the incentive effects of medicaid on women s labor supply this paper investigates medicaid s impact on women s labor supply behavior while taking into account medicaid s link to the afdc program the data were extracted from the 1986 current population survey a majorfinding is that medicaid valued as government provided health insurance has a significant negative impact on an average female head s probability of working for instance a i0 percent increase in medicaid would reduce a head s probability of working by 9 to 1 3 percentage points contrary to expectations medicaid is found to have a generally insignificant effect on hours worked

the measurement and trend of inequality comment in a recent article in this review morton paglin proposes a measure of concentration which he claims will correct the gini ratio for overstatement in populations where each individual may be expected to vary his income or wealth over his life cycle the paglin measure suggests that the gini ratio overstates income concentration in the united states by a third and does not reveal a 23 percent decline in concentration which has occurred between 1947 and 1972 these results are based on an improper decomposition of the gini ratio in this note i decompose the gini ratio to derive the paglin measure it is shown to correct for neither demographic nor life cycle income effects and to understate intracohort income or wealth inequality if properly normalized the paglin measure shows that the gini overstates u s income concentration by 7 percent or less and indicates a decline in u s interfamily income concentration of less than 12 percent four percentage points of this decline are the result of demographic change while less than 7 points comparable to the 5 percent decline of the gini are the result of decreased income concentration within cohorts of family heads decomposition further reveals major changes in the division of income among cohorts and in concentration of income within cohorts these changes compensate each other in the paglin measure the use of which as a measure of income or wealth concentration is not recommended the gini concentration ratio

labour supply effects of unemployment insurance benefits data from the 1976 wave of the panel study of income dynamics are employed to study the effect of unemployment insurance ui benefits on weeks worked ols regressions to model labour supply behaviour are estimated for both recipients and nonrecipients of ui benefits we find some inteesting differences between the labour supply behaviour of ui recipients and nonrecipients

social security in panama a multiperiod analysis of income distribution abstract a unique multiperiod data set is used to look at the income distribution effects of the retirement portion of the social security system of panama while it is clear that the system is an important source of income for workers it is argued that its true redistributive importance is greatly exaggerated using a multiperiod view it is found that previously high wage and urban workers are disproportionately represented among current recipients it is also argued that social security has substantially reduced the work effort of these workers hence the appropriateness of the present social security system is questioned on both equity and efficiency grounds

the effect of food stamps on labor supply a bivariate selection model abstract although there is a large literature on the effects of u s transfer programs on labor supply this is the first such study of the food stamp program we model the nonlinearity and nonconvexity of the budget constraint and use maximum likelihood methods to estimate hours of work functions for female heads of household the largest recipient group in the program we also model the joint response to afdc and food stamps and we account for the existence of a significant number of eligible households who do not participate in the programs a three equation bivariate selection model is estimated on a sample of eligible households with maximum likelihood

discrimination in the payment of full time wage premiums this study investigates how many hours must be worked per week in order for workers in different race and gender groups to receive a high hours full time wage premium an analysis of 1989 current population survey data shows that across occupations both white and black men received a full time wage premium for working at least 33 hours per week whereas white women had to work at least 37 hours and black women at least 39 hours to receive the premium controlling for occupation changes the threshold for black women to 33 hours but does not change the results for the other groups the authors find that the observed differences account for at most two percentage points of the wage differentials across race and gender

us federal redistributive income policies the purpose of this paper is to present a statiscial model of inequality that allows us to analyse simultaneously the impact of several major redistributive expenditure policies as well as analysing the impact of income taxation on inequality the paper includes multivariate exogeeity tests to determine whether the policies have caused the observed income distribution or if there is feedback i e inequality in the distribution has lead to enhanced or diminished redistributive policies the direction of causality for these policies has not to ourr knowledge been previously examined this paper examines the usual redistributive vehicles of transfer payments social security medicare and medicaid as well as analysing the impact of the personal income tax system on inequality using time series analysis we can allow for lagged effects of these policies as well as current period effects this lagged effects specification may be sugggestive of behavioural responses to policy changes

how debt markets have malfunctioned in the crisis the financial crisis that began in 2007 is especially a crisis in debt markets a full understanding of what happened in the financial crisis requires investigation into the plumbing of debt markets during a financial crisis when funds often cannot be raised easily or quickly the fundamental values for certain assets can become separated for a time from market prices with consequences that can echo into the real economy this article will explain in concrete ways how debt markets can malfunction with deleterious consequences for the real economy after a quick overview of debt markets i discuss three areas that are crucial in all debt markets decisions risk capital and risk aversion repo financing and haircuts and counterparty risk in each of these areas feedback effects can arise so that less liquidity and a higher cost for finance can reinforce each other in a contagious spiral i will document the remarkable rise in the premium that investors placed on liquidity during the crisis next i will show how these issues caused debt markets to break down indeed fundamental values and market values seemed to diverge across several markets and products that were far removed from the toxic subprime mortgage assets at the root of the crisis finally i will discuss briefly four steps that the federal reserve took to ease the crisis and how each was geared to a specific systemic fault that arose during the crisis

what went wrong the erosion of relative earnings and employment among young black men in the 1980s this paper shows a widening in black white earnings and employment gaps among young men from the mid 1970s through the 1980s earnings gaps increased most among college graduates and in the midwest while gaps in employment population rates grew most among dropouts we attribute the differential widening to shifts in demand for subgroups due to shifting industry and regional employment the falling real minimum wage and deunionization the growing supply of black to white workers that was marked among college graduates and to increased crime among dropouts the different factors affecting subgroups highlight the economic diversity of black americans

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

means testing versus universal provision in poverty alleviation programs this paper contrasts the use of means tested and universal schemes in the alleviation of poverty using a class of poverty measures the authors illustrate the trade off from the fact that means testing is costly to both the government and the claimant while universal provision entails a leakage to the nonpoor the paper provides numerical as well as analytical results copyright 1990 by the london school of economics and political science

the connection between public transfers and private interfamily transfers abstract this paper investigates the anti poverty effectiveness of public transfers taking private transfer responses into account widespread altruistically motivated private transfers would neutralize the distributional impact of public transfers but exchange motivated transfers can reinforce the effects of public transfers on the distribution of economic well being the common technique for gauging anti poverty effectiveness subtracting public transfers from other income and measuring the poverty rate counterfactual yields results that are close to a more complex procedure that takes private transfer responses into account and some of the empirical findings suggest an exchange rather than altruistic motive for private transfers indicating that the effects of public transfers can be magnified by private behavior this is an exact reversal of the prediction that public transfers merely supplant private ones

an analysis of the relationship between various redistributive programs and poverty this paper utilizes multivariate exogeneity causality tests to analyze the relationship between various income policy programs and the poverty rate the framework we develop allows us to make a distinction between intended poverty reduction objectives and automatic stabilizing behavior since we find that the poverty in a given year affects the funding of social programs in later years we conclude that these programs are primarily acting as automatic stabilizers i e the poverty reduction instruments do not appear to have been implemented with a relentless intent to reduce poverty a result consistent with tullock s 1983 1986 theorem

trickle down or transfers postwar determinants of family income inequality the expansion of social welfare has been promoted as one means of equalizing the distribution of economic well being macroeconomic expansion has been touted as an alternative strategy for improving the lot of the poor focusing on the postwar era this paper provides an empirical assessment of these two competing theories of income redistribution for female headed families and unrelated men and women the growth of public transfers is seen to be the major force behind a reduction in income disparities only husband wife families and men living apart from kin seem to have experienced any distributional impact of business cycles

welfare recipient work choice and in kind benefits in washington state we analyze the work choice of welfare recipients potential welfare recipients compare their on and off welfare utility from after tax income and in kind benefits via employment or welfare and choose whether to work our null hypothesis which we reject is that benefits affect only the decision to work or not not the hours worked which will depend on wages using temporary assistance for needy families tanf administrative data from washington state we find that employer provided health insurance and child care subsidies significantly raise exit rates of tanf recipients and induce greater work effort other work inducing factors include wages and the earned income tax credit while increased levels of medicaid food stamps and the income guarantee increase welfare dependency

employment and welfare participation among women laurie j bassi the model makes a distinction between voluntary and involuntary welfare receipt the findings suggest that among female heads of households the increase in welfare receipt that occurred between 1967 and 1979 was almost completely attributable to an increase in involuntary unemployment and an increase in the proportion of the population that was eligible for welfare due to changes in program parameters the passage of time used as a proxy for changes in the stigma associated with receiving welfare appears to be of secondary importance the labor supply response to welfare programs is small and possibly diminishing over time i introduction during the last thirty years the aid to families with dependent children afdc and food stamp programs experienced phenomenal increases in outlays between 1965 and 1975 the afdc population grew 162 percent and real government spending on benefits more than tripled by 1980 the probability that a family was receiving afdc was four times the probability in 1950 value the food stamp program after its introduction in the late 1960s experienced equally dramatic increases in recipiency rates and outlays these striking increases in welfare costs and participation brought an emerging consensus that the afdc and food stamp programs had failed as charles murray writes in losing ground 1984 146 the popular wisdom is characterized by hostility toward welfare it makes people lazy historian james patterson 1981 179 provides an alternative though not inconsistent explanation of the skyrocketing caseloads despite the hostility of the middle classes to increases in welfare poor americans refused at last to be cowed from applying for aid compared to the past when poor people harassed and stigmatized by public authorities were slow to claim their rights this was a fundamental change both of these explanations of the increase in welfare participation assert changes in people s response to the programs murray claims that program changes in the 1960s induced negative labor supply responses increasing numbers of individuals voluntarily reduced their earned income in order to become eligible for welfare patterson claims that a reduction in the stigma associated with welfare led a greater percentage of those eligible to apply for welfare a theoretical model for evaluating the validity of these two views as descriptions of reality is presented here the model is tested using data on women who headed households at some time between 1967 to 1979 the analysis attempts to identify changes in behavior among female heads of households but does not model the decision to head a family a decision which embodies both marital status and fertility choices the implications of this limitation are discussed at the end of the paper the focus is on developing a tractable theoretical structure that allows for a distinction between voluntary and involuntary welfare participation the model also provides a simple test for whether reported unemployment is a constraint on choice or rather a result of it i e whether unemployment too is involuntary or voluntary the empirical results enable us to dis aggregate the changes in welfare participation into their component parts the findings suggest that the increase in welfare participation rates among female heads of households during the late 1960s and 1970s is attributable to both an increase in involuntary unemployment and to an increase in those eligible for welfare as a result of changes in program parameters the passage of time used as a proxy for a lessening of stigma appears to be of minor importance the labor supply response to welfare programs appears to be small and possibly diminishing over time in section ii a model for determining the effect of redistribution schemes on labor supply and welfare participation decisions is developed

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

precautionary savings a panel study theoretical literature shows that income uncertainty boosts saving yet empirical work is incomplete i test for the precautionary motive for saving using panel data knowing this motive s size is important for gauging the responsiveness of saving to government programs that reduce uncertainty and for comparison to other motives such as bequests most empirical studies of precautionary saving use either aggregate time series or cross sectional data which cannot capture the effects of individual income uncertainty i derive measures of total permanent and transitory income uncertainty from panel data the national longitudinal survey and find a strong precautionary motive a doubling of uncertainty increases the ratio of wealth to permanent income by 29

slipping into and out of poverty the dynamics of spells this paper examines the dynamics of poverty previous analyses have examined either fluctuations in the male heads earnings or the frequency of poverty periods over a fixed time frame our approach depends on a definition of spells of poverty using this methodology we find that the majority of poor persons at any time are in the midst of a rather long spell of poverty the methodology also allows us to estimate that less than 40 percent of poverty spells begin because of a drop in the heads earnings while 60 percent of the spells end when the heads earnings increase thus researchers must focus on household formation decisions and on the behavior of secondary family members there has been a dramatic resurgence recently of discussion of the underclass the discussion is reminiscent of debates about poverty during the 1960s when the notions of a culture of poverty particularly as popularized by michael harrington s other america 1962 dominated both intellectual and policy thinking the idea of an underclass seems inconsistent however with much of the research on the dynamics of poverty during the 1970s that research using new longitudinal data seemed to show that the bulk of the poor were poor for only a few years the research also showed that the poor were a very heterogeneous group including a small minority of persistently poor the persistence of poverty is of interest both for understanding the phenomenon and for developing policy claims about dependency and separate life styles among the poor rest on assumptions about the long term nature of poverty questions

the joint choice of retirement age and postretirement hours of work in this paper we develop and estimate the first complete and internally consistent model of the effect of social security on the labor supply of the aged we develop a simple life cycle model that captures the effect of social security on the joint choice of the date of retirement and hours of work immediately after retirement we show that in the presence of social security the budget constraint relating these choices is highly complex and nonlinear and we develop a maximum likelihood procedure for the model that yields consistent parameter estimates our procedure avoids the selectivity biases present in prior studies that have ignored the nonlinearity of the constraint or have examined only self selected subsamples that exclude nonretirees our results show that social security has a significant though relatively small effect on the age of retirement and postretirement hours of work and that the effect of social security grows with advancing age

electoral competition and the growth of public spending in 13 industrial democracies 1950 to 1983 this article examines a theoretically important issue that has received surprisingly little attention whether the process of democratic competition for public office has fueled the growth of domestic spending in the capitalist democracies since world war ii probably because it is difficult to measure electoral competition in multiparty systems existing comparative studies of public spending either ignore this question or use dubious measures of electoral competition this study presents and tests some conceptually more appealing measures of competition the results show a strong robust relationship between improved indicators of electoral competition and the growth of domestic spending from 1950 to 1973 and 1973 to 1983 the study concludes by analyzing the implications of the findings for economic performance in the capitalist democracies and for the democratic management of fiscal policy

the effectiveness of structural adjustment lending initial evidence from malawi abstract the world bank s new programs of structural adjustment lending are likely to prove most effective with those governments which demonstrate shared ideals in their approach to economic adjustment and policy reform malawi has long been regarded as a country placing great reliance on the market in resource allocation showing restraint in public sector expansion and retaining a strong export orientation the balance of payments difficulties and the deterioration in economic circumstances which began in 1980 did not arise solely from external shocks but the structural adjustment lending programs introduced in 1981 as a means of easing the painful reform process found root in a fertile and responsive policy environment this paper chronicles the first two sals to malawi reviewing in particular the specific policy reforms advocated and required by the bank the extent of their implementation and the provisional effects on the malawi economy

a measure of horizontal inequity politicians academicians and the general public alike have perceived that the status quo tax and transfer legislation creates inequities among living units tax laws create numerous situations in which living units with seemingly equal abilities to pay are taxed quite different amounts state by state differences in welfare eligibility rules benefit schedules and administrative procedures the general unavailability of cash welfare to childless nonaged healthy couples and single individuals and other features of transfer programs similarly provide vastly different levels of income support to units with equal needs advocates of major tax and welfare reform have marshalled such evidence into a central argument in favor of their proposals while there is wide agreement that the process of redistributing incomes abounds with inequities there have been few attempts to quantify their extent 2 this paper develops a measure of horizontal inequity and illustrates its use section ii discusses the concept of horizontal equity then builds upon familiar lorenz curve gini coefficient analysis to derive the inequity index the third part considers some problems of implementing the measure and illustrates it section iv provides a short conclusion

the tradeoff between equality and efficiency short run politics and long run realities in concluding this paper the best way to emphasize what has been argued is to make as clear as possible what has not been argued nothing in the above argumentation or evidence can or is intended to deny that some social welfare programs genuinely serve the long run interests of the poor undoubtedly such programs exist and can be identified as successful other programs exist however that are undeniably making the poor worse off from the perspective of reducing income inequality it is obvious that the successful programs should be maintained and even expanded in ways that further assist the poor while the harmful programs should be terminated unfortunately it is simply not possible politically to select out those programs that do promote broad social goals such as reducing poverty while eliminating those programs that do not this is a point that the present paper is intended to emphasize once you open up the political transfer process to one group no matter how deserving that group may be economic rents are generated that will motivate competition among politically organized interest groups the inevitable result of this competition is a package of programs that serve a variety of interests but which on balance do little if anything to benefit those groups which it was our intention to assist

measuring the influence of unemployment insurance on unemployment experiences this article investigates the comprehensive effects of unemployment insurance ui policies on the amount of time and unemployment that individuals report between jobs the econometric model jointly determines the effects of ui on the lengths of nonemployment spells the classification of these spells as unemployment and the likelihood of collecting program benefits the model carefully attempts to isolate variation in ui benefits attributable to differences in generosity across programs to avoid biases in estimating policy effects induced by other contaminating sources of benefit variation using data on men from the national longitudinal survey of youth the empirical results find a ui recipients typically experience longer spells between jobs at least up to the exhaustion of ui benefits and report substantially larger fractions of these spells as unemployment b weekly benefit amounts exert no significant influence on the likelihood of ui recipiency on the length of spells between jobs or on t

do means tested transfers reduce labor supply abstract it is frequently argued that recipients of means tested government transfers work less than they would in the absence of the transfer this note shows that this conclusion may not be accurate for many participants in a major housing program

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

cash welfare as a consumption smoothing mechanism for divorced mothers abstract while there has been considerable research on the disincentive effects of cash welfare under the aid to families with dependent children afdc program there is little evidence on the benefits of the program for single mothers and their children one potential benefit of this program is that it provides short run consumption insurance for women at the point that they become single mothers this is only true however to the extent that the program is not crowding out other sources of support such as own savings labor supply or transfers from others i assess the importance of this insurance mechanism by measuring the extent to which afdc smooths the consumption of women who transition to single motherhood through marital dissolution i use longitudinal data on family structure and consumption expenditures on food and housing from the panel study of income dynamics psid matched to information on the welfare benefits available in each state and year over the 1968 1985 period i find that raising potential benefits by one dollar raises the food and housing consumption of women who get divorced and their families by 28 cents this estimate implies that for each dollar of afdc received by this population their consumption of these categories of goods rises by up to 51 cents this is roughly the share of food and housing in the consumption bundle of divorced mothers and their families suggesting little crowdout of other sources of support

is there an effect of incremental welfare benefits on fertility behavior a look at the family cap this analysis exploits the variation across states in the timing of policy implementation to determine if family cap policies lead to a reduction in births to women aged 15 to 34 vital statistics birth data for the years 1989 to 1998 offer no such evidence the data reject a decline in births of more than one percent the finding is robust to multiple specification checks the data also reject large declines in higher order births among demographic groups with high welfare participation rates

macroeconomic adjustment and poverty in selected industrial countries the business cycle affects the incidence of poverty as shown by evidence from australia sweden the united kingdom and the united states many of the poor in these countries are outside the labor markets and transfers are a major source of income for many others but the unemployment and wage reductions that occur in recession increase the incidence of poverty major causes of poverty are unemployment in australia and the united kingdom and low wages in the united states similar cyclical effects are observed in sweden but a vast transfer program virtually eliminates poverty there are several policy options for combating poverty caused by recession a combination of unemployment insurance for a limited period followed by a job guarantee is the most effective policy toward unemployment whereas poverty caused by low earnings can be remedied by redistribution through the tax system

labor supply response to welfare programs a dynamic analysis previous static analyses of the work disincentive effects of welfare programs are extended to a dynamic context using a sample of continuous longitudinal labor market histories estimates are derived for welfare nonwelfare differences in labor market flows among the states of employment unemployment and nonparticipation the estimates are used to identify the main sources of the lower employment and labor force participation rates and higher unemployment rate of welfare recipients the findings indicate that welfare programs have substantial effects on virtually every labor market transition examined but that the primary source of the static work disincentive effect is slower entry into employment

does unemployment compensation affect unemployment duration abstract we use a flexible hazard rate model with unrestricted spell duration and calendar timeeffects to analyse a dataset including all norwegian unemployment spells during the1990 s the dataset provides a unique access to conditionally independent variation inunemployment compensation we find that a marginal increase in compensation re duces the escape rate from unemployment significantly irrespective of business cycleconditions and spell duration the escape rate rises sharply in the months just prior tobenefit exhaustion while men are more responsive than women with respect to mar ginal changes in compensation women are most responsive with respect to benefitexhaustion keywords unemployment spells business cycles unemployment compensation non parametric duration analysis jel classification c41 j64 the ragnar frisch centre for economic research oslo we wish to thank the re search council of norway for financial support and christian brinck harald goldstein costas meghir espen moen steinar strom rolf aaberge and three anonomyous referees for helpful comments cor respondence to knut roed the ragnar frisch centre for economic research gaustadalleen 21 0349oslo norway e mail knut roed frisch uio no

welfare the earned income tax credit and the labor supply of single mothers during 1984 1996 welfare and tax policy were changed to encourage work by single mothers the earned income tax credit was expanded welfare benets were cut welfare time limits were added and welfare cases were terminated medicaid for the working poor was expanded as were training programs and child care during this same time period there were unprecedented increases in the employment and hours of single mothers we show that a large share of the increase in work by single mothers can be attributed to the eitc and other tax changes with smaller shares for welfare benet cuts welfare waivers training programs and child care programs

poverty comparisons with dependent samples standard inference procedures for poverty comparisons require samples to be independent for many commonly used income samples however this requirement is not ful lled since samples are rotated this note introduces an easy to use method of correction for sample dependency we also apply the method to test changes in u s poverty in the 1990s and evaluate the marginal effects of public assistance on poverty before and after the recent welfare reform

pension wealth and household savings tests of robustness abstract a substantial literature exists on the impact of pension schemes both public and private on the level of household saving yet there is no clear consensus on the impact of pensions on private saving in this paper we show how beliefs about this displacement effect are modified by prior beliefs both about variables which might be relevant in an equation for private savings and about the magnitude of the displacement effect using data for 8279 canadian households and estimates of pension wealth both private and social security which we construct for each household in the sample the estimated displacement effects are found to be relatively robust with respect to both types of prior belief

the economic implications of public disability insurance in the united states a review of previous analyses of labor supply effects of social security disability insurance di concludes that estimates of labor supply effects and net social costs are upward biased because they ignore interactions between di and other insurances a model of optimal insurance postinjury accommodations and labor supply shows that reduction in labor supply and increase in consumption when disabled do not necessarily imply moral hazard optimal postinjury accommodations vary inversely with firm size the americans with disabilities act will reduce wages and labor supply of healthy workers particularly in small firms effects on labor supply of the disabled are ambiguous

the reverse lbo decision and firm performance theory and evidence we investigate the transition from private to public ownership of companies that had previously been subject to leveraged buyouts lbos we show that the information asymmetry problem firms face when they go to public markets for equity as well as behavioral and debt overhang effects will produce a pattern in which superior performance before an offering should be expected with disappointing performance subsequently we find empirical evidence of this phenomenon by studying 62 reverse lbos that went public between 1983 and 1987 the market appears to anticipate this pattern in 1991 56 leveraged buyouts lbos returned to the public equity markets part of a broader phenomenon in which a large fraction of lbos go public again hence becoming reverse lbos kaplan 1991 reports that 45 percent of a sample of large lbos completed between 1979 and 1986 later returned to public ownership moreover reverse lbos tend to be larger than the average initial public offering ipo 1 in sum transitions from the lbo form to public ownership have become a widespread and economically significant phenomenon we find strong evidence that the return to public ownership of reverse lbos coincides with a peak in their operating performance their operating income as a percentage of total assets grew by about seven percentage points in the preoffering year comparison firms in the same industries show a slight decline in the same performance measure moreover in the preoffering year reverse lbos outperform continuing lbos in the year after the

redistributive effects of transfer programmes in the united kingdom we discuss the redistribution effects of transfer using a conditional choice general equilibrium model we calibrate it to uk data for the early 2000s results indicate that a money metric measure of the welfare value of transfer received by the bottom decile of uk households equals 17 of the cash transfer

private equity performance what do we know we study the performance of nearly 1400 u s buyout and venture capital funds using a new dataset from burgiss we find better buyout fund performance than has previously been documented performance consistently has exceeded that of public markets outperformance versus the s p 500 averages 20 to 27 over a fund s life and more than 3 annually venture capital funds outperformed public equities in the 1990s but underperformed in the 2000s our conclusions are robust to various indices and risk controls performance in cambridge associates and preqin is qualitatively similar to that in burgiss but is lower in thomson venture economics

structural change in malawi since independence consequences of a development strategy based on large scale agriculture abstract this paper investigates the nature of the structural change which has occured in the malawian economy since independence and identifies key policies pursued by the government which it is argued have been decisive in shaping this development the salient feature of structural change is shown to be the rapid growth of large scale agriculture associated with an equally rapid transfer of labour into wage employment and a decline in the importance of peasant production the implications of these changes for living standards and future development and policy are considered

the impact of taxes and transfers on job search this article develops a framework for analyzing the impact of taxes and transfers on the length of time a person waits to accept a job while receiving transfer payments it considers the impact of changes in the parameters of a generic tax transfer system characterized by a guarantee and a tax rate on the costs and benefits of search the analytical results indicate that increases in guarantees need not increase duration of unemployment the results for unemployment insurance are a special case of the more general formulation developed in this article in fact increases in guarantees and increases in tax rates may shorten the duration of unemployment while decreasing the labor supply of transfer recipients

female labor supply with a discontinuous nonconvex budget constraint incorporation of a part time full time wage differential this paper incorporates the well documented part time full time wage differential into an empirical labor supply model with both a heterogeneity and a random error term and estimates that model fo

do private equity returns result from wealth transfers and short termism evidence from a comprehensive sample of large buyouts we test whether the well documented high returns of private equity sponsors result from wealth transfers from other financial claimants and counterparties and from a focus on short term profits at the expense of long term value debt investors who finance buyouts as well as buyers of private equity portfolio companies represent the two potential sources of wealth transfers however we find that on average public companies benefit when they buy financial sponsors portfolio companies experiencing positive abnormal returns upon the announcement of the acquisition and long run posttransaction abnormal returns indistinguishable from zero we further find that large portfolio company payouts to private equity on average have no relation to future portfolio company distress suggesting that debt investors are not suffering systematic wealth losses either however we find some evidence of wealth transfers from both strategic buyers and debt investors in some special situations finally we find that portf

welfare as a cause of poverty a time series analysis since the inception of welfare programs critics have argued that giving aid to the poor dampens their incentive to provide for themselves and their dependents 1 charles murray s losing ground 1984 presents a modern reincarnation of this work disincentive hypothesis he notes that both nominal welfare benefits and caseloads increased during the seventies suggesting that higher benefits cause more people to join the welfare rolls others contend that welfare receipt may be a necessity rather than a matter of personal choice even if the nonworking poor actively sought employment many would not be able to find jobs furthermore many would find only low paying jobs which would not enable them to work their way out of poverty e g abraham 1983 in this view unemployment labor market segmentation and low wages cause poverty which view is correct studies of the effects of welfare typically specify a single model and use regression analysis to test whether the data support its implications in contrast this paper uses the granger 1969 causality test in a system of welfare and employment equations this strategy offers two advantages first regression presumes causality whereas the granger approach tests whether or not causality defined in a technical sense exists second we can use a very general empirical model to test the work disincentive hypothesis as well as the implications of two competing models section 2 presents three models of the welfare caseload and their implied patterns of causality section 3 explains granger s concept of and test for causality in section 4 the test is performed indicating the direction of causality between real afdc benefits the afdc caseload and unemployment we then repeat the exercise using labor force participation rates rather than unemployment rates the paper concludes with a summary of the results and their qualifications

in kind transfers cash grants and the supply of labour abstract this paper corrects the notion that somehow benefits given in kind interfere less with the work leisure choice than cash grants of equivalent monetary value in a simple model the analysis proves that the true effect depends on the extent of the in kind transfer and the substitutability of the good in question with leisure

the labor force participation of older workers this study examines the decision to participate in the labor force made by persons over 54 years of age through the use of a set of pooled time series cross section observations from the current population survey over the years 1974 80 the analysis emphasizes the effect of two factors on this decision cohort crowding and supplemental security income ssi the empirical results reveal that pressures arising from the relative growth in the youth population led to increased labor market activity by older women that retirement incentives in the form of ssi and social security had a negative effect on female as well as male labor force behavior though the effects were considerably stronger for men and that the differential between men s and women s participation rates was largely a result of the female response to marital status and retirement incentives

public transfers family socioeconomic traits and the job search behavior of the unemployed evidence from puerto rico abstract this paper explores the theoretical and empirical associations between the job search efforts of the unemployed and the socioeconomic characteristics of the family it takes as a point of reference that certain supply side phenomena may contribute to puerto rico s high open unemployment rate the statistical analyses carried out indicate that there does exist what can be labeled luxury unemployment in other words government provided transfer payments generate disincentive effects with respect to the job market behavior of the unemployed moreover the dependency status of the individual within the family group also leads to lower job search effort

income distribution in the united states political action has affected postwar income distribution in the united states mainly through policy induced variations in macroeconomic activity and government transfer benefits in proportion to total income we present a small dynamic model of the connections among the partisan balance of power macroeconomic fluctuations transfer spending trends and income distribution outcomes the model is based on the premise that the parties have different distributional goals and it is designed to identify how shifts in party control of the presidency and the strength of the parties in congress have affected the distribution of after tax after transfer income by influencing cyclical economic performance and the flow of resources to transfer programs we therefore extend the partisan theory of macroeconomic policy to the domain of income distribution outcomes

equity efficiency and environmental quality many government policies ostensibly designed to serve allocative ends appear to be driven primarily if not exclusively by redistributive considerations this paper analyzes one such policy the new source performance standards of the clean air act of 1977 using data derived principally from studies commissioned by and known to those involved in the policy making process these data are used to produce estimates of the magnitude and relative efficiency of the wealth transfers effected by the policy among our conclusions are that at least with respect to this particular episode a environmental regulation is an extremely inefficient method of transferring wealth and b transfers between groups within regions of the u s are large relative to transfers between those regions

replacement income duration of unemployment and the migration of unemployed prime age males the relationship between the interstate migration of unemployed males of prime working age i e 25 44 years of age the level of unemployment replacement income and the duration of unemployment spells is addressed through the use of a relatively untapped data source the us census s survey of income and program participation sipp the rich set of details that are provided in this database allows a more precise empirical analysis of the above relationships than has been possible with psid cps and other previously used databases by restricting the sample to a relatively homogeneous segment of the work force its is possible to isolate better the effects of unemployment replacement income and job search duration on the migration decision of unemployed workers without the confounding effects of the variety of demographic factors that previous studies have shown to influence labour force migration the results suggest that for unemployed prime working age males the probability of migration is negativel

assessing the impact of management buyouts on economic efficiency plant level evidence from the united kingdom we assess the total factor productivity of 35 752 manufacturing establishments before and after management buyouts mbos mbo plants are less productive than comparable plants before the transfer of ownership they experience a substantial increase in productivity after a buyout which appears to be due to measures undertaken by new owners to reduce the labor intensity of production via outsourcing of intermediate goods and materials these findings which are pervasive across industries imply that mbos reduce agency costs and enhance economic efficiency our evidence is consistent with jovanovic and rousseau 2002 who suggest that ownership changes shift resources to more efficient uses and to better managers

the economic implications of disability insurance in canada the article empirically estimates the effects of disability pensions provided under the canada quebec pension plans on the labor force participation rates of males aged 45 64 years two data sets are used one consists of pooled cross section annual time series data by province for the years 1975 83 the other consists of observations as of 1985 on 651 males in the specified age group naive estimation results from both sets of data suggest a large negative effect of pension income in the case of the micro data this effect becomes small and statistically nonsignificant when more sophisticated estimation methods are used

do welfare benefits cause the welfare caseload analyses of the welfare system generally examine one of five competing models 1 the work disincentive model 2 the human capital model 3 the macroeconomic model 4 the public choice model or 5 the cost of job loss model this paper employs the granger causality concept and the multiple rank f statistic to test the implications of all five of these models simultaneously the results offer modest support to all but the macroeconomic model the relationships among welfare benefits caseloads and labor market conditions appear to be too complex to be fully captured by a single model

a comparison of the effect of welfare programme features on welfare participation one and two parent families the effect of welfare programme characteristics on the decision to enter the welfare system is modelled as a binary discrete choice latent variable model dependent upon an underlying index function the two chief classes of welfare beneficiaries in the us welfare system are analysed two parent families and single female headed families the data set is a large recent non experimental multiyear cross sectional pooled data set derived from the us census bureaus current population survey behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory newly estimated comprehensive descriptive statistics of the entire welfare system for both single female household heads and married couples with children are employed to characterize the welfare system statistically significant estimates of substantial magnitude are obtained for the impacts on welfare participation for the welfare guarantee level the effective tax rate on earned income and the effec

american federalism welfare policy and residential choices the relationship between welfare benefit levels and the residential choices of the poor raises two issues for federalism in the united states do state benefit levels affect the residential choices of the poor do residential choices of the poor affect the level at which a state sets its benefit levels empirical studies have seldom studied the interconnection between these two issues this research estimates simultaneously the mutual effects of welfare benefits and poverty rates while controlling for other economic and political variables when benefit levels become high the size of the poverty population increases conversely when poverty rates become high benefit levels are cut the findings are consistent with the claim that state determined benefit levels distort policy and residential choices

should social security benefits be means tested social security retirement benefits distort the saving decisions of workers who are rational enough to save for their future since the implicit rate of return in an unfunded social security program is less than the marginal product of capital the resulting decline in saving causes a welfare loss the present paper examines the conditions under which the welfare loss could be reduced by replacing the current universal social security program with a means tested program that pays benefits only to those individuals with little or no other retirement income or assets every society must solve the problem of supporting those individuals who become too old to work but have not made adequate provision for their own old age by saving when they were young at the present time the major industrial countries of the world have responded to this problem by creating social security programs that tax the working population and use the proceeds to provide a universal benefit to all retirees regardless of their financial condition this universal provision of social security benefits distorts the saving decisions of those workers who are rational enough to plan for the future since the implicit rate of return that taxpayers get on their this research is part of the nber study of the government budget and the private economy a more complete version of this paper with some numerical calculations is available as nber working paper no 1775 feldstein 1985b i am grateful to gilbert metcalf for assistance with the calculations presented in this paper and for helpful discussions for a discussion of the effect of promised retirement benefits on the savings of employees see feldstein 1974 1982 barro 1974 1978 has discussed an interesting

income distribution within nations problems of cross national comparison in recent years a large number of cross national studies have examined the causes and consequences of income inequality within nations unfortunately few of these studies have attended very carefully to problems of measurement and definitional consistency that can seriously undermine the comparative use of currently available data on income shares this article offers a discussion of the major theoretical and practical problems that can arise in measuring and comparing patterns of income distribution across nations focusing on the completeness of income coverage the unit of analysis the time period over which income is measured the scope of population coverage the underreporting of income and the effect of public sector fiscal policies it then assesses major published sources of cross national data on the size distribution of income in light of these problems finally the article offers several suggestions for minimizing the negative consequences of measurement problems that remain in even the be

is the welfare state necessarily an obstacle to economic growth abstract the welfare state is widely held to be one of the elements responsible for slower economic growth in europe this paper seeks to clarify the nature of this indictment and to suggest that there is a plausible case for defence of the welfare state

pricing policies in africa with special reference to agricultural development in malawi abstract microeconomic policy in the controlled market economy of malawi rests upon three fundamental balances these are the food export balance the rural urban income linkage and the domestic donor contribution to development capital there are therefore six major domestic polarities food and exports rural and urban domestic and donor within the microeconomic system any change in one will necessitate changes in the other five or the triplex becomes unbalanced this is the rigidity in the capacity of small economies to adjust

labour supply impacts of effective welfare programme parameters a reanalysis we quantify the impact of effective welfare programme parameters on the labour supply of single female household heads the primary group of welfare recipients in the usa our panel of data is derived from the us census bureau s current population survey for the years 1979 to 1990 inclusive behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory we find that effective welfare gurantee levels and the effective tax rate on earned income both significantly decrease labour supply the marginal effects of these welfare programme parameters are economically small a us 1000 increase in the expected welfare guarantee level reduces annual labour supply by about 36 hours a 10 percentage point increase in the effective tax rate on earned income reduces annual labour supply by about 7 5 hours

the backward hustle an experimental investigation of tax code notches and labor supply abstract the phase in and phase out of benefits as part of social safety nets has the potential to distort individuals labor supply decisions classical economic theory predicts a strong incentive to adjust labor supply and bunch at the discontinuities that arise within notched tax systems however such behavior has been difficult to observe in both survey and administrative data in this paper we design a laboratory experiment to explore the impact of notches on subjects bunching behavior within an environment where subjects receive full information about their payment schedules and can freely adjust their labor supply number of tasks completed while we find clear evidence of bunching under our notched payment system many subjects still fail to bunch we explore the role of behavioral factors such as self control overconfidence and loss aversion as potential determinants of bunching behavior our results indicate that within our sample self control and loss aversion have a positive and significant association with subjects decision to bunch while overconfidence has a negative association these estimates are of the expected sign and suggest that behavioral factors may serve as important underlying determinants of an individual s decision to bunch

unemployment insurance in the united states layoff incentives and cross subsidies we survey unemployment insurance ui in the united states and provide new evidence on the ui payroll tax most ui receipt is due to firms that pay part of the ui costs of their layoffs but weak experience rating leads most firms to pay considerably less than the full costs industries consistently receiving subsidies from the ui system are construction manufacturing and mining finally a large fraction of layoffs resulting in payment of ui are made by firms that are not charged for the costs of the claim because they have employed the individual for less than 2 quarters

uncertain lifetime consumption and dissaving in retirement this paper asks whether the continued accumulation or mild dissaving observed among the retired can be explained by uncertain lifetime in the absence of annuities after an initial period influenced by borrowing constraints under constant relative risk aversion uncertain lifetime depresses consumption by a proportion increasing with age if the elasticity of intertemporal substitution in consumption is small illustrative computations based on actual income and survival data show that plausible elasticities are sufficiently small to give this effect the reduction in consumption is large enough to explain much of the lack of decumulation by the elderly

explaining the black white gap in labor force participation among women heading households for the first time in this century black women are participating in the labor force at lower rates than are white women the black white gap in female labor force participation is driven by those in the severest need of income women heading households the author compares three explanations of the black white gap in labor force participation among female household heads lack of human capital lack of opportunities resulting from industrial restructuring and disarticulation from mainstream institutions as described by theories of the underclass using a representative national sample from the panel study of income dynamics he finds that lower rates of labor force participation among black women heading households are determined by black white differences in human capital as well as by characteristics associated with a breakdown in the processes linking black women to the labor market overall the largest impediments to labor force participation among women heading households are dropping out of high school having a child under the age of six in the household and being a long term welfare recipient

the distribution and anti poverty effectiveness of u s transfers 1992 in 1992 federal state and local governments spent almost 1 3 trillion for social welfare programs this paper examines program participation and the anti poverty effectiveness of nine selected social welfare programs the results suggest that the benefits from these programs are fairly well targeted with the elderly disabled and those with poor labor market prospects receiving most of the benefits

sources of racial wage inequality in metropolitan labor markets racial ethnic and gender differences research on racial inequality has become increasingly specialized often focusing on a single explanation and subgroup of the population in a diverse society a broader comparative framework for interpreting the causes of wage inequality for different racial ethnic and gender groups is called for the effects of a range of different factors on the wages of latinos asians and blacks relative to whites and separately for women and men are examined new sources of racial wage inequality are also considered significant differences are found in the sources of wage inequality across race ethnicity and gender differences are generally greater between racial and ethnic groups than between men and women key findings include a large negative effect of immigration on the relative wages of latinos and asians and only a small effect on the relative wages of black women and no effect on black men in contrast the relative wages of blacks remain most affected positively by the presence of manufacturing employment and unions new economy indicators of high skill services and flexible employment conditions play only a secondary role in explaining metropolitan racial wage inequality

welfare employment and income evidence on the effects of benefit reductions from california in recent years there have been unprecedented changes in welfare the 1996 personal responsibility and work opportunity reconciliation act abolished afdc and created temporary assistance for needy families tanf a set of block grants that gave states nearly complete freedom in designing their welfare programs between march 1994 and march 2001 welfare caseloads fell 59 percent to 2 1 million families from 5 1 million these changes in welfare caseloads mirror changes in employment rates of single women which rose to 76 5 percent in 1998 1999 from 67 5 percent in 1989 1990 after a recession early in the decade the economy experienced the longest economic expansion in u s history beginning in march 1991 with gdp growing for 120 consecutive months the unemployment rate fell to 4 0 percent in 2000 its lowest level since 1969 with the strong economy state and federal budgets prospered the good fiscal climate and the funding and flexibility of tanf allowed many states to expand child care benefits health insurance and transportation services for low income families and to change welfare rules so that recipients could keep a greater share of earned income than was previously the case the overwhelming majority of pre tanf welfare waivers and current state tanf plans employ one or more of the following building blocks mandatory employment services earnings supplements and time limits on welfare receipt there is a considerable amount of emerging evidence that these changes along with the strong economy and expansion of the earned income tax credit eitc increased employment of low skilled families see e g dan bloom and charles michalopoulos 2001 jeffrey grogger 2001 hotz et al 2001 bruce meyer and dan t rosenbaum 2001 yet if history is any guide to the future state policymakers facing deteriorating fiscal climates will contemplate cutting welfare benefits this paper summarizes results from a larger paper hotz et al 2002 in which we analyze data from an experimental evaluation of welfare reform in california during the early part of the 1990 s starting in 1991 california experienced a severe economic downturn prompted by the very weak state economy and sharply rising welfare caseloads california implemented changes in its aid to families with dependent children afdc program that included among other changes a 15 percent reduction in the maximum benefits provided to families on aid we exploit these data to assess the impact of these changes on the employment labor market earnings and levels of disposable income for low income households because this experiment was run for almost six years we are also able to assess the long run effects of the benefit changes understanding how welfare reforms especially benefit reductions affect employment and financial resources available to poor households is important given the goal of work based welfare reforms to move these families toward economic self sufficiency

a multiple time series analysis of labor supply and earnings in economic development abstract using multivariate time series techniques the dynamics of male and female labor supply and earnings in puerto rico are examined during a period of rapid economic developemnt 1953 1978 the temporal analysis suggests that aggregate male and female labor force participation rates are exogenous to male and female earnings in addition continous declines in male participation have been partly responsible for increases in both male and female earnings and a narrowing of relative earnings differentials the study also finds that the advent of the food stamp program in 1975 has resulted in a small reduction in male labor force participation moreover the inclusion of food stamps as an intervention component is quite useful in forecasting the male participation rate the forecasting accuracy of univariate and multivariate models is assessed with the result that in every instance the multivariate transfer functions prove superior overall the results support the incorporation of multiple time series in econometric studies of developing countries and provide evidence of its usefullness for development planning and policy

truncation bias and the measurement of income inequality 1988 truncation bias and the measurement of income inequality journal of business economic statistics vol 6 no 3 pp 335 337

do welfare asset limits affect household saving evidence from welfare reform we use data from the panel study of income dynamics to estimate the effect of new saving incentives implemented as part of the 1996 welfare reform on household saving economic theory predicts that loosening asset limits will increase total savings for households with a large ex ante probability of welfare receipt such as female headed households with children we follow a sample of female heads with children and find that in both absolute terms and relative to comparison groups of male heads and female heads without children there has been no effect of welfare policy changes on the saving of at risk households

measures to assist the least developed countries the case of malawi abstract many of the national measures introduced by the malawi government following the un conference on least developed countries 1981 accord with the substantial new program of action snpa agreed to at the conference these include improving the performance of the productive sectors especially agriculture and strengthening key institutions but demand management policies for financial stabilization as part of world bank imf loans with level funding for development expenditure and cuts in recurrent expenditure do not provide the basis for an snpa the international community has failed to fulfil its commitments in the snpa since aid to malawi has fallen lessons of this experience are drawn for other least developed countries

unemployment benefit duration and incentives in britain how robust is the evidence abstract recent years have seen considerable advances in the econometric treatment of micro data in models of unemployment duration this paper examines the evidence from such models concerning the effects of unemployment benefits on incentives to work in britain widely accepted results of a small but significant benefit effect are reproduced using a sample of 1 231 unemployed men however these results are only found when benefit receipt is assumed to follow a hypothetical pattern which is shown to be unrealistic and over generous when more realistic calculations of benefits are used no benefit effect is found the paper also argues that search theory is of little help in determining the choice between competing functional forms and explanatory variables results concerning benefits are shown to be sensitive to the latter