consumer debt stress changes in household debt and the great recession this research examines psychological debt stress and changes in household debt holdings for consumers during the great recession using data from a monthly national u s household survey covering the period 2006 through 2012 debt stress measures in the population rose by over 50 at the bottom of the recession determining relative stress for eight different types of household debt we find that noncollateralized debts are more stressful than collateralized debt and that during the recession the composition of debt shifted away from collateralized debt and toward noncollateralized our empirical results show that women and hispanics experienced higher measured levels of stress jel d12 d18 i introduction in the latter part of the twentieth century household debt began to rise to high levels in the united states accompanying this there was an upsurge in reports concerning psychological debt stress coming from financial and family counselors health care professionals employers and others these reports pointed to a wide range of health family and job problems for americans arising from this increase in debt after 2007 events in the housing market marked the onset of the great recession and financial crisis many households faced declining home prices and foreclosure as well as changes in other asset values and incomes there was a general tightening of credit and changes in some lending practices by banks here we seek to add additional understanding to changes in consumer debt stress 1 during the great recession by relating them to changes in eight different types of debt holdings during this period we use data covering 2006 through 2012 from the consumer finance monthly survey cfm a national random telephone survey of household finances taken on a monthly basis from a cross

relative versus absolute income joy of winning and gender brain imaging evidence in this paper we study the role of absolute versus relative income using functional magnetic resonance imaging fmri while being scanned in two adjacent mri scanners pairs of subjects had to simultaneously perform a simple estimation task that entailed monetary rewards for correct answers we show that a variation in the comparison subject s payment affects blood oxygenation level dependent bold responses in the ventral striatum this brain region is engaged in the prediction and registration of primary rewards such as food delivery as well as more abstract forms of rewards like money in particular we show that activation in the ventral striatum increases in absolute income and for a given level of absolute income decreases in lower relative income using a male and a female sample allows us to study whether the perception of relative and absolute incomes is gender specific we find that the effects of absolute and relative incomes are strong and relatively similar for both genders finally we analyze the importance of joy of winning i e the impact of outperforming another subject our results suggest that the mere fact of outperforming the other subject positively affects reward related brain areas

approximate factor structures interpretations and implications for empirical tests this paper provides some new insights about approximate factor structures as defined by chamberlain and rothschild 2 and their implications for empirical tests first we show that any economy that satisfies an approximate factor structure can be transformed in a manner that does not alter the characteristics of investor portfolios into an economy that satisfies an exact factor structure as defined by ross 9 second we show that principal components analysis represents just one of many methods of forming groups of well diversified portfolios with no idiosyncratic risk in large samples correct factor loadings will be obtained by regressing security returns on any group of these portfolios our interpretations of the chamberlain and rothschild results also provide additional insights into the testability of the arbitrage pricing theory we show that securities cannot be repackaged to hide factors in the manner suggested by shanken 10 without the variance of some of the repackaged securities approaching infinity in large economies

adaptation to poverty in long run panel data we consider the link between poverty and subjective well being and focus in particular on potential adaptation to poverty we use panel data on almost 45 800 individuals living in germany from 1992 to 2011 to show first that life satisfaction falls with both the incidence and intensity of contemporaneous poverty we then reveal that there is little evidence of adaptation within a poverty spell poverty starts bad and stays bad in terms of subjective well being we cannot identify any causes of poverty entry which are unambiguously associated with adaptation to poverty

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

measurement error and misclassification a comparison of survey and administrative data we provide both a theoretical and empirical analysis of the relation between administrative and survey data by distinguishing between different sources of deviations between survey and administrative data we are able to reproduce several stylized facts we illustrate the implications of different error sources for estimation in simple econometric models and find potentially very substantial biases this article shows the sensitivity of some findings in the literature for the assumption that administrative data represent the truth in particular the common finding of substantial mean reversion in survey data largely goes away once we allow for a richer error structure

heterogeneous risk loss aversion in complete information all pay auctions we extend previous theoretical work on n player complete information all pay auctions to incorporate heterogeneous risk and loss averse utility functions we provide sufficient and necessary conditions for the existence of equilibria with a given set of active players with any strictly increasing utility functions and characterize the players equilibrium mixed strategies assuming that players can be ordered by their risk aversion player a is more risk averse than player b if whenever player b prefers a certain payment over a given lottery so does player a we find that in equilibrium the more risk averse players either bid higher than the less risk averse players and win with higher ex ante probability or they drop out furthermore while each player s expected bid decreases with the other players risk aversion her expected bid increases with her own risk aversion thus increasing a player s risk aversion creates two opposing effects on total expected bid a sufficient condition for the total expected bid to decrease with a player s risk aversion is that this player is relatively more risk averse compared to the rest of the players our findings have important implications for the literature on gender differences in competitiveness and for gender diversity in firms that use personnel contests for promotions

tax policy and aggregate demand management under catching up with the joneses this paper examines the role for tax policies in productivity shock driven economies with catching up with the joneses utility functions the optimal tax policy is shown to affect the economy countercyclically via procyclical taxes i e cooling down the economy with higher taxes when it is overheating in booms and stimulating the economy with lower taxes in recessions to keep consumption up thus models with catching up with the joneses utility functions call for traditional keynesian demand management policies but for rather unorthodox reasons

the causal effect of income on health evidence from german reunification we investigate whether there was a causal effect of income changes on the health satisfaction of east and west germans in the years following reunification our data source is the german socio economic panel gsoep between 1984 and 2002 and we fit a recently proposed fixed effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition we find evidence of a significant positive effect of income changes on health satisfaction but the quantitative size of this effect is small this is the case with respect to current income and a measure of permanent income

great expectations the subjective well being of rural urban migrants in china summary this paper is among the first to link the literatures on migration and on subjective well being in developing countries it poses the question why do rural urban migrant households settled in urban china have an average happiness score lower than rural households three basic hypotheses are examined migrants had false expectations about their future urban conditions or about their future urban aspirations or about their future selves estimated happiness functions and decomposition analyses based on a 2002 national household survey indicate that certain features of migrant conditions make for unhappiness and that their high aspirations in relation to achievement influenced by their new reference groups also make for unhappiness although the possibility of selection bias among migrants cannot be ruled out it is apparently difficult for migrants to form unbiased expectations about life in a new and different world

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

the costs of urban property crime this paper estimates the impact of recorded domestic property crime on property prices in the london area crimes in the criminal damage category have a significant negative impact on prices a one tenth standard deviation decrease in the local density of criminal damage adds 1 to the price of an average inner london property burglaries have no measurable impact on prices even after allowing for the potential dependence of burglary rates on unobserved property characteristics one explanation we offer here is that vandalism graffiti and other forms of criminal damage motivate fear of crime in the community and may be taken as signals or symptoms of community instability and neighbourhood deterioration in general

a lifecycle perspective of stock market performance and wellbeing we estimate the effect of stock market fluctuations on subjective wellbeing and mental health using australian survey data over the period 2001 2012 which includes the global financial crisis a particular innovation of the paper is the use of three satisfaction measures overall financial employment and the use of a stylised lifecycle investment model these features coupled with a robust identification strategy based on comparing survey respondents interviewed in the same quarter and location allow us to better understand individual reactions to stock market changes we find that stock market increases lead to a significant but modest improvements in life satisfaction and mental health this effect is driven by young and middle aged males and is stronger for those with direct exposure to the stock market for young cohorts the stock market index acts as a leading indicator of employment prospects whilst for older cohorts it acts directly on financial satisfaction

on measuring child costs with applications to poor countries the theoretical basis for measuring child costs is discussed and detailed consideration is given to two straightforward procedures for calculation engel s food share method and rothbarth s adult good method each of these methods embodies different definitions of child costs so that the same empirical evidence can generate quite different estimates depending on the method used it is shown that true costs are generally overstated by engel s method and understated by rothbarth s procedure although the latter unlike the former can provide a sensible starting point for cost measurement our estimates from sri lankan and indonesian data suggest that children cost their parents about 30 40 percent of what they spend on themselves

income related inequalities in mental health in great britain analysing the causes of health inequality over time using regression techniques this paper estimates the level of income related health inequality in gb in 1992 and 1998 inequality is decomposed to investigate which socio demographic factors are important contributors to health differences the paper includes a range of measured and subjective income variables to control for absolute income a relative deprivation measure is included to test the impact of income inequality on health inequality it is found that subjective financial status is a major determinant of ill health and makes a major contribution to income related inequalities in health relative deprivation is an important contributor for women but not for men

some results in the theory of arbitrage pricing this paper derives a stronger version of huberman s recent preference free pricing theorem this pricing result relates the expected return on an asset to its factor responses and the covariance structure of the residuals from a linear factor model it must characterize any infinite asset economy in which no arbitrage opportunities are present whether or not the factor model has uncorrelated residuals this result provides the intuition for the role of residual risk in the pricing model and eliminates some classes of arbitrage opportunities still present under huberman s bound some applications to empirical tests and performance measurement are also discussed the arbitrage pricing theory is one of several financial pricing models which attempts to explain the cross sectional variation in expected returns on assets in certain respects it is similar to the capital asset pricing model but there are both substantive and subtle differences one of the key advantages of the apt is that it derives a simple linear pricing relation approximating that in the capm without some of the latter s objectionable assumptions perhaps the key disadvantage of the apt is that it provides no clues as to what might be important factors nor as to how to interpret the factor premiums which appear in the pricing equation this paper serves several purposes after reviewing the linear factor model formulation in section i it derives in section ii a stronger version of huberman s 9 recent preference free pricing theorem this pricing result relates the expected return on an asset to its factor responses and the covariance structure of the residuals this relation must characterize any infinite asset economy in which no arbitrage opportunities are present whether or not a linear factor model with uncorrelated residuals is the appropriate returns generating mechanism section iii specializes this result by eliminating the effects of residual covariances and compares the results here to those of previous apt models when applied to the standard linear factor model with uncorrelated residuals this new pricing bound eliminates arbitrage opportunities which remain under huberman s bound this result also provides for the first time the intuition for the role of residual risk in the approximate pricing relation section v provides an interpretation of the factor premiums and gives a valid asset pricing model interpretation to the apt which is consistent with merton s

unpaid work and conformity why care we study the supply of unpaid eldercare in particular caring for parents in the uk focusing on both the division of care and caring tasks by gender and the effect of conformity to social norms in relation to caring we then investigate the effect of the amount of care on the well being of caregivers and whether agreeing with the care norm enhances their well being our results suggest that the eldercare reform neglects important aspects underlying the distribution of care hours and care tasks between caregivers and may potentially worsen intrahousehold inequality in earnings and well being in particular between men and women

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

consumption and happiness we examine the relationship between relative consumption and happiness using panel data for china an important developing country we find that consumption has a positive effect on happiness an

beliefs about whether spending implies wealth spending is influenced by many factors one that has received little attention is the meaning that people give to the act of spending spending money might imply that someone is relatively wealthy since they have money to spend or relatively poor since spending can deplete assets we show that people differ in the extent to which they believe that spending implies wealth siw beliefs we develop a scale to measure these beliefs and find that people who more strongly believe that siw spend their own money relatively lavishly and are on average more financially vulnerable we find correlational evidence for these relationships using objective financial transaction data including over 2 million transaction records from the bank accounts of over 2 000 users of a money management app as well as self reported financial well being we also find experimental evidence by manipulating siw beliefs and observing causal effects on spending intentions these results show how underlying beliefs about the link between spending and wealth play a role in consumption decisions and point to beliefs about the meaning of spending as a fruitful direction for further research

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

the relation between mean variance efficiency and arbitrage pricing the mean standard deviation diagram has proven to be a valuable tool for understanding equilibrium asset pricing theory first introduced by markowitz 1952 1959 and tobin 1958 the diagram helps students and researchers alike to develop intuition about the capital asset pricing model capm its properties are useful for analyzing the conditions under which the market portfolio is mean variance efficient and for linking the location of the market portfolio in the diagram with the validity of the capm in addition its simple geometry seems to be the critical inspiration for roll s 1977 argument that the capm cannot feasibly be tested because the market portfolio is unobservable and because of a mathematical equivalence between the individual return beta linearity relation and the market portfolio s mean variance efficiency p 129 recent research on equilibrium asset pricing both theoretical and empirical has tended to focus on multibeta pricing models especially the arbitrage pricing theory apt this paper will show that the simple intuition derived from the

volunteering and life or financial shocks does income and wealth matter volunteering is a dominant social force that signals a healthy state however although the literature on volunteering is extensive knowledge on how life s discontinuities life and financial shocks affect volunteering is limited because most studies work with static cross sectional data to reduce this shortcoming we use longitudinal data from australia hilda that track the same individuals over time to assess how individuals from different income and wealth groups respond to life and financial shocks with respect to volunteering although both income and wealth can act as buffers against life shocks by providing stability and reducing vulnerability which decreases the need to actually change behaviour patterns we observe more heterogeneity than expected and also stickiness at the lowest income levels response delays in post shock volunteering also suggest that volunteering habits may be driven and influenced by strong commitment and motivation that are not shattered by life or financial shocks in fact the amount of time spent volunteering tends to increase after negative income shocks and decrease after positive income shocks

a multivariate linear regression test for the arbitrage pricing theory a test for the arbitrage pricing theory which employs a multivariate linear regression model is developed given a sample of return premiums for a set of n assets which includes a subset of k linearly independent portfolios the k factor apt hypothesis is accepted if the intercept term is zero in the multivariate regression of the n k returns on the k portfolios the test may be carried out simply by using univariate multiple regression software the relation of this test to the concept of performance potential and sharpe s measure of performance is also discussed if the performance potential of the k portfolios is not significantly less than the performance potential of the complete set of n assets then the k factor apt hypothesis is accepted in roll and ross rr 10 an empirical investigation of the ross 11 arbitrage theory of pricing apt was carried out the central core of the apt as outlined in rr is that the return generating process for a population of n assets is a linear function of only a few say k k n systematic factors or components and as a consequence many portfolios are close substitutes the central conclusion of the apt is that the mean premium return vector lies in a k dimensional subspace spanned by the factor loadings the purpose of the empirical investigation as claimed by rr was to investigate the existence of the factors and their association with the risk premia as stressed by rr their methodology does not determine k but is designed to test the hypothesis that there exist several factors whose factor loadings together explain a significant portion of the variation in the mean premium returns the empirical results in rr however indicate the presence of three to four priced factors the first empirical test outlined by rr involves two steps using time series data the mean return premium vector is estimated and a factor analysis procedure is used to estimate the k factors and their loadings a complex weighted least squares procedure is then used to estimate the linear model relating the mean return premium vector to the factor loadings the weighted least squares procedure requires estimation of the matrix of weights and is carried out for t 1 2 t cross sections in this paper the central conclusion of the apt is shown to be equivalent to a statement about the intercept term in the multivariate regression function of a

the labor market return to academic fraud abstract academic fraud by undergraduate students is pervasive but should it be taken seriously as an economic problem our research suggests so using a unique data set from the caucasus we estimate a large positive effect of academic fraud on the probability of employment econometrically we deal with endogenous selection into academic fraud and possible measurement error in the reporting of academic fraud using partial identification techniques the findings demonstrate that incentives to commit academic fraud are strong and point towards the potentially damaging consequences of academic fraud in broader settings

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

community comparisons and subjective well being in a divided society using a south african data set the paper poses six questions about the determinants of subjective well being much of the paper is concerned with the role of relative concepts we find that comparator income measured as average income of others in the local residential cluster enters the household s utility function positively but that income of more distant others others in the district or province enters negatively the ordered probit equations indicate that as well as comparator groups based on spatial proximity race based comparator groups are important in the racially divided south african society it is also found that relative income is more important to happiness at higher levels of absolute income potential explanations of these results and their implications are considered

bouncing back from health shocks locus of control and labor supply abstract many studies have demonstrated a causal effect of ill health on labor supply in this study i explore the personality related heterogeneity measured by differences in control beliefs in the labor supply response to health shocks to identify such behavioral differences i follow the labor supply trajectories of 649 initially full time employed and healthy men who experience at some point in time an episode of ill health when compared with men who have positive control beliefs men with negative control beliefs are on average 100 more likely to drop out of the labor force a drop out unrelated to early retirement and work on average 12 less hours per week the year after the health shock these behavioral differences remain robust to alternative estimation samples and health shock definitions they are strongest for men from low socioeconomic backgrounds who do not have access to private health insurance or who experience high intensity shocks heterogeneous labor supply responses are also observed for conscientiousness and risk tolerance traits that have been linked with willingness to invest and treatment compliance an important conclusion from the findings is that a small set of non cognitive skills produces long term labor market benefits in the advent of adversity

policy watch congressional campaign finance reform while campaign finance reform attracts a lot of attention it seems unlikely that such reform at least in it current guise will have a large impact on the functioning of the american political system recent studies have called into question the conventional wisdom that challenger campaign spending is especially effective suggesting that attempts to close the gap between incumbent and challenger spending will have a smaller than expected impact on election outcomes while it is safe to conclude that pacs wield some influence it is not clear that limiting cash contributions will have a substantial effect

do women shy away from competition do men compete too much we examine whether men and women of the same ability differ in their selection into a competitive environment participants in a laboratory experiment solve a real task first under a noncompetitive piece rate and then a competitive tournament incentive scheme although there are no gender differences in performance men select the tournament twice as much as women when choosing their compensation scheme for the next performance while 73 percent of the men select the tournament only 35 percent of the women make this choice this gender gap in tournament entry is not explained by performance and factors such as risk and feedback aversion only playa negligible role instead the tournament entry gap is driven by men being more overconfident and by gender differences in preferences for performing in a competition the result is that women shy away from competition and men embrace it

an asset pricing theory unifying the capm and apt this study shows that the competitive equilibrium version of the arbitrage pricing theory may be extended to develop an exact mode l if idiosyncratic risks obey the ross separating distribution the r esults indicate that one only need add the market portfolio as an ext ra factor to the factor model in order to obtain an exact asset prici ng relation the empirical arbitrage pricing theory is also general ized to allow for some factors to be omitted from the econometric m odel employed to test the theory the importance of the market portfo lio is shown to be a monotonic increasing function of the number of o mitted factors copyright 1988 by american finance association

transformed securities and alternative factor structures grinblatt and titman 1985 reformulate a result of chamberlain and rothschild 1983 to show that the approximate factor structure of chamberlain and rothschild is asymptotically equivalent to the strict factor structure of ross 1976 as long as investors can always repackage securities into an equal number of arbitrary portfolios this paper uses a procrustes rotation methodology that is compatible with the repackaging interpretation of grinblatt and titman to show that the empirical structure of stock prices is consistent with the convergency hypothesis

the gender wage gap and the role of reservation wages new evidence for unemployed workers this paper examines the importance of differences in reservation wages for the gender wage gap based on two waves of rich survey data for a sample of newly unemployed individuals in germany we perform a decomposition analysis including measures for reservation wages detailed information on education socio demographics labor market history as well as personality traits in order to address the potential endogeneity of reservation wages we exploit a generated instrumental variable strategy that relies on heteroscedasticity of the error terms our findings indicate that the gender wage gap becomes small and statistically insignificant once we control for reservation wages moreover we perform a subgroup analysis that provides valuable insights about the importance of potentially unobserved characteristics that affect reservation wages and realized wages simultaneously reasons for differences in reservation wages could arise from productivity differences the fact that women anticipate discrimination and different unobserved traits or preferences

changes in health related quality of life a compensating income variation approach this paper investigates the relationship between negative changes in health and life satisfaction using a sample from the household income and labour dynamics of australia survey we use panel da

debt and depression we examine the effect of household financial indebtedness on psychological well being using a large household survey of families with children in britain existing studies that find a link between debt and depression tend to utilise small and highly selective samples of people and only self reported measures of financial stress responses to which are likely to correlate with subjective measures of health from additional household data we can construct a variety of objective quantitative measures of financial stress in order to validate self reported measures we show that although there is a positive association between subjective measures of financial well being and psychological well being individuals differ in their psychological response to objective household financial situations we also examine how the potential simultaneity of financial and psychological health might be handled

disability capacity for work and the business cycle an international perspective important policy issues arise from the high and growing number of people claiming disability benefits for reasons of incapacity for work in oecd countries economic conditions play an important part in explaining both the stock of disability benefit claimants and inflows to and outflows from that stock employing a variety of cross country and country specific household panel data sets as well as administrative data we find strong evidence that local variations in unemployment have an important explanatory role for disability benefit receipt with higher total enrolments lower outflows from rolls and often higher inflows into disability rolls in regions and periods of above average unemployment in understanding the nature of the cyclical fluctuations and trends in disability it is important to distinguish between work disability and health disability the former is likely to be influenced by economic conditions and welfare programmes while the latter evolves in a slower fashion with medical technology and demographic changes there is little evidence of health disability being related to the business cycle so cyclical variations are driven by work disability the rise in unemployment due to the current global economic crisis is expected to increase the number of disability insurance claimants

life satisfaction dynamics with quarterly life event data using life satisfaction responses from australian panel data we examine the questions of when and to what extent individuals are affected by major positive and negative life events including changes in financial situation marital status death of a close relative and being the victim of crime the key advantage of our data is that we are able to identify these events on a quarterly basis rather than on the yearly basis used by previous studies we find evidence that life events are not randomly distributed that individuals anticipate major events to a large extent and that they fully adapt to many events within 12 months the estimates can be used to calculate monetary values needed to compensate individuals for life events using a new valuation methodology that incorporates these dynamic factors produces considerably smaller compensation valuations than those calculated using the standard approach

viewpoint replication in economics this examination of the role and potential for replication in economics points out the paucity of both pure replication checking on others published papers using their data and scientific replication using data representing different populations in one s own work or in a comment several controversies in empirical economics are used to illustrate how and how not to behave when replicating others work the incentives for replication are examined and proposals aimed at journal editors and authors are advanced that might stimulate an activity that most economists applaud but few perform

are wages habit forming evidence from micro data although utility functions play a central role in economics the axiom that utility depends only on the absolute levels of its arguments is rarely tested this paper uses panel data on 2000 british employees who remain with the same employer and who are not promoted from one wave to the next it is shown that one important measure of well being overall job satisfaction is strongly positively correlated with the change in the worker s pay between waves but is unrelated to the current level of pay empirical tests suggest that a reference dependent satisfaction function where individual well being depends on current pay relative to past pay is more consistent with these regression results than are productivity or agency explanations of increasing wage profiles some evidence is presented of greater job satisfaction effects of pay rises for lower paid less well educated and younger workers these results provide some micro evidence consistent with the theory widespread in social science of habituation individuals may become used to any given level of consumption or income as such they tie in with the finding that a country s well being as measured by the average happiness of its citizens is only weakly correlated with its per capita gnp

household finances income shocks and family separation in britain we examine the effect of household financial indebtedness on the incidence of partnership dissolution using a large survey of families with children in britain we use detailed data on household finances to provide a robust statistical analysis of the relationship between indebtedness and partnership dissolution and to avoid the potential simultaneity of financial and psychological health responses that arise when using self reported data on the extent of household financial problems we examine whether the data provides any support for the economic models of divorce and separation developed by gary becker and his colleagues

campaign contributions and access an important and pervasive view of campaign contributions is that they are given to promote access to successful candidates under circumstances when such access would not ordinarily be given in this story access is valuable as it offers groups the opportunity to influence legislative decisions through the provision of policy relevant information under complete information regarding donors policy preferences i argue that this model predicts a negative relationship between contributions and the extent to which the groups and the recipient legislators preferences are similar however one of the more robust empirical findings in the literature is that this relationship is positive relaxing the informational assumption on donors preferences i reexamine the access story with a model in which campaign contributions can act as signals of policy preference and the informational value of access to any agent is endogenous

relative income effects on subjective well being in the cross section abstract recent work suggests that a person s subjective well being swb depends to a large degree on relative income focusing on the underlying identification this paper makes four contributions to this literature it describes the aggregation problem with past studies implements an estimation strategy to overcome this problem finds micro level evidence in support of the hypothesis that relative income does matter in individual assessments of swb and uses cross section estimates to replicate the aggregate time series the evidence further indicates that relative income effects may be smaller at low income levels the results are obtained from ordered probit techniques and the general social survey gss

the amenity value of the italian climate the hedonics literature suggests that locations with more favourable characteristics should display compensating wage and house price differentials specifying climate in terms of january and july averages estimates of the marginal willingness to pay for small changes in climate variables are derived using this technique applied to italian data italians would prefer a drier climate during the winter months but higher summertime temperatures are shown to reduce welfare in some locations households would prefer to see clearer skies these results may have relevance to the task of determining the economic impact of future climate change c 2003 elsevier science usa all rights reserved

when information dominates comparison abstract we propose a micro econometric evaluation of the relation between life satisfaction and income distribution using a balanced panel survey of the russian population russian longitudinal monitoring survey rlms running from 1994 to 2000 covering 4685 individuals we show that in the context of the very volatile russian environment hirschman s q j econ 87 1973 544 tunnel effect conjecture seems to be confirmed variables reflecting income distribution do not influence satisfaction through social comparisons individuals rather seem to use their informational content in order to form their expectations the reference group s income thereby exerts a positive influence on individual satisfaction which contrasts with other studies on the subject inequality indices do not affect individual welfare

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

the gender difference in the value of winning we design an all pay auction experiment in which we reveal the gender of the opponent using this design we find that women bid higher than men but only when bidding against other women these findings interpreted through a theoretical model incorporating differences in risk attitude and the value of winning suggest that women have a higher value of winning than men

altruistic voting and campaign contributions abstract an altruistic citizen votes yes in a referendum if the perceived benifit of the project exceeds its perceived cost the altruist gets information about benifits and costs from contributions to the pro and con campaigns in the nash equilibrium of a campaign contribution game with two beneficiaries altruists vote on the side with the largest contribution and altruistic voting guarantees efficient choices if there are many agents however altruistic voters do not always make efficient choices a disclosure law that provides information about the number of beneficiaries increases the efficiency of the referendum process

invention and innovation under alternative market structures the case of natural resources this paper examines the interactions between market structure and resource allocation over time when there is endogenous technical progress the structures considered are a planned economy pure monopoly and competition with patent rights in an efficient allocation the date of invention coincides with the date of innovation the date at which technology is used this is also true with a pure monopoly but monopoly retards technical progress relative to the efficient level competition for patents rights to a new technology results in excessively rapid technical progress if the resource endowment of the economy is sufficiently large also competition may lead to sleeping patents where invention strictly precedes the date of innovation

health income and relative deprivation evidence from the bhps it is believed that income affects health directly but it is argued that indirect income effects due to relative deprivation may be equally important this paper investigates these relationships using parametric and semiparametric panel data models which ameliorate problems of misspecification and unobservable heterogeneity by allowing for a flexible functional form of income we ensure that coefficients on relative deprivation variables are not an artefact of a highly non linear relationship between health and income the results provide strong evidence for the impact of income on self reported measures of health for men and women these results are robust across a range of techniques and are resilient to the inclusion of measures of relative deprivation the parametric results for relative deprivation largely reject its influence on health although there is some evidence of an effect in the semiparametric models

rigging the lobbying process an application of the all pay auction textabstractin a world where a politician can explicitly auction off a prize to the high bidder the standard auction literature can be used to analyse political behavior the justice system however precludes politicians from explicitly selling the prize to the highest bidder thus politicians cannot let it become public knowledge that they are in the business of selling political favors an institution has emerged in political markets to overcome this constraint which are termed as lobbying lobbyists make implicit payments to the politician through campaign contributions if these up front payments were rebated to those failing to receive the prize it would be clear that the politician was selling favors this article has examined an interesting principle arising in all pay auctions this principle states that a politician wishing to maximize political rents may find it in his best interest to exclude certain lobbyists from participating in the lobbying process particularly lobbyists valuing most the political prize

intertemporal preferences and labor supply in this paper the authors examine whether nonseparable preference structures ar e important in characterizing life cycle labor supply using longitud inal data on prime age males from the panel study of income dynamics they estimate a model of life cycle leisure and consumption under un certainty in which intertemporal preferences are allowed to be nonsep arable in leisure the model tests several alternative specifications considered in the literature they investigate the robustness of the ir findings to certain forms of population heterogeneity and types of model misspecification across alternative specifications the autho rs find that the standard assumption of intertemporally separable pre ferences for leisure is not consistent with the data copyright 1988 by the econometric society

a puzzle for adaptive theory abstract over the life cycle aspirations for material goods grow commensurately with consumer wealth but aspirations for marriage and the number and quality of children do not change much the puzzle is why there is this difference between life domains in the extent to which aspirations adapt to actual circumstances the findings come from a cohort analysis of 1978 and 1994 survey responses on the good life

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

unemployment and mental health some evidence from panel data microdata are used in this paper to analyze the effects of unemployment on mental health the analysis is done in two steps first cross section data of labor force participants are analyzed it appears that the unemployed have worse mental health than the employed next panel data are used to control for fixed effects that is unobserved omitted variables that are constant over time the model is also specified to allow both the occurrence of and duration of unemployment to affect mental health then we cannot reject the hypothesis that there are no effects of unemployment on mental health however some sensitivity tests indicate that the precision of our estimates is rather low

adaptation anticipation and social interaction in happiness an integrated error correction approach abstract adaptation anticipation and social reference effects on happiness are strongly interrelated phenomena however in the existing empirical literature these phenomena are mainly studied in isolation from each other therefore using soep panel data for the years 1984 2007 this study offers an integrated investigation of the implications of these three phenomena for the dynamics of individual life satisfaction i focus on the short and long run effects of income and social reference income but i control for similar dynamics with respect to a large set of control variables gmm estimates for instrumented income variables in an error correction model indicate an insignificant future income effect a significant and positive current income effect and an insignificant long run income effect on life satisfaction with significant hedonic adaptation social reference income has a significant negative and strong impact in the long run but not in the short run consequently increasing own income and reference income by the same percentage tends to have an insignificant effect in the long term but a significant and positive effect in the short term adaptation to an income shock and reinforcement of a reference income shock take place for more than 90 within three years on the basis of these results a more comprehensive explanation of the easterlin paradox than those given in the literature is presented

some empirical tests of the theory of arbitrage pricing we estimate the parameters of ross s arbitrage pricing theory apt using daily return data during the 1963 78 period we compare the evidence on the apt and the capital asset pricing model capm as implemented by market indices and find that the apt performs well the theory is further supported in that estimated expected returns depend on estimated factor loadings and variables such as own variance and firm size do not contribute additional explanatory power to that of the factor loadings

all pay contests this paper studies a class of games all pay contests which capture general asymmetries and sunk investments inherent in scenarios such as lobbying competition for market power labor market tournaments and r d races players compete for one of several identical prizes by choosing a score conditional on winning or losing it is weakly better to do so with a lower score this formulation allows for differing production technologies costs of capital prior investments attitudes toward risk and conditional and unconditional investments among others i provide a closed form formula for players equilibrium payoffs and analyze player participation a special case of contests is multiprize complete information all pay auctions

the existence and persistence of household financial hardship a bayesian multivariate dynamic logit framework we investigate the existence and persistence of financial hardship at the household level using data from the british household panel survey our modelling strategy makes three important contributions to the existing literature on household finances firstly we model nine different types of household financial problems within a joint framework allowing for correlation in the random effects across the nine equations secondly we develop a dynamic framework in order to model the persistence of financial problems over time by extending our multi equation framework to allow the presence or otherwise of different types of financial problems in the previous time period to influence the probability that the household currently experiences such problems our third contribution relates to the possibility that experiencing financial problems may be correlated with sample attrition we model missing observations in the panel in order to allow for such attrition our modelling framework allows us to identify any persistence in financial problems over time as well as any interdependence that may exist between different types of financial problems our findings reveal interesting variations in the determinants of experiencing different types of financial problems including demographic and regional differences our findings also highlight persistence in experiencing financial problems over time as well as the role that saving on a regular basis can play in mitigating current financial problems

a simple approach to arbitrage pricing theory the following sections are included introductionarbitrage pricingdiscussionreferencesdiscussion notes on the arbitrage pricing theorypure arbitrage pricing theoryapproximate arbitrage and the aptapproximate factor modelsthe competitive equilibrium version of the aptconclusionnotereferences this abstract was borrowed from another version of this item

should public policy respond to positional externalities abstract a nice suit is one that compares favorably with those worn by others in the same local environment more generally a positional good is one whose utility depends strongly on how it compares with others in the same category 1 a positional externality occurs when new purchases alter the relevant context within which an existing positional good is evaluated 2 for example if some job candidates begin wearing expensive custom tailored suits a side effect of their action is that other candidates become less likely to make favorable impressions on interviewers from any individual job seeker s point of view the best response might be to match the higher expenditures of others lest her chances of landing the job fall but this outcome may be inefficient since when all spend more each candidate s probability of success remains unchanged all may agree that some form of collective restraint on expenditure would be useful in such cases however it is often impractical to negotiate private solutions do positional externalities then become legitimate objects of public policy concern in attempting to answer this question i employ the classical libertarian criterion put forth by john stuart mill 3 who wrote the state may not legitimately constrain any citizen s freedom of action except to prevent harm to others i argue that many positional externalities appear to meet mill s test causing not just negative feelings but also large and tangible economic costs to others who are ill equipped to avoid them i also discuss an unintrusive policy remedy for positional externalities one modeled after the use of effluent charges to curb environmental pollution the paper is organized as follows section 1 notes the deep similarity between the conditions that give rise to positional arms races and those that give rise to conventional military arms races section 2 follows with a review of evidence concerning the strength of concerns about relative position section 3 describes some of the tangible economic costs that people experience as a result of positional externalities arising from such concerns section 4 takes up the question of whether collective action directed against positional externalities is consistent with respect for individual rights section 5 describes how a progressive consumption tax could neutralize many of the most costly effects of positional externalities

ill health and retirement in britain a panel data based analysis we examine the effect of ill health on retirement decisions in britain using the british household panel survey 1991 1998 as self reported health status is likely to be endogenous to the retirement decision we instrument self reported health by a constructed health stock measure using a set of health indicator variables and personal characteristics as suggested by bound et al bound j schoenbaum m stinebrickner t m waidmann m 1999 the dynamic effects of health on the labor force transitions of older workers labour economics 6 179 202 using a range of econometric techniques we show that adverse shocks to individual health stocks predict individual retirement behaviour among workers aged from 50 until state pension age we compare responses of economic activity to constructed health measures with that arising using direct indicators of functional limitations and specific health problems we also examine the dynamics of health shocks and whether adverse and positive health shocks have symmetric effects on transitions in and out of economic activity

rational habit formation abstract this paper discusses consumer demand under rational habit formation if consumer tastes change endogenously through habit stocks depending on past consumption the rational consumer will make allowance of the future habit forming effects of current consumption a model with rational habit formation is made formally equivalent to an intertemporal consumer model without habit formation by redefining the cost of consumption and wealth the cost of consumption is obtained by adding the cost of future induced consumption to the rental price of the commodity the extended wealth concept is obtained by subtracting the cost of the initial stocks of habits and the cost of future physically necessary consumption from wealth the paper also investigates the implication of rational habit formation for constructing one period cost of living indices

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

arbitrage pricing theory as a restricted nonlinear multivariate regression model iterated nonlinear seemingly unrelated regression estimates by replacing the unknown random factors of factor analysis with observed macroeconomic variables the arbitrage pricing theory apt is recast as a multivariate nonlinear regression model with across equation restrictions an explicit theoretical justification for the inclusion of an arbitrary well diversified market index is given using monthly returns on 70 stocks iterated nonlinear seemingly unrelated regression techniques are employed to obtain joint estimates of asset sensitivities and their associated apt risk prices without the assumption of normally distributed errors these estimators are strongly consistent and asymptotically normal with the additional assumption of normal errors they are also full information maximum likelihood estimators classical asymptotic nonlinear nested hypothesis tests are supportive of the apt with measured macroeconomic factors

contest efforts in light of behavioural considerations this study shows that distortion of probabilities is a possible reason for rent under dissipation incontests with relatively small number of participants such distortion may also result however inover dissipation of the contested rent focusing on contests with homogeneous contestants and thecommonly studied contest success function our main results clarify under what circumstances i rents are more under dissipated relative to the standard situation where probabilities are notdistorted ii rents are under dissipated yet less intensely relative to the standard situation whereprobabilities are not distorted iii rents are over dissipated and iv the contest does not possess asymmetric interior equilibrium in pure strategies

people do not adapt new analyses of the dynamic effects of own and reference income on life satisfaction abstract do people adapt to changes in income in contradiction to much of the previous literature i find no evidence of adaptation to income in gsoep 1984 2015 and ukhls 1996 2017 data furthermore i find that people also do not adapt to changes in reference income instead reference income effects may be subject to reinforcement over time following the empirical approach of vendrik 2013 i obtain these findings by estimating life satisfaction equations in which contemporaneous and lagged terms for a respondent s own household income and their estimated reference income are simultaneously entered additionally i instrument for own income and include lags of a large set of controls what was found to be adaptation to raw household income in previous studies turns out to have been driven by reinforcement of an initially small negative effect of household size that grows large over time implications of this result for the estimation of equivalence scales with subjective data are discussed

lottery versus all pay auction models of lobbying i first provide a complete characterization of the unique equilibrium of the lottery game by n lobbyists with asymmetric valuations and then compare the lottery and the all pay auction models of lobbying i show that the exclusion principle discovered by baye kovenock and de vries 1993 for all pay auction does not apply to lottery i also show that the perverse effect that an exogenous cap may increase the total lobbying expenditure in a two bidder all pay auction discovered by che and gale 1998 does not apply to lottery

contests with three or more heterogeneous agents abstract we study monotone equilibrium behavior in contests with observable effort bid where three or more participants have distinct risk attitudes and the monetary value for the prize of each is drawn independently from a distinct distribution these differences can either cause a player to drop out that is always choose zero effort regardless of his valuation or use all or nothing strategies with discontinuous effort choice neither complete drop out nor discontinuous bidding with finitely many gaps is consistent with pure strategy monotone bayesian nash equilibrium in a contest with either ex ante identical players or only two distinct participants

informal care and long term labor market outcomes in this paper we estimate long run effects of informal care provision on female caregivers labor market outcomes up to eight years after care provision we compare a static version where average effects of care provision in a certain year on later labor market outcomes are estimated to a partly dynamic version where the effects of up to three consecutive years of care provision are analyzed our results suggest that there are significant initial negative effects of informal care provision on the probability to work full time the reduction in the probability to work full time by 4 percentage points or 2 4 5 0 if we move from point to partial identification is persistent over time short run effects on hourly wages are zero but we find considerable long run wage penalties

internal external attitudes sense of efficacy and labor market experience a reply to duncan and morgan the paper studies direct evidence on reservation wages reported in great britain in 1982 to assess 1 whether such asking prices are high and 2 whether variations in these reservation wages are related to differences in measures of the subjective

employability miles and worker employability awareness this article studies the use and impact of a employability miles voucher scheme these vouchers could be used for participation in a restricted number of training courses which all aim to stimulate employees to develop a more active attitude towards their own employability using data from two surveys of one firm s workforce we find that voucher use is related to various personality traits and personal characteristics in particular a worker s ambition goal setting and education level are positively related to voucher use in addition workers with longer tenure spend their vouchers more often conversely workers with a more positive self image as well as those who are negatively reciprocal spend their vouchers less often the negative relation between voucher use and negative reciprocity suggests that workers who are more negatively reciprocal perceive the voucher as an hr tool for outplacement further we find that voucher use positively affects worker employability awareness and willingness t

living in the shadow of the past financial profiles and well being we here consider the link between individual financial profiles over time and well being as measured by life satisfaction we in particular look at annual self reported financial worsening and improvement information for over 25 000 individuals in australian panel data from 2002 to 2017 we first find that satisfaction falls rises with a contemporaneous major financial worsening improvement with worsening having the larger influence second the experience of these financial events in the past continues to be linked to current well being last only the order of financial improvement spells relates to well being a given number of past years where finances deteriorated has the same association with current well being whether the deterioration occurred in one continuous spell or was interrupted we last show that these associations are heterogeneous over the distribution of well being

individual well being in a dynamic perspective this paper explores the determinants of individual well being as measured by self reported levels of satisfaction with income making full use of the panel data nature of the german socio economic panel we provide empirical evidence for well being depending on absolute and on relative levels of income in a dynamic framework this finding holds after controlling for other influential factors in a multivariate setting the main novelty of the paper is the consideration of dynamic aspects individual s own history as well as the relative income performance with respect to the others living in the society under analysis do play a major role in the assessment of well being

debt and depression causal links and social norm effects individuals exhibiting problems repaying their debt obligations also exhibit much worse psychological health selection into problem debt on the basis of poor psychological health accounts for much of this difference the causality between problem debt and psychological health may be two way using individual level uk panel data local house price movements exogenous to individual households are used to establish the causality from problem mortgage debt to psychological health in addition the social norm effects of problem debt are investigated using local bankruptcy and repossession rates results indicate there are sizeable causal links and social norm effects in the debt psychological health relationship language en

ambiguous political power and contest efforts when there is incomplete information on the source of power in a contest the contestants may divide their lobbying efforts between the potential centers of power only one of which determines the contests winning probabilities our analysis focuses on the effect of ambiguity regarding the source of power on the contestants aggregate effort in a symmetric simple lottery contest with two potential centers of power specifically we examine the effects of varying the informativeness of the contestants private signals i e the probability that a signal is correct and the degree of correlation between them our benchmark case is the standard tullock s model in which the source of power is known i e the contestants signals are perfectly informative we show that the level of aggregate effort in this case is reached also when the signals are perfectly uninformative however in any intermediate case the contestants aggregate effort is lower provided that the signals are not perfectly correlated in other words there is a u shape relationship between the informativeness of the signals and the aggregate effort in the contest the lowest level of effort is spent when the signals are independent and the probability that a signal is true is about 0 85 in this case efforts are reduced by about one fifth in comparison with the benchmark case from a rent dissipation of 50 to slightly over 40