a search theoretic model of the retail market for illicit drugs a search theoretic model of the retail market for illegal drugs is developed trade occurs in bilateral potentially long lived matches between sellers and buyers buyers incur search costs when experimenting with a new seller moral hazard is present because buyers learn purity only after a trade is made this model is consistent with some new stylized facts about the drugs market and it is informative for policy design the effectiveness of different enforcement strategies is evaluated including some novel ones that leverage the moral hazard present in the market copyright oxford university press

individual risk attitudes measurement determinants and behavioral consequences this paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects homes using a question asking people about their willingness to take risks in general we find that gender age height and parental background have an economically significant impact on willingness to take risks the experiment confirms the behavioral validity of this measure using paid lottery choices turning to other questions about risk attitudes in specific contexts we find similar results on the determinants of risk attitudes and also shed light on the deeper question of stability of risk attitudes across contexts we conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks occupational choice and smoking the question about risk taking in general generates the best all round predictor of risky behavior

measurement errors in agricultural data and their implications on marginal returns to modern agricultural inputs the low uptake of modern agricultural technologies in sub saharan african countries has encouraged researchers to revisit the returns to or profitability of these agricultural inputs a related strand of literature is exploring the allocative efficiency of these factors of production in african agriculture however all these studies rely on self reported agricultural data which are prone to nonclassical measurement errors the errors in these data are correlated with the true values of variables of interest in this article we investigate the implication of measurement errors in self reported agricultural input and production data on marginal returns to these modern agricultural inputs we consider a generic two sided measurement error problem where both production and inputs can be measured with error and these errors can be correlated we employ both self reported and objective measures of production and plot size to compute output elasticities under these alternative measurement scenarios we find that using self reported production and plot size overestimates output elasticities and hence marginal returns to modern agricultural inputs including chemical fertilizer and improved seed these results are noteworthy in terms of informing conventional technology diffusion strategies as well as in view of revisiting existing presumptions about the profitability of modern agricultural inputs

understanding the process of agricultural technology adoption mineral fertilizer in eastern dr congo summary we analyze the adoption of mineral fertilizer in south kivu we model technology adoption as a three step process including awareness tryout and adoption and empirically analyze these steps using cross sectional farm household data and bivariate and heckman selection probit models we find that awareness about fertilizer is high 57 and mainly determined by education and social capital tryout is low 13 of aware farmers but positively influenced by extension interventions continued adoption is high 70 of tryout farmers but capital constraints are important and not all extension interventions are effective for continued adoption our results entail implications for extension policies in poor areas

loss aversion and the demand for index insurance abstract this work analyzes if reference dependence and loss aversion can explain the puzzling low adoption rates of rainfall index insurance we present a model that predicts the impact of loss aversion on index insurance demand to vary with different levels of insurance understanding index insurance demand of farmers who are unaware of the loss hedging benefit that insurance provides decreases with loss aversion in contrast insurance demand of farmers who are aware of the loss hedging benefit increases with loss aversion the model further predicts that farmers who are unaware of the loss hedging benefit will not demand an even highly subsidized index insurance using data from a randomized controlled trial involving a sample of indian farmers we provide empirical support for our core conjecture that insurance understanding mitigates the negative impact of loss aversion on index insurance adoption

theories of poverty traps and anti poverty policies in this paper we provide a conceptual overview of alternative mechanisms leading to poverty traps at the individual level making a distinction between those that are due to external frictions e g market failure and those that are due to behavior under extreme scarcity in the absence of any frictions we develop a common theoretical framework to examine alternative scenarios characterizing conditions under which poverty traps in the sense of multiple stable steady states arise as opposed to possibly conditional convergence to a unique steady state we apply this framework to discuss the relative merits of alternative anti poverty policies such as unconditional and conditional cash transfers and direct interventions aimed at improving market access to the poor or improving public service delivery jel codes d13 d23 o12 o15

the last mile s in modern input distribution pricing profitability and adoption increasing adoption of modern inputs remains one of the best hopes for greater agricultural production in developing countries based on unique data from northwestern ethiopia this study examines the last mile s from the input distribution center to the farmer in the chemical fertilizer and improved seed distribution system we find that increasing transaction and transportation costs over a 35 km distance along a route mainly accessible to only foot traffic lead to a 50 increase of the price of chemical fertilizer and to a 75 reduction in its use farmers who live about 10 km from the distribution center face per unit transaction and transportation costs as high as the costs needed to bring the fertilizer from the international port to the input distribution center about 1 000 km tackling the last mile s costs should thus be a priority to improve modern input adoption and use in these settings

locus of control and savings abstract this paper analyzes the relationship between individuals locus of control and their savings behavior i e wealth accumulation savings rates and portfolio choices locus of control is a psychological concept that captures individuals beliefs about the causal relationship between their own behavior and life events we find that households with an internal reference person a main respondent who believes that he she can generally control relevant aspects of life save more in terms of levels and in some cases as a percentage of their permanent incomes although the locus of control gap in savings rates is largest among rich households the gap in wealth accumulation is particularly large for poor households finally our findings indicate that households with an internal reference person are in a better position to save in forms that are harder to access such as pension wealth than otherwise similar households with an external reference person

rural finance and agricultural technology adoption in ethiopia does the institutional design of lending organizations matter summary it has now become almost a stylized fact that sustained agricultural growth is central to rapid poverty reduction and economic development yet world poverty is largely concentrated in the agrarian societies which have the potential for agricultural productivity growth this is particularly true for sub saharan african countries where the gaps between potential and actual yields remain high minimizing this gap through the promotion of modern inputs such as fertilizer and modern seeds has been at the core of almost all development strategies in ethiopia among other initiatives the country has promoted microfinance institutions and member owned financial cooperatives to alleviate credit constraints of the smallholder farmers this paper analyzes the impacts of these institutions using household survey data and a propensity score matching technique we examine the effects that institutional financial services have on farmers adoption of agricultural technology in ethiopia the results suggest that access to institutional finance has a significant positive impact on both the adoption and extent of technology use however when impacts are disaggregated by type of financial institution and farm size heterogeneities are observed in particular financial cooperatives have a greater impact on technology adoption than microfinance institutions and the results appear to vary depending on farm size and types of inputs the paper concludes with implications for policies to promote adoption of modern agricultural inputs

the impact of psychological and human capital on wages historically economists have taken the position that psychological capital is either unobservable or immeasurable thus heretofore little evidence has been available on the contribution of psychological capital to wages using data drawn from two different waves of the national longitudinal survey of youth we offer evidence that psychological capital has both a direct effect via self esteem and an indirect effect through locus of control on an individual s real wage we find a person s wage is more sensitive to changes in self esteem than to comparable alterations in human capital both relative wages and human capital contribute to self esteem

returns to spending on agricultural extension the case of the national agricultural advisory services naads program of uganda the aim of this paper is to assess the direct and indirect impacts of the agricultural extension system of uganda the national agricultural advisory services naads program on household agricultural income data from two rounds of surveys of ugandan rural farm households conducted in 2004 and 2007 as well as different program evaluation methods and model specifications are used to estimate impacts and compute a rate of return the direct and indirect impact of the program is estimated at 37 95 and 27 55 increase in per capita agricultural gross revenue between 2004 and 2007 for households participating directly and indirectly in the program respectively compared to nonparticipants the rate of return on the program s expenditures is estimated at 8 49 the program has been relatively more effective among male headed larger and asset poor households as well as those taking up noncrop high value enterprises and living further away from financial services all weather roads and markets or located in the eastern and northern regions policy implications of the results are drawn

the economic case against drug prohibition this paper discusses the costs and benefits of drug prohibition it offers a detailed outline of the economic consequences of drug prohibition and a systematic analysis of the relevant empirical evidence the bottom line is that a relatively free market in drugs is likely to be vastly superior to the current policy of prohibition

locus of control and technology adoption in developing country agriculture evidence from ethiopia abstract we investigate the implication of farmers locus of control on their technology adoption decisions our empirical analysis is based on two longitudinal surveys and hypothetical choice exercises conducted on ethiopian farmers we find that locus of control significantly predicts farmers technology adoption decisions including use of chemical fertilizers improved seeds and irrigation we show that individuals with an internal locus of control have higher propensity of adopting agricultural technologies we observe these empirical regularities in both datasets and for both revealed measures of farmers technology adoption decisions as well as farmers hypothetical demand for agricultural technology the results hold even in a more conservative fixed effects estimation approach assuming locus of control as time variant and dynamic behavioral trait these findings provide behavioral and psychological explanations for the low rates of adoption of profitable agricultural technologies in sub saharan africa our results highlight that improving farmers non cognitive skills locus of control may facilitate technology adoption and agricultural transformation more generally the results suggest that anti poverty policies that only focus on relaxing short term external constraints including physical access to markets and technologies may not sufficiently alleviate agricultural underinvestment

poverty and self control we argue that poverty can perpetuate itself by undermining the capacity for self control in line with a distinguished psychological literature we consider modes of self control that involve the self imposed use of contingent punishments and rewards we study settings in which consumers with quasi hyperbolic preferences confront an otherwise standard intertemporal allocation problem with credit constraints our main result demonstrates that low initial assets can limit self control trapping people in poverty while individuals with high initial assets can accumulate indefinitely thus even temporary policies that initiate accumulation among the poor may be effective we examine implications concerning the effect of access to credit on saving the demand for commitment devices the design of financial accounts to promote accumulation and the variation of the marginal propensity to consume across income from different sources we also explore the nature of optimal self control demonstrating that it has a simple and behaviorally plausible structure that is immune to self renegotiation

self command in practice in policy and in a theory of rational choice an increasingly familiar occurrence for obstetricians is being asked by patients to withhold anesthesia during delivery the physician often proposes that a facemask be put beside the patient who may inhale nitrous oxide as she needs it but some determined patients ask that no such opportunity be provided if gas is available they will use it and they want not to be able to the request is interesting for decision theory and raises questions of ethics policy and physician responsibility even if the woman is merely making a mistake if she simply does not know how painful labor will be and how glad she will be even in retrospect if the pain is relieved but some women who make this request have had earlier deliveries during which they demanded anesthesia and received it they are acquainted with the pain they anticipate asking for relief and they want it withheld when they do they expect to regret afterwards any recourse to anesthesia this particular instance of attempted selfdenial has features that are special but many that are common the woman is so far as we know in good health physically and mentally she anticipates a transient period when her usual values and preferences will be suspended or inaccessible she has reasons for wanting to frustrate her own wishes at the critical time she needs cooperation she may ratify her choice afterward by expressing herself grateful that no anesthesia was offered even when requested there are ethical dilemmas and legal issues and there is conflict if say the husband disagrees with the physician in the delivery room about what his wife really wants

nudging farmers to use fertilizer theory and experimental evidence from kenya we model farmers as facing small fixed costs of purchasing fertil izer and assume some are stochastically present biased and not fully sophisticated about this bias such farmers may procrastinate post poning fertilizer purchases until later periods when they may be too impatient to purchase fertilizer consistent with the model many farmers in western kenya fail to take advantage of apparently profit able fertilizer investments but they do invest in response to small time limited discounts on the cost of acquiring fertilizer free deliv ery just after harvest calibration suggests that this policy can yield higher welfare than either laissez faire policies or heavy subsidies

neighbors and extension agents in ethiopia who matters more for technology adoption improving agricultural productivity is seen as vital to economic growth in poor countries particularly in sub saharan africa where productivity growth has lagged behind that of other continents the focus has therefore been on new technologies particularly the adoption and diffusion of improved seed varieties and the increased use of fertiliser supported by investments in effective extension services it is important to understand how these new technologies spread and the effectiveness of extension services in this process

the role of education in facilitating risk taking and innovation in agriculture the impact of education on farmers attitudes toward endogenous risk measured using an attitude survey instrument is estimated with household data from rural ethiopia education of the household head is found to decrease risk aversion next the effects of education and risk attitudes on technology adoption are estimated schooling encourages farmers to adopt innovations whereas risk aversion reduces the probability of adoption thus we find that schooling encourages innovation a potentially risky undertaking not only directly but also indirectly through its effect upon attitudes toward risk to the extent that educated farmers are early innovators and are copied by those with less schooling as other research on the same data has shown the reduction of riskaversion not only has private benefits for those with education but also may have externality benefits

two economists musings on the stability of locus of control empirical studies of the role of non cognitive skills in driving economic behavior often rely heavily on the assumption that these skills are stable over the relevant time frame we analyze the change in a specific non cognitive skill i e locus of control in order to directly assess the validity of this assumption we find that short and medium run changes in locus of control are rather modest on average are concentrated among the young or very old do not appear to be related to the demographic labor market and health events that individuals experience and are unlikely to be economically meaningful still there is no evidence that locus of control is truly time invariant implying that the use of lagged measures results in an errors in variables problem that could downward bias the estimated wage return to locus of control by as much as 50 percent those researchers wishing to analyze the economic consequences of non cognitive skills should consider i restricting their analysis to the working age population for whom there is little evidence of systematic change in skill levels and ii accounting for error in the skill measures they employ

search bargaining money and prices under private information this paper presents a model of money and search where bargaining determines prices and the quality of goods is private information it studies how a lemons problem affects the purchasing power of money there are multiple pareto ranked equilibria the superior equilibrium where no lemons are produced exists even if information about quality is relatively scarce in other equilibria there is price dispersion and uninformed buyers pay higher prices than informed buyers for all goods taxing money balances a proxy for inflation makes buyers less selective thus reducing the average quality of supply and the premium paid for known quality

the effect of marketing messages and payment over time on willingness to pay for fuel efficient cookstoves abstract smoke from inefficient biomass cookstoves contributes to global climate change and kills approximately four million people per year cooking technologies such as manufactured fuel efficient cookstoves that mitigate the negative effects of traditional cookstoves exist but adoption rates are low the international development community debates whether this low adoption of fuel efficient cookstoves is due to a lack of adequate product information or due to household financial constraints we ran vickery second price auctions in rural uganda to elicit willingness to pay for fuel efficient cookstoves comparing the effect of informational marketing messages and time payments on willingness to pay a randomized trial tested the following marketing messages this stove can improve health this stove can save time and money and both messages combined none of the messages consistently increased willingness to pay in a second experiment we compared willingness to pay for two different contracts one with payment due within a week and one with equal installment payments over 4 weeks consistent with household financial constraints time payments raised willingness to pay by 40

the complex dynamics of smallholder technology adoption the case of sri in madagascar this article explores the dynamics of smallholder technology adoption with particular reference to a high yielding low external input rice production method in madagascar we present a simple model of technology adoption by farm households in an environment of incomplete financial and land markets we then use a probit model and symmetrically censored least squares estimation of a dynamic tobit model to analyze the decisions to adopt expand and disadopt the method we find that seasonal liquidity constraints discourage adoption by poorer farmers learning effects both from extension agents and from other farmers exert significant influence over adoption decisions

a behavioral economics view of poverty standard theorizing about poverty falls into two camps social scientists regard the behaviors of the economically disadvantaged either as calculated adaptations to prevailing circumstances or as emanating from a unique culture of poverty rife with deviant values the first camp presumes that people are highly rational that they hold coherent and justified beliefs and pursue their goals effectively without mistakes and with no need for help the second camp attributes to the poor a variety of psychological and attitudinal short fallings that render their views often misguided and their choices fallible leaving them in need of paternalistic guidance we propose a third view the behavioral patterns of the poor we argue may be neither perfectly calculating nor especially deviant rather the poor may exhibit the same basic weaknesses and biases as do people from other walks of life except that in poverty with its narrow margins for error the same behaviors often manifest themselves in more pronounced ways and can lead to worse outcomes in what follows we illustrate the kinds of insights that might be gained from a behaviorally more realistic analysis of the economic conditions of the poor and we propose that alternative policies for alleviating poverty be considered

time preference noncognitive skills and well being across the life course do noncognitive skills encourage healthy behavior a number of prominent diseases are influenced by health behaviors for example it is well known that the decision to smoke comes with considerable risks of developing smoking related ailments such as lung cancer emphysema and heart disease obesity is another health condition that can be costly it is associated with increased risk for diseases such as coronary heart disease and diabetes centers for disease control 2009 nationally it is estimated that about one third of the u s population is obese and estimates suggest that obesity costs society anywhere from 27 to 47 billion in health care expenditures annually centers for disease control 2009 national center for health statistics 2008 research suggests that changing individuals diets and getting them to exercise would help to reduce the prevalence of obesity in society melayne mcinnes and judith shinogle 2009 smoking and obesity provide just two examples of cases in which the nation s burden of disease is influence by behaviors that its citizens engage in because the united states spends a large share of gdp on health care each year understanding the determinants of health behaviors is important as it may allow scholars to identify ways to reduce these costs this paper examines the relationship between individuals health behaviors and the non cognitive skills that individuals possess in the past decade the economics discipline has seen a burst of interest in human capabilities that contribute to labor market productivity beyond the usual foci of attention levels of education and learning by doing the collection of personality traits soft skills incentive enhancing preferences and socio emotional factors that economists are now studying has been loosely grouped together under the heading non cognitive skills 1 while the term may be something of a misnomer because many of the worker attributes that the authors writing in this subfield are interested in require reasoning or cognition the skills of interest have been found to be important determinants of labor market success james heckman jora stixrud and sergio urzua 2006 samuel bowles herbert gintis and melissa osborne 2001 2james heckman 2007 has stated that these socio emotional attributes as non cognitive skills are sometimes called are also likely to affect health behaviors this paper tests this hypothesis it provides a theoretical and an empirical analysis of the connection between socio emotional attributes and the choices that individuals make about health it uses data from a large nationally representative dataset to analyze the relationships

can modern input use be promoted without subsidies an analysis of fertilizer in ethiopia fertilizer use in ethiopia has nearly quintupled since official elimination of direct input subsidies in the early 1990s during this time policies changed from liberalization with both private and public sector participation to a government monopoly over imports along with exclusive marketing through farmers cooperatives this article presents estimates of detail costs and margins in the value chain econometrically derived profitability and yield responses as well as costs of the government s fertilizer promotion policies results suggest that a irrespective of the methods of calculation fertilizer use in major cereal is profitable b while there is no official subsidy program fertilizer promotion has involved large fiscal costs estimated at us 40 million per year since 2008 and c there has been a mismatch between government s policy targets and the effective fertilizer demand resulting in large carryover stock with estimated implicit costs of us 30 million per year during 2008 2011 areas of policy attention value chain improvements and ongoing efforts to improve for fertilizer use and profitability are discussed

list pricing and discounting in a bertrand edgeworth duopoly list or retail pricing is a widely used trading institution where firms announce a price that may be discounted at a later stage competition authorities view list pricing and discounting as a procompetitive practice we modify the standard bertrand edgeworth duopoly model to include list pricing and a subsequent discounting stage both firms first simultaneously choose a maximum list price and then decide whether to discount or not in a subsequent stage we show that list pricing works as a credible commitment device that induces a pure strategy outcome this is true for a general class of rationing rules further unlike the dominant firm interpretation of a price leader the low capacity firm may have incentives to commit to a low price and in this sense assume the role of a leader