a test of the rational expectations hypothesis using data from a natural experiment data on contestants choices in italian game show affari tuoi are analysed in a way that separates the effect of risk attitude preferences from that of beliefs concerning the amount of money that will be offered to contestants in future rounds this separate identification is possible by virtue of the fact that at a certain stage of the game beliefs are not relevant and risk attitude is the sole determinant of choice the rational expectations hypothesis is tested by comparing the estimated belief function with the true offer function which is estimated extraneously using data on offers actually made to contestants we find a close correspondence leading us to accept the rational expectations hypothesis the importance of belief formation is confirmed by the estimation of a mixture model which establishes that the vast majority of contestants are forward looking as opposed to myopic

claim timing and ex post adverse selection many health care treatments are not urgent and may be delayed if patients so choose because insurance coverage is typically determined by the treatment date individuals may have incentives to strategically delay treatments to minimize out of pocket costs the strategic delay of treatment a particular form of moral hazard can be an important source of subsequent adverse selection in which ex ante identical individuals select insurance coverage based on their differing accumulation of previously delayed treatments this article investigates these forces empirically in the context of the missing market for dental insurance using rich claim level data my analysis reveals that approximately 40 of individuals strategically delay dental treatments when incentivized to do so and this flexibility in delaying treatment can explain why the market for dental insurance has largely unraveled more generally the counterfactual analysis suggests features such as open enrolment periods and contracting on pre existing conditions may be helpful tools in overcoming adverse selection in insurance contexts where the timing of uncertainty is not contractible

limited liability moral hazard and share tenancy abstract this paper contributes to the literature on share tenancy by reexamining a framework developed in basu 1992 it is shown that limited liability and moral hazard in effort provides a richer theory of share contracts when the tenant also has discretion in the choice of projects

game shows and economic behavior risk taking on card sharks this paper studies individual risk taking behavior with a unique data set risky decisions of contestants during the threeyear history of the television game show card sharks in the bonus round of the game individuals choose how much to wager on positive expected value gambles with known and varying probabilities and large possible payouts since no special skills or knowledge are involved empirical analysis is not complicated by a contestant s superior information about her own abilities stakes can reach 16 000 and average 3 200 few experimental budgets permit even one observation of this magnitude first i simply estimate how risk averse contestants behave under the assumption of expected utility maximization i estimate a lower bound for the coefficient of absolute risk aversion of 0 00031 which when multiplied by per capita u s personal income gives an estimate of relative risk aversion of 4 8 this estimate is higher than most econometric estimates of risk aversion contestants however do not act in a manner consistent with expected utility maximization so this number should not be given a structural interpretation rather it is simply a useful way to summarize average willingness to bear risk of individuals on the show second i explore how individual behavior is inconsistent with expected utility theory the amount a contestant wishes to wager depends critically on the amount of wealth she has accumulated in the bonus round and therefore on the size of the stakes this is at odds with expected utility theory since the size of the stakes although far from insignificant is small relative to a person s wealth contestants should then have close to constant absolute risk aversion with respect to accumulated winnings in the game a more striking result deals with contestants who had previ

keep up with the winners experimental evidence on risk taking asset integration and peer effects the paper reports the result of an experimental game on asset integration and risk taking we find some evidence that winnings in earlier rounds affect risk taking in subsequent rounds but no evidence that real life wealth outside the experiment affects risk taking controlling for past winnings participants receiving a low endowment in a round engage in more risk taking we test a keeping up with the joneses hypothesis and find that subjects seek to keep up with winners though not necessarily with average earnings overall the evidence suggests that risk taking tracks a reference point affected by social comparisons

the zero lower bound the dual mandate and unconventional dynamics abstract this paper examines monetary policy when it is constrained by the zero lower bound zlb on the nominal interest rate our analysis uses a nonlinear new keynesian model with technology and discount factor shocks specifically we investigate why technology shocks may have unconventional effects at the zlb what factors affect the likelihood of hitting the zlb and the implications of alternative monetary policy rules we initially focus on a new keynesian model without capital model 1 and then study that model with capital model 2 the advantage of including capital is that it introduces another mechanism for intertemporal substitution that strengthens the expectational effects of the zlb four main findings emerge 1 in model 1 the choice of output target in the taylor rule may reverse the effects of technology shocks when the zlb binds 2 when the central bank targets steady state output in model 2 a positive technology shock at the zlb leads to more pronounced unconventional dynamics than in model 1 3 the presence of capital changes the qualitative effects of demand shocks and alters the impact of a monetary policy rule that emphasizes output stability and 4 in model 1 the constrained linear solution is a decent approximation of the nonlinear solution but meaningful differences exist between the solutions in model 2

international evidence on investment and fundamentals abstract if a firm s costs of installing capital are not quadratic then its optimal investment is not a linear function of fundamentals such as the returns and costs of capital this study specifies a model in which a firm may face fixed linear and convex costs of investing and estimates the resulting investment function using firm level data from 11 countries the evidence suggests important nonlinearities consistent with the presence of fixed or other non quadratic costs in the relationship between investment and fundamentals for most countries these findings are statistically signficant at the level of the firm and economically significant when aggregated by country

a new method of estimating risk aversion i show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model i derive a formula for the coefficient of relative risk aversion in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor i bound the degree of complementarity using data on consumption choices when labor supply varies across states using labor supply elasticity estimates i find a mean estimate of 1 then show generating 2 requires that wage increases cause sharper labor supply reductions jel d81 j22

assessing individual risk attitudes using field data from lottery games we use information from the television game show with the highest guaranteed average payoff in the united states hoosier millionaire to analyze risktaking in a high stakes experiment we characterize gambling decisions under alternative assumptions about contestant behavior and preferences and derive testable restrictions on individual risk attitudes based on this characterization we then use an extensive sample of gambling decisions to estimate distributions of risk aversion parameters consistent with the theoretical restrictions and revealed preferences we find that although most contestants display risk averse preferences the extent of the risk aversion implied by our estimates varies substantially with the stakes involved in the different decisions

the economic theory of agrarian institutions introduction alternative approaches to the theory of institutions in economic development pranab bardhan rational peasants efficient institutions and a theory of rural organization methodological remarks for development economics joseph e stiglitz part 1 land and labour theories of sharecropping nirvikar singh a comparison of principal agent and bargaining solutions the case of tenancy contracts clive bell contracts with eviction in infinitely repeated principal agent relationships bhaskar dutta et al production relations in semi arid african agriculture hans binswanger et al part 2 credit and interlinked transactions rural credit markets the structure of interest rates exploitation and efficiency kaushik basu credit and agrarian class structure mukesh eswaran and ashok kotwal credit rationing tenancy productivity and the dynamics of inequality avishay braverman and joseph e stiglitz on choice among creditors and bonded labour contracts t n srinivasan some aspects of linked product and credit market contracts among risk neutral agents clive bell and t n srinivasan a note on interlinked rural economic arrangements pranab bardhan interlinkages and the pattern of competition debraj ray and kunal sengupta part 3 marketing and insurance agricultural institutions for insurance and stabilization david m newbery peasants risk aversion and the choice of marketing intermediaries and contracts a bargaining theory of equilibrium marketing contracts pinhas zusman part 4 co operatives technology and the state agricultural producer co operatives louis putterman institutional analysis of credit co operatives avishay braverman and j luis guasch agrarian structure technological innovations and the state alain de janvry et al

trust interlinking transactions and credit in the industrial district an essential feature of the industrial district is trust among individuals and firms within it this paper focuses mainly on trust based on investments in building up a good reputation that is a personal capital that can even substitute for collateral in obtaining credit informal credit often linked to other transactions and especially subcontracting is therefore an important way of financing economic development in the industrial district moreover the importance of trust as personal capital gives rise to a double financial intermediation in the industrial district this double intermediation constitutes a device to reduce information problems that are usually responsible for credit rationing c 1994 academic press inc copyright 1994 by oxford university press

securing victory or not surrendering optimal play when facing simple calculations a natural experiment from the swedish and us jeopardy this article empirically investigates the common assumption of economicagents capabilities to process complex mathematical problems to findoptimal strategies applied in economic modelling by expl

the costs and beliefs implied by direct stock ownership this paper develops and estimates an economic model of the costs and beliefs required to rationalize household direct stock ownership in the model investors believe they can learn information about individual stock returns through costly research the model identifies the distributions of both research costs and beliefs about the predictability of individual stock returns identification depends only on households wealth and portfolio choices the model also provides a novel explanation for many empirical features of household portfolios parameter estimates suggest that most households have modest beliefs about the benefits of individual stock research although a minority must expect extraordinary returns data are available at https doi org 10 1287 mnsc 2017 2791 this paper was accepted by neng wang finance

measuring uncertainty based on rounding new method and application to inflation expectations abstract the literature on cognition and communication documents that people use round numbers to convey uncertainty this paper introduces a method of quantifying the uncertainty associated with round responses in pre existing survey data i construct micro level and time series measures of inflation uncertainty since 1978 inflation uncertainty is countercyclical and correlated with inflation disagreement volatility and the economic policy uncertainty index inflation uncertainty is lowest among high income consumers college graduates males and stock market investors more uncertain consumers are more reluctant to spend on durables cars and homes round responses are common on many surveys suggesting numerous applications of this method

risk and rationality the effects of mood and decision rules on probability weighting empirical research has shown that people tend to overweight small probabilities and underweight large probabilities when valuing risky prospects but little is known about factors influencing the shape of the probability weighting curve based on a laboratory experiment with monetary incentives we demonstrate that pre existing good mood is significantly associated with women s probability weights women in a better than normal mood tend to weight probabilities relatively more optimistically many men however seem to be immunized against effects of incidental mood by applying a mechanical decision criterion such as maximization of expected value

how do prior gains and losses affect subsequent risk taking new evidence from individual level horse race bets many empirical studies focusing on how prior outcomes affect subsequent risk taking report conclusions that appear mutually contradictory while some studies document increased risk taking after gains and risk aversion after losses others report the opposite this paper contributes to this literature by investigating horse race bettors sequential risky decisions using individual level data a horse race betting market is a laboratory like environment and can be used to analyze behavioral patterns associated with decision making under risk we find evidence for i the house money effect as bettors take riskier wagers after gains and mostly spend the money they have won ii risk aversion after prior losses which we label a playing safe effect and iii a preference for breakeven contrary to the widely held conception in the empirical literature our findings suggest that the break even effect does not necessarily imply an increased preference for riskier bets because bettors may seek to break

real implications of the zero bound on nominal interest rates if monetary policy succeeds in keeping average inflation very low nominal interest rates may occasionally be constrained by the zero lower bound the degree to which this constraint has real implications depends on the monetary policy feedback rule and the structure of price setting policy rules that make the price level stationary lead to small real distortions from the zero bound if policy imparts persistence into the inflation rate the real implications of the zero bound are large in the presence of backward looking price setting and small if prices are set to maximize profits

does lack of access to formal credit constrain agricultural production evidence from the land tenancy market in rural india while it is commonly believed that lack of access to government subsidized formal credit underlies observed differences in farm productivity in rural india there is little empirical evidence on this issue in this paper i address this issue by examining whether households use the farm land rental market to equilibrate their access to formal credit as they are known to do in the case of other imperfectly marketable inputs this research reveals however that the advantage formal borrowers enjoy in the tenancy market does not reflect their access to formal credit per se but their greater ownership of inputs such as irrigated land

a theory of sharecropping the role of price behavior and imperfect competition this paper proposes a theory of sharecropping on the basis of price behavior in agriculture and imperfectly competitive nature of rural product markets we consider a contractual setting between one landlord and one tenant with seasonal variation of price where the tenant receives a low price for his output while the landlord can sell his output at a higher price by incurring a cost of storage we consider two different classes of contracts i tenancy contracts and ii crop buying contracts it is shown that sharecropping is the optimal form within tenancy contracts and it also dominates crop buying contracts provided the price variation is not too large then we consider interlinked contracts that have both tenancy and crop buying elements and show that there are multiple optimal interlinked contracts finally proposing an equilibrium refinement that incorporates imperfect competition in the rural product market it is shown that the unique contract that is robust to this refinement results in sharecropping

anchoring in financial decision making evidence from jeopardy abstract this paper analyzes 12 596 daily double wagering decisions of 6064 contestants in the us game show jeopardy we exploit a situation in which a player has to unexpectedly wager on responding correctly to an unknown clue known as a daily double clue we find evidence consistent with the hypothesis of contestants anchoring heavily on the initial dollar value of a clue in wagering this positive relationship remains statistically significant at the one percent level after controlling for other characteristics that may independently affect wagering decisions such as scores clue categories time trends individual jeopardy experience and player fixed effects exploiting within player variation only raising the anchoring amount by 100 translates to an increase of 29 in the wager an alternative explanation of underlying strategic considerations appears unlikely and results are consistent throughout a number of robustness checks overall these findings suggest that anchoring can play a substantial role in financial decision making under pressure

monetary news shocks we pursue an empirical strategy to identify a monetary news shock in the u s economy we use a monetary policy residual along with other variables in a vector autoregression var and identify a monetary news shock as the linear combination of reduced form innovations that is orthogonal to the current residual and that maximizes the sum of contributions to its forecast error variance over a finite horizon real gdp declines in a persistent manner after a positive monetary news shock this contraction in economic activity is accompanied by a fall in inflation and a rapid increase in the nominal interest rate

limited liability and the existence of share tenancy abstract the paper considers the problem confronting an absentee landlord who can lease out his land on a fixed rent contract share rent contract or a mixture of the two it is argued that in poor areas it is natural to have each contract underwritten by an implicit limited liability clause which allows a person to forego paying rent under extreme crop failures in the presence of such an implicit clause a certain tension appears between a tenant and a landlord with the former preferring risky projects and the latter preferring safe ones it is shown that in such a case share tenancy turns out to be the dominant system from among the class mentioned above because it minimises the tension between the landlord and the tenant the result is then used to discuss conditions under which share tenancy will tend to wither away

share tenancy as strategic delegation abstract the paper develops a new explanation of sharecropping based on the idea of an incentive equilibrium it considers a set up in which a few landlords in a village confront the choice of cultivating their farms by adopting different tenurial arrangements ranging from owner operation through the fixed rental system to sharecropping these landlords are the only sources of employment in the village and compete in the wages they pay to their workers in such an environment sharecropping is explained as a form of strategic delegation where a landlord gets extra benefit by having a share tenant and giving him suitable incentives

the small sample bias of the gini coefficient results and implications for empirical research the gini coefficient is a downward biased measure of inequality in small populations when income is generated by one of three common distributions the paper discusses the sources of bias and argues that this property is far more general this has implications for i the comparison of inequality among subsamples some of which may be small and ii the use of the gini in measuring firm size inequality in markets with a small number of firms the small sample bias has often led to misperceptions about trends in industry concentration a small sample adjustment results in a reduced bias which can no longer be signed this remaining bias rises with the dispersion and falls with increasing skewness of the distribution finally an empirical example illustrates the importance of using the adjusted gini in this example it is shown that controlling for market characteristics larger shipping cartels include a set of firms that is stochastically identical in terms of relative size to those of smaller shipp

property rights and the political organization of agriculture we propose a general equilibrium model where the economic organization of agriculture and the political equilibrium determining the security of property rights are jointly determined in particular because the form of organization may affect the probability and distribution of benefits from future property challenges it may be shaped in anticipation of this impact property rights security may then be secured at the expense of economic efficiency the model provides a framework for understanding why in some contexts land is redistributed primarily via land sales and tenancy markets but via politics and conflict in others we test some implications of the theory using a five decade panel dataset that traces changes in the extent of tenancy and tenancy reform across 15 indian states

the quest for prosperity without inflation abstract in recent years activist monetary policy rules responding to inflation and the level of economic activity have been advanced as a means of achieving effective output stabilization without inflation advocates of such policies suggest that their flexibility may yield substantial stabilization benefits while avoiding the excesses of overzealous discretionary fine tuning such as is thought to characterize the experience of the 1960s and 1970s in this study i present evidence suggesting that these conclusions are misguided using an estimated model i show that when informational limitations are properly accounted for activist policies would not have averted the great inflation but instead would have resulted in worse macroeconomic performance than the actual historical experience the problem can be attributed in large part to the counterproductive reliance of these policies on the output gap the analysis suggests that the dismal economic outcomes of the great inflation may have resulted from an unfortunate pursuit of activist policies in the face of bad measurement specifically overoptimistic assessments of the output gap associated with the productivity slowdown of the late 1960s and early 1970s

new keynesian dynamics in a low interest rate environment recent research has found that the dynamic properties of the new keynesian model are unorthodox when the nominal interest rate is zero improvements in technology and reductions in the labor tax rate lower economic activity and the size of the government purchase output multiplier is very large this paper provides evidence that these results are not empirically relevant we show that a prototypical new keynesian model fit to japanese data exhibits orthodox dynamics during japan s episode with zero interest rates we then demonstrate that this specification is more consistent with outcomes in japan than alternative specifications that have unorthodox properties

equilibrium selection payoff or risk dominance the case of the weakest link abstract when a game has more than one nash equilibrium a coordination issue arises pareto and risk dominations are two available criteria to select one of them there is a debate on how to use these criteria when they point in different directions we study the first wave of the weakest link show broadcast in france to generate field data on this issue observed behavior can be rationalized in terms of pareto and risk domination the payoff dominant equilibrium is selected if it is not too risky otherwise players coordinate themselves according to risk dominance this rationalization is in line with the experimental literature

optimal monetary policy under commitment with a zero bound on nominal interest rates we determine optimal monetary policy under commitment in a forwardlooking new keynesian model when nominal interest rates are bounded below by zero the lower bound represents an occasionally binding constraint that causes the model and optimal policy to be nonlinear a calibration to the u s economy suggests that policy should reduce nominal interest rates more aggressively than suggested by a model without lower bound rational agents anticipate the possibility of reaching the lower bound in the future and this amplifies the effects of adverse shocks well before the bound is reached while the empirical magnitude of u s mark up shocks seems too small to entail zero nominal interest rates shocks affecting the natural real interest rate plausibly lead to a binding lower bound under optimal policy however this occurs quite infrequently and does not imply positive average inflation rates in equilibrium interestingly the presence of binding real rate shocks alters the policy response to non binding markup shocks

coordination focal points and voting in strategic situations a natural experiment this paper studies coordination in a multi stage elimination tournament with large monetary incentives and a diversified subject pool drawn from the adult british population in the tournament members of an ad hoc team earn money by answering general knowledge questions and then eliminate one contestant by plurality voting without prior communication we find that in the early rounds of the tournament contestants use a focal principle and coordinate on one of the multiple nash equilibria in pure strategies by eliminating the weakest member of the team however in the later rounds contestants switch to playing a mixed strategy nash equilibrium

fiscal policy in an expectations driven liquidity trap we study the effects of fiscal policy interventions in a liquidity trap in a model with nominal rigidities and an interest rate rule in a liquidity trap caused by a self fulfilling state of low confidence higher government spending has deflationary effects that reduce the spending multiplier when the zero lower bound is binding instead cuts in marginal labor tax rates are inflationary and become more expansionary when the zero lower bound is binding these findings contradict popular views about the effects of fiscal policy in a liquidity trap

lowest unmatched price auctions lowest unmatched price auctions lupas specify that the lowest bid placed by only one participant wins they are used in internet trading and tv and radio shows we model lupas as games with minimal restrictions in particular allowing players to place more than one bid since multiple bids have been observed in most actual lupas though lupas are games for which a closed form solution does not seem to exist in general our model generates several testable implications about the type of strategies played in equilibrium and the highest bid in a given lupa our analysis suggests that players follow strategic considerations and arrive at decisions which at least in the aggregate are generally consistent with theoretical predictions yet there are some remarkable deviations

decision making under uncertainty when the stakes are high evidence from a lottery game show illinois instant riches a televised set of three different games of chance provides a natural experiment for assessing the risk taking behavior of individuals recently there have been a limited number of other studies that have also used game shows as natural experiments including card sharks 6 jeopardy 11 and the price is right 1 an advantage of using game shows over most laboratory experiments is the ability to see how individuals respond to wagers involving relatively large sums instant riches is particularly interesting in this regard because it involves very high stakes across the three games played the potential winnings from wagers offered to contestants ranged from 2000 to 100 000 losses from 3000 to 35 000 and expected values from 10 938 to 15 000 given our data our primary research objective is to provide additional evidence on the degree of risk aversion under high stakes wagering to date that evidence is mixed gertner concludes that card sharks contestants are on average risk averse metrick could not reject the hypothesis that jeopardy contestants are risk neutral in respective experimental studies using indian peasant farmers and chinese university students binswanger 2 3 and kachelmeier and shehata 9 employed small nominal stakes that were nonetheless large relative to their subjects monthly incomes e g 20 percent to just over 100 percent of income both reported a shift toward risk aversion as stakes were increased but in the kachelmeier study the subjects remained largely risk neutral in another experimental study this time involving modest stakes e g hundreds of dollars goodman et al 7 found expected value to be the best predictor of las vegas casino patrons certainty equivalents a result implying risk neutrality in all these studies the stakes were lower than for instant riches

the price is right but are the bids an investigation of rational decision theory the television game show the price is right is used as a laboratory to conduct a preference free test of rational decision theory in an environment with substantial economic incentives it is found that contestants strategies are transparently suboptimal in response to this evidence simple rules of thumb are developed that are shown to explain observed bidding patterns better than rational decision theory further learning during the show reduces the frequency of strategic errors this is interpreted as evidence of bounded rationality finally there is no evidence that a concern for fairness significantly alters bidding behavior copyright 1996 by american economic association

contract choice in modern agriculture cash rent versus cropshare e conomists have expended enormous effort examining the rationale for various contractual arrangements in agriculture particularly sharecropping while economists have made considerable theoretical efforts to understand agricultural contracts few empirical studies have been undertaken the dearth of empirical analyses of agricultural contracts is particularly striking for modern western agriculture this is an important omission not only because the existing empirical work tends to focus on the question of efficiency but also because the theoretical models tend to examine contracts that bear little resemblance to those found in the united states today

credit layering in informal financial markets abstract informal lenders with access to markets or capital often find it attractive to delegate loan provision to downstream lenders who have an information or enforcement advantage in dealing with particular borrowers in this paper we examine the conditions under which such an arrangement is preferred by two informal lenders a landlord and a merchant who compete in loan provision to tenant farmers differentiated by wealth we show that credit layering is preferred only when tenants are sufficiently poor in this case the trader lends to tenant farmers via a contract with their landlord otherwise only the trader lends as a consequence a pattern of borrowing emerges in which relatively wealthy tenants borrow from merchants while poor tenants borrow mainly from their landlords interlinkage between land and credit thus arises only for a subset of tenants and purely as a consequence of credit layering this pattern is shown to be supported empirically

the perils of taylor rules abstract since john taylor s 1993 carnegie rochester conf ser publ policy39 195 214 seminal paper a large literature has argued that active interest rate feedback rules that is rules that respond to increases in inflation with a more than one for one increase in the nominal interest rate are stabilizing in this paper we argue that once the zero bound on nominal interest rates is taken into account active interest rate feedback rules can easily lead to unexpected consequences specifically we show that even if the steady state at which monetary policy is active is locally the unique equilibrium typically there exist an infinite number of equilibrium trajectories originating arbitrarily close to that steady state that converge to a liquidity trap that is a steady state in which the nominal interest rate is near zero and inflation is possibly negative journal of economic literature classification numbers e52 e31 e63

contract choice in agriculture with joint moral hazard in effort and risk we analyze optimal contract choice in agriculture when there is joint moral hazard on the part of the farmer in the supply of effort and the riskiness of the technique of cultivation in the presence of limited liability high powered incentive contracts such as fixed rental contracts will induce the farmer to adopt techniques of cultivation that are too risky from the point of view of the landlord on the other hand low powered incentive contracts such as fixed wage contracts will induce the farmer to supply too little effort we show that sharecropping contracts emerge as a natural solution to balance these two conflicting considerations

imperfect credibility and inflation persistence in this paper we formulate a dynamic general equilibrium model with staggered nominal contracts in which households and rms use optimal ltering to disentangle persistent and transitory shifts in the monetary policy rule the calibrated model accounts quite well for the dynamics of output and insation during the volcker disinsation and implies a sacri ce ratio very close to the estimated value our approach indicates that insation persistence and substantial costs of disinsation can be generated in an optimizing agent framework without relaxing the assumption of rational expectations or relying on arbitrary modi cations to the aggregate supply relation jel classi cation e31 e32 e52

two tier land tenure system and sustained economic growth in post 1978 rural china abstract the two tier land tenure system has been widely blamed for the problems in land allocation and in land specific investment observed in the postreform rural china greater privatization of property rights in land has been proposed to enable productive farmers to acquire more land to promote land circulation to improve farmers access to credit and to encourage farm investment it is argued here that in the presence of multiple market distortions land privatization is unlikely to provide a solution to the agricultural problems rather an approach which refines the existing framework of the two tier ownership system offers more promise

competition and relational contracts in the rwanda coffee chain how does competition affect market outcomes when formal contracts are not enforceable and parties resort to relational contracts difficulties with measuring relational contracts and dealing with the endogeneity of competition have frustrated attempts to answer this question we make progress by studying relational contracts between upstream farmers and downstream mills in rwanda s coffee industry first we identify salient dimensions of their relational contracts and measure them through an original survey of mills and farmers second we take advantage of an engineering model for the optimal placement of mills to construct an instrument that isolates geographically determined variation in competition conditional on the suitability for mills placement within the catchment area we find that mills surrounded by more suitable areas i face more competition from other mills ii use fewer relational contracts with farmers and iii exhibit worse performance an additional competing mill also iv reduces the aggregate quantity of coffee supplied to mills by farmers and v makes farmers worse off competition hampers relational contracts directly by increasing farmers temptation to default on the relational contract and indirectly by reducing mill s profits

meso economic filters along the policy chain understanding the links between policy reforms and rural poverty in latin america abstract the paper clarifies the meso economy concept by defining it as comprising both the market mechanisms and administrative procedures through which policy decisions and market signals trickle down to the household level three main bodies of literature are reviewed the policy oriented literature in which the meso economy was initially considered the transaction cost approach analyzing market and policy failures and the micro economy level of agricultural household models the paper develops a synthesis of macro meso and micro economic perspectives which focuses on the roles played by three levels of filters intervening along the policy chain implications for policy and research are drawn

forward guidance and the state of the economy this paper analyzes forward guidance in a nonlinear model with a zero lower bound zlb on the nominal interest rate forward guidance is modeled with news shocks to the monetary policy rule which capture innovations in expectations from central bank communication about future policy rates whereas most studies use quasi linear models that disregard the expectational effects of hitting the zlb we show how the effectiveness of forward guidance nonlinearly depends on the state of the economy the speed of the recovery the degree of uncertainty the policy shock size and the forward guidance horizon when households account for the zlb jel e43 e58 e61

equilibrium in a production economy with an income tax this paper develops a method to study an infinite horizon production economy distorted by a state dependent income tax this setting permits taxes to depend on the capital stock an endogenous state variable and thus captures situations where the evolution for capital and taxes is jointly determined to solve this model the consumption function is represented as a fixed point of a nonlinear monotone operator that is defined such that its nth iteration computes the consumption function n steps away from the horizon for a corresponding finite horizon economy the oparator s monotonicity is exploited in proving the existence of and constructing an equilibrium copyright 1991 by the econometric society

bringing water markets down to earth the political economy of water rights in chile 1976 1995 abstract for 15 years chile has been the leading international example of pro market policies for water resources and its 1981 water code has recently been touted as a model for other countries to follow water markets are controversial in both theory and practice their potential benefits include greater efficiency and flexibility of water use and less state intervention and expenditure while their drawbacks include social and environmental externalities vulnerability to high transactions costs and other common examples of market failure no country has taken the experiment as far as chile since its water code privatized water rights reduced state administration and attempted to stimulate a free market in water rights the results have been mixed and uneven the lesson of the chilean case is that setting up water markets is harder and more complicated than it may seem even in the fairly simple arena of irrigation transfers

an econometric model of farm tenures in fifteenth century florence we estimate a discrete choice model of farm tenures in fifteenth century florence using data in the form of an unbalanced panel with individual farms nested within landlords total property holdings the probabilities of wage rental and sharecropping tenures are estimated allowing for landlord specific random effects specification tests are used to validate the model our results emphasize the role of long lived fixed assets vines vulnerable to damage by short term over production as a factor favouring sharecropping which taxes over production however we find evidence against theories emphasizing high monitoring costs as an influence favouring rental contracts

tax evasion and financial development under asymmetric information in credit markets abstract recent empirical studies have documented that after controlling for variables related to state capacity the incidence of firms tax evasion on their sales is negatively correlated with the level of a country s financial development motivated by this stylized fact our paper takes state capacity as given and provides an alternative theory that is built upon asymmetric information in credit markets particularly within developing economies we analytically show that with a more developed financial sector that exhibits smaller agency costs the government of a rich small open economy country will raise its optimal tax auditing probability which in turn leads to more tax compliance our baseline model also yields an empirically realistic positive correlation between financial development and the ratio of tax revenue over gdp in an extended setting which allows for size dependent probabilities of tax detection we find that consistent with the empirical evidence large firms comply with taxes whereas small firms evade taxes

environmental regulations transfers and trade theory and evidence abstract this paper develops a theory of compensation of producers for the costs associated with environmental regulations we show that the existence of transfers can give counter intuitive effects of environmental policy on both output and trade flows in particular the compensation obtained by producers neutralizes the effect of environmental policy on output and consequently on trade flows this may help explain why previous empirical research has found weak evidence that environmental regulations affect trade patterns the theory is tested using agricultural sector data the evidence supports the hypothesis that environmental regulations and transfers are positively correlated

risk attitudes in large stake gambles evidence from a game show this article estimates the degree of risk aversion of contestants appearing on vas o no vas the mexican version of deal or no deal we consider both dynamic agents who fully backward induct and myopic agents that only look forward one period further we vary the level of forecasting sophistication by the agents we find substantial evidence of risk aversion the degree of which is more modest than what is typically reported in the literature

renegotiation proof tenurial contracts as screening mechanisms abstract this paper is motivated by the hypothesis that the nature of the tenurial contract is sensitive to the tenant s privately known level of farming skill in particular tenants with low skill levels work for wage contracts those with high skill levels work for rent contracts and tenants whose skill levels lie in between these extremes work for share contracts we study a principal agent type model both with and without the assumption that the parties can commit not to renegotiate the terms of the initially binding accepted contract if the parties can make such a commitment then our results do support this hypothesis on the other hand if the parties cannot make such a commitment then with some positive probability tenants of all skill levels work for the same wage or share contract however with the complement positive probability the hypothesis is vindicated in the no commitment case as well

the gender of opponents explaining gender differences in performance and risk taking abstract analyzing 8169 contestants over 32 years of the us game show jeopardy we find that women compete more aggressively become marginally more competitive and take on more risk when paired against men specifically a woman is more likely to win a jeopardy episode and within the show to respond to a clue once responding she is also marginally more likely to respond correctly potentially most surprising even the sizeable gender gap in risk taking analyzing daily double wagering decisions disappears once a woman competes in an otherwise all male field of competitors men on the other hand wager significantly less when paired against women only but the gender of opponents does not affect their competitive performance otherwise our rich sample allows us to control for a host of potentially confounding factors and player fixed effects thereby eliminating potential biases from unobservable individual characteristics our findings are consistent with an explanation that emphasizes an adaptation to social norms applied to gender

optimal monetary policy at the zero interest rate bound what should a central bank do when faced with a weak aggregate demand even after reducing the short term nominal interest rate to zero to address this question we solve a central bank s intertemporal loss minimization problem in which the non negativity constraint on nominal interest rates is explicitly considered we find that the optimal path is characterized by policy inertia in the sense that a zero interest rate policy should be continued for a while even after the natural rate of interest returns to a positive level by making such a commitment the central bank is able to achieve higher expected inflation lower long term nominal interest rates and a weaker domestic currency in the adverse periods when the natural rate of interest significantly deviates from a steady state level

agricultural workers credit rationing and family networks in rural mexico abstractwe use mixed methods and first hand household data in mexico to investigate credit practices by households engaged in agricultural wage employment quantitative analysis shows evidence of rationing in the formal sector but also suggests the existence of mitigating mechanisms qualitative analysis provides additional insights first income patterns associated with agricultural wage generate income smoothing needs that are sometimes better met by the informal sector second family networks can perform key functions as gateways to the formal sector through specific informal arrangements that inject flexibility into formal rules and procedures

risky choice in the limelight this paper examines how risk behavior in the limelight differs from that in anonymity in two separate experiments we find that subjects are more risk averse in the limelight however risky choices are similarly path dependent in the different treatments under both limelight and anonymous laboratory conditions a simple prospect theory model with a path dependent reference point provides a better explanation for subjects behavior than a flexible specification of expected utility theory additionally our findings suggest that ambiguity aversion depends on being in the limelight that passive experience has little effect on risk taking and that reference points are determined by imperfectly updated expectations

is there a fiscal free lunch in a liquidity trap this paper uses a dsge model to examine the eects of an expansion in government spending in a liquidity trap the spending multiplier can be much larger than in the normal situation if the liquidity trap is very persistent and scal stimulus can be rapidly implemented moreover the budgetary costs may be minimal as the large response of output boosts tax revenues allowing for something close to a scal free lunch however we caution that the multiplier may be much smaller under plausible implementation lags for many types of public spending and or if the liquidity trap lasts less than two years in addition because the marginal impact of scal expansion decreases in the scale of the outlay it is crucial to distinguish between average and marginal multipliers

decision making under risk in deal or no deal we analyse the choices of 399 contestants in the australian version of the television game show deal or no deal we calculate risk aversion bounds for each contestant revealing considerable heterogeneity we then estimate a structural stochastic choice model that captures the dynamic decision problem faced by contestants to address individual heterogeneity we nest the dynamic problem within the settings of both a random effects and a random coefficients probit model our structural model produces plausible estimates of risk aversion confirms the role of individual heterogeneity and suggests that a model of stochastic choice is indeed appropriate we find mixed evidence of greater risk aversion by females we also examine generalizations to expected utility theory finding that the rank dependent utility model adds non negligible explanatory power and indicates optimism in probability weighting finally we test but are unable to confirm the existence of an endowment effect for lotteries copyright 2009 john wiley sons ltd

adverse selection and inertia in health insurance markets when nudging hurts this paper investigates consumer inertia in health insurance markets where adverse selection is a potential concern we leverage a major change to insurance provision that occurred at a large firm to identify substantial inertia and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk we use these estimates to study the impact of policies that nudge consumers toward better decisions by reducing inertia when aggregated these improved individual level choices substantially exacerbate adverse selection in our setting leading to an overall reduction in welfare that doubles the existing welfare loss from adverse selection jel d82 g22 i13 a number of potential impediments stand in the way of efficient health insur ance markets the most noted of these is adverse selection first studied by akerlof 1970 and rothschild and stiglitz 1976 in insurance markets prices reflect the expected risk costs of the insured pool whether the reason is price regulation or private information when insurers cannot price all risk characteristics riskier consumers choose more comprehensive health plans this causes the equilibrium prices of these plans to rise and healthier enrollees to select less comprehensive coverage than they would otherwise prefer

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

deal or no deal decision making under risk in a large payoff game show we examine the risky choices of contestants in the popular tv game show deal or no deal and related classroom experiments contrary to the traditional view of expected utility theory the choices can be explained in large part by previous outcomes experienced during the game risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes our results point to reference dependent choice theories such as prospect theory and suggest that path dependence is relevant even when the choice problems are simple and well defined and when large real monetary amounts are at stake

limited liability wealth differences and tenancy contracts in agrarian economies abstract an explanation is provided for two observations concerning variations in the choice of tenants and their welfare differences in tenants wealth imply corresponding differences in liability when default is possible on fixed rental commitments in this context the inability of landlords to specify their tenants effort lead to effort choices that vary with the type of contract offered the selection of tenants and the contract terms they receive thus depend on wealth with wealthier tenants being preferred and receiving fixed rent contracts these results also predict that wealthier tenants earn higher profits on their leased plots

protectionism in a liquidity trap abstract this paper studies the effects of protectionism as a business cycle instrument in normal times protectionism reduces international trade distorts production and reduces output however in a liquidity trap protectionism lowers the real interest rate because inflation goes up while the nominal interest rate is stuck at the zero lower bound this stimulates consumption and output

subdividing the commons distributional conflict in the transition from collective to individual property rights in kenya s maasailand summary this paper suggests that explanations of property rights transformation need to move beyond models of relative price change and state enforcement to include accounts that accommodate conflict and competition among actors and the possibility that state actors may not provide the enforcement that is often taken for granted the transition from collective to individualized holdings in kenya s maasailand is burdened with politics and procedural problems that can undermine the gains anticipated in that move moreover in semi arid ecological settings individualization results in unstable land holdings necessitating re contracting and reaggregation by individual parcel owners

collective agricultural production a solution for transition economies abstract the paper examines theoretical reasons and provides examples for productivity differences between agricultural service cooperatives and collectives service cooperatives can utilize economies of scale enhance competitiveness and provide technical information advantages that often outweighed problems of free riding low investment and excessive political intervention agricultural collectives while not adding substantial advantages are in addition associated with problems of supervision and effort supply tendencies to substitute casual workers or mechanization for regular members and low investment incentives while collective forms of organization in transition economies respond to high risk and market imperfections they do so inefficiently policies that create conditions for service cooperatives to compete may lead to large productivity gains

entrepreneurship over the life cycle where are the young entrepreneurs most individuals do not start a business and if they do they start well into their 30s to explain these stylized facts i estimate a dynamic roy model with experience accumulation risk aversion and imperfect information about ability using the panel study of income dynamics information frictions and income risk reduce entrepreneurship by up to 40 and 35 respectively entry costs and information frictions explain most of the delayed entry results from counterfactual policies targeting delayed entry suggest that entrepreneurship education can yield higher returns than subsidies fostering young entrepreneurship yields higher returns than fostering old entrepreneurship

intertemporal discounting and tenurial contracts a simple two period model without uncertainty and strategic complementarity in the labor market or asymmetric information of any kind is employed to study the nature of contracts signed between a landlord and a tenant in a rural economy the paper provides conditions under which different types of contracts may prevail q 2001 elsevier science b v all rights reserved

a natural experiment in jeopardy this paper uses the television game show jeopardy as a natural experiment to analyze behavior under uncertainty and the ability of players to choose strategic best responses the results suggest that while most players bet in a rational manner the failure rate for choosing best responses increases as the betting problem grows more complex and that players choices are affected by the frame of the problem however suboptimal betting tends to decrease as inferior players are driven from the game the data also allow for estimation of the extent of risk aversion the results imply near risk neutrality jel c72 c93

last place aversion evidence and redistributive implications we present evidence from laboratory experiments showing that individuals are last place averse participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution in modified dictator games participants randomly placed in second to last place are the most likely to give money to the person one rank above them instead of the person one rank below last place aversion suggests that low income individuals might oppose redistribution because it could differentially help the group just beneath them using survey data we show that individuals making just above the minimum wage are the most likely to oppose its increase similarly in the general social survey those above poverty but below median income support redistribution significantly less than their background characteristics would predict jel codes h23 d31 c91

effective lower bound risk abstract even when the policy rate is currently not constrained by its effective lower bound elb the possibility that the policy rate will become constrained in the future lowers today s inflation by creating tail risk in future inflation and thus reducing expected inflation in an empirically rich model calibrated to match key features of the u s economy we find that the tail risk induced by the elb causes inflation to undershoot the target rate of 2 by as much as 50 basis points at the economy s risky steady state our model suggests that achieving the inflation target may be more difficult now than before the great recession if the likely decline in long run neutral rates has led households and firms to revise up their estimate of the frequency of future elb events