asset i derive the implications for optimal savings behavior in this environment and relate this to the frictions that characterize the endogenous earnings process implied by on the job search savings behavior depends in a very intuitive way on the rate at which offers are received the rate at which jobs are destroyed and a worker s current rank in the wage distribution the implication is that workers who are identical in terms of preferences and opportunities have substantially different savings behavior depending on their history and current position in the wage distribution the mechanism that generates the substantial differences in savings behavior in the model is the dynamic of the wage ladder resulting from the search process there is an important asymmetry between the incremental wage increases generated by onthe job search climbing the ladder and the drop in income associated with job loss falling off the ladder the behavior of workers in low paying jobs is primarily governed by the expectation of wage growth while the behavior of workers near the top of the distribution is driven by the possibility of job loss the distributions of earnings wealth and consumption implied by the model suitably aggregated align reasonably well with the data with the notable exception of implying substantially less concentration of wealth among the richest one percent of the population in this paper i develop and estimate a model of on the job search in which risk averse workers choose search effort and can borrow or save using a single risk free asset i derive the implications for optimal savings behavior in this environment and relate this to the frictions that characterize the endogenous earnings process implied by on the job search savings behavior depends in a very intuitive way on the rate at which offers are received the rate at which jobs are destroyed and a worker s current rank in the wage distribution the implication is that workers at different point in the wage distribution have substantially different savings behavior resulting in wealth dispersion that is much greater than earnings dispersion the mechanism that generates the high degree of wealth dispersion in the model is the dynamic of the wage ladder resulting from the search process there is an important asymmetry between the incremental wage increases generated by on the job search climbing the ladder and the drop in income associated with job loss falling off the ladder this feature of the model generates differential savings behavior at different points in the earnings distribution the behavior of workers in low paying jobs is primarily governed by the expectation of wage growth while the behavior of workers near the top of the distribution is primarily driven by the possibility of job loss the wage growth expected by low wage workers combined with the fact that their earnings are not much higher than unemployment benefits causes them to dissave as a worker s wage increases the incentive to save increases the potential for wage growth declines and it becomes increasingly important to insure against the large income reduction associated with job loss the fact that high wage and low wage workers have such different savings behavior leads to a wealth distribution that is much more unequal 1

why and how to differentiate in claims problems an axiomatic approach abstract in a bankruptcy situation individuals are not equally affected since each one has its own specific characteristics these aspects cannot be ignored and may justify an allocation bias in favor of or against some individuals this paper develops a theory of differentiation in claims problems that considers not only the vector of claims but also some justified differentiating criteria based on other characteristics wealth net income gdp etc accordingly we propose some progressive transfers from richer to poorer claimants with the purpose of distributing the damage as evenly as possible finally we characterize our solution by means of the lorenz criterion endogenous convex combinations between solutions are also considered