habits costly investment and current account dynamics abstract we analyze the current account dynamics for a small country model with habit forming consumers and costly investment the model has several empirical and policy implications i it is consistent with stylized facts regarding the effects of productivity shocks and increases in fiscal spending and regarding the savings investment co movement ii the long run effect of a temporary shock on net foreign assets is often opposite to that of a permanent shock iii under strong habit persistence the welfare dynamics are sluggish so that a beneficial tax financed fiscal policy may have a harmful hangover effect on welfare

tobacco taxes and regressivity recent literature on tobacco taxation suggests that optimal tax rates should be very high but such high taxes raise concerns over regressivity most econometric estimates of elasticities by income group use historic price data that are low and the usefulness of such estimates is therefore questionable on account of the serious out of sample prediction problem to address that problem this paper estimates price elasticities for different socioeconomic groups using recent canadian survey data for a period during which prices rose to a level of about 7 per pack the results provide little reason to overturn the traditional concerns about regressivity

habit formation in children evidence from incentives for healthy eating we present findings from a field experiment conducted at 40 elementary schools involving 8000 children and 400 000 child day observations which tested whether providing short run incentives can create habit formation in children over a 3 or 5 week period students received an incentive for eating a serving of fruits or vegetables during lunch relative to an average baseline rate of 39 providing small incentives doubled the fraction of children eating at least one serving of fruits or vegetables two months after the end of the intervention the consumption rate at schools remained 21 above baseline for the 3 week treatment and 44 above baseline for the 5 week treatment these findings indicate that short run incentives can produce changes in behavior that persist after incentives are removed

the hidden persuaders institutions and individuals in economic theory in his classic book the hidden persuaders vance packard claimed that large corporations manipulated consumers using advertising techniques john kenneth galbraith and others have repeated a similar view against this gary becker and george stigler have claimed that advertising is essentially informative rather than manipulative in contrast it is argued here that both of these opposed accounts of human agency neglect the more subtle and undesigned processes by which institutions bear upon and mould individuals this paper proposes a concept of reconstitutive downward causation in which institutions act upon individual habits and dispositions the mechanisms involved do not fall foul of past critiques of holism or methodological collectivism this argument involves a rehabilitation of the concept of habit in social science with far reaching implications

welfare implications of the interaction between habits and consumption externalities we analyze the welfare properties of the equilibrium path of a growth model where both habits and consumption externalities affect the utility of consumers our analysis highlights the crucial role played by complementarities between externalities and habits in order to generate an infficient dynamic equilibrium in particular we show that the competitive equilibrium is inefficient when consumption externalities and habit adjusted consumption are not perfect substitutes

agency relationships in family firms theory and evidence does owner management necessarily eliminate the agency costs of ownership drawing on agency literature and on the economic theory of the household we argue that private ownership and owner management expose privately held owner managed firms to agency threats ignored by jensen s and meckling s 1976 agency model private ownership and owner management not only reduce the effectiveness of external control mechanisms they also expose firms to a self control problem created by incentives that cause owners to take actions which harm themselves as well as those around them jensen 1994 p 43 thus shareholders have incentive to invest resources in curbing both managerialand owner opportunism we extend this thesis to the domain of the family firm after developing hypotheses which describe how family dynamics and specifically altruism exacerbate agency problems experienced by these privately held owner managed firms we use data obtained from a large scale survey of family businesses to field test our hypotheses and find evidence which suggests support for our proposed theory finally we discuss the implications of our theory for research on family and other types of privately held owner managed firms

testing for forward looking behaviour evidence from the enactment of smoking restrictions abstractthis paper develops a new test for forward looking behaviour based on the establishment of public smoking restrictions given that the announcement of these restrictions effectively increases the future cost of smoking we should expect forward looking smokers to curb their consumption before the restriction is effective due to complementarity between present and future consumption i perform the estimation using detailed high frequency household level purchase data the results provide evidence against the forward looking behaviour of smokers households do not reduce their cigarette purchases before announced public smoking restrictions are established they only do so once the restriction is in effect

is smoking inferior evidence from variation in the earned income tax credit in this paper we estimate the causal income elasticity of smoking participation cessation and cigarette demand conditional upon participation using an instrumental variables iv estimation strategy we find that smoking appears to be a normal good among low income adults higher instrumented income is associated with an increase in the number of cigarettes consumed and a decrease in smoking cessation the magnitude and direction of the changes in the income coefficients from our ols to iv estimates are consistent with the hypothesis that correlational estimates between income and smoking related outcomes are biased by unobservable characteristics that differentiate higher income smokers from lower income smokers

taxation or regulation looking for a good anti smoking policy abstract this paper investigates the relative ability of two anti smoking policies taxes and regulation in inducing reductions in cigarette consumption and in providing incentives to stop smoking or not to start to our results based on canadian data show that cigarette demand responds to taxes elasticity of 0 28 but not to regulation while the converse is true for the proportion of smokers in the population

short run demand for palestinian labor palestinian residents of the west bank and gaza strip who work in israel generally earn more than palestinians employed locally but this wage premium is highly volatile beginning with the 1987 palestinian uprising changes in wage differentials by work location parallel palestinian absences from work in israel this article interprets changing location differentials in response to exogenous shocks as movements along an israeli demand curve for migrant workers estimates of a model of the west bank and gaza strip labor market are used to evaluate the effect of policies governing palestinian access to the israeli labor market

consumer habituation this paper examines how consumers willingness to pay for goods is determined by past patterns of consumption the central result is atheorem of interior maximum which states that willingness to pay for a good is maximized at a moderate level of habitual consumption the theorem is derived from a simple model of adaptive behavior that involves a shifting s shaped value function the detailed analysis of the impact of consumption frequency and intensity on willingness to pay reveals an unsuspected implication of diminishing sensitivity even as it leads to a formalization of consumer habituation patterns including sensitization habituation and response recovery upon withdrawal that matches and integrates the most robust empirical regularities attendant on nonassociative learning in neurobiology and behavioral psychology an examination of the implications for demand dynamics and pricing highlights deterministic recurrent and transient patterns of consumption at higher price points

mother s education and the intergenerational transmission of human capital evidence from college openings we examine the effect of maternal education on birth outcomes using vital statistics natality data from 1970 to 1999 we also assess the importance of four channels through which maternal education may improve birth outcomes use of prenatal care smoking marriage and fertility in an effort to account for the endogeneity of education attainment we use data about the availability of colleges in the womans country in her 17th year as an instrument for maternal education we find that higher maternal education improves infant health as measured by birth weight and gestational age it also increases the probability that a new mother is married reduces parity increases use of prenatal care and reduces smoking suggesting that may be important pathways for the ultimate effect on health our results add to the growing body of literature which suggests that estimates of the returns to education which focus only on increases in wages understate the total return

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

do minimum wage increases influence worker health this study investigates whether minimum wage increases impact worker health in the united states we consider self reported measures of general mental and physical health we use data on lesser skilled workers from the 1993 to 2014 behavioral risk factor surveillance survey among men we find no evidence that minimum wage increases improve health instead we find that such increases lead to worse health outcomes particularly among unemployed men we find both worsening general health and improved mental health following minimum wage increases among women these findings broaden our understanding of the full impacts of minimum wage increases on lesser skill workers jel i1 i11 i18

price knowledge in household demand for utility services a household s decision to acquire price knowledge is endogenous in the demand for utility services and may affect elasticities and consumption levels a simultaneous equation model with endogenous switching is developed to evaluate the effects of price knowledge and other sources of heterogeneity results indicate informed households were more responsive to average and marginal price signals informed households also use less water but this is due to heterogeneity rather than price knowledge controlling for heterogeneity price knowledge actually increases monthly water usage the implications of accounting for differences in price knowledge in utility demand modeling and demand management policy are discussed

betting bias in exotic bets abstract the evidence from racetrack betting is that the subjective probabilities to win expressed through the public s bets are good approximations to the objective probabilities on the whole but that a betting bias exists in that favorites are underbet and long shots overbet we examine these questions for exactas and trifectas which the aid of a new database the approximation of subjective to objective probabilities is good for exactas and no betting bias is evident for trifectas the findings are more ambiguous and suggest that a taste for long shots or a misperception of true probabilities may play a role

the economic functioning of online drugs markets abstract the economic functioning of online drug markets using data scraped from online platforms is studied analysis of over 1 5 million online drugs sales shows online drugs markets tend to function without the significant moral hazard problems that a priori one might think would plague them only a small proportion of online drugs deals receive bad ratings from buyers and online markets suffer less from problems of adulteration and low quality that are a common feature of street sales of illegal drugs furthermore as with legal online markets the market penalizes bad ratings which subsequently lead to significant sales reductions and to market exit the impact of the well known seizure by law enforcement of the original silk road and the shutdown of silk road 2 0 are also studied together with the exit scam of the market leader at the time evolution there is no evidence that these exits deterred buyers or sellers from online drugs trading as new platforms rapidly replaced those taken down with the online market for drugs continuing to grow

efficiency and profitability in exotic bets the efficiency and profitability of exotic racetrack bets such as exactas and daily doubles are examined efficiency is understood to mean that above average returns cannot be made in the long run once risk is appropriately controlled for the markets in question are found not to be efficient the inefficiencies however are insufficient to permit simple strategies to show a consistent profit some evidence of smart money exists in that holders of inside information may bet on exactas rather than equivalent standard bets in order to avoid signaling their actions to the betting public copyright 1987 by the review of economic studies limited

are wages habit forming evidence from micro data although utility functions play a central role in economics the axiom that utility depends only on the absolute levels of its arguments is rarely tested this paper uses panel data on 2000 british employees who remain with the same employer and who are not promoted from one wave to the next it is shown that one important measure of well being overall job satisfaction is strongly positively correlated with the change in the worker s pay between waves but is unrelated to the current level of pay empirical tests suggest that a reference dependent satisfaction function where individual well being depends on current pay relative to past pay is more consistent with these regression results than are productivity or agency explanations of increasing wage profiles some evidence is presented of greater job satisfaction effects of pay rises for lower paid less well educated and younger workers these results provide some micro evidence consistent with the theory widespread in social science of habituation individuals may become used to any given level of consumption or income as such they tie in with the finding that a country s well being as measured by the average happiness of its citizens is only weakly correlated with its per capita gnp

rational exuberance at the mall addiction to carrying a credit card balance the becker murphy model of rational addiction is tested with new zealand credit card debt data the results clearly favour the rational addiction model over the myopic backward looking model the estimated short run and long run price elasticities are 0 58 and 2 32 respectively and the estimated rate of time preference is 6 7 per quarter

a cue theory of consumption psychological experiments demonstrate that repeated pairings of a cue and a consumption good eventually create cue based complementarities the presence of the cue raises the marginal utility derived from consumption in this paper such dynamic preferences are embedded in a rational choice model behavior that arises from this model is characterized by endogenous cue sensitivities costly cue management commitment and cue based spikes in impatience the model is used to understand addictive habit forming behaviors and marketing the model explains why preferences change rapidly from moment to moment why temptations should sometimes be avoided and how firms package and position goods

motives for private transfers over the life cycle an analytical framework and evidence for peru abstract this paper tests for the motives for private income transfers we consider two motives altruism and exchange the question of private transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income using a household survey for peru we find that transfer amounts received increase with recipient pre transfer income which contradicts a key prediction of the strong form of the altruism hypothesis but is consistent with exchange we also find that capital market imperfections are likely to be an important cause of private transfers and that social security benefits crowd out the incidence of private transfers

life cycle consumption of a harmful and addictive good david goldbaum this article demonstrates that the endogenous desire to quit smoking can result from a rational consumption path chosen at the time the consumer begins smoking this result is obtained without relying on hidden costs or unknown preferences a finite lived agent chooses a path of consumption of a harmful and addictive good to maximize present discounted utility the consumer chooses his consumption rate to account for the future health consequence of smoking and the withdrawal costs of quitting a consumer may choose to smoke even if it means a lowered utility level for the majority of the time spent smoking jel d91 c61 i12 i introduction some of what we consume for pleasure can be harmful economists assume that consumers take measure of the potential harm and balance it against the pleasure derived from consumption when both the pleasure and the harm occur at the time of consumption the decision is straightforward some goods though impose a cost borne at some future date requiring intertemporal planning these present a greater challenge to the consumer and to the economist trying to explain the consumer s behavior at times observed behavior implores us to question whether the consumer is properly weighing the costs and benefits in a manner that maximizes his or her utility theoretically for each item under consideration the rational consumer properly balances the lifetime benefits derived from the consumption against the lifetime costs some observed behavior seems to contradict this rational approach to consumption in particular it is common for people to begin smoking cigarettes during their youth only to endogenously make a decision to quit at a future date to integrate this behavior with rationality modelers have proposed hidden costs multiple selves changing preferences or other strategies that limit the decision making ability of the youth in all of these cases for some consumers the decision to smoke is a mistake made during youth that has to be reversed at some cost as a middle aged adult this article aims to demonstrate that a lifetime path of consumption in which a person consumes a harmful and addictive good while young and quits at some later date is a path that is perfectly consistent with rational behavior it is not necessary to assume that mid life quitters are displaying irrational or time inconsistent behavior if all information regarding a good s harmful properties is revealed some consumers will still choose a path that requires quitting mid life this paper primarily examines the consumption of cigarettes but also includes analysis of a nonaddictive unhealthy good both of these harmful goods provide the consumer with immediate pleasure but at the cost of decreasing life expectancy background becker and murphy 1988 bm introduced the concept of rational addiction the idea that addicts are forward looking rational consumers present consumption choices reflect not only current utility considerations and budget constraints but also incorporate the anticipated impact of present consumption on future utility and budget constraints bm examine the behavior response of addicts to exogenous shocks changes from a steady state including the desire to quit originate only from exogenous shocks such as a change in the relative price of the good or a revelation about the detrimental health consequences of the addictive good that alters the consumer s utility derived from consumption the model offers no mechanism by which smokers may choose to alter behavior endogenously in contrast to bm s smokers many of today s smokers appear to quit in absence of an external shock anyone who began smoking after 1966 has been subjected to the legislated health warnings appearing on cigarette packages since that time 1 antismoking messages in radio and television advertisements during the 1950s and 1960s also helped to make the health consequences of smoking common knowledge

identifying the causal effect of income on religiosity using the earned income tax credit abstract how do economic conditions income and the generosity of social insurance affect religious behavior this paper provides novel evidence for the united states using variation in earned income tax credit benefits across states over time and by number of children in the raw data income and religiosity have a trivial relationship in contrast the instrumental variables strategy shows that increases in income from the eitc are found to sizably reduce religious attendance among low income individuals among individuals who attend the results indicate that an additional 1000 in annual income is associated with a decrease of roughly 1 service per year as compared to an average of 16 services per year the effect arises mainly along the intensive margin decreasing devout behavior and increasing more marginal attendance but having little impact on whether an individual participates at all or on beliefs there are also minimal effects on the occurrence and amount of contributions to religious organizations the results extend our understanding of the determinants of religiosity the relationship between governmental income support and religious behavior and the social effects of the earned income tax credit

unemployment insurance and cigarette smoking abstract we provide evidence for the causal relationship between unemployment insurance ui and individuals smoking behavior using the 1995 2011 current population survey tobacco use supplement data our identification relies on the exploitation of the exogenous variations of the maximum ui weekly benefits across states and over years instead of focusing on all unemployed people we concentrate on those who are eligible for ui benefits we find that when the maximum ui weekly benefit level increases by 100 smoking cessation increases by approximately 2 9 percentage points among the ui eligible unemployed the results are robust to various model specifications we also explore the mechanism and find suggestive evidence that the increase in the maximum ui weekly benefit leads to a decrease in the probability of over work of the respective spouse moreover the unemployed who are less educated are more responsive to the increasing ui benefits

development growth and policy reform in the middle east and north africa since 1950 prior to 1950 the countries of the middle east exhibited some of the lowest levels of socioeconomic development in the world for many of these countries not even approximate economic statistics are available for the first half of the twentieth century but the state of underdevelopment can be illustrated by looking at egypt the most modernized and populous country in the arab world at the time egyptian per capita income stagnated in the first half of the twentieth century the country lacked modern industries and relied largely on the cotton sector for export and government revenues but agricultural productivity had been on a steady decline since the end of the nineteenth century owen and pamuk 1998 prior to land reforms in 1952 three quarters of peasants in this agrarian country owned less than an acre or no land at all the neglect of human services allowed periodic epidemics and malnutrition to keep mortality rates high until the late 1940s education levels were well below other developing regions with adult illiteracy estimated at 85 percent in 1939 and only 23 percent of children ages 5 19 enrolled in school but in the 1960s and 1970s egypt and other countries of the middle east experienced robust economic growth based largely on high levels of investment in physical capital that facilitated substantial increases in per capita income it might seem obvious that the higher oil prices of the 1970s should have sustained the growth cycle in this oil exporting region but gdp growth per worker in the middle east decelerated in that decade and factor productivity growth actually turned negative in the 1980s and 1990s gdp growth per worker in the region was less than 1 percent per year and modest gains in human capital were largely offset by

the effects of excise taxes and regulations on cigarette smoking abstract we estimate a generalized linear model to examine adult and teenage cigarette demand our analysis focuses on the extent to which exice taxes and regulations restricting smoking in public places affect cigarette consumption the adult results indicate that the price elasticity of demand is unstable over time ranging from 0 06 in 1970 to 0 23 in 1985 these estimates are lower than most found in previous studies the teenage price elasticity does not differ statistically from the estimates for adults additionally regulations restricting smoking in public places have a significant effect on both adult and teenage cigarette demand

the effects of government transfers on monthly cycles in drug abuse hospitalization and mortality this paper analyzes the monthly patterns of adverse outcomes due to the consumption of illegal drugs by recipients of government transfer payments we find evidence that certain subpopulations on government cash aid significantly increase their consumption of drugs when their checks arrive at the beginning of the month and as a result experience adverse events including hospitalization and death using data from california we find that the overall rate of drug related hospital admissions increases abruptly at the beginning of the month with admissions increasing 23 during the first five days of the month we find that this cycle is driven largely by recipients of supplemental security income ssi ssi recipients also experience an abrupt 22 increase in within hospital mortality after receiving their checks these findings suggest that full wallets adversely affect some aid recipients and that policymakers should explore alternate disbursement regimes such as a staggered disbursement schedule or in kind support that have the potential to reduce the rate of adverse events

a test of dual labor market theory despite substantial differences in their views of the appropriate policy response to the existence of poverty neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis this paper presents a test of the two central propositions of dual market theory 1 the existence of two distinct labor markets with different wage setting mechanisms and 2 the existence of barriers to mobility between the labor markets we find considerable support for both hypothesis estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations the one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience the other equation is flat with no returns to human capital these two equations resemble the predictions of dual market theory for the primary and secondary markets respectively further we present evidence that at least some non white workers are involuntarily confined to the secondary market this crowding of minority workers into the low wage labor market accounts for a substantial portion of white non white wage differences we interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels in addition combining the efficiency wage argument with the observation that much of the white non white wage difference is explained by the exclusion of non whites from the primary sector suggests an explanation for the persistance of wage differences this abstract was borrowed from another version of this item

illicit drug use and labour market achievement evidence from the uk this study using data from the british crime survey bcs examines the effect of drug use on occupational achievement it starts by attempting to overcome the identification problem that results from the limited set of drug use questions presented in the bcs taking this into account and allowing for the endogeneity of drug use in equations for unemployment and labour market outcomes that a mild positive association with soft drugs and occupational achievement is observed that diminishes with age this relationship holds for males but not for females in contrast it is also found that past use of hard drugs significantly increases the likelihood of current unemployment although it appears to be unrelated to occupational success conditional on achieving employment

the simple analytics of tobacco taxation with illegal supply this paper examines the impact of tobacco excise taxes where legal and illegal supplies coexist the government s objective is to minimize cigarettes smoked in the economy or to maximize revenue or to minimize illegal activity it reacts to a competitive illegal supply in an adjoining jurisdiction a model of consumer choice is used to demonstrate how demand response to tax changes can yield counterintuitive results while the model mimics the canadian market similar situations characterize the us and european markets a novel element of the paper is the treatment of externalities on the supply side rather than the demand side resume analytique simple des taxes sur le tabac quand il y a offre illegale ce memoire examine l impact des taxes sur la vente de tabac quand des offres legale et illegale coexistent l objectif du gouvernement est de minimiser les cigarettes fumees dans l economie ou de maximiser le revenu fiscal ou de minimiser l activite illegale il doit prendre en compte l offre concurrentielle illegale dans une juridiction contigue on utilise un modele de choix du consommateur pour montrer comment la reaction de la demande aux changements dans les taxes peut engendrer des resultats contre intuitifs bien que le modele soit concu pour le marche canadien on trouve des situations avec des caracteristiques similaires dans les marches americain et europeens un element novateur du memoire est sa prise en compte des externalites du cote de l offre plutot que du cote de la demande

dynamic corrective taxes with time varying salience abstract economies across the globe are becoming increasingly cashless and many payment systems have become automated driving a temporal wedge between consumption and payment and generally making the costs of consumption intermittently salient since this inconsistent price salience alters demand elasticities it is a particular concern for goods that generate externalities and the price based policies deployed to address them this paper derives optimal dynamic corrective taxes for suboptimal and persistent consumption decisions these taxes depend on the agent s ability to commit to a future consumption path we also characterize a second best constant tax and the excess burden from time invariant tax rates when calibrated to u s residential electricity consumption the model shows that the second best constant tax is more than twice the marginal external cost of carbon emissions

rational habit formation abstract this paper discusses consumer demand under rational habit formation if consumer tastes change endogenously through habit stocks depending on past consumption the rational consumer will make allowance of the future habit forming effects of current consumption a model with rational habit formation is made formally equivalent to an intertemporal consumer model without habit formation by redefining the cost of consumption and wealth the cost of consumption is obtained by adding the cost of future induced consumption to the rental price of the commodity the extended wealth concept is obtained by subtracting the cost of the initial stocks of habits and the cost of future physically necessary consumption from wealth the paper also investigates the implication of rational habit formation for constructing one period cost of living indices

the duration of the smoking habit i introduction most smokers smoke out of habit once the habit is ended many of smoking s most harmful effects decline rather quickly preventing and ending cigarette addiction is therefore the straightest path toward preventing the health damage done by cigarette smoking consequently the related questions of why people start smoking and why they quit are central to formulating and evaluating effective antismoking policies duration or hazard models are designed to measure the probability of transition between states and are thus ideal for investigating the structural determinants of the transition between addiction and non addiction nevertheless most previous work in the economics literature uses the aggregate smoking participation rate defined as the percentage of people who currently smoke or an individual s probability of participation rather than a hazard rate to measure the attractiveness of habitual smoking this paper models the hazard rates of both starting and quitting the cigarette smoking habit the starting hazard rate is the probability that an individual will start smoking in a given time period conditional on being a nonsmoker until then the quitting hazard rate is the probability of quitting smoking in a given time period conditional on being a smoker since the starting date both of these rates should rise and fall in response to changes in the attractiveness of smoking the two rates will respond differently to different stimuli since the starting hazard reflects the point of view of nonsmokers and the quitting hazard reflects the point of view of smokers hazard or duration models possess several advantages over smoking participation models most obviously smoking participation rates cannot directly distinguish between increased starting rates and decreased quitting rates but the hazard models can also in a participation rate model it is difficult to control for the effect of the duration of the habit whereas duration models are designed specifically to allow for and measure the dependence of the hazard rate on duration another advantage is that the participation rate at any one time will oversample the number of long term smokers relative to those who had a short term habit whereas a duration model is designed to avoid this source of bias one drawback however is that because of their inherent panel nature the data requirements of duration models are somewhat more difficult to satisfy as shall be seen the only previous work in the economics literature that estimates the hazard rate of starting smoking is douglas and hariharan 1994 my paper improves upon douglas and hariharan in at least three important ways first it estimates the hazard rate of quitting smoking as well as that of starting second it takes into account variation in state level regulation third its time varying covariate model allows hazard rates to respond dynamically to changes in cigarette price regulation and information variables the use of time varying covariates is important because it brings the empirical model into much closer accord with theory the decision whether or not to start or quit smoking is an ongoing decision made one day at a time on the basis of current information the hazard of starting is greatest when the cost of the habit appears lowest and its benefit appears highest this comparison of cost and benefit changes through time as price information income and life cycle variables change while douglas and hariharan 1994 used price information from the potential smoker s most vulnerable age on the theory that its marginal effect is greatest at that time the model used in this paper allows each individual s hazard rate to respond to changes in price and public information as they occur the leading theoretical model of the decision to smoke is the rational addiction model of becker and murphy 1988 which assumes that consumers of addictive goods begin smoking only after fully weighing the costs and benefits of the habit

alcoholism work and income this article reports on an empirical analysis of the relationships between alcoholism and income and working we show that the relationships between alcoholism and labor market success have important age or life cycle dimensions we present evidence that alcoholism may affect income more by restricting labor market participation than by affecting the wages of workers finally we demonstrate that the effects of alcoholism on earnings depend on the extent to which one controls for other covariates associated with alcoholism as such we suggest that there may be important indirect as well as direct effects of alcoholism on labor market success

racetrack betting and informed behavior abstract horse racing data permit interesting tests of attitudes toward risk the present paper studies a new sample of racetrack results from atlantic city new jersey the questions examined are 1 are the market odds the best data for predicting the order of finish 2 do horses go off at odds that reflect their true probability of winning 3 is there any evidence that late bettors have better information than early bettors it is found that market odds predict the order of finish well but that favorites are good bets and long shots are poor ones the data suggest that there does exist an informed class of bettors and that bettors are on the whole neither risk neutral nor risk averse

tax incidence with strategic firms in the soft drink market abstract because soft drink sd consumption is considered to be a contributor to the epidemic of obesity there is a growing interest in evaluating the impact on sd consumption of alternative tax policies in this paper we propose a methodology to evaluate the impact of taxation of a food market taking into account the strategic price response of both manufacturers and retailers we apply this methodology to the french sd market and simulate the impacts of ad valorem and excise taxes we find that firms behave differently when facing an ad valorem tax or an excise tax an excise tax is overshifted to consumer prices while an ad valorem tax is undershifted to consumer prices we find that an excise tax based on the sugar content of sd is the most effective at reducing sd consumption our results also indicate that ignoring strategic pricing by firms leads to misestimations of the impact of taxation by between 15 and 40 depending on the products and the tax implemented in the short term that is ignoring positive long term health effects a 9 cents l excise tax has a small negative welfare effect about 1 person year

market efficiency and the favorite longshot bias the baseball betting market this paper examines the efficiency of the legal gambling market for major league baseball weak form tests of market efficiency within and across odds lines are performed surprisingly the consistently observed favorite longshot bias in racetrack betting is shown to exist in reverse for baseball bettors however these and other deviations from efficiency are shown to be insufficient to allow for profitable betting strategies when commissions are considered

employment wages and alcohol consumption in russia 1 introductionconcerns regarding the relationship between alcohol consumption and labor market productivity are well grounded if problem drinking or alcoholism is considered a disease then it may have depressant effects on labor market productivity causing reductions in employment earnings and other labor market outcomes mullahy and sindelar 1993 1996 kenkel and ribar 1994 however there is a medical literature that documents a u shaped relationship between alcohol consumption and the risk of cardiovascular disease according to this literature moderate drinkers have a lower risk of cardiovascular disease than do either abstainers or heavy drinkers beaglehole and jackson 1992 doll et al 1994 consistent with this evidence several economists have found a positive association between moderate drinking and earnings berger and leigh 1988 french and zarkin 1995 heien 1996 hamilton and hamilton 1997 zarkin et al 1998 macdonald and shields 2001 this article investigates the impact of alcohol consumption on employment and wages in russia the primary contributions of the article are twofold first it enhances the economic literature on the relationship between alcohol consumption and labor market behavior by using data from a longitudinal survey the use of a longitudinal data set enables the estimation of a fixed effects model which helps avoid the potential bias caused by unobserved individual factors not captured in cross sectional models the use of a fixed effects model is an important extension to the literature because the data sets used in previous studies are cross sectional and usually lack adequate variables that could serve as identifying instruments to control for the endogeneity of alcohol consumption 1 furthermore the richness of the data set used in this article allows for the application of three alternative measures of alcohol consumption in the empirical analysis this is important because the relationship between alcohol consumption and labor market outcomes may be sensitive to the alcohol measure that is used the second notable contribution of this article is that it provides the first empirical evidence on the association between alcohol consumption and labor market outcomes in russia excessive alcohol consumption is a widespread problem in russia where per capita alcohol consumption is around 14 liters per year the world health organization who considers 8 liters to be a sign that a country has a critical consumption level for health problems quinn judge 1997 furthermore the dramatic fluctuations in mortality rates experienced in russia over the past 15 years have generated considerable attention to the potential effect of alcohol consumption on the overall health of the russian population it is important to investigate how labor market outcomes would be affected by alcohol consumption in a country which demonstrates such dramatic fluctuations in alcohol consumption and mortality consistent with the previous studies cross sectional results generally support the hypothesis of an inverse u shaped relationship between alcohol consumption and wages and employment results from the fixed effect models are found to be quite different from those of cross sectional models the positive effect of alcohol consumption on employment disappears for both males and females once the individual fixed effects are controlled for the results of the wage model lend support to a small and linear return to alcohol consumption but the effects are significant only at the 10 level the fixed effects estimates are smaller in magnitude and estimated with less precision compared with cross sectional estimates section 2 reviews the previous literature section 3 discusses the conceptual issues and empirical strategy section 4 introduces the data set section 5 provides a discussion of the results and sensitivity analyses section 6 concludes the article

on the existence of balanced growth equilibrium the authors characterize the class of dynamic models that allow for the most commonly used types of sustained economic growth balanced and asymptotically balanced they show that under a constant returns to scale technology asymptotically constant discount rate and asymptotically constant elasticity of marginal felicity are not only necessary but also sufficient conditions for the existence of a n asymptotically balanced growth equilibrium path the authors provide examples of recursive utility models that accept a n asymptotically balanced growth equilibrium and discuss their implications on cross country differences in growth rates as well as on savings behavior and wealth distribution copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

welfare the earned income tax credit and the labor supply of single mothers during 1984 1996 welfare and tax policy were changed to encourage work by single mothers the earned income tax credit was expanded welfare benets were cut welfare time limits were added and welfare cases were terminated medicaid for the working poor was expanded as were training programs and child care during this same time period there were unprecedented increases in the employment and hours of single mothers we show that a large share of the increase in work by single mothers can be attributed to the eitc and other tax changes with smaller shares for welfare benet cuts welfare waivers training programs and child care programs