david pearce and the economic valuation of biodiversity david pearce was a pioneer in the economic valuation of biodiversity his work powerfully influenced both later economists who worked in the field and natural scientists and practitioners who gained and appreciation of the importance of economics to their efforts pearce often applied the paradigm of demonstration followed by appropriation the values of biodiversity must first be demonstrated to those who make decisions concerning its survival and then appropriated by them the later step will be possible when market and policy failures are rectified so as to allow the realization of conservation values while pearce wrote extensively on these themes he was also acutely aware of the limitations of the paradigm rosy projections of values that could not be realized and appropriated would be of little practical use and pearce often cautioned against excesses of optimism yet he also clearly believed that there are compelling if not always easily demonstrated reasons for conservation i argue in this paper that pearce s seminal work on the valuation of biodiversity cannot be understood without some appreciation of his philosophical perspective pearce would have described himself as a pragmatist however his pragmatism was grounded in the belief that it is both expedient and ethical to recognize that communities in some of the poorest corners of the world will only conserve biodiversity if they are justly compensated for the sacrifices they must make to do so

search bioprospecting and biodiversity conservation abstract to what extent can private sector bioprospecting incentives be relied upon for the protection of biological diversity the literature contains dramatically different estimates of these incentives from trivial to quite large we resolve this controversy by isolating the fundamental source of the discrepancy and then providing empirically defensible estimates based on that analysis results demonstrate that the bioprospecting incentive is unlikely to generate much private sector conservation thus other mechanisms are likely required to preserve the public good of biodiversity

the gender earnings differential in the russian transition economy using data from the russia longitudinal monitoring survey rlms the first nationally representative household survey in the russian federation the author examines the gender earnings differentia

inflation and reputation in many macroeconomic models with rational expectations optimal policy is time inconsistent and therefore announced policy may not be credible this paper models the government s credibility explicitly using kreps and wilson s analysis time consistent optimal government policy emerges as a sequential equilibrium in a repeated game this policy is at least as good as the inconsistent optimal policy and dominates the consistent policy when reputational effects are ignored thus the analysis resolves the problem of specifying a credible optimal policy in such models the results show why attempts to disinflate may lead to recession even with perfectly flexible prices this abstract was borrowed from another version of this item

rogoff s conservative central banker restored we show that delegation of monetary policy to a weight conservative central banker can be desirable although the government can also use an inflation contract an employment target an inflation target or any combination of these to control the central banker the key feature of our model is a stochastic inflation bias arising when wage setters receive some information about a supply shock prior to signing nominal wage contracts weight conservatism is found to be desirable if fully state contingent delegation is not possible and the stochastic inflation bias cannot be eliminated by optimal choice of the delegation parameters

the constitution of economic policy one of the most exciting intellectual moments of my career was my 1984 discovery of knut wicksell s unknown and untranslated dissertation finanztheoretische untersuchungen buried in the dusty stacks of chicago s old harper library only the immediate post dissertation leisure of an academic novice allowed for the browsing that produced my own dramatic example of learning by serendipity wicksell s new principle of justice in taxation gave me a tremendous surge of self confidence wicksell who was an established figure in the history of economic ideas challenged the orthodoxy of public finance theory along lines that were congenial with my own developing stream of critical consciousness from that moment in chicago i took on the determination to make wicksell s contribution known to a wider audience and i commenced immediately a translation effort that took some time and considerable help from elizabeth henderson before final publication this abstract was borrowed from another version of this item

central bank independence economic behavior and optimal term lengths the authors parameterize central bank independence in terms of partisanship and term length focusing on the implications of alternative policy structures for real economic activity while long terms of office for the central banker can reduce the role of electoral surprises term lengths that are too long are costly if societal preferences are subject to permanent shifts the appointment of a conservative central banker increases the optimal term length and leads to lower average inflation but need not increase the volatility of output copyright 1996 by american economic association

inflation contracts and inflation targets under uncertainty why we might need conservative central bankers this paper compares the relative effectiveness of inflation contracts and inflation targets in the presence of uncertainty regarding the central bank s preferences and the underlying output target the model explains why discretion may be superior to a delegation solution we also show that there might be the need to combine inflation targets and contracts with the appointment of a rogoff type conservative central banker if contracts and targets cannot be made state contingent and that less flexible inflation targets may be appropriate with uncertain central bank preferences

sex segregation within occupations do the paychecks and career prospects of men and women differ because of rational optimizing decisions made by men and women given their respective skills experiences home responsibilities and intentions regarding future work and family activities the human capital model coherent logical and internally consistent has a certain elegance to it nevertheless empirically it cannot explain the sex composition of jobs in lines of work pursued by both men and women the results reported below are more consistent with the notion that employers statistically discriminate that is they reserve some jobs for men and others for women based on their perceptions of the average traits of the two groups however our results also call into question the assumption that statistical discrimination is merely an optimal decisionmaking strategy under conditions of uncertainty we summarize below our recent research on determinants of the sex composition of jobs in mixed occupations that research is based on data on staffing patterns job requirements and personnel policies collected by the u s employment service in over 400 california establishments between 1959 and 1979 details on sample representativeness procedures of data collection and the like can be found in our 1984 and 1986 papers

the price of innovation new estimates of drug development costs the research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms these data were used to estimate the average pre tax cost of new drug development the costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval the estimated average out of pocket cost per new drug is us 403 million 2000 dollars capitalizing out of pocket costs to the point of marketing approval at a real discount rate of 11 yields a total pre approval cost estimate of us 802 million 2000 dollars when compared to the results of an earlier study with a similar methodology total capitalized costs were shown to have increased at an annual rate of 7 4 above general price inflation 2003 elsevier science b v all rights reserved

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

estimating wage discrimination in the labor market if labor supply curves are not perfectly inelastic wage discrimination induces some minority workers to leave the labor force studies of discrimination that focus only on wage differentials overlook these disincentive effects on minority employment

central bankers bureaucratic incentives and monetary policy 1 central bankers bureaucratic incentives and monetary policy an introduction i structure of central bank financing and bureaucratic rents 2 monetary policy theory and practice 3 inflationary bias of the federal reserve system a bureaucratic perspective 4 preliminary evidence on the use of inputs in the federal reserve system 5 human capital and bureaucratic inertia the use of inputs by the federal reserve ii the organization of central bank bureaus and the problems of control 6 the choice of monetary instruments and the theory of bureaucracy 7 bureaucratic theory and the choice of central bank goals 8 research activities and budget allocations among federal reserve banks 9 banking sector influence on the relationship of congress to the federal reserve system iii political pressures bureaucratic incentives and monetary policy 10 politics and fed policymaking 11 central bank independence an international comparison 12 a private central bank some olde english lessons iv conclusion 13 central bankers and the issue of independence contributors

anti discrimination or reverse discrimination the impact of changing demographics title vii and affirmative action on productivity this study estimates the changes over time in the relative productivities of minorities and females i find no significant evidence that the productivity of minorities or females decreased relative to that of white males as relative minority and female employment increased during the 1960s and 1970s this study also compares the impact of title vii and affirmative action and presents evidence that title vii litigation has played a significant role in increasing black employment this suggests that the employment of minorities and females has not entailed large efficiency costs and that title vii litigation has had some success in fighting racial discrimination the eeoc has sometimes been credited with opening up new pools of labor that corporations somehow contrived to ignore and occasionally with hastening the breakdown of traditional barriers to labor mobility but in the context of the market s endless search for efficiency these anomalies would have been eliminated anyway leaving only the question of whether they were worth the expenditures compelled by law affirmative action is a net cost to the economy and the true dynamic effects the opportunity cost of all this expense and effort the diminution of competition inefficiencies due to the employment and promotion of marginal labor and the consequent demoralization of good workers can only be a matter of conjecture although they are clearly the most important of all senator orrin hatch 1980

intertemporal market effect on gender earnings differentials lawyers in canada 1970 80 the conventional methodology for decomposition of cross sectional earnings differentials is extended to include a market effect on intertemporal changes in earnings and to analyse the changes in gender differentials over time the integrated cross sectional and intertemporal methodology is illustrated by a decomposition of the change in the earnings differential that occurred during the 1970s between male and female lawyers in canada an unprecedented rate of growth in the supply of lawyers during the 1970s in canada was associated with changes in the gender earnings differential in the legal profession this rapid supply growth had an almost negligible net impact on female earnings but a negative impact of 15 on the male earnings this explains the narrowing of the earnings differential by almost 30 over the decade although three fifths of the gender differential in 1970 and half of the differential in 1980 were attributable to the differences in the characteristics of the two groups these chang

housework fixed effects and wages of married workers although the primacy of household responsibilities in determining gender differences in labor market outcomes is universally recognized there has been little investigation of the direct effect of housework on wages using data from the panel study of income dynamics cross sectional wage regressions reveal a substantial negative relation between wages and housework for wives which persists in specifications controlling for individual fixed effects the evidence for husbands is inconclusive married women s housework time is on average three times that of married men s the addition of housework time to the wage equations increases the explained component of the gender wage gap from 27 30 percent to 38 percent

rational expectations and policy credibility following a change in regime we examine the dynamic path of an economy after a change in regime when neither the policy to be followed nor the reactions of the public are known the model is an application of kreps and wilson s reputation model to barro and gordon s macroeconomic policy game equilibrium is defined to be the dynamically consistent solution to a game between the government and the private sector it involves mixed strategies and bayesian learning by both sides until the uncertainty about government and public behaviour is resolved the absence of complete credibility of government policy and intransigence of private sector wage demands increase the output loss of disinflation the analysis also sheds light on the strategic nature of economic policymaking and the role of information in macroeconomics

sex related wage differentials and women s interrupted labor careers the chicken or the egg wage differentials between men and women are often attributed to differences in on the job training the lower investment of women being explained by their plans to interrupt their careers for family reasons career interruptions however are often explained by low wages to trace this interrelationship i adopt a simultaneous equations approach trying to explain wages planned separations on the job training and the skill intensity of the job simultaneously skill intensity is found to be a key variable in the explanation of the wage differential traditional theory is hard pressed to explain the sex related differences in this variable

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

family labor supply and aggregate fluctuations abstract this paper considers an economy which is populated by a continuum of identical families consisting of two members the two members have different productivities and the family faces a fixed utility cost if both members supply labor simultaneously although both family members have the same preferences they display very different elasticities of labor supply a real business cycle model is calibrated and it is seen that this cross sectional heterogeneity results in interesting forms of aggregation bias

the trend in the male female wage gap in the united states despite the rise in the feminist movement the enactment of equal opportunity legislation and the rapid increase in women s labor force participation a substantial sex differential in wages has persisted in the united states for at least 4 decades measured by hourly earnings of year round workers this wage gap was 31 in 1955 widened to a 35 37 range by the 1960s and early 1970s and then narrowed to 33 by 1982 this paper examines the extent to which changes in the characteristics of men and women in the labor force and other factors can account for the observed pattern the main finding is that increases in women s labor force participation were initially associated with a declining skill level of employed women relative to employed men where skill is measured by years of schooling and job tenure more recently the work experience of employed women has been increasing which helps account for the recent narrowing trend in the wage gap during the 1970s the wage gap probably woul have narrowed m

valuing research leads bioprospecting and the conservation of genetic resources bioprospecting has been touted as a source of finance for biodiversity conservation recent work has suggested that the bioprospecting value of the marginal unit of genetic resources is likely to be vanishingly small creating essentially no conservation incentive this result is shown to flow specifically from a stylized description of the research process as one of brute force testing unaided by an organizing scientific framework scientific models channel research effort toward leads for which the expected productivity of discoveries is highest leads of unusual promise then command information rents associated with their role in reducing the costs of search when genetic materials are abundant information rents are virtually unaffected by increases in the profitability of product discovery and decline as technology improvements lower search costs numerical simulation results suggest that under plausible conditions the bioprospecting value of certain genetic resources could be large enough to s

optimal inflation contracts and inflation targets with uncertain central bank preferences accountability through independence this paper examines some problems which arise when monetary policy is delegated to an independent central bank and where the central bank s preferences are unknown two key conclusions emerge from the paper first even with optimal targets or contracts central bank independence may not always be desirable because central banks may have distorted preferences relative to society second if the delegation solution is preferable and the independent central bank responds to information about supply shocks the central bank may be made more accountable by allowing it to set its own inflation targets i e by making it goal independent

a life cycle consistent empirical model of family labour supply using cross section data this paper estimates a utility maximising model of the joint determination of male and female labour supplies using a sample of married couples from the u k family expenditure survey the emphasis is on the estimation of within period preferences that are consistent with intertemporal two stage budgeting under uncertainty however the approach we adopt provides an alternative method of estimating certain aspects of life cycle behaviour to the fixed effects constant approach of heckman and macurdy 1980 macurdy 1981 and browning deaton and irish 1985 moreover it relaxes some of the underlying restrictions that are implicit in these constant models under uncertainty

pension benefits and male female wage differentials female members of defined benefit pension plans will receive greater pension benefits than males with identical work and earnings histories since females have greater longevity yet females have higher turnover rates and lower earnings both of which serve to reduce pension benefits relative to those received by males we illustrate the net effect on pension benefits in defined benefit plans of gender differences in longevity turnover and wages we conclude that females tend to receive lower pension benefits and therefore that pension benefits are more likely to exacerbate than to reduce the male female wage gap

can job evaluation improve women s wages systematic job evaluation or comparable worth programmes are often seen as a method to increase the relative wages of women this paper examines whether this is the case using two job evaluation studies from the university sector in sweden two different evaluation schemes were used in these studies the general result found in this analysis is that complete implementation of the evaluation results would lead to an increase in women s relative wages by between 2 and 6 this finding is however not uniform in the sense that all women would gain and all men would lose results indicate that about two thirds of women are winners and one third losers while the figures for men are approximately the reverse assuming that the job evaluations give a correct measure of productivity the results are also used in an analysis of wage discrimination and the crowding effect the findings indicate a significant crowding effect but are less conclusive with regard to discrimination

crucial issues concerning central bank independence abstract this paper argues first that it is inappropriate to presume that central banks will in the absence of any tangible precommitment technology inevitably behave in a discretionary fashion that implies an inflationary bias furthermore there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it several implications are discussed

intercountry comparisons of labor force trends and of related developments an overview this paper is a survey of analyses of women s labor force growth in 12 industrialized countries originally presented at a conference in sussex england in june 1983 the main focus of the conference papers and of the current survey is on growth of the labor force of married women in the years 1960 80 trends in fertility wages and family instability also receive attention as related developments married women s labor force growth is observed in all countries except for the ussr after 1970 where labor force rates of women reached the level of men growth rates differ among countries they apparently respond to growth in real wages and to growth in education but response elasticities differ among countries estimates of these elasticities contained in the country papers were helpful in predicting the trends other findings include ubiquitous declines in fertility and growth of divorce in the 1970s both developments are related to long run labor force growth in all countries wages of women were lo

trends in earnings differentials by gender 1971 1981 this paper clarifies trends in relative earnings by sex over the decade 1971 1981 and decomposes these trends to determine which factors contributed to a decline and which to an increase our analyses are based upon data from the annual demographic files of the current population survey for 1972 and 1982 this study is unique in that it estimates earnings functions in each year which are corrected for selectivity bias it is found that such a correction markedly raises the progress of white women relative to men among blacks the impact of the selectivity bias correction was to substantially lower the relative earnings increase of women however the coefficients on the selectivity variable were not significant the findings suggest declining sex role specialization and discrimination as conventionally measured over the decade on the other hand contrary to expectations the total effect of variables reflecting the sex composition of the individuals occupation worked to widen the sex differential over the period the sex differential was also adversely affected by a decline in the relative return to education especially for whites authors modified

inflation targets and contracts with uncertain central banker preferences within a standard model of monetary delegation the authors show that the optimal linear inflation contract performs strictly better than the optimal inflation target when there is uncertainty about the central banker s preferences the optimal combination of a contract and a target performs best and eliminates the inflation bias and any variability not associated with supply shocks however variability due to shocks is enhanced by uncertain central banker preferences quadratic contracts are shown to overcome this problem partly but the advantages of delegation may still be dominated by the excess variability due to shocks hence the credibility stabilization tradeoff is restored

lobbying and international cooperation in tariff setting abstract this paper develops a theory of tariff protection that incorporates cooperative behavior and lobbying governments use import tariffs or subsidies to maximize a weighted sum of lobbying contributions and general welfare governments do not use export taxes or subsidies and thus balance the interests of export and import competing lobbies in setting tariff levels in a symmetric model cooperation between governments is sustained by threats of punishment in future periods unless governments place too much weight on the future the result is a cooperative tariff otherwise the result is a reciprocal import subsidy

evolution of the gender earnings gap among canadian university graduates this paper reports the results of an empirical analysis of the gender earnings gap among recent canadian bachelor s level university graduates the overall gap as of two years leaving university narrowed significantly across successive cohorts of graduates but widened significantly from two to five years out for all groups differences in the explanatory variables explain account for between 40 and essentially the entire gap across the different periods this portion rising from two to five years out and across cohorts by the final group all of the gap is thus explained at the two year point in time and most of it is explained at the five year mark meaning that labour market returns measured in this manner are largely gender neutral for the last group of graduates hours of work is the single most important influence while past work experience job characteristics family status and province of residence and language have smaller and more mixed effects

social security and private saving new time series evidence in an important article in the journal of political economy martin feldstein 1974 estimated that the introduction of the social security system had reduced personal saving by 50 percent with serious consequences for capital formation and output his conclusion was based on a consumer expenditure function estimated with u s time series data and incorporating a social security wealth variable of his construction this paper presents new evidence that casts considerable doubt on feldstein s conclusion first the social security wealth variable used by feldstein was seriously flawed as a result of a computer programming error simply correcting this error substantially changes the estimated effect of social security on saving second the statistical evidence depends upon assumptions which are embedded in the construction of the social security wealth variable assumptions that are not demonstrably preferable and are in some cases inferior to alternative assumptions these assumptions relate first to how individuals form their expectations about the social security benefits they expect to receive and the social security taxes they expect to pay and second to estimates of the number of workers dependent wives and surviving

valuing biodiversity for use in pharmaceutical research biodiversity prospecting has been touted as a mechanism for both discovering new pharmaceutical products and saving endangered ecosystems it is unclear what values may arise from such activities however evidence from transactions is incomplete and existing theoretical models are flawed we calculate an upper bound on the value of the marginal species even under favorable assumptions this bound is modest slightly modified assumptions lead to drastically lower estimates we extend our findings to the value of the marginal hectare of habitat and find that the incentives for habitat conservation generated by private pharmaceutical research are also at best very modest

affirmative action and labor markets affirmative action remains controversial the controversy extends from the original antidiscrimination legislation and its interpretation to estimates of affirmative action s effect on the labor market this paper provides a progress report on our recent efforts at detecting the effects of affirmative action on minority wages and employment although we find a substantial increase in wages for black men and black women over our sample period the timing of these wage changes is surprising most of the wage gains came prior to 1974 before the establishment of an effective monitoring structure for affirmative action indeed when the powers of the eeoc and ofcc are greatest the wage effects for young blacks are somewhat perverse using eeo 1 reports we find a major shift in black employment toward firms most vulnerable to the monitoring and potential sanctions of the affirmative action programs as with wages the shift in minority employment came prior to the expansion of the powers and budgets of the ee

central banking as a political principal agent problem i introduction conventional wisdom holds that during election periods political leaders have incentives to misuse policy instruments to enhance their chances of reelection rogoff and sibert 1988 construct a rational political economy model of monetary policy based on this theme 1 the results of their model can be interpreted in the following way 2 society elects a leader every other period whose competence affects the level of output in the economy and private agents will tend to vote for the incumbent if the level of output is expected to be higher than that which can be provided by an unknown challenger voters have imperfect information regarding the politician s true impact on output and exogenous shocks to output and consequently cannot disentangle the effects of one from the other in an election period this asymmetry of information gives the incumbent an incentive to expand output through the use of inflationary monetary policy in order to appear more competent than he really is however rational voters are aware of this incentive to inflate and adjust their expectations such that in equilibrium no gain in output occurs and the economy suffers from excessive inflation an implication of the rogoff sibert model is that unless a society does away with elections as a way to choose policymakers excessive inflation and a political inflation cycle will be an unavoidable cost of democracy however societies can try and have tried to avoid these ill effects by taking the power of money creation away from the elected officials and giving it to an appointed independent central banker who will presumably pursue the public good but can this approach actually work the problem with this proposal is that the central bankers well being in many respects reappointment post central bank employment opportunities avoidance of public criticism etc often hinges on pleasing their political benefactors giving the central bankers incentives to act in the interest of elected officials 3 as a result the central banker could pursue objectives different from society s and may actually function as a veil for the elected policymaker in the real world this veil is not complete but partial and hence we can characterize the relationship between the monetary authority and society as a principal agent problem the advantage of delegating power to an appointed central banker and then erecting appropriate institutions is that the inflation problems may be resolved without abandoning the electoral process in this paper we develop a rational political business cycle model that starts from the foundations laid down by rogoff and sibert we depart from their model by having monetary policy delegated to a central banker who is appointed by the elected leaden the concern about reappointment is what motivates the agency problem the central banker would like to be reappointed and this desire leads her to partially accommodate the wishes of the current administration which in turn may not coincide with the desires of the electorate we then analyze the problem faced by a central banker who is concerned about her own selfinterest as well as social well being it is this feature that turns the setting of monetary policy into a political principal agent problem the contributions of our approach to modelling the agency problem of central banking are 1 it explicitly incorporates reappointment concerns into the decision process of the central banker which heretofore has not been done in the literature and 2 we explicitly model the source of the agency problem unlike previous research that simply assumes an agency problem exists our key results are as follows in equilibrium the pursuit of her own self interest leads the central banker to create a socially inefficient inflation bias while rogoff and sibert also obtain this result our explicit functionalform model allows us to analyze this bias in more detail and tie it directly to the strength of the relationship between the central banker and the current administration

credibility of optimal monetary delegation while optimal monetary policy is subject to a credibility problem it is often argued that the government should appoint a central banker whose incentives differ from the government s the author argues however that such delegation does not overcome credibility problems given that delegation is discretionary and without costs reappointment costs of delegation are shown to improve suboptimal outcomes but credibility of optimal monetary policy turns out be worsened at best delegation therefore has no effects on credibility but only if reappointment has no costs copyright 1997 by american economic association

sex discrimination and product market competition the case of the banking industry this paper examines the relationship between product market competition and employment discrimination using an especially constructed data set that links microeconomic data on female employment with measures of market concentration in the banking industry the use of firm specific data drawn from this one industry allows estimation of this relationship in a manner that avoids the problems of interindustry differences that have troubled previous studies the results provide strong support for a negative relationship between market concentration and the relative employment of women further we find that individual market shares are unrelated to female employment suggesting that the relationship is due primarily to differences across markets rather than individual firms

trade wars and trade talks when governments meet in the international arena their actions reflect the political situations at home previous studies of trade relations have focused on governments that are immune from political pressures and that act as benevolent servants of the public interest here we introduce domestic politics into the analysis of international economic relations we study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups our analysis sheds light on the determinants of the structure of protection in non cooperative and cooperative policy equilibria

the effect of britain s anti discriminatory legislation on relative pay and employment pressive increase in the number of women in the labour force during the i970s between i970 and i980 female relative employment increased by i8 3 and female relative hours by i 7 6 in this paper we attempt an evaluation of the possible effects of anti discriminatory legislation by considering the labour market as a whole taking into account not only relative employment but also other factors that through their influence on demand and supply may have affected relative pay the prima facie evidence in favour of the effectiveness of this legislation is very strong and we want to see if this evidence is maintained after considering all these additional factors and their interaction within the context of the labour market in the first section we present the main facts under analysis the analytical framework to consider the joint effect of the legislation on pay and employment and the

comparable worth limited coverage and the exacerbation of inequality citing relevant judicial decisions the author argues that any application of the comparable worth remedy for gender discrimination is likely to cover only certain groups of workers most likely to be covered are women who work for governmental or large private employers in female dominated jobs and least likely to be covered are women who work for small private employers the implementation of comparable worth would cause the wages of noncovered workers to fall relative to those of covered workers and they might even fall absolutely an analysis of 1979 current population survey data suggests that the women most likely to gain from comparable worth are fewer in number better paid and subjected to no greater discrimination than the women most likely to lose

sources of ethnic inequality in vietnam vietnam s ethnic minorities who tend to live mostly in remote rural areas typically have lower living standards than the ethnic majority how much is this because of differences in economic characteristics such as education levels and land rather than low returns to characteristics is there a self reinforcing culture of poverty in the minority groups reflecting patterns of past discrimination the authors find that differences in levels of living are due in part to the fact that the minorities live in less productive areas characterized by difficult terrain poor infrastructure less access to off farm work and the market economy and inferior access to education geographic disparities tend to persist because of immobility and regional differences in living standards but the authors also find large differences within geographical areas even after controlling for household characteristics they find differences in returns to productive characteristics to be the most important explanation for ethnic inequality but the minorities do not obtain lower returns to all characteristics there is evidence of compensating behavior for example pure returns to location even in remote inhospitable areas tend to be higher for minorities though not high enough to overcome the large consumption difference with the majority the majority ethnic group s model of income generation is a poor guide on how to fight poverty among ethnic minority groups nor is it enough to target poor areas to redress ethnic inequality policies must be designed to reach minority households in poor areas and to explicitly recognize behavior patterns including compensating behavior that have served the minorities well in the short term but intensify ethnic inequalities in the longer term it will be important to open up options for minority groups both by ensuring that they are not disadvantaged in labor markets for example and by changing the conditions that have caused their isolation and social exclusion

the sensitivity of an empirical model of married women s hours of work to economic and statistical assumptions this study undertakes a systematic analysis of several theoretic and statistical assumption s used in many empirical models of female labor supply using a singl e data set psid 1975 labor supply data the author is able to replic ate most of the range of estimated income and substitution effects fo und in previous studies in this field he undertakes extensive specif ication tests and finds that most of this range should be rejected du e to statistical and model misspecifications the two most important assumptions appear to be the tobit assumption used to control for sel f selection into the labor force and exogeneity assumptions on the wi fe s wage rate and her labor market experience copyright 1987 by the econometric society

optimal monetary policy cooperation through state independent contracts with targets abstract simple state independent monetary institutions are shown to secure optimal cooperative policies in a stochastic linear quadratic two country world with international policy spill overs and national credibility problems institutions characterize delegation to independent central bankers facing quadratic performance related contracts punishing or rewarding deviations from primary and intermediate policy targets

two fallacies concerning central bank independence this paper takes issue with two basic conclusions prevalent in the literature on central bank behavior first the paper argues that it is inappropriate to presume that central banks will in the absence of any precommitment technology necessarily behave in a discretionary fashion that implies an inflationary bias since there is no functional connection between average rates of money creation or inflation and policy responsiveness to cyclical disturbances it is entirely feasible for the bias to be avoided in other words there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any absolute precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it this abstract was borrowed from another version of this item

optimal central banker contracts and common agency this paper considers the contracting approach to centralbanking in a simple common agency model we suggest thatcentral banker contracts that do not consider the possibilityof more than one principal existing are incomplete contracts such incomplete contracts can be a poor form ofmonetary policy delegation under common agency we develop amodel with two principals society government and ageneric interest group whose objective conflicts withsociety s ex ante preferences by incorporating an inflationarybias we determine when the government offered orinterest group offered contract dominates the central banker sdecision the results largely depend on whether theinterest group offered contract is written in terms of outputor inflation

optimal accommodation by strong policymakers under incomplete information abstract this paper examines the optimal behavior of a policymaker who is able to precommit labelled strong when the public entertains the possibility that he is either strong or weak unable to precommit the main result is that in the presence of doubts about their type it is optimal even for strong policymakers to partially accommodate inflationary expectations this contrasts with vickers 1986 who finds that when strength is conceived in terms of the relative concern for employment the strong policymaker inflates less under incomplete than under full information the paper also provides a theory of endogenous announcements

social security and private saving reply i am embarrassed by the programming error that dean leimer and selig lesnoy uncovered but grateful to them for the care with which they repeated my original study feldstein 1974 they set an admirable example of the tradition of replication on which all scientific work ultimately rests as economic research increasingly involves large and complex computer programs to analyze macroeconomic data sets or to simulate models that cannot be solved analytically replication studies like that of leimer and lesnoy social security and private saving new time series evidence in this issue should become increasingly important in their comment leimer and lesnoy also suggest a variety of modifications to the social security wealth variable to incorporate alternative employee perceptions and actuarial assumptions as i explain below i have strong doubts about the appropriateness of these modifications i therefore do not agree with their conclusion that the time series evidence does not support the hypothesis that the introduction of social security has substantially reduced personal saving in the united states more specifically as i show in this reply correcting the computerprogramming error and reestimating the original equation for the original sample period produces results that are not substantially different from the results that were originally published in 1974 the point estimate of the coefficient of social security wealth implies that the level of social security wealth in the final year of the sample 1971 depressed personal saving by an amount equal to 44 percent of the actual personal saving in that year although the estimated coefficient of the social security wealth variable is smaller than in the original version and its standard error larger the conventional statistical test

centralised wage setting inflation contracts and the optimal choice of central banker the paper examines the appropriate design of central banking institutions in an economy in which the nominal wage is set by an inflation averse monopoly union as a positive mark up over its market clearing value the analysis considers both the optimal choice of central banker and the potential role for a linear inflation contract the optimal set of arrangements is a central banker who attaches less significance to inflation than does society combined with an inflation contract where the value of the contract parameter is related to the union s degree of inflationaversion following the important contribution of rogoff 1985 the appointment of a conservative central banker has been widely accepted as a potential albeit partial solution to the time inconsistency problem associated with discretionary policy making in placing a greater weight on inflation than does the government and society as a whole in the setting of monetary policy the central bank s temptation to create inflation surprises is reduced this then leads to a lower inflation rate in equilibrium than would otherwise prevail whilst in rogoff s stochastic framework this reduction in the inflationary bias has to be weighed against an increase in output variability the appropriate choice of central banker ensures a net improvement in welfare an important feature of rogoff s model is the assumption of an atomistic labour market in which nominal wages embodied in single period contracts reflect interaction between agents who hold no market power such a representation of the labour market also characterises most subsequent extensions of rogoff s analysis e g lohmann 1992 and waller 1992 however a number of recent papers in considering the time inconsistency issue have employed the assumption of unionised wage setting assuming either an allencompassing monopoly union or alternatively a number of individual unions each of which has a non negligible impact on macroeconomic variables examples include agell and ysander 1993 bleaney 1996 cubitt 1992 1995 horn and persson 1988 hutchison and walsh 1998 and skott 1997 these contributions have examined the implications of the assumed labour market imperfection from a variety of perspectives but only those of bleaney and skott directly consider its consequences for the appropriate specification of central bank objectives in what follows we explore the significance of unionised wage setting for

the effects of social security in a life cycle family labor supply simulation model abstract we simulate a number of social security provisions in an overlapping generations model of family labor supply the program causes both men and women to shift labor toward the beginning of the life cycle increases the family s ratio of retirement consumption to consumption when young and lowers both wage rates but does not substantially alter the male female wage ratio the wealth effects of the program appear to dominate the incentive effects our exhaustive sensitivity analysis reveals that our results are robust to changes in several key labor supply parameters the intertemporal male and female own wage elasticities and the cross wage elasticity

an investigation into sexual orientation discrimination as an explanation for wage differences this study explores the effects of sexual orientation on earnings it is found that ceteris paribus men living with male partners tend to earn less than other men and women living with female partners tend to earn more than other women these earnings differentials tend to vary by region they also vary by education and occupation for men and with the presence of minor children for women in addition the age earnings profiles of women living with female partners tend to be higher flatter and less concave than those of other women

will you marry me a perspective on the gender gap abstract this paper develops a general equilibrium model of the gender wage gap the difference in earnings is a consequence of a demographic regularity that men tend to marry younger women which may limit women s labor mobility and hence their average earnings however couples are always free not to marry and do so only if it is in each s self interest the intrafamily allocation of resources is determined via non cooperative bargaining this leads to interesting interactions between the game played by husband and wife on the one hand and the competitive environment in which they are immersed on the other the predictions resulting from this model s interplay between locational choice and family bargaining are consistent with the observation that the increasing stress put by women on their careers over the past 30 years has been contemporaneous with reductions in both marriage rates and the gender gap the model provides insight into the consequences of this for the relative welfare of men and women as well as exploring its wider economic implications

the reverse regression problem statistical paradox or artefact of misspecification the usual approach to wage discrimination asks whether certain individuals receive lower wages for the same level of productivity characteristics the reverse approach asks whether these individuals are more productive given the same wages when these hypotheses are tested incompatible conclusions seem to result to circumvent specification problems nonparametric techniques were used to estimate canadian male female wage experience profiles the findings indicate that when the correct functional form is specified and the effects of childrearing activities are controlled for there exists a wage experience gap favoring men regardless of the approach suggesting that the paradox may be simply an artifact of misspecification

gender and poverty issues and policies with special reference to asian developing countries abstract recent years saw the outpouring of a theoretical and empirical literature exploring the nexus between gender and poverty in developing countries this paper which provides a critical review of the literature examines the conceptual basis for a gender focused approach to poverty alleviation reviews the relevant empirical studies and data drawn principally but not exclusively from asian developing countries and explores the role of public policies to redress gender disparity the present review argues that the conceptual basis for many gender focused policies is far from well established the empirical foundations of many conventional wisdoms as well as of popular policies remain fragile due to the dearth of reliable gender segregated data and rigorous empirical studies the paper underscores the need for more careful empirical analyses as an input to formulating sound public policy with regard to gender and poverty

gender differences in observed and offered wages in canada 1980 according to the 1981 census of canada the female rate of pay is 30 percent less than the male rate the average female wage offer however is only around one half of that received by males other things being equal slightly more than one half of the difference in observed wages can be explained by diffe rences in wage related characteristics between males and females two fifths of the disparity between wage offers can be explained by the same set of factors analysis of the distribution of wage offers indicates greater wage inequality in the canadian labor market than suggested by study of observed wages

employers discriminatory behavior and the estimation of wage discrimination this paper considers the linkage of empirical estimates of wage discrimination between two groups introduced by oaxaca 1973 to a theoretical model of employers discriminatory behavior it is shown that conditional on different assumptions about employers discriminatory tastes oaxaca s estimators of wage discrimination can be derived that the approach is more generally useful is demonstrated by deriving an alternative estimator of wage discrimination based on the assumption that within each type of labor e g unskilled skilled the utility function capturing employers discriminatory tastes is homogeneous of degree zero with respect to labor inputs from each of the two groups the estimators are compared empirically in an application to male female wage differentials

monetary politics and unemployment persistence abstract this paper develops a positive model of monetary policy that allows for persistent unemployment and electoral uncertainty the common credibility problem associated with low inflation monetary policy results in both a more severe inflation bias and a stabilization bias however a simple state contingent performance contract eliminates both biases monetary policy is also subject to two different strategic political considerations it is used to influence future policy decisions as well as to increase the incumbent party s probability of re election this results in a political business cycle which however is fundamentally different for left wing and right wing governments

returns to r d on new drug introductions in the 1980s abstract this study finds that the mean irr for 1980 1984 u s new drug introductions is 11 1 and the mean npv is 22 million 1990 dollars the distribution of returns is highly skewed the results are robust to plausible changes in the baseline assumptions our work is also compared with a 1993 study by the ota despite some important differences in assumptions both studies imply that returns for the average nce are within one percentage point of the industry s cost of capital this is much less than what is typically observed in analyses based on accounting data

species preservation and biodiversity value a real options approach abstract we evaluate biodiversity in a real options framework when the resources in use are substitutable we examine optimal conservation decisions given that a biodiversity loss is irreversible and that future use values are uncertain while species substitutability has been shown to reduce the value of diversity we show that the flexibility associated with substitutability is a source of value marginal species value is decreasing in the number of species but rising and convex in the value of the marginal species as we show in the two species homogenous model increased volatility raises biodiversity value and a positive correlation between species values both reduces the value of the pool of species and the value of biodiversity the role played by the correlation between the value of a species and the value of other species is reminiscent of the beta of a financial asset just like an asset with a negative beta derives additional value by providing insurance against fluctuations in the market portfolio a species whose value tends to move in the opposite direction as the species in use derives additional value from its higher probability to be available for substitution if the value of the species in use diminishes

household choices in equilibrium this paper is an empirical investigation of equilibrium restrictions on household consumption and male labor supply it exploits a simple factor structure rationalized by two assumptions that household allocations are pareto optimal and that the labor market is competitive the paper estimates household preferences and tests how well this parsimonious factor structure represents panel data on married couples and time series data on asset returns most of the estimates are roughly comparable to those found in previous work no evidence against the simple factor representation is found and the intertemporal capital asset pricing model is not rejected copyright 1990 by the econometric society

male female wage differentials and policy responses without implicating them for any of the contents of the paper i am grateful to the following for helpful discussions or comments andrea beller university of illinois david bloom harvard and columnbia glen cain university of wisconsin ron ehrenberg cornell victor fuchs stanford bob gregory australian national university jonathan leonard university of california berkeley roberta robb brock university and paul weiler harvard financial support of the humanities and social sciences committee of the research board of the universitu of toronto is eratefullu acknowlede ed

strategic discipline in monetary policy with private information optimal targeting periods this paper analyzes a multiperiod monetary targeting procedure as a possible resolution to the credibility problem in pol icy when the monetary authority has some private information by limitin g the degree of flexibility permitted in policy this procedure mitiga tes the credibility problem as the length of the targeting horizon decreases the severity of the credibility problem falls but at the expense of weakening the monetary authority s ability to pursue its stabilization goals based on model simulations the analysis studi es the determinants of the optimal targeting horizon that balances the benefits of flexibility and discipline in policy copyright 1993 by american economic association

his and hers gender differences in work and income 1959 1979 this paper describes changes in hours of work and income between 1959 and 1979 of women and men ages 25 64 it includes attempts to measure and value nonmarket production and leisure as well as market work to take account of possible income sharing within households and to allow for economies of scale in household production the most important empirical result is that relative to men women s access to goods and services and leisure was lower in 1979 than in 1959 changes in hourly earnings hours of work and household structure contributed to this result the sex differential in hourly earnings is explored in detail

central banker contracts incomplete information and monetary policy surprises in search of a selfish central banker approaching monetary policy as a principal agent problemprovides a useful framework for interpreting alternativedelegation schemes in this paper we consider theeffectiveness of central banker incentive schemes when theprincipal delegates monetary policy through contracts butremains uncertain about the central banker s responsiveness tosuch schemes we adopt a simple principal agent model andassume that the central banker s trade off between socialwelfare and the incentive scheme is private information weconsider two types of central bankers one who responds to theincentive scheme selfish and one who does not and onlycares about social welfare benevolent we demonstratethat when a benevolent central banker accepts a contractdesigned for a selfish central banker positive inflationsurprises occur and output exceeds its natural rate wefurther show that a benevolent central banker with aninflation bias has an incentive to masquerade as selfish mechanisms exist that solve that problem by achievingpreference revelation we consider a simple mechanism indominant strategies that induces the benevolent type eithernot to breach or not to accept the appointment contract inthe first place this multi period mechanism works with eitherinflation targets or the appointment of a conservativecentral banker our results suggest that more complicatedincentive schemes embedded within broader constitutionalarrangements are required in the presence of privateinformation for them to work effectively

incorporating the causes of occupational differences in studies of racial wage differentials this study provides a basic framework for incorporating the causes of occupational differences into analyses of racial wage differentials separating the influences of personal characteristics occupational choice and hiring discrimination on occupational attainment provides measures of the contributions of each to the racial pay gap the paper also considers the potential for bias in the wage equation estimates arising from self selection into occupations there are two generalfindings first correcting for self selection increases the importance of occupational distribution in explaining racial wage differentials second a proper accounting of the causes of these occupational differences yields discrimination measures that are higher than those that arise when occupational dummy variables are included in the wage equations and all the difference in occupational distribution is treated as nondiscriminatory

salary differentials by sex in the academic labor market this paper examines faculty time allocation decisions that are fundamental to the functioning of a university a random utility approach yields a grouped data multinomial logit model and predicts that time allocation decisions depend systematically on

searching for uncertain benefits and the conservation of biological diversity this paper describes a model under which the maximization of option value leads to a preference for biological diversity arising from potential substitutability among species

the walsh contract for central bankers proves optimal after all a recent paper argues that the walsh linear inflation contract does not prove optimal when the government concerns itself about the cost of the central bank contract candel sanchez campoy minarro 2004 this result relies on assuming that the participation constraint does not represent an effective constraint on the central banker s decision we show that the walsh linear inflation contract does produce the optimal outcome even when the government cares about the cost of the contract assuming that the participation constraint holds

female earnings and the divorce rate a simultaneous equations model economists have contributed a great deal of research both theoretical and empirical to the study of marital formation and dissolution many empirical examinations of marriage and divorce rates exist based on becker s seminal contributions to the literature all of these divorce studies are single equation models with female earnings assumed exogenous as discussed by becker 1981 however causality may run in the opposite direction as well the divorce rate may influence female earnings this paper estimates a simultaneous equations model in which divorce rates and female earnings are the jointly endogenous variables data are by state for 1960 1970 1980 and 1990 the state wide divorce rate equation is an extension of waters and ressler 1999 and the specification of a state wide earnings equation follows standard human capital theory the specification of joint endogeneity between female earnings and the divorce rate allows valid inferences to be made regarding the effect of female earnings on

corrigendum on a life cycle model of female labour supply in the empirical work in our article on the intertemporal substitution of leisure time for married women heckman and macurdy 1980 we inadvertently constrained the estimated intertemporal substitution elasticity to be too high since this parameter plays a prominent role in discussions of equilibrium models of the business cycle and since our empirical work has been cited in discussions on this topic e g hall 1980 we would like to present a corrected set of empirical results for our model the period t utility function adopted in this note is in the notation of our original paper equation 15

optimal linear contracts under common agency and uncertain central bank preferences we analyze the effects of imperfectly known central banker s preferences on optimal linear contracts offered by the government and an interest group these effects depend on the type of uncertainty faced by the principals when the central bank s output target is uncertain the results by campoy and negrete public choice 137 197 206 2008 under perfectly known preferences obtain uncertainty about the central banker s degree of conservatism or about its degree of selfishness has a multiplicative impact on the principals instruments in the agent s best response function this may generate an inflation bias independently of the type of contract offered by the interest group

nobel lecture the economic way of looking at behavior an important step in extending the traditional theory of individual rational choice to analyze social issues beyond those usually considered by economists is to incorporate into the theory a much richer class of attitudes preferences and calculations while this approach to behavior builds on an expanded theory of individual choice it is not mainly concerned with individuals it uses theory at the micro level as a powerful tool to derive implications at the group or macro level the lecture describes the approach and illustrates it with examples drawn from my past and current work

comparable worth wage adjustments and female employment in the state and local sector our paper simulates the likely effects of a comparable worth wage adjustment policy in the state and local sector on female employment in the sector the simulation is based on estimates of within occupation male female substitution and across occupation occupational employment substitution that we obtain using data from the 1980 census of population