international correlation risk we show that the cross sectional dispersion of conditional foreign exchange fx correlation is countercyclical and that currencies that perform badly well during periods of high dispersion yield high low average excess returns we also find a negative cross sectional association between average fx correlations and average option implied fx correlation risk premiums our findings show that while investors in spot currency markets require a positive risk premium for exposure to high dispersion states fx option prices are consistent with investors being compensated for the risk of low dispersion states to address our empirical findings we propose a no arbitrage model that features unspanned fx correlation risk

answering the skeptics yes standard volatility models do provide accurate forecasts a voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using arch and stochastic volatility models while most of these studies have documented highly significant in sample parameter estimates and pronounced intertemporal volatility persistence traditional ex post forecast evaluation criteria suggest that the models provide seemingly poor volatility forecasts contrary to this contention we show that volatility models produce strikingly accurate interdaily forecasts for the latent volatility factor that would be of interest in most financial applications new methods for improved ex post interdaily volatility measurements based on high frequency intradaily data are also discussed

introducing household production in collective models of labor supply in a recent paper chiappori 1992 i proposed a model of labor supply based on a collective representation of household behavior in this framework each household member is characterized by his or her own utility function and decisions are only assumed to result in pareto efficient outcomes i showed that these simple assumptions were sufficient to i generate testable restrictions on labor supply functions and ii recover individual preferences and the outcome of the decision process from observed behavior for the sake of simplicity the results were derived in the simplest possible case namely a static labor supply model with private consumptions such a framework was appropriate only for the purpose of the paper that is a preliminary exploration of the properties of collective models of labor supply the next step is to evaluate the robustness of the results to various extensions of the basic model this opens a general research program and generates a wide range of particular problems that it is hoped will be considered in the future among the most serious shortcomings of the 1992 model is the absence of household production as in most labor supply models agents were assumed to divide their time between market activities and leisure as apps and rees 1997 in this issue very rightly point out in their comment the absence of domestic production is far from innocuous as soon as welfare issues are considered for instance a low level of market labor supply will automatically be interpreted as a large consumption of leisure whereas it may in fact reflect the specialization of one of the members in domestic

environmental governance in federal systems the effects of capital competition and lobby groups noel gaston we argue that centralized and decentralized environmental governance yield equivalent environmental regulations we model worker environmental and capital owner lobby groups that seek influence by offering political contributions worker lobbying in the decentralized case has an effect on environmental regulations identical to that of capital owner lobbying in the centralized case this is because the aggregate effects of environmental regulations on income are equivalent under the two institutional designs whereas workers carry the full burden in the decentralized case when capital competition occurs the burden is shared with the capital owners in the centralized case we present evidence consistent with our theory jel q28 f21 r38 d72 d78 i introduction as the demand for efficient environmental policies increases the ambit of political power in a federation must be determined cumberland 1981 suggests that uniform federal rules avoid the economic competition between jurisdictions in order to attract investment that may result in an excessively low environmental quality as discussed by burtraw and portney 1991 central decision making may be highly inefficient however because federal regulations fail to take into account the heterogeneity of local environments 1 this article develops a theory of decentralized and centralized environmental policy making in federal systems that incorporates the political forces determining the outcomes under the two alternative regulatory designs the empirical evidence on the effects of interjurisdictional capital competition on environmental policies is inconclusive and mainly anecdotal esty 1996 gives an overview of the available evidence and finds that rent seeking behavior undoubtedly affects national as well as state environmental policy making but there is no evidence that public decision making is systematically more distorted at the federal level than at state and local levels 2 in a study of packaging waste regulation in the european union eu paul 1994 95 describes how the move from decentralized to centralized regulation remains controversial some greens bitterly criticize the directive as a sellout to industry it is true that industry aggressively lobbied parliament to stop the efforts of the greens to tighten the directive and that i t is tempting to describe this debate as one more example in which the regulatory authority was captured by industry 3 evidently the move to centralized regulation stimulated industry lobbying the present paper provides an explanation for why industry lobbying may be stronger at the federal level and discusses the implications for environmental policy under decentralized and centralized environmental policy making 4 the current literature lacks a formal comparison of politically determined environmental regulations under the different institutional arrangements that may exist in federal systems 5 while we couch our argument in terms of environmental policy making that could be undertaken either at the national level or at lower levels in a federal structure we believe that the central ideas extend to regulatory policy carried out at both the highest and lowest levels of multi country federations such as the eu 6 extensions of our theory may apply more generally to several forms of regulation for example worker safety standards and product liability legislation as well as to firm taxation a key concern of environmental policy makers in federal systems is interjurisdictional capital mobility we model a decentralized system of regulation with a mobile capital stock consideration of the effects of environmental regulations on capital is important van beers and van den bergh 1997 find no significant negative effect of environmental regulation on export flows in polluting industries except when restricting their data to sectors with high capital mobility

execution risk in high frequency arbitrage in this paper we investigate the role of execution risk in high frequency trading through arbitrage strategies we show that if rational agents face uncertainty about completing their arbitrage portfolios then arbitrage is limited even in markets with perfect substitutes and convertibility using a simple model we demonstrate that this risk arises from the crowding effect of competing arbitrageurs entering the same trade and inflicting negative externalities on each other our empirical results provide evidence that support the relevance of execution risk in high frequency arbitrage this paper was accepted by wei xiong finance

equilibrium pollution taxes in open economies with imperfect competition abstract this paper argues that imperfect competition in global markets creates a strategic interaction between governments that can lead to the inefficient distortion of pollution taxes this distortion can be decomposed into a rent capture effect and a pollution shifting effect the rent capture effect lowers equilibrium taxes as each country attempts to gain a competitive advantage over its trading partner and thereby capture foreign rent through net exports the pollution shifting effect raises equilibrium taxes as each country attempts to transfer production and its associated pollution to the other country this effect vanishes if pollution is perfectly transboundary because shifted pollution causes as much damage to the domestic environment as does domestic pollution the net effect on symmetric equilibrium taxes is negative except in the special case of perfect competition with no transboundary pollution in this case the two effects are mutually offsetting and the nash equilibrium is efficient when pollution is at least partially transboundary there also arises the usual transboundary externality and this reinforces the negative net strategic effect giving rise to equilibrium taxes that are lower than what is globally efficient

political internalization of economic externalities and environmental policy abstract this paper derives the characteristics of endogenous environmental policy in a common agency model of politics and proceeds to show that competition between lobby groups is an important source of internalization of economic externalities our analysis generalizes bhagwati s principle of targeting to the case of distorted political markets moreover we show that the politically optimal structure of environmental taxes incorporates a pigouvian adjustment however since lobby groups care about the distribution of income as well as about efficiency the equilibrium structure of taxes differs considerably from the pigouvian rule

competition in regional environmental policies when plant locations are endogenous abstract a two region model is presented in which an imperfectly competitive firm produces a good with increasing returns at the plant level production of the good causes local pollution the firm decides whether to maintain plants in both regions serve both regions from a single plant or shut down if the disutility of pollution is high enough the two regions will compete by increasing their environmental taxes standards until the polluting firm is driven from the market alternatively if the disutility from pollution is not as great the regions will usually compete by undercutting each other s pollution tax rates

on environmental federalism and direct emission control abstract a theoretical exception to the race to the bottom contends that if decentralized environmental policy is comprised of direct controls on each firm emissions standards are set too high when compared to a centralized optimum herein we examine potential distortions in decentralized decision making by reconciling two recent views of direct environmental controls we show that differences in direct control policy can arise from differences in the number of symmetric jurisdictions in an economy our results suggest the race is on once the number of jurisdictions competing for a fixed number of firms increase we see the race is off when few jurisdictions can exploit their form of environmental market power

the voluntary provision of a pure public good the case of reduced cfc emissions and the montreal protocol abstract this paper applies the theory of the voluntary provision of a pure public good to the behavior of nations to curb chlorofluorocarbon cfc emissions during the late 1980s by devising an empirical test we determine that these cutbacks in emissions are consistent with nash behavior when taste parameters are controlled the relationship between emission cutbacks and national income is nearly linear as implied by the theory if the sample is purged of potential outliers then the linear relationship results a significant taste parameter is the extent of political and civil freedoms while a marginally significant parameter is geophysical position in terms of latitude

child labor and schooling responses to anticipated income in south africa abstract forward looking unconstrained households make child labor and schooling decisions considering their permanent income and weighing the relative returns to child time in various potential activities the timing of anticipated changes in income should have no effect on child labor and schooling in a setting where households can borrow against permanent income however this study documents large increases in schooling attendance and declines in total hours worked when black south african families become eligible for fully anticipatable social pension income as an explanation the data are most consistent with liquidity constraints for black elder males forcing rural families into less schooling for boys than they would choose absent the constraint perhaps because of schooling costs

oil shocks and financial systemic stress international evidence abstract by conducting a structural var analysis on the financial systemic stress in 20 countries this paper provides international evidence that oil structural shocks impact not only stress in individual financial markets but also their connectedness the oil structural shocks explain a large fraction of the variation in the connectedness among various financial markets the effect of oil structural shocks on financial systemic stress is largely dependent on the origins of oil price changes and a country s net oil export position in most oil importing economies financial systemic stress is negatively impacted by supply and aggregate demand shocks and positively impacted by oil market specific demand shocks opposite patterns are detected in oil exporting economies the effects of the spillovers are asymmetrically related with market conditions during normal periods more risks are spilled over from the oil market to financial systems but during financial crises the opposite occurs in periods of financial crises and oil price collapses there is noticeable contagion between the oil market and financial systems

harmonization and optimal environmental policy in a federal system with asymmetric information abstract should environmental policy be set at the federal level to counter incentives for environmental dumping when states act non cooperatively assuming that environmental damage costs are known only by state governments i ask whether this asymmetry of information could rationalize a federal government harmonizing environmental policies across states i show that asymmetric information narrows the difference in environmental policies across states relative to full information but does not justify harmonization the welfare loss from harmonization rises sharply with the variance in damage costs across states and can erode the benefit of setting policy at the federal level to counter environmental dumping

stoking the fires co2 emissions and economic growth abstract we examine the relationship between economic development and carbon dioxide emissions a greenhouse gas central to global warming predictions estimates derived from global panel data suggest a diminishing marginal propensity to emit mpe carbon dioxide as gdp per capita rises despite this global carbon dioxide emissions growth will continue at 1 8 percent per annum for the foreseeable future a result that is not sensitive to average output growth instead emissions growth continues because output and population will grow most rapidly in lower income nations with high mpes this latter feature emphasizes the distributional consequences of policies to reduce emissions

crowding out of private support to the elderly evidence from a demogrant in mexico abstract to examine whether private support dampens or reinforces the impact of redistributive policies this paper estimates the effect of an exogenous increase in the income of the elderly caused by a recent demogrant in mexico on the amount of private transfers they receive my instrumental variables strategy overcomes the endogeneity of income that typically contaminates estimates and unlike related studies that use natural or policy experiments in reduced form estimations it yields evidence of a positive bias this suggests that an unobservable characteristic is positively correlated both with income and private transfer receipt and that treating income as exogenous could lead to an underestimation of the crowding out effect in contrast my preferred estimates are negative significant and not far from minus one implying an almost complete crowding out my findings suggest that private transfers could neutralize the changes in the public transfers for the elderly

commodity trade and the carry trade a tale of two countries persistent interest rate differentials account for much of the currency carry trade profitability commodity currencies offer high interest rates on average while countries that export finished goods tend to have low interest rates we develop a general equilibrium model of international trade and currency pricing where countries have an advantage in producing either basic inputs or final goods in the model domestic production insulates commodity producing countries from global productivity shocks forcing final good producers to absorb them commodity currency exchange rates and risk premia increase with productivity differentials and trade frictions these predictions are strongly supported in the data this article is protected by copyright all rights reserved

cross hauling of polluting factors abstract this paper analyzes the investment environment overlap using a two stage model of two jurisdictions capital exports are modeled as choice variables for capital owners who weigh income considerations against the effects of capital exports on the quality of their local environments and on environmental policy this framework reveals that capital owners have an incentive to cross haul polluting factors across jurisdictions when direct controls are used to regulate emissions and that this cross hauling induces policymakers to ratchet up environmental policies in both locations the importance of instrument type and commitment on environmental policy is also analyzed

the reaction of household consumption to predictable changes in social security taxes the key implication of rational expectations and the basic life cycle permanent income hypothesis that predictable changes in income have no effect on the growth rate of consumption expenditures is examined this implication is important for understanding the effectiveness and optimal timing of fiscal policy the causes and propagation of business cycles and the effects of income fluctuations on the growth rate of the economy using household level consumption data from the consumer expenditure survey whether expenditures on nondurable goods increase contemporaneously with predictable changes in social security tax withholding is tested it is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the social security tax system

borrowing constraints and progress through school evidence from peru this paper investigates the effect of borrowing constraints on the timing of human capital investment in a developing country by looking at how quickly children with different family backgrounds progress through the primary school system in peru the main findings are that children start withdrawing from school earlier as indicated by repetition of grades in households with lower income and durable good holdings and when children are more closely spaced behavior also differs as predicted between children from households that appear to be borrowing constrained and those that appear unconstrained copyright 1994 by mit press

can a small social pension promote labor force participation evidence from the colombia mayor program one of the primary motivations behind the establishment of noncontributory pension programs is to allow beneficiaries to retire from the labor force yet as with other unconditional cash transfer schemes their aggregate effects may be more complex using panel data and instrumental variable techniques this paper shows that the effect of one such program colombia mayor has been to raise the labor force participation of relatively younger male beneficiaries this increase occurred precisely in the occupations with characteristics that are likely to require some up front investment the paper concludes that the transfer effectively loosened the liquidity constraints to remaining in these occupations however no such effect is found among women or older beneficiaries

inter regional competition comparative advantage and environmental federalism in this paper we compare endogenous environmental policy setting with centralized and decentralized governments when regions have comparative advantages in different polluting goods we develop a two region two good model with inter regional environmental damages and perfect competition in product markets where both regions produce both goods despite positive spillovers of pollution across regions the model predicts that decentralization may lead to weaker or stricter environmental standards or taxes depending on the degree of regional comparative advantage and the extent of transboundary pollution this suggests that federalism can lead to either a race to the bottom or a race to the top without relying on inefficient lobbying efforts or capital competition resume concurrence inter regionale avantage comparatif et federalisme environnemental dans ce texte les auteurs comparent l appareil de definition de politique environnementale endogene pour des gouvernements centralises et decentralises quand les regions ont des avantages comparatifs dans la production de divers biens polluants on developpe un modele a deux regions et a deux biens operant dans un cadre ou existent 1 des effets de retombees inter regionales toxiques pour l environnement 2 concurrence parfaite dans les marches des produits et 3 ou les deux regions produisent les deux biens malgre les effets de pollution entre regions le modele predit que la decentralisation peut entrainer des standards et des taxes portant sur l environnement qui sont soit plus faibles ou plus forts selon le degre d avantage comparatif regional et la nature de la pollution transfrontiere on suggere que le federalisme peut conduire a une emulation soit vers le bas soit vers le haut sans avoir a avoir recours a des efforts de lobbying inefficaces ou a la concurrence pour le capital pour expliquer le resultat

what drives bitcoin s price crash risk abstract we examine the association of the bitcoin price crash risk with economic uncertainty and behavioral factors we show that economic uncertainty displays a negative and significant association with bitcoin price crash risk indicating that when economic uncertainty is high the crash risk of bitcoin is low we also find that behavioral factors have a weak association with bitcoin crash risk our results suggest that investors can hedge economic uncertainty by investing in bitcoin

do private transfers displace the benefits of public transfers evidence from south africa abstract this paper investigates whether government transfer programs displace or crowd out private support focusing on a large increase in state old age pensions in south africa using data spanning the period of the expansion we find that each rand of public pension income to the elderly leads to a 0 25 0 30 rand reduction in private transfers from children living away from home however despite the large increase in income there were no significant changes in migration labor supply or household composition we also show that evaluations of the distributional effects of the pension are overstated when crowding out is ignored

latin america s social policy challenge education social insurance redistribution abstract long regarded as a region beset by macroeconomic instability high inflation and excessive poverty and inequality latin america has undergone a major transformation over the last 20 years the region has seen improved macroeconomic management and substantial and sustained reductions in poverty and inequality in this paper we argue that social policy including human capital and education social insurance and redistribution need special attention if achievements of the last two decades are to be sustained and amplified starting in the mid 1990s many governments in the region introduced a variety of programs including noncontributory pensions and health insurance and cash transfers targeted to the poor social spending in latin america increased sharply these policies have been widely praised and we believe they have resulted in substantial improvements in the lives of the poor in the region however a more nuanced view shows some worrisome trends moving forward we believe it is nec

the effect of noncontributory pensions on saving in mexico this paper examines the effects of non contributory pension programs at the federal and state levels on mexican households saving patterns using micro data from the mexican income and expenditure survey the federal program by itself appears to reduce the saving rate of households whose oldest member is either 18 to 54 or 65 to 69 state programs by themselves have no significant effects on household saving rates in the smallest localities but in larger localities they may reduce the saving of households with members in their sixties the combination of both types of programs generally does not have statistically significant effects on households aggregate saving probably because each program seems to affect different population strata no significant effects are found for households whose oldest member is age eligible 70 and older within specific investment categories evidence is found of increases in human capital and in durable and financial goods for some age groups finally the paper provides evidence on household level labor supply responses

option prices implied price processes and stochastic volatility this paper characterizes all continuous price processes that are consistent with current option prices this extends derman and kani 1994 dupire 1994 1997 and rubinstein 1994 who only consider processes with deterministic volatility our characterization implies a volatility forecast that does not require a specific model only current option prices we show how arbitrary volatility processes can be adjusted to fit current option prices exactly just as interest rate processes can be adjusted to fit bond prices exactly the procedure works with many volatility models is fast to calibrate and can price exotic options efficiently using familiar lattice techniques

child health and household resources in south africa evidence from the old age pension program this paper presents nonparametric evidence on the effects of the expansion of the old age pension program in south africa on child health did this increase in household resources improve child health and nutrition does the gender of the recipient of the pension affect its impact the answers to these questions have very important policy implications there is evidence that inadequate nutrition during childhood and even in utero affects long term physical development as well as the development of cognitive skills this in turn affects productivity later in life see partha dasgupta 1993 john strauss and duncan thomas 1998 t paul schultz 1999 in the united states the evidence suggests that monetary transfers to the poor have very little impact on child welfare janet currie 1995 susan mayer 1997 however the effects of parental income and monetary transfers on child outcomes are likely to be of greater magnitude among poor households in developing countries the south african pension program provides an unusual opportunity to evaluate the possible effects of such a monetary transfer this paper exploits the rapid increase in the coverage and benefits of the old age pension program in south africa which took place in the early 1990 s anne case and angus deaton 1998 at the end of the apartheid era the government committed to achieving parity of benefits and eligibility requirements between whites and africans this was achieved mostly by increasing the benefits received by the africans in 1993 80 percent of african women above age 60 and 77 percent of african men above 65 received the pension the maximum benefit of 370 rands per month aproximately 3 per day was equal to half of the minimum wage and about twice the median income per capita in rural areas due to living arrangements inherited from the apartheid era close to onethird of african children under the age of 5 currently live with a pension recipient children who live with a pension recipient tend to come from relatively disadvantaged backgrounds as a consequence they tend to be smaller than other children their age to estimate the effect of receiving a pension on the anthropometric status of children this paper exploits the fact that height reflects accumulated investments in child nutrition the larger the proportion of her life during which a child is well nourished the taller she will be given her age due to the expansion of the program in the early 1990 s individuals of qualified age became more likely to receive a pension and the benefits became substantially larger thus children born after the expansion of the program are more likely to have spent a larger fraction of their lives wellnourished if they live with a pension recipient to the extent that the pension resulted in improved nutrition in this paper i present nonparametric evidence of the program s effect on nutrition based on this observation

a note on environmental federalism interpreting some contradictory results abstract this paper reconciles some conflicting interpretations of recent literature on interjurisdictional environmental regulatory competition 6 7 present a model in which competition to attract investment by lowering environmental standards leads to a pareto optimal equilibrium 3 and 4 describe a model in which such competition can result in a suboptimal nash equilibrium while it would be possible to draw opposite policy implications from the two models regarding the appropriate degree of environmental federalism such a conclusion would be incorrect this paper reconciles the different results by showing that they depend in large part on monopoly profits and tax exporting not the nature of the pollution externality or environmental federalism

locational choices of firms and decentralized environmental policy with various instruments abstract suppose there exists a federation with a given number of mobile firms generating waste emissions in the jurisdiction in which they locate this paper demonstrates that if jurisdictions use emission taxes or marketable emission rights to control pollution within their boundaries and distribute the revenues captured by these instruments in a socially efficient way firms locate efficiently taking their pollution externalities into account decentralized environmental policy relying on direct controls however prevents locational efficiency of mobile firms furthermore if jurisdictions are small decentralized environmental policy with emission taxes and marketable pollution rights also support an efficient environmental quality while a policy using direct controls sets too high emission standards

the effects of a non contributory pension program on labor force participation the case of 70 y mas in mexico abstractwe estimate the effect of 70 y mas an age conditioned cash transfer program for individuals age 70 and older in rural mexico on the labor force participation of beneficiaries and of younger individuals who live with them using data from the 2010 mexican census we exploit the age and locality population thresholds to identify the effects of the program which at the time operated only in localities with less than 30 000 inhabitants we find that the program reduces the labor force participation of elderly men particularly those who live alone and who are relatively poor but has a much weaker effect on that of elderly women the program has no statistically significant effect on the labor force participation of either prime age men or women who live with potential beneficiaries and it has a negative and significant effect on the labor force participation of boys age 12 17 particularly those in the lowest wealth quintiles but not on that of same age girls these results suggest that the prog

public policy and extended families evidence from pensions in south africa how are resources allocated within extended families in developing economies this question is investigated using a unique social experiment the south african pension program under that program the elderly receive a cash transfer equal to roughly twice the per capita income of africans in south africa the study examines how this transfer affects the labor supply of prime age individuals living with these elderly in extended families it finds a sharp drop in the working hours of prime age individuals in these households when women turn 60 years old or men turn 65 the ages at which they become eligible for pensions it also finds that the drop in labor supply is much larger when the pensioner is a woman suggesting an imperfect pooling of resources the allocation of resources among prime age individuals depends strongly on their absolute age and gender as well as on their relative age the oldest son in the household reduces his working hours more than any other prime age household member

correlation risk and optimal portfolio choice we develop a new framework for multivariate intertemporal portfolio choice that allows us to derive optimal portfolio implications for economies in which the de gree of correlation across industries countries or asset classes is stochastic optimal portfolios include distinct hedging components against both stochastic volatility and correlation risk we find that the hedging demand is typically larger than in univari ate models and it includes an economically significant covariance hedging compo nent which tends to increase with the persistence of variance covariance shocks the strength of leverage effects the dimension of the investment opportunity set and the presence of portfolio constraints this paper develops a new multivariate modeling framework for intertempo ral portfolio choice under a stochastic variance covariance matrix we consider an incomplete market economy in which stochastic volatilities and stochastic correlations follow a multivariate diffusion process in this setting volatili ties and correlations are conditionally correlated with returns and optimal portfolio strategies include distinct hedging components against volatility and correlation risk we solve the optimal portfolio problem and provide simple closed form solutions that allow us to study the volatility and covariance hedg ing demands in realistic asset allocation settings we document the importance of modeling the multivariate nature of second moments especially in the con text of optimal asset allocation and find that the optimal hedging demand can be significantly different from the one implied by more common models with constant correlations or single factor stochastic volatility an important thread within the asset pricing literature has documented the characteristics of the time variation in the covariance matrix of asset

a theory of dissimilarity between stochastic discount factors this paper proposes a measure of dissimilarity between stochastic discount factors sdfs in different economies the sdfs are made comparable using the respective bond prices as the numeraire the

trading rules and the environment does equal treatment lead to a cleaner world abstract in this paper we consider a three stage game in the context of a competing exporters model to compare and contrast the effects of discriminatory and uniform most favored nation mfn tariffs on countries choice over environmental standards for varying degrees of pollution spillovers because of the presence of punishment effects and stronger own and cross tariff effects we find that discrimination yields higher standards than mfn and free trade independently of the extent of pollution spillovers when pollution is local and incentives to free ride on other countries abatement efforts are weak we show however that welfare is larger under mfn than under discrimination in a dynamic setting we consider the impact of symmetric and asymmetric treatments on the sustainability of an international environmental agreement iea and obtain that multilateral cooperation is easier to sustain under discrimination than under mfn or free trade

testing the neoclassical model of family labor supply and fertility the mcelroy horney nash bargaining model of family demand behavior relaxes the restriction that nonearned income of husband and wife has the identical effect on family labor supply and commodity demands this restriction of the neoclassical model offamily behavior is tested for the determination of husband and wife labor supply andfertility based on the 1981 socioeconomic survey of thailand the neoclassical restriction is rejected for female labor supply andfertility another unexplored limitation offamily demand studies due to the sample self selection of intact marriages is empirically treated through alternative estimation strategies in this case a more sharply focused theory of marital behavior is needed to identify family demand models

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

the provision of local public goods and factors in the presence of firm and household mobility abstract this paper studies the efficiency properties of allocations when firms and households are mobile and when local governments provide local public goods and local public factors the analysis differentiates between immobile land owners and perfectly mobile workers and concludes that an efficient allocation is obtained if there is no outflow of land rents to absentee owners if rents flow out only local public goods are supplied in accordance with the samuelson rule the provision of local public factors is inefficiently low however and jurisdictions tax mobile firms and mobile households inefficiently high in order to restrict the outflow of rents an optimal intervention scheme is derived in this case we also analyze the distortions that result when the non availability of local head taxes makes it impossible to internalize crowding costs

who benefits from public old age pensions evidence from a targeted program abstract given the aging of the population policies relating to the design and reform of public pension programs are prominent in policy debates for many developing countries a major concern centers around the possible displacement of traditional family based support by public programs one challenge in estimating this displacement or crowding out is the endogeneity of social security benefits the incidence and size of benefits may be correlated with unobserved determinants of private transfers especially if benefits are means tested using two rich data sets this article explores the impact of the taiwanese farmers pension program fpp on recipients and their noncohabiting adult children the fpp is targeted at elderly farmers and has relatively clean exogenous rules for eligibility that allow the endogeneity problem to be addressed estimates from multiple identification strategies consistently imply that 1 dollar of pension crowds out 30 39 cents of private transfers received by the elderly

pensions and retirement evidence from union army veterans i investigate the factors that fostered rising retirement rates prior to social security and most private sector pensions by estimating the income effect of the first major pension program in the united sates that covering union army veterans the elasticity of nonparticipation with respect to union army pension income was 0 73 the findings suggest that secularly rising income explains a substantial part of increased retirement rates comparisons with elasticities of nonparticipation with respect to social security income suggest that the elasticity of labor force nonparticipation may have decreased with time perhaps because of the increasing attractiveness of leisure

on interjurisdictional competition and environmental federalism herein we construct a competitive interjurisdictional model that reconciles two recent exceptions to the race to the bottom j publ econ 35 1988 333 354 j urban econ 37 1995 290 310 our results suggest that since environmental rents from local production are likely not captured 100 percent by local residents devolved command and control environmental regulation is inefficient moreover faced with the reality of fiscal constraints local governments adopt property tax structures that serve to compound inefficiencies within such a second best setting if a jurisdiction underprovides non environmental public goods and jurisdictional capital productivity and emissions are strong complements a race to the bottom equilibrium is supported

country size currency unions and international asset returns differences in real interest rates across developed economies are puzzlingly large and persistent i propose a simple explanation bonds issued in the currencies of larger economies are expensive because they insure against shocks that affect a larger fraction of the world economy i show that indeed differences in the size of economies explain a large fraction of the cross sectional variation in currency returns the data also support additional implications of the model the introduction of a currency union lowers interest rates in participating countries and stocks in the nontraded sector of larger economies pay lower expected returns

college entry by blacks since 1970 the role of college costs family background and the returns to education college enrollment of black 18 19 year old high school graduates declined from 1980 through 1984 and then rebounded after 1984 this paper presents data from a time series of cross sections of 18 19 year old youths from 1973 through 1988 to test the role of family background direct college costs local economic conditions and returns to college in driving these trends the evidence suggests that on the one hand increases in direct college costs were driving enrollment rates downward throughout the eighties on the other hand dramatic increases in average parental education for black youths exerted upward pressure on college enrollment by blacks particularly in the latter half of the decade the net effect of these two factors contributed to the pattern of decline and recovery observed during the eighties