carbon dioxide emissions and governance a nonparametric analysis for the g 20 this paper applies nonparametric estimators to examine countries carbon dioxide co2 emissions and governance relationship by using data for the time period 1996 2010 of the twenty largest economies group of twenty g 20 the dynamics of the considered relationship are analyzed six governance measures are included in our analysis voice and accountability political stability and absence of violence government effectiveness regulatory quality rule of law and control of corruption as have been defined in world governance indicators from the world bank the empirical findings reveal a nonmonotonic relationship between countries co2 emissions and the examined governance measures in addition and with respect to the environmental policy makers a significant difference on the number of governance measures influencing countries carbon dioxide emissions which is subject to countries specific regional and development variations is recorded finally the carbon dioxide emissions governance relationship is highly nonlinear and appears that countries higher governance quality does not always result to lower carbon dioxide emission levels

the rotten kid theorem meets the samaritan s dilemma a familiar result in the economic theory of the family is becker s rotten kid theorem this theorem states that altruism by a family member will lead other selfish members to act efficiently from the family viewpoint we extend becker s one period model to two periods and show that parental altruism can result in an inefficiency known in other contexts as the samaritan s dilemma implications of this for transfer arrangements within the family and for the ricardian equivalence theorem are drawn

the role of property rights in determining the environmental quality income relationship article i nfo this paper examines the role of property rights in shaping the relationship between environmental quality and income it develops an analytical framework that integrates the effects of property rights evolution natural resource attributes agent characteristics and production technology on the environment income relationship the substantive strength of this framework lies in its ability to rationalize a wide range of environment income relationships the model shows that the u shaped environment income relationship which is consistent with the environmental kuznets curve ekc hypothesis can arise only under specific model conditions thus the framework provides an additional explanation for non universality of ekc we provide evidence in support of our framework from case studies of various natural resources

children as collective goods and divorce settlements the failure of many divorced fathers to comply with court mandated child support awards has been identified as a major reason why a growing number of children live in poverty in female headed households this paper presents a model that seeks to explain why so many divorced fathers allow their children s welfare to suffer as a consequence of divorce the point of departure is the recognition that children are collective consumption goods from the point of view of the father and mother within marriage proximity and altruism serve to overcome the free rider problem associated with the provision of public goods however on divorce the noncustodial parent suffers a loss of control over the allocative decisions of the custodial parent and it is not feasible for the couple to achieve a pareto optimal allocation of their joint resources a model of optimal marriage contracts is constructed in which a couple decides on the allocation of resources within marriage and on the terms of a settlement in the event

the influence of private contractual failure on regulation the case of oil field unitization an analysis of the interdependence between regulation and private contractual failure reveals that the feasible range of regulation is restricted by the same forces that block private agreement the focus of the study is oil field unitization regulation in oklahoma texas and wyoming federal lands from 1948 through 1975 despite large potential gains from unitization private negotiations fail because of lease heterogeneities and information problems regarding lease value estimates in response the federal and state governments have adopted strikingly different policies to encourage unitization with different results only the federal government s regulations are effective because they surmount information problems texas has the least successful regulation the paper argues that the policy differences are due to the political influence of small firms that benefit from nonunitized production 25 references 2 tables

evolution of population resource dynamics models abstract this paper provides a comprehensive analysis of brander and taylor s 1998 model and its descendants from the following perspectives population growth substitutability innovation capital accumulation property rights and institutional designs and modeling approach this survey aims to contribute to a better understanding of population and resource dynamics models in general and facilitate further application of the model framework to relevant circumstances although often treated as exogenous in optimal growth models making population growth an endogenous function allows us to analyze broader effects of economic activities on population the issues of substitutability innovation and capital accumulation are intertwined allowing a model to address the effect of an endogenous technological change on substitutability between natural and man made capital facilitates our analyses of sustainability issues to address internalizing inter generational externalities in resource use incorporating property right changes and institutional designs to this type of model is a useful exercise but careful attention is needed for the consistency between such an arrangement and the mathematical representation of the depicted economy finally although the common criticism regarding convenient mathematical assumptions applies to the existing bt type models the use of computer simulation can relax such assumptions to better represent the intended relationships between the relevant variables

tax planning of married couples and intra household income inequality abstract this paper examines tax planning of married couples under separate taxation it shows that concerns about the intra household income distribution prevent couples from minimizing tax payments the empirical analysis exploits a specific feature of the german tax system which allows married couples to save taxes by deviating from the default symmetric payroll tax treatment and assigning favorable tax treatment to the primary earner and unfavorable tax treatment to the secondary earner based on a representative random sample of individual tax files we find that a couple is less likely to choose the tax minimizing treatment if tax planning is associated with a larger decline of the net of tax income of the secondary earner this applies regardless of whether the husband or the wife is the main earner however couples where the wife is the main earner are generally more reluctant to assign the more favorable tax treatment to the wife

the family as the health producer when spouses are nash bargainers the grossman model is extended to a situation in which the family is regarded as the producer of individual health and spouses are nash bargainers the model has implications for the interaction between family structure income and the stocks of health capital and the bargaining strength of different family members the main insight is that the possibility of divorce affects the distribution of health capital between family members we analyse inter alia the impact on the distribution of health particularly regarding child health of changes in family policies related to the dissolution of the family

mommy tracks and public policy on self fulfilling prophecies and gender gaps in hiring and promotion abstract consider a model with two types of jobs the profitability of hiring a worker to a fast track job depends not only on his or her observable talent but also on incontractible effort we investigate whether self fulfilling expectations may lead to higher hiring or promotion standards for women if employers expect women to do more household work than men thereby exerting less effort in their paid job then women must be more talented to make it profitable to hire them specialization in the family will then result in women doing most of the household work such self fulfilling prophecies can be defeated by affirmative action or family policy however it is unlikely that temporary policy can move the economy to a symmetric equilibrium policy must be made permanent anti discrimination policy need not enhance efficiency and from a distribution viewpoint this is a policy with both winners and losers

neoclassical growth the j curve for abatement and the inverted u curve for pollution abstract this paper reexamines the neoclassical environmental growth model of forster to gain insights into the dynamic relationships among pollution abatement effort and economic development whereas the model has heretofore been used to examine steady state levels of capital consumption and environmental quality it also provides a theoretical basis for recent empirical research on j curves for abatement effort and inverted u curves for pollution

a theoretical basis for the environmental kuznets curve abstract this paper attempts to explain the environmental kuznets curve ekc or inverted u shaped relationship between income and environmental degradation in the framework of endogenous growth model considering a closed economy one part of capital is used for commodity production which generates pollution that degrades existing environment and the remaining part is used for abating pollution i e upgrading environment sufficient abatement activity improves restores environmental quality a sufficient abatement activity associated with commodity production could only lead optimally towards steady state the ratio of allocation of capital between two sectors production and abatement is fixed along the optimal path but it varies along the non optimal path that exists in the off steady state in the economy allocation of capital for abatement activity varies over time thus a change from insufficient to sufficient allocation of capital i e investment for abatement activity is the basis for an inverted u shaped relationship between environmental quality and economic growth

nash bargained household decisions reply pierre andre chiappori s 1988 claim that the nash bargaining model is of weak empirical relevance and neither convenient nor really restrictive is incorrect nash bargained household behavior implies a rich set of empirical implications extending well beyond the pareto efficiency of intrafamily distributions by systematically accounting for the impact of opportunities outside the family on resource distribution within the family nash bargained demand theory considerably expands the scope of neoclassical demand theory such expansion can elucidate issues ranging from the impact of alimony and child support laws in developed societies to the intrafamily distribution of nutrition in less developed countries copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the mix of social and private provision of goods and services abstract in some countries health insurance and education are supplied as social goods at near zero prices and funded from taxation this paper analyses a case where such provision competes with income supplements as a redistribution device and where taxes or transferable vouchers influence the take up of the social goods compared to alternatives available in a private market each consumer chooses to consume either social or private goods and a vertical market segmentation results from differential demand for quality

the saving behaviour of a two person household the facts that wives are typically younger than their husbands and that women typically live longer than men imply that wives may have more incentive to save for old age than do husbands a theoretical model of the determination of household saving and portfolio choice is introduced which takes into account differences in preferences for saving the most important result is that the level and the composition portfolio of saving and the time path of consumption are dependent on the distribution of income within the household women typically live longer than men and wives are typically younger than their husbands these two facts imply that preferences about saving for old age in married households with forward looking members may differ between husband and wife this paper presents a theoretical analysis of saving and portfolio behaviour if the members of the household have differ ent preferences over future consumption as compared to current consump tion the analysis stands in contrast to unitary models of household intertemporal allocation which assume that the household has a single utility function thus this paper is a contribution in a novel context to the burgeoning literature on intra household decision making the base case analysis is for a simple two person husband and wife1 two period model in which there is only one asset saving it is assumed that because of the two facts given at the start of the introductory paragraph the husband discounts the future more than the wife in section ii the implications of a non cooperative decision making process for the base case are derived see ulph 1988 for a non cooperative model of demand and

comparison friction experimental evidence from medicare drug plans consumers need information to compare alternatives for markets to function efficiently recognizing this public policies often pair competition with easy access to comparative information the implicit assumption is that comparison friction the wedge between the availability of comparative information and consumers use of it is inconsequential because information is readily available and consumers will access this information and make effective choices we examine the extent of comparison friction in the market for medicare part d prescription drug plans in the united states in a randomized field experiment an intervention group received a letter with personalized cost information that information was readily available for free and widely advertised however this additional step providing the information rather than having consumers actively access it had an impact plan switching was 28 percent in the intervention group versus 17 percent in the comparison group and the intervention caused an average decline in predicted consumer cost of about 100 per year among letter recipients roughly 5 percent of the cost in the comparison group our results suggest that comparison friction can be large even when the cost of acquiring information is small and may be relevant for a wide range of public policies that incorporate consumer choice

private property and economic efficiency a study of a common pool resource abstract the british columbia halibut fishery provides a natural experiment of the effects of privatizing the commons using firm level data from the fishery 2 years before private harvesting rights were introduced the year they were implemented and 3 years afterward a stochastic frontier is estimated to test for changes in technical allocative and economic efficiency the study indicates that 1 the short run efficiency gains from privatization may take several years to materialize and can be compromised by restrictions on transferability duration and divisibility of the property right 2 substantial long run gains in efficiency can be jeopardized by preexisting regulations and the bundling of the property right to the capital stock and 3 the gains from privatization are not just in terms of cost efficiency but include important benefits in revenue and product form

pareto optimal redistribution and private charity abstract when private charity exists and is motivated by utility interdependence a non pareto optimal outcome the free rider problem typically arises nevertheless incremental fiscal redistribution cannot achieve a paretian welfare improvement so long as private charity continues at positive levels donors respond to incremental fiscal redistribution by reducing their voluntary contributions by exactly a dollar for every dollar transferred in this way no net transfer is achieved unless incremental fiscal redistribution is pursued to the point where private contributions have been driven to zero alternatively a net transfer may be achieved by fiscal measures which affect donors marginal incentives to donate

estimating neighborhood choice models lessons from a housing assistance experiment we use data from a housing assistance experiment to estimate a model of neighborhood choice the experimental variation effectively randomizes the rents which households face and helps identify a key structural parameter access to two randomly selected treatment groups and a control group allows for out of sample validation of the model we simulate the effects of changing the subsidy use constraints implemented in the actual experiment we find that restricting subsidies to even lower poverty neighborhoods would substantially reduce take up and actually increase average exposure to poverty furthermore adding restrictions based on neighborhood racial composition would not change average exposure to either race or poverty jel i32 i38 r23 r38

non parametric tests of consumer behaviour the neoclassical model of consumer behaviour postulates that a consumer s choice behaviour can be described as deriving from utility maximization subject to a budget constraint one is then naturally led to ask what this model implies about observed behaviour this question has been addressed from two quite distinct approaches the first approach originating in the work of slutsky 1915 and antonelli 1886 derives necessary and sufficient conditions involving the derivatives of the demand functions the second approach originating in the work of samuelson 1938 1947 1948 derives algebraic conditions on the demand functions implied by maximizing behaviour

mergers with differentiated products the case of the ready to eat cereal industry traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products i discuss an alternative which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger i estimate a brand level demand system for ready to eat cereal using supermarket scanner data and use the estimates to 1 recover marginal costs 2 simulate postmerger price equilibria and 3 compute welfare effects under a variety of assumptions the methodology is applied to five mergers two of which occurred and for which i compare predicted to actual outcomes

bounded rationality models tasks to become intellectually competitive abstract research in experimental economics has cogently challenged the fundamental precept of neoclassical economics that economic agents optimize the last two decades have seen elaboration of boundedly rational models that try to move away from the optimization approach in ways consistent with experimental findings nonetheless the collection of alternative models has made little headway supplanting the dominant paradigm we delineate key ways in which neoclassical microeconomics holds continuing and compelling advantages over bounded rationality models and suggest via a few examples the sorts of further difficult pushes that would be needed to redress this state of affairs closer collaboration between theoretic modeling and experiments is clearly seen to be necessary jel b40 c72 c90 d01 d21

equilibrium search unemployment endogenous participation and labor market flows the sustainability of welfare states requires high employment and high participation to raise the tax base to analyze labor supply in a world with market frictions we propose and solve a macro model of the labor market with unemployment and labor force participation as endogenous and distinct states in our world workers decisions of participating are determined by an entry decision and an exit decision a calibration of the model improves the usual representations of labor markets since it quantitatively accounts for the observed flows between employment and nonparticipation the paper investigates also the effect of payroll taxes and unemployment benefits on participation decisions taxes reduce entries and increase exits whereas unemployment benefits at a given job finding rate raise entries and have ambiguous effects on exits jel j2 j6

a cournot nash model of family decision making this paper models a two person family each family member is utility maximising yet family members are interdependent because of caring and public goods within the family the two family members interdependent utility maximisation problems are first solved using a non cooperative or cournot nash game theoretic framework the cournot nash equilibrium is then used as a threat point in a bargaining game the paper provides a rigorous derivation of the properties of household demands a full analysis of the determinants of intra household resource allocation including the effect of varying household bargaining power and consideration of policy implications

tax transfer policies and the voluntary provision of public goods abstract the purpose of this paper is twofold first it extends previous models of non cooperative private funding of pure public goods by allowing both for distortionary taxation of private goods and for subsidies based on contributions to the public goods second it clarifies the type of behavioral and informational assumptions which are needed to insure neutrality of both lump sum and distortionary policies the analysis is developed in the context of fiscal federalism

nash bargained household decisions a rejoinder this note is a rejoinder to marjorie b mcelroy and mary jean horney s 1990 reply it discusses the scope of mcelroy and horney s previous results and the possibility of estimating a nash bargained model from independent observation of threat points copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

noncooperative bargaining models of marriage in this paper we discuss some simple noncooperative models of distribution within marriage in which the equilibria are not necessarily pareto optimal in which history and culture can affect which equilibrium is realized and in which distribution may depend on whether resources are controlled by the husband or by the wife recent moves away from single decision maker models of the family have permitted economists to address distribution within marriage and cooperative bargaining models have played the central role in these moves the next step is to permit strategic interaction between family members by modeling distribution within marriage as a noncooperative game noncooperative game theory allows great flexibility in specifying the rules of the game and unlike cooperative game theory imposes few a priori restrictions on the nature of equilibrium outcomes in particular noncooperative models neither assume nor imply that all equilibria are pareto optimal

static and intertemporal household decisions we discuss the most popular static and dynamic models of household behavior our main objective is to explain which aspects of household decisions different models can account for using this insight we describe testable implications identification results and estimation findings obtained in the literature particular attention is given to the ability of different models to answer various types of policy questions

weakest link public goods giving in kind or transferring money abstract this paper extends the analysis of weakest link public goods whose level equals the smallest of the agents provision levels by permitting an agent either to increase one s own provision or else augment both one s own provision and that of the other agent s nash equilibria may be either symmetric with agents matching one another s provision or else asymmetric with an in kind transfer by one agent to another an equilibrium with cash transfers but no in kind transfers may be pareto superior to one with only in kind transfers if agents differ in their efficiency then in kind transfers by the low cost agent may dominate a cash transfer the possibility of pareto improving transfers is enhanced as the number of agents increases

shrouded attributes consumer myopia and information suppression in competitive markets bayesian consumers infer that hidden add on prices e g the cost of ink for a printer are likely to be high prices if consumers are bayesian firms will not shroud information in equilibrium however shrouding may occur in an economy with some myopic or unaware consumers such shrouding creates an inefficiency which firms may have an incentive to eliminate by educating their competitors customers however if add ons have close substitutes a curse of debiasing arises and firms will not be able to profitably debias consumers by unshrouding add ons in equilibrium two kinds of exploitation coexist optimizing firms exploit myopic consumers through marketing schemes that shroud high priced add ons in turn sophisticated consumers exploit these marketing schemes it is not possible to profitably drive away the business of sophisticates it is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms we show that informational shrouding flourishes even in highly competitive markets even in markets with costless advertising and even when the shrouding generates allocational inefficiencies

health insurance choice and risk preferences under cumulative prospect theory an experiment we investigate how consumers choose insurance contracts when using a measure of decision quality based on individual risk preferences for this we use a laboratory experiment with a sequential design first subjects face insurance choices then we elicit risk preferences allowing for different latent decision making theories i e cumulative prospect theory and expected utility theory we find that the vast majority are cumulative prospect theory types analyzing whether subjects choose contracts consistent with their risk preferences we find that about 14 of all participants show inconsistent behavior and low decision quality yet the majority shows consistent behavior and good decision quality our results suggest that one explanation for inconsistent choices is the application of heuristics

how are snap benefits spent evidence from a retail panel we use a novel retail panel with more than six years of detailed transaction records to study the effect of participation in the supplemental nutrition assistance program snap on household spending we frame our approach using novel administrative data from the state of rhode island the marginal propensity to consume snap eligible food mpcf out of snap benefits is 0 5 to 0 6 the mpcf out of cash is much smaller these patterns obtain even for households for whom snap benefits are economically equivalent to cash in the sense that benefits do not cover all food spending we reject the hypothesis that households respect the fungibility of money in a semiparametric framework a model with mental accounting can match the facts

labour taxation in a unionised economy with home production this paper investigates the impact of payroll taxes on unemployment and welfare in a model with household production and union firm wage bargaining it turns out that unemployment most likely fal

good jobs bad jobs and redistribution we analyse the question of optimal taxation in a dual economy when the policy maker is concerned about the distribution of labour income income inequality is caused by the presence of sunk capital investments which creates a good jobs sector due to the capture of quasi rents by trade unions with strong unions and high planner preference for income equality the optimal policy is a combination of investment subsidies and progressive income taxation if unions are weaker the policy maker may instead choose to tax investment

selection on moral hazard in health insurance economic analysis of market failure in insurance markets tends to analyze selection and moral hazard as distinct phenomena in this paper we explore the potential for selection on moral hazard in insurance markets by this we mean the possibility that moral hazard effects are heterogenous across individuals and that individuals selection of insurance coverage is affected by their anticipated behavioral response to coverage we examine these issues empirically in the context of employer provided health insurance in the united states specifically we break down the general

paying attention or paying too much in medicare part d we study whether people became less likely to switch medicare prescription drug plans pdps due to more options and more time in part d panel data for a random 20 percent sample of enrollees from 2006 2010 show that 50 percent were not in their original pdps by 2010 individuals switched pdps in response to higher costs of their status quo plans saving them money contrary to choice overload larger choice sets increased switching unless the additional plans were relatively expensive neither switching overall nor responsiveness to costs declined over time and above minimum spending in 2010 remained below the 2006 and 2007 levels

beyond revealed preference choice theoretic foundations for behavioral welfare economics we propose a broad generalization of standard choice theoretic welfare economics that encompasses a wide variety of nonstandard behavioral models our approach exploits the coherent aspects of choice that those positive models typically attempt to capture it replaces the standard revealed preference relation with an unambiguous choice relation roughly x is strictly unambiguously chosen over y written xp y iff y is never chosen when x is available under weak assumptions p is acyclic and therefore suitable for welfare analysis it is also the most discerning welfare criterion that never overrules choice the resulting framework generates natural counterparts for the standard tools of applied welfare economics and is easily applied in the context of specific behavioral theories with novel implications though not universally discerning it lends itself to principled refinements

privatizing an open access resource and environmental degradation abstract we develop a tractable dynamic model of the exploitation of an environmental resource with endogenous property rights we are able to explain both the evolution of property rights and environmental quality the model demonstrates that the development of property rights may emerge from within a community as a response to the overexploitation of an open access resource in the equilibrium of our model the resource is fully privatized and resource quality is greater than under the open access steady state we show that while environmental quality may initially decline privatizing the resource reduces its exploitation and eventually environmental quality improves

choice inconsistencies among the elderly evidence from plan choice in the medicare part d program comment consumers enrollment decisions in medicare part d can be explained by abaluck and gruber s 2011 model of utility maximization with psychological biases or by a neoclassical version of their model that precludes such biases we evaluate these competing hypotheses by applying nonparametric tests of utility maximization and model validation tests to administrative data we find that 79 percent of enrollment decisions from 2006 to 2010 satisfied basic axioms of consumer theory under the assumption of full information the validation tests provide evidence against widespread psychological biases in particular we find that precluding psychological biases improves the structural model s out of sample predictions for consumer behavior

a fresh look at the rotten kid theorem and other household mysteries gary becker s rotten kid theorem asserts that if all family members receive gifts of money income from a benevolent household member then even if the household head does not precommit to an incentive plan for family members it will be in the interest of selfish family members to maximize total family income i show by examples that the rotten kid theorem is not true without assuming transferable utility i find a simple condition on utility functions that is necessary and sufficient for there to be the kind of transferable utility needed for a rotten kid theorem while restrictive these conditions still allow one to apply the strong conclusions of the rotten kid theorem in an interesting class of examples

gender power fertility and family policy the birth of children often shifts the balance of power within a family if family decisions are made according to the welfare function of the spouses this shift in power might cause a time consistency problem in a model of cooperative family decision making we show that this problem can lead to a systematic downward bias in fertility by keeping fertility low spouses mitigate the ex ante undesired shift in the balance of power that results from the presence of children this provides scope for welfare enhancing policy intervention we discuss to what extent existing family policy measures are suitable for overcoming the bias

the structure of a contract and the theory of a non exclusive resource the process of arriving at a useful concept of analysis is not only slow and painful but also may go astray and attain nothing useful someone begins with one example or observation followed by a theory which is intuitively plausible a theoretical term associated with a vague concept is coined examples of a seemingly different type emerge which call for another theory the process goes on as examples and theories continue to accumulate the different categories under the same heading of analysis serve only to confuse and each associated theory becomes ad hoc such has been the fate of the concept of externality a more useful approach i think is via contractual conditions the example chosen for illustration is marine fisheries where the fishing right is taken

marital division of labor with risk of divorce the role of voice enforcement of contracts it is assumed that emotional ties can be relied on to enforce implicit marital contracts by voice therefore in the present model divorce has economic consequences not only because the economies of scale from living together are destroyed but also because the scope for such voice enforcement is weakened moreover perhaps surprisingly i find that it is ambiguous how an increase in the probability of divorce influences predivorce allocation of time even when preferences are assumed to be homothetic

a model of regulated open access resource use abstract this paper develops a model of regulated open access resource exploitation the regulatory model assumes that regulators are goal oriented choosing target harvest levels according to a safe stock concept these harvest quotas are implemented by setting season lengths conditioned on the industry fishing capacity the industry enters until rents are dissipated conditioned on season length regulations harvest levels fishing capacity season length and biomass are determined jointly using parameter estimates from the long regulated north pacific halibut fishery predictions of these variables from the regulated open access model are compared to predictions that arise from the gordon model

ownership risk investment and the use of natural resources the effect of insecure ownership on ordinary investment and natural resource use is examined insecure ownership is postulated to depend on the type of government regime in power and the prevalence of political violence or instability the political determinants of economy wide investment are estimated from cross country data and the results are used to form an index of ownership security when introduced into empirical models of natural resource use this index has a significant and quantitatively important effect on the use of forests and petroleum contrary to conventional wisdom ownership risk slows resource use in some circumstances

optimal taxation in a growth model with public consumption and home production in a neoclassical growth model with public consumption we show the following pareto optimal tax rules the government should tax leisure and private consumption at the same rate and subsidize net investment at the same rate it taxes net capital income also it should tax capital income more heavily than labor income in an extension for home production the additional rule is to tax investment for home production at the same rate of the tax on private market consumption these tax and subsidy rates should be constant over time except the initial tax rate on capital income

diagnosing consumer confusion and sub optimal shopping effort theory and mortgage market evidence mortgage loans are leading examples of transactions where experts on one side of the market take advantage of consumers lack of knowledge and experience we study the compensation that borrowers pay to mortgage brokers for assistance from application to closing two findings support the conclusion that confused borrowers overpay for brokers services i a model of effective shopping shows that bor rowers sacrifice at least 1 000 by shopping from too few brokers ii borrowers who compensate their brokers with both cash and a commission from the lender pay twice as much as similar borrowers who pay no cash jel d12 d14 g21 we study a large and financially complex expenditure that the majority of consumers make only a few times in their lives the payment for mortgage origination services in these transactions information is not only imperfect but traditional market practices have likely contributed to consumer confusion these payments range from 0 to 30 000 for mortgages of normal size mortgage brokers receive payments from both borrowers and from wholesale lenders on most loans broker fees paid in cash by the borrower are usually broken down into more than a dozen individual items such as origination fee discount points funding fee and doc prep in addition to these cash payments about half of the value that the bor rower transfers to the broker takes the form of a payment from the wholesale lender to the mortgage broker the borrower bears the burden of this part of the payment in the form of a higher interest rate on the loan these payments compensate mortgage brokers for arranging mortgage loans we stress that this paper is about how and how much borrowers pay their brokers for origination services the broker is an administrator of the process of loan origination the broker bears none of the risk of default on the mortgage so that risk is not a determinant of the broker s compensation under standard theories of pricing because consumers enter the mortgage market infrequently and because features of the market make it difficult to learn the best price mortgage origination pricing

on the empirical implementation of some game theoretic models of household labor supply this paper discusses some issues in the empirical implementation of game theoretic models of household labor supply in particular we focus on the identification problems inherent in many of these models as an illustration we estimate a game theoretic model which uses data on preferred working hours as additional identifying information

intra family distribution of paid work time this article analyses the intra family distribution of paid work time in five european countries france germany italy spain and the uk to that end we formulate a collective model which allows us to characterize the efficient labour supply decisions of each spouse this two equation model is then simultaneously estimated by using national panel data drawn from the european community household panel echp 1994 2001 empirical results clearly show that in all sample countries the labour supply of wives is affected by own wages household and own nonlabour incomes and the number of children whereas evidence for husbands differs across countries

the empirical content of nash bargained household behavior in households whose allocation decisions can be represented as nash bargained household decisions extrahousehold environmental parameters eeps serve as pure shifters of the threat points the comparative statics of changes in demands due to changes in these eeps are given these are incorporated into a comprehensive statement of the empirical content of nash bargained household behavior including a nash generalization of barten s 1966 fundamental matrix equation of the theory of consumer demand estimation and data requirements are discussed along with nested testing of the following structure the neoclassical model is nested in the nash bargained model which in turn is nested in an unrestricted model of household demands emphasized throughout is the enriched menu of explanatory variables for demand analysis provided by the nash model as well as the model s ability to jointly analyze i household formation and ii intrahousehold allocation decisions

choice inconsistencies among the elderly evidence from plan choice in the medicare part d program we evaluate the choices of elders across their insurance options under the medicare part d prescription drug plan using a unique data set of prescription drug claims matched to information on the characteristics of choice sets we document that elders place much more weight on plan premiums than on expected out of pocket costs value plan financial characteristics beyond any impacts on their own financial expenses or risk and place almost no value on variance reducing aspects of plans partial equilibrium welfare analysis implies that welfare would have been 27 higher if patients had all chosen rationally

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

public finance solutions to the european unemployment problem public finance solutions a tax shift away from low paid labour may fight unemployment unemployment in europe is heavily concentrated among low skilled workers it has therefore been suggested that structural unemployment could be reduced by shifting the tax burden away from low skilled labour and away from the production of consumer services which are intensive in the use of such labour this paper finds that a tax shift away from low paid labour may raise aggregate employment and welfare but only if wage formation is sufficiently responsive to changing tax incentives the analysis also suggests that non negligible employment and welfare gains could be reaped by offering tax concessions or subsidies to those parts of the consumer service sector which compete most directly with low productivity home production and with underground economic activity peter birch sorensen

symmetric tragedies commons and anticommons an anticommons problem arises when there exist multiple rights to exclude in a lengthy law review paper michael a heller has examined the tragedy of the anticommons especially in regard to disappointing experiences with efforts to shift from socialist to market institutions in russia in an early footnote heller suggests that a formal economic model of the anticommons has not been developed this paper responds to heller s challenge we analyze the anticommons problem in which resources are inefficiently underutilized rather than overutilized as in the familiar commons setting the two problems are shown to be symmetrical in several respects we present an algebraic and geometric illustration and extend the discussion to several applications of greater importance we suggest that the construction is helpful in understanding the sources of major value wastage in modern regulatory bureaucracy the navigation of the danube is of very little use to the different states of bavaria austria and hungary in comparison of what it would be if any of them possessed the whole of its course till it falls into the black sea adam smith the wealth of nations 1776 bk 1 ch 3

integrated insurance design in the presence of multiple medical technologies the classic theory of moral hazard concerns the insurance of a single good and predicts that co insurance is larger when the elasticity of demand is higher and when small risks are insured we extend this analysis to the insurance of multiple goods for example the simultaneous insurance of medical services and prescription drugs we show that when multiple goods are either complements or substitutes so that a change in co insurance for one service affects the demand of others the classic moral hazard results do not hold for example the single good model would predict high co payments for prescription drugs since drug demand is elastic and of modest financial risk however a model of multi good insurance suggests such drug coverage may optimally involve zero or even negative co insurance when it is a substitute to other services insured such as hospital care or physician services we summarize some of the empirical evidence in support of markets adopting optimal integrated pricing structures rather than individually optimal pricing structures this abstract was borrowed from another version of this item

separate spheres bargaining and the marriage market this paper introduces the separate spheres bargaining model a new model of distribution within marriage it differs from divorce threat bargaining models e g manser brown mcelroy horney in that the threat point is not divorce but a noncooperative equilibrium within marriage this noncooperative equilibrium reflects traditional gender roles the predictions of our model thus differ from those of divorce threat bargaining models in the separate spheres model cash transfer payments to the mother and payments to the father can but need not imply different equilibrium distributions in existing marriages in the long run the distributional effects of transfer policies may be substantially altered by changes in the marriage market equilibrium

family policy with non cooperative families we consider a non cooperative model of a family s time allocation between market work and providing a home produced family public good such as child care or care for the elderly the model predicts underprovision of the public good because of crowding out this does not necessarily warrant public provision in contrast to other approaches in family economics we find that attempts to redistribute between spouses may alter the final distribution within the marriage and that such a policy may be pareto improving we also find that some degree of progressivity of the income tax can be welfare improving

trade tragedy and the commons we develop a theory of resource management where the degree to which coun tries escape the tragedy of the commons and hence the de facto property rights regime is endogenously determined three forces determine success or failure in resource management the regulator s enforcement power the extent of har vesting capacity and the ability of the resource to generate competitive returns without being extinguished the model can explain heterogeneity across coun tries and resources in the effectiveness of resource management and it predicts that changes in prices population and technology can cause transitions to better or worse management regimes jel p14 q21 q22 q23 q32 many of the world s major renewable resource stocks are in a state of decline this is true for capture fisheries for forests in developing countries and for many measures of the biosphere s health other renewable resources including many species of wildlife marine mammals and coral reefs are also under threat while poverty and government corruption are surely respon sible for some of this record particular emphasis is often placed on the potentially damaging role played by international trade this emphasis is not surprising given that natural resource products are a key export for much of the developing world and property rights over renewable resources are both difficult to define and poorly enforced but property rights are not an immutable country characteristic such as weather mineral deposits or topography they are instead market institutions developed to facilitate transactions and protect scarce resources consequently changes in prices technology and other effects of market integration may alter the de facto property rights regime and lead to impacts quite dif ferent from those predicted by existing analyses the purpose of this paper is to examine renew able resource use within a framework where the enforcement of property rights and hence the efficacy of resource management is endogenously determined we develop a theory where an existing government regulates the use of a renewable resource by a set of agents who have a right to harvest the resource could be a fishery forest stock aquifer etc and we assume it is local and therefore contained within one country the govern ment sets rules limiting harvests but agents may cheat on these allocations and risk punishment property rights are endogenous in this framework because the government must account for agents incentive to cheat as a result the effective protection for the resource or what we refer to as the de facto property rights regime may be far from perfect even though property rights would be perfectly enforced if there was no monitoring problem

altruism in the family and selfishness in the market place adam smith argued in a famous passage that people are selfish in their market transactions it is not from the benevolence of the butcher the brewer or the baker that we expect our dinner but from their regard to their own interest we address ourselves not to their humanity but to their self love and never talk to them of our own necessities but of their advantages 1937 p 14 in an earlier study he said with irony we are not ready to suspect any person of being defective in selfishness 1853 p 446 selfishness in market transactions has been assumed in practically all subsequent discussions of the economic system objections were dismissed with vague allusions to human nature or with an assertion that altruism loses out to selfishness in the struggle to survive in the market sector yet altruism is generally recognized to be important within a family again adam smith said