influencing the influencers a theory of strategic diffusion the growth of the internet and assorted technologies has made it possible to collect and process detailed information on social networks this article investigates how firms and governments can harness the power of social networks to promote their goals we show that the optimal use of social networks leads to higher sales and greater profits however an increase in the level and dispersion of social interaction can increase or decrease the optimal influence strategy and profits of the player depending on the content of the interaction optimal influence strategies will target individuals with low or high connections depending on the content of interaction finally the returns to investing in market research on social networks are greater in more unequal networks

customer referral incentives and social media we study how to optimally attract new customers using a referral program whenever a consumer makes a purchase the firm gives her a link to share with friends and every purchase coming through that link generates a referral payment the firm chooses the referral payment function and consumers play an equilibrium in response the optimal payment function is nonlinear and not necessarily monotonic in the number of successful referrals if we approximate the optimal policy using a linear payment function the approximation loss scales with the square root of the average consumer degree using a threshold payment the approximation loss scales proportionally to the average consumer degree combining the two using a linear payment function with a threshold bonus we can achieve a constant bound on the approximation loss this paper was accepted by noah gans stochastic models and simulation

advertising learning and consumer choice in experience good markets an empirical examination this article empirically analyzes different effects of advertising in a nondurable experience good market a dynamic learning model of consumer behavior is presented in which i allow both informative effects of advertising and prestige or image effects of advertising this learning model is estimated using consumer level panel data tracking grocery purchases and advertising exposures over time empirical results suggest that in this market advertising s primary effect was that of informing consumers the estimates are used to quantify the value of this information to consumers and evaluate the welfare implications of an alternative advertising regulatory regime

designing optimal disability insurance a case for asset testing we analyze an implementation of an optimal disability insurance system as a competitive equilibrium with taxes an optimum is implemented by an asset tested disability system in which a disability transfer is paid only if an agent has assets below a specified maximum the logic behind this result is that an agent who plans to falsely claim disability a finds doing so unattractive if he does not adjust his savings and b cannot collect disability insurance if he does adjust his savings in the desired direction upward for a calibrated economy we find that welfare gains from asset testing are significant

word of mouth communication and percolation in social networks this paper develops a model of demand pricing and advertising in the presence of social learning via word of mouth communication between friends in the model consumers must receive information about a monopolist s product in order to consider purchasing it the presence of word of mouth is not sufficient for demand to be more elastic and prices to be lower compared to an informed population i derive the comparative static results of connectivity mean preserving spread of friendships and clustering of friends on prices the optimal targets for advertising are not generically the individuals with the most friends jel l12 l14 a fundamental issue for economists is understanding the process by which demand is formed through social learning by consumers this article develops a framework based on random graphs for understanding the ways social learning via

unemployment insurance and precautionary saving abstract models of precautionary saving imply that households will hold more assets when faced with greater income uncertainty however previous empirical studies of income uncertainty have produced somewhat mixed support for the precautionary saving hypothesis in this paper we note that differences in the state contingent income stream available to workers through the unemployment insurance ui program provides an excellent source of variation for testing the presence of a precautionary savings motive simulations of a stochastic life cycle model suggest that a ui system similar to the type currently in place in the u s can lead to a significant reduction in the assets accumulated by a median worker moreover there is considerable variation in the ui benefit schedules for workers living in different states in the u s which provides an exogenous source of variation for empirically testing the precautionary saving hypothesis we carry out this test using data on expected ui benefit replacement rates and financial assets held by households in the survey of income and program participation our empirical results are consistent with the predictions of the model and suggest that reducing the ui benefit replacement rate by 50 percent would increase gross financial asset holdings by 14 percent or 241 for the average worker we also find empirical evidence that this crowd out effect of ui on household saving is stronger for those facing higher unemployment risk and weaker for older workers both of which are implications from our precautionary saving model

a new product growth for model consumer durables this article originally appeared in management science january 1969 volume 15 number 5 pp 215 227 published by the institute of management sciences a growth model for the timing of initial purchase of new products is developed and tested empirically against data for eleven consumer durables the basic assumption of the model is that the timing of a consumer s initial purchase is related to the number of previous buyers a behavioral rationale for the model is offered in terms of innovative and imitative behavior the model yields good predictions of the sales peak and the timing of the peak when applied to historical data a long range forecast is developed for the sales of color television sets

decision making under uncertainty capturing dynamic brand choice processes in turbulent consumer goods markets we construct two models of the behavior of consumers in an environment where there is uncertainty about brand attributes in our models both usage experience and advertising exposure give consumers noisy signals about brand attributes consumers use these signals to update their expectations of brand attributes in a bayesian manner the two models are 1 a dynamic model with immediate utility maximization and 2 a dynamic forward looking model in which consumers maximize the expected present value of utility over a planning horizon given this theoretical framework we derive from the bayesian learning framework how brand choice probabilities depend on past usage experience and advertising exposures we then form likelihood functions for the models and estimate them on nielsen scanner data for detergent we find that the functional forms for experience and advertising effects that we derive from the bayesian learning framework fit the data very well relative to flexible ad hoc functional forms such as exponential smoothing and also perform better at out of sample prediction another finding is that in the context of consumer learning of product attributes although the forward looking model fits the data statistically better at conventional significance levels both models produce similar parameter estimates and policy implications our estimates indicate that consumers are risk averse with respect to variation in brand attributes which discourages them from buying unfamiliar brands using the estimated behavioral models we perform various scenario evaluations to find how changes in marketing strategy affect brand choice both in the short and long run a key finding obtained from the policy experiments is that advertising intensity has only weak short run effects but a strong cumulative effect in the long run the substantive content of the paper is potentially of interest to academics in marketing economics and decision sciences as well as product managers marketing research managers and analysts interested in studying the effectiveness of marketing mix strategies our paper will be of particular interest to those interested in the long run effects of advertising note that our estimation strategy requires us to specify explicit behavioral models of consumer choice behavior derive the implied relationships among choice probabilities past purchases and marketing mix variables and then estimate the behavioral parameters of each model such an estimation strategy is referred to as structural estimation and econometric models that are based explicitly on the consumer s maximization problem and whose parameters are parameters of the consumers utility functions or of their constraints are referred to as structural models a key benefit of the structural approach is its potential usefulness for policy evaluation the parameters of structural models are invariant to policy that is they do not change due to a change in the policy in contrast the parameters of reduced form brand choice models are in general functions of marketing strategy variables e g consumer response to price may depend on pricing policy as a result the predictions of reduced form models for the outcomes of policy experiments may be unreliable because in making the prediction one must assume that the model parameters are unaffected by the policy change since the agents in our models choose among many alternative brands their choice probabilities take the form of higher order integrals we employ monte carlo methods to approximate these integrals and estimate our models using simulated maximum likelihood estimation of the dynamic forward looking model also requires that a dynamic programming problem be solved in order to form the likelihood function for this we use a new approximation method based on simulation and interpolation techniques these estimation techniques may be of interest to researchers and policy makers in many fields where dynamic choice among discrete alternatives is important such as marketing decision sciences labor and health economics and industrial organization

cellular telephone new products and the cpi since their introduction in 1983 cellular telephones adoption has grown at 25 35 per year at year end 1997 about 55 million cellular telephones were in use in the united states the bureau of labor statistics bls did not know that cellular telephones existed at least in terms of calculating the consumer price index cpi until 1998 when they were finally included in the cpi omitting cellular telephones from the cpi created a significant bias i estimate a bias in the bls estimate of the telecommunications services index of between 8 1 9 per year because of the omission of the cellular telephone rather than telecommunications service prices increasing at about 1 1 per year the correct calculation has them decreasing at about 8 per year omission of new goods from the cpi for significant periods of time leads to important bias in the calculation of the cpi

monopoly pricing and diffusion of social network goods abstract i present a model of dynamic pricing and diffusion of a network good sold by a monopolist in the model the network good is a subscription social network good this means that in each period each consumer has to pay a subscription price to use the good and the utility derived from subscribing to the good increases as more of her neighboring consumers subscribe consumers myopically optimize their subscription decisions and the monopolist chooses a sequence of subscription prices that maximizes his discounted sum of per period profits three main results emerge first i characterize a unique steady state of the monopoly market second i find that optimal sequences of subscription prices oscillate around the subscription price at the steady state third i analyze how changes in the monopolist s discount factor and the density of the social network affect the subscription price subscription rate and deadweight loss at the steady state

meeting strangers and friends of friends how random are social networks we present a dynamic model of network formation where nodes find other nodes with whom to form links in two ways some are found uniformly at random while others are found by searching locally through the current structure of the network e g meeting friends of friends this combination of meeting processes results in a spectrum of features exhibited by large social networks including the presence of more high and low degree nodes than when links are formed independently at random having low distances between nodes in the network and having high clustering of links on a local level we fit the model to data from six networks and impute the relative ratio of random to network based meetings in link formation which turns out to vary dramatically across applications we show that as the random network based meeting ratio varies the resulting degree distributions can be ordered in the sense of stochastic dominance which allows us to infer how the formation process affects average utility in the network

consumer search with observational learning this article studies observational learning in a consumer search environment consumers observe the purchasing decision of a predecessor with similar preferences consumers rationally emulate by initiating their search at the firm from which their predecessor purchased free riding on search effort and reacting less to price changes prices are nonmonotone in search costs and may be as low as marginal costs we discuss several extensions and show that the effect of emulation on prices is stronger when i the number of firms increases ii consumers first visits are more elastic with respect to market shares and iii prices are adjusted more frequently

the effect of expanding medicaid eligibility on supplemental security income program participation abstract low income adults without dependent children have historically had few paths to obtain public health insurance unless they qualified for supplemental security income ssi cash benefits because of a disability however in states that expand their medicaid programs childless adults may obtain medicaid without undergoing an intensive ssi disability review process and with substantially higher income and assets than the ssi program allows this expanded availability of medicaid coverage independent of ssi participation creates an opportunity to increase earnings and savings without jeopardizing health insurance coverage in this paper we use the natural experiments created by state decisions to expand medicaid to nondisabled nonelderly adults without dependent children to study the effect of decoupling medicaid eligibility and cash assistance using a difference in differences study design we collected data on the income eligibility limits enrollment caps and coverage characteristics of state medicaid expansions to childless adults from 2001 to 2013 we combine these data with the nationally representative american community survey to estimate the effects of state expansion on ssi participation we find relative declines in ssi participation of 0 17 percentage points on average after the introduction of medicaid coverage for childless adults a 7 relative decrease this finding suggests the potential for small but important efficiency gains from separating ssi and medicaid eligibility

capital taxation quantitative explorations of the inverse euler equation economies with private information provide a rationale for capital taxation in this paper we ask what the welfare gains from following this prescription are we develop a method to answer this question in standard general equilibrium models with idiosyncratic uncertainty and incomplete markets we find that general equilibrium forces are important and greatly reduce the welfare gains once these effects are taken into account the gains are relatively small in our benchmark calibration these results do not imply that dynamic aspects of social insurance design are unimportant but they do suggest that capital taxation may play a modest role

the rise in the disability rolls and the decline in unemployment between 1984 and 2001 the share of nonelderly adults receiving social security disability insurance income di rose by 60 percent to 5 3 million beneficiaries rapid program growth despite improving aggregate health appears to be explained by reduced screening stringency declining demand for less skilled workers and an unforeseen increase in the earnings replacement rate we estimate that the sum of these forces doubled the labor force exit propensity of displaced high school dropouts after 1984 lowering measured u s unemployment by one half a percentage point steady state calculations augur a further 40 percent increase in the rate of di receipt

conversations among competitors conversation is a central part of economic life a wide range of information gets passed from one person to another via word of mouth communication and a number of authors argue that the nature of connections between people i e the structure of social networks can have a

diffusion of behavior and equilibrium properties in network games situations in which agents choices depend on choices of those in close proximity be it social or geographic are ubiquitous selecting a new computer platform signing a political petition or even catching the flu are examples in which social interactions have a significant role while some behaviors or states propagate and explode within the population e g windows os the hiv virus others do not e g certain computer viruses our goal in this paper is twofold first we provide a general dynamic model in which agents choices depend on the underlying social network of connections second we show the usefulness of the model in determining when a given behavior expands within a population or disappears as a function of the environment s fundamentals we study a framework in which agents face a choice between two actions 0 and 1 e g whether to pursue a certain level of education switch to linux os etc agents are linked through a social network and an agent s payoffs from each action depend on the number of neighbors she has and her neighbors choices the diffusion process is defined so that at each period each agent best responds to the actions taken by her neighbors in the previous period assuming that her neighbors follow the population distribution of actions a mean field approximation steady states correspond to equilibria of the static game under some simple conditions equilibria take one of two forms some are stable so that a slight perturbation to any such equilibrium would lead the diffusion process to converge back to that equilibrium point other equilibria are unstable so that a slight change in the distribution of actions leads to a new distribution of actions and eventually to a stable steady state we call such equilibria tipping points we analyze how the environment s fundamentals cost distribution payoffs and network structure affect the set of equilibria and characterize the adoption patterns within the network the paper relates to recent work on network games and network diffusion including work by stephen morris 2000 pastor satorras and vespignani 2000 mark e j newman 2002 dunia lopez pintado 2004 jackson and brian w rogers 2007 jackson and yariv 2005 and andrea galeotti et al 2005 henceforth ggjvy its contribution is in characterizing diffusion of strategic behavior and analyzing the stability properties of equilibria and employing methods that allow us to make comparisons across general network structures and settings given that social networks differ substantially and systematically in structure across settings e g ethnic groups professions etc understanding the implications of social structure on diffusion is an important undertaking for a diverse set of applications

swimming with the tide solidary wage policy and the gender earnings gap this paper addresses the consequences of wage compression for the gender wage gap in sweden during the period 1968 1991 we find that the effects of changes in the wage structure on women s wages have varied over time and have been partly counteracting changes in industry wage differentials have systematically worked against women while changes in the returns to human capital and unobserved characteristics have contributed to reductions in the gender wage gap changes in the wage structure were particularly important between 1968 and 1974 when there was a dramatic reduction in overall wage inequality jel classification j16 j31 j51

disability insurance benefits and labor supply a critical input for assessing the optimal size of disability insurance programs is the elasticity of labor force participation with respect to the generosity of benefits unfortunately this parameter has been difficult to estimate in the context of the u s disability insurance program since all workers face an identical benefits schedule i surmount this problem by studying the experience of canada which operates two distinct disability insurance programs for quebec and for the rest of canada the latter program raised its benefits by 36 percent in january 1987 whereas benefits in quebec were constant i find a sizable labor supply response to the policy change my central estimates imply an elasticity of labor force nonparticipation with respect to disability insurance benefits of 0 28 0 36

wage structure and gender earnings differentials an international comparison using microdata to analyse the gender pay gap in ten industrialized nations we focus on the role of wage structure the prices of labour market skills in influencing the gender gap we find wage structure enormously important in explaining why the us gender gap is higher than that in most other countries we conclude that the us gap would be similar to that in sweden and australia the countries with the smallest gaps if the united states had their levels of wage inequality this finding reflects the larger penalty in the united states for those with low skill levels or employed in low wage sectors 650 o 75 the united states was amoung the countries with the largest differ entials oecd ilo usbls this paper uses microdata to analyse inter national differences in the gender pay gap among a sample of ten industrialized nations we focus particularly on explaining the surprisingly low ranking of the united states in comparison with other industrialized countries an advan tage of an international perspective is that countries vary considerably with respect to governmental policies women s relative labour market qualifications and wage setting institutions such variability allows one to infer reasons for differences in the pay gap and by implication the impact of alternative govern ment policies empirical research on gender pay gaps has traditionally focused on the role of gender differences in qualifications and on differences in the treatment of otherwise equally qualified male and female workers i e labour market dis crimination analyses of trends over time in the gender differential within countries as well as inter country comparisons of gender earnings ratios have tended to emphasize these types of gender specific factors an innovative feature of our study is to focus on the role of wage structure as an additional factor influencing the gender gap to analyse the impact of wage structure we adapt a framework developed by juhn et al 1991 to analyse trends over time in race differentials in the united states our findings suggest that labour market institutions that affect overall wage inequality have an extremely impor tant effect on the gender earnings gap wage structure describes the array of prices set for various labour market skills measured and unmeasured and rents received for employment in par

pricing network effects the increase in the information that firms can collect or purchase about network effects across consumers motivates two important questions how does a firm s pricing strategy react to detailed information on network effects are the availability and use of such information beneficial or detrimental to consumer surplus we develop a model in which a monopoly sells a network good and price discriminates based on information about consumers influence and consumers susceptibility to influence the monopoly optimally offers consumers price discounts for their influence and charges price premia for their susceptibility the price premia and the price discounts are simple functions of the pattern of network effects we determine under which conditions relative to uniform price consumer surplus increases and we characterize the value of information on network effects for the monopoly

the growth in the social security disability rolls a fiscal crisis unfolding the u s social security disability insurance di program has grown dramatically over the last 20 years in size and expense this growth poses significant risks to the finances of the di program and the broader social security system and raises troubling questions as to whether the program is being misused by claimants this article first provides an overview of the disability insurance program describing who qualifies for the program how an individual applies for benefits and how the level of benefits is determined next we summarize the factors responsible for the growth in the di rolls and discuss how the characteristics of di recipients have changed as a result we then explore the extent of moral hazard in the di program and the effectiveness of the screening process in distinguishing meritorious from nonmeritorious claims finally we identify the challenges that the di program creates for social security finances and social security reform and discuss potential reforms to the di program

the health and earnings of rejected disability insurance applicants applicants for social security disability benefits who fail to pass the medical screening form a natural control group for beneficiaries data drawn from the 1972 and 1978 surveys of the disabled done for the social security administration show that fewer than 50 percent of rejected male applicants work typical earnings of those that do are less than 59 percent of median earnings for other men their age these data cast doubt on recent econometric work that suggests that the disincentive effects of the social security disability program have been substantial copyright 1989 by american economic association

filtered social learning knowledge sharing is economically important but also typically incomplete we filter our communication this paper analyzes the consequences of filtering in the model homogeneous agents share knowledge with their peers whenever the private benefits exceed communication costs the welfare implications of this transmission mechanism hinge on whether units of knowledge complement substitute for or are independent of each other both substitutability and complementarity generate externalities cheaper communication eliminates externalities in the former case but not necessarily in the latter complementary basic skills such as numeracy catalyze technology adoption and adoption may be path dependent even when payoffs are certain and independent across agents

trends in employment and earnings of allowed and rejected applicants to the social security disability insurance program since the early 1980s changes in the economic environment and in the process for determining eligibility for the social security disability insurance di program have had significant effects on the program first the economic situation and labor force opportunities for lower skilled people continued to decline leading to lower rates of participation in the labor force for less educated men second changes in the eligibility process made it easier to obtain di benefits based on conditions difficult to clearly identify on medical terms alone such as back pain or depression 1 those two factors have likely contributed to a substantial increase in the number of individuals receiving di as well as a significant change in the characteristics of applicants and new beneficiaries over the same period both applicants and new beneficiaries have become younger longer lived more likely to apply because of nonterminal conditions such as back pain or mental health and more likely to be female 2 as a result recent work projects a rapid increase in program costs as greater numbers of beneficiaries stay on the program for more years e g david h autor and duggan 2006 the concurrent developments in the economy and eligibility rules have also fueled the concern that the generosity of di increasingly induces low income workers to apply for and sometimes receive benefits and that some of those beneficiaries would be able to work in the absence of the program indeed a growing body of research suggests that some workers in difficult economic conditions exit the labor force to

noisy contagion without mutation in a local interaction game agents play an identical stage game against their neighbours over time for nearest neighbour interaction it is established that starting from a random initial configuration in which each agent has a positive probability of playing the risk dominant strategy a sufficiently large population coordinates in the long run on the risk dominant equilibrium almost surely our result improves on blume 1995 ellison 2000 and morris 2000 by showing that the risk dominant equilibrium spreads to the entire population in a two dimensional lattice and without the help of mutation as long as there is some randomness in the initial configuration

stability analysis of financial contagion due to overlapping portfolios abstract common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis we develop a network approach to the amplification of financial contagion due to the combination of overlapping portfolios and leverage and we show how it can be understood in terms of a generalized branching process this can be used to compute the stability for any particular configuration of portfolios by studying a stylized model we estimate the circumstances under which systemic instabilities are likely to occur as a function of parameters such as leverage market crowding diversification and market impact although diversification may be good for individual institutions it can create dangerous systemic effects and as a result financial contagion gets worse with too much diversification there is a critical threshold for leverage below it financial networks are always stable and above it the unstable region grows as leverage increases note that our model assumes passive portfolio management during a crisis however we show that dynamic deleveraging during a crisis can amplify instabilities the financial system exhibits robust yet fragile behavior with regions of the parameter space where contagion is rare but catastrophic whenever it occurs our model and methods of analysis can be calibrated to real data and provide simple yet powerful tools for macroprudential stress testing

innovation diffusion in heterogeneous populations contagion social influence and social learning new ideas products and practices take time to diffuse a fact that is often attributed to some form of heterogeneity among potential adopters this paper examines three broad classes of diffusion models contagion social influence and social learning and shows how to incorporate heterogeneity into each at a high level of generality without losing analytical tractability each type of model leaves a characteristic footprint on the shape of the adoption curve which provides a basis for discriminating empirically between them the approach is illustrated using the classic study of ryan and gross 1943 on the diffusion of hybrid corn

disability insurance rejection rates and the labor supply of older workers abstract we investigate the effects of trying to mitigate moral hazard in the disability insurance di program by raising the stringency of the screening process for applicants we do so by studying a dramatic increase in rejection rates for the di program in the late 1970s which varied substantially across the us states we find that each 10 rise in denial rates led to a statistically significant 2 8 fall in labor force non participation among 45 64 year old males we also find that the denial rate increases effectively targeted their incentive effects to more able individuals according to an anthropometric measure of disability

does disability insurance receipt discourage work using examiner assignment to estimate causal effects of ssdi receipt abstract we present the first causal estimates of the effect of social security disability insurance benefit receipt on labor supply using all program applicants we use administrative data to matc

equal pay for equal work evidence from sweden and a comparison with norway and the u s using a new data set covering most privately employed workers in sweden we compare gender wage differences to those previously reported for norway and the u s the central finding is that the wage gap is small when comparing men and women working in the same type of occupation for the same employer segregation of men and women by occupation accounts for more of the gap in sweden than in the other two countries in all three countries we find that segregation by occupation explains more than segregation by establishment and that institutional changes over the past two decades aimed at improving the status of women had little effect on the gender wage gap jel classification j16 j71

optimal indirect and capital taxation we consider an environment in which agents skills are private information and follow arbitrary stochastic processes we prove that it is typically pareto optimal for an individual s marginal benefit of investing in capital to exceed his marginal cost of doing so this wedge is consistent with a positive tax on capital income we also prove that it is pareto optimal for the marginal rate of substitution between any two consumption goods to equal the marginal rate of transformation this lack of a wedge is consistent with uniform taxation of consumption goods within a period

dynamic optimal taxation with private information we study dynamic optimal taxation in a class of economies with private information optimal allocations in these environments are complicated and history dependent yet we show that they can be implemented as competitive equilibria in market economies supplemented with simple tax systems the market structure in these economies is similar to that in bewley 1986 agents supply labour and trade risk free claims to future consumption subject to a budget constraint and a debt limit optimal taxes are conditioned only on two observable characteristics an agent s accumulated stock of claims or wealth and her current labour income we show that optimal taxes are generally non linear and non separable in these variables and relate the structure of marginal wealth and income taxation to the properties of agent preferences this paper studies optimal taxation in a class of dynamic economies with private information we consider an environment in which agents preferences are defined over consumption and labour and each agent receives a privately observed sequence of i i d preference shocks incentivecompatibility constraints stemming from private information imply that socially optimal or constrained efficient allocations in this environment are complicated and history dependent yet we show that they can be implemented as competitive equilibria in market economies supplemented with simple tax systems the market structure in these economies is identical to that in bewley 1986 huggett 1993 or aiyagari 1994 agents can trade current consumption for claims to future consumption subject to a budget constraint and a borrowing limit these claims have a non contingent pre tax return crucially taxes are conditioned upon only two observable characteristics of an agent current wealth given by the agent s accumulated stock of claims and current labour income they do not depend on any other aspect of an agent s past history most models of dynamic optimal taxation follow the ramsey approach in which the set of fiscal instruments available to the government is exogenously specified 1 linear labour and capital income taxes are typically included in this set while lump sum taxes are ruled out the exclusion of the latter is justified by appealing to incentive or administrative constraints but these are not explicitly modelled these exogenous restrictions on fiscal instruments represent frictions that the government seeks to ameliorate through its optimal choice of tax rates the approach we adopt in this paper builds on the optimal taxation literature initiated by mirrlees 1971 mirrlees assumes that agents receive privately observed shocks to their

evidence on discrimination in employment codes of color codes of gender there is substantial racial and gender disparity in the american economy as we will demonstrate discriminatory treatment within the labor market is a major cause of this inequality the evidence is ubiquitous careful research studies that estimate wage and employment regressions help wanted advertisements audit and correspondence studies and discrimination suits that are often reported by the news media yet there appear to have been periods of substantial reductions in economic disparity and discrimination for example donohue and heckman provide evidence that racial discrimination declined during 1965 1975 1 gottschalk has produced statistical estimates that indicate that discrimination against black males dropped most sharply between 1965 and 1975 and that discrimination against women declined during the interval 1973 1994 2 but some unanswered questions remain why did the movement toward racial equality stagnate and eventually decline after the mid 1970s what factors are most responsible for the remaining gender inequality what is the role of the competitive process in the elimination or reproduction of discrimination in employment

disability insurance and the dynamics of the incentive insurance trade off we provide a life cycle framework for comparing insurance and disincentive effects of disability benefits the risks that individuals face and the parameters of the disability insurance di program are estimated from consumption health disability insurance and wage data we characterize the effects of disability insurance and study how policy reforms impact behavior and welfare di features high rejection rates of disabled applicants and some acceptance of healthy applicants despite worse incentives welfare increases as programs become less strict or generosity increases disability insurance interacts with welfare programs making unconditional means tested programs more generous improves disability insurance targeting and increases welfare

economic aspects of optimal disability benefits this paper analyzes optimal disability and retirement or welfare benefits with imperfect disability evaluation with some able workers judged disabled and some disabled workers judged able thus the levels of both disability and retirement benefits affect labor supply with anyone not working eligible for retirement benefits we analyze the optimal structure of benefits for a given disability screening mechanism and briefly consider the problem of optimal evaluations of disability evidence in the united states there is an overlap in eligibility for disability and retirement portions of social security more generally welfare is sometimes available to people denied disability benefits

generics and new goods in pharmaceutical price indexes drug prices and their rate of inflation are a major focus of current policy debates on u s health care in this paper we show that where patent expiration and generic entry are significant as they are for many important classes of drugs movements in the official price indexes may be poor indicators of the actual prices paid and the resulting changes in consumer welfare when a drug goes off patent those consumers who regard the branded and generic versions as more or less perfect substitutes experience a substantial price decline and concomitant welfare gain which the current methods used by the statistical agencies fail to capture we suggest a number of alternative ways of proceeding although our computations are based on a limited number of cases they imply that the overall rate of inflation in drug prices may be quite seriously overstated while generic pharmaceuticals are the topic of our calculations the problem discussed is also of wider importance generic drugs are a special and possibly easy case

aching to retire the rise in the full retirement age and its impact on the social security disability rolls abstract the social security amendments of 1983 reduced the generosity of social security retired worker benefits in the u s by increasing the program s full retirement age from 65 to 67 and increasing the penalty for claiming benefits at the early retirement age of 62 these changes were phased in gradually so that individuals born in or before 1937 were unaffected and those born in 1960 or later were fully affected no corresponding changes were made to the program s disabled worker benefits and thus the relative generosity of social security disability insurance ssdi benefits increased in this paper we investigate the effect of the amendments on ssdi enrollment by exploiting variation across birth cohorts in the policy induced reduction in the present value of retired worker benefits our findings indicate that the amendments significantly increased ssdi enrollment since 1983 with an additional 0 6 of men and 0 9 of women between the ages of 45 and 64 receiving ssdi benefits in 2005 as a result of the changes our results further indicate that these effects will continue to increase during the next two decades as those fully exposed to the reduction in retirement benefit generosity reach their fifties and early sixties

monopoly pricing in the presence of social learning a monopolist offers a product to a market of consumers with heterogeneous quality preferences although initially uninformed about the product quality they learn by observing past purchase decisions and reviews of other consumers our goal is to analyze the social learning mechanism and its effect on the seller s pricing decision consumers follow an intuitive non bayesian decision rule under conditions that we identify we show that consumers eventually learn the product s quality we show how the learning trajectory can be approximated in settings with high demand intensity via a mean field approximation that highlights the dynamics of this learning process its dependence on the price and the market heterogeneity with respect to quality preferences two pricing policies are studied a static price and one with a single price change finally numerical experiments suggest that pricing policies that account for social learning may increase revenues considerably relative to policies that do not this

pricing and referrals in diffusion on networks abstract when a new product or technology is introduced potential consumers can learn its quality by trying it at a risk or by letting others try it and free riding on the information that they generate we propose a dynamic game to study the adoption of technologies of uncertain value when agents are connected by a network and a monopolist seller chooses a profit maximizing policy consumers with low degree few friends have incentives to adopt early while consumers with high degree have incentives to free ride the seller can induce high degree consumers to adopt early by offering referral incentives rewards to early adopters whose friends buy in the second period referral incentives thus lead to a double threshold strategy by which low and high degree agents adopt the product early while middle degree agents wait we show that referral incentives are optimal on certain networks while inter temporal price discrimination is optimal on others

new product diffusion with influentials and imitators we model the diffusion of innovations in markets with two segments influentials who are more in touch with new developments and who affect another segment of imitators whose own adoptions do not affect the influentials this two segment structure with asymmetric influence is consistent with several theories in sociology and diffusion research as well as many viral or network marketing strategies we have four main results 1 diffusion in a mixture of influentials and imitators can exhibit a dip or chasm between the early and later parts of the diffusion curve 2 the proportion of adoptions stemming from influentials need not decrease monotonically but may first decrease and then increase 3 erroneously specifying a mixed influence model to a mixture process where influentials act independently from each other can generate systematic changes in the parameter values reported in earlier research 4 empirical analysis of 33 different data series indicates that the two segment model fits better than the standard mixed influence the gamma shifted gompertz and the weibull gamma models especially in cases where a two segment structure is likely to exist also the two segment model fits about as well as the karmeshu goswami mixed influence model in which the coefficients of innovation and imitation vary across potential adopters in a continuous fashion

the impact of economic conditions on participation in disability programs evidence from the coal boom and bust abstract we examine the impact of the coal boom of the 1970 s and the coal bust of the 1980 s on disability program participation these shocks provide clear evidence that as the value of labor market participation increases disability program participation falls for the disability insurance program the elasticity of payments with respect to local earnings is between 0 3 and 0 4 and for supplemental security income the elasticity is between 0 4 and 0 7 consistent with a model where qualifying for disability programs is costly the relationship between economic conditions and program participation is much stronger for permanent than for transitory economic shocks

dynamics of consumer demand for new durable goods most new consumer durable goods experience rapid prices declines and quality improvements suggesting the importance of modeling dynamics this paper specifies a dynamic model of consumer preferences for new durable goods with persistently heterogeneous consumer tastes rational expectations and repeat purchases over time we estimate the model on the digital camcorder industry using panel data on prices sales and characteristics we find that the 1 year elasticity in response to a transitory industrywide price shock is about 25 percent less than the 1 month elasticity standard cost of living indices overstate welfare gain in later periods due to a changing composition of buyers

consumption risk sharing in social networks we develop a model of informal risk sharing in social networks where relationships between individuals can be used as social collateral to enforce insurance payments we characterize incentive compatible risk sharing arrangements and obtain two results 1 the degree of informal insurance is governed by the expansiveness of the network measured by the number of connections that groups of agents have with the rest of the community relative to group size twodimensional networks where people have connections in multiple directions are su ciently expansive to allow very good risk sharing we show that social networks in peruvian villages satisfy this dimensionality property thus our model can explain townsend s 1994 puzzling observation that village communities often exhibit close to full insurance 2 in second best arrangements agents organize in endogenous risk sharing islands in the network where shocks are shared fully within but imperfectly across islands as a result network based risk sharing is local socially closer agents insure each other more

separate and unequal occupation establishment sex segregation and the gender wage gap the authors report the first large scale empirical investigation of within job wage differences between men and women in the same occupation and establishment using data first on blue collar and clerical employees from 16 u s industries in 1974 83 and second on employees in 10 professional and administrative occupations the authors report three findings first wage differences at the occupation establishment level were small even without controls for individual level characteristics hence within job wage discrimination was much less important than occupation establishment segregation for observed wage differences second establishment segregation was an important cause although not as important as occupational segregation of wage differences third establishment segregation was extensive as was occupational segregation

trends in the well being of american women 1970 1995 this paper examines the trends in the well being of american women over the last 25 years a time of significant changes in the relative economic status of women and in the labor market as a whole a broad range of indicators are considered to capture changes in women s well being in the family as well as in the labor market for virtually all age and education groups substantial evidence is obtained of rising gender equality in labor market outcomes notably labor force participation wages and occupational distributions broad evidence is also found of greater gender parity within married couple families as the housework time of husbands increased relative to wives and the relative wages of wives rose compared to their husbands however parallel to the recent evidence of the declining labor market position of lower skilled men there has been a similar deterioration in the economic status of less educated women especially high school dropouts their labor force participation rates and wages have risen at a much slower pace than those of more highly educated women while their incidence of single headship has increased much more rapidly these findings for less educated women serve to underscore the widening gap between more and less skilled americans of both sexes as well as to emphasize its broad dimensions

the employment effects of terminating disability benefits abstract few social security disability insurance di beneficiaries return to the labor force making it hard to assess their likely employment in the absence of benefits using administrative data i examine the employment of individuals who lost di eligibility after the 1996 removal of drug and alcohol addictions as qualifying conditions approximately 22 started working at levels that would have disqualified them for di an employment response that is large relative to their work histories those who received di for 2 3 years had the largest response suggesting that a period of public assistance may maximize the employment of some disabled individuals

asset accumulation and labor force participation of disability insurance applicants abstract this paper provides empirical evidence of the existence of forward looking asset accumulation behavior among disability insurance applicants previously examined only in the theoretical literature using panel data from the rand health and retirement study i show that rejected applicants for social security disability insurance ssdi possess significantly more assets than accepted applicants immediately prior to application and exhibit lower attachment to the labor force these empirical results are consistent with the theoretical prediction in diamond and mirrlees 1978 and golosov and tsyvinski 2006 that certain individuals with high unwillingness to work maximize utility by planning in advance for their future disability insurance application because the existing empirical literature on disability insurance does not account for this intertemporal channel it may underestimate the total work disincentive effect of ssdi