how do people cope with natural disasters evidence from the great hanshin awaji kobe earthquake in 1995 this paper investigates the coping strategies employed by victims of the great hanshin awaji kobe earthquake in 1995 using a unique household data set we show that households that held a large amount of collateralizable assets before the catastrophe and were free from a binding borrowing constraint were able to maintain their consumption levels by borrowing in contrast households subject to a binding borrowing constraint before the disaster were unable to borrow to cope with the losses inflicted by the earthquake on the other hand both types of households relied on private transfers depending on the extent of the damage

evaluating the technical efficiency of large us law firms we conduct a performance evaluation in terms of technical efficiency of large law firms based on a unique sample of 163 large law firms in the usa in 1994 to estimate technical efficiency for individual firms we use the stochastic frontier production function with composed errors where output measured in terms of revenue is a function of various labour and human capital inputs based on the sample the average level of technical efficiency in the production of legal service in large us law firms is estimated at 82 20 more than 87 of the firms attained 75 or higher level of technical efficiency the estimation results also indicate that the number of lawyers the number of paralegals and the number of associates per partner have a positive and statistically significant effect on the production of legal service

degradation of environmental capital and national accounting procedures abstract the capital theoretic approach to the environment as a wastable stock a stock with a flow of abatement services is explored in a simple ricardo like model involving wheat production and pollution production as an essential by product we then turn to how the national accounts are implicit in growth or capital theory models and how formulae emerge for accounting for the wasting of environmental capital airsheds and watersheds from excessive use

nuclear power externalities and non standard pigouvian taxes the external effects arising from the use of nuclear power are in a fundamental way related to uncertainty in this paper we locate these external effects and derive a dynamic pigouvian tax in order to make the decentralized economy support the command optimum another interesting result is that a small constant energy tax which we interpret as a second best policy can take the decentralized economy reasonably close to the command optimum

flows of air pollution ill health and welfare we provide a theoretical framework for measuring welfare when pollution influences economic growth by impairing health and driving up defensive medical expenditures we demonstrate the usefulness of our framework in practice by applying it to data from swedish valuation studies designed according to the accounting principles suggested here we estimate that the negative health effects of nitrogen dioxide emissions amount to 0 6 of gdp in sweden we also show that a corrective pigouvian tax should internalize the direct disutility reduced labor productivity and increased healthcare expenditures caused by pollution according to our calculations harmful health impacts alone excluding ecosystem effects justify 65 of the current swedish tax on nitrogen dioxide

cost and efficiency in nursing homes a stochastic frontier approach abstract the average level of cost inefficiency in new york nursing homes is estimated at 29 based on a two year panel of 164 skilled nursing facilities and 443 combination skilled and health related facilities the stochastic frontier cost function is fit to the data utilizing the composed error model wherein statistical noise and allocative and technical inefficiency are jointly estimated there is no change in efficiency between 1987 and 1990 and it does not vary between for profit and not for profit homes excessive managerial and supervisory personnel and diseconomies of size are linked to inefficient operation chronic excess demand is suggested as a cause of the high level of inefficiency

economic growth pollution and renewable resources abstract this paper first analyzes a model of economic growth with stock pollution allowing smooth substitution between emissions and reproducible capital when emissions are optimally controlled the steady state consumption is lower than without pollution control but the optimal steady state equilibrium may not exist if the marginal productivity of capital is bounded the steady state is shown to be a local saddle point independent of the rate of discount if pollution is not controlled a competitive economy moves along a stable growth path toward a too heavily polluted steady state next a growth model in which pollution affects the growth of renewable resources is presented the conditions for the existence and saddle point property of the steady state are given and the consequences of nonoptimal externality taxes are discussed when renewable resources are included higher than optimal pollution may decrease steady state consumption contrary to the case where renewable resources are ignored

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

the market for lawyers it is hardly news but the plethora of bad jokes about lawyers should be the tip off that the 1980s were a boom market for legal services data always lag behind a little and mine are no exception the current recession is not included but although the price of lawyers time in the mid1980s had not attained the all time heights of the late 1960s and early 1970s it was traveling fast in that direction the harder problem is understanding why the data are described in light of some fundamental economic ideas much important research on the economics of occupational choice has been done by economists who were at or associated with the university of chicago milton friedman s doctoral dissertation published with simon kuznets l was a remarkable pioneering empirical study of incomes from independent professional practice contrasting medicine with law some important aspects of that study were clarified and extended by h gregg lewis 2 david blank and george stigler s study of scientists and engineers was one of the first empirical studies of a subject that is still a great concern of public policy 3 t w schultz and gary becker devel

the significance of the market portfolio the market portfolio is in one sense the least important portfolio to provide to investors in an j agent one period stochastic endowment economy where preferences are quadratic a social welfare minded contract designer would never create a contract that would allow trading the market portfolio even the complete set of contracts all j 1 of them which achieve a first best solution never span the market portfolio these conclusions rely on the assumption that the contract designer has perfect information about agents utilities we also show that as the contract designer s information about agents utilities becomes more imperfect the optimal contracts approach contracts that weight individual endowments in proportion to elements of eigenvectors of the variance matrix of endowments then if there is a strong enough market component to endowments a portfolio approximating the market portfolio may be the most important portfolio

la crema a case study of mutual fire insurance we analyze a mutual fire insurance mechanism used in andorra which is called la crema in the local language this mechanism relies on households announced property values to determine how much a household is reimbursed in the case of a fire and how payments are apportioned among other households the only pareto efficient allocation reachable through the mechanism requires that all households honestly report the true value of their property however such honest reporting is not an equilibrium except in the extreme case in which the property values are identical for all households nevertheless as the size of the society becomes large the benefits from deviating from truthful reporting vanish and all the nondegenerate equilibria of the mechanism are nearly truthful and approximately pareto efficient

measuring hospital efficiency with frontier cost functions this paper uses a stochastic frontier multiproduct cost function to derive hospital specific measures of inefficiency the cost function includes direct measures of illness severity output quality and patient outcomes to reduce the likelihood that the inefficiency estimates are capturing unmeasured differences in hospital outputs models are estimated using data from the aha annual survey medicare hospital cost reports and medpar we explicitly test the assumption of output endogeneity and reject it in this application we conclude that inefficiency accounts for 13 6 percent of total hospital costs this estimate is robust with respect to model specification and approaches to pooling data across distinct groups of hospitals

disease microdams and natural resources in tigray ethiopia impacts on productivity and labour supplies we examine the effects of water microdams and ensuing waterborne diseases on household decisions in tigray ethiopia where the government implemented a water resource development programme two decades ago we find microdams increase productivity of both fuelwood collection and crop production but the costs of these dams to households can be significant in villages close to dams disease prevalence is higher and all household labour categories spend more time sick and more time is spent by male and female adults caring for sick family members these can cost the household anywhere in the region of 150 250 birr per season depending on the type of labour diversion and the productivity of labour males are most significant here removing their time from production results in 40 60 per cent higher productivity and income losses compared to diversion of female labour sick households also spend significantly more money on health care especially when male and female adults are sick

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

wealth from optimal health abstract recently much research has been devoted to the question of how the conventional net national product measure should be augmented so as to cover changes in the stocks of natural resources this paper investigates the treatment of health capital and the risk of doomsday caused by pollution in such welfare measures our problem is not a standard optimal control problem because the survival probability depends on state variables we show how to handle this complication the resulting welfare measure is contrasted with the conventional net national product measure finally we address the matter of how to design a subsidy on health investment such that a market economy provides the optimal level of health

individual risk and mutual insurance this paper examines how in the presence of individual risk economic efficiency can be achieved without an unrealistically large number of contingent claims market uncertainty is specified in such a way that general types of individual risk and collective risk are properly accounted for and so that specifically market clearing is always satisfied ex post as well as ex ante we show that consistency of beliefs and optimality of allocation can be guaranteed with an appropriate array of pure arrow securities to spread collective risk and mutual insurance policies to pool individual risk when there is individual risk common to like groups of individuals pooling risk by means of mutual insurance permits substantial economizing on market transactions as compared to those required if dealing instead with the full complement of pure arrow securities we show that if there are n households consisting of h types each facing the possibility of being in s individual states together with t collective states then ensuring pareto optimality requires only h s 1 t independent mutual insurance policies plus t pure arrow securities our results also help to clarify the question of which missing markets may affect allocational efficiency

natural resources national accounting and economic depreciation abstract the current value hamiltonian in an aggregate optimal growth problem with heterogeneous capital stocks including exhaustible renewable and environmental stocks is the nnp function routine substitutions reveal that the using up of natural resource stocks is representable as easy to interpret economic depreciation magnitudes we obtain true nnp inclusive of natural resource stock diminution implications for actual national accounting practices are also discussed

the allocation of consumer incentives to meet simultaneous sales quotas an application to u s army recruiting consumer incentives often have a dual role to expand the market and to redistribute the market so as to meet sales targets for a range of products the proper allocation of incentives must recognize and deal with the competitive and cannibalizing effects operating among product classes the presence of environmental factors scale economies and cost per unit for each of the candidate incentive types also must be accounted for this paper develops and illustrates an analytical approach designed to improve the allocation of consumer incentives where sales targets are exogenously set the model generates a system of simultaneous behavioral equations a portion of which is included to reflect attempted cost minimizing behavior the model is applied to fy81 fy86 data from the u s army recruiting command which allocated over 1 billion for special incentives to selected recruits the incentives consist of enlistment bonuses and educational benefits offered to quality recruits who select critical occupational specialties the sales targets are enlistment quotas for each of the occupational specialties that must be simultaneously satisfied the army s goal is to meet these quotas in a postulated recruiting environment at minimum total incentive expenditure results suggest that the army could improve the cost effectiveness of its recruiting effort through a reallocation of the incentives it offers to recruits misallocation during the fy81 fy86 period is estimated to have cost the army approximately 3 5 of its total incentives expended in infantry recruiting recruiting

fiscal policy in an endogenous growth model in a neoclassical growth model it is possible to make a case for public debt because a balanced growth path may be dynamically inefficient this paper shows that this possibility no longer holds in an endogenous growth model with constant external returns to capital it is shown that an increase in public debt reduces the growth rate so there always exists a future generation that will be harmed and that a reduction in public debt although it increases the growth rate cannot be pareto improving one current generation must be harmed