secular stagnation the effect of aging on economic growth in the age of automation several recent theories emphasize the negative effects of an aging population on economic growth either because of the lower labor force participation and productivity of older workers or because aging will create an excess of savings over desired investment leading to secular stagnation we show that there is no such negative relationship in the data if anything countries experiencing more rapid aging have grown more in recent decades we suggest that this counterintuitive finding might reflect the more rapid adoption of automation technologies in countries undergoing more pronounced demographic changes and provide evidence and theoretical underpinnings for this argument

explaining male wage inequality in the philippines non parametric and semiparametric approaches the study examines the roles of experience and education in explaining the increase in wage inequality among philippine male workers between 1988 and 1995 it also provides a methodological approach to the analysis of wage inequality by combining non parametric methods with semiparametric additive models using the variance accounting framework non parametric density estimators allow flexibility in dealing with distributional inference while additive models yield marginal effects estimates under minimal assumptions on the functional specification of the wage schooling and wage experience relationships the results show that much of the inequality increase from 1988 to 1995 was caused by greater variabilities in returns to schooling and experience among 1995 workers the rise of the p90 p10 percentile ratio was caused by greater return variabilities on schooling and experience in the 90th percentile

impact of income growth and economic reform on nutrition availability in urban china 1986 2000 abstract urban china has experienced rapid income growth over the past 20 years however nutrition availability for the poor declined in the 1990s does this imply a zero or negative income elasticity using a large representative urban sample of repeated cross sectional data for the period 1986 2000 we find that income elasticities of calorie availability are far from zero and the lower the income level the higher the income elasticity the main reason for the reduction in calorie availability in the early 1990s was a sharp increase in food prices afterward calorie availability for the above medium income groups stabilized and then increased for the low income groups calorie availability continued to decline which may be related to the large scale social welfare reform that increased households need to pay for nonfood necessities such as education medical and housing expenses

modeling conditional yield densities given the increasing interest in agricultural risk many have sought improved methods to characterize conditional crop yield densities while most have postulated the beta as a flexible alternative to the normal others have chosen nonparametric methods unfortunately yield data tends not to be sufficiently abundant to invalidate many reasonable parametric models this is problematic because conclusions from economic analyses which require estimated conditional yield densities tend not to be invariant to the modeling assumption we propose a semiparametric estimator that because of its theoretical properties and our simulation results enables one to empirically proceed with a higher degree of confidence copyright 2003 oxford university press

the effect of cohort size on earnings growth a reexamination of the evidence this study reexamines the effect of cohort size on earnings growth finis welch finds that individuals in larger cohorts experience depressed earnings conditions on entry into the labor market but that their earnings grow at faster rates than in smaller cohorts thus a large portion of the cohort size effect on earnings dissipates after a few years however using data almost identical to those of welch but estimating less restrictive models it is found here that cohort size not only depresses earnings at entry but also seems to slow down early career earnings growth the evidence suggests that earnings ini larger cohorts do not approach normal levels after at brief period in the labor force rather the negative cohort size effect on earnings appears to worsen with experience

snow removal auctions in montreal costs informational rents and procurement management using semiparametric and nonparametric estimation techniques we infer cost distributions and informational rents from 457 snow removal contracts o ered for tender by the city of montreal our results are compatible with standard received theory of competitive auctions there is a positive correlation between costs and bids and rents increase with the variance of costs bids and costs have decreased over the sample period while rents remained relatively constant the city deserves credit for these results as it has succeeded in exploiting economies of scale and triggering innovations while maintaining competition further it has been successful in adjusting its reserve prices to keep up with the decreasing cost of snow removal

fiscal institutions fiscal policy and sovereign risk premia in emu we investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest rate spreads of eurozone countries deficits significantly increase risk premia measured by relative swap spreads the effect of deficits is significantly lower under emu this effect partly results from neglecting the role of fiscal institutions after controlling for institutional changes fiscal policy remains a significant determinant of risk premia in emu better institutions are connected with lower risk premia furthermore deficits matter less for risk premia in countries with better institutions markets acknowledge that better institutions reduce fiscal difficulties rendering the monitoring of annual developments less important

the growth of family farms in hungary the article investigates the validity of gibrat s law for hungarian family farms using fadn data collected between 2001 and 2007 gibrat s law states that the growth rate of firms will be independent of their initial size regression results allow us to reject gibrat s law for all quantiles evidence suggests that smaller farms tend to grow faster than larger ones results do not support the hypothesis of disappearing middle in hungarian agriculture we study a number of socio economic factors that can help to explain farm growth we find that total subsidies received by a farm and the farm operator s age are the most significant factors correlated with farm growth

how well do children insure parents against low retirement income an analysis using survey data from urban china abstract as population aging becomes more pronounced in the developing world the uneven implementation of social safety nets raises important questions as to how well traditional family based mechanisms insure elderly incomes when pension systems fail using a unique dataset from a recent household survey conducted in urban china we find evidence that private transfers respond to low household income of retired workers when income falls below the poverty line this finding is consistent with an altruistic motive for transfers at low levels of household income at the same time however the transfer response to elderly pre transfer income is not sufficient to fully cover shortfalls that arise with severe pension arrears and low retirement income

citizen coproduction and efficient public good provision theory and evidence from local public libraries abstract in both public administration and economics efficiency is brought forward as an important criterion for evaluating administrative actions clearly its value as an assessment principle depends on our ability to adequately measure efficiency this article argues that citizen s coproduction in public services requires a careful reassessment of how we approach the measurement of productive efficiency in public service delivery theoretically we illustrate that using observable outcomes e g library circulation school results health outcomes fires extinguished and crimes solved as output indicators is inappropriate and leads to biased estimates of public service providers productive efficiency this bias arises because citizens co determine final outputs leaving them at least partly beyond the service providers control empirically we find supportive evidence of both the existence and importance of such demand induced bias

marginal income tax rates in the united states a non parametric approach abstract the objective of this paper is to estimate both the u s federal marginal income tax rate and the state and local marginal income tax rates we use the non parametric regression method and data on income and tax extracted from u s individual tax model files for the period 1985 1995 the flexibility of the non parametric approach and the information at the individual level enable us to construct a more reliable time series of the average federal marginal income tax rates and that of the average state and local marginal income tax rates our results suggest that the average federal marginal income tax rate varies from 18 2 to 21 8 and the average state and local marginal income tax rate varies from 4 7 to 5 6 we also find that the state and local income tax accounts for roughly 18 of the total income taxes paid during 1985 1995 moreover our analysis shows that stephenson journal of monetary economics 41 1998 pp 389 409 provides the most consistent tax rate series for use in applications that require estimates of tax rates for years prior to 1985

cohort size and the earnings growth of young workers this study used data from the 1968 75 current population surveys cps and the national longitudinal survey of young men nls to examine the effect of cohort size on earnings profiles in the us the elasticity of earnings growth with respect to cohort size was negative in each of the regressions analyzed indicating flatter earnings profiles and slower earnings growth for large cohorts a larger proportion of workers in large cohorts appear to choose occupations with less training content and flatter earnings profiles than workers in small cohorts in addition workers in large cohorts may find it advantageous to reduce their investments in training the negative effect of cohort size generally carried over to other schooling and gender groups only for the 2 lowest male schooling groups in the cps samples were the cohort size elasticities positive the cohort size elasticity displayed a larger negative effect for college graduates than for high school graduates or those with some college education the predicted earnings growth of college graduates is 11 6 less than that of high school graduates using the male cps parameter estimates 25 3 less with the female cps estimates and 6 less with the nls estimates these estimates are consistent with freemans finding that the longitudinal earnings profiles of college graduates have flattened relative to those of high school graduates in recent years since the initial earnings depression caused by cohort size widens with age as larger cohorts move along flatter earnings profiles the baby boom cohorts earnings levels may remain depressed throughout their careers on the other hand the smaller cohorts entering the labor market during the 1980s are likely to experience more favorable labor market conditions and faster earnings growth

financial dependence and growth diminishing returns to improvement in financial development this paper examines how much financial development facilitates economic growth by nonparametrically estimating the effect of financial development on reducing the costs of external finance to firms the data reveal substantial evidence of diminishing returns to improvement in financial development

using semiparametric models to study nutrition improvement and dietary change with different indices the case of china in company with rapid economic growth chinese consumers have seen a remarkable nutrition improvement and a dramatic dietary change this article investigates the driving forces behind these changes with use of the china health and nutrition survey chns data this paper first proposes 10 different indices to measure nutrition improvement and dietary change from different perspectives and then adopts semiparametric panel data models to capture the complicated nonlinear relationship between these nutrition indices and income growth while controlling for other variables parametrically this enables us to directly predict the nutrition improvement and dietary change at different income levels from different aspects this paper particularly finds that nutrition improvement and dietary change will continue in china but will slow down in the future with further income growth

mechanism design with interdependent valuations efficiency ggagents valuations are interdependent if they depend on the signals or types of all agents under the implicit assumption that agents cannot observe their outcome decision payoffs previous literature has shown that with interdependent valuations and independent signals efficient design is impossible this paper shows that an efficient mechanism exists in an environment where first the final outcome e g allocation of the goods is determined then the agents observe their own outcome decision payoffs and then final transfers are made

bidding with securities comment to feasible securities 1 their main finding concerns the role of the steepness of securities in determining the seller s revenue they show that the steeper the payment to the seller as a func tion of the realized value the higher is the seller s expected revenue a shift from a security say a debt to a steeper one say equity or call option flattens the surplus accruing to a bidder as a function of his future realized value and this levels the competitive gaps between bidders hence the competition becomes intensified 2 in this comment we wish to add to dks analysis a caveat that the adverse selection prob lem should be an important part of security and auction design consideration unlike cash bids security bids are difficult to evaluate when the seller does not know the buyer s exact type for instance a 40 percent share of an asset managed by a buyer may be less valuable than a 30 per cent share of the same asset managed by a different buyer if the latter is much more competent lacking such information a seller may fall victim to adverse selection choosing a wrong bidder this problem has been noted by several authors such as william samuelson 1987 simon board 2007 and charles zheng 2001 in the context of a fixed security design our concern here is its relevance for security design we show that the adverse selection problem may lead to rankings of alternative security designs that are quite different from and in fact opposite to those found in dks in particular under a reasonable circumstance a steeper security is more vulnerable to adverse selection and could result in a poorer revenue performance than a flatter security to illustrate suppose there are two buyers 1 and 2 buyer 1 2 has a project which gener ates a gross return of v and requires initial investment cost of x r suppose that vx v2 0 and xx x2 and also that vx xx v2 x2 that is buyer 1 s project generates a higher net return so is efficient to select but requires a higher investment than buyer 2 s project this assumption is reasonable a financially distressed or bankrupt firm will more likely turn profitable again under management willing to infuse more cash for instance or a firm that can generate a greater value from an underperforming target is more likely to have a higher opportunity cost e g of pursuing other target or standalone values the assumption is equally compelling in other contexts such as the government sale of oil leases

distributional effects of general population prescription drug programs in canada canadian household prescription drug expenditures are studied using the statistics canada family expenditure survey masterfiles for periods that include the introduction of provincial general population prescription drug programs budget shares for non senior households are examined over time using non parametric regres sion parametric difference in difference techniques and quantile regression methods the evidence suggests that while program effects are muted when there are high deductibles a non senior prescription drug subsidy is more redistributive than an equal cost proportional income transfer in part because of differential private health insurance coverage by income this is in contrast to previous evidence on canadian senior prescription drug subsidies jel classification 118 j42

what do we really know about wages the importance of nonreporting and census imputation in the most frequently used microdata sets over a quarter of all respondents now refuse to answer some questions about their incomes the census bureau has dealt with this problem which has been increasing in severity over time by imputing incomes of non respondents their imputation procedure called the hot deck essentially matches nonrespondents with demographically similar donors in this paper we evaluate the census imputation methodology and raise some questions first the census procedure is tied to commonality of events in the population rather than the more appropriate informational content of regressors clearly the census procedure severely understates income in certain occupations because it is based on the apparently invalid assumption that income does not affect reporting propensities it most likely understates average incomes as well

the effects of the gender of children on expenditure patterns in rural china a semiparametric analysis we analyse expenditure patterns for rural china focusing on differences between families with boys and girls the sample includes more than 5000 nuclear families from 19 chinese provinces following the existing literature we estimate engel curves for food and for alcohol a typical adult good we use a flexible partially linear specification and allow for endogeneity of total expenditures the results are similar to those of other studies not providing much evidence of gender differentials we then focus on the decision to send a child to school and on the budget share spent on educational goods using both parametric and semiparametric estimates we find evidence that boys are more often sent to school and that expenditures on a boy that goes to school are larger than for a school going girl of the same age copyright 2005 john wiley sons ltd

urbanization and co2 emissions a semi parametric panel data analysis this paper investigates the relationship between urbanization and co2 emissions in a sample of 20 emerging countries over the period 1992 2008 using the semi parametric panel data model with fixed effects proposed by baltagi and li 2002 we find little evidence in support of an inverted u curve and thus the kuznets hypothesis is not confirmed by our analysis our findings shed new light on the urbanization co2 emissions nexus

average crop revenue election a revenue based alternative to price based commodity payment programs this article develops a stochastic model of the average crop revenue election acre program which offers revenue based commodity payments under the 2008 farm act our analysis shows that adding acre revenue payments to gross revenue reduces downside revenue risk for corn wheat and soybean farmers in 2009 on average by 16 21 and 23 respectively results indicate that farms with higher expected yields and lower variance of yields tend to benefit the most from acre integrating federal crop insurance with acre lowers insurance premiums from 10 to 40 depending on the crop and location

unconditional quantile regressions wage growth and inequality in the philippines 2001 2006 the contribution of covariates i implement a two stage procedure to estimate the components of real wage change in the philippines along the wage distribution from 2001 to 2006 as well as the contribution of individual covariates to each component the methodology is based on re centred influence functions rif as suggested by firpo et al 2009 the advantage of this methodology is that it not only decomposes the unconditional wage change at any quantile of the wage distribution but also allows the characterization of the contribution of any single covariate on each component i find that real earnings of males in the philippines declined and the decline along the earnings distribution is generally higher at higher deciles for all males and higher at lower deciles in manila decomposition results are driven by the wage structure component while the composition effect is small and generally positive with education as the main contributor within the wage structure effect the main determinants are associated with changes in the r

fiscal adjustment in eu countries a balance sheet approach abstract several european union countries have recently implemented or are envisaging fiscal operations which improve budgetary figures but have no structural impact on government finances we evaluate some of these measures using a balance sheet approach in particular we examine the degree to which reductions in government debt in eu countries has been accompanied by a decumulation of government assets in the runup to maastricht we find a strong correlation between changes in government liabilities and government assets and larger declines in government assets in countries starting from higher public debt levels

risk and the value of bt corn a conceptual model is developed to evaluate the effect of bt corn on risk results highlight the importance of distinguishing between marginal and aggregate risk effects and demonstrate that the effect of bt corn on risk depends crucially on the price paid for the technology empirical results show that depending on the price bt corn can be marginally risk increasing or decreasing and can either increase or decrease corn acreage also depending on the price bt corn can provide a risk benefit to farmers even when bt corn is risk increasing bt corn is genetically engineered to produce a protein found in the soil bacterium bacillus thuringiensis bt the protein is toxic to lepidopterous insects such as the european

decomposing changes in wage distributions a unified approach over the last fifteen years many researchers have attempted to explain the determinants and changes of wage inequality i propose a simple procedure to decompose changes in the distribution of wages or in other distributions into three factors changes in regression coefficients the distribution of covariates and residuals the procedure requires only estimating standard ols regressions augmented by a logit or probit model it can be extended by modelling residuals as a function of unmeasured skills and skill prices two empirical examples showing how the procedure works in practice are considered in the first example sources of differences in the wage distribution in alberta and british columbia are considered in the second sources of change in overall wage inequality in the united states 1973 99 are re examined finally the proposed procedure is compared with existing procedures jel classification j3 la decomposition des changements dans les distributions de salaires une approche unifee au cours des quinze dernieres annees nombre d etudes se sont penchees sur les determinants et les changements de la distribution des salaires ce memoire propose une procedure pour decomposer les changements de la distribution des salaires en trois elements les changements dans les coefficients de regression la distribution des regresseurs et les changements residuels cette procedure ne necessite que l estimation de regressions par moindre carres ordinaires et d un modele probit ou logit l auteur montre aussi comment modeliser les residus en fonction de competences non mesurees la procedure proposee est mise en application dans le contexte de deux exemples la distribution des salaires en alberta et en colombie britannique et les changements dans la distribution des salaires de 1973 a 1999 aux etats unis le memoire examine aussi comment cette procedure se compare aux methodes proposees par d autres chercheurs

testing day s conjecture that more nitrogen decreases crop yield skewness whilecontroversysurroundsskewnessattributesoftypicalyielddistributions abetterunderstandingis importantforagriculturalpolicyassessmentandforcrop insuranceratesetting day 1965 conjectured that crop yield skewness declines with an increase in nitrogen use at low levels but not at higher levels employing four corn yield experimental plot datasets we investigate the conjecture by introducing a a flexible bayesian extension of the just pope technology to incorporate skewness and b a quantilebased measure of skewness shift bayesian estimation provides strong evidence in favor of negative skewnessatcommercialnitrogenratesandforday sconjecture therewasweakerevidenceinfavorof positively skewed cotton yield and little evidence in favor of the conjecture the results are confirmed by the quantile based measure we also find evidence that skewness becomes more negative upon moving from corn after corn to corn after soybean

a likelihood approach to estimating market equilibrium models this paper develops a new likelihood based method for the simultaneous estimation of structural demand and supply models for markets with differentiated products we specify an individual level discrete choice model of demand and derive the supply side assuming manufacturers compete in prices the proposed estimation method considers price endogeneity through simultaneous estimation of demand and supply allows for consumer heterogeneity and incorporates a pricing rule consistent with economic theory the basic idea behind the proposed estimation procedure is to simulate prices and choice probabilities by solving for the market equilibrium by repeating this many times we obtain an empirical distribution of equilibrium prices and probabilities the empirical distribution is then smoothed and used in a likelihood procedure to estimate the parameters of the model the advantage of this method is that it avoids the need to perform a transformation of variables if the tastes of consumers are independent across market periods our approach yields maximum likelihood estimates otherwise it yields consistent but not fully efficient partial likelihood estimates

do households prefer small school districts a natural experiment author affiliation h spencer banzhaf hsbanzhaf gsu edugarima bhalla gbhalla live unc edu acknowledgment we thank rajashri chakrabarti rob fleck jason fletcher john pepper jesse rothstein holger sieg david sjoquist todd sorensen christiana stoddard randall walsh anonymous referees and participants of a session at the 2006 southern economic association meetings and seminars at montana state university and the university of pittsburgh for valuable comments 1 introductionperennial discontent with the quality of public education in the united states is a constant motivation for new educational reforms one potential reform is to break up large urban school districts into smaller districts 1 this proposal emerges from two lines of logic first large districts may suffer from substantial diseconomies of scale a recent review of the evidence concludes that diseconomies may emerge in districts with as few as 15 000 students andrews duncombe and yinger 2002 see also barrow and rouse 2004 and duncombe miner and ruggiero 2005 by comparison the urban districts of new york city los angeles and chicago handle as many as 1 1 million 727 000 and 421 000 students respectively a second line of logic is that breaking up large school districts would provide more choice for households in particular the smaller districts may be differentiated horizontally with some emphasizing math others reading others specific extra curricular courses and so forth since smaller districts can respond better to parental input these differences can reflect local tastes additionally the new districts would have to compete with one another for students enhancing their incentive to improve their performance borland and howsen 1992 hoxby 2000 hanushek and rivkin 2003 sandstrom and bergstrom 2005 these reforms are subject to a market test following the logic of tiebout 1956 households should respond to exogenous changes in public goods by voting with their feet that is moving into improving communities and bidding up prices 2 consequently if households perceive that decentralizing large school districts is desirable for any of these reasons we would expect the ceteris paribus demand for housing to increase in school districts undergoing such reforms relative to nearby substitutes this article examines just such a market test studying the effect on local real estate markets surrounding the april 2000 breakup of the los angeles unified school district lausd into 11 subdistricts this breakup was only partial insofar as official authority remained vested in a single school board nevertheless the breakup delegated substantial power to a more local level creating 11 new superintendents and devolving authority over educational policy and curricula to the new subdistricts we employ a difference in differences hedonic methodology comparing changes in real estate prices before and after the breakup announcement within the lausd area to price changes in nearby districts our approach has three distinct advantages first the october 1999 announcement of the breakup plan was abrupt and surprising and was swiftly followed by official passage in april 2000 because the announcement was so abrupt and so well covered by the media we have an excellent proxy for households expectations and it is expectations after all that govern market behavior our proxies for expectations are based on the announcement date the implementation date and in some models an index of newspaper coverage second few of the benefits of the reform would be likely to spill over into other school districts making the lausd border a sharp boundary defining relevant control groups third the lausd area is not coextensive with the city of los angeles but rather includes some 24 cities this implies that any other potentially confounding political events over the period would affect real estate markets in only a portion of the lausd rather than the whole area a possibility that we can test

public versus private production and economies of scale the cost of producing the same good often differs substantially for public and private producers we investigate the effect of organization in a case where the production technology is simple the cleaning of danish schools three forms of organization are used decentral municipal central municipal or private for small schools the organizational form has little impact on cost for larger schools decentral municipal production is the most expensive on average centralization reduces costs by 5 while privatization reduces costs by 30 similar cost differences are reported in the literature for other cases but it is a new result that the cost differences are due to economies of scale public choice theories predict that cost differences are due to ownership or competition we find evidence that both theories help explain the cost differences

the effects of drug subsidies on out of pocket prescription drug expenditures by seniors regional evidence from canada abstract between 1970 and 1986 all canadian provinces introduced some version of a prescription drug subsidy for those aged 65 years or over and since 1986 all the provinces have increased copayments or deductibles to some degree employing a first order approximation to the welfare gains from a subsidy we find evidence that these subsidies have been less redistributive than an absolute per household cash transfer but slightly more redistributive than a transfer that would increase each household s income by the same percentage such evidence may have relevance for predicting the redistributive effects of a potential national prescription drug plan for seniors in the us

optimal equity auctions with heterogeneous bidders abstract i analyze the effects of heterogeneity in terms of bidders valuation distributions and standalone values in equity auctions auctions in which bidders offer equities rather than cash heterogeneity misaligns equity bids face values monetary values and bidder types making the seller s revenues sensitive to the auction design given heterogeneity i identify the mechanism that maximizes the expected revenue among all incentive compatible mechanisms of equity auctions i show how different sources of heterogeneity alter the optimal design revenues and allocational efficiency unlike optimal cash auctions myerson 1981 where bidders standalone values are irrelevant the allocation of optimal equity auctions favors bidders with lower standalone values because the seller can extract a larger proportion of their rents by contrast when bidders differ only in valuation distributions optimal equity auctions feature more efficient allocations than optimal cash auctions

efficient dynamic mechanisms with interdependent valuations this paper considers a dynamic environment with interdependent valuations and evolving private information under the assumption of independent types we construct an efficient incentive compatible mechanism that is also budget balanced in every period of the game our mechanism works in environments where in each period each agent observes her own realized outcome decision payoff from the previous period this extends the insight of mezzetti 2004 to the dynamic setting

using repayment data to test across models of joint liability lending theories rationalising joint liability lending are rich in implications for repayment rates we exploit this fact to test four diverse models we show that the models repayment implications do not always coincide for example higher correlation of output and borrowers ability to act cooperatively can raise or lower repayment depending on the model data from thai borrowing groups suggest that repayment is affected negatively by the joint liability rate ceteris paribus and social ties and positively by the strength of local sanctions and correlated returns further the relative fit of the adverse selection versus informal sanctions models varies by region

understanding different migrant selection patterns in rural and urban mexico abstract the productive characteristics of migrating individuals emigrant selection affect welfare the empirical estimation of the degree of selection suffers from a lack of complete and nationally representative data this paper uses a dataset that addresses both issues the enet mexican labor survey which identifies emigrants right before they leave and allows a direct comparison to non migrants this dataset presents a relevant dichotomy it shows negative selection for urban mexican emigrants to the united states for the period 2000 2004 together with positive selection in mexican emigration out of rural mexico to the united states in the same period three theories that could explain this dichotomy are tested whereas higher skill prices in mexico than in the us are enough to explain half of the negative selection result in urban mexico its combination with network effects and wealth constraints fully accounts for positive selection in rural mexico

a new measure of horizontal equity in this paper we propose a new measure of horizontal equity that overcomes many of the shortcomings of previous proposed measures our starting point is the observation that a well behaved social welfare function need not evaluate global vertical equity differences in after tax income using the same weights it applies to local horizontal equity differences even though this constraint has been applied in the past following work on the structure of individual preferences we show that a social welfare function can imply different preferences toward horizontal and vertical equity adopting the general approach to the measurement of inequality developed by atkinson 1970 we use such a social welfare function to derive measures of inequality that are decomposable into components naturally interpreted as indices of horizontal and vertical equity in particular the former index measures deviations from the fundamental principle that equals be treated equally finally we apply our new measure to two tax return data sets evaluating the degree to which the horizontal equity of the us personal income tax has changed over time and how horizontal equity would be altered by one version of recent proposals to do away with the so called marriage penalty this abstract was borrowed from another version of this item

horizontal mergers with synergies cash vs profit share auctions we consider takeover bidding in a cournot oligopoly when firms have private information concerning the synergy effect of merging with a takeover target and bidders can influence rivals beliefs through their bids we compare cash and profit share auctions first and second price supplemented by entry fees since non merged firms benefit from a merger if synergies are low bidders are subject to a positive externality with positive probability nevertheless pooling does not occur unlike cash auctions profit share auctions are not revenue equivalent and the second price profit share auction is more profitable than the other auctions

defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can b e defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whol e story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of governme nt narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these is sues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

increasing wage dispersion and the changes in relative employment and wages in mexico s urban informal sector 1987 1993 this study analyses the role of changes in informal formal relative employment wage levels and wage inequality in explaining increasing wage dispersion in mexico during the 1987 1993 period from 1987 to 1993 the variance of the log of hourly wages for mexican workers increased by more than 50 per cent using data from the encuesta nacional de empleo urbano we find that this increase in the overall wage dispersion was mainly driven by increasing wage dispersion in the formal sector coupled with a faster growth in formal sector employment as a percentage of total employment however compression in the distribution of wages within the informal sector contributed to substantially slowdown the increasing overall wage inequality about 60 per cent of the 1987 1993 4 65 percentage point reduction in the informal sector share of total employment is explained by changes in the structure that determines sectoral employment the rest is explained by changes in the composition of the labour force particularly in

nonparametric regression techniques in economics this introduction to nonparametric regression emphasizes techniques that might be most accessible and useful to the applied economist the paper begins with a brief overview of the class of models under study and central theoretical issues such as the curse of dimensionality the bias variance trade off and rates of convergence the paper then focuses on kernel and nonparametric least squares estimation of the nonparametric regression model and optimal differencing estimation of the partial linear model constrained estimation and hypothesis testing is also discussed empirical examples include returns to scale in electricity distribution and hedonic pricing of housing attributes

calvin s restrictions on interest guidelines for the credit crisis calvin s view on the legitimacy of interest has had a great impact on the economic development of western society although calvin took a fundamentally positive attitude to interest he also proposed several restrictions on the charging of interest in this article we investigate the relevance of these restrictions to the current credit crisis we find that each of them provides a relevant interpretation of what went wrong in the buildup of the credit crisis and gives directions to improve policies of banks and governments as well

empirical age earnings profiles the human capital earnings function in which earnings are expressed as a quadratic in potential experience is probably the most widely accepted empirical specification in economics in spite of its widespread acceptance the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience the standard formulation understates early career earnings growth by about 30 50 and overstates midcareer growth by 20 50 however simple alternative specifications that fit the data are available

thresholds in the process of international financial integration abstract the financial crisis has re ignited the fierce debate about the merits of financial globalization and its implications for growth especially for developing countries the empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration indeed a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses a major complication however is that there seem to be certain threshold levels of financial and institutional development that an economy needs to attain before it can derive the indirect benefits and reduce the risks of financial openness in this paper we develop a unified empirical framework for characterizing such threshold conditions we find that there are clearly identifiable thresholds in variables such as financial depth and institutional quality the cost benefit trade off from financial openness improves significantly once these threshold conditions are satisfied we also find that the thresholds are lower for foreign direct investment and portfolio equity liabilities compared to those for debt liabilities

spatial inequality and development is there an inverted u relationship abstract this paper studies the hypothesis of an inverted u shaped relationship between spatial inequality and economic development the theory of kuznets 1955 and williamson 1965 suggests that spatial inequality first increases in the process of development and then decreases to test this hypothesis i have used a unique panel data set of spatial inequalities in 56 countries at different stages of economic development covering the period 1980 2009 parametric and semiparametric regressions are carried out using cross section and unbalanced panel data the results provide strong support for the existence of an inverted u i also find some evidence that spatial inequalities increase again at very high levels of economic development

the demand for ethanol as a gasoline substitute abstract this paper estimates household preferences for ethanol e85 as a gasoline e10 substitute i develop a theoretical model linking the shape of the ethanol demand curve to the underlying distribution among households of willingness to pay for ethanol i estimate the model using instrumental variables techniques and data from many retail fueling stations i find that a 0 10 per gallon increase in ethanol s price relative to gasoline leads to a 12 16 decrease in the quantity of ethanol demanded my findings imply that preferences for ethanol are heterogeneous and that a substantial fraction of households are willing to pay a premium for the fuel this reduces substantially the simulated efficiency cost of an ethanol content standard since some households choose ethanol without large subsidies mitigating deadweight losses

scale economies in electricity distribution a semiparametric analysis we estimate the costs of distributing electricity using data on municipal electric utilities in ontario canada for the period 1993 5 the data reveal substantial evidence of increasing returns to scale with minimum efficient scale being achieved by firms with about 20 000 customers larger firms exhibit constant or decreasing returns utilities which deliver additional services such as water sewage have significantly lower costs indicating the presence of economies of scope our basic specifications comprise semiparametric variants of the translog cost function where output enters non parametrically and remaining variables including their interactions with output are parametric we rely upon non parametric differencing techniques and extend a previous differencing test of equality of non parametric regression functions to a panel data setting copyright 2000 john wiley sons ltd

nonparametric efficiency estimation in stochastic environments this paper develops a new nonparametric model for efficiency estimation in contrast to data envelopment analysis dea it does not impose debatable production assumptions like free disposability and convexity and it does not assume that the data are measured without error the estimators are asymptotically unbiased and have an asymptotic variance that is comparable to that of stochastic frontier estimators provided the latter use a correct specification of the functional form for the production relationships in addition the estimators can be computed using a simple enumeration algorithm

the effectiveness of institutional borrowing restrictions empirical evidence from spanish municipalities the need for restrictions on borrowing by subnational governments is a generally accepted notion that is justified both by public choice theory and by the fact that such restrictions are in force in the majority of decentralized countries furthermore recent breaches of the stability and growth pact of the european union have led to the introduction of legislative tools aimed at balancing the budget at all levels of government have come to the forefront of interest in european public finance research this paper is concerned with the financial situation and debt level of spanish municipalities from 1988 to 2000 we have two main objectives the first is to assess the value of mandatory limitations on municipal borrowing and past trends in the borrowing policies adopted by spanish local authorities the second is to develop an econometric model using panel data stratified by population size to measure indebtedness in spanish municipalities these measures enable us to formulate a series of hypotheses to explain municipal borrowing practices which are then tested empirically the evidence thus obtained appears to support the effectiveness of institutional borrowing restrictions to introduce some financial discipline in the borrowing policies adopted by local governments in spain

economies of scale and gender discrimination in transition the case of the republic of tajikistan this article tests for economies of scale and for evidence of discrimination based on gender lines in intra household consumption allocations using data from the living standards survey in the republic of tajikistan tlss overall results support the existence of household economies of scale in tajikistan however empirical evidence supporting boy girl discrimination is limited despite anecdotal evidence otherwise

the second engel law is it a paradox abstract the second engel law says that the engel curve for food moves out as family size increases thus showing a decrease in welfare what is puzzling though is that this regularity does not hold for equivalent income functions expressed in per capita terms deaton and paxon 1998 economies of scale household size and the demand for food journal of political economy 106 5 897 930 show that holding per capita total household expenditure constant per capita expenditure on food falls with the number of heads deaton and paxson s empirical evidence from developed and less developed countries seems to invalidate the claim of the second engel s law the main objective of this paper is to understand such paradoxical relationship between food consumption and household size our nonparametric empirical evidence drawn from the colombian 1985 urban survey shows that the food share is negatively related to total household per capita expenditure in line with deaton and paxson s claim but equivalent incomes shift to the right as theory predicts the regularity of our nonparametric results is an indication of a problem in the parametric specification of the engel curve modified by family size in fact using also the surveys of italy nepal djibouti and bangladesh we show that a theoretically plausible modified engel curve is coherent with the claim of the second engel law and explains deaton and paxson s paradox

public accounting fudges towards emu a first empirical survey and some public choice considerations this paper analyses some one off measures and other accounting tricks that eu member states have been using to qualify for emu membership moving from empirical evidence to strategic goals this investigation brings to the fore three crucial issues the weakness of the methodological rules of the european system of accounts used to assess budgetary convergence in line with the maastricht treaty the open ended definition of the required budgetary discipline the shortcomings of the excessive deficit procedure enforced through the stability pact the conclusion urges a return to a strict annual balance requirement for governments current accounts to impede strategic adjustments of budgetary positions that are in fact creative accounting operations

the relation between variance and information rent in auctions abstract this paper examines the conventional wisdom expressed in mcafee and mcmillan s 1987 widely cited survey paper on auctions that links increased variance of bidder values to increased information rent we find that although the conventional wisdom does indeed hold in their 1986 model of a linear contract auction this relationship is an artifact of that particular model and cannot be generalized using samuelson s 1987 model which is similar but allows for unobservable costs we show that increased variance does not always imply increased information rent finally we give the appropriate measure of dispersion different from variance that provides the link between the bidder value distribution and information rent

the effects of cognitive ability and high school quality on college entry decisions nonparametric estimation of parameters of interest the decisions to attend college are analysed and nonparametric predictions compared to those obtained from the widely used logit model the impacts of measured cognitive ability and proxies for high school quality on the decisions to attend college are examined for a sample of white and black males and females from the usa two different parameters of interest which isolate the effects of ability and high school quality on college entry decisions are described and estimated by integrating out the effect of other covariates it is found that measured cognitive ability is an extremely important determinant of college entry for all race and gender groups at the same point in the ability distribution blacks are more likely to select into college than whites and females more likely than males of the same racial group proxies for high school quality such as teacher education student teacher ratios school enrolment and library size are shown to have little or no effects on the likelihood of college entry

nonparametric and semiparametric methods for economic research abstract developments in the vast and growing literatures on nonparametric and semiparametric statistical estimation are reviewed the emphasis is on useful methodology rather than statistical properties for their own sake some empirical applications to economic data are described the paper deals separately with nonparametric density estimation nonparametric regression estimation and estimation of semiparametric models

the essential economics of threshold based incentives theory estimation and evidence from the western states 100 abstract many public and private entities utilize incentive systems in which improvements in measured performance are rewarded only when the agent crosses some pre specified threshold this paper comprehensively analyzes the effects of these incentive systems on effort the net benefits of effort and the accuracy of information about agents performance and lays out methods for estimating each these methods are then used to reveal the motivations physiological limits and racing strategy of ultramarathoners trying to complete a one hundred mile race in under twenty four hours

efficient mechanisms for mergers and acquisitions we characterize incentive ecient merger outcomes when payments can be made both in cash and stock each firm has private information about both its stand alone value and a component of the possibly negative potential synergies we study two cases when transfers can and cannot be made contingent on the value of any new firm when they can we show that redistributing shares of any non merging firm generates information rents and provide necessary and sucient conditions for the implementability of ecient merger rules when they cannot private information undermines eciency more when it concerns stand alone values

estimating the benefits of targeted r d subsidies we study the expected welfare effects of targeted r d subsi dies using project level data from finland we model the application and r d investment decisions of firms and the subsidy granting decision of the public agency in charge of the program our model and institutional environment allow us to identify different benefits and costs of the r d subsidy program we find that expected effects of subsidies are very het erogeneous and estimated application costs low on average the social rate of return on targeted subsidies is 30 to 50 but spillover effects of subsidies are smaller than effects on firm profits

bidding with securities auctions and security design we study security bid auctions in which bidders compete for an asset by bidding with securities that is they offer payments that are contingent on the realized value of the asset being sold the value depends on investment by the winner thus creating the possibility of moral hazard such auctions are commonly used both formally and informally in formal auctions the seller generally restricts bids to an ordered set such as an equity share or royalty rate by restricting the bids standard auction formats such as first and second price auctions can be used in informal settings with competing buyers the seller does not commit to a mechanism upfront rather bidders offer securities and the seller chooses the most attractive bid based on his beliefs ex post we characterize equilibrium payoffs and bidding strategies in this setting and show that an informal mechanism yields the lowest possible revenues across all mechanisms we also determine the optimal formal mechanism and show that the security design is more important than the auction format we show that the revenue equivalence principle that expected revenues are independent of the auction format holds if the set of permissible securities is ordered and convex such as equity otherwise it need not hold for example when bidders offer standard debt securities a second price auction is superior on the other hand if bidders compete on the conversion ratio of convertible debt a first price auction yields higher revenues finally we examine how different forms of moral hazard impact our results

parametric and semiparametric model representations of the conditional mean of wages do they make a difference against nonparametric ones this study is concerned with the validation of parametric functional representations of the conditional mean of wages using philippine data this is done in the light of studies confirming relative

what do deficits tell us about debt empirical evidence on creative accounting with fiscal rules in the eu fiscal rules such as the excessive deficit procedure and the stability and growth pact sgp aim at constraining government behavior milesi ferretti 2003 develops a model in which governments circumvent such rules by reverting to creative accounting the amount of this depends on the reputation cost for the government and the economic cost of sticking to the rule we provide empirical evidence of creative accounting in the european union we find that the sgp rules have induced governments to use stock flow adjustments a form of creative accounting to hide deficits the tendency to substitute stock flow adjustments for budget deficits is especially strong for the cyclical component of the deficit as in times of recession the cost of reducing the deficit is particularly large

optimal equity auctions with two dimensional types abstract we analyze the design and performance of equity auctions when bidder s valuations and opportunity costs are private information distributed according to an arbitrary joint density that can differ across bidders we identify for any incentive compatible mechanism an equivalent single dimensional representation for uncertainty we then characterize the revenue maximizing and surplus maximizing equity mechanisms and compare revenues in optimal equity and cash auctions unlike in cash auctions the adverse selection arising from bidders two dimensional types in equity auctions can lead to a global violation of the regularity condition which represents a maximal mismatch between incentive compatibility and maximization of revenue or surplus such mismatch can lead a seller to exclude bidders and demand a bidder specific stake from a non excluded bidder providing insights into when a firm should employ an auction and when it should just negotiate with a single bidder

nonparametric estimation of exact consumers surplus and deadweight loss we apply nonparametric regression models to estimation of demand curves of the type most often used in applied research from the demand curve estimators we derive estimates of exact consumers surplus and deadweight loss which are the most widely used welfare and economic efficiency measures in areas of economics such as public finance we also develop tests of the symmetry and downward sloping properties of compensated demand we work out asymptotic normal sampling theory for kernel and series nonparametric estimators as well as for the parametric case the paper includes an application to gasoline demand empirical questions of interest here are the shape of the demand curve and the average magnitude of welfare loss from a tax on gasoline in this application we compare parametric and nonparametric estimates of the demand curve calculate exact and approximate measures of consumers surplus and deadweight loss and give standard error estimates we also analyze the sensitivity of the welfare measures to components of nonparametric regression estimators such as the number of terms in a series approximation

one and multi directional conditional efficiency measurement efficiency in lithuanian family farms abstract this paper analyses farming efficiency by the means of the partial frontiers and multi directional efficiency analysis mea in particular we apply the idea of the conditional efficiency framework to the mea approach to ensure that observations are compared to their homogeneous counterparts moreover this paper shows that combining the traditional one directional and multi directional efficiency framework yields valuable insights it allows one to identify what factors matter in terms of output production and input consumption the application deals with lithuanian family farms for which we have a rich dataset the results indicate that the output efficiency positively correlates to a time trend and negatively to the subsidy share in the total output the mea based analysis further suggests that the time trend has been positively affecting the productive efficiency due to increase in the labour use efficiency meanwhile the increasing subsidy rate has a negative influence upon mea efficiencies associated with all the inputs

defining the government s debt and deficit defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can be defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whole story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of government narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these issues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

automobile prices in market equilibrium with unobserved price discrimination in markets where sellers are able to price discriminate or the buyers to bargain individuals receive discounts over the posted prices that are usually not observed by the econometrician this paper considers the structural estimation of a demand and supply model a la berry et al 1995 when only posted prices are observed we consider that heterogeneous discounts occur due to price discrimination by firms on observable characteristics of consumers within this framework identification is achieved by assuming that the marginal costs of producing and selling the goods do not depend on the characteristics of the buyers we also require a condition relating the posted prices to the prices actually paid for instance we can assume that at least one group of individuals pays the posted prices under these two conditions the demand and supply parameters as well as the exact discounts corresponding to each type of consumers can be identified we apply our methodology to estimate the demand and supply in the new automobile market in france results suggest that discounting arising from price discrimination is important the average discount is estimated to be 10 5 with large variation depending on the buyers characteristics and cars specifications our results are in line with discounts generally observed in european and american automobile markets

what do we know about global income inequality in this paper we review the recent literature on global interpersonal income inequality while all estimates agree that the level is very high with a gini of between 0 630 and 0 686 in the 1990s there is no consensus regarding the direction of change we discuss methodological issues including the use of national accounts versus survey based estimates of mean income or consumption and the choice of purchasing power parity exchange rates findings of a rise or fall in global income inequality are not robust across different estimation methods and datasets given the diversity of estimates and various sources of uncertainty including gaps and errors in the underlying data we conclude there is insufficient evidence to determine the direction of change in global interpersonal inequality in recent decades