technology adoption under production uncertainty theory and application to irrigation technology we propose a theoretical framework to analyze the conditions under which a farmer facing production uncertainty due to a possible water shortage and incomplete information will adopt a more efficient irrigation technology a reduced form of this model is empirically estimated using a sample of 265 farms located in crete greece the empirical results suggest that farmers choose to adopt the new technology in order to hedge against production risk in addition we show that the farmer s human capital also plays a significant role in the decision to adopt modern more efficient irrigation equipment

decomposition of moral hazard this study seeks to simulate the portion of moral hazard that is due to the income transfer contained in the coinsurance price reduction healthcare spending of uninsured individuals from the meps with a priority health condition is compared with the predicted counterfactual spending of those same individuals if they were insured with either 1 a conventional policy that paid off with a coinsurance rate or 2 a contingent claims policy that paid off by a lump sum payment upon becoming ill the lump sum payment is set to be equal to the insurer s predicted spending under the coinsurance policy the proportion of moral hazard that is efficient is calculated as the proportion of total moral hazard that is generated by this lump sum payment we find that the efficient proportion of moral hazard varies from disease to disease but is the highest for those with diabetes and cancer

inter vivos transfers and exchange most parents divide their bequests equally among their children whereas inter vivos transfers are usually unequal we propose that exchange is better for inducing inter vivos transfers than bequests inter vivos transfers can be adjusted quickly to the amount of care are less costly than writing a will and can be kept secret from other family members and the public the results from national longitudinal data show that as expected if a parent gives any inter vivos transfers she is more likely to give to children who provide informal care informal care has no effect on the equality of intended bequests

the effect of physician advice on alcohol consumption count regression with an endogenous treatment effect although there are encouraging trends alcohol abuse continues to be a significant public health problem econometric studies of alcohol demand have yielded a great deal of information for alcohol abuse prevention policy these studies suggest that higher alcohol taxes and stricter drunk driving policies can reduce heavy drinking and drunk driving in this paper we explore the role physician advice plays in the campaign to prevent alcohol related problems compared to alcohol taxation physician advice is a more precisely targeted intervention that does not impose extra costs on responsible drinkers compared to the resource costs of arresting processing and punishing drunk drivers physician advice may be a lower cost intervention to provide a basis for alcohol policy analysis we use an alcohol demand framework to test whether physician provided information about the adverse consequences of alcohol abuse shifts demand to more moderate levels there are three aspects of our alcohol demand model that complicate the estimation 1 the dependent variable is non negative it is a count variable number of drinks consumed 2 a non trivial number of sample observations have zero values for the dependent variable and 3 because the data we use is non experimental the treatment variable indicating receipt of advice from a physician may be endogenous we implement an estimation method that is specifically designed to deal with these three complicating factors our results show that advice has a substantial and significant impact on alcohol consumption by males with hypertension and that failing to account for the endogeneity of advice masks this result copyright 2001 john wiley sons ltd

supply side and demand side cost sharing in deregulated social health insurance which is more effective abstract microeconomic theory predicts that if patients are fully insured and providers are paid fee for service utilization of medical services exceeds the efficient level moral hazard effect in switzerland both demand side and supply side cost sharing have been introduced to mitigate this problem analyzing a panel dataset of about 160 000 adults we find both types of cost sharing to be effective in curtailing the use of medical services however when moral hazard mitigation is traded off against risk selection the minimum deductible supply side cost sharing option ranks first followed by the medium deductible demand side alternative making the supply side option somewhat more effective

organic label bargaining power and profit sharing in the french fluid milk market the paper determines how the value added created by an organic label is shared in a vertical chain among manufacturers and retailers using purchase data on the french fluid milk sector we develop a structural econometric model of demand and supply that takes into account the bargaining power between manufacturers and retailers our results suggest that the organic label segment is more profitable as it permits the existence of higher margins moreover an organic label allows manufacturers to achieve more bargaining power relative to retailers and hence to obtain a higher share of total margins the econometric model is then used to assess the impact of an environmental policy in favor of the organic segment based on a mechanism of price support our results suggest that while a subsidy policy towards organic products benefits both manufacturers and retailers a tax policy toward conventional products benefits manufacturers of national brands at the expense of retailers and manufacturers that provide the private labels the benefits of such policies on the environment is relatively small all such policies tend to increase the impact on global warming and land use but reduce the impact on eutrophication acidification and energy use

a test of the structure of pac contracts an analysis of house gun control votes in the 1980s enactment of the bill was a major victory for the national rifle association which had worked for years to win relaxation of the landmark gun control act of 1968 congressional quarterly almanac 1986 p 82 i introduction every election the same political action committees pacs contribute millions of dollars to candidates for office well informed participants in the political process surely must get value for their money yet empirical research fails to provide systematic evidence that campaign contributions influence congressional roll call votes 1 a mischaracterization of the exchange between pacs and politicians may produce these contradictory results empirical studies of roll call voting typically use pac contributions from only one election cycle earlier studies generally assume prepayment in the prior congress while more contemporary studies assume a spot exchange recent empirical work however suggests another possibility interest groups may buy current influence with money spent over multiple election cycles stratmann 1995 shows that contributions from both the current and the previous election cycles influence floor votes on agricultural price supports snyder 1990 1992 presents evidence that interest groups make long term investments in politicians previous studies by arbitrarily imposing a payment structure may have produced erroneous estimates of the influence of pac money on legislative votes we examine roll call votes on gun control in the u s house of representatives during the 1980s to determine whether pacs make spot market purchases prepay for votes in the prior election cycle or make long term investments we investigate whether pac contributions have a durable long term investment effect as snyder 1992 suggests we consider two types of evidence concerning the campaign contribution contract first we examine the pattern of expenditures by the two dominant interest groups concerned with gun control the national rifle association nra and hand gun control hgc their expenditures provide strong evidence against the spot market exchange hypothesis both groups made significant expenditures in sessions of congress in which no floor vote occurred nor were these expenditures purchasing services such as committee work in a spot market exchange further 1986 nra expenditures are significantly higher for first term representatives which is consistent with long term investments but contradicts a spot exchange since freshmen have the least influence to sell second we include expenditures from both the current and the five previous election cycles as separate independent variables in a model of roll call voting to date no empirical paper tests whether pac money from more than two cycles influences roll call voting and only stratmann 1995 and grenzke 1989 use a model that specifies money from more than one cycle in an equation explaining roll call votes our probit estimates indicate that nra expenditures in the three most recent election cycles and hgc expenditures in the two most recent cycles buy votes the independent effect of expenditures from different cycles suggests that contributions are neither an unqualified one session prepayment nor a spot exchange the influence of nra expenditures two sessions prior to the roll call votes is evidence of a long term investment the literature on the determinants of roll call voting assumes that pac contributions alter representatives votes interest groups might instead simply provide campaign assistance to their supporters to affect the composition of congress stratmann 1991 bronars and lott 1997 if a difficult to quantify variable and thus omitted from regressions signals a representative s true position and interest groups make campaign contributions on the basis of this variable pac contributions might appear to influence votes the pattern of contributions and votes on gun control however indicates attempts by the nra and hgc to influence votes not merely the composition of congress

two stage residual inclusion estimation addressing endogeneity in health econometric modeling the paper focuses on two estimation methods that have been widely used to address endogeneity in empirical research in health economics and health services research two stage predictor substitution 2sps and two stage residual inclusion 2sri 2sps is the rote extension to nonlinear models of the popular linear two stage least squares estimator the 2sri estimator is similar except that in the second stage regression the endogenous variables are not replaced by first stage predictors instead first stage residuals are included as additional regressors in a generic parametric framework we show that 2sri is consistent and 2sps is not results from a simulation study and an illustrative example also recommend against 2sps and favor 2sri our findings are important given that there are many prominent examples of the application of inconsistent 2sps in the recent literature this study can be used as a guide by future researchers in health economics who are confronted with endogeneity in their empirical work

does health insurance reduce illness related worker absenteeism the objective of this article is to examine whether having health insurance reduces illness related absenteeism among older workers a nationally representative sample of 1780 workers in the united states aged 52 64 are drawn from the 2004 2006 health and retirement study hrs binary logistic regressions and censored tobit models are estimated for workers likelihood of missing work days due to illness and the number of illness related work days missed respectively while explicitly addressing the possibility of insurance selection effects the findings suggest that over a 12 month period older workers without health insurance are as likely as insured workers to miss work days due to illness and there are no differences in the number of days missed between insured and uninsured workers however there is strong evidence that poor baseline health onset of new diseases and longer hospitalization significantly increase an older worker s absenteeism at work these results suggest that having health ins

a microeconometric model of the demand for health care and health insurance in australia this paper develops a model for interdependent demand for health insurance and health care under uncertainty to throw light on the issue of insurance induced distortions in the demand for health care services the model is used to empirically analyse the determinants of the choice of health insurance type and seven types of health care services using micro level data from the 1977 78 australian health survey econometric implementation of the model involves simultaneously issues of discreteness of choice selectivity and stochastic dependence between health insurance and utilization health status appears to be more important in determining health care service use than health insurance choice while income appears to be more important in determining health insurance choice than in determining health care service use for a broad range of health care services both moral hazard and self selection are found to be important determinants of utilization of health care services

the impact of private hospital insurance on the utilization of hospital care in australia abstractwe use the australian national health survey to estimate the impact of private hospital insurance on the propensity for hospitalization as a private patient we account for the potential endogeneity of supplementary private hospital insurance purchases and calculate moral hazard based on a difference of means estimator we decompose the moral hazard estimate into a diversion component that is due to an insurance induced substitution away from public patient care towards private patient care and an expansion component that measures a pure insurance induced increase in the propensity to seek private patient care our results suggest that on average private hospital insurance causes a sizable and significant increase in the likelihood of hospital admission as a private patient however there is little evidence of an expansion effect the treatment effect of private hospital insurance on private patient care is driven almost entirely by the substitution away from public patient care towards private

efficiency technical change and returns to scale in large us banks panel data evidence from an output distance function satisfying theoretical regularity abstract this paper provides parametric estimates of technical change efficiency change economies of scale and total factor productivity growth for large banks those with assets in excess of 1 billion in the united states over the period from 2000 to 2005 this is done by estimating an output distance function subject to theoretical regularity within a bayesian framework we find that failure to incorporate theoretical regularity conditions results in mismeasured shadow revenue and or cost shares which in turn leads to perverse conclusions regarding productivity growth our results from the regularity constrained model show that total factor productivity of the large us banks grew at an average rate of 1 98 over the sample period however our estimates also show a clear downward trend in the growth rate of total factor productivity and our decomposition of the primal divisia total factor productivity growth index into its three components technical change efficiency change and economies of scale indicates that technical change is the driving force behind this decline

in the same boat but not equals the heterogeneous effects of parental income on child labour this paper examines the impact of parental income on child labour the empirical literature has found conflicting results regarding whether poverty leads parents to send their children to work mos

returns to scale at large banks in the us a random coefficient stochastic frontier approach abstract this paper investigates the returns to scale of large banks in the us over the period 1997 2010 this investigation is performed by estimating a random coefficient stochastic distance frontier model in the spirit of tsionas 2002 and greene 2005 2008 the primary advantage of this model is that its coefficients can vary across banks thereby allowing for unobserved technology heterogeneity among large banks in the us we find that failure to consider unobserved technology heterogeneity results in a misleading ranking of banks and mismeasured returns to scale our results show that the majority of large banks in the us exhibit constant returns to scale in addition our results suggest that banks of the same size can have different levels of returns to scale and there is no clear pattern among large banks in the us concerning the relationship between asset size and returns to scale due to the presence of technology heterogeneity

does privatisation of vocational rehabilitation improve labour market opportunities evidence from a field experiment in sweden this paper analyses if privatisation of vocational rehabilitation can improve labour market opportunities for individuals on long term sickness absence we use a field experiment performed by the p

crop diversity household welfare and consumption smoothing under risk evidence from rural uganda abstract in the wake of climate change there is now a resurgence of interest in the promotion of crop diversification as a climate smart agricultural practice in sub saharan africa the development economics literature suggests that increasing crop diversity is an effective risk management and consumption smoothing strategy in a context characterized by repeated exposure to shocks but weak institutional innovations using panel survey data from rural uganda merged with historical weather data this paper sheds light on the household welfare and consumption smoothing effects of crop diversity we employ instrumental variables methods to control for unobserved heterogeneity and potential reverse causality our study finds that crop diversification is a welfare enhancing strategy that increases consumption and aggregate household diets instrumental variables quantile regression results show that crop diversification generates higher consumption benefits for poorest households in the lower quantile of the consumption distribution than for relatively richer households crop diversification also improves consumption smoothing through reducing households reliance on less effective strategies such as informal insurance and involuntary diet changes as risk coping mechanisms overall the findings suggest that transforming agriculture towards a more diversified cropping system is a viable pathway for improving diets welfare risk management and the resilience of rural households

net migration endogenous incomes and the speed of adjustment to the north south differential the model of net migration is developed in the next section in section iii the model is used to estimate the net flow of heterogeneous labor over the 1965 to 1970 period between the northern and southern regions of the united states forty eight age education race specific categories of labor constitute the observation set the estimates of the net migration function are then used with the relationship developed in section iv to obtain a measure of the speed for each labor category at which the long run north south income disparity was being eliminated the estimates obtained indicate that migration systematically induced by interregional income differences does operate to close the income differential but that the process is quite slow for every demographic category considered excerpt

an intergenerational model of wages hours and earnings we develop a model in which a set of unobserved parental and sibling factors drives wages and work preferences these factors lead to similarities within families in wages work hours and earnings we estimate the model using data on parents and siblings in the national longitudinal surveys we find that parental and sibling wage factors influence the wages of both sons and daughters we also find strong similarities in work hours that run along gender lines and are due primarily to linkages in preferences the effect of wages on earnings is direct rather than through a labor supply response

psychiatric disorders and labor market outcomes evidence from the national comorbidity survey replication this paper uses the national comorbidity survey replication to estimate effects of recent psychiatric disorder on employment hours worked and earnings we employ methods proposed in altonji et al 2005a which use selection on observable traits to provide information regarding selection along unobservable factors among males disorder is associated with reductions in labor force participation and employment when selection on observed characteristics is set equal to selection on unobserved characteristics the magnitudes of these effects for males are 9 and 14 percentage point reductions for participation and employment respectively among females we find negative associations between disorder and labor force participation and employment but these estimates are more sensitive to assumptions about selection there are no effects of disorder on earnings or hours worked among employed individuals

do large banks have lower costs new estimates of returns to scale for u s banks this paper presents new fully nonparametric estimates of ray scale and expansion path scale economies for u s banks based on a model of bank costs unlike prior studies that use models with restrictive parametric assumptions or limited samples our methodology uses local polynomial estimators and data on all u s banks over the period 1984 2006 our estimates indicate that as recently as 2006 most u s banks faced increasing returns to scale suggesting that scale economies are a plausible but not necessarily only reason for the growth in average bank size and that the tendency toward increasing scale is likely to continue unless checked by government intervention

child income appropriations as a disease coping mechanism consequences for the health education relationship this paper analyses the relationships between hiv aids and education taking into account the appropriative nature of child income using a theoretical model we show that considering remittances from one s child as an insurance asset can reverse the usual negative relationship between disease prevalence and educational investment this prediction confirms the results of an empirical study conducted on data compiled from the demographic and health survey dhs database for 12 sub sahara african countries for children aged between 7 and 22 years old using regional hiv prevalence as a measure of health risk we find that the sign of the slope between health risk and the enrolment of children is not constant splitting the data based on expected remittance patterns for example rural versus urban we obtain that the effect is most likely driven by household characteristics related to child income appropriation

estimating the moral hazard effect of supplemental medical insurance in the demand for prescription drugs by the elderly almost all persons over the age of 65 are insured under the medicare program for inpatient drug consumption this national insurance plan does not however generally cover the purchase of outpatient prescription drugs rx in 1992 more than onethird of all outpatient drug expenditures in the united states were incurred by medicare enrollees yet approximately 50 percent of the elderly did not have any coverage for this type of treatment daniel waldo 1994 in response to this and other gaps in medicare coverage private firms have offered insurance instruments specifically designed to fill such voids commonly known as medigap policies in addition to this form of financial protection contingent upon state of residency and economic status elderly persons may qualify and obtain coverage for rx through medicaid or a state sponsored drug program however even with these incomeand wealth sensitive options many relatively poor elderly are faced with significant outof pocket drug expenditures coverage is concentrated among those elderly with income over 200 percent of poverty and those below the poverty line stephen long 1994 the most vulnerable elderly seem to be protected from the financial hardship of excessive rx expenses through medicaid coverage but private supplemental insurance is potentially too expensive for seniors near the poverty line to alleviate this burden 11 states currently offer some form of rx insurance that is targeted at those elderly or disabled persons who are relatively poor but do not qualify for medicaid at the national level policymakers and interest groups have advocated adding coverage to the medicare program to assess such programmatic changes an accurate forecast of the potential change in rx usage is needed in this paper we use a 1990 sample of medicare enrolled pennsylvanians who may have private medigap insurance or coverage under the state s rx program to estimate the amount by which the rx demand of the average individual would change in the presence of insurance coverage ceteris paribus such a residual increase in the consumption of a medical commodity has been labeled the moralhazard effect of health insurance the estimation of this effect requires a nonstandard regression technique because insurance coverage for rx and those types of treatments that are complementary or substitutable for prescriptions may be endogenously determined those persons with a higher demand for drugs are more likely to demand supplemental insurance for rx coulson and terza department of economics pennsylvania state university university park pa 16802 neslusan division of economic research at the social security administration 4301 connecticut avenue n w washington dc 20008 stuart department of health policy and administration pennsylvania state university university park pa 16802 funding for survey design and implementation used in this research was supported by grants from the pew charitable trusts and the health care financing administration grant no 88 01439 001 the views expressed herein are not necessarily endorsed by either these agencies or the social security administration 1the now repealed medicare catastrophic coverage act of 1988 as well as many of the recent healthcare reform proposals would have provided for outpatient rx coverage for the elderly 122

estimation of input distance functions a system approach this article offers a methodology to address the endogeneity of inputs in the input distance function idf formulation of the production processes we propose to tackle endogenous input ratios appearing in the normalized idf by considering a flexible simultaneous system of the idf and the first order conditions from the firm s cost minimization problem our model can accommodate both technical and input allocative inefficiencies amongst firms we also present the algorithm for quantifying the cost of allocative inefficiency we showcase our cost system based model by applying it to study the production of norwegian dairy farms during the 1991 2008 period among other things we find both an economically and statistically significant improvement in the levels of technical efficiency among dairy farms associated with the 1997 quota scheme change which a more conventional single equation stochastic frontier model appears to be unable to detect

the effect of illicit drug use on the wages of young adults this article examines the effects of cocaine and marijuana use on the wages of young adults the endogeneity of drug use in a wage equation is considered and a two stage least squares procedure is implemented the results suggest that increased use of marijuana or cocaine is associated with higher wages the positive relationship between drug use and the wage does not diminish with age i also investigate whether systematic differences in the return to measures of human capital investments can explain the positive relationship between drug use and wages

enjoying the quiet life under deregulation evidence from adjusted lerner indices for u s banks abstract the quiet life hypothesis posits that firms with market power incur inefficiencies rather than reap monopolistic rents we propose a simple adjustment to lerner indices to account for the possibility of forgone rents to test this hypothesis for a large sample of u s commercial banks we find that adjusted lerner indices are significantly larger than conventional lerner indices and trending upward over time instrumental variable regressions reject the quiet life hypothesis for cost inefficiencies however lerner indices adjusted for profit inefficiencies reveal a quiet life among u s banks

estimates of returns to scale elasticity of substitution and the thrifty food plan meal poverty rate from a direct household meal production function abstract many nutritional policies are designed to make home food production more affordable and yet very little is actually known about the home food production process a better understanding of home food production can be used to help explain shortcomings in current nutrition policies and consequently help in designing better nutrition policies this paper provides results from several home meal production function specifications that are rather robust the median returns to scale and elasticity of substitution between money and time is in the 1 2 1 9 range and 33 56 range respectively indicating increasing returns to scale but difficulty in substituting money for time in home meal production a home meal poverty rate is estimated which is the percentage of the sample that produces fewer meals at home than consistent with dietary guidelines the estimated home meal poverty rate is about 85 which is consistent with recent research taking a less rigorous approach though the approach taken here is novel the overall message is consistent with the recent literature time is a more important factor in achieving nutritional targets than money

illegal drug use and employment this article investigates the relationship between employment and the use of marijuana and cocaine for males in national longitudinal survey of youth data from 1984 and 1988 previous studies yielding mixed evidence may have inadequately accounted for the simultaneity between drug consumption and employment i implement an instrumental variable procedure that identifies drug use with variables that are empirically unrelated to employment including the regional cocaine price and a state marijuana decriminalization indicator results indicate that the use of each drug substantially reduces the likelihood of employment exogeneity tests reveal that standard probit estimates are severely biased toward zero

the demand for illicit drugs i introduction illicit drug use and alcohol abuse imposes significant costs on society and on the individual users these costs include increased crime health problems and employment problems because of these considerable costs government at all levels has made drug control and the control of alcohol abuse important priorities the federal government has undertaken an aggressive program of interdiction of drug shipments and eradication of drug crops in the field the federal government and the state governments have also increased their criminal justice efforts in analyzing the effect of government drug control programs economists have applied the conventional supply and demand model to illicit drug markets the model includes a demand function that is downward sloping with respect to price and a supply function that is upward sloping or horizontal with respect to price drug programs like interdiction and drug sanctions are assumed to reduce supply and raise equilibrium price other policy options such as some form of drug legalization could increase supply and reduce equilibrium price the effect of these policies on equilibrium quantity is dependent on the elasticity of demand and on whether demand shifts since not much is known about drug price elasticities the potential effects of various drug control policies remain a speculative exercise the purpose of this paper is to estimate the effects of alcohol and drug prices on alcohol use and drug participation both own price and cross price effects are estimated there are few prior empirical studies of the effect of drug prices because data have been difficult to acquire this paper makes use of newly available data on drug prices and is the first paper to link these data to a nationally representative drug use data set of 49 802 individuals estimates of drug price elasticities are important empirical evidence that drug sales can be characterized by market forces drug price elasticities are also important in estimating the likely impact of policies that affect drug prices and in estimating the effects of drug prohibition cross price elasticities are important to estimate since they suggest the likely effects of policies such as an increase in alcohol taxes on illicit drug participation and the effects of marijuana decriminalization on alcohol cocaine and heroin use ii prior studies while there are a number of prior studies of the effects of alcohol prices and policies there are few prior studies of drug prices and polices the reason for so few prior drug studies is the limited amount of data on drug prices and the limited options for linking these data to an individual record by residential area this study uses a new data set of cocaine and heroin prices from the drug enforcement agency that was linked to individual records by the office of applied studies at the substance abuse and mental health services administration leung and phelps 1993 provide a review of a number of recent alcohol demand studies the empirical literature provides considerable evidence that shows increasing the price of alcoholic beverages to decrease alcohol use alcohol demand studies generally estimate price elasticities for beer wine and spirits separately most studies employ aggregate data but a few use individual data studies using aggregate data find price elasticities for beer from about 2 to about 1 0 for wine from about 3 to about 1 8 and for spirits from about 3 to about 1 8 studies using individual data estimate price elasticities for beer from about 5 to about 3 0 for wine at about 5 and for spirits from about 5 to about 4 0 the few prior studies of the effect of decriminalization on marijuana use generally find that marijuana decriminalization has no effect on participation pacula 1994 thies and register 1993 dinardo and lemieux 1992 and johnston o malley and bachman 1981 all used samples of young people and found no effect of marijuana decriminalization

labor market effects of marijuana and cocaine use among young men using data on marijuana and cocaine use from the 1984 national longitudinal survey of youth the authors examine the hypothesis that drug use reduces labor market productivity as measured by wages from an analysis that controls for the probability of employment and the endogeneity of drug use they find that although long term and on the job use of marijuana negatively affected wages the net productivity effect for all marijuana users both those who engaged in long term or on the job use and those who did not was positive no statistically significant association was found between cocaine use and productivity

social security income and the utilization of home care evidence from the social security notch this paper exploits social security law changes to identify the effect of social security income on the use of formal and informal home care by the elderly results from an instrumental variables estimation strategy show that as retirement income increases elderly individuals increase their use of formal home care and become less likely to rely on informal home care provided to them by their children this negative effect on informal home care is most likely driven by male children withdrawing from their caregiving roles the empirical results also suggest that higher social security benefits would encourage the use of formal home care by those who would not have otherwise used any type of home care and would also encourage the use of both types of home care services among elderly individuals

the lerner index of monopoly power origins and uses abba lerner s 1934 paper in the review of economic studies is known today as the source of the lerner index of monopoly power by identifying the social loss from monopoly as the diver gence between price and marginal cost rather than the usually accepted p 161 relationship between price and average cost lerner redirected attention from the monopolist s profits to the allocative inefficiency created by the pursuit of those profits this insight is so ingrained in the mind of economists today that it is easy to over look what a significant advance it represented in a paper commemorating lerner s sixtieth birthday paul samuelson 1964 observed that while lerner s insight may seem simple i can testify that no one at chicago or harvard could tell me in 1935 exactly why p mc was a good thing p 173 lerner s reasoning about the social loss from monopoly identified the social optimum with a pareto optimal state of affairs and in the process offered what tibor scitovsky 1984 called the first clear rigorous and definitive statement of pareto optimality p 1 551 these encomia from titans of the discipline refer to a paper written when lerner was a graduate student 1 the lerner index p mc p identified the degree of monopoly with the differ ence between the firm s price and its marginal cost at the profit maximizing rate of output for lerner a bigger wedge between p and mc meant greater monopoly power a profit maximizing firm s monopoly power varied directly and only with the firm s own price elasticity of demand lerner s benchmark for measuring monopoly

factor movements and commodity trade as complements abstract several models are presented in which factor mobility leads to an increase in the volume of world trade the models share the common characteristic that the basis for trade is something other than differences in relative factor endowments these alternative bases for trade include returns to scale imperfect competition production and factor taxes and differences in production technology taken together the models suggest a more general idea the widely held notion that trade in goods and factors are substitutes is in fact a rather special result which is a general characteristic only of factor proportions models

trial and settlement a study of high low agreements this paper presents the first systematic theoretical and empirical study of high low agreements in civil litigation a high low agreement is a private contract that if signed by litigants before the conclusion of a trial constrains the future damages payment to lie between a minimum and a maximum amount whereas the existing literature describes litigation as a choice between trial and settlement our examination of high low agreements a relatively new phenomenon in civil litigation introduces partial or incomplete settlements in our theoretical model trial is both costly and risky when litigants have divergent subjective beliefs and are mutually optimistic about their trial prospects cases may fail to settle in these cases high low agreements can be in the litigants mutual interest because they limit the risk of outlier damages awards while still allowing for an optimal degree of speculation using unique insurance claims data from a national insurance company we describe the features of these agreements and empirically investigate the factors that may influence whether litigants discuss or enter into high low agreements our empirical findings are consistent with the predictions of the theoretical model we also explore extensions and alternative explanations for high low agreements including their use to mitigate excessive offsetting trial expenditures

national capital city location and subsidiary portfolio expansion the negative effect of geographic distance to the capital city at inception on the speed of subsequent investments a multinational enterprise develops its subsidiary portfolio by investing in new foreign markets and subsequently pursuing further investments within these host countries we find that firms which locate their first equity investment closer to the national capital city can subsequently expand their subsidiary portfolio within the host country at a higher speed this effect is particularly strong in emerging economies further analyses of various contingencies support the robustness of our findings we discuss different theoretical mechanisms which could cause these effects in particular face to face interactions with governmental actors and opportunities to develop political connections our research contributes to the literature on internationalization processes by analyzing how the initial location choice affects the development of the subsidiary portfolio

the effects of male and female labor supply on commodity demands we examine the effects of male and female labor supply on household demands and present a simple and robust test for the separability of commodity demands from labor supply using data on individual households from six years of the uk fes we estimate a demand system for seven goods which includes hours and participation dummies as conditioning variables allowance is made for the possible endogeneity of these conditioning labor supply variables we find that separability is rejected furthermore we present evidence that ignoring the effects of labor supply leads to bias in the parameter estimates

measuring banks market power in the presence of economies of scale a scale corrected lerner index abstract a positive lerner index indicates a welfare loss for consumers due to deviations from marginal cost pricing such a welfare loss may not always be due to market power though in particular marginal cost pricing would result in negative profit for the firm in the presence of economies of scale in such a scenario a positive lerner index could simply reflect the firm s need to earn non negative profits rather than market power we propose a novel scale corrected price cost margin for firms that produce in the economies of scale range we show that this measure is more informative about market power than the lerner index itself as an empirical illustration we analyze market power in the u s banking sector using both the corrected and uncorrected lerner index the corrected lerner index reveals significant market power for u s commercial banks during the 2000 2014 period

cannabis use and its effects on health education and labor market success cannabis is the most popular illegal drug its legal status is typically justified on the grounds that cannabis use has harmful consequences empirically investigating this issue has been a fertile topic for research in recent times we provide an overview of this literature focusing on studies which seek to establish the causal effect of cannabis use on health education and labor market success we conclude that there do not appear to be serious harmful health effects of moderate cannabis use nevertheless there is evidence of reduced mental well being for heavy users who are susceptible to mental health problems while there is robust evidence that early cannabis use reduces educational attainment there remains substantial uncertainty as to whether using cannabis has adverse labor market effects

current account adjustment in developing countries the role of exchange rate regimes i introduction an important question in open economy macroeconomics is whether exchange rate rigidity hinders current account adjustment also known as the friedman hypothesis according to friedman 1953 a flexible exchange rate regime facilitates current account adjustment while a fixed exchange rate regime delays the adjustment process this hypothesis has stimulated extensive research on the relationship between exchange rate regimes and current account reversals e g adalat and eichengreen 2007 de haan schokker and tcherneva 2008 milesi feretti and razin 2000 pancaro and rueffer 2009 while existing studies have made significant contributions to the literature they largely focus on the determinants of current account reversals rather than the duration of current account deficit spells emphasized in the friedman hypothesis does a country s exchange rate regime really matter to how long it stays in a high current account deficit state and if so to what extent does the fixed exchange rate regime delay the adjustment process this article addresses the above important questions by empirically evaluating the role of exchange rate regimes on the duration of high current account deficit spells in developing countries given the prevalence of large and persistent current account deficits across countries over the last few decades understanding the impact of exchange rate regimes on the duration of high deficit spells is particularly important and pertinent specifically we identify high current account deficit spells and employ hazard models to examine whether a fixed exchange rate regime increases the duration of high deficit spells and thus delays current account adjustment 1 a novelty of this approach is that by estimating hazard models we can explicitly test for the effect of exchange rate regimes on the duration of high current account deficit spells which is more in the spirit of the friedman hypothesis on the basis of a large dataset with annual observations for 95 developing countries over the period 1971 2004 we find strong evidence that in developing countries fixed exchange rate regimes are associated with longer duration of high deficit spells and hence significant delays in the adjustment to high current account deficits this finding is robust to alternative exchange rate regime classifications and different model specifications furthermore we show that fixed exchange rate regimes delay current account adjustment only in the hard peg case but not in the soft peg case from a policy perspective this suggests that only the corner solution of a very rigid exchange rate regime delays the current account adjustment but not if the regime allows for some flexibility in the exchange rate adjustment our findings thus lend strong support to the friedman hypothesis the remainder of the article proceeds as follows after a brief review of the relevant literature in section ii section iii provides a description of our dataset and defines high deficit spells in section iv we discuss the methodological issues involved in the duration analysis the empirical results are presented in section v and section vi concludes ii the literature on exchange rate regimes and current account adjustment the discussion on the relationship between exchange rate regimes and current account adjustment goes back to friedman s seminal work in the 1950s friedman 1953 argues that nominal exchange rate flexibility expedites current account adjustment while nominal exchange rate rigidity delays the adjustment under a flexible exchange rate system where the exchange rate is allowed to vary freely a rising current account deficit would induce the depreciation of domestic currency which in turn leads to an increase in exports a decrease in imports and a rapid convergence to a balanced current account in the case of fixed exchange rate regimes where exchange rates are not allowed to vary countries have to rely solely on internal price adjustment mechanisms to produce corrective movements in their current accounts

measuring multi product banks market power using the lerner index abstract the aggregate lerner index is a popular composite measure of multi product banks market power based on total assets as the single aggregate output factor we show that the aggregate lerner index only qualifies as a consistently aggregated lerner index if three conditions hold under these conditions the aggregate lerner index reduces to a weighted average of the product specific lerner indices we test the three conditions for a sample of u s banks covering the years 2011 2017 all three conditions are rejected and we show that they may cause an economically relevant bias to the aggregate lerner index depending on the economic context as a general solution we propose using the always consistently aggregated weighted average lerner index whenever a composite lerner index is needed

labor force migration and allocative efficiency in the united states the roles of information and psychic costs this paper examines the relative importance of information psychic and other costs of relocation as mitigating factors off sets to spatial earnings differentials within the migration decision the method employed for this examination is based upon 1 observation of relationships between the geographic allocation and personal characteristics of labor force migrants and 2 inferences drawn from these observations about the relative importance of various relocation cost components empirical analyses of the migration decision based upon this indirect method provide important insights on both the determinants and allocative efficiency of interstate labor force migration in the united states excerpt

forced displacement and technology adoption an empirical analysis based on agricultural households in bosnia and herzegovina we use the bosnian living standards measurement study lsms survey to show that conflict induced displacement of agricultural households dramatically affects the adoption of new technologies in agriculture we exploit the heterogeneity in the level of violence in the pre war location to account for selection bias this natural experiment seems to be a source of exogenous variation in our case because violence aims at ethnic cleansing without economic consideration we find that the displaced are less likely than stayers to adopt fertiliser and pesticide

health insurance the tradeoff between risk pooling and moral hazard choosing optimal health insurance coverage involves a trade off between the gain from risk reduction and the deadweight loss from moral hazard this paper examines this trade off empirically by estimating both the demand for health insurance and the demand for health services it relies on data from a randomized controlled trial of cost sharing s effects on the use of health services and on the health status for a general non elderly population

estimation in a class of simultaneous equation limited dependent variable models estimation in a class of simultaneous equation limited dependent variable models is considered the minimum chi squared method is used to compare the asymptotic relative efficiency of marginal and new conditional maximum likelihood estimators for this class of models efficient minimum chi squared estimation procedures are described a two step algorithm based on a conditional maximum likelihood estimator provides a natural framework for both computing a linearized and locating the joint maximum likelihood estimator the unimodality of the simultaneous equation tobit likelihood function is proved and this model is used to illustrate the empirical application of some of the estimators considered in the paper the relative efficiency of these estimators in the simultaneous equation tobit model is examined in a set of monte carlo experiments many applications of microeconomic theory to individual data face the joint problems of censoring and simultaneity in particular the dependent variable under investigation may not be continuously observed and some of the conditioning variables representing the outcome of other decisions by the individual may be simultaneously determined smith and blundell 1986 developed an asymptotically efficient test for exogeneity or simultaneity in the simultaneous equation tobit model as a byproduct a conditional maximum likelihood estimator was obtained which is consistent under the alternative hypothesis of simultaneity nelson and olsen 1978 amemiya 1978 1979 and heckman 1978 consider a number of consistent marginal maximum likelihood estimators based on marginal maximum likelihood estimators of the reduced form parameters for the probit and tobit models in contrast the estimator derived from smith and blundell 1986 is based on the corresponding conditional maximum likelihood estimators this paper is concerned with estimation in a class of simultaneous limited dependent variable regression models which includes the simultaneous probit and tobit models as special cases analogous marginal and conditional maximum likelihood estimators to those of nelson and olsen 1978 amemiya 1978 1979 heckman 1978 and smith and blundell 1986 are derived and other new estimators are suggested the minimum chi squared approach discussed by ferguson 1958 malinvaud 1970 and rothenberg 1973 is used to compare the asymptotic relative efficiency of various estimators considered a simple two step algorithm based on the conditional maximum likelihood

bank competition and financial stability in asia pacific the impact of bank competition on financial stability has been a focus of academic and policy debate over the last two decades and particularly since the 2007 08 global financial crises beck 2008 oecd 2011 under the traditional competition fragility view banks cannot earn monopoly rents in competitive markets and this results in lower profits capital ratios and charter values this makes banks less able to withstand demand or supply side shocks and encourages excessive risk taking marcus 1984 alternatively the competition stability view suggests that competition leads to greater stability a less competitive banking market may lead to more risk taking if the big banks are deemed too important to fail and as such obtain implicit or explicit subsidies via government safety nets mishkin 1999 in addition banks with more market power tend to charge higher loan rates which may induce borrowers to assume greater risk leading to greater default in competitive banking markets loan rates are lower too big to fail issues and safety net subsidies are smaller and this results in a positive link between bank competition and stability boyd and de nicolo 2005 it could also be the case as noted by martinez miera and repullo 2010 that bank competition and stability are linked in a non linear manner and in a similar vein berger et al 2009 argue that competition and concentration may coexist and can simultaneously induce stability or fragility

factor endowments heterogeneous labor and north south migration the relationship between the relative factor endowments of heterogeneous labor in the north and south of the united states and interregional labor migration is examined the purpose of the present paper is to make explicit a sufficient set of conditions that will support a factor endowment based migration model and to evaluate the advantages and weaknesses of that model the models predictions are tested using data from the 1970 census excerpt

alcoholism work and income this article reports on an empirical analysis of the relationships between alcoholism and income and working we show that the relationships between alcoholism and labor market success have important age or life cycle dimensions we present evidence that alcoholism may affect income more by restricting labor market participation than by affecting the wages of workers finally we demonstrate that the effects of alcoholism on earnings depend on the extent to which one controls for other covariates associated with alcoholism as such we suggest that there may be important indirect as well as direct effects of alcoholism on labor market success

the role of birth order in child labour and schooling does when a child was born relative to his or her siblings affect whether the child attends school or participates in child labour we investigate this question by estimating the causal effect of birth order on the probabilities of school attendance and child labour participation to address the potential endogeneity of family size we use instrumental variable approach where the proportion of boys in the family is used to instrument family size using a longitudinal household survey data from ethiopia we estimate unobserved effects bivariate probit instrumental variable model of school attendance and child labour choices the results suggest that the probability of child labour participation decreases with birth order but we find no evidence that suggests birth order affects the probability of school attendance however among children who are going to school hours spent studying increases with birth order results from complementary time use analysis reveal that there is no birth order effect on hour

private politics and environmental management abstract we study determinants and effects of two types of private political actions ppas against s p 500 companies environmental boycotts and shareholder proxy proposals we consider effects on the firms adoption of environmental management systems ems and the environmental protocol iso 14001 we find that ppas have a significant impact on firms environmental management decisions and consistent with baron 2009 that a company s likelihood of experiencing a ppa is higher if it is a receptive target that has a reputation for social responsibility

do hmo plans reduce health care expenditure in the private sector i introduction since the hmo act was passed in 1973 health maintenance organizations hmos have become one of the most popular types of managed care plans in the u s health delivery system faced with a dramatic increase in health care costs hmos are designed to implement a tight utilization review and authorization process along with restricted choice of providers as a means of managing utilization and quality by comparing health care expenditure patterns of hmo members with those of non hmo members among the privately insured nonelderly population this study seeks to understand the impact that hmos have on health care expenditure in the private insurance sector our data come from the 2000 medical expenditure panel survey meps a nationally representative survey of the u s civilian noninstitutionalized population despite the dramatic growth in the number and proportion of individuals enrolled in private hmo plans much of existing research on this issue has focused on the relationship between hmo enrollment and use of health care services miller and luft 1994 2002 whereas only a limited number of studies have been conducted on the role of prevalent hmo enrollment in saving health care expenditure kralewski et al 2000 analyses on expenditure performance are mostly carried out on the performance of the medicaid or medicare managed care plans buchanan et al 1996 mello et al 2002 this study extends previous research in several ways first rather than using localized or insurance group wise data johnson and aquilina 1986 kralewski et al 2000 mclaughlin et al 1983 mclaughlin 1987 robinson 1996 or employer data baker and corts 1996 feldman et al 1993 we use data provided directly by hmo members through nationally representative surveys second by using decomposed expenditure data we are able to ascertain whether the provision of financial incentives to both consumers and providers in hmo plans makes any differences in medical care expenditure by each party compared with traditional plans furthermore by testing the hypothesis of selectivity in health insurance choice we try to avoid the biased findings that often find in favor of hmo plans trends and relevance during the past two decades the number of hmo enrollees has proliferated from 9 1 million 4 of the total population in 1980 to 76 1 million 26 4 in 2001 health united states 2003 between 1977 and 2001 the percentage of the u s population under age 65 that joined private insurance hmos increased dramatically from 3 7 to 27 9 table 1 over the same time period per capita national health expenditure increased from 1 980 to 4 773 in 1995 constant dollars and total national health expenditure as a percentage of gross domestic product rose from 8 8 to 14 1 out of total national health expenditure the share of private expenditure decreased from 57 3 to 54 1 motivated by the prevalence of hmos in the private insurance market and the insufficiency in understanding its cost containment performance we investigate the patterns of health care expenditure among hmo members to understand whether hmos contribute to limiting medical expenditure relative to non hmo arrangement there are two main complications to our empirical analysis the first is selection bias due to endogenous health plan choice decisions previous studies buchanan and cretin 1986 jackson beeck and kleinman 1983 suggest that the utilization reduction effect of hmos may be a consequence of the selective enrollment of a healthier population in hmo plans rather than the more efficient medical care delivery management of hmos thus we first estimate the probit model of health insurance plan choice decisions and test this hypothesis in line with the analysis of taylor et al 1995 the second complication is that the dependent variables are nonnegative with a high frequency of zero observations

the demand for cocaine by young adults a rational addiction approach abstract this paper applies the rational addiction model to the demand for cocaine by young adults in the monitoring the future panel the price of cocaine is added to this survey from the drug enforcement administration s system to retrieve information from drug evidence results suggest that annual participation and frequency of use given participation are negatively related to the price of cocaine in addition current participation frequency is positively related to past and future participation frequency the long run price elasticity of total consumption participation multiplied by frequency given participation of 1 35 is substantial

men women and competition an experimental test of behavior this study reports a series of experiments that examine outcomes when agents are able to choose between a payment scheme that rewards based on absolute performance i e piece rate and a scheme that rewards based on relative performance i e a tournament we test for the presence and persistence of gender differences in performance and the rate of entry into the tournament option and whether these differences are sensitive to the structure of the tournament rewards in the winner take all wta condition only the best performer in the tournament for each round received a payment 4 50 in the graduated tournament condition the same payment 4 50 was divided among the first second and third finishers in the tournament in the wta condition men showed significantly lower forecast errors than women in addition a clear sorting effect occurs in the wta condition in early rounds of the wta condition male entrants into the tournament show significantly lower forecast errors than female tournament entrants however the difference disappears over time after controlling for forecasting skill gender did not predict entry into the tournament for the wta condition however lower forecasting skill reduced the probability of entry in the graduated tournament the situation was reversed men entered the tournament at significantly higher rates even after controlling for skill forecasting skill had no impact on the decision to enter the tournament while the average male entrant to the tournament had lower forecast errors than the average female entrant the men entered at much higher rates as a consequence men were much more likely than women to enter the tournament too frequently

what drives the choice of the type of partner in r d cooperation evidence for spanish manufactures and services abstractwe analyse the heterogeneity in firms decisions to engage in r d cooperation taking into account the type of partner competitors suppliers or customers and research institutions and the sector to which the firm belongs manufactures or services we use information from the technological innovation panel pitec for spanish firms and estimate multivariate probit models corrected for endogeneity which explicitly consider the interrelations between the different r d cooperation strategies we find that placing a higher importance to publicly available information incoming spillovers receiving public funding and firm size increase the probability of cooperation with all kind of partners but the role is much stronger in the case of cooperative agreements with research institutions and universities our results also suggest that r d intensity and the importance attributed to the lack of qualified personnel as a factor hampering innovation are key factors influencing positively r d cooperation

does distance matter for institutional delivery in rural india this article estimates the causal effect of distance to health facility on in facility birth in rural india taking into account the endogenous placement of the health facility we find that women living farther away from the health facilities are less likely to give birth at a health facility each additional kilometre from the nearest health facility is associated with a 4 4 decline in the probability of in facility birth policy simulation results indicate that providing access to a health facility within 5 km would increase institutional delivery by 10 overall our findings confirm that distance is an important barrier to in facility births in rural india

exogenous shocks and related goods drinking and the legalisation of marijuana abstract the paper uses the substitutability between goods to model the transmission to other products of a consumption shock to one product the framework is used to analyse the impact on drinking of legalisation of marijuana for all types of consumers for example the results indicate that legalisation would lead to approximately a 4 increase in marijuana consumption while beer wine and spirits consumption would fall by 1 2 and almost 4 respectively

employment wages and alcohol consumption in russia 1 introductionconcerns regarding the relationship between alcohol consumption and labor market productivity are well grounded if problem drinking or alcoholism is considered a disease then it may have depressant effects on labor market productivity causing reductions in employment earnings and other labor market outcomes mullahy and sindelar 1993 1996 kenkel and ribar 1994 however there is a medical literature that documents a u shaped relationship between alcohol consumption and the risk of cardiovascular disease according to this literature moderate drinkers have a lower risk of cardiovascular disease than do either abstainers or heavy drinkers beaglehole and jackson 1992 doll et al 1994 consistent with this evidence several economists have found a positive association between moderate drinking and earnings berger and leigh 1988 french and zarkin 1995 heien 1996 hamilton and hamilton 1997 zarkin et al 1998 macdonald and shields 2001 this article investigates the impact of alcohol consumption on employment and wages in russia the primary contributions of the article are twofold first it enhances the economic literature on the relationship between alcohol consumption and labor market behavior by using data from a longitudinal survey the use of a longitudinal data set enables the estimation of a fixed effects model which helps avoid the potential bias caused by unobserved individual factors not captured in cross sectional models the use of a fixed effects model is an important extension to the literature because the data sets used in previous studies are cross sectional and usually lack adequate variables that could serve as identifying instruments to control for the endogeneity of alcohol consumption 1 furthermore the richness of the data set used in this article allows for the application of three alternative measures of alcohol consumption in the empirical analysis this is important because the relationship between alcohol consumption and labor market outcomes may be sensitive to the alcohol measure that is used the second notable contribution of this article is that it provides the first empirical evidence on the association between alcohol consumption and labor market outcomes in russia excessive alcohol consumption is a widespread problem in russia where per capita alcohol consumption is around 14 liters per year the world health organization who considers 8 liters to be a sign that a country has a critical consumption level for health problems quinn judge 1997 furthermore the dramatic fluctuations in mortality rates experienced in russia over the past 15 years have generated considerable attention to the potential effect of alcohol consumption on the overall health of the russian population it is important to investigate how labor market outcomes would be affected by alcohol consumption in a country which demonstrates such dramatic fluctuations in alcohol consumption and mortality consistent with the previous studies cross sectional results generally support the hypothesis of an inverse u shaped relationship between alcohol consumption and wages and employment results from the fixed effect models are found to be quite different from those of cross sectional models the positive effect of alcohol consumption on employment disappears for both males and females once the individual fixed effects are controlled for the results of the wage model lend support to a small and linear return to alcohol consumption but the effects are significant only at the 10 level the fixed effects estimates are smaller in magnitude and estimated with less precision compared with cross sectional estimates section 2 reviews the previous literature section 3 discusses the conceptual issues and empirical strategy section 4 introduces the data set section 5 provides a discussion of the results and sensitivity analyses section 6 concludes the article

parties politics and regulation evidence from clean air act enforcement does local federal regulation respond to the preferences of local congressional representatives for example do republican congressmen reduce local enforcement of clean air laws in their districts we use facility level panel data on clean air act inspections over 1989 2005 to study the causal effect of a congressman s party affiliation on local enforcement random assignment of electoral outcomes is obtained with a regression discontinuity design we find that new republican vs democratic representatives significantly depress inspection rates for local polluting facilities in the first year after their election jel d73 q52 q53

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item

employment unemployment and problem drinking the misuse of alcohol is estimated to result in enormous economic costs composed largely of reduced labor market productivity however there has been debate on this issue the purpose of this paper is to help to resolve this debate by presenting sound structural estimates of the relationship between measures of problem drinking and of employment and unemployment the analysis is based on the 1988 alcohol supplement of the national health interview survey we find that for both men and women problem drinking results in reduced employment and increased unemployment

does drug use lower wages this study using microdata from the 1980 and 1984 waves of the national longitudinal survey of youth examines the effects of drug use on wages and employment contrary to most previous researcher