credit constraints and the phenomenon of child labor abstract this paper develops an overlapping generations general equilibrium model where inefficient child labor arises due to credit constraints it derives a positive relationship between inequality in the distribution of income and the incidence of child labor looking at policy implications it shows how trade sanctions against countries using child labor may fail to reduce the incidence of child labor it discusses some alternative policies to reduce the incidence of child labor

effects of economic shocks on children s employment and schooling in brazil abstract this paper uses longitudinal employment survey data to analyze the impact of household economic shocks on the schooling and employment transitions of young people in metropolitan brazil the paper uses data on over 100 000 children ages 10 16 from brazil s monthly employment survey pme from 1982 to 1999 taking advantage of the rotating panels in the pme we compare households in which the male household head becomes unemployed during a four month period with households in which the head is continuously employed probit regressions indicate that an unemployment shock significantly increases the probability that a child enters the labor force drops out of school and fails to advance in school the effects can be large implying increases of as much as 50 in the probability of entering employment for 16 year old girls in contrast shocks occurring after the school year do not have significant effects suggesting that these results are not due to unobserved characteristics of households that experience unemployment shocks the results suggest that some households are not able to absorb short run economic shocks with negative consequences for children

competition between multiple asymmetric networks theory and applications this paper presents a tractable model of network competition with many firms elastic subscriber demand off net price discrimination call externalities and cost and market share asymmetries we characterize stability in expectations and equilibrium under firm and market level network effects the model is applied to simulate the effects of termination rates market maturity and retail pricing strategies we show that predictions based on duopoly models can be misleading in particular concerning the effects of termination rates

selling to overconfident consumers consumers may overestimate the precision of their demand forecasts this overconfidence creates an incentive for both monopolists and competitive firms to offer tariffs with included quantities at zero marginal cost followed by steep marginal charges this matches observed cellphone service pricing plans in the us and elsewhere an alternative explanation with common priors can be ruled out in favor of overconfidence based on observed customer usage patterns for a major us cellular phone service provider the model can be reinterpreted to explain the use of flat rates and late fees in rental markets and teaser rates on loans nevertheless firms may benefit from consumers losing their overconfidence

child labor and agricultural shocks this paper examines the relationship between household income shocks and child labor in particular we investigate the extent to which transitory income shocks lead to increases in child labor and whether household asset holdings mitigate the effects of these shocks using data from a household panel survey in tanzania we find that both relationships are significant we investigate mechanisms that could account for these results including buffer stocks and borrowing

mobile termination network externalities and consumer expectations we re examine the literature on mobile termination in the presence of network externalities externalities arise when firms discriminate between on and o net calls or when subscription demand is elastic this literature predicts that profit decreases and consumer surplus increases when termination charges increase this is puzzling since in reality regulators are pushing termination rates down while being opposed to do so by network operators this puzzle is resolved when consumers expectations are assumed passive but required to be fulfilled in equilibrium as defined by katz and shapiro aer 1985 instead of being responsive to non equilibrium prices as assumed until now

the family and the state the immaturity of children sometimes precludes efficient arrangements between children and parents or others responsible for child care the difficulty in establishing efficient relations within families provides the point of departure for our interpretation of the heavy state involvement in the family the authors believe that a surprising number of state interventions mimic the agreements that would occur if children were capable of arranging for their care many regulations of the family improve the efficiency of family activities these interventions include subsidies to education and training social security and other old age support subsidies to births laws that limit access to divorce and the sale of children and laws that require parents permission for early marriage and other choices of children families that leave bequests can force children to repay parents for investments in human capital by reducing bequests therefore these families do not underinvest in childrens human capital by contrast families that do not leave bequests often poorer families do underinvest in children the state may subsidize schools and other training facilities to raise investments in children by poorer families to efficient levels authors modified

network competition and interconnection with heterogeneous subscribers abstract this paper analyses two way access pricing in a telecommunications market where consumers are heterogeneous in their demand for calls and firms are allowed to use non linear tariffs we first investigate how the presence of access charges affects the tariffs offered by firms in symmetric equilibrium next we show that under certain conditions each firm s profit is independent of the level of reciprocal access charge and therefore collusion using access charges is not sustainable this result suggests that efficient call allocations can be achieved under a minimal regulatory intervention i e recommending firms set access charges equal to call termination cost

a retail benchmarking approach to efficient two way access pricing no termination based price discrimination jeon gratefully acknowledges financial support from the spanish government under sej2006 09993 econ and a ramon y cajal grant hurkens gratefully acknowledges the financial support from the spanish ministry of science and technology under sej2006 01717 both authors acknowledge support through grant consolider ingenio 2010 csd2006 00016 and through the net institute netinst org

using bill and keep interconnect arrangements to soften network competition abstract this paper demonstrates that low below marginal cost interconnect or access charges can be used to sustain high subscription prices under network competition with two part tariffs and price discrimination this result stands in contrast to other results in the literature suggesting that high interconnect charges can play a collusive role

market provision of broadcasting a welfare analysis this paper presents a theory of the market provision of broadcasting and uses it to address the nature of market failure in the industry advertising levels may be too low or too high depending on the nuisance cost to viewers the substitutability of programs and the expected benefits to advertisers from contacting viewers market provision may allocate too few or too many resources to programming and these resources may be used to produce programs of the wrong type monopoly ownership may produce higher social surplus than competitive ownership and the ability to price programming may reduce social surplus

child labor and schooling response to changes in coca production in rural peru abstract coca eradication and interdiction are the most common policies aimed at reducing the production and distribution of cocaine in the andes but little is know about their impact on households this paper uses the shift in the production of coca leaves from peru to colombia in 1995 to analyze the indirect effects of the anti coca policy on children s allocation of time after different sensitivity checks the results indicate that a decrease in coca production is associated with increases in work and hours children living in coca growing states devote to work within and outside the household with no effects on schooling outcomes these findings suggest a previously undocumented indirect effect of drug policies on household behavior

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

estimating the causal effect of forced eradication on coca cultivation in colombian municipalities summary colombia has aggressively pursued forced coca eradication to reduce the amount of land that agricultural households devote to illegal crops however few rigorous empirical studies have assessed its causal effect on land allocation decisions i use a 6 year panel covering the entire country for the years 2001 06 to estimate this effect i instrument eradication with changes in the expected cost of protecting eradication crews as they get far from the airports used as a point of departure estimates show the causal effect of a 1 increase in eradication to be approximately a 1 increase in coca cultivation

price and variety in the spokes model the spokes model of nonlocalized spatial competition provides a new analytical tool for dierentiated oligopoly and a representation of spatial monopolistic competition an increase in the number of rms leads to lower equilibrium prices when consumers have relatively high product valuations but surprisingly to higher equilibrium prices for in termediate consumer valuations new entry alters consumer and social welfare through price market expansion and matching eects with free entry the market may pro vide too many or too few varieties from a social welfare perspective and the equilibrium price remains above marginal cost even when the number of rms is arbitrarily large

monopolistic competiton on the pyramid the purpose of this paper is to develop a model of monopolistic competition that has a simple locational interpretation and which allows for multifirm competition one of the major weaknesses of the standard circular road model is the fact that it allows only localized competition this creates problems when one wishes to analyze problems of international trade where one often has to work with firms with different production costs one of the major advantages of the pyramid model presented here is that one can easily compute the firms equilibrium profits even when their production costs differ copyright 1991 by blackwell publishing ltd

parental altruism and self interest child labor among late nineteenth century american families intergenerational relationships within late nineteenth century industrial families are analyzed using several large scale contemporary household surveys nonaltruistic behavior by parents was pervasive even among families with positive assets child labor was common in certain industrial settings suggesting that child labor or nonschooling did not simply reflect parental borrowing constraints neither did physical asset transfers offset human capital losses among working youth a quantitative estimate of parental nonaltruism is derived from an equilibrium labor market model approximately 90 percent of all child earnings was implicitly competed away through lower adult wages as families migrated to areas with abundant child labor opportunities

in the same boat but not equals the heterogeneous effects of parental income on child labour this paper examines the impact of parental income on child labour the empirical literature has found conflicting results regarding whether poverty leads parents to send their children to work mos

child labor in the global economy few issues in developing countries draw as much popular attention as child labor this paper begins by quantifying the extent and main characteristics of child labor it then considers the evidence on a range of issues about child labor fundamentally child labor is a symptom of poverty low income and poor institutions are driving forces behind the prevalence of child labor worldwide this study concludes by assessing the policy options to reduce worldwide child labor

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

blessing and curse the gold boom and local development in colombia abstract i provide a microeconomic channel for the resource curse using the boom in colombian gold mining as a case study identification strategies exploit trend changes in international gold prices after 2002 and regional gold production capabilities as measured by water supply the majority of gold mining in colombia is placer mining and water is important for industrial gold production i find that the gold boom decreases local unemployment in the short term by 3 5 however given the lack of capacity to effectively ban child labor these economic opportunities are also available for children my results indicate that because of the gold boom the probability that a child works increases by 9 3 and school attendance decreases by 23 9 capital accumulation seems to be permanently hurt since the probability that a child is lagging three or more grades behind increases by 9 these effects are only discernible after 2002 the human capital results can be retrieved from different databases furthermore results are robust to a series of robustness checks restricting the sample to gold producers and their neighbors using alternative sets of controls and restricting the sample to non migrants resources are a blessing in the short term but a curse for long term economic growth if human capital is productive

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

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

child labour a review of recent theory and evidence with policy implications in recent years a growing number of authors have turned their attention to the question of why children work the purpose of this paper is to review some of the more recent theoretical and empirical research into the topic of child labour and to illustrate the fact that no one factor on its own can account for the phenomenon of child labour therefore policies aimed at eradicating child labour will need to address the broad range of underlying factors that contribute to the incidence of child labour such as poverty market imperfections and access to education

is child labor inefficient we build a model of child labor and study its implications for welfare we assume that there is a trade off between child labor and the accumulation of human capital even if parents are altruistic and child labor is socially inefficient it may arise in equilibrium because parents fail to fully internalize its negative effects this occurs when bequests are zero or when capital markets are imperfect we also study the effects of a simple ban on child labor and derive conditions under which it may be pareto improving in general equilibrium we show that the implications of child labor for fertility are ambiguous

crop choice school participation and child labor in developing countries cotton expansion in burkina faso we estimate the effects of changes in cotton adoption on children s schooling and child labor in rural burkina faso using time and spatial variations we find evidence that expansion of cotton farming has led to an increase in enrollment and to a reduction of participation in child labor for girls there are however no detectable effects on boys in theory cotton adoption could increase household income leading to increased demand for schooling and reduced child labor on the other hand because children are productive on cotton farms adoption of cotton could increase the opportunity cost of child time and the demand for child labor we provide suggestive evidence showing that boys are more productive than girls on cotton farms taken together the results suggest that the income effect from cotton adoption might have been larger than the wage effect for girls hence the overall positive impacts on school enrollment for girls

network competition ii price discrimination our companion article developed a clear conceptual framework of negotiated or regulated interconnection agreements between rival operators and studied competition between interconnected networks under the assumption of nondiscriminatory pricing this article relaxes this assumption and allows networks to charge different prices for calls terminating on the subscriber s network and those terminating on a rivals network this creates a price differential between services that are identical for the consumer and generates network externalities despite network interconnection we show that in both the mature and entry phases of the industry the nature of competition is substantially affected by such price discrimination

explanations of unemployment economists commonly distinguish between two sorts of unemployment roughly speak ing the involuntarily unemployed workers are unwillingly out of work i e they feel that they would be better off with jobs on the other hand the voluntarily unemployed workers prefer to be out of work for any of a wide variety of reasons e g because they are searching or training for a job or because they choose leisure over work

do different types of assets have differential effects on child education evidence from tanzania to assess the conventional view that assets uniformly improve childhood development through wealth effects this paper tests whether different types of assets have different effects on child education the analysis indicates that household durables and housing quality have the expected positive effects but agricultural assets have adverse effects on highest grade completed and no effects on exam performance extending the standard agricultural household model by explicitly including child labor the study uses three waves of panel data from tanzania to estimate the effects of household assets on child education the analysis corrects for the endogeneity of assets and uses a hausman taylor instrumental variable panel data estimator to identify the effects of time invariant observables and more efficiently control for time invariant unobservables the negative effect of agricultural assets is more pronounced among rural children and children from farming households presumably due to the higher opportunity cost of their schooling

a bequest constrained economy welfare analysis bequest constraints have played a major role in discussions of debt neutrality but their welfare implications were not sufficiently dealt with in the literature in this paper we focus on the welfare implications of bequest constraints we found that when institutional constraints to the transfer of resources from children to their parents exists the welfare of the parents generation may be improved by an old age security scheme such a scheme is justified not by income redistribution consideration as is typically the case but rather on pure efficiency grounds due to its intergenerational transfer role the social security scheme is pareto improving with altruistic parents if in addition the real income effect which tends to raise children consumption is relatively strong this abstract was borrowed from another version of this item

network competition in nonlinear pricing previous research assuming linear pricing has argued that telecommunications networks may use a high access charge as an instrument of collusion i show that this conclusion is difficult to maintain when operators compete in nonlinear pricing i as long as subscription demand is inelastic profits can remain independent of the access charge even when customers are heterogeneous and networks engage in second degree price discrimination ii when demand for subscriptions is elastic networks may increase profits by agreeing on an access charge below marginal cost relative to cost based access pricing welfare is typically increased by setting the access charge above marginal cost

you get what you pay for schooling incentives and child labor abstract can schooling promotion deter child participation in hazardous forms of child labor we examine two interventions intended to promote schooling and deter child labor for children associated with carpet factories in kathmandu the first intervention provides scholarships for school related expenses the second provides the scholarship and an in kind stipend conditional on school attendance paying for schooling expenses promotes schooling but only at the beginning of the school year when most schooling expenses occur the scholarship combined with the conditional stipend increases school attendance rates by 11 decreases grade failure rates by 46 and reduces carpet weaving by 48 financial support lasted one year effects on schooling and weaving do not persist past the year of support you get what you pay for when schooling incentives are used to combat hazardous child labor

child labour in indonesian small industries abstract we analyse the geographic incidence of child labour in small manufacturing firms in indonesia at the village level our unique data set covers virtually all indonesian villages and urban neighbourhoods it allows us to distinguish between demand and supply side determinants of child labour we show by correcting for sample selection that a number of counterintuitive results child labour being unaffected by credit access and school proximity are the result of an interplay between supply and demand side determinants credit access and school proximity reduce child labour supply but simultaneously constitute positive location factors for firms thereby increasing the demand for child labourers to effectively reduce child labour growth oriented policies such as enhancing school and credit facilities should be complemented by policies specifically geared towards increasing school attendance

asymmetric access price regulation in telecommunications markets abstract in liberalized telecommunications markets the incumbent typically enjoys several advantages over any entrant regulation in such asymmetric markets stimulates competition in the short and the long term if retail prices are low and the entrant s profits are high so that entry is encouraged i show that asymmetric access price regulation with a cost based access price for the incumbent and an access markup for the entrant is more successful than cost based access price regulation applied to incumbent and entrant this is a robust prediction with respect to the pricing strategies considered such asymmetric access price regulation is in accordance with european legislation

competition and collusion in the american automobile industry the 1955 price war movements in total quantity and in quality adjusted price suggest a supply side shock in the american automobile market in 1955 this paper tests the hypothesis that the shock was a transitory change in industry conduct a price war the key ingredients of the test are alternative equilibrium models of oligopoly under product differentiation in nonnested cox tests of hypotheses a collusive solution is sustained in 1954 and in 1956 while a competitive solution holds in 1955 the result does not appear to be an artifact since it is robust in tests against alternative specifications copyright 1987 by blackwell publishing ltd

empirical evidence on the relationship between mobile termination rates and firms profits the theoretical literature on mobile termination rates mtrs is inconclusive on how the level of mtrs affects overall consumer charges and firms profits we show that when firms offer bundles with fixed included usage a tariff structure that has become more common in recent years an identical change in all mtrs does not affect firms retail prices or profits we use a panel dataset from saturated european markets to estimate the effect of mtrs on mobile operators profits as predicted by the theoretical model we cannot reject the fact that firms profits are unaffected by an identical change in all mtrs

short and long run effects of a tax cut in an open economy with a sticky real wage the effects of a tax cut in an open economy with a sticky real wage are studied in the short run the lower the tax rate the lower the real wage the long run movement of this wage rate depends on the level of output in the short run a tax cut will increase output but the effects on the trade balance price level and total tax revenue are ambiguous a reduced relative price between domestic and imported goods is a necessary condition for an improved trade balance which in turn is a necessary condition for an increase in tax revenue in the long run the tax cut will have no output effect while the real wage and the relative price between domestic and imported goods will rise and the trade balance will deteriorate the price level will increase if the exchange rate is fixed but is unaffected if the exchange rate is flexible

can conditional cash transfers compensate for a father s absence this paper investigates how the permanent departure of the father from a household affects children s school enrollment and work participation in rural colombia the results indicate that the permanent departure of the father decreases children s school enrollment by approximately 5 percentage points and increases child labor by 3 percentage points this paper explores the rollout of a conditional cash transfer program during the period of study and shows that this program counteracts these adverse effects when coupled with other evidence this finding strongly suggests that the channel through which the father s departure most affects children is by reducing the income of very poor households which tightens their liquidity constraints this finding also highlights the important safety net role played by welfare programs with respect to disadvantaged households particularly because these households are unlikely to have formal or informal mechanisms with which to insure themselves against such vagaries

can tax cuts beat the phillips curve abstract an economy with a non vertical long run phillips curve defined for employment and the growth rate of real disposable wage is assumed steady state effects of long run gradual changes in the tax rate and public expenditure are analyzed the slower the tax rate increases or the faster it is reduced the higher the steady state employment level the higher the inflation rate and the larger the trade deficit an increase in the growth rate of public expenditure has the same effects a combined reduction in tax increases and public expenditure may increase steady state employment reduce inflation and improve the trade balance

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

child labor and schooling decisions in urban and rural areas comparative evidence from nepal peru and zimbabwe summary this study sheds some light on the causes of child labor using crosscountry empirical data we find that while poverty is the main cause of child labor in rural areas there is a general lack of support for the poverty hypothesis in urban areas similarly improving access to credit has a greater potential for alleviating child labor and enhancing school attendance in rural areas on the other hand availability of alternative childcare options promises greater impact in urban areas finally the evidence from all countries suggests that efforts to bolster adult educational level and wage will help curb the prevalence and intensity of child labor and improve the likelihood that children stay in school

income inequality human capital accumulation and economic performance we show that greater income equality implies higher human capital accumulation and economic performance in an overlapping generations model with heterogeneity in income and talent given liquidity constraints and declining marginal utility individuals with a given level of talent receive education if their initial income is higher than a threshold level and the threshold is lower for more talented individuals assuming the more talented create more human capital when educated greater initial income equality for one generation then imply not only higher aggregate human capital accumulated by that generation but an improvement in all subsequent generations initial income distributions

child labor and schooling in a globalizing world some evidence from urban india trade influences child time allocation in developing countries through its effects on the returns to education labor demand and poverty we examine how india s dramatic 1991 trade liberalization influenced child labor and schooling in urban areas of india that differ in the extent to which employment lost tariff protection in general urban india experienced large increases in schooling and decreases in child labor over the 1990s we find that these improvements are attenuated in indian cities where employment experienced larger reductions in tariff protection girls are particularly affected we argue that the observed changes in child time allocation are consistent with differential declines in poverty across regions but changes in the economic opportunities of children might also play a role in our findings jel f15 f16

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

shadow wages and peasant family labour supply an econometric application to the peruvian sierra a striking feature of developing economies is the large proportion of the work force that is self employed lack of widespread labor market participation in the agricultural sector can pose a major obstacle to the empirical implementation of economic models of the peasant household whether because wage data are simply not available or because the assumptions required to make use of wage data stretch the bounds of credulity this paper develops a methodology for estimating a structural labor supply model for primarily self employed peasant households which holds under a general agricultural technology and set of labor market conditions the unique feature of the approach is that the opportunity cost of time or shadow wage of household workers is explicitly estimated from an agricultural production function and is subsequently used to identify a set of structural labor supply parameters recent household survey data from rural peru is employed to estimate and perform various diagnostic tests on the model the empirical findings lend support to the hypothesis that peasant households allocate their members time as if to maximize a family utility function and moreover demonstrate the tractability of the shadow wage methodology and its usefulness in estimating more elaborate time allocation models

network competition and entry deterrence we develop a model of logit demand that extends to a multi firm industry the traditional duopoly framework of network competition firstly we show that incumbents establish inefficiently the reciprocal access charge below cost when they compete in prices but they behave efficiently if they compete in utilities secondly we study how incumbents determine the industry wide access charge under the threat of entry we show that incumbents may accommodate all possible entrants only a group of them or may completely deter entry when entry deterrence is the preferred option incumbents distort the access charge upwards

network interconnection in telecommunications this paper discusses industries such as telecommunications where firms each have their own customers and must interconnect with other firms to provide a comprehensive service two scenarios are considered i the case of a symmetric unregulated industry and ii the case of an industry with a dominant regulated incumbent in the first provided there is sufficient product differentiation it is shown that firms agree to set interconnection charges above associated costs in order to obtain the joint profit maximising outcome in the second a formula for the welfare maximizing interconnection charge is derived relations with the efficient component pricing rule are discussed

schooling and labor market consequences of school construction in indonesia evidence from an unusual policy experiment between 1973 and 1978 the indonesian government engaged in one of the largest school construction programs on record combining differences across regions in the number of schools constructed with differences across cohorts induced by the timing of the program suggests that each primary school constructed per 1 000 children led to an average increase of 0 12 to 0 19 years of education as well as a 1 5 to 2 7 percent increase in wages this implies estimates of economic returns to education ranging from 6 8 to 10 6 percent

a model of add on pricing this paper examines competitive price discrimination with horizontal and vertical taste differences consumers with higher valuations for quality are assumed to have stronger brand preferences two models are considered a standard competitive price discrimination model in which consumers observe all prices and an add on pricing game in which add on prices are naturally unobserved and firms may advertise a base good at a low price in hopes of selling add ons at high unadvertised prices in the standard game price discrimination is self reinforcing the model sometimes has both equilibria in which the firms practice price discrimination and equilibria in which they do not the analysis of the add on pricing game focuses on the chicago school argument that profits earned on add ons will be competed away via lower prices for advertised goods a conclusion is that add on practices can raise equilibrium profits by creating an adverse selection problem that makes price cutting unappealing although profitable when jointly adopted using add on pricing is not individually rational in a simple extension with endogenous advertising practices and costless advertising several models that could account for add on pricing are discussed

network competition i overview and nondiscriminatory pricing we develop a model of unregulated competition between interconnected networks and analyze the mature and transition phases of the industry in this deregulated environ ment networks pay negotiated or regulated access charges to each other and com pete in prices for customers we show that a competitive equilibrium may fail to exist for large access charges or for large network substitutability and that freely negotiated access charges may prevent effective competition in the mature phase of the industry and erect barriers to entry in the transition toward competition last we examine the meaning and impact of policies such as the efficient component pricing rule

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

commodity prices and intra household labor allocation volatility in commodity markets poses a distinct risk to farmers in developing countries who rely on cash crop agriculture we combine a time series of international coffee prices with a long running panel on coffee growing households in vietnam to investigate coping mechanisms employed by farmers in a transitioning economy we find that households cope with lower coffee prices by increasing wage labor of adults with children and adolescents substituting for adults on the farm heterogeneity analysis indicates a stronger substitution pattern among women ethnic minorities and households with fewer assets a variety of robustness checks corroborate these findings account of this finding should be taken in formulating and implementing social protection and inclusive growth policies

colombia s income from the drug trade abstract we estimate the net dollar proceeds that colombia receives from the drug trade making use of production data recently compiled by us authorities care is taken in assuring that our estimations are consistent with previous research on cocaine consumption in the united states and production in bolivia and peru we show that net dollar proceeds which used to represent around 7 of gdp and 70 of exports in the early 1980s now represent around 3 of gdp and 25 of exports these numbers though significant pale in comparison with those suggested in the popular press according to which colombia s economy has been all but overtaken by the drug trade

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded