efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

a liquidity based model of security design we consider the problem of the design and sale of a security backed by specified assets given access to higher return investments the issuer has an incentive to raise capital by securitizing part of these assets at the time the security is issued the issuer s or underwriter s private information regarding the payoff of the security may cause illiquidity in the form of a downward sloping demand curve for the security the severity of this illiquidity depends upon the sensitivity of the value of the issued security to the issuer s private information thus the security design problem involves a tradeoff between the retention cost of holding cash flows not included in the security design and the liquidity cost of including the cash flows and making the security design more sensitive to the issuer s private information we characterize the optimal security design in several cases we also demonstrate circumstances under which standard debt is optimal and show that the riskiness of the debt is increasing in the issuer s retention costs for assets

the effect of food stamps on labor supply a bivariate selection model abstract although there is a large literature on the effects of u s transfer programs on labor supply this is the first such study of the food stamp program we model the nonlinearity and nonconvexity of the budget constraint and use maximum likelihood methods to estimate hours of work functions for female heads of household the largest recipient group in the program we also model the joint response to afdc and food stamps and we account for the existence of a significant number of eligible households who do not participate in the programs a three equation bivariate selection model is estimated on a sample of eligible households with maximum likelihood

when is reputation bad abstract in traditional reputation models the ability to build a reputation is good for the long run player in ely j valimaki j 2003 bad reputation naj econ 4 2 http www najecon org v4 htm quart j econ 118 2003 785 814 ely and valimaki give an example in which reputation is unambiguously bad this paper characterizes a class of games in which that insight holds the key to bad reputation is that participation is optional for the short run players and that every action of the long run player that makes the short run players want to participate has a chance of being interpreted as a signal that the long run player is bad we allow a broad set of commitment types allowing many types including the stackelberg type used to prove positive results on reputation although reputation need not be bad if the probability of the stackelberg type is too high the relative probability of the stackelberg type can be high when all commitment types are unlikely

contractual solutions to the hold up problem this paper considers a general version of the hold up problem where n agents first make relation specific investments and then must agree on some collective action it is shown that first best solutions exist under a variety of different assumptions about the nature of information asymmetries

why do low income households not use food stamps evidence from an experiment this paper explores why many low income households do not participate in the food stamp program by analyzing detailed income and asset data from a sample of low income households we find that many households that appear to be eligible for food stamps in fact are not eligible by conducting an experiment designed to investigate the role of information on participation in the food stamp program we observe that ignorance about the program contributes to nonparticipation however there is evidence that knowledge about the program is endogenous households generally avail themselves of information about the program when the anticipated benefits of doing so are large

investments holdup and the form of market contracts the authors analyze incomplete contracts to induce efficient investment with exogenous switching costs fixed price contracts are efficient generate some rigidity in prices are renegotiated intermittently by possibly small amounts and when inflation is positive generate asymmetric responses to shocks all consistent with evidence on prices and wages with two sided specific investments efficiency requires prices to have sufficient escalator clauses to avoid renegotiation as observed in many long term contracts a third case with one sided specific investments can generate take or pay contracts and explain why firms sometimes pay for specific investments that appear to benefit employees directly

factors determining participation of the elderly in supplemental security the same low participation rates which plague many welfare programs have been observed among the elderly eligible for supplemental security income ssi a number of hypotheses have been offered to explain the low enrollment but none has attracted universal acceptance in this paper i use the survey of income and program participation sipp to examine the participation of the elderly in ssi because of the high quality of the data i am able to determine eligibility more accurately than in most previous studies in this sample only 56 percent of those whom i determine to be eligible for ssi are presently receiving benefits i model the decision to participate as a probit equation but modify the likelihood function to account for measurement error in the expected benefit the results indicate that participation is primarily determined by the financial situation of the eligible individuals although all those eligible for ssi are poor those with little in the way of other resources are significantly more likely to participate this finding differs from widespread beliefs that eligible individuals are discouraged by the difficulty of the application process or that many are uninformed about the program

information and participation in social programs participation in social programs such as clubs and other social organizations results from a process in which an agent learns about the requirements benefits and likelihood of acceptance related to a program applies to be a participant and finally is accepted or rejected we propose a model of this participation process and provide an application of the model using data from a social program in mexico our empirical analysis illustrates that decision at each stage of the process are responsive to expectations about the decisions and outcomes at the subsequent stages and that knowledge about the program can have a significant impact on participation outcomes

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

renegotiation design with unverifiable information this paper considers a buyer seller relationship with observable but unverifiable investments and or random utility parameters in such situations it is known that contract renegotiation may prevent the implementation of first best outcomes in this paper we show however that efficient investments and optimal risk sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process specifically we focus on the following two features of renegotiation design first default options in case renegotiation breaks down second the allocation of all bargaining power to either contracting party moreover we show that these two features can be obtained in standard rubinstein bargaining games through contractual provisions such as specific performance clauses and penalties for delay or equivalently financial hostages refundable without interest

transfers in cash and in kind theory meets the data we review theoretical explanations for in kind transfers in light of the limited empirical evidence after reviewing the traditional paternalistic arguments we consider explanations based on imperfect information and self targeting we then discuss the large literature on in kind programs as a way of improving the efficiency of the tax system and a range of other possible explanations including the samaritan s dilemma pecuniary effects credit constraints asymmetric information amongst agents and political economy considerations our reading of the evidence suggests that paternalism and interdependent preferences are leading overall explanations for the existence of in kind transfer programs but that some of the other arguments may apply to specific cases political economy considerations must also be part of the story

if at first you don t succeed applying for and staying on the supplemental nutrition assistance program we examine households applications to and participation in the supplemental nutrition assistance program using administrative records from south carolina we model application resolutions with multinomial logit mnl specifications where the possible outcomes are acceptance denial due to income ineligibility denial due to a failure to provide sufficient information and denial due to other reasons for cases with successful applications we model the durations of participation spells using competing risk hazard specifications that distinguish among exits that result from missed recertifications financial ineligibility incomplete or missing information and other reasons the application and hazard outcomes depend on past programme behaviour and observed characteristics the results indicate that a household s application and participation history affect its subsequent application success and programme tenure

reputation for quality and adverse selection abstract we analyze a dynamic market with a seller who can make a one time investment that affects the returns of tradable assets the potential buyers of the assets cannot observe the seller s investment prior to the trade or verify it in any way after the trade the market faces two types of inefficiency the ex ante inefficiency i e the seller s moral hazard problem and the ex post inefficiency i e inefficient ex post allocations due to the adverse selection problem we analyze how the observability of information by future buyers through which the seller builds a reputation affects the two types of inefficiency as well as the interplay between them

improving takeup of health insurance program a social experiment in france this paper is based on a randomised social experiment conducted in order to understand the low take up rate of a complementary health insurance voucher program for the poorest in france the aide complementaire sante acs we explore two of the main hypotheses put forward to explain low enrolment a lack of information about the program and a voucher amount considered to be too low a sample of eligible individuals living in an urban area in northern france were randomly split into three groups a control group who benefited from the standard level of financial aid a group benefiting from an increase in the value of the voucher and a third group benefiting from the same increase along with an invitation to an information meeting regarding acs we show that the voucher increase has a small but statistically significant effect on acs take up the invitation to the meeting appears to cancel out the positive effect of the voucher increase using an instrumental variable model to control for potential selection bias we find ambiguous evidence of the meeting attendance on acs take up this study confirms the difficulties that are faced in increasing the health insurance coverage of poor populations via subsidy programs

psychological frictions and the incomplete take up of social benefits evidence from an irs field experiment we address the role of psychological frictions in the incomplete take up of eitc benefits with an irs field experiment we specifically assess the influence of program confusion informational complexity and stigma by evaluating response to experimental mailings distributed to 35 050 tax filers who failed to claim 26 million despite an initial notice while the mere receipt of the mailing simplification and the heightened salience of benefits led to substantial additional claiming attempts to reduce perceived costs of stigma application and audits did not the study and accompanying surveys suggests that low program awareness understanding and informational complexity contribute to the puzzle of low take up jel c93 d03 h24 m38

the impact of unemployment insurance benefit levels on recipiency this article studies the effect of unemployment insurance benefit levels on recipiency increasing benefit levels as measured by the fraction of weekly earnings of the lost job that they replace is found to significantly increase the probability of unemployment insurance recipiency among the eligible there is some evidence however that the effect is smaller at high replacement rates cost increases resulting from take up responses are found to be substantial for increases in the state s maximum benefit amount and for increases in the weekly benefit amount in low replacement rate states

a meta analysis of the effects of remittances on household education expenditure abstract as a source of income remittances can be spent on consumption and investment the aim of this study is to quantify the effect of remittances on investment in education do remittances increase household education expenditure to answer this question we apply meta regression analysis to 1343 estimates of this effect drawn from 73 studies covering 30 countries our findings confirm the importance of economic resources to educational choices when the evidence base is corrected for sample selection reverse causality and research design differences the incidence of international remittances increases education expenditure by about 35 in most countries and by about 53 in latin america though remittances have no effect in eastern europe and east asia remittances from domestic migration have smaller effects on education expenditure than international remittances we find no differences in the effect between males and females

social image concerns and welfare take up abstract using a laboratory experiment we present first evidence that social image concerns causally reduce the take up of an individually beneficial transfer our design manipulates the informativeness of the take up decision by varying whether transfer eligibility is based on ability or luck and how the transfer is financed we find that subjects avoid the inference both of being low skilled ability stigma and of being willing to live off others free rider stigma using a placebo treatment we exclude other explanations for the observed stigma effects although stigma reduces take up elicitation of political preferences reveals that only a minority of taxpayers vote for the public transfer

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

public vs private offers in the market for lemons we study the role of observability in bargaining with correlated values short run buyers sequentially submit offers to one seller when previous offers are observable bargaining is likely to end up in an impasse in contrast when offers are hidden agreement is always reached although with delay

neighborhood effects in integrated social policies when potential beneficiaries share their knowledge and attitudes about a policy intervention their decision to participate and the effectiveness of both the policy and its evaluation may be influenced this matters most notably in integrated social policies with several components in this article spillover effects on take up behaviors are investigated in the context of a conditional cash transfer program in rural mexico these effects are identified using exogenous variations in the local frequency of beneficiaries generated by the program s randomized evaluation a higher treatment density in the areas surrounding the evaluation villages is found to increase the take up of scholarships and enrollment at the lower secondary level these cross village spillovers operate exclusively within households receiving another component of the program and do not carry over larger distances while several tests reject heterogeneities in impact due to spatial variations in program implementation evidence is found suggesting that spillovers stem partly from the sharing of information about the program among eligible households

meta analysis of economics research reporting guidelines meta regression analysis mra can provide objective and comprehensive summaries of economics research their use has grown rapidly over the last few decades to improve transparency and to raise the quality of mra the meta analysis of economics research network maer net has created the below reporting guidelines future meta analyses in economics will be expected to follow these guidelines or give valid reasons why a meta analysis must deviate from them

housing demand and neighborhood choice with housing vouchers abstract this paper presents a new model of household choice of neighborhood and housing consumption and uses it to predict the effects of alternative housing voucher policies on the choices of voucher recipients and their levels of wellbeing the model is estimated using household level data from housing voucher recipients in pittsburgh aggregate data on unsubsidized households and a large dataset of neighborhood characteristics including crime rates school quality racial composition and housing prices using the estimated model this study predicts effects of a variety of interesting reforms of the housing voucher program namely a more generous voucher subsidy subsidy amounts that vary with census tract housing prices instead of metropolitan area prices subsidies that are proportional to the market rent of the specific units and a requirement that voucher recipients live in a census tract where the poverty rate is less than 30

motivations to remit evidence from botswana in this article a theory of motivations to send remittances is described and tested with data from botswana altruism is one of the motivations tested and found to be an insufficient explanation for remittances among migrants in botswana a refinement of the model stipulates a modified altruism or enlightened self interest in this model the relationship between the migrant and family is tempered by an implicit understanding of mutual benefit the household strategy may be to encourage some members to migrate as a means of spreading risk and sharing gains the household strategy is similar to an insurance policy where migration is to places where market potential is high the risks incurred might be high the example is given of migration during a drought in botswana migrant remittances were greater in households with more cattle or households with more to lose drought alone was not statistically related to remittances increases in remittances were related to increased levels of education it is suggested that repayment was the motive for parents investment in migrants education migrants gains are identified as the potential for an inheritance the security of channeling investments through a trusted family member and security in having a home to return to it is pointed out that the altruism and family remittances from urban migration were strategies that bridged the simple dynamic of either urban development or rural development impacting on family welfare it is suggested that household models of economy adopt some measure to express the relationship of household wealth to remittances from urban migrants

renegotiation and optimality in agency contracts we analyse renegotiation in a hidden action principal agent model contract renegotiation offers are made by the agent a refinement is imposed on the principal s beliefs if precisely one action is optimal with respect to both the principal s and the agent s contracts the principal believes that that action has been taken with the refinement imposed perfect bayesian equilibrium allocations are identical to the second best in the classical principal agent model without renegotiation when renegotiation is led by the agent and when equilibria satisfy the refinement equilibrium allocations are ex ante efficient incentive contracting is a common mechanism for promoting ex ante investments and for avoiding ex post opportunistic behaviour in a long term or continuing economic relationship the classical principal agent model holmstrom 1979 grossman and hart 1983 is a natural framework for this class of problem in such a model a risk averse agent performs an action on behalf of a risk neutral principal the agent s action is unobservable and affects the principal s revenue in a random fashion the derivation and characterization of efficient compensation schemes have been the major focus in the principal agent literature generally the incentives to motivate a costly action from the agent take the form of profit sharing the agent s reward is made contingent on his random performance outcomes

reputation in bargaining and durable goods monopoly this paper analyzes durable goods monopoly in an infinite horizon discrete time game we prove that as the time interval between successive offers approaches zero all seller payoffs between zero and static monopoly profits are supported by subgame perfect equilibria this reverses a well known conjecture of coase alternatively one can interpret the model as a sequential bargaining game with one sided incomplete information in which an uninformed seller makes all the offers our folk theorem for seller payoffs equally applies to the set of sequential equilibria of this bargaining game

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

education and economic growth a meta regression analysis summary this paper surveys the literature which examines the effect of education on economic growth specifically we apply meta regression analysis to 57 studies with 989 estimates and show that there is substantial publication selection bias toward a positive impact of education on growth once we account for this the genuine growth effect of education is not homogeneous across studies but varies according to several factors specifically it is attributed to differences in education measurement and study characteristics mainly model specification as well as type of data used and the quality of research outlets where studies are published e g academic journals vs working papers

adverse selection in dynamic moral hazard this paper studies a multiperiod moral hazard problem under two assumptions i contracts are subject to renegotiations ii the agent s action has long term effects the action is also interpreted as a choice of characteristic or type renegotiation proof contracts that implement various actions including random ones are characterized under appropriate conditions the equilibrium involves the principal implementing a random action therefore the equilibrium has standard properties of adverse selection models

costly distortion of information in agency problems anecdotal evidence suggests that agents often spend resources distorting information transmitted to principals we present a model where costly information distortion emerges as equilibrium behavior the information structure we focus on is intermediate between and encompasses the cases of private information and public information the agent can falsify the privately observed state at some cost although the principal can design contracts that induce no falsification these may involve excessive iinformation rents falsification can be beneficial in spite of the waste of resources involved because it helps reduce information rents we examine how optimal contract and equilibrium payoffs change as the information structure ranges from private to public information

take up and targeting experimental evidence from snap this paper develops a framework for evaluating the welfare impact of various interventions designed to increase take up of social safety net programs in the presence of potential behavioral biases we calibrate the key parameters using a randomized field experiment in which 30 000 elderly individuals not enrolled in but likely eligible for the supplemental nutrition assistance program snap are either provided with information that they are likely eligible provided with this information and also offered assistance in applying or are in a status quo control group only 6 percent of the control group enrolls in snap over the next 9 months compared to 11 percent of the information only group and 18 percent of the information plus assistance group the individuals who apply or enroll in response to either intervention receive lower benefits and are less sick than the average enrollee in the control group the results are consistent with the existence of optimization frictions that are greater for needier individuals suggesting that the poor targeting properties of the interventions reduce their welfare gains

recent trends in insured and uninsured unemployment is there an explanation this paper explores the recent decline in the fraction of unemployed workers who receive unemployment insurance benefits using march current population surveys we compare the fraction who are potentially eligible for benefits with the fraction who receive them the decline in insured unemployment is almost entirely due to a decline in the early 1980s in the takeup rate for benefits we analyze the determinants of the takeup rate using both aggregated state level data and micro data at least half the decline is due to an increasing share of unemployment in states with lower takeup rates

international migration remittances and household investment evidence from philippine migrants exchange rate shocks how do households respond to overseas members economic shocks overseas filipinos in dozens of countries experienced sudden heterogeneous changes in exchange rates during the 1997 asian financial crisis appreciation of a migrant s currency against the philippine peso leads to increases in household remittances from overseas the estimated elasticity of philippine peso remittances with respect to the exchange rate is 0 60 positive migrant shocks lead to enhanced human capital accumulation and entrepreneurship in origin households child schooling and educational expenditure rise while child labour falls households also work more hours in self employment and become more likely to start relatively capital intensive household enterprises

obstacles to takeup ecuador s conditional cash transfer program the bono de desarrollo humano summary social assistance programs cannot help the poor if the poor do not enroll in them obstacles to the takeup of social assistance in industrialized countries include information costs compliance costs and psychological costs using qualitative field research and quantitative analysis of data from a nationwide survey in 2013 14 we explore the impact of these costs on the takeup of the bono de desarrollo humano bdh a us 50 monthly cash transfer in ecuador drawing on interviews with ecuadorians whose households are eligible for the bdh as well as on findings about social assistance takeup in industrialized countries we hypothesize that particular information costs compliance costs and psychological costs along with program design and household poverty will influence the probability of bdh takeup we then use probit regression to estimate the statistical effect of these factors on the probability of takeup using data on 11 449 bdh eligible households sampled by ecuador s 2013 14 encuesta condiciones de vida living standards measurement survey controlling for program design and household poverty we find that compliance costs and psychological costs each have a significant deterrent effect on bdh takeup the purpose of social assistance is to help the poor but if social assistance is to achieve this goal the poor must actually receive it this study helps to identify the forces and circumstances that influence the takeup of an important social assistance program in a middle income latin american country

snap expansions and participation in government safety net programs this paper investigates the interactions between health and nutritional assistance programs such as medicaid snap wic and school lunch programs exploiting variation in snap eligibility across states and over time i find strong evidence of program interactions when a state moves from the federal rule to the most extensive snap eligibility rule enrollment in free school lunch and wic increases by 4 1 and 7 9 percentage points respectively i estimate that the federal government spends an additional 74 cents on the school lunch program and wic for each dollar spent on snap due to the expansion

waiting for news in the market for lemons econometrica vol 80 no 4 july 2012 1433 1504 waiting for news in the market for lemons b y b rendan d aley and b rett g reen 1 we study a dynamic setting in which stochastic information news about the value of a privately informed seller s asset is gradually revealed to a market of buyers we con struct an equilibrium that involves periods of no trade or market failure the no trade period ends in one of two ways either enough good news arrives restoring confidence and markets reopen or bad news arrives making buyers more pessimistic and forcing capitulation that is a partial sell off of low value assets conditions under which the equilibrium is unique are provided we analyze welfare and efficiency as they depend on the quality of the news higher quality news can lead to more inefficient outcomes our model encompasses settings with or without a standard static adverse selection problem in a dynamic setting with sufficiently informative news reservation values arise endogenously from the option to sell in the future and the two environments have the same equilibrium structure k eywords dynamic games adverse selection information economics signaling 1 introduction c onsider an entrepreneur who is interested in selling her company due to liquidity constraints naturally she is better informed than the market about her company s fundamentals she would like to sell yet there is no reason she is forced to do so on any given day nor can she commit to delaying trade with every passing day that she retains ownership she gains or loses the day s profit and maintains the option to sell the next day if trade is in fact delayed then the market may learn about the value of the firm by observing cash flows investments customer base and so forth herein lies the key innovation of this paper we introduce an exogenous public information process news into a model of such settings we then study the implications for trading behavior efficiency and welfare we model the environment as a game played in continuous time where a risk neutral seller faces a competitive market there is common knowledge of gains from trade but the seller is privately informed about the asset s value i e her type which may be either high or low at each point in time prior to trade the seller receives offers from the market if an offer is accepted then the trade is consummated and the game ends if all offers are rejected then the seller consumes the type dependent flow payoff endowed by the asset contemporaneously information about the seller s type is publicly revealed we are grateful to a co editor and three anonymous referees for helpful comments and sug gestions we are greatly indebted to jeremy bulow michael harrison and andrzej skrzypacz for useful conversations comments and encouragement special thanks also to peter demarzo johannes horner ilan kremer jon levin paul milgrom yuliy sannikov bob wilson and sem inar participants at chicago chicago gsb duke mit kellogg nyu penn stanford olin wharton unc yale and the 7th annual duke northwestern texas io theory conference 2012 the econometric society doi 10 3982 ecta9278

unobservable investment and the hold up problem we study a two person bargaining problem in which the buyer may invest and increase his valuation of the object before bargaining we show that if all offers are made by the seller and the time between offers is small then the buyer invests efficiently and the seller extracts all of the surplus hence bargaining with frequently repeated offers remedies the hold up problem even when the agent who makes the relation specific investment has no bargaining power and contracting is not possible we consider alternative formulations with uncertain gains from trade or two sided investment

investment and screening under asymmetric endogenous information this article provides an analysis of screening contracts in a complete but imperfect information environment as opposed to the usual incomplete information bayesian environment an agent faces a hold up situation while making a cost reducing specific investment that is not observed by the principal to prevent the hold up the agent randomizes his investment strategy and the principal offers a screening contract the informational rents provided by the equilibrium contract finance the investment for a large class of cost functions the randomization is such that the marginal surplus follows a power distribution

dynamic market for lemons with endogenous quality choice by the seller we analyze a dynamic market for lemons in which the quality of the good is endogenously determined by the seller potential buyers sequentially submit offers to one seller the seller can make an investment that determines the quality of the item at the beginning of the game which is unobservable to buyers at the interim stage of the game the information and payoff structures are the same as in the market for lemons our main result is that the possibility of trade does not create any efficiency gain if i the common discounting is low and ii the static incentive constraints preclude the mutually agreeable ex ante contract under which the trade happens with probability one our result does not depend on whether the offers by buyers are private or public

information and bargaining in the hold up problem this article incorporates an information structure with partial information into the canonical hold up problem the optimal information structure balances the tradeoff between ex ante efficiency the information rent effect and ex post efficiency the bargaining disagreement effect with one shot bargaining it occurs at an intermediate level of information asymmetry when there is repeated bargaining it is attained with perfect asymmetry asymmetric information the parameter that is frequently ignored in the literature turns out to be an important welfare instrument for the hold up problem our results therefore provide a basis for institutional design regarding the optimal control of information flow

the power of bias in economics research we investigate two critical dimensions of the credibility of empirical economics research statistical power and bias we survey 159 empirical economics literatures that draw upon 64 076 estimates of economic parameters reported in more than 6 700 empirical studies half of the research areas have nearly 90 of their results under powered the median statistical power is 18 or less a simple weighted average of those reported results that are adequately powered power 80 reveals that nearly 80 of the reported effects in these empirical economics literatures are exaggerated typically by a factor of two and with one third inflated by a factor of four or more

repeated principal agent relationships with lending and borrowing abstract it is shown optimal long term contracts are strictly better than a series of unrelated short term contracts for two reasons long term contracts allow risk to be spread over time and the agent s intertemporal choices provide information about the unobservable random variable

efficient allocations with hidden income and hidden storage we consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources we provide a simple characterization of the unique efficient allocation of consumption in cases in which the rate of return on storage is sufficiently high or alternatively in which the worst possible outcome is sufficiently dire we show that unlike in environments without unobservable storage the symmetric efficient allocation of consumption is decentralizable through a competitive asset market in which individuals trade riskfree bonds among themselves in this paper we consider an environment in which individuals have random income and can accumulate assets through a storage technology their income realizations and their asset position are private information given these informational frictions we provide a simple characterization of the unique efficient allocation of consumption in cases in which the rate of return on storage is sufficiently high or alternatively in which the worst possible outcome is sufficiently dire we show that the symmetric efficient allocation of consumption is decentralizable through a competitive asset market in which individuals trade risk free bonds among themselves there is a large prior literature which examines the characteristics of efficient risksharing in dynamic settings in the presence of private information unlike our paper this literature generally finds that efficient allocations do not coincide with the equilibrium allocations of any economy with a competitive bond market see atkeson and lucas 1992 in particular the key difference between our paper and these preceding ones is that the earlier literature assumes either that agents cannot accumulate resources over time or that if they can this accumulation is observable in contrast we assume that both agents incomes and their stored resources are private information it is this combination of assumptions that leads to our result our findings are reminiscent of allen s 1985 he considers a dynamic principalagent relationship in which the agent is risk averse and has hidden stochastic income the

policy uptake as political behavior evidence from the affordable care act partisanship is a primary predictor of attitudes toward public policy however we do not yet know whether party similarly plays a role in shaping public policy behavior such as whether to apply for government benefits or take advantage of public services while existing research has identified numerous factors that increase policy uptake the role of politics has been almost entirely overlooked in this paper we examine the case of the affordable care act to assess whether policy uptake is not only about information and incentives but also about politics using longitudinal data we find that republicans have been less likely than democrats to enroll in an insurance plan through state or federal exchanges all else equal employing a large scale field experiment we then show that de emphasizing the role of government and highlighting the market s role can close this partisan gap

does education reduce income inequality a meta regression analysis this paper reexamines the effects of education on inequality through a comprehensive meta regression analysis of the extant empirical literature we find that education affects the two tails of the distribution of income education reduces the income share of top earners and increases the share of the bottom earners education has been particularly effective in reducing inequality in africa some of the results suggest that secondary schooling appears to have a stronger effect than primary schooling though this finding is not always robust the heterogeneity in reported estimates can be largely explained by differences in the specification of the econometric model and measure of inequality and education

does government spending affect income poverty a meta regression analysis summary this paper presents the results of a meta regression analysis of the relationship between government spending and income poverty with a focus on low and middle income countries through a comprehensive search and screening process we identify a total of 19 cross country econometric studies containing 169 estimates of this relationship we find that the size and direction of the estimated relationship are affected by a range of factors most notably the composition of the sample used for estimation the control variables included in the regression model and the type of government spending overall we find no clear evidence that higher government spending has played a significant role in reducing income poverty in low and middle income countries this is consistent with the view that fiscal policy plays a much more limited redistributive role in developing countries in comparison with oecd countries in addition we find that the relationship between government spending and poverty is on average less negative for countries in sub saharan africa and more negative for countries in eastern europe and central asia compared to other regions we also find that the relationship is less negative for government consumption spending in comparison with other sectors finally we find some evidence indicating the possibility of publication bias

networks or neighborhoods correlations in the use of publicly funded maternity care in california abstract this study focuses on network effects in the utilization of publicly funded prenatal care using vital statistics data from california for 1989 2000 networks are defined using 5 digit zip codes and a woman s racial or ethnic group like others we find evidence that the use of public programs is highly correlated within groups defined using race ethnicity and neighborhoods these correlations persist even when we control for many unobserved characteristics by including zip code year fixed effects and when we focus on the interaction between own group behavior and measures of the potential for contacts with other members of the group contact availability however the richness of our data allows us to go further and to conduct several tests of one important hypothesis about networks that the estimated effects represent information sharing within groups the results cast doubt on the idea that the observed correlations can be interpreted as evidence of information sharing in particular we find estimated effects to be as large or larger among women who have previously used the program as among first time users

unobserved investment endogenous quality and trade a seller can make investments that affect a tradable asset s future returns the potential buyer of the asset cannot observe the seller s investment prior to trade nor does he receive any signal of it nor can he verify it in anyway after trade despite this severe moral hazard problem this paper shows the seller will invest with positive probability in equilibrium and that trade will occur with positive probability the outcome of the game is sensitive to the distribution of bargaining power between the parties with a holdup problem existing if the buyer has the bargaining power a consequence of the holdup problem is surplus reducing distortions in investment level perhaps counterintuitively in many situations this distortion involves an increase in the expected amount invested vis a vis the situation without holdup

renegotiation of sales contracts this paper studies moral hazard contracts that may be renegotiated after an agent chooses an unobservable effort unlike in previous models a contract here contains only one compensation scheme and the agent has all the bargaining power in the renegotiation stage using a relatively weak forward induction refinement all equilibria are shown tb be second best efficient renegotiation occurs in every equilibrium if the effort set is rich the only equilibrium initial contract is a sales contract i e a scheme which sells the project to the agent this captures the idea that a party the principal who has an inherently weak renegotiation position will sometimes insist on a simple initial contract

on delay in bargaining with one sided uncertainty recently attention has been given to a model of two person bargaining in which the parties alternate making offers and there is uncertainty about the valuation of one party the purpose of the analysis has been to identify delay to agreement with a screening process where agents with relatively lower valuations distinguish themselves by waiting longer to settle we point out a fundamental difficulty with this program by demonstrating that the assumptions used in the literature allow for delay only in so far as the time between offers is significant

remittances household expenditure and investment in guatemala the author uses a large household data set from guatemala to analyze how the receipt of internal remittances from guatemala and international remittances from the united states affects the marginal spending behavior of households on various consumption and investment goods contrary to other studies the author finds that households receiving remittances actually spend less at the margin on consumption food and consumer goods and durables than do households receiving no remittances instead of spending on consumption households receiving remittances tend to spend more on investment goods like education health and housing the analysis shows that a large amount of remittance money goes into education at the margin households receiving internal and international remittances spend 45 and 58 percent more respectively on education than do households with no remittances these increased expenditures on education represent investment in human capital like other studies the author finds that remittance receiving households spend more at the margin on housing these increased expenditures on housing represent a type of investment for the migrant as well as a means for boosting local economic development by creating new income and employment opportunities for skilled and unskilled workers

when do women use aid to families with dependent children and food stamps the dynamics of eligibility versus participation this paper investigates dynamic patterns in the relationship between eligibility and participation in the aid to families with dependent children afdc and food stamp programs using monthly longitudinal data from the survey of income and program participation the results indicate that there are many relatively short eligibility spells that do not result in program participation and end with increases in income participation is most likely to occur among women with lower current and future earnings opportunities and is affected by locational and policy parameters those who elect to participate in these programs tend to start receiving benefits almost immediately upon becoming eligible a substantial number of women exit these programs before their eligibility ends among at least some of these women it is likely that unreported changes in income are occurring in 1989 if all eligible single parent families had participated in afdc and food stamps benefit payments in these programs would have been 13 5 billion higher