real and nominal effects of monetary policy shocks we employ the identification scheme of kahn kandel and sarig 2002 to analyse the impact of canadian monetary policy on ex ante real interest rates and inflationary expectations first we decompose nominal interest rates into ex ante real rates and inflationary expectations using the methodology of blanchard and quah 1989 then we estimate a recursive var model with innovations in a monetary aggregate and the overnight target interest rate as alternative measures of monetary policy shocks we find that a negative policy shock raises both nominal and ex ante real interest rates lowers inflationary expectations and real industrial output and appreciates the canadian dollar les auteurs utilisent le scheme d identification de kahn kandel et sarif 2002 pour analyser les impacts de la politique monetaire canadienne sur les taux d interet reels ex ante et sur les anticipations d inflation d abord ils decomposent les taux d interet nominaux entre taux d interet reel ex ante et anticipation d inflation en utilisant la methodologie de blanchard et quah 1989 ensuite ils calibrent un modele var recursif avec des innovations dans l agregat monetaire et le taux directeur en tant que mesures alternatives des chocs dans la politique monetaire on decouvre qu un choc monetaire negatif tend a accroitre et le taux d interet nominal et le taux reel ex ante a reduire les anticipations d inflation et le produit industriel reel et a faire s apprecier le dollar

occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

inequality and rules in the governance of water resources this paper considers two types of farmer with unequal land endowments who voluntarily contribute to a joint project for the maintenance of an irrigation network the collective output water is distributed according to some allocation rule and used by each farmer in combination with land to produce a final good the analysis shows that the initial degree of inequality affects the allocation rule that maximises the amount of water collectively provided specifically two forces act in opposite directions the first effort augmenting force pushes the distribution of water towards the agent with the higher return to water in the attempt to maximise the aggregate level of effort this is the prominent force when efforts are highly substitute if efforts display some degree of complementarity the effort mix alongside with aggregate effort becomes important a second effort mix force then emerges that favours more egalitarian or even progressive water allocation rules

manipulation of endowments in replica economies an example abstract in an example with two types of cobb douglas consumers the gains and losses due to downward misrepresentation of endowments can be explicitly calculated therefor thefollowing results which are shown in the paper appear extremely clearly existence of non trivial nash equilibria of the manipulation game in increasing replica economies convergence of the non trivial equilibrium outcomes to the walrasian equilibrium allocation

heterogeneity returns to scale and collective action i analyze the effects of resource inequality and valuation heterogeneity on the provision of public goods with increasing or decreasing returns to scale in production the existing literature typically takes the agents characteristics as given and known to the researcher in contrast this paper compares collective action provision across groups of agents with resources and valuations for the public good drawn from different known joint distributions specifically i characterize the expected equilibrium public good level as function of various distributional properties and moments a resource valuation distribution that first order stochastically dominates another distribution always results in higher expected public good provision level independent of the production technology with decreasing returns to scale in the public good production higher resource inequality results in higher expected provision with increasing returns the same result holds when the mean resource level is relatively low but expected provision decreases in inequality when the mean resource level is high a parallel result holds for agents valuations l auteur analyse les effets de l inegalite des ressources et de l heterogeneite dans l evaluation de biens publics dont la production se fait avec des rendements croissants et decroissants a l echelle la litterature specialisee suggere habituellement que les caracteristiques des agents sont donnees et connues du chercheur a contrario ce memoire compare l action collective de groupes d agents dont les ressources et les evaluations du bien public sont tirees de distributions conjointes connues specifiquement le niveau d equilibre anticipe du bien public est fonction de divers moments et proprietes de ces distributions une distribution conjointe ressources evaluations qui en domine une autre au sens stochastique de premier ordre resulte toujours en un niveau de bien public anticipe plus eleve quelle que soit la technologie de production quand les rendements a l echelle sont decroissants une inegalite de ressources plus grande resulte en un niveau de bien public anticipe plus eleve quand les rendements sont croissants le meme resultat s ensuit si le niveau moyen de la ressource est relativement bas mais le niveau de bien public anticipe decroit quand le niveau moyen de la ressource est eleve des resultats paralleles sont notes pour ce qui est des evaluations du bien public par les agents

wealth inequality and collective action abstract we study the effect of inequality in the distribution of endowments of private inputs e g land wealth that are complementary in production with collective inputs e g contribution to public goods such as irrigation and extraction from common property resources on efficiency in a class of collective action problems we focus on characterizing the joint surplus maximizing level of inequality making due distinction between contributors and non contributors in a framework that allows us to consider a wide variety of collective action problems ranging from pure public goods to impure public goods to commons we show that while efficiency increases with greater equality within the groups of contributors and non contributors so long the externalities positive or negative are significant there is an optimal degree of inequality between these groups

dyke maintenance and other stories some neglected types of public goods the orthodox summation model of a pure nonexcludable public good assumes that each individual consumes a quantity of public good defined as the sum of all individuals contributions to that good recently hirshleifer 1983 1985 has analyzed models that do not fall within this class at one extreme is the weakestlink in which the total quantity available to each consumer equals the smallest individual contribution at the other is the best shot in which the total quantity available equals the largest individual contribution hirshleifer s example of the weakest link case concerns a circular region of which each citizen owns a pie shaped slice the perimeter is marked by a dyke floods may penetrate the weakest point of the dyke and cause damage equally throughout the region each citizen decides the height and state of repair of that section of the dyke adjoining his piece of land its maintenance constituting his contribution to the public good thus the level of protection enjoyed by all is determined by the least well maintained section of the dyke an example of the best shot case concerns a number of antimissile batteries ringing a city firing at an incoming icbm all that matters is the accuracy of the best shot bliss and nalebuff 1984 discuss dragon slaying as another example of a best shot situation section ii of this paper introduces a class of functions of which the summation weakest link and best shot are examples section iii analyzes the properties of equilibrium when consumers have identical tastes and incomes section iv analyzes the implications of income redistribution in the summation case the equilibrium is unaffected by the initial redistribution over a range and outside that range transfers help the recipient and hurt the donor within the broader class of models however the invariance property does not generally hold and there may be opportunities for paretoimproving income redistribution i give an example similar to the weakest link case in which a pareto improving redistribution is

are incentives against economic justice abstract we consider the problem of fairly allocating a social endowment of indivisible goods and money when the domain of admissible preferences contains but is not restricted to quasi linear preferences we analyze the manipulability of the generalized money rawlsian fair gmrf solutions i we show that the nash and strong nash equilibrium correspondences of the preference revelation game form associated with each gmrf solution coincide with the no envy solution in equilibrium efficiency is preserved according to agents true preferences ii a corollary is that the gmrf solutions naturally implement the no envy solution in nash and strong nash equilibria

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

maximal manipulation of envy free solutions in economies with indivisible goods and money abstract we consider the problem of the fair allocation of indivisible goods and money with non quasi linear preferences the purpose of the present study is to examine strategic manipulation under envy free solutions we show that under a certain domain richness condition each individual obtains the welfare level of his optimal envy free allocation by maximally manipulating the solutions this maximal manipulation theorem is helpful in analyzing the set of nash equilibrium allocations in the direct revelation games associated with a given envy free solution if an envy free solution satisfies a mild condition the set of nash equilibrium allocations in its associated direct revelation game coincides with that of envy free allocations

coalition formation in games of fair division abstract i consider economies with a single indivisible good and money allowing agents to form coalitions i show that the set of equilibrium allocations in the manipulation game associated with any subcorrespondence of the no envy correspondence coincides with the set of envy free allocations for the true preference profile

did higher inequality impede growth in rural china this paper estimates the relationship between initial village inequality and subsequent household income growth for a large sample of households in rural china using a rich longitudinal survey spanning the years 1987 2002 and controlling for an array of household and village characteristics the paper finds that households located in higher inequality villages experienced significantly lower income growth through the 1990s however local inequality s predictive power and effects are significantly diminished by the end of the sample the paper exploits several advantages of the household level data to explore hypotheses that shed light on the channels by which inequality affects growth biases due to aggregation and heterogeneity of returns to own resources previously suggested as candidate explanations for the relationship are both ruled out instead the evidence points to unobserved village institutions at the time of economic reforms that were associated with household access to higher income activities as the source of the link between inequality and growth the empirical analysis addresses a number of pertinent econometric issues including measurement error and attrition but underscores others that are likely to be intractable for all investigations of the inequality growth relationship

history social divisions and public goods in rural india we examine the influence of three historically important sources of social divisions on the availability of public goods in rural india colonial power landowner peasant relations as determined by the land tenure system and social fragmentation based on the hindu caste system and the presence of sizable religious minorities using data on public goods from 1991 we find that regions that were under british colonial power in the pre independence period and those where agrarian power was concentrated in the hands of landlords have lower access to these goods as do areas with high levels of social fragmentation jel h41 p16

existence of equilibrium for walrasian endowment games this work deals with no destruction walrasian endowment games where agents can manipulate by declaring false initial endowments the existence theorem of non trivial nash equilibrium ne for large economies is the main purpose of the paper this theorem also implies 1 the existence of nontrivial ne for walrasian preference games and 2 the existence of ne allocations which are almost efficient it is also shown that under some regularity conditions and when the economy gets large every sequence of ne allocations converges to a true walrasian allocation

inequality and inefficiency in joint projects a group of agents voluntarily participates in a joint project in which efforts are not perfectly substitutable the output is divided according to some given vector of shares a share vector is unimprovable if no other share vector yields a higher sum of payoffs when the elasticity of substitution across efforts is two or lower only the perfectly equal share vector is unimprovable and all other vectors can be improved via lorenz domination for higher elasticities of substitution perfect equality is no longer unimprovable our results throw light on the connections between inequality and collective action

network economics and the environment insights and perspectives local interactions and network structures appear to be a prominent feature of many environmental problems this paper discusses a wide range of issues and potential areas of application including the role of relational networks in the pattern of adoption of green technologies common pool resource problems characterized by a multiplicity of sources the role of social networks in multi level environmental governance infrastructural networks in the access to and use of natural resources such as oil and natural gas the use of networks to describe the internal structure of inter country relations in international agreements and the formation of bilateral links in the process of building up an environmental coalition for each of these areas we examine why and how network economics would be an effective conceptual and analytical tool and discuss the main insights that we can foresee

pure public goods versus commons benefit cost duality sandler and arce 1 pure public goods versus commons benefit cost duality by todd sandler school of international relations university of southern california von kleinsmid center 330 los angeles ca 90089 0043 tsandler usc edu 213 740 9695 213 742 0281 fax and daniel g arce m department of economics rhodes college 2000 n parkway memphis tn 38112 1690 arce rhodes edu 901 843 3121 901 843 3736 fax final revision november 2002 sandler is the robert r and katheryn a dockson professor of international relations economics university of southern california and arce is the robert d mccallum distinguished professor of economics business rhodes college sandler s and arce s research was funded through the dockson and mccallum endowments respectively we have profited from the helpful comments of two anonymous referees

heterogeneity and collective management evidence from common forests in himachal pradesh india summary this paper conducts a statistical investigation into the impact of differences in economic benefits wealth and social classes within the community on collective management of forests there are two key results first social parochialism is not a pre requisite for collective management of forests moderate levels of social diversity are associated with low collective management but at high levels of social diversity collective management is high second moderate wealth heterogeneity is beneficial however at high levels and in the presence of benefit heterogeneity it decreases collective management similarly benefit heterogeneity reduces collective management if wealth heterogeneity also exists these results run counter to the dominant understanding of heterogeneity but may be seen as alternate explanations under a specific socioeconomic context

inequality and conservation on the local commons a theoretical exercise to analyse the effect of asset inequality on co operation within a group we consider a twoplayer nonco operative model of conservation of a common pool resource overexploitation by one user affects another s payoff by reducing the next period catch we give necessary and sufficient conditions such that conservation is a nash equilibrium and show that increasing inequality does not in general favour full conservation however once inequality is sufficiently great further inequality can raise efficiency thus the relationship between inequality and economic efficiency is u shaped finally we analyse the implications for conservation if players have earning opportunities outside the commons the daily livelihood of vast masses of the rural poor in many countries depends on the success with which common pool resources cprs such as forest resources grazing lands in shore fisheries and irrigation water are managed and on the environmental consequences of their management understanding the factors that lead to success or failure of community management of these resources is thus critical to rural development cpr management is a collective action dilemma a situation in which mutual cooperation is collectively rational for the group as a whole but individual cooperation is not necessarily individually rational for each member one factor that has not always been recognised as critical to the outcome of collective action dilemmas is heterogeneity among the resource users in this paper our attention will be largely restricted to a single but potent kind of heterogeneity inequality in asset ownership olson 1965 hypothesised that inequality might favour the provision of a public good

can good projects succeed in bad communities abstract the lack of social capital is frequently given as an explanation for why communities perform poorly yet to what extent can project design compensate for these community specific constraints i address this question by examining determinants of collective success in a costly problem for developing economies the upkeep of local public goods it is often difficult to obtain reliable outcome measures for comparable collective tasks across well defined communities in order to address this i conducted detailed surveys of community maintained infrastructure projects in northern pakistan the findings show that while community specific constraints do matter their impact can be mitigated by better project design inequality social fragmentation and lack of leadership in the community do have adverse consequences but these can be overcome by changes in project complexity community participation and return distribution moreover the evidence suggests that better design matters even more for communities with poorer attributes the use of community fixed effects and instrumental variables offers a significant improvement in empirical identification over previous studies these results provide evidence that appropriate design can enable projects to succeed even in bad communities

income inequality and the quality of public services a developing country perspective abstract that the high growth rising inequality phenomenon experienced by many high growth developing economies in the recent past may lead to discontent among the poor is a well discussed issue this paper argues that as the demand for higher quality of the public services rises with income the rising income in the hands of the rich leads to their dissatisfaction about the quality of available public services thereby inducing them to form their own club for self provision of the public services whenever possible this however results in a lowering of quality available to the others outside the club despite less crowding at the publicly provided facilities

the changing relation between the canadian and u s yield curves abstract the term structures of canada and of the united states two countries with historically interdependent economic ties have been closely linked we investigate the link between canadian and u s yield curves and show previously strong correlations between yield curve components dissipate after canadian monetary policy reforms in the early 1990s we attribute the separated ties to the adoption of explicit inflation targets in 1991 and the maintenance of credibility in price stability as a central policy goal by the bank of canada the effect is particularly evident in the diminished cross country correlations of the short term bond yields additionally there exists strong evidence of cointegration before the reforms evidence which weakens after the policy change date lastly the results on the term structure are shown using a vector autoregression with an endogenously determined break date for canadian and u s estimates of the three factor nelson and siegel 1987 yield curve model

green consumerism and pollution control abstract in this paper we show that collective action by environmentally aware green consumers who derive benefits from consuming environmentally cleaner products can reduce pollution and improve social welfare in the same manner as pollution taxes or subsidies for reducing pollution can we construct a model with two competing firms each producing a good of different environmental quality and two types of consumers with high and low preferences for environmental quality and characterize a benchmark equilibrium in which each consumer acts individually and disregards that his decision to buy a good may affect the level of pollution we then show that compared to the benchmark equilibrium collective action by consumers with high preference who take into account the impact of their combined decision to buy a good on pollution will result in an equilibrium with not only lower pollution and higher social welfare but also higher prices and profits for the firms

limit properties of equilibrium allocations of walrasian strategic games abstract we characterize the set of equilibrium allocations of walrasian strategic games where each agent manipulates his strategic demand map to his benefit we first show that for a finite economy the set of cournot nash equilibrium allocations will be large and the equilibrium allocation map will not in general possess a closed graph property then we show that with appropriate smoothness conditions and the regularity condition on the mean aggregate limit excess demand map true walrasian allocations in a large economy can be claimed to be sufficiently robust against strategic manipulations of agents demand maps

determinants of the long term yield in canada an open economy var approach this study analyses the economic determinants of short and long term interest rates in canada using a structural vector autoregressive var model the var takes into consideration that canadian financial markets are small and open relative to those in the usa and that canada is a relatively large exporter of commodities in part the empirical results for canada are similar to those for the usa aggregate demand shocks have relatively large and persistent effects on long term yields while aggregate supply shocks do not have significant effects however monetary policy shocks in canada are found to have larger and more persistent effects on long term yields than those found for the usa the most striking result is that movements in us monetary policy have relatively large significant and persistent effects on canadian long term bond yields furthermore us monetary policy disturbances can account for the overall trend in long term yields in canada

equilibrium allocations of walrasian preference games following hurwicz 1972 we think of an allocation mechanism as a set of rules governing the behavior of economic agents given the economic environment initial allocations consumer preferences and the technology the behavior prescribed by the allocation mechanism determines future allocations thus we may think of an allocation mechanism as a mapping from a set of economic environments to a set of allocations a question which often comes up in discussions of allocation mechanisms is whether or not there are incentives for the economic agents to follow the prescribed rules is the mechanism incentive compatible this question has received considerable attention in the public finance literature where the concern has been primarily with whether or not consumers will reveal their true prefrences as prescribed by mechanisms designed for the allocation of public goods see for example samuelson 1969 hurwicz 1972 presented a game theoretic structure for the analysis of incentive compatibility the economic agents are the players and their reported characteristics preferences endowments or technologies are the strategy variables when the strategies are played a reported environment is characterized and the allocation mechanism under consideration determines the resulting allocation this allocation as evaluated by the true consumer preferences is the payoff to the strategies played hurwicz calls the mechanism individually incentive compatible if the vector of true characteristics is a nash equilibrium strategy vector for this game hurwicz 1972 first used this structure to investigate the incentive compatibility of the walrasian mechanism he considered pure exchange economies with finitely many consumers in which initial endowments were taken to be known by all and thus not subject to misreporting thus preferences were the only characteristics reported strategically he found that

the demand for insurance against common shocks abstract in recent years index based insurance has been offered to smallholder farmers in the developing world to protect against common shocks such as weather shocks despite their attractive properties these products have met with low demand we consider the frequent situation where farmers are members of groups with common interests we show that this creates strategic interactions among group members in deciding to insure that reduce the demand for insurance for two reasons one is free riding due to positive externalities on other group members when a member chooses to insure the other is potential coordination failure because it may not be profitable for a risk averse member to insure if the other members do not as a consequence we argue that the demand for insurance against common shocks could increase if the insurance policy were sold to groups rather than to individuals

determinants of collective action on the local commons a model with evidence from mexico i develop a model of cooperation in small irrigation systems i give conditions under which an equalizing redistribution of wealth increases the level of equilibrium cooperation but also show that some redistributions that increase inequality can also increase cooperation the distributive rule a combination of arrangements for maintenance cost sharing and water allocation also affects the cooperation level i estimate statistical models of cooperation for three maintenance indicators using field data from a study of mexican irrigation societies social heterogeneity and landholding inequality are significantly associated with lower maintenance distributive rules that allocate water proportionally to landholding size likewise reduce maintenance

sincere and sophisticated players in an equal income market abstract we study the simultaneous direct revelation mechanism associated with each equal income competitive social choice function in the allocation of objects and money among sincere and strategic agents strategic agents take advantage of sincere agents they non cooperatively coordinate on the equal income competitive allocations for the true preferences that are pareto undominated for them within the set of equal income competitive allocations sincere agents are protected to some extent however their welfare is usually above their maximin payoff

interest parity cointegration and the term structure in canada and the united states in this paper the author uses a simple but powerful technique to examine two models of the term structure for an open economy cointegration tests using two data sets for canada and the united states support the open economy model based on uncovered interest parity as an explanation for the canadian term structure of interest rates support for the generalized present value model is at best mixed this lack of support may be attributable to low test power due to the author s smaller sample or to differences in the periods examined

task divisions in teams with complementary tasks abstract a team leader and a team follower non cooperatively produce a team specific public good out of two complementary tasks both team members are identically productive and can contribute to both tasks by moving first the team leader effectively determines the division of the tasks in the team we show that the existence of multiple but finitely many types of task divisions is associated with a non convex leader s budget constraint non convexity generates discontinuities and non monotonicities in the equilibrium provision of the good and also in the follower s utility if incomes are redistributed within the team non monotonicity of the follower s utility motivates the follower to give a cash transfer to the leader having received the cash transfer the leader adopts a task division that compensates the contributions of the follower hence we observe a non cooperative gift exchange with a monetary gift to the leader and a subsequent non monetary reward to the follower through a lighter task allocation these gift exchanges disappear in the presence of infinitely many types of task divisions generated by a continuum of complementary tasks

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

empowerment and efficiency tenancy reform in west bengal the paper analyzes the effect of agricultural tenancy laws offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity theoretically the net impact of tenancy reform is shown to be a combination of two effects a bargaining power effect and a security of tenure effect analysis of evidence on how contracts and productivity changed after a tenancy reform program was implemented in the indian state of west bengal in the late 1970s suggests that tenancy reform had a positive effect on agricultural productivity there

public goods provision and redistributive taxation abstract this paper studies the relationship between redistributive taxation and tax deductible charitable contributions redistribution has two opposite effects on voluntary giving the price of charitable giving decreases with the degree of redistribution and this has a positive effect on the total amount of giving substitution effect however redistribution leads to lower consumption for the contributors and therefore has a negative effect on contributions to the charity income effect the theoretical model developed in this paper demonstrates that under a general class of utility functions the substitution effect dominates the income effect hence charitable giving increases with the tax rate in purely egalitarian societies the public good is provided efficiently and the total welfare is maximized independent of the ex ante income inequality however the positive impact of taxation on charitable giving and welfare may disappear if individuals generate their income levels in anticipation of taxation and redistribution does not take into account the cost of effort

in praise of inequality public good provision and income distribution abstract it is shown that if all individuals contribute towards the provision of a public good their utilities are equalised even if the income distribution is unequal it may seem that there is then no role for redistributive policy but it is proved that social welfare can be raised by creating sufficient income inequality that only the rich provide public goods