higher education subsidies and heterogeneity a dynamic analysis abstract in this paper we develop a simple dynamic general equilibrium framework to address the effects of increasing higher education subsidies in the us from their already substantial levels on inequality welfare and efficiency we focus on three policies the first is a tax and subsidy scheme that ensures that the parental decision to send a child to college is independent of income such a policy decreases the efficiency of the utilization of education resources while the welfare gain is minimal the second policy maximizes the fraction of college educated labor this results in a large drop in the above mentioned efficiency with little or no welfare gain the third is the provision of merit based aid to the poor as opposed to purely need based aid this policy can increase education efficiency with little decrease in welfare based on these experiments we conclude that the case for further increases in higher education subsidies might have been overstated

private food safety and quality standards for fresh produce exporters the case of hortico agrisystems zimbabwe abstract there is evidence that the challenges of complying with stricter food safety and quality standards are acting to exclude small scale producers from export supply chains for high value agricultural products the case of hortico agrisystems illustrates the considerable challenges and costs faced by supermarket suppliers in sourcing from a broad base of small scale producers in the context of evolving food safety and quality standards while small scale producers are able to achieve levels of compliance at least equal to those of large scale producers multi tiered and dynamic systems of control are required to maintain control these need to include measures that facilitate compliance incentives to reward good performance and penalties to punish non compliance in establishing a sustainable supply system in this context both exporters and small scale producers face a steep learning curve in adjusting to new requirements further emphasising the need for supply chains to be responsive to change

intergenerational income group mobility and differential fertility one question development economists are especially interested in but so far left unanswered is how would the societal income distribution be affected by introducing a family planning program to reduce the reproduction rate of the poor which is usually high in developing countries the purpose of this paper is to search for analytical answers to this question we are able to make definite comparisons about some class of inequality measures of the steady state societal income distributions and these comparisons provide strong theoretical support in favor of the above mentioned family planning program excerpt

managing technological development lessons from the newly industrializing countries this survey looks at the technological development of the newly industrializing countries to draw some important lessons for firms and governments in other developing countries first inventing products and processes is not at the center of the technological development needed for successful industrialization it is at the fringe what is at the center is acquiring the capabilities needed for efficient production and investment second some countries have overemphasized the drive for technological self sufficiency and paid a high price in poor productivity what makes the best economic sense is to combine foreign and local technological elements and to do this in a way that progressively develops local capabilities in areas where they can be more efficient third the acquisition of technological capability does not come merely from experience though experience is important fourth the economic environment through its influence on the technological efforts of firms is very important in determining the productivity of a country s resources

public funding of higher education abstract recent criticism from different sides has expressed the view that with scarce resources there is little justification for massive public funding of higher education central to the debate is the conjecture that colleges and universities use their resources inefficiently and focus insufficiently on their mission to expand students human potential our aim in this paper is to examine the theoretical premises of this conjecture in a small open economy and uncover the conditions under which public investment in higher education is efficient and desirable we analyze non stationary equilibria of an olg economy characterized by perfect capital mobility intergenerational transfers and a hierarchical education system the government uses income tax revenues to finance basic education and support higher education that generates skilled labor given this the following issues are considered a the impact of education and international markets on the equilibrium number of low skilled and skilled workers in each generation b the economic efficiency of public subsidies to higher education in generating skilled human capital c the endogenous support for a government s educational policies found in a political equilibrium

self enforcing exchange among generations implications for consumption and mobility abstract a three generation olg model with one directional altruism and two directional intra family transfers is presented adults invest in their children s education and make transfers to their elderly parents however due to lack of altruism adults with high earnings do not share consumption equally with their elderly parents but spend a larger share of their earnings on own consumption and on their children s education this allows the model to be consistent with three empirical observations that are difficult to reconcile with traditional altruistic frameworks of intergenerational social interactions and mobility i consumption is not perfectly shared between members of an extended family ii consumption is not equally persistent over the lifecycle as across generations and iii the intergenerational persistence of earnings is particularly high at the top end of the earnings distribution

decomposing intergenerational income elasticity the gender differentiated contribution of capital transmission in rural philippines summary using longitudinal data from rural philippines we decompose intergenerational income elasticity ige into five distinct pathways intergenerational transmissions of health education land and spouse education capital plus residual correlation in productivity intergenerational human capital transmissions from mothers are stronger than those from fathers maternal education is the parental capital most strongly associated with ige while naive ige estimates are indistinguishable for sons and daughters the pathways that generate these results differ strikingly for sons ige is entirely explained by parent to child capital transmission by contrast strong income correlation exists between daughters and parents even after controlling for parent and child capital endowments

developing technological capabilities in agro industry ghana s experience with fresh pineapple exports abstract this article examines the emergence and trajectory of a new agro industry in ghana the pineapple export industry using the technological capabilities approach it explains the limited expansion of the industry and its declining competitiveness in the face of new competition by looking at how ghanaian exporters developed technological capabilities initially and the incentives and disincentives to building on those capabilities the article argues that at the heart of the industry s crisis was an inability to further develop technological capabilities the crisis had systemic features that have broader implications for developing new agro industries in ghana as well as other african countries

distributional effects of public education in an economy with public pensions we study how the allocation of government expenditures between two major outlays education and pay as you go social security affects human capital distribution in an economy with heterogeneous agents we consider an overlapping generations economy where the government maintains both programs and allocates tax revenues to finance them in our model human capital is one of the factors of production it is itself produced as a combined result of public inputs and private inputs parents decisions to invest time and material resources in education of their children are motivated by altruism heterogeneous in its strength across the population which leads to heterogeneity of incomes we investigate the effect of an increase in public funding for education on the human capital distribution we show that in this framework contrary to some earlier results increased spending on public education may lead to higher inequality our results depend crucially on the interaction of education funding with the social security budget and on the elasticity of substitution in the learning technology

the economics of poverty traps and persistent poverty an asset based approach abstract longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty while a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty this paper develops an asset based approach to poverty analysis that makes it possible to distinguish deep rooted persistent structural poverty from poverty that passes naturally with time due to systemic growth processes drawing on the economic theory of poverty traps and bifurcated accumulation strategies this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long term persistent structural poverty as well as relevant extensions of the popular foster greer thorbecke class of poverty measures the paper closes with reflections on how asset based poverty can be used to underwrite the design of persistent poverty reduction strategies

educational inequality and intergenerational mobility in latin america a new database abstract the causes and consequences of the intergenerational persistence of inequality are a topic of great interest among various fields in economics however until now issues of data availability have restricted a broader and cross national perspective on the topic based on rich sets of harmonized household survey data we contribute to filling this gap by computing time series for several indexes of relative and absolute intergenerational education mobility for 18 latin american countries over 50 years and making them publicly available we find that intergenerational mobility is on average rising in latin america this pattern seems to be driven by the high upward mobility of children from low educated families at the same time there is substantial immobility at the top of the distribution significant cross country differences are observed and are associated with income inequality poverty economic growth public educational expenditures and assortative mating

like grand parent like child multigenerational mobility across the eu abstract this study shows that the multigenerational transmission of inequality in most of the 28 eu countries is higher than what a parent to child paradigm would suggest while a strand of the literature claims that this is due to a direct grandparental effect economic historian gregory clark argues that multigenerational mobility follows a markovian process in his view not only are previous estimates severely attenuated by an errors in variables problem but persistence is also constant across time and space using a unique retrospective survey containing information on three generations of european citizens we provide suggestive evidence against such a universal law of mobility while estimates based on measurement error models show that persistence is indeed as strong as clark suggests there are cross country differences furthermore for a few eu countries we cannot reject the hypothesis of a direct grandparental effect overall there is no single data generating process to describe multigenerational persistence that fits all eu countries 2

efficient investment in children abstract many would say that children are society s most precious resource so how should we invest in them to gain insight into this question a dynamic general equilibrium model is developed where children differ by ability parents invest time and money in their offspring depending on their altruism this allows their children to grow up as more productive adults first the efficient allocation is characterized next this is compared with the outcome that arises when financial markets are incomplete the situation where child care markets are also lacking is then examined additionally the consequences of impure altruism are analyzed journal of economic literature classification numbers d1 d31 d58 i2

markov perfect equilibria in altruistic growth economies with production uncertainty this paper concerns the existence of markov perfect equilibria in altruistic growth economies previous work on deterministic models has established existence only under extremely restrictive conditions we show that the introduction of production uncertainly yields an existence theorem for aggregative infinite horizon models with very general forms of altruism journal of economic literature classification numbers

viewpoint customized competitiveness strategies for horticultural exporters central america focus with lessons from and for other regions abstract this paper presents the idea of customized competitiveness as a strategy necessary for overall competitiveness in particular in globalized horticulture markets and in the second round of globalization that started in the mid late 1990s customized competitiveness is additional and complementary to basic structural competitiveness that is the focus of competitiveness debates today and for the past decade the paper illustrates the need for this new strategy using the example of central america highlighting the severe challenges similar to those facing other developing regions it faces in the second round of globalization of horticulture markets magnified by market liberalization culminating recently in implementation of cafta the paper then illustrates solutions by providing examples of cutting edge programs in various developing countries of de facto customized competitiveness in the form of public private partnerships and the provision of public and semi public goods to help their exporters access and succeed in the new markets we conclude with policy implications for central america and other developing regions

pride and prejudice using ethnic sounding names and inter ethnic marriages to identify labour market discrimination labour markets discriminate against workers with particular ethnic sounding names we use non random sorting into interethnic marriage and salient differences between sephardic and ashkenazi surnames to evaluate the causal impact of sephardic affiliation on wages using the 1995 israeli census we estimate the effect of a sephardic sounding surname on wages we first compare the wages of israeli jewish males born to sephardic fathers and ashkenazi mothers sa who are more likely to carry a sephardic surname with the wages of israeli jewish males born to ashkenazi fathers and sephardic mothers as we find that israeli labor markets discriminate based on perceived ethnicity sa workers earn significantly less than their as counterparts we then exploit the custom of women to adopt their husbands surnames to disentangle actual ethnicity from the ethnicity perceived by the market consistent with ethnic discrimination based on surnames we find that it is father in law s ethnicity rather than father s ethnicity that shapes female wage rates finally we find that labor markets discriminate based on surname only when those names provide additional information about ethnicity when ethnicity can be discerned from skin tone surnames do not provide additional explanatory power with respect to wages

is there a pilot in the chain identifying the key drivers of change in the fresh pineapple sector high value export oriented agriculture is today considered as a means of integrating smallholders into the world economy this paper examines the geographic and organisational changes that have taken place in the fresh pineapple sector over the past 50 years we begin with a historical analysis of the changes in leadership among producer countries namely the dethroning of cote d ivoire by costa rica we show that this geographical shift has been accompanied by massive organisational changes the pineapple sector is increasingly driven by large downstream actors who derive their power from the ability to impose their definition of quality to the whole chain and from economies of scale and scope although varietal innovation plays a key role throughout the period commercial and logistical innovation are of increasing strategic importance however because of the constraints imposed by the concerned supply chains small farmers risk being excluded or marginalized

when equal opportunity is not enough training costs and intergenerational inequality this paper develops an individual optimization model with persistent intergenerational immobility its key feature is that training costs are negatively correlated with family background leading to differences in privately optimal training levels across population groups heterogeneity of innate abilities is shown to reduce but not eliminate the importance of family backgrounds conversely wage thresholds which result from indivisibilities in the production or training functions or noncompetitive elements in the economy such as segmented labor markets increase the scope for inequality in the steady state

creating and maintaining global connections agro business and the precarious making of fresh cut markets abstract this article reconstructs the evolution of a multinational fruit processing company from ghana starting from the perspective that firms more generally aim at achieving stability in intra and extra organisational relations the article explores the practical means organisational forms resources technologies strategies and routines through which the case study company achieved relational stability in global markets but also shows how this was eroded in changing market environments extending out from this case study the article also addresses the questions why some agro business firms in africa have developed more sophisticated high value market connections while others have not and whether foreign direct investments can serve as catalysts for agro industrialisation

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

capital income taxation wealth distribution and borrowing constraints the theorem of zero taxation of capital income is reexamined and is shown to hinge critically on the assumptions of a long horizon and perfect markets for the inter temporal allocation of resources the theorem does not hold when borrowing constraints prevent individuals from insuring against idiosyncratic shocks and have a precautionary motive for savings structural assumptions are made such that with no taxation aggregate savings are socially excessive in the long run i e the rate of return is smaller than the discount rate sufficient conditions for a pareto efficient taxation or subsidization of capital in the long run depend on the correlation between individuals consumption and savings a subsidy may be efficient when individuals incomes follow a predictable pattern of life cycles with no negative bequest 2001 elsevier science b v all rights reserved

job information networks neighborhood effects and inequality this paper explores the theoretical and empirical literature to examine the use by different social groups of informal sources of information provided by friends relatives and acquaintances during job search and its consequences for the job market it also addresses the role of network structure and size the resource endowments of contacts and nature of the links between contacts to explain differences in the effects of job information networks in doing so the paper also turns to the sociology literature on job information networks and provides an economic perspective on such sociological concepts as strong versus weak ties inbreeding distance from structural holes etc the paper distinguishes between models of exogenous job information networks that is where individuals obtain job related information through a given social structure and endogenous job information networks which are social networks that result from individuals uncoordinated actions the paper pays special attention to such issues as physical and social proximity and sharing of information and discusses them in the context of the recent social interactions and neighborhood effects literature finally the paper outlines a model that integrates job information networks where interactions occur in business cycle frequencies with the dynamics of human capital formation which include the joint effects of parental community and neighborhood human capital and are set in life cycle frequencies for the purpose of organizing suggestions for future research and examining earned income inequality

distribution and growth in models of imperfect capital markets abstract a full analysis of the distribution of income should include both the inequality in income between different generations of the same family what is usually called intergenerational ocial mobility and the inequality in income between different families in the same generation becker tomes 1979 p 1154

the nature of credit constraints and human capital we develop a human capital model with borrowing constraints explicitly derived from government student loan gsl programs and private lending under limited commitment the model helps explain the persistent strong positive correlation between ability and schooling in the u s as well as the rising importance of family income for college attendance it also explains the increasing share of undergraduates borrowing the gsl maximum and the rise in student borrowing from private lenders our framework ofiers new insights regarding the interaction of government and private lending as well as the responsiveness of private credit to economic and policy changes

economic interpretations of intergenerational correlations science itself for example see galton s 1869 study of the eminence of relatives or his 1889 analysis of the heights of parents and children but extensive use of economic theory to interpret these correlations is much more recent using basic economic concepts such as supply demand investment incentives missing markets and so on theorists hope to explain how and why status is correlated across generations economic theory might provide a unified treatment of a variety of socioeconomic indicators such as earnings income occupation or wealth or it might predict how taxes subsidies and economic regulation affect intergenerational mobility and the operation of markets however while the subject matter earnings consumption wealth occupa tion is clearly interesting to economists it could nonetheless be the case that beyond basic questions of measurement economic theory has not improved our understanding of intergenerational mobility goldberger 1989 is quite explicit in this contention by emphasizing the distinction between genes and environment and by using statistical theory as its main analytical tool the paper by samuel bowles and herbert gintis in this issue implicitly concurs with goldberger we take this challenge very seriously what characterizes an economic approach to mobility while biologists and bowles and gintis distinguish endowments and investments by their source genetic versus environmental factors one focus of economic theorists is motiva

talent growth and income distribution a model with heterogeneous individuals and bequests between generations is constructed to analyze income distribution and educational choice the introduction of an imperfection in the credit market is shown to influence the allocation of talent both ability and bequest are of relevance in deciding whether or not to invest in education with learning by doing between generations the allocation of talent affects not only the level of production but also the growth rate copyright 1993 by the editors of the scandinavian journal of economics

the effects of compulsory schooling on growth income distribution and welfare abstract in this paper we consider an olg model with productive capital and human capital affecting the quality of labor in each generation parents invest in their children s education but disregard its external effect on the aggregate production function government intervention in providing compulsory schooling increases economic growth along the equilibrium path while the intragenerational income distribution becomes more equal also in the long run the majority of individuals in each generation are better off due to compulsory schooling

intergenerational earnings mobility inequality and growth abstract we examine a model in which per capita income inequality intergenerational mobility and returns to education are all determined endogenously individuals earn wages depending on their ability which is a random variable they purchase an education with transfers received from their parents and are subject to liquidity constraints in the model multiple steady state equilibria are possible countries with identical tastes and technologies can reach differing rates of mobility inequality and per capita income equilibria with higher levels of output also have lower inequality higher mobility and more efficient distribution of education

a theory of intergenerational mobility we study the link between market forces cross sectional inequality and intergenerational mobility emphasizing complementarities in the production of human capital we show that wealthy parents i

domestic concentration foreign trade and economic performance abstract in a competitive fringe model the impact of concentration on price cost margins can be shown to be ambiguous therefore looking at the relationship between rates of return and concentration ratios is not sufficient for perceiving collusive elements in this paper a model is set up that permits discerning collusion more clearly additional evidence concerning collusion can be gained by analyzing the influence of exports and imports on price cost margins applying this approach to west germany yields the result that the collusiveness prevailing in domestic markets has not visibly decreased in spite of a substantial increase in foreign trade

the desegregating effect of school tracking this paper makes the following point detracking schools that is preventing them from allocating students to classes according to their ability may lead to an increase in income residential segregation it does so in a simple model where households care about the school peer group of their children if ability and income are positively correlated tracking implies that some high income households face the choice of either living in the areas where most of the other high income households live and having their child assigned to the low track or instead living in lower income neighbourhoods where their child would be in the high track under mild conditions tracking leads to an equilibrium with partial income desegregation where perfect income segregation would be the only stable outcome without tracking

optimal timing of college subsidies enrollment graduation and the skill premium abstract the large increase in the skill premium has led many policy makers to propose increasing college subsidies as a strategy to increase college enrollment and reduce inequality existing analyses typically assume that there is no distinction between enrollment and graduation but in fact more than 50 of college enrollees do not graduate this highlights the need to explicitly model the decision to drop out in assessing the effect of subsidies i build a general equilibrium model of education choice that features an explicit dropout decision calibrate it to match key features of the us economy and use it to evaluate the impact of college subsidies on the supply of college educated labor i show that moving to a system in which subsidies are back loaded i e higher for juniors and seniors than for freshmen and sophomores will increase the supply of college educated labor even holding total subsides constant in fact this effect is larger than what would be accomplished by a uniform 50 increase in subsidies

learning adjustment and economic development transforming firms the state and associations in chile abstract this article views learning processes as key to successful economic adjustment it discusses results of research conducted in chile focused on the agroindustry and footwear sectors it identifies specific problems that large and small firms face to upgrade production and stresses the limits of focusing exclusively on market reforms for achieving growth the article discusses how institutions reshape to facilitate learning and improve performance in chile particularly the relations between firms the reorientation of trade associations and the state s role as facilitator of collective learning processes

general education vocational education and labor market outcomes over the life cycle policy proposals promoting vocational education focus on the school to work transition but with technological change gains in youth employment may be offset by less adaptability and diminished employment later in life to test for this tradeoff we employ a difference in differences approach that compares employment rates across different ages for people with general and vocational education using microdata for 11 countries from ials we find strong and robust support for such a tradeoff especially in countries emphasizing apprenticeship programs german microcensus data and austrian administrative data confirm the results for within occupational group analysis and for exogenous variation from plant closures respectively

the measurement of profitability and the diagnosis of market power this paper develops a model which yields the specification of an empirical test for the difference between price and marginal revenue which will be significantly positive if a firm exercises market power the test can be carried out with any of a number of commonly used measures of accounting profitability and embodies a specific functional form for the consideration of nonconstant returns to scale the model is estimated for four firms in the medical surgical supply industry and four firms in the motor vehicle industry the results are consistent with the hypothesis that product differentiation is an important basis for firm specific market power import quotas are shown to increase market power in the motor vehicle industry claims that accounting data cannot be used to analyze market power are rejected

governance and trade in fresh vegetables the impact of uk supermarkets on the african horticulture industry production of fresh vegetables for export has grown rapidly in a number of countries in sub saharan africa over the last decade this trade brings producers and exporters based in africa together with importers and retailers in europe large retailers in europe play a decisive role in structuring the production and processing of fresh vegetables exported from africa the requirements they specify for cost quality delivery product variety innovation food safety and quality systems help top determine what types of producers and processors are able to gain access to the fresh vegetables chain and the activities they must carry out the control over the fresh vegetables trade exercised by uk supermarkets has clear consequences for inclusion and exclusion of producers and exporters of differing types and for the long term prospects for the fresh vegetables industry in the two major exporting countries studied kenya and zimbabwe

gary becker s contributions to economics from his first published work gary becker has consistently strived to extend the domain of economic analysis his interest is in social science broadly defined and he is convinced that economic theory in its established neoclassical form provides the best set of tools for analysing social science questions when he finds an interesting problem on the borderland of what is conventionally thought of as economics and that is where he is looking for his problems he is not worried that he is trespassing on the traditional grounds of sociologists political scientists lawyers anthropologists or biologists on the contrary he clearly delights in showing how economic theory can be brought to bear on such problems he is of course not alone in trying to extend the borders of economics many other scholars have contributed to the movement which some have characterized as economic imperialism becker is one of the most outstanding of the imperialists this review of his work is organized in accordance with the main topics on which becker has worked chronologically his work on the economics of discrimination which grew out of his doctoral dissertation comes first next in order come his fundamental contributions to human capital theory he was also one of the founders of the so called new theory of consumption which is no longer so new and he has made important contributions to the economic study of crime and punishment and to the economics of political decision making some of his most original work is in the economics of the family where he provides economic explanations of such questions as marriage divorce and procreation after the topic by topic review of becker s contributions i will try to provide a more general evaluation of his work and to characterize it more fully in terms of research traditions and methodological attitudes

alternative methods of depreciation and the reliability of accounting measures of economic profits most u s firms use straight line depreciation some use accelerated depreciation a series of monte carlo experiments were conducted to show how a proposed switch to annuity depreciation would affect accounting estimates of two measures of economic profitability the rate of return and q the ratio of a firm s market value to its replacement cost annuity depreciation significantly improved the accounting rate of return but had little effect on estimates of q some of the improvement in the rate of return and almost all the improvement in q could be obtained if all firms used straightline depreciation

intergenerational persistence of earnings the role of early and college education recent empirical evidence from the united states indicates a high degree of persistence in earnings across generations designing effective public policies to increase social mobility requires identifying and measuring the major sources of persistence and inequality in earnings we provide a quantitative model of intergenerational human capital transmission that focuses on three sources innate ability early education and college education we find that approximately one half of the intergenerational correlation in earnings is accounted for by parental investment in education in particular early education we show that these results have important implications for education policy

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

life cycle schooling and dynamic selection bias models and evidence for five cohorts of american males this paper examines an empirical regularity found in many societies that family influences on the probability of transiting from one grade level to the next diminish at higher levels of education we examine the statistical model used to establish the empirical regularity and the intuitive behavioral interpretation often used to rationalize it we show that the implicit economic model assumes myopia the intuitive interpretive model is identified only by imposing arbitrary distributional assumptions onto the data we produce an alternative choice theoretic model with fewer parameters that rationalizes the same data and is not based on arbitrary distributional assumptions

economic development as self discovery in the presence of uncertainty about what a country can be good at producing there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated we develop a general equilibrium framework for a small open economy to clarify the analytical and normative issues we highlight two failures of the laissez faire outcome there is too little investment and entrepreneurship ex ante and too much production diversification ex post optimal policy consists of counteracting these distortions to encourage investments in the modern sector ex ante but to rationalize production ex post we provide some informal evidence on the building blocks of our model

tax and education policy in a heterogeneous agent economy what levels of redistribution maximize growth and efficiency this paper studies the effects of progressive income taxes and education finance in a dynamic heterogeneous agent economy such redistributive policies entail distortions to labor supply and savings but also serve as partial substitutes for missing credit and insurance markets the resulting tradeoffs for growth and efficiency are explored both theoretically and quantitatively in a model that yields complete analytical solutions progressive education finance always leads to higher income growth than taxes and transfers but at the cost of lower insurance overall efficiency is assessed using a new measure that properly reflects aggregate resources and idiosyncratic risks but unlike a standard social welfare function does not reward equality per se simulations using empirical parameter estimates show that the efficiency costs and benefits of redistribution are generally of the same order of magnitude resulting in plausible values for the optimal rates aggregate income and aggregate welfare provide only crude lower and upper bounds around the true efficiency tradeoff

default risk and private student loans implications for higher education policies abstract in recent years the proportion of students facing a binding constraint on government student loans has grown this has led to substantially increased use of private loans as a supplementary source of finance for households higher education investment a critical aspect of the private market for student loans is that loan terms must reflect students risk of default college investment will therefore differ from a world in which government student loans whose terms are not sensitive to credit risk are expanded to no longer bind moreover beyond simply crowding out private lending expansions of the government student loan program will feed back into default risk on private loans the goal of this paper is to provide a quantitative assessment of the likely effects of the private market for student loans on college enrollment we build a model of college investment that reflects uninsured idiosyncratic risk and a well defined life cycle that is consistent with observed borrowing and default behavior across family income and college preparedness we find that higher government borrowing limits increase college investment but lead to more default in the private market for student loans while tuition subsides increase college investment and reduce default rates in the private market consequently higher limits on government student loans have small negative welfare effects while tuition subsidies increase aggregate welfare

risky higher education and subsidies abstract tertiary education in the u s requires large investments that are risky lumpy and well timed tertiary education is also heavily subsidized our model suggests that despite adverse selection arising from encouraging poorly prepared students to enroll observed collegiate subsidies improve outcomes substantially relative to the fully decentralized case this result occurs because increases in subsidy rates for college education generate reductions in college failure risk without altering mean returns we find that this mechanism is robust and that tertiary subsidy rates well in excess of those observed in the u s can be justified by failure risk alone

structure and performance with profit measures based on stock market prices the theory that there is a causal relationship between industry structure conduct and performance is the fundamental premise in the field of industrial organization the most carefully researched component of that general theory is the hypothesis that increasing industrial concentration will give rise to increasing profits this traditional view is important not only because of its prominence in the academic analysis of industrial markets but also because of its implications for government policy especially antitrust policy the traditional view typically has been tested by treating an accounting based measure of industry profit as the dependent variable with concentration and other structural variables as independent variables within a cross section of manufacturing industries at a given point in time numerous papers have found that concentration has a positive impact on profits the methodology adopted in this paper is different the profit measures are based on stock market prices and are adjusted for risk this is an improvement because accounting methods are so poorly adapted to the measurement of economic profit and because risk may vary with concentration 2 39 another methodological innovation is the choice of time series over cross section analysis the question asked is whether the change over time in each industry s level of concentration had an impact on profits this minimizes the problem of omitted or inaccurately measured independent variables since there should be less change in basic structural characteristics over short time periods within an industry than between industries at a single point in time 2 a second important advantage is freedom from a basic assumption of crosssection studies the assumption that the relationship between concentration and profit is homogeneous across industries if the assumption is invalid empirical results are subject to bias two tests 7 26 have firmly rejected the homogeneity assumption 3

intergenerational transfers production and income distribution abstract we consider an overlapping generations economy where the aggregative production process uses physical capital and human capital intergenerational transfers from parents to their children are motivated by altruism we distinguish between two types of transfers investment of parents in the education of their offspring and capital transfer the gift bequest motive we show that the intensity of each type of altruism and hence the composition of the two types of transfers affect significantly the equilibrium output and the intragenerational income distributions comparing competitive equilibria from the same initial distributions of capital transfers and human capital we derive a the economy with the higher education inclined altruism attains lower output and more equal intragenerational income distributions if either the production function s elasticity of substitution is not large or the altruism is weak b for more bequest inclined altruism the effects are usually reversed c under public provision of education higher bequest inclined altruism results in lower output and less equal distribution of income in all dates

public private partnerships and collective action in high value fruit and vegetable supply chains accessing developed country food markets entails meeting stringent food safety requirements food retailers impose protocols relating to pesticide residues field and pack house operations and traceability to enable smallholders to remain competitive in such a system new institutional arrangements are required in particular public private partnerships can play a key role in creating farm to fork linkages that can satisfy market demands for food safety while retaining smallholders in the supply chain furthermore organized producer groups monitoring their own food safety standards through collective action often become attractive to buyers who are looking for ways to ensure traceability and reduce transaction costs this paper compares the ways in which small producers of fruits and vegetables in kenya and india have coped with increased demands for food safety from their main export markets

long run growth and human capital this paper analyzes long term growth in a closed economy with human as well as physical capital the human capital corresponds to general education private utility maximization determines each child s schooling costs of educating a given individual are convex although self sustaining growth is not possible steady states with per capita output growing faster than the underlying rate of technological progress do emerge and the magnitude of some comparative static results is increased section 3 attempts to pin down the degree of growth rate amplification implied in practice concluding with estimates of 30 50 percent

introduction to development theory abstractthisarticle introduces the symposium on economic development theory 2007 elsevier inc all rights reserved jel classi cation o11 o12keywords development economics development economics a subject that studies institutions growth inequality and povertyin the developing world is a large lively and exciting area of research the objective of thissymposium is to put together some contributions in economic theory with a distinct focus ondevelopment questions much of early development economics as typi ed in the work of paul rosenstein rodan arthurlewis ragnarnurkse tiborscitovsky allynyoung gunnarmyrdal harveyleibenstein alberthirschman amartyasenandothers wastheoretical thoughnotnecessarilyinthesenseofformalmodel building theseauthorsallfelttheneedtobringnewconceptsintoeconomictheory ideas that would capture the essential features of underdevelopment and provide explanationsof the development process existing economic theory with its focus on competitive markets depersonalized exchange steady technical progress and balanced growth simply did not seemrightwhenmatchedwiththegroundrealitiesofunderdevelopment fragmented imperfect orjustplain missing markets highly personalized transactions in credit insurance or agrarian tenancy ambiguousornonexistentpropertyrights andwidespreadevidenceofpovertytrapsandhistoricallock ins a fair bit of modern economic theory was born in some of these early development writings young s article 40 on increasing returns was perhaps the rst systematic study of noncon vexities in economic growth rosenstein rodan s celebrated paper 32 on post war interven tion in europe provided a conceptual foundation for modern thinking on coordination failures

linking smallholder farmers to markets on extensive and intensive margins evidence from nicaragua abstract access to modern commercialization channels is key for smallholder farmers to move away from subsistence farming and overcome poverty however achieving that goal is challenging for smallholders given their lack of appropriate managerial practices production technology and infrastructure this paper examines the association between receiving trainings in two distinct entrepreneurial practices one direct at the individual and farmer association level and another indirect at the community level and commercialization in non local markets at the extensive and intensive margins we exploit a panel dataset of bean producers in nicaragua that participated in an ngo program implemented between 2007 and 2012 we find opposite results for the two market linkage activities especially on the intensive margin or volume of sales while reciving direct training on entrepreneurial practices ep is positively associated with commercialization training on municipality engagement me activities is negatively associated these correlation patterns are mainly observed among entrant farmers as opposed to those already participating in commercial markets prior to the program implementation we also find varying results for me activities by plot size and leadership position additional estimations show that training activities that are positively correlated with bean commercialization are not necessarily correlated with the commercialization of other crops and vice versa

technological progress mobility and economic growth this paper analyzes the relationship between technological progress wage inequality intergenerational earnings mobility and economic growth in periods of major technological inventions a decline in the relative importance of initial conditions raises inequality enhances mobility and generates a larger concentration of high ability individuals in technologically advanced sectors stimulating future technological progress and growth however once technologies become more accessible mobility is diminished and inequality decreases but becomes more persistent the reduction in the concentration of ability in technologically advanced sectors diminishes the likelihood of technological breakthroughs and slows future growth user friendliness therefore becomes unfriendly to future economic growth copyright 1997 by american economic association

risks and rewards gary becker s contributions to economics gary becker is one of the most original and influential economists of our age his originality lies in extending the frontiers of economics and broadening the range of important social science problems that are amenable to economic analysis he has gone against the grain of establishment thinking in the economics profession invariably choosing to work on problems that were considered beyond the boundaries of modem economics yet this work made close contact with many of the great economists of the past and many of the concepts he invented and developed are now widely if not routinely used in modem economics several of the approaches to problems he pioneered have evolved into fields and specialities in their own right that becker has had an immense intellectual impact and influence in the economics profession is supported empirically by the voluminous citations to his work over the years and in other ways obviously citation counts have well known difficulties and cannot prove anything by themselves but if used in conjunction with more fundamental evidence they do have the virtue of being quantifiable marshall medoff s 1989 1 recent citation study is one of the best available because citations are weighted by the importance of the journals in which articles appear among non nobel prize economists working in u s universities under 65 years of age becker ranks first in total citations over the 1971 85 period to which medoff s study refers and he is first by a very wide margin though the study is limited to economists in the united states it is clear that becker would rank at or very close to the top of any worldwide list furthermore becker s work is virtually all substantive economic analysis hardly any of it is devoted to the development of methodological tools or to surveys both of which gamer citations more easily and many concepts

stochastic wealth dynamics and risk management among a poor population we use herd history data collected among pastoralists in southern ethiopia to study stochastic wealth dynamics among a poor population although covariate rainfall shocks plainly matter household specific factors including own herd size account for most observed variability in wealth dynamics we find no support for the tragedy of the commons hypothesis past studies may have conflated costly self insurance with stocking rate externalities biophysical shocks move households between multiple dynamic wealth equilibria the lowest suggesting a poverty trap according to nonconvex path dynamics these findings have broad implications for development and relief strategies among a poor population vulnerable to climatic shocks a vast economic literature on risk management rests explicitly or implicitly on the classic friedmanite permanent income hypothesis studies of portfolio management consumption smoothing social insurance and the like all depend on the canonical assumption that stochastic income realisations are drawn from a stationary income distribution leading to consumption smoothing off a stable asset base the possibility of asset accumulation connects this literature to the immense literature on the theory and empirics of economic growth

evaluating q as an alternative to the rate of return in measuring profitability the ratio of a firm s market value to its replace ment cost q is often used to measure firms profitability the use of q is increasin g in large part because of the growing realization that errors in evaluating firms capital assets may cause errors in estimates of the accounting rate of return r the same objection however applies t o q this paper reports the results of monte carlo experiments designed to determine whether q is superior to r errors in both q and r are large and potentially serious but do not render either measure useless copyright 1988 by mit press

a theory of trickle down growth and development this paper develops a model of growth and income inequalities in the presence of imperfect capital markets and it analyses the trickle down effect of capital accumulation moral hazard with limited wealth constraints on the part of the borrowers is the source of both capital market imperfections and the emergence of persistent income inequalities three main conclusions are obtained from this model first when the rate of capital accumulation is sufficiently high the economy converges to a unique invariant wealth distribution second even though the trickle down mechanism can lead to a unique steady state distribution under laissez faire there is room for government intervention in particular redistribution of wealth from rich lenders to poor and middle class borrowers improves the production efficiency of the economy both because it brings about greater equality of opportunity and also because it accelerates the trickle down process third the process of capital accumulation initially has the effect of widening inequalities but in later stages it reduces them in other words this model can generate a kuznets curve

regional agricultural endowments and shifts of poverty trap equilibria evidence from ethiopian panel data we examine changes in patterns of equilibria over time and across regions applied to the ethiopia rural household survey we revisit incidence of multiple equilibria using new nonparametric techniques and examine single equilibria that remain stagnant below the poverty line using quantile regressions we identify differences across the income distribution we introduce the empirical analysis of sequences of equilibria we identify a single equilibrium in 1994 1999 but find a second higher equilibrium emerging in 1999 2004 evidencing a shift from unimodal toward a bimodal asset distribution the most deprived region exhibits a low level stagnant equilibrium despite significant rural income growth nationwide

early and late human capital investments borrowing constraints and the family we develop a dynastic human capital investment framework to study the importance of family borrowing constraints and uninsured labor market risk as well as the process of intergenerational ability

public versus private investment and growth in a hierarchical education system abstract the paper studies the interaction between public and private spending in a two stage education framework k 12 and tertiary education and their effects on economic growth we find that an increase in the overall education public spending crowds out the total level of private contributions and increases the share of resources that households devote to k 12 education for a given public budget a higher share of k 12 public funding induces higher private education spending overall of which a larger share goes towards higher education the model broadly matches data on education finance in the oecd countries the calibrated parameter values suggest that at both stages public and private inputs are good yet imperfect substitutes with a higher degree of complementarity in basic education we show that the growth maximizing share of public spending devoted to k 12 should be high irrespective of the size of the public budget using the calibrated model to compare the structure of education funding in the eu and the us we find that to maximize growth high tax countries should use more of their public resources in tertiary education relative to low tax countries this suggests that us efforts to improve k 12 education and the reform of higher education in europe are consistent with the objective of increased economic growth

sorting and long run inequality many social commentators have raised concerns over the possibility that increased sorting in society may lead to greater inequality to investigate this we construct a dynamic model of intergenerational education acquisition fertility and marital sorting and parameterize the steady state to match several basic empirical endings we end that increased sorting will signiecantly increase income inequality four factors are important to our endings a negative correlation between fertility and education a decreasing marginal effect of parental education on children s years of education wages that are sensitive to the relative supply of skilled workers and borrowing constraints that affect educational attainment for some low income households

wage structure as implicit insurance on human capital in developed versus underdeveloped countries abstract this paper explores the role of wage structure as implicit insurance on human capital it illustrates how smaller wage differentials in the developed world can be welfare enhancing by acting as implicit insurance while larger wage differentials in underdeveloped countries make investments in human capital riskier in other words with smaller wage differentials the students in a developed country are insured against poor educational outcomes through the existence of well paid alternative employments which are not present in the economy of a less developed country this result arises as multiple equilibria in a general equilibrium model when there are no insurance markets for human capital

improvement in information and private investment in education this paper uses the framework of an olg economy for an analysis of the dynamic interaction between the precision of information about individual skills investment in education human capital accumulation and social welfare the human capital of an individual depends on both his subjectively random ability and his investment in education individual investment in education is financed through a loan contract with income contingent terms of repayment investment decisions are based on public signals test outcomes which screen all agents for their abilities we find that better information which allows more efficient screening enhances aggregate human capital formation but may at the same time stifle aggregate investment in education moreover social welfare may increase or decline depending on the transformation technology and on the relative measure of risk aversion c 2009 elsevier b v all rights reserved

wealth distribution and optimal inheritance taxation in life cycle economies with intergenerational transfers we introduce intergenerational transfers into a general equilihrium life cycle model in order to explain observed levels of wealth heterogeneity in our overlapping generations model heterogenous agents face uncertain lifetime and leave both accidental and voluntary bequests to their cinldren furthermore agents face stochastic employment opportunities the model is calibrated with regard to the characteristics of the us economy our resuits indicate that hequests onl account for a sniall proportion of ohserved wealth heterogeneitv the introduction of an inheritance tax increases both welfare are measured by the average value of the newborn and equality of the wealth distribution preliminary versions of this paper have been presented at conference on intergenerational transfers taxes and the distribution of wealth in uppsala 1999 and the econoinetric societv european meetirig in santiago dc compostela 1999 we would like to thank michael kaganovieli john laitner james smith frank stafford and carl cristian von weizsacker for comments on earlier versions of the paper all remaining errors are ours

the political economy of intergenerational income mobility the intergenerational elasticity of income is considered one of the best measures of the degree to which a society gives equal opportunity to its members while much research has been devoted to measuring this reduced form parameter less is known about its underlying structural determinants using a model with exogenous talent endowments endogenous parental investment in children and endogenous redistributive institutions we identify the structural parameters that govern the intergenerational elasticity of income the model clarifies how the interaction between private and collective decisions determines the equilibrium level of social mobility two societies with similar economic and biological fundamentals may have vastly different degrees of intergenerational mobility depending on their political institutions we offer empirical evidence in line with the predictions of the model we conclude that international comparisons of intergenerational elasticity of income are not particularly informative about fairness without taking into account differences in politico economic institutions jel e24 j62 j68 p16