how much damage will climate change do recent estimates two reasons to be concerned about climate change are its unjust distributional impact and its negative aggregate effect on economic growth and welfare although our knowledge of the impact of climate change is incomplete and uncertain economic valuation is difficult and controversial and the effect of other developments on the impacts of climate change is largely speculative the authors find that poorer countries and people are more vulnerable than are richer countries and people a modest global warming is likely to have a net negative effect on poor countries in hot climates but may have a net positive effect on rich countries in temperate climates if one counts dollars the world aggregate may be positive if one counts people the world aggregate is probably negative negative impacts would become more negative and positive impacts would turn negative for more substantial warming the marginal costs of carbon dioxide emissions are uncertain and sensitive to assumptions that partially reflect ethical positions but are unlikely to be larger than 50 per tonne carbon

advance notice and job search the value of an early start recent studies of the effect of advance notice on jobless duration following displacement misspecify the relationship between these two variables by treating advance notice as a dummy regressor in conventional survival time models job search theory however suggests that the major impact of advance notice is not to alter the efficiency of search after job loss but rather to allow workers to begin search before job loss the authors develop a sequential regimes job search model which allows search prior to displacement for workers with advance knowledge of layoff with different search intensities before and after layoff maximum likelihood estimates of the model are then computed using a pooled data set from the 1984 and 1986 displaced worker surveys advance knowledge is found to significantly shorten jobless duration for most labor force groups using these estimates the authors simulate the effect of various levels of advance knowledge on jobless duration their results indicate that relatively modest advance notice substantially benefits many displaced workers

the effect of advance notification of plant closings on the re employment earnings of displaced blue collar workers in the united states this study uses the 1988 cps displaced workers surveyto analyse the effect of written advance notification of plant closings and relocations on the re employment earnings of blue collar and for comparison purposes white collar workers in the united states the results show that written notification given less than 60 days in advance of the layoffs did not have any significant effect on the re employment earnings of either blue collar or white collar workers of either gender however the results show that dislocated male blue collar workers who were given advance notification of 60 days or more before their layoffs had significantly higher re employment earnings this result is supportive of the federal plant closing legislation mandating 60 day advance notification to dislocated workers in the united states

the effect of advance notification of plant closings on unemployment using data from the 1984 displaced worker survey the authors model the determinants of time without work following job displacement for a large sample of workers laid off because of plant shutdowns between 1979 and 1984 the major focus of the paper is on the role of advance notification in mitigating unemployment the estimating procedure accommodates right censored observations stemming from continuing or open ended spells of unemployment advance notification is found to have significantly reduced the duration of unemployment of those notified workers who did not draw unemployment insurance benefits and in particular of those who left the plant prior to termination advance notice had much less effect on the time without work of notified workers whose spell length of unemployment was long enough for them to collect unemployment insurance benefits

double co2 and beyond benefits costs and compensation abstract economic decisions over what action if any to take concerning the greenhouse effect tend to revolve around the social discount rate implicitly the debate concerns how to attribute intertemporal weights to welfare and implies a moral stance that is rarely given explicit recognition refocusing on the outcomes of current actions emphasises the role of compensation a conflict is apparent between the view that the current generation need be unconcerned over the loss or injury caused to future generations because they will benefit from advances in technology investments in both man made and natural capital and direct bequests and the requirement to avoid harming the innocent changes in units of welfare cannot be viewed as equivalent regardless of their direction in general doing harm is not cancelled out by doing good the result is a rejection of the potential compensation principle which underlies the current economic stance and a reconsideration of the acceptability of compensation altogether the concept of human rights and a non utilitarian perspective are used to show how cost benefit analysis denies the existence of inalienable rights and economics limits the moral considerability of harm

selection in insurance markets theory and empirics in pictures government intervention in insurance markets is ubiquitous and the theoretical basis for such intervention based on classic work from the 1970s has been the problem of adverse selection over the last decade empirical work on selection in insurance markets has gained considerable momentum this research finds that adverse selection exists in some insurance markets but not in others and it has uncovered examples of markets that exhibit advantageous selection a phenomenon not considered by the original theory and one that has different consequences for equilibrium insurance allocation and optimal public policy than the classical case of adverse selection advantageous selection arises when the individuals who are willing to pay the most for insurance are those who are the most risk averse and so have the lowest expected cost indeed it is natural to think that in many instances individuals who value insurance more may also take action to lower their expected costs drive more carefully invest in preventive health care and so on researchers have taken steps toward estimating the welfare consequences of detected selection and of potential public policy interventions in this essay we present a graphical framework for analyzing both theoretical and empirical work on selection in insurance markets this graphical approach provides both a useful and intuitive depiction of the basic theory of selection and its implications for welfare and public policy as well as a lens through which one can understand the ideas and limitations of existing empirical work on this topic

hips and hearts the variation in incentive effects of insurance across hospital procedures the separate identification of effects due to incentives selection and preference heterogeneity in insurance markets is the topic of much debate in this paper we investigate the presence and variation in moral hazard across health care procedures the key motivating hypothesis is the expectation of larger causal effects in the case of more discretionary procedures the empirical approach relies on an extremely rich and extensive dataset constructed by linking survey data to administrative data for hospital medical records using this approach we are able to provide credible evidence of large moral hazard effects but for elective surgeries only

the aggregation of climate change damages a welfare theoretic approach the economic value of environmental goods is commonly determined using the concepts of willingness to pay wtp or willingness to accept wta however the wtp wta observed in different countries or between individuals will differ according to socio economic characteristics in particular income this notion of differentiated values for otherwise identical goods say a given reduction in mortality risk has been criticized as unethical most recently in the context of the social cost chapter of the ipcc second assessment report these critics argue that being a function of income wtp wta estimates reflect the unfairness in the current income distribution and for equity reasons uniform per unit values should therefore be applied across individuals and countries this paper analyses the role of equity in the aggregation of climate change damage estimates using basic tools of welfare economics it shows one way of how wtp wta estimates can be corrected in aggregation if the underlying income distribution is considered unfair it proposes that in the aggregation process individual estimates be weighted with an equity factor derived from the social welfare and utility functions equity weighting can significantly increase aggregate global damage figures although some specifications of weighting functions also imply reduced estimates the paper also shows that while the postulate of uniform per unit values is compatible with a wide range of reasonable utility and welfare specifications there are also cases where the common value notion is not compatible with defensible welfare concepts

a microeconometric model of the demand for health care and health insurance in australia this paper develops a model for interdependent demand for health insurance and health care under uncertainty to throw light on the issue of insurance induced distortions in the demand for health care services the model is used to empirically analyse the determinants of the choice of health insurance type and seven types of health care services using micro level data from the 1977 78 australian health survey econometric implementation of the model involves simultaneously issues of discreteness of choice selectivity and stochastic dependence between health insurance and utilization health status appears to be more important in determining health care service use than health insurance choice while income appears to be more important in determining health insurance choice than in determining health care service use for a broad range of health care services both moral hazard and self selection are found to be important determinants of utilization of health care services

a dynamic analysis of the demand for health insurance and health care we find that asymmetric information is important for the uptake of supplementary private health insurance and health care utilization we use dynamic panel data models to investigate the sources of asymmetric information and distinguish short run selection effects into insurance from long run selection effects short run selection effects i e responses to shocks are adverse but small in size also long run effects driven by differences in for example preferences and risk aversion are small but we find some evidence for multidimensional asymmetric information for example mental health causes advantageous selection estimates of health care utilization models suggest that moral hazard is not important

discounting and distributional considerations in the context of global warming the economics of global warming is reviewed with special emphasis on how the cost depends on the discount rate and on how costs in poor and rich regions are aggregated into a global cost estimate both of these factors depend on the assumptions made concerning the underlying utility and welfare functions it is common to aggregate welfare gains and losses across generations and countries as if the utility of money were constant but it is not if we assume that a e co2 equivalent dlubling implies costs equal to 1 5 of the income in both high and low income countries a pure rate of time preference equal to zero and a utility function which is logarithmic in income then the marginal cost of co2 emissions is estimated at 260 590 usd ton c for a time horizon in the range 300 1000 years an estimate which is large enough to justify significant reductions of co2 emissions on purely economic grounds the estimate is approximately 50 100 times larger than the estimate made by nordhaus in his dice model and the difference is almost completely due to the choice of discount rate and the weight given to the costs in the developing world as well as a more accurate model of the carbon cycle finally the sensitivity of the marginal cost estimate with respect to several parameters is analyzed

the social cost of carbon and its policy implications the shadow price or social cost of carbon is an important indicator of the global incremental damage done by emitting greenhouse gases today cost benefit analysis would set the optimal amount of greenhouse gas emission reduction at the point where this social cost just equals the incremental cost of controlling emissions the higher the value for the social cost of carbon the more control is warranted this comparison assumes that cost benefit analysis is the correct way of determining climate change policy and many believe this is not the case because of the very long term irreversible and potentially catastrophic nature of global warming but in the short run at least a comparison of cost and benefits is required and in any event all decisions imply costs and benefits but what is the right figure for the social cost of carbon this paper reviews the uk government s assessment of the cost and concludes that it has been set far too high because of a misreading of the integrated assessment models used to balance costs and benefits moreover adoption of the uk government s shadow price would have formidable implications for energy policy in the uk and for policies on afforestation copyright 2003 oxford university press

union membership in the united states 1973 1981 this paper reports estimates of union membership gathered from may current population surveys from 1973 to 1981 the authors present data by occupation industry selected states and smsas race gender and educational attainment the paper both extends and differs from that by freeman and medoff which presents unionism estimates for the private sector for 1968 75 to facilitate longitudinal analysis this paper reports three year moving averages of occupational and industry data and annual estimates of demographic classifications the data include public sector as well as private sector workers and they exclude workers not covered by the national labor relations act also the authors provide only union membership estimates not estimates on workers covered by union contracts this paper suggests that the percentage of all workers that are unionized in the united states remained fairly constant over the 1973 81 period

multiple dimensions of private information evidence from the long term care insurance market we demonstrate the existence of multiple dimensions of private information in the long term care insurance market two types of people purchase insurance individuals with private information that they are high risk and individuals with private information that they have strong taste for insurance ex post the former are higher risk than insurance companies expect while the latter are lower risk in aggregate those with more insurance are not higher risk our results demonstrate that insurance markets may suffer from asymmetric information even absent a positive correlation between insurance coverage and risk occurrence the results also suggest a general test for asymmetric information

why the far distant future should be discounted at its lowest possible rate abstract a critical feature of the distant future is currently unresolvable uncertainty about what will then be the appropriate rate of return on capital to use for discounting this paper shows that there is a well defined sense in which the lowest possible interest rate should be used for discounting the far distant future part of any investment project some implications are discussed for evaluating long term environmental projects or activities like measures to mitigate the possible effects of global climate change

optimal greenhouse gas emissions under various assessments of climate change ambiguity the probabilities associated with global warming damage are likely to be continuously revised in the light of new information such revisions of probability are the defining characteristic of ambiguity as opposed to risk this paper examines how climate change ambiguity may affect optimal greenhouse gas emission strategies via the decision maker s attitude towards anticipated changes of damage probabilities two conceptualizations of ambiguity are distinguished according to the emphasis placed on the ambiguity of priors or on the ambiguity of news respectively it is shown that the way in which ambiguity is viewed and the attitude taken towards it have a substantial influence on the optimal emission trajectory

union effects on white collar compensation this paper uses two new data sources each of which combines information on worker and establishment characteristics with detailed information on the components of employee compensation to examine union nonunion pay differentials for white collar workers estimates reveal that nonunion wages and total compensation are more responsive than union pay levels to worker productivity differences such as education and work experience also large firms pay 10 to 15 percent more to their white collar employees than small firms in the nonunion sector but only 5 percent or less in the union sector overall the white collar union wage differential appears to be 3 5 to 4 0 percent rising to 7 1 percent when fringe benefits are included in the dependent variable significant spillovers to nonunion white collar workers which appear to erode the measured union nonunion pay differentials are also found

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

do financial incentives trump clinical guidance hip replacement in england and scotland following devolution in 1999 england and scotland s national health services diverged resulting in major differences in hospital payment england introduced a case payment mechanism from 2003 4 while scotland continued to pay through global budgets we investigate the impact this change had on activity for hip replacement we examine the financial reimbursement attached to uncemented hip replacement in england which has been more generous than for its cemented counterpart although clinical guidance from the national institute for clinical excellence recommends the later in scotland this financial differential does not exist we use a difference in difference estimator using scotland as a control to test whether the change in reimbursement across the two countries had an influence on treatment our results indicate that financial incentives are directly linked to the faster uptake of the more expensive uncemented hip replacement in england which ran against the clinical guidance

does medicare save lives health insurance characteristics shift at age 65 as most people become eligible for medicare we measure the impacts of these changes on patients who are admitted to hospitals through emergency departments for conditions with similar admission rates on weekdays and weekends the age profiles of admissions and comorbidities for these patients are smooth at age 65 suggesting that the severity of illness is similar on either side of the medicare threshold in contrast the number of procedures performed in hospitals and total list charges exhibit small but statistically significant discontinuities implying that patients over 65 receive more services we estimate a nearly 1 percentage point drop in 7 day mortality for patients at age 65 equivalent to a 20 reduction in deaths for this severely ill patient group the mortality gap persists for at least 9 months after admission

estimation of the greenhouse gas externality with uncertainty the shadow price of carbon dioxide is the value of the external damage caused by an emission a shadow price model for calculating the present value of the external damage of a carbon dioxide emission is derived explicitly sixteen experts provided subjective high low and most likely parameter estimates because correct values for the eight model parameters are uncertain the estimation procedure retains parameter uncertainty while generating the main result which is a distribution of shadow price estimates major assumptions made in the estimation identify the basis for the results of the eight model parameters the discount rate dominates the determination of the shadow price for comparison expert estimates of the shadow price itself provide a second distribution of shadow price estimates

renewable resources and economic sustainability a dynamic analysis with heterogeneous time preferences abstract in recent years there has been increasing interest in the study of economic sustainability and its relationship with natural resources this paper attempts to shed some light on the issue by taking into account the individual variations in time preferences for consumption and resource amenity we characterize the long run steady state analyze its asymptotic stability and explore the transational dynamics from any initial state the welfare implications of the optimal path are also discussed

medicaid managed care effects on children s medicaid coverage and utilization abstract we use data from the national health interview surveys nhis to measure the effects of the growth of medicaid managed care on children we examine both the probability that individual children were medicaid covered and their utilization of care we find that managed care penetration has significant effects on the composition of the medicaid caseload young children are less likely to be covered while poor school age children are more likely to be covered when we examine coverage by race we find that black children are less likely to be covered where medicaid managed care organizations mmcos are more prevalent these lower medicaid enrollment rates are linked to increases in the numbers of young children who go without any doctor visits in a year these results suggest that it is important to examine the potential effects of changes in medicaid on selection into the medicaid program rather than focusing exclusively on the effects of managed care on those who are enrolled in addition among those enrolled in medicaid higher managed care penetration is associated with an increase in the number of black children with chronic conditions who go without doctor visits but with decreases in the number of hispanic children and poor teens who go without care

weight factors in cost benefit analysis of climate change equity considerations may justify the use of weight factors when estimating the costs of climate change this paper reviews different weight factors that have been used in the climate economics literature based on a simple model it is shown that although the different weight factors imply substantially different cost damage estimates they actually yield the same optimal emission reductions this paradox is explained by the fact that some of the approaches require that also the abatement costs are weighted and this offsets the effect of the diverging cost damage estimates the model is then used to analyse the importance weighting may have on the overall cost benefit analysis at present when most of the global emissions of fossil co2 originate from the industrialised countries the global optimal emissions are considerably lower if costs are weighted however the more the emissions in developing countries grow the less important becomes the introduction of weight factors in cost benefit analysis of climate change for the global emission reductions in the model developed here on a regional level the introduction of weight factors continues to play an important role implying substantially lower emissions in the rich region and slightly higher in the poor

targets for global climate policy an overview a survey of the economic impact of climate change and the marginal damage costs shows that carbon dioxide emissions are a negative externality the estimated pigou tax and its growth rate are too low to justify the climate policy targets set by political leaders a lower discount rate or greater concern for the global distribution of income would justify more stringent climate policy but would imply an overhaul of other public policies catastrophic risk justifies more stringent climate policy but only to a limited extent

positive time preference the case for positive time preference is absolutely compelling unless there is an infinite time horizon with the expectation of unending technological advance combined with what we call drastically diminishing marginal utility this finding holds both in the positive and normative senses a corollary is that savings are interest elastic

private insurance subsidies and public health care markets evidence from canada in this study i examine the effects of government subsidies to employer provided health insurance on the decision to purchase insurance and on utilization of publicly funded health services using unique variation in tax subsidies across canadian provinces as an instrument i estimate the effects of these subsidies on the demand for supplemental health insurance and their extended effects on the decision to use publicly funded health services my results show that government subsidies through tax exemptions have significant effects on the decision to purchase insurance furthermore additional insurance policies lead to moral hazard in the use of publicly funded health services jel classification h2 h4 11

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

the damage costs of climate change toward more comprehensive calculations it is argued that estimating the damage costs of a certain benchmark climate change is not sufficient what is needed are cost functions and confidence intervals although these are contained in the integrated models and their technical manuals this paper brings them into the open in order to stimulate discussion after briefly reviewing the benchmark climate change damage costs region specific cost functions are presented which distinguish tangible from intangible losses and the losses due to a changing climate from those due to a changed climate furthermore cost functions are assumed to be quadratic as an approximation of the unknown but presumably convex functions results from the damage module of the integrated climate economy model fund are presented next uncertainties are incorporated and expected damages are calculated it is shown that because of convex loss functions and right skewed uncertain ties the risk premium is substantial calling for more action than analysis based on best guess estimates the final section explores some needs for further scientific research

union membership determination and industry characteristics recent literature on the economics of unionism has expanded beyond its customary focus on the wage and nonwage effects of collective bargaining and given increased attention to the determinants of union membership previous union membership studies have been couched primarily within an individual choice framework whereby utility maximizing individuals choose either to join or not to join a union empirical work typically treats membership as a function of some vector of personal characteristics 1 2 10 11 21 it is our contention that such studies can best be interpreted as explaining the determination of the union status of jobs and that several industry and firm characteristics in addition to personal characteristics can be expected to affect significantly union membership in this paper theory and evidence relating to the effects of firm and industry characteristics on union membership are presented industry level data are bridged with a large microdata set containing individual characteristics in order to examine the determinants of unionism among workers in manufacturing utilizing a simultaneous model and controlling for sample selection bias we find that product market concentration capital intensity establishment size and job risk significantly affect the likelihood of union membership

health insurance eligibility utilization of medical care and child health two economists applied data from the current population survey and the national health interview survey and state level data on child mortality to a simulation model of utilization of medical care that varies only with the states legislative environment to examine the utilization of medical care and health effects of medicaid eligibility on low income children the models took into consideration the recent expansions of medicaid to low income children 38 of those ineligible for medicaid in 1984 who became eligible due to changes during 1984 1992 were uninsured between 1984 and 1992 expansions of the medicaid program increased the proportion of children eligible for medicaid almost two fold 16 1 vs 31 2 yet coverage rates were always lower than eligibility rates 13 2 vs 16 1 in 1984 and 20 3 vs 31 2 in 1992 and the increase in coverage rates was only about 50 of the increase in eligibility rates during 1984 1992 the probability that a child was eligible for medicaid increased the probability of health insurance coverage by 29 77 when the model considered bias in variables e g a recession in a state the take up rate was only 22 73 nevertheless medicaid markedly increased use of medical care for example eligibility for medicaid increased the likelihood of making a visit to a physicians office in the last two weeks by about 50 it also increased the probability of a child visiting the hospital suggesting inefficiency in the way that providers deliver care to medicaid enrollees medicaid eligibility had a significant effect on reducing child mortality the 15 1 percentage point increase in eligibility during 1984 1992 reduced child mortality by 4 5 when the researchers examined parent assessed subjective health measures medicaid eligibility had no effect on child health medicaid eligibility reduced race and education based disparities in the number of visits and racial differences in mortality yet it may actually intensify current disparities in health care delivery site