trade policy coordination and food price volatility many countries adjust their trade policies counter cyclically with food prices to the extent that the use of restrictions by food exporting countries has occasionally threatened the food security of food importing countries these trade policies are inconsistent with the terms of trade motivation often retained to characterize the payoff frontier of self enforcing trade agreements as they can worsen the terms of trade of the countries that apply them this article analyzes trade policy coordination when trade policies are driven by terms of trade effects and a desire to reduce domestic food price volatility this framework implies that importing and exporting countries have incentives to deviate from cooperation at different periods the latter when prices are high and the former when prices are low since staple food prices tend to have asymmetric distributions with more prices below than above the mean but with occasional spikes a self enforcing agreement generates asymmetric outcomes without cooperation an importing country uses its trade policy more frequently because of the concentration of prices below the mean but an exporting country has a greater incentive to deviate from a cooperative trade policy because positive deviations from the mean price are larger than negative ones thus the asymmetry of the distribution of commodity prices can make it more difficult to discipline export taxes than tariffs in trade agreements

the form of incentive contracts agency with moral hazard risk neutrality and limited liability the analysis obtains a complete characterization of the optimal agency contract with moral hazard risk neutrality and limited liability we introduce a critical ratio that indicates the returns to providing the agent with incentives for effort in each random state the form of the contract is debt a capped bonus when the critical ratio is increasing decreasing in the state an increasing critical ratio in the state space setting corresponds to the hazard rate order for the reduced form distribution of output which we term the decreasing hazard rate in effort property dhrep the critical ratio also yields insights into agency with adverse selection

put call parity and arbitrage bounds for options on grain futures many arbitrage opportunities have become available for market participants since the inception of trading in options central to many of these is the put call parity relationship if this condition is violated arbitrage profits could be earned this paper examines arbitrage possibilities between put and call options on grain futures using two different tests one is a test of market efficiency over the duration of trading and the other evaluates arbitrage bounds on individual trading days in general the results suggest that the options markets on grain futures are not completely efficient however violations varied substantially across contracts and through time

can agents be better off with pay caps a popular way to discipline the managers of companies or banks that got into trouble during the recent financial crisis has been to impose caps on managers pay using a small extension of the standard principal agent model we argue that pay caps might serve the opposite purpose because the agent might be better off with a pay cap specifically we show that given a fixed effort level to be implemented the agent s expected utility can be decreasing in an upper bound for the agent s reward the effect of pay caps on the general structure of optimal incentive contracts is also characterized while an improvement of contracting information always helps the principal it might increase or decrease the marginal cost of imposing pay caps

limited liability and incentive contracting with ex ante action choices abstract this article examines a principal agent model of financial contracting in which a risk neutral entrepreneur agent makes an unobservable ex ante effort choice while employing the investment funds of a risk neutral investor principal the key innovation is that the investment contract is subject to statutory liability limits given these liability limits two settings are considered one in which the investor payoff function is also constrained to be monotonically nondecreasing in firm profit and another in which no such monotonic contract constraint is imposed in the former case a standard debt contract is shown to emerge and a first best effort choice is not achieved in the latter setting the optimum is characterized by a live or die payoff function and a first best effort level may or may not be realized

price scissors and the structure of the economy this paper undertakes three sets of tasks i it analyzes positive and normative aspects of price scissors the domestic terms of trade between agriculture and industry within nonsocialist as well as socialist ldcs the critical role of the economy s institutional features e g external trade environment wage and income determination and wage productivity effects is emphasized certain aspects of the soviet industrialization debate and subsequent collectivization are interpreted ii it develops simple rules to delineate who gains and who loses within agriculture from changes in terms of trade iii it presents powerful and informationally parsimonious rules for pareto improving price reforms for cash crops and agricultural inputs

existence and non existence in the moral hazard problem abstract we provide a new class of counter examples to existence in a simple moral hazard problem in which the first order approach is valid in contrast to the mirrlees example unbounded likelihood ratios on the signal technology are not central rather our examples center around the behavior of the utility function as utility diverges to negative infinity for any utility function such as ln w in which utility diverges to negative infinity at a finite wealth level existence will fail for some specifications of the agent s cost of effort when utility diverges to negative infinity only as wealth does as well existence holds for all specifications of the agent s cost of effort if and only if the agent continues to dislike risk as wealth diverges to negative infinity when there is a finite lower bound on utility existence is assured for those cases where existence fails we characterize the limit of near optimal contracts

an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

moral hazard in strategic decision making abstract this paper develops a theory of moral hazard in which the agent takes the role of strategic decision maker career concerns give rise to preferences over risk which in turn create an incentive for the agent to manipulate the project s risk return tradeoff to the disadvantage of the principal the resultant moral hazard can be ameliorated by an incentive contract the optimal non decreasing wage involves granting in the money options in the context of academic tenure the optimal tenure standard requires the agent to exceed expectations and lies within one standard deviation of the expected outcome

input demand under yield and revenue insurance previous studies disagree on the effects of insurance on fertilizer application rates the effect of increased fertilizer on the probability of low yields primarily determines whether fertilizer and insurance are substitutes or complements we estimate conditional distributions of corn yields to determine if the technical relationship between yields and fertilizer supports the hypothesis that insurance increases optimal application rates our results indicate no support for this hypothesis at all nitrogen fertilizer rates and reasonable levels of risk aversion nitrogen fertilizer and insurance are substitutes suggesting that those who purchase insurance are likely to decrease nitrogen fertilizer applications

optimal monitoring design this paper considers a principal agent model with hidden action in which the principal can monitor the agent by acquiring independent signals conditional on effort at a constant marginal cost the principal aims to implement a target effort level at minimal cost the main result of the paper is that the optimal information acquisition strategy is a two threshold policy and consequently the equilibrium contract specifies two possible wages for the agent this result provides a rationale for the frequently observed single bonus wage contracts

political economy of public policies insights from distortions to agricultural and food markets the agricultural and food sector is an ideal case for investigating the political economy of public policies many of the policy developments in this sector since the 1950s have been sudden and transformational while others have been gradual but persistent this paper reviews and synthesizes the literature on trends and fluctuations in market distortions and the political economy explanations that have been advanced based on a rich global data set covering a half century of evidence on commodities countries and policy instruments the paper identifies hypotheses that have been explored in the literature on the extent of market distortions and the conditions under which reform may be feasible

farm productivity and rural poverty in india armed with new data we return to an old question from the pages of this journal to what extent do india s rural poor share in agricultural growth combining data from 24 household sample surveys spanning 35 years with other sources we estimate a model of the joint determination of consumption poverty measures agricultural wages and food prices we find that higher farm productivity brought both absolute and relative gains to poor rural households a large share of the gains was via wages and prices though these effects took time the benefits to the poor were not confined to those near the poverty line

poverty decline agricultural wages and non farm employment in rural india 1983 2004 the authors analyze five rounds of national sample survey data covering 1983 1987 8 1993 4 1999 0 and 2004 5 to explore the relationship between rural diversification and poverty poverty in rural india declined at a modest rate during this period the authors provide region level estimates that illustrate considerable geographic heterogeneity in this progress poverty estimates correlate well with region level data on changes in agricultural wage rates agricultural labor remains the preserve of the uneducated and also to a large extent of the scheduled castes and scheduled tribes although agricultural labor grew as a share of total economic activity over the first four rounds it had fallen back to the levels observed at the beginning of the survey period by 2004 this all india trajectory masks widely varying trends across states during this period the rural non farm sector grew modestly mainly between the last two survey rounds regular non farm employment remains largely associated with education levels and social status that are rare among the poor however casual labor and self employment in the non farm sector reveal greater involvement by disadvantaged groups in 2004 than in the preceding rounds the implication for poverty is not immediately clear the poor may be pushed into low return casual non farm activities due to lack of opportunities in the agricultural sector rather than being pulled by high returns offered by the non farm sector econometric estimates reveal that expansion of the non farm sector is associated with falling poverty via two routes a direct impact on poverty that is likely due to a pro poor marginal incidence of non farm employment expansion and an indirect impact attributable to the positive effect of non farm employment growth on agricultural wages the analysis also confirms the important contribution to rural poverty reduction from agricultural productivity availability of land and consumption levels in proximate urban areas

household responses to food subsidies evidence from india abstractthe indian public distribution system is one of the world s largest food security programs and provides a monthly quota of cereals at discounted prices to poor households i study the effec

structural transformation and the deterioration of european labor market outcomes this paper examines hours worked in continental europe and the united states from 1956 to 2003 the empirical work establishes two results first hours worked in europe decline by almost 45 percent compared to the united states over this period second this decline is almost entirely accounted for by the fact that europe develops a much smaller market service sector than the united states a simple model of time allocation is used to understand these patterns i find that relative increases in taxes and technological catch up can account for most of the differences between the european and american time allocations over this period

the econometrics of damage control why specification matters the contribution of damage control agents to production differs fundamentally from that of standard inputs lands labor capital this paper develops an econometric model based on the key characteristics of damage control agents and examines its properties it demonstrates that standard production function specifications overestimate damage control agent productivity and have erroneous implications for the evolution of damage control agent productivity and use in response to changing environments e g the spread of pest resistance it also proposes several alternative specifications and discusses methods for estimating them

agriculture in africa telling myths from facts a synthesis stylized facts drive research agendas and policy debates yet robust stylized facts are hard to come by and when available often outdated in a special issue of food policy 12 papers revisit conventional wisdom on african agriculture and its farmers livelihoods using nationally representative surveys from the living standards measurement study integrated surveys on agriculture initiative in six african countries at times the findings simply confirm the common understanding of the topic but the studies also throw up several surprises redirecting some policy debates while fine tuning others overall the project calls for more attention to checking and updating the common wisdom this requires nationally representative data and sufficient incentives among researchers and policy makers alike without well grounded stylized facts they can easily be profoundly misguided

heterogeneity and distributional form of farm level yields representing farm level crop yield heterogeneity and distributional form is critical for risk and crop insuranceresearch moststudieshaveusedcountydata understatingbothsystematicandrandomvariation comparison of systematic versus random intra county variation is lacking few studies compare the various distributional forms that have been proposed this study utilizes the extensive potential of government farm level crop insurance data results show that systematic intra county variation is surprisingly strong a newly applied reverse lognormal distribution is preferred when county wide variation is removed but the normal distribution fits surprisingly well in the crop insurance relevant percentiles when county wide variation is not removed representing and accounting for both spatial and temporal heterogeneity is a major problem in agricultural economics and policy analysis due to the fact that most data are aggregated to at least the county level e g gardner and kramer 1986 just and pope 1999 both systematic and random components of crop yields are major factors in intra county farm level heterogeneity that are critical for modeling risk producer behavior and crop insurance participation most studies have either used aggregate at least county level data or relied on relatively few farm level observations the former makes results primarily illustrative while the latter limits statistical significance this article characterizes intra county crop yield heterogeneity both spatially and temporally with the most extensive dataset utilized to date and evaluates a broader set of parametric distributional possibilities than previously

information risk sharing and incentives in agency problems this paper studies the use of information for incentives and risk sharing in agency problems when the principal is risk neutral or the outcome is contractible risk sharing is unnecessary or dealt with by a contract on the outcome in this case information systems are ranked only according to their informativeness about the agent s action when the outcome is noncontractible however the principal has to rely on imperfect information not only for incentives but also for risk sharing under the rst order approach this paper characterizes a problem independent ranking of information systems relaxing gjesdal s 1982 criterion we also nd sucient conditions justifying the rst order approach when output is noncontractible

insurance moral hazard and chemical use in agriculture this paper examines how crop insurance affects corn farmers fertilizer and pesticide use in the u s midwest crop insurance might be expected to affect chemical use because of moral hazard insured farmers may undertake riskier production than do uninsured farmers results suggest that insurance exerts considerable influence on corn farmers chemical use decisions those purchasing insurance applied significantly more nitrogen per acre 19 spent more on pesticides 21 and treated more acreage with both herbicides and insecticides 7 and 63 than did those not purchasing insurance these results suggest that both fertilizer and pesticides may be risk increasing inputs

distributional implications of climate change in rural india a general equilibrium approach we develop a general equilibrium framework based on a specific factors trade model to quantify the medium term household welfare impacts of global warming in rural india using an hedonic approach grounded in the theory combined with detailed microdata we estimate that three decades of warming will reduce agricultural productivity in the range of 7 13 with the arid northwest of india especially hard hit our analysis shows that the proportional welfare cost of climate change is likely to be both modest and evenly distributed across percentiles of the per capita income distribution but this latter conclusion emerges only when the flexibility of rural wages is taken into account

wealth effects and agency costs abstract we analyze how the agent s initial wealth affects the principal s expected profits in the standard principal agent model with moral hazard we show that if the principal prefers a poorer agent for all specifications of action sets probability distributions and disutility of effort then the agent s utility of income must exhibit a coefficient of absolute prudence less than three times the coefficient of absolute risk aversion for all levels of income thus strengthening the sufficiency result of thiele and wambach 1999 also we prove that there is no condition on the agent s utility of income alone that will make the principal prefer richer agents moreover we show that for an interesting class of problems the principal prefers a relatively poorer agent if agent s wealth is sufficiently large finally we discuss how alternative ways of modeling the agent s outside option affects the principal s preferences for agent s wealth

a theory of managed trade this paper proposes a theory that predicts low levels of protection during periods of normal trade volume coupled with episodes of special protection when trade volumes surge this dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game facing volatile trade swings high trade volume leads to a greater incentive to defect unilaterally from cooperative tariff levels therefore as the volume of trade expands the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check copyright 1990 by american economic association

food prices wages and welfare in rural india this paper considers the welfare and distributional consequences of higher relative food prices in rural india through the lens of a specific factors general equilibrium trade model applied at the district level the evidence shows that nominal wages for manual labor both within and outside agriculture respond elastically to increases in producer prices that is wages rose faster in rural districts growing more of those crops with large price run ups over 2004 09 accounting for such wage gains the analysis finds that rural households across the income spectrum benefit from higher agricultural commodity prices indeed rural wage adjustment appears to play a much greater role in protecting the welfare of the poor than the public distribution system india s giant food rationing scheme moreover policies like agricultural export bans which insulate producers as well as consumers from international price increases are particularly harmful to the poor of rural india conventional welfare analyses that assume fixed wages and focus on households net sales position lead to radically different conclusions

agency models with frequent actions the paper analyzes dynamic principal agent models with short period lengths the two main contributions are i an analytic characterization of the values of optimal contracts in the limit as the period length goes to 0 and ii the construction of relatively simple almost optimal contracts for fixed period lengths our setting is flexible and includes the pure hidden action or pure hidden information models as special cases we show how such details of the underlying information structure affect the optimal provision of incentives and the value of the contracts the dependence is very tractable and we obtain sharp comparative statics results the results are derived with a novel method that uses a quadratic approximation of the pareto boundary of the equilibrium value set

optimal compensation and pay performance sensitivity in a continuous time principal agent model this paper studies the optimal contract between risk neutral shareholders and a constant relative risk aversion manager in a continuous time model several interesting results are obtained first the optimal compensation is increasing but concave in output value if the manager is more risk averse than a log utility manager second when the manager has a log utility a linear contract is optimal when there is no explicit lower bound on the compensation and an option contract is optimal when there is an explicit lower bound third optimal effort is stochastic state dependent fourth consistent with empirical findings and contrary to standard agency theory predictions the relationship between pay performance sensitivity and firm performance and that between pay performance sensitivity and firm risk can be nonmonotonic this paper was accepted by wei xiong finance

dynamics of rice prices and agricultural wages in the philippines rice trade liberalization in the philippines should decrease domestic rice prices impacting both agricultural wages and the welfare of agricultural wage earners this study examines the short run and long run relationship between rice prices and agricultural wages in the philippines using a neoclassical wage determination model three empirical frameworks are used a cointegration error correction framework which assumes nonstationary variables in long run equilibrium a first difference model that assumes nonstationary variables but no long run equilibrium and an ols framework that assumes the model variables are stationary conclusions are reasonably robust across the three empirical frameworks with wages adjusting positively to rice price changes with a short run elasticity of 0 29 to 0 57 and a long run elasticity of 0 70 to 1 0 in preferred models an analysis of welfare implications suggests that although households that are heavily reliant on agricultural wages for income will be adversely affected by rice price decreases other households will benefit

rising food prices food price volatility and social unrest can food prices cause social unrest throughout history riots have frequently broken out ostensibly as a consequence of high food prices using monthly data at the international level this article studies the impact of food prices food price levels as well as food price volatility on social unrest because food prices and social unrest are jointly determined data on natural disasters are used to identify the causal relationship flowing from food price levels to social unrest results indicate that for the period 1990 2011 food price increases have led to increases in social unrest whereas food price volatility has not been associated with increases in social unrest these results are robust to alternative definitions of social unrest to using real or nominal prices to using commodity specific price indices instead of aggregated price indices to alternative definitions of the instrumental variable to alternative definitions of volatility and to controlling for non food related social unrest

estimating the short run poverty impacts of the 2010 11 surge in food prices global food prices have increased substantially since mid 2010 as have prices in many developing countries in this study we assess the poverty impact of the price changes between june and december 2010 in twenty eight low and middle income countries this is done by gathering detailed information on individual households food production and consumption levels for thirty eight agricultural and food commodities to assess the impacts on household welfare this study estimates that this sudden food price surge increased the number of poor people globally but with considerably different impacts in different countries the heterogeneity of these impacts is partly related to the wide variation in the transmission of global prices to local prices and partly to differences in households patterns of production and consumption on balance the adverse welfare impact on net buyers outweighs the benefits to net sellers resulting in an increase in the number of poor and in the depth of poverty we estimate that the average poverty change was 1 1 percentage points in low income countries and 0 7 percentage points in middle income countries with a net increase of 44 million people falling below the 1 25 per day extreme poverty line

crop insurance acreage decisions and nonpoint source pollution the redirection of farm policy in the 1996 farm bill has generated much interest in seeking environmentally friendly and economically viable ways to protect farm income agricultural insurance has been suggested as such an instrument this article estimates the effect of crop insurance on crop mix and the resulting change in chemical use in the central nebraska basin providing corn insurance will shift land from hay and pasture to corn which will increase chemical use at the extensive margin this extensive margin effect dominates the effect of crop insurance on the application rate leading to an increase in total chemical use

wage floors imperfect performance measures and optimal job design we analyze the effects of wage floors on optimal job design in a moral hazard model with asymmetric tasks and imperfect aggregate performance measurement due to cost advantages of specialization assigning the tasks to different agents is efficient a sufficiently high wage floor however induces the principal to dismiss one agent or to even exclude tasks from the production process imperfect performance measurement always lowers profit under multitasking but may increase profit under specialization we further show that variations in the wage floor and the agents reservation utility have significantly different effects on welfare and optimal job design

trade tastes and nutrition in india this paper introduces habit formation into an otherwise standard model of international trade household tastes evolve over time to favor foods consumed as a child the opening of trade causes preferred goods to rise in price as these were relatively inexpensive in autarky neglecting the correlation between tastes and agro climatic endowments overstates the short run nutritional gains from agricultural trade liberalization and masks potential caloric losses for laborers i examine the predictions of this model of trade with habit formation using household survey data from india both by looking across indian regions and by examining the consumption patterns of inter state migrants

joint determination of food consumption and production in rural sierra leone estimates of a household firm model abstract this paper investigates the determination of food consumption for rural households in sierra leone that produce the foods which they consume a household firm model is estimated with seven commodities including five foods non foods and labor as compared to three commodities in past studies such food disaggregation permits tracing of the effects of socioeconomic variables on household nutrient availability household specialization in production is such that censored data is a problem a tobit approach is used to correct for this for most crops the own price effects on consumption remain negative when a price change is allowed to shift the budget constraint by effecting the profits from home production elasticities of calorie availability with respect to toal expenditure are found to be sizeable varying little by expenditure group the price elasticities of calorie availability are generally positive however an important exception occurs for price of the staple food rice this exception has several important policy implications which are explored

existence of optimal mechanisms in principal agent problems we provide general conditions under which principal agent problems with either one or multiple agents admit mechanisms that are optimal for the principal our results cover as special cases pure moral hazard and pure adverse selection we allow multidimensional types actions and signals as well as both financial and non financial rewards our results extend to situations in which there are ex ante or interim restrictions on the mechanism and allow the principal to have decisions in addition to choosing the agent s contract beyond measurability we require no a priori restrictions on the space of mechanisms it is not unusual for randomization to be necessary for optimality and so it should be and is permitted randomization also plays an essential role in our proof we also provide conditions under which some forms of randomization are unnecessary

optimal food price stabilization in a small open developing country in poor countries most governments implement policies aiming to stabilize the prices of staple foods which often include storage and trade measures insulating their domestic market from the world market it is of crucial importance to understand the precise motivations and efficiency of those interventions because they can have consequences worldwide this paper addresses those issues by analyzing the case of a small open developing country confronted by shocks to both the crop yield and foreign price in this model government interventions may be justified by the lack of an insurance market for food prices considering this market imperfection the authors design optimal public interventions through trade and storage policies they show that an optimal trade policy largely consists of subsidizing imports and taxing exports which benefits consumers at the expense of producers import subsidies alleviate the non negativity of food storage in other words when stocks are exhausted subsidizing imports prevents domestic price spikes one striking result an optimal storage policy on its own is detrimental to consumers since its stabilizing benefits leak into the world market and it raises the average domestic price by contrast an optimal combination of storage and trade policies results in a powerful stabilizing effect for domestic food prices

food prices and poverty do higher food prices help or hinder poverty reduction despite much debate existing research has almost solely relied on simulation models to address this question in this paper world bank poverty estimates are used to systematically test the relationship between changes in poverty and exogenous changes in real domestic food prices the paper uncovers indicative evidence that increases in food prices are associated with reductions in poverty not increases a likely empirical explanation is the relatively strong agricultural supply and wage responses to food price increases and the fact that the majority of the world s poor still heavily rely on agriculture or agriculture related activities to earn a living

justifying the first order approach to principal agent problems it is of interest to know when the incentive compatibility conditio n in principal agent problems can be replaced by the condition that the agent s expected utility be stationary in effort the mirrlees rogerson conditions do not work if the principal can observe more than one observable statistic also the mirrlees rogerson assumption that the distribution function of output is convex in the agent s action is unsatisfactory even in the context of the basi c model it is too restrictive the paper presents a suite of conditio ns that are applicable to the multistatistic case and replaces the objectionable convex distribution function assumption copyright 1988 by the econometric society

on the moral hazard problem without the first order approach abstract we study the moral hazard problem without the first order approach or other common structure we present sufficient conditions under which the shadow value of simultaneously tightening the minimum payment and individual rationality constraints has a simple and intuitive expression we then show how this expression can be used to perform comparative statics exercises in which we study i the effect of a change in the agent s wealth on the well being of the principal and ii the effects of the outside option and minimum payment on the effort level optimally implemented

participation in moral hazard problems two principals engage in hotelling competition for an agent s services under incomplete information as to her outside option location this renders the agent s participation decision probabilistic from the perspective of each principal regardless of the market structure at equilibrium the optimal contract features a trade off between participation probability and incentives rent and effort are inversely related and non monotonic in the agent s transport cost and so in market structures they increase decrease with competition uncertainty as to the agent s location may increase or decrease the rent compared to full information this correspondingly harms or benefits principals

multimarket contact and collusive behavior traditional analyses of industrial behavior typically link the exercise of market power in an industry to internalfeatures such as demand conditions concentration and barriers to entry nevertheless some economists have remained concerned that external factors such as contact across markets may also play a significant role in determining the level of competitiveness in any particular industry in this article we examine the effect of multimarket contact on the degree of cooperation that firms can sustain in settings of repeated competition we isolate conditions under which multimarket contact facilitates collusion and show that these collusive gains are achieved through modes of behavior that have been identified in previous empirical studies of multimarketfirms

tariff pass through and the distributional effects of trade liberalization abstract this paper estimates the distribution of welfare gains due to the trade reforms in india by simultaneously considering the effect on prices of tradable goods and wages the cost of consumption for each household is affected by the domestic price changes while wage incomes adjust to these price changes in equilibrium three rounds of the indian employment and consumption surveys are used for the analysis the price transmission mechanisms are estimated for both rural and urban areas to understand the extent to which the trade reforms are able to affect the domestic prices in order to assess the distributional effects a series of nonparametric local linear regressions are estimated the findings show that households at all per capita expenditure levels had experienced gains as a result of the trade liberalization while the average effect was generally pro poor and varied significantly across the per capita expenditure spectrum

sectoral shocks and home substitution we show that the effect of a sectoral shock on the composition of sectoral shares crucially depends on whether the goods produced in the sector are home substitutable or not when a productivity shock hits the market sector that produces non home substitutable goods e g manufacturing goods the shock largely affects the composition of consumption shares of market sectors on the other hand when a shock hits the market sector that produces home substitutable goods e g service goods relocation in shares mainly occurs between the sector and the home sector we compare our results to those of the traditional three sector model without a home sector and show that the missing of the home substitution effects predicts completely different implications for the response of consumption shares to sectoral shocks

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

using survey data to assess the distributional effects of trade policy the author develops and applies a methodology to empirically explore the effects of trade policies on the distribution of income and poverty in developing countries he uses a methodology based on two links one connecting trade policies to prices and another connecting prices to household welfare the author applies the methodology to the study of the distributional effects of mercosur on argentine families the main finding is that mercosur benefits the average argentine household across the entire income distribution there is evidence of a pro poor bias of the regional trade agreement on average poor households gain more from the reform than middle income households whereas the effects on rich families are positive but not statistically significant prior to the reform argentine trade policy protected the rich over the poor and after the reform granted some protection to the poor as relative pre mercosur tariffs are higher on relatively skill intensive goods the tariff removals tend to benefit the poor over the rich these findings indicate that trade reforms may actually help improve the distribution of income and reduce poverty in the country

welfare consequences of food prices increases evidence from rural mexico this paper presents an analysis of the welfare consequences of recent increases in food prices in mexico using micro level data we estimate a quaids model of demand for food using data collected to evaluate the conditional cash transfer program oportunidades we show how the poor have been affected by the recent increases and changes in relative prices of foods we also show how a conditional cash transfer program provides a means of alleviating the problem of increasing staple prices and simulate the impact of such a policy on household welfare and consumer demand we contrast this policy with alternative policy responses such as price subsidies which distort relative prices and are less well targeted

can export restrictions be disciplined through the world trade organisation a number of major agricultural exporting countries responded to high food prices from 2007 to 2011 by imposing export restrictions on agricultural commodities in efforts to constrain domestic food price inflation these restrictions reduced the volume of internationally traded food and exacerbated international price spikes net food importing countries were faced with growing import bills and non governmental organisations that target food security scaled back programme commitments and appealed for increased funding there have subsequently been a chorus of calls for the development of a formal international framework that could discipline the use of agricultural export restrictions the agreements of the world trade organisation wto have been targeted as possible fora for such disciplines we present a framework in which the efficacy of such disciplines can be analysed and conclude that constraints on agricultural export restrictions are not likely to be effective within the wto s dispute settlement understanding for two reasons first the timelines for dispute settlement in the wto are too long to be useful in disputes about export restrictions during periods of high food prices second the withdrawal of tariff concessions or trade retaliation that could be authorised in such cases would not be a credible response for many complainant countries

implications of the global growth slowdown for rural poverty over the past 25 years higher growth in developing countries has contributed to a dramatic fall in global poverty although poverty rates in rural areas remain higher than in urban areas unfortunately projected growth rates have fallen in recent years this article examines the impact of this slowdown on the poor particularly the rural poor it first uses a global model to assess the impacts of lower productivity on key price and income variables it then uses microsimulation models for almost 300 000 households to assess the impacts on their real incomes although poverty rates overall are projected to fall substantially the poorest countries see the greatest slowdown in poverty reduction with over 5 of their population projected to remain below the poverty line in addition poverty rates will remain alarmingly high in many countries overall 38 million fewer people will leave extreme poverty compared to earlier projections farm households are at particular risk in middle income countries with over 1 5 more of the farming population remaining trapped in poverty than previously estimated by 2030 average extreme poverty in rural areas is projected at about 7 5 rather than 7 1 under the earlier growth projections clearly a strong focus on policies for poverty reduction will be vital for eliminating poverty by 2030

minimum payments and induced effort in moral hazard problems abstract consider a moral hazard problem in which there is a constraint to pay the agent no less than some amount m this paper studies the effect of changes in m on the effort that the principal chooses to induce from the agent we present sufficient conditions on the informativeness of the signal observed by the principal and on the agent s utility under which when m increases induced effort and hence productivity falls we also study how the cost minimizing contract for any given effort level varies in m we present an efficient algorithm for numerically calculating optimal contracts for given parameters and show that induced effort falls when m is increased in many cases even when our sufficient conditions fail

effects of international food price shocks on political institutions in low income countries evidence from an international food net export price index we examine the effects of variations in the international food prices on political institutions in low income countries our empirical analysis exploits that the economic impact of changes in the international food prices differs across countries depending on whether countries are net food importers or exporters we construct an international food net export price index that captures this heterogeneity our panel fixed effects analysis yields that in low income countries within country variations in the international food net export price index are significantly negatively related to democratic institutions we further explore the mechanisms driving this relationship along the economic and the conflict dimensions

tax reform and welfare measurement do we need demand system estimation the exact measurement of the welfare costs of tax and price reform requires a detailed knowledge of individual preferences typically first order approximations of welfare costs are calculated avoiding detailed knowledge of substitution effects the authors derive second order approximations which unlike first order approximations require knowledge of the distribution of substitution elasticities this paper asks to what extent simple approximations can be used to measure the welfare costs of tax reform and evaluates the magnitude of the biases for a plausible size tax reform in the authors empirical examples first order approximations display systematic biases second order approximations always work well

analysing the impact of price shocks in rural economies do household responses matter abstractwe analyse the impact of higher food prices on rural households in tanzania focusing on the often neglected role of households behavioural responses we introduce a new framework which considers the production response jointly with substitution effects in consumption and takes into account households market participation choices taking into account behavioural responses on consumption and production can significantly alter the sign and magnitude of the welfare impact in the long run

the economic role of commodity storage one of the earliest and most successful exainples of economic policy is the oftquoted biblical account of joseph s interpretation of the pharoah s dream joseph foretold that seven years of abundant harvests would precede seven years of drought and recommended that the pharoah accumulate grain during the good years since that time the central role of storage in stabilising the economy in the face of exogenous disturbances has been obvious but our understanding of the nature of that role has not greatly advanced without divine assistance in forecasting stochastic production the storage decision is considerably more complex than the one joseph faced and the role of storage quite different in fact several commonly held impressions about the role of storage of commodities such as grains are incorrect rather than stabilising production storage actually accentuates its variability rather than causing a mean price preserving decrease or a mean output preserving decrease in the dispersion of price storage generally causes a more complex modification of the distribution of price rather than being most effective at eliminating short falls in consumption storage actually is more effective at eliminating the incidence of exceedingly high consumption in this paper we explore the role of storage in a model where production is stochastic and both production and storage are performed by competitive profitmaximisers who form rational expectations about the returns to their activities we derive the subtle but very important interactions among production price expectations and storage which simpler models cannot capture finally we make a comparative statics assessment of the distributional implications of storage these results while confirming the importance of the specification of the demand function and the supply elasticity identified in recent analytical studies e g wright i979 and newbery and stiglitz i979 are surprisingly favourable to consumers considering the asymmetric nature of the effects of storage on consumption and price storage is simply a productive activity one that transfers a commodity from one period to the next like other forms of production it is costly the total cost of storing an amount st from period t to period t i is as of period t i

delegated information acquisition with moral hazard abstract we analyze a principal agent problem with moral hazard where a principal searches for an opportunity of uncertain return and hires an agent to evaluate available options the agent s effort affects the informativeness of a signal about an option s return based on the information provided by the agent the principal decides whether to exercise the option at hand we derive properties of the optimal contract in both static and dynamic versions of the problem we show that there are intermediate values of the prior probability that the option is of high quality at which positive effort cannot be sustained we also show that if the prior is below a threshold then the agent is rewarded for delivering bad news about the option s quality we derive distortions relative to the first best on the implemented effort level and optimal stopping decision for some parameter values it is optimal for the principal to commit to an ex post suboptimal stochastic decision to exercise an option

binary payment schemes moral hazard and loss aversion we modify the principal agent model with moral hazard by assuming that the agent is expectation based loss averse according to k o szegi and rabin 2006 2007 the optimal contract is a binary payment scheme even for a rich performance measure where standard preferences predict a fully contingent contract the logic is that due to the stochastic reference point increasing the number of different wages reduces the agent s expected utility without providing strong additional incentives moreover for diminutive occurrence probabilities for all signals the agent is rewarded with the fixed bonus if his performance exceeds a certain threshold

are smallholder farmers better or worse off from an increase in the international price of cereals citation nakelse t dalton t j hendricks n p hodjo m 2018 are smallholder farmers better or worse off from an increase in the international price of cereals food policy 79 213 223 https doi org 10 1016 j foodpol 2018 07 006

futures hedging under price basis and production risk we consider the hedging problem of a firm that has three sources of risk price basis and yield uncertainty an exact solution for the optimal futures hedge is derived under the assumption that the three random variables are jointly normally distributed and that utility is of the cara type unlike the mean variance approximation applied in previous research we show that the optimal hedge does depend on risk attitudes even when the agent perceives the futures price as being unbiased the theoretical results are applied empirically to the problem of hedging soybean production in iowa the exact solution relying on cara and normality is compared with numerical solutions under lognormal distributions and crra utility

rice prices and income distribution in thailand a non parametric analysis rice is a staple crop in thailand significantly entering both household production and consumption this paper examines the effect of rice prices on the distribution of real income across households taking into account household characteristics and geographical location the data set is a large scale survey of 11 893 households simple nonparametric techniques for regression and density estimation are used these methods depend on few assumptions and generate flexible graphical results that are directly informative about the problem at hand the main results are that higher rice prices should benefit all rural households but the largest benefits accrue to rural households in the middle of the income distribution copyright 1989 by royal economic society

selling labor low wage responses to productivity shocks in developing countries productivity risk is pervasive in underdeveloped countries this paper highlights a way in which underdevelopment exacerbates productivity risk productivity shocks cause larger changes in the wage when workers are poorer less able to migrate and more credit constrained because of such workers inelastic labor supply this equilibrium wage effect hurts workers in contrast it acts as insurance for landowners agricultural wage data for 257 districts in india for 1956 87 are used to test the predictions with rainfall as an instrument for agricultural productivity in districts with fewer banks or higher migration costs the wage is much more responsive to fluctuations in productivity

the theory of moral hazard and unobservable behaviour part i principal agent models are studied in which outcomes conditional on the agent s action are uncertain and the agent s behaviour therefore unobservable for a model with bounded agent s utility conditions are given under which the first best equilibrium can be approximated arbitrarily closely by contracts relating payment to observable outcomes for general models it is shown that the solution may not always be obtained by using the agent s first order conditions as constraint general conditions of lagrangean type are given for problems in which contracts are finite dimensional 1 the moral hazard situation

export restrictions and price insulation during commodity price booms for individual countries variable trade barriers can be used to reduce the volatility of domestic relative to world prices if this is done by countries accounting for a large share of the market its effect is offset by increases in world price volatility this study shows the nature of the resulting collective action problem with the policy being ineffective on average in stabilizing domestic prices while increasing the volatility of the income transfers from terms of trade changes a simple approach to assessing the contribution of insulation to the price increases is developed and used with new estimates of agricultural distortions to assess its contribution to the price spikes in 1972 74 and 2006 08 for rice and wheat the analysis suggests that 45 percent of the increase in rice prices in 2006 08 and 30 percent of the increase in wheat prices was due to insulating behavior one sign of progress since 1972 74 was a substantial reduction in the extent of price insulating behavior by the industrial countries this provides little stabilizing benefit in the rice market because countries not classifying themselves at the world trade organization as developing account for only 3 percent of world rice consumption but it does offer some benefit for the wheat market where non developing countries account for 27 percent of consumption

reflections on food crises past abstract world food crises are relatively rare events occurring roughly three times a century but they also tend to be regular events every three decades or so suggesting there is an underlying cyclical cause if so far sighted donor and government investments in raising agricultural productivity and policies on behalf of stable food production and prices might go a long way to preventing food crises in the future preventing food crises rather than trying to cope after the fact with their impact on the poor is the only way to avoid substantial perhaps permanent damage to the welfare of poor households lessons from the world food crises in 1972 73 and in 2007 08 especially lessons from how the world rice market functioned point the way toward improved food policy management at national and international levels in the future

the price effect of tariff liberalization measuring the impact on household welfare abstract trade policy literature has for many years emphasized open policies positive impact on economic growth and development while these results generally hold when measured on averages empirical evidence suggests that trade liberalization is unlikely to produce beneficial results across all households this study adds to the literature by providing an analysis of the distributive effects of tariff liberalization in mexico the paper examines the effect of tariff liberalization from the perspective of households both as consumers and factor owners allowing for imperfect domestic price transmission the results indicate the overall positive effect of tariff liberalization masks significant differences in the distribution of gains both across income levels and across geographic regions richer households are found to have gained relatively more urban areas as well as mexican states closest to the united states border are also found to be larger beneficiaries while southernmost states have been largely bypassed by the effects of tariff liberalization those results can be explained not only in relation to the different endowments of the households but also by the diverse effects on local prices that has resulted from mexican trade liberalization

implications of higher global food prices for poverty in low income countries in many poor countries the recent increases in prices of staple foods raise the real incomes of those selling food many of whom are relatively poor while hurting net food consumers many of whom are also relatively poor the impacts on poverty will certainly be very diverse but the average impact on poverty depends upon the balance between these two effects and can only be determined by looking at real world data results using household data for ten observations on nine low income countries show that the short run impacts of higher staple food prices on poverty differ considerably by commodity and by country but that poverty increases are much more frequent and larger than poverty reductions the recent large increases in food prices appear likely to raise overall poverty in low income countries substantially

moral hazard with bounded payments we study the moral hazard problem with general constraints on how little or much the agent can be paid as a function of output we provide a characterization and existence result using only very simple methods in the dual problem of minimizing costs for a given effort level a constraint that harms the principal will always result in a contract that pays according to the constraint on some range of outcomes for the case of a simple fixed minimum feasible payment the resultant contract will be option like we show how the strike price and intensity of incentives once the strike price is exceeded vary in the minimum payment and the outside option of the agent when the principal can also choose the effort to induce then even if the constraint harms the principal he may optimally choose a contract that never pays the minimum or maximum we show that this can only occur if the problem without the payment constraints fails a form of concavity

trading off volatility and distortions food policy during price spikes this paper analyses the trade off between price distortions and reduced volatility when governments intervened in agricultural and food markets during the recent food price spikes we develop a model to derive how much distortions a government would introduce when it cares about price stability in a situation with limited policy options we show that there is a trade off and identify the optimal combination of distortions and stability for given international price shocks and interest groups preferences for stability we compare these theoretical findings with empirical indicators on actual government interventions in staple food markets we find that several countries have been able to reduce short run price volatility in the domestic markets while at the same time allowing structural medium and long term price changes to pass through to producers and consumers however this is not the general case for many countries even when explicitly taking into account the trade off and the benefits of reducing volatility government policies appear far removed from the optimal trade off and there appears to be much room for policy improvement

moral hazard and capital structure dynamics we base a contracting theory for a start up firm on an agency model with observable but nonverifiable effort and renegotiable contracts two essential restrictions on simple contracts are imposed the entrepreneur must be given limited liability and the investor s earnings must not decrease in the realized profi to f thefirm all message game contracts with pure strategy equilibria and no third parties are considered within this class of contracts equilibria and regardless of who has the renegotiating bargaining power debt and convertible debt maximize the entrepreneur s incentives to exert effort these contracts are optimal if the entrepreneur has the bargaining power in renegotiation if the investor has the bargaining power the same is true unless debt induces excessive effort in the latter case a non debt simple contract achieves efficiency the non contractibility of effort does not lower welfare thus when the non contractibility of effort matters our results mirror typical capital structure dynamics an early use of debt claims followed by a switch to equity like claims

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

renegotiating moral hazard contracts under limited liability and monotonicity in a principal agent model with unobservable effort and possible renegotiation contracts are assumed to satisfy two natural restrictions limited liability for the agent and monotonicity of payments for the principal the main result is that if the agent has the renegotiation bargaining power any contract is weakly pareto dominated by a debt contract journal of economic literature classification numbers d820 l140 o261

urban wage behaviour and food price inflation in ethiopia abstracttheoretically increases in food prices could benefit the poor by increasing the demand for unskilled labour and hence their wages this paper tests this hypothesis in urban ethiopia we exploit a unique panel of monthly price and wage data from 111 urban markets to first construct welfare relevant measures of real wages before employing various panel estimators to formally test wage food price integration we find moderate rates of long run adjustment to increases in food prices but that adjustment is very slow this implies highly adverse short run welfare impacts of higher food prices on the urban poor

ex post unbalanced tournaments tournaments create strong incentives under the assumption that the competition between the agents is balanced if at the outset one agent is stronger than the other the tournament is ex ante unbalanced and incentives break down handicaps can in this case restore incentives in practice competing agents are often overall equally strong but have different sorts of strengths then competition will typically be unbalanced ex post and incentives break down but handicaps cannot be used we show how a simple means introducing the possibility of a tie can often resolve the problem we examine under what conditions incentives are maximized by ties

tariffs as insurance optimal commercial policy when domestic markets are incomplete free trade is not optimal for a small country that faces uncertain terms of trade if some factors are immobile ex post and markets for contingent claims are incomplete the government can improve social welfare by using commercial policy that serves as a partial substitute for missing insurance markets using a combination of analytical and simulation techniques we demonstrate that optimal policy for this purpose will often have an anti trade bias we also show that the usual preference by economists for factor or product taxes and subsidies over tariffs and export subsidies may not be justified in this context this abstract was borrowed from another version of this item