social security liquidity constraints and pre retirement consumption one of the primary goals of the social security retirement program is the maintenance of consumption in old age in the past decade since the pioneering paper by feldstein 13 studies have examined the impact of the system on consumption over the entire life cycle and not just in old age empirical work has tested the impact on consumption of the individual wealth transfers accompanying the introduction of a pay as you go social security system extending this discussion of the impact of social security on pre retirement consumption hubbard 21 has shown in the context of lifetime uncertainty that even an actuarially fair fully funded social security system can raise lifetime consumption hence previous partial equilibrium estimates of the impact of social security on consumption drawn solely from consideration of the intergenerational wealth transfer at the introduction of the system are underestimates of the potential effect 2 an important assumption in the approaches cited above is that of perfect capital markets i e that individuals can borrow against prospective gains from participating in the social security system such an assumption is at variance with actual limitations on borrowing e g upward sloping interest rate schedules collateral requirements and quantity restrictions hayashi 18 found that approximately twenty percent of all consumption in the u s is accounted for by liquidity constrained consumers 3 flavin 16 found that the estimate of the marginal propensity to consume is affected dramatically by the inclusion of proxies for liquidity constraints suggesting that liquidity constraints are an important part of the observed excess sensitivity of consumption to current income since its inception in 1935 old age and survivors insurance oasi provided

international effects of tax reforms in an open economy with international capital flows there is an equivalence relation between income tax consumption tax international borrowing tax and an external interest earning tax this paper analyzes tax reform involving shifts between income and consumption taxes in this setting it is shown that the real effects of such revenue neutral tax reform depend critically on the country s current account position and the nature of the reform in particular whether the world interest rate rises or falls as a consequence of a budget deficit depends on the tax system in force the analysis provides a clear rationale for the international coordination of tax policies copyright 1989 by royal economic society

a life cycle consumption model with liquidity constraints theory and empirical results a structural consumption model incorporating endogenous liquidity constraints is fit to a cross section of 798 u s families liquidity constrained families are estimated to constitute 19 4 percent of the population sampled a group that accounts for 16 7 percent of consumption in the population sampled in sample simulations of the model suggest that a temporary tax has three to four times more impact on aggregate consumption than it would if liquidity constraints were not in effect copyright 1987 by the econometric society

the strategic bequest motive although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation our understanding of bequest motives remains incomplete we develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries actions the model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers we present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries

the transition from payroll to consumption receipts with endogenous human capital abstract the transition from payroll to consumption receipts is simulated in a life cycle growth model featuring adult human capital as in other studies savings are higher under the consumption base however unlike those studies much of the additional savings here take human form human capital production increases for all cohorts in or yet to join the labor market as of the tax change the additional human capital production tends to dampen physical capital accumulation when compared with otherwise identical simulations which hold human capital constant the implications for intergenerational incidence are similar to that found in other examinations of the transition to a consumption base

the spirit of capitalism and savings behavior abstract this paper presents a capitalist spirit model of savings by including wealth in the intertemporal utility function while this model includes the life cycle model and bequest model as two special cases it sheds light on why wealth holding has tended to increase with age why decumulation of wealth after retirement has not happened and why households with and without children have not shown significant differences in their savings behavior the capitalist spirit approach is especially useful for understanding savings by the rich and savings across countries and over time jel e21 b10

increasing returns and competitive equilibrium the content and development of marshall s theory this paper reviews alfred marshall s attempts to reconcile increasing returns and competition from the early economic writings to the later editions of his principles it is shown that while marshall s final solution to the problem involved naming external economies the cause of increasing returns in a regime of competition both the life cycle of the firm and internal economies remained necessary to his argument their function was to give some operation al content to the elusive concept of external economies copyright 1992 by oxford university press

inheritance and wealth inequality the case of the punjab abstract this study follows a wealth function approach to quantify the role of inheritance in wealth inequality in the region of punjab india using household data from the national sample survey 25th round the specification of the wealth function is fairly general it is used to test the hump shaped pattern of wealth age relationship and also to decompose the reported wealth holding of each sample household into inherited and accumulated components it is found that inheritance accounts for 53 38 and 24 13 percent of wealth inequality in the rural and urban sectors respectively some policy implications of our results are stated

saving behavior in retirement when life horizon is uncertain abstract we try to explain some recent empirical observations that retired people continue to save in retirement for several years a behavior which seems to contradict the life cycle hypothesis we show that such a behavior is consistent if individuals become more optimistic about their life probability distribution or if individuals become more risk averse as they age

uncertain lifetimes retirement and economic welfare the effect of increased life expectancy on retirement age is ambiguous because a change in the survival probability is analogous to a change in intertemporal prices it is shown that the decision to retire earlier or later depends on the old age saving behavior early retirement could emerge if one saves in old age it is also shown that the effect of intertemporal substitutions arising from the imperfection of the annuity market could produce a tilt to the reservation wage profile which in turn makes early retirement possible copyright 1991 by the london school of economics and political science

tax policies and the financially constrained farm household this article analyzes the implications of income profit and consumption taxes on the economic decisions of financially constrained farm households within a dynamic intertemporal framework the most important results are that replacing a profits tax with a consumption tax would lead to increases in on farm work farm income and farm production in the short run capital accumulation would be enhanced leading to similar effects in the long run if an income tax is replaced with a consumption tax similar expansive effects would occur in the intermediate and long run but in the short run there would be no effect on farm production

pay as you go social security and the distribution of altruistic transfers this paper studies the impact of an unfunded social security system on the distribution of altruistic transfers in a framework where savings are due to both life cycle and random altruistic motivations we show that the effect of social security on the distribution of these transfers depends crucially on the strength of the bequest motive in explaining savings behaviour we measure this strength by the expected weight that individuals attach to the utility of future generations on the one hand if the bequest motive is strong then an increase in the social security tax raises the bequests left by altruistic parents on the other hand when the importance of altruism in motivating savings is sufficiently low the increase in the social security tax could result in a reduction of the bequests left by altruistic parents under some conditions on the attitude of individuals toward risk and on the relative returns associated with private saving and social security some implications concerning the transitional effects of introducing an unfunded social security scheme are also discussed

conversion to a consumption tax the transition in a life cycle growth model this paper examines the transitional losses that may follow conversion from an income tax to a consumption tax even when conversion eventually raises steady state lifetime welfare two recent studies have left the impression that the transitional losses would be large using a life cycle growth model this paper examines two reasons why these studies have probably overestimated the transitional losses the model computes the welfare gains and losses of each age cohort along the transition path it is shown that the greater the bequest motive and subjective discount rate generating the particular initial income tax steady state the smaller would be the transitional losses similarly a policy of age phasing would reduce the losses the results demonstrate the importance of examining the transition path whenever a policy change alters capital accumulation

the firm as a dedicated hierarchy a theory of the origins and growth of firms in the formative stages of their businesses entrepreneurs have to provide incentives for employees to protect rather than steal the source of organizational rents we study how the entrepreneur s response to this problem determines the organization s internal structure growth and its eventual size large steep hierarchies will predominate in physical capital intensive industries and will have seniority based promotion policies by contrast e at hierarchies will prevail in human capital intensive industries and will have up or out promotion systems furthermore e at hierarchies will have more distinctive technologies or cultures than steep hierarchies the model points to some essential differences between organized hierarchies and markets at the root of most enterprises generating economic surplus is an entrepreneur with a unique critical resource such as an idea good customer relationships a new tool or superior management technique a fundamental problem of entrepreneurship is how to enlist the cooperation of the many agents necessary for production without ceding to them too much of the surplus generated by the enterprise the risk of being expropriated however is always inherent in production in particular the entrepreneur has to give her employees whom we call managers close proximity or access to the critical resource for them to learn to produce effectively for example a manager has to understand the idea be in contact with the key customers and suppliers or even learn the entrepreneur s unique managerial techniques in order to work effectively but access also gives the manager the opportunity to expropriate this critical resource and compete against the entrepreneur managers may steal the idea walk away with clients or mimic the entrepreneur s management style and start up a rival concern the greater the access a manager has the more he can appropriate and the more effectively he can compete this paper explores the role of organizational design in

pasture conversion and competitive cattle rents in the amazon the economic incentives for conversion to pasture in mato grosso brazil are investigated using pastureland rents pastureland rents are estimated from physical and geographic determinants and verified by predicting the location of conversion to pasture between 2001 and 2004 results indicate that a one hundred dollar increase in mean cattle rent increases the probability of conversion to pasture from 8 6 to 11 1 the use of economic rent allows the direct study of fiscal policy levers on land conversion behavior expanding policy discussions beyond the role of roads and road improvement towards the use of excise and conversion taxes or conservation subsidies

the role of intergenerational transfers and life cycle saving in the accumulation of wealth he purpose of this paper is to review what economists know at present about the following question how large a portion of the existing wealth is the result of a bequest motive that is of accumulation for the specific purpose of leaving bequests i will also endeavor to clarify why an answer to this question is of interest in the early keynesian period when the study of national saving first attracted wide interest relatively little attention was paid to what led people to save though it was generally understood that the main systematic reason was to leave bequests j m keynes in the famous chapter 9 of the general theory of employment interest and money 1936 had listed seven distinct motives for saving besides the leaving of bequests but five of these which include to increase one s future income or to insure one s independence and power implied that all or nearly all the accumulation would finally wind up as bequeathed wealth this in turn meant that most private wealth originated through bequests that is it either had been received through bequests or was destined to be bequeathed and indeed how else could society accumulate wealth however keynes 1936 p 107 also mentioned two further motives precaution that is to build up a reserve against unforeseen contingencies and foresight that is to provide for an anticipated future relation between the income and the needs of the individual or his family different from that which exists in the present as for example in relation to old age family education or the maintenance of dependents these motives in contrast to most of the previous ones have the

can economic causes of tropical deforestation be identified at a global level this paper contributes to the literature on the macro scale economic determinants of the increase in global forest depletion by performing a regression analysis based on a panel dataset for fifty tropical countries over an eighteen year period while the initial findings appear at first to confirm a common causality pattern of selected macroeconomic variables in influencing tropical deforestation subsequent statistical tests question the significance of the results more specifically testing for autocorrelation which has been downplayed in previous studies appears to represent a critical issue when the initial results are corrected for autocorrelation the significance of the parameters declines substantially below statistically acceptable levels the implications are twofold first regression analyses that seek to explain deforestation at the global level need to be carefully scrutinised and checked to ensure that they meet standard statistical tests second tropical deforestation might ultimately depend upon case specific factors and further research may render more effective policy suggestions if conducted at a more disaggregated local level

the wealth age relation among the aged aged people face the problem of allocating over the rest of their lifetimes the wealth that they have accumulated during their working years this problem is fairly complex because they are uncertain about the dates of their death and because they may wish to use their wealth to finance general consumption or hold it to meet emergencies leave estates or maintain power or status whether skilled at dynamic programming or not aged people effectively do make these decisions what are the results some studies of the entire lifetime pattern of saving and wealth tend to support the simple life cycle model in which the aged use up their wealth to help finance consumption harold lydall for example found saving rates to increase and then decrease with age in the whole population and to be negative for the group aged 65 and over guarded support for the theory was found by franco modigliani and albert ando in britain and by dorothy projector in the united states more recently a f shorrocks examined the lifetime pattern of wealth holding in estate tax data for a single cohort and found the hump pattern that is characteristic of life cycle saving other evidence on wealth holding runs contrary to this however in a study of estate tax returns in washington d c james d smith found that wealth increased with age among the aged after controlling for other demographic variables examining national estate tax data john brittain found wealth to increase with age in the united states and a b atkinson and a j harrison reported the same pattern in england and wales in a sample of tiaa annuity recipients analyzed by james mulanaphy over half reported that their total savings had increased during retirement and another quarter reported that their savings had remained about the same in this paper i examine wealth holding patterns among aged married couples using survey data representing the entire aged population of the united states in 1968 the statistical analysis serves as a test of the hypothesis that emerges from life cycle theory and provides some further exploration into the economic behavior of the aged i find that the aged tend to increase their wealth over time

public investment and its effects on the burden of the public debt few problems in economics have been so thoroughly debated without being resolved as the question about whether the burden of the public debt is passed on to the future the key issue in the debate is whether taxation and debt are equivalent in their real effects as methods of raising public revenues the question in this form is an old one and both sides of the debate were eloquently discussed by ricardo 2 the purpose of this paper is to present a framework within which the choices facing the many different individuals in the society can be analyzed as is explained below the nature of the economy s adjustment to debt issue cannot be fully understood without first understanding that different individuals will adjust differently to the issuance of additional debt it is unlikely that a single paper could end a debate that is well over two centuries old hence our goal is more modestly to extend the framework of the debate adding some more realistic features to a barro like model illustrates that there are areas of commonality that unite both sides of the debate this study extends the current debate in two ways first it examines the intergenerational transfer of public sector wealth by including the effects of intergenerational bequests of assets in addition to the intergenerational transfer of debt after all when individuals consider the well being of their heirs they must consider the value of the assets that are passed from one generation to the next in addition to the stock of public debt 3 second it

social security and individual welfare precautionary saving borrowing constraints and the payroll tax this paper examines the impact of social security on national saving and individual welfare in the presence of realistic capital market imperfections market failure in the private provision of annuities and restrictions on borrowing against anticipated future wages the introduction of social security increases lifetime welfare and reduces national saving if borrowing restrictions are absent however the increase in individual welfare is reduced and in some cases eliminated when borrowing constraints are taken into consideration the substantial difference suggests the importance of reexamining the proportional payroll tax finance of social security copyright 1987 by american economic association

tax reform and external balance abstract this paper examines the effect of a transformation from capital taxation to consumption in an open economy with the residential capital tax rate being endogenous an increase in the domestic consumption tax rate decreases the interest rate increases capital accumulation and increases the domestic country s net foreign asset holdings and trade surplus with the territorial capital tax rate being endogenous an increase in the domestic consumption tax rate may either increase or decrease the domestic country s interest rate net foreign asset holdings and trade surplus depending on the interest elasticity of capital demand

population age structure saving capital flows and the real exchange rate a survey of the literature this paper surveys the existing literature on the effects of population age structure on saving capital flows and the real exchange rate we build on previous surveys of age structure and saving behaviour by including extensive discussion of international linkages specifically the impact on capital flows and real exchange rates we also point to unresolved issues that need to be addressed given that population aging has serious policy implications in the developed economies these days

differential mortality and wealth accumulation the issue of asset accumulation and decumulation is central to the life cycle theory of consumer behavior and to many policy questions one of the main implications of the life cycle model is that assets are decumulated in the last part of life most empirical studies in this area use cross sectional data of estimate mean or median wealth age profiles the use of cross sections to estimate the age profile of assets is full of pitfalls for example if wealth and mortality are related in that poorer individuals die younger one overestimates the last part of the wealth age profile when using cross sectional data because means or other measures of location are taken over a population which becomes richer as it ages this paper examines the effect of differential mortality on cross sectional estimates of wealth age profiles our approach is to quantify the dependence of mortality rates on wealth and use these estimates to correct wealth age profiles for sample selection due to differential mortality we estimate mortality rates as a function of wealth and age for a sample of married couples drawn from the survey of income and program participation sipp our results show that accounting for differential mortality produces wealth profiles with significantly more dissaving among the elderly

life cycle saving and dissaving in retirement abstract in a life cycle saving model with no bequest motive it is shown that aged persons may continue to accumulate wealth during the early years of retirement the key features of the model are the lack of borrowing opportunities and the recognition of empirically based mortality probabilities

capital income taxation in a two commodity life cycle model the role of factor intensity and asset capitalization effects this paper discusses the impact of changes in capital income taxation in a two commodity life cycle general equilibrium growth model in contrast to the solow swan one commodity framework which has been used in previous life cycle policy simulation summers 1981 auerbach et al 1983 auerbath and kotlikoff 1983 1987 we use a two commodity uzawa 1961 1963 type model consumption and capital goods are separately identitied with an endogenously determined relative price between them as a result both asset capitalization effects changes in the relative price of capital and consumption goods and factor intensity effects across sectors are captured calculations with the model suggest that both of these effects

direct conservation payments in the brazilian amazon scope and equity implications abstract this article looks into the scope and equity implications of applying payments for environmental services pes as a redd implementation mechanism in the brazilian amazon we establish a set of economic and institutional preconditions for pes to become a feasible and cost effective conservation mechanism we proceed with a macro scale spatial analysis and overlay of opportunity costs deforestation patterns carbon services and land tenure in order to assess where these conditions hold we then screen how the benefits of potential pes schemes might be distributed across different socioeconomic groups of service providers in different land tenure categories our economic quantitative analysis though sensitive to documented assumptions suggests that under current carbon prices the economic preconditions are in place to pay for avoided deforestation in over half of threatened forests over the next decade unfortunately the same optimism does not apply to institutional preconditions land grabbing insecure tenure overlapping claims and lacking information on private tenure constitute real medium term impediments to pes if payments were to accrue to current landholders regardless of current tenure insecurities large landowners who account for about 80 of all deforestation would reap the highest benefits though per capita benefits other tenure categories are also high schemes that closely align payments with opportunity costs are preferable for cost effectiveness and not necessarily more inequitable in outcomes essentially pes systems cannot substitute command and control measures the former depend on the latter for basic governance systems to secure effective rights of exclusion which land stewards essentially need in order to become reliable service providers

ecosystem service value and agricultural conversion in the amazon implications for policy intervention we explore the welfare implications of agricultural expansion in the brazilian amazon by comparing spatially explicit estimates of soybean rents and the value of ecosystem services although these estimates are generated from different datasets models and estimation techniques the values are comparable such that the value of ecosystem services is greater than soybean rents for about 61 of the total area and 24 of the area where soybean rents are positive if protected areas are well enforced based on the balance between the benefits and costs of conversion failure to value ecosystem services reduces total social welfare by 7 13 billion dollars annually relative to an optimum policy instruments that internalize the value of ecosystem services via protected lands land conversion taxes conservation subsidies or excise taxes can avoid much of this loss regardless of intervention regime policy makers should be cognizant of the diminishing net benefits of converting natural ecosystems to agriculture realizing the final 3 8 requires the conversion of an additional 15 natural ecosystems to soybean production

the economic effects of social security toward a reconciliation of theory and measurement abstract in this paper we argue that actuarial valuation of social security benefit streams is theoretically inconsistent with the assumption of pure life cycle motives instead we show that the simple discounted value of future benefits ignoring the possibility of death is often a good approximation to the relevant concept of value this observation motivates a re examination of existing empirical evidence concerning the economic effects of social security we focus our attention on studies of distributional equity and personal saving behavior in both cases we argue that the use of simple rather than actuarial discounting of survival contingent income streams produces results that differ dramatically from previous findings specifically estimates based on actuarial valuation may overstate the importance of redistribution between and within generations and may understate the depressive effect of social security on personal wealth accumulation by a factor of three or more

intergenerational transfers and savings in recent years the role of intergenerational transfers in the process of wealth accumulation has been the subject of substantial empirical and theoretical analysis the key question stimulating this research is what is the main explanation for savings is it primarily accumulation for retirement as claimed by albert ando richard brumberg and franco modigliani in their celebrated life cycle model of savings is it primarily intentional accumulation for intergenerational transfers or is it primarily precautionary savings much of which may be bequeathed because of imperfections in annuity markets this paper examines a range of findings on the importance of intergenerational transfers the strong conclusion that emerges from this evidence is that intergenerational transfers play a very important if not a key role in aggregate wealth accumulation while intergenerational transfers figure very large in savings the precise motivation for such transfers is unclear intergenerational altruism might appear the most likely candidate but at least sane stylized facts such as the equal allocation of bequests among children are strongly at adds with the altruism model other explanations involving imperfect insurance arrangements or payments for child services do not appear capable of explaining the substantial amounts of transfers actually observed sorting cut the relative contributions of different models to intergenerational transfers and the precise role of intergenerational transfers in the process of wealth accumulation remains an intriguing and exciting enterprise this abstract was borrowed from another version of this item

time consistent taxation in a dynastic family model with human and physical capital and a balanced government budget this paper analyzes optimal time consistent taxation in a dynastic family model with human and physical capital and with a balanced government budget when tax revenue is used for publicly provided consumption or lump sum transfers leisure would be higher than its social optimum pareto optimal taxation requires taxing capital income more heavily than labour income and subsidizing investment at the same rate of the tax also it requires either subsidizing labour at the same rate as a consumption tax or subsidizing consumption at the same rate as a labour income tax and hence it is not a practical guide to policy further a consumption tax or equivalently a uniform income tax with investment subsidies at the same rate can be improved on by taxing capital income more heavily than labour income ce memoire analyse la fiscalite optimale et consistante dans le temps dans un modele de famille dynastique avec capital humain et physique et un budget gouvernemental equilibre quand le revenu fiscal est utilise pour financer la consommation publique ou pour des transferts forfaitaires le niveau de loisir sera plus eleve que l optimum social la fiscalite optimale paretienne exige qu on taxe le revenu du capital plus fortement que celui du travail et qu on subventionne l investissement au meme taux que la taxe elle exige aussi soit qu on subventionne le travail au meme taux que la taxe a la comsommation soit qu on subventionne la consommation au meme taux que l impot sur le revenu du travail et donc ce n est pas un guide pratique pour la politique de plus un regime de taxe sur la consommation ou de maniere equivalente d impot uniforme sur le revenu avec subvention a l investissement au meme taux peut etre ameliore en taxant le revenu du capital plus fortement que celui du travail

marshall s theory of value the role of external economies the view that marshall relied upon the assumption of external economies in his attempt to reconcile the existence of competition and decreasing long run average costs continues to attract many supporters however it is argued here that in marshall s writings external economies were to play only a very minor role in the reconciliation exercise subsequent writers emphasis on the role of external economies is shown to reflect a lack of understanding of the object of marshall s as opposed to the marshallians reconciliation problem

saving and the life cycle a cohort analysis abstract this paper examines the life cycle hypothesis with reference to japanese employees the study is based on panel data created from successive cross section data which is expected to give better results than past studies the sample was categorized by many elements one important result is that empirical testing of saving and the life cycle is crucially dependent upon the samples it is found that the majority of japanese employees have not accumulated wealth enough to assure consumption during retirement the paper however did not reject a hump shaped course of wealth accumulation under the assumption of myopic behavior

savings of the elderly and desired bequests cross section data often show that the wealth of the elderly increases with age even at advanced ages these and other results suggest that the life cycle hypothesis of consumption should be augmented to include a bequest motive for saving in this paper the author proposes a model of bequests and a test for a bequ est motive using panel data he finds that over a ten year period the elderly in the data set dissaved in contradiction to most cross section results the test offers no support for a bequest motive copyright 1987 by american economic association

the evolutionary firm and cournot s dilemma to transform this competence based approach into an evolutionary theory the con nection between the firm and veblen s concept of social knowledge is more fully devel oped once established the evolutionary theory of the firm is utilised to bypass marshall s reconciliation problem and solve cournot s dilemma

trade policies economic growth and the direct causes of deforestation by ramon lopez gregmar i galinato please send correspondence to ramon lopez 2200 symons hall university of maryland college park md 20742 email rlopez arec umd edu tel 301 405 1281 fax 301 314 9091 gregmar i galinato 2200 symons hall university of maryland college park md 20742 email ggalinato arec umd edu tel 301 405 0477 fax 301 314 9091

medicaid insurance in old age the old age provisions of the medicaid program were designed to insure retirees against medical expenses we estimate a structural model of savings and medical spending and use it to compute the distribution of lifetime medicaid transfers and medicaid valuations across currently single retirees compensating variation calculations indicate that current retirees value medicaid insurance at more than its actuarial cost but that most would value an expansion of the current medicaid program at less than its cost these findings suggest that for current single retirees the medicaid program may be of the approximately right size

imagination and leadership the neglected dimension of an evolutionary theory of the firm abstract bounded rationality prevents humans from tracing all action plans that could in principle be imagined in the present paper individuals partly socially shaped cognitive frames explain which action plans do gain attention this provides the basis for a new entrepreneurial theory of the firm where business conceptions which underlie any entrepreneurial venture play a key role coordination and motivation of the firm members can be achieved and opportunism be held down if through cognitive leadership the entrepreneur succeeds in implementing and defending his own business conception as a tacit cognitive frame collectively shared within the firm

the economics of cropland conversion in amazonia the importance of agricultural rent abstract we use spatially efficient logit models to explore the role of economic incentives on the expansion of cropland in the mato grosso region between 2001 and 2004 an empirical measure for agricultural economic rent is used to quantify the desirability of a particular plot of land which previous research proxies with variables such as distance to roads or urban areas and simple climatic and edaphic variables results indicate that the measure for economic rent provides additional information and explanatory power to one of the most commonly used proxies distance to roads as predicted by economic theory it is not simply access or variation in transportation costs that drives the spatial determinants of agricultural expansion but the expected total returns from the venture this suggests that spatially explicit rent models can be used to simulate the location and quantity of land use change in an economically consistent framework such a framework lays the foundation for an enhanced methodology that can evaluate the ability of fiscal policy levers to influence the location of agricultural conversion with the ultimate aim of balancing economic and environmental goals

organizational capabilities and the economic history of the industrial enterprise in my book scale and scope 1990 i focused on the history of the modern industrial firm from the 1880s when such firms first appeared through world war ii i did so by comparing the fortunes of more than 600 enterprises the 200 largest industrial firms at three points in time world war i 1929 and world war ii in each of the three major industrial economies those of the united states britain and germany in this paper i first describe the similarities in the historical beginnings and continuing evolution of these enterprises and then outline my explanation for these similarities next i relate my explanation of these empirical regularities to four major economic theories relating to the firm the neoclassical the principal agent the transaction cost and the evolutionary finally i suggest the value of the transactions cost and evolutionary theories to historians and economists who are attempting to explain the beginnings and growth of modern industrial enterprises

older or wealthier the impact of age adjustment on wealth inequality differences in individual wealth holdings are widely viewed as a driving force of economic inequality however as this finding relies on cross sectional data a concern is that older is confused with wealthier we propose a new method to adjust for age effects in cross sections which eliminates wealth inequality due to age yet preserves inequality arising from other factors using a new cross country comparable database we examine the impact of age adjustments on wealth inequality across countries and over time we find that the most widely used method yields a substantially different picture of age adjusted wealth inequality than our method 2011 the editors of the scandinavian journal of economics

optimal taxation in a growth model with public consumption and home production in a neoclassical growth model with public consumption we show the following pareto optimal tax rules the government should tax leisure and private consumption at the same rate and subsidize net investment at the same rate it taxes net capital income also it should tax capital income more heavily than labor income in an extension for home production the additional rule is to tax investment for home production at the same rate of the tax on private market consumption these tax and subsidy rates should be constant over time except the initial tax rate on capital income

creating holdup through vertical integration fisher body revisited abstract general motors s gm s 1926 acquisition of fisher body has long served as a cornerstone of hold up arguments for vertical integration this paper utilizes primary historical evidence to make three related claims first it shows that gm s initial investment in fisher body occurred primarily to gain access to the fisher brothers specialized human assets second it shows that holdup was not the cause of gm s purchase of fisher body instead the primary factors leading to vertical integration were gm management s fears over the fisher brothers impending departure coupled with problems of financing new body plants finally i show that while holdup was not an issue prior to integration the fisher brothers successfully held up gm after they became employees far from reducing opportunistic behavior vertical integration increased gm s vulnerability to rent seeking behavior based in human asset specificity

evidence on wealth age profiles in canadian cross section data this paper reports on one component of a research program in which we are studying household behaviour to establish a set of empirical facts upon which researchers can construct more realistic models evidence on whether wealth age profiles conform to the inverse u shape predicted by the standard life cycle model is mixed here we show that there are significant differences in accumulation behaviour across major household types on average blue collar households decumulate after retirement but white collar do not la relation entre la richesse et l dge profils dr en moyenne les menages de cols bleus font l experience d une decumulation de richesse apres la retraite alors que les menages de cols blancs ne font pas cette experience

transaction cost economics in real time this paper attempts to place the theq of the boundaries of thejirm within the context of the passage of time more precisely it resurrects and places in a modem frame some of the insights of the chsical and marshallian theories of organization the modem reinterpretation of those theories centers around the capabilities view of the jirm taken together with governance costs the capabilities ofjirm and market determine the boundaries of the jirm in the short run ovw time capabilities change as firms and markets learn which implies a kind of information or knowledge cost the cost of trandewing the firm s capability to the market w vice versa these dynamic governance costs are the costs of persuading negotiating and coordinating with and teaching others they arise in the face of change notably txchnological and organizational innovation in fit they are the costs of not having the capabilities you need when you need them dynamic transaction costs provide an explanation for vertical integration that is arguably more general than those dominant in the literature in the face of uncertainty and divwgent views ofthe future common ownership of multiple stages of production is a supwior institutional arrangement for coordinating systemic change asset specrfity is neither necessary nor suffient for this to be true dynamic governance costs may also affit internal organization it may sometimes be costly in 3 terms of persuasion negotiation and teaching to create within the firm capabilities readily available on the market indeed in cases in which systemic coordination is not 4 the issue the market may turn out to be the superior institution of coordination in e 2 genwal the capabilities view of the jirm suggests that we look atfim2 and market as alternative and sometimes overlapping institutions of learning 1 transaction costs in the long rzln and the short 9 x classical and neoclassical perspectives

optimal growth with unobservable resources and learning abstract this paper examines the problem of choosing optimal resource consumption from an imperfectly observable aggregate capital wealth or resource stock which the decision maker learns about over time learning is complicated by the fact that the planner receives information about an object the true resource stock which is a moving target under the assumption that the utility of zero consumption is we show that the optimal policy follows a completely deterministic cautious or minmax policy that assumes the worst in each period and optimizes against that when this model is compared to a model with completely observable wealth levels the following insights are obtained 1 there is over saving 2 investment and output processes are more volatile than consumption and 3 regressions underestimate the risk aversion of agents information about the wealth or stock level is only valuable if it alters the support of the agent s beliefs thus information may be statistically informative yet economically valueless if information changes the support of the agent s beliefs then the optimal solution features an endogenous resource discovery process

savings and wealth in models with altruistic bequests during recent years much attention has been given to the role of bequests in explaining various aspects of economic behavior for example authors have studied the impact of bequests on physical wealth accumulation laurence kotlikoff and lawrence summers 1981 the interest elasticity of savings owen evans 1983 tax reform laurence seidman 1984 and the distribution of wealth alan blinder 1976a more recently economists have begun to distinguish between human and physical bequests gary becker and nigel tomes 1986 acknowledging the presence of bequest in human form is important in analyzing each of the issues mentioned above outlays on children affect the shape of the family s labor supply and expenditure profiles upon which the level of aggregate savings crucially depends if these outlays are interest sensitive substitutes for physical bequests they will also influence the interest elasticity of savings in the area of tax reform the neutrality of the consumption tax depends on the ability of the government to identify human capital bequests from general consumption raymond batina 1987 if this is not possible the portfolio choice of investment in human versus physical capital may be distorted at the margin finally the unequal transmission of wealth across generations may be explained by the lack of physical bequests and the inefficiently low levels of human bequests made by wealthconstrained households becker and tomes 1986 to distinguish clearly the behavior of constrained households from unconstrained households who make sizeable physical bequests both types of bequests must be recognized this paper introduces a model that makes explicit examination of these issues possible it extends lord s 1989 multiperiod model of life cycle savings and adult human capital investment by adding altruistically motivated human and physical bequests 2 the model is calibrated using microeconomic data on earnings time and goods expenditures on children s human capital and physical bequests we then use the model to examine the contribution of bequests to wealth accumulation and the level of savings this topic is the source of an important but yet unresolved debate between franco modigliani 1988 and kotlikoff 1988 kotlikoff maintains that u s wealth accumulation is primarily the consequence of bequests as opposed to life cycle savings for retirement one type of evidence cited by kotlikoff comes from simulation results demonstrating the failure of realistically calibrated life cycle models to generate sufficiently high saving rates and wealth income ratios alan auerbach and kotlikoff 1987 we show however that if a pure life cycle

on the evolution of thorstein veblen s evolutionary economics this article addresses the origins of thorstein veblen s evolutionary economics as announced in his 1898 essay why is economics not an evolutionary science before 1897 and partly under the influence of c lloyd morgan veblen rejected biological reductionism veblen s 1897 endorsement of a critique of marxism by max lorenz shows that he found karl marx s account of human action too limiting by this time veblen had also rejected the idea of either the individual or society as exclusive foundations for social science instead he embraced an evolutionary framework of explanation along darwinian lines involving multiple levels of explanation and emergent properties copyright 1998 by oxford university press

cyclical uncertainty precautionary saving and economic growth this paper studies the interaction between cyclical uncertainty precautionary saving and economic growth in a stochastic endogenous growth model the analysis provides insight into the potential connection between technological uncertainty of the sort popularized in real business cycle models and the determinants of economic growth in a stochastic version of a popular model of endogenously determined economic growth the magnitude of the link between cyclical uncertainty and growth is quantified and found to be small in terms of its effect on the growth rate but possibly large in terms of its effect on levels of macroeconomic variables moreover the welfare costs of reduced cyclical uncertainty can be substantial owing to the lower historical rate of capital accumulation induced by a decrease in precautionary saving the chief implications of the model are found to be roughly consistent with the postwar experience of several countries although the predictions of the model with regard to growth rates are too small to explain much of the variation in growth rates across time or across countries

uncertain lifetime consumption and dissaving in retirement this paper asks whether the continued accumulation or mild dissaving observed among the retired can be explained by uncertain lifetime in the absence of annuities after an initial period influenced by borrowing constraints under constant relative risk aversion uncertain lifetime depresses consumption by a proportion increasing with age if the elasticity of intertemporal substitution in consumption is small illustrative computations based on actual income and survival data show that plausible elasticities are sufficiently small to give this effect the reduction in consumption is large enough to explain much of the lack of decumulation by the elderly

the consumption tax in the presence of altruistic cash and human capital bequests with endogenous fertility decisions abstract we provide an analysis of the consumption tax policy in the presence of cash bequests human capital investments in children and endogenous fertility decisions it is shown that the consumption tax is no longer neutral if the tax rate is constant over the taxpayer s life cycle labor supply is exogenous and the parent expects the offspring to pay the same tax rate if the number of children is chosen optimally by the parent neutrality breaks down because the shadow prices of both bequests and fertility are interlinked it is more expensive to produce a child the larger either bequest is and it is more expensive to make a bequest of either type to each child the larger the number of children produced several examples are provided where imposing the consumption tax induces an increase in the number of children produced and a decrease in net capital formation

the competence based approach veblenian ideas in the modern theory of the firm the author argues that a contemporary stronghold of a number of thorstein veblen s crucial ideas can be found in the emerging competence based approach to the firm e g penrose chandler winter for example the emphasis in this literature on firms as path dependent entities characterized by their heterogenous and group based knowledge bases can be linked with key themes in veblen s work thus the paper presents the competence based approach as a modern veblenian approach moreover the veblenian aspects of the competence based approach are also those aspects that most differentiate it from the other dominant economic approach to the firm the contractual approach e g alchian and demsetz williamson grossman and hart the aim of the paper is both to make this historical point and to present a contemporary body of theory that may with some justice be called veblenian copyright 1998 by oxford university press

is there a retirement savings puzzle in this paper we ask whether households are saving enough for their retirement we use data on income expenditure and expenditure components to analyse patterns of behaviour at and around the time of retirement for successive date of birth cohorts we compare periods of unemployment to periods of retirement and separate expenditures into categories reflecting work related expenditures basic necessities and other goods we find that income typically falls by more at unemployment than retirement but the reverse is true for expenditure we observe falls in expenditure at retirement for all expenditure categories using a stochastic life cycle model including mortality rates we assess the anticipated impact of retirement on consumption against that of unemployment the inter relationship between goods and leisure explains a large part of the persistent fall in expenditure at retirement we argue that the only way in which the life cycle hypothesis could be reconciled with the remaining unanticipated dip in consumption would be with the systematic arrival of unexpected adverse information at the time of retirement

deforestation and the real exchange rate deforestation is a phenomenon that has largely been concentrated in the developing world we construct a theoretical model of deforestation that focuses on the factors affecting the incentives to transform forested land into agricultural land we show that i lower discount rates and stronger institutions decrease deforestation ii depreciations in the real exchange rate increase deforestation in developing countries whereas the opposite obtains in developed countries iii paradoxically better institutions may exacerbate the deleterious impact of depreciations in developing countries these hypotheses are tested on an annual sample of 101 countries over the 1961 1988 period and are not rejected by the data our results suggest that short term macroeconomic policy institutional factors and the interaction between the two are potentially important determinants of environmental outcomes