policy watch child support policies with more parents living apart the societal problem of parents who fail to share with each other or with their children becomes more acute although governments have mainly relied on public transfers to address the resulting economic hardships among children the emphasis has been shifting toward mandatory sharing through the rigorous enforcement of child support laws this paper first describes the economic context for child support the expanding federal role in regulating awards and collections the complex array of incentive and equity effects associated with child support the record of obtaining support payments from noncustodial parents and the effects of new award setting and enforcement policies finally it considers the child support assurance system csas approach recently proposed in congress under this plan the government would make up the difference between some minimum assured payment and the child support actually paid by the non custodial parent

revenue maximizing dutch auctions with discrete bid levels abstract this paper is concerned with setting a predetermined number of bid levels in a dutch auction to maximize the auctioneer s expected revenue as a departure from the traditional methods used by applied economists and game theorists a novel approach is taken in this study to tackle the problem by formulating the auctioning process as a constrained nonlinear program and applying standard optimization techniques to solve it aside from proposing respective closed form formulae for computing the optimal bid levels and the auctioneer s maximum expected revenue we also show that the bid decrements should be increasing if there are two or more bidders in the dutch auction additionally the auctioneer s maximum expected revenue increases with the number of bidders as well as the number of bid levels finally managerial implications of the key findings as well as limitations of this research work are discussed

bidding behavior in descending and ascending auctions this research examines how individual differences and institutional practices influence consumer bidding in auctions bidders may be motivated by different goals e g thrill of winning the item with minimal attention to what they pay for it versus prudence winning the item at a price at or below its perceived value also innate or auctioneer induced differences may exist in the precision and salience of bidder cognitions about the item s value we report two studies on how these motivational and cognitive factors influence bids in descending and ascending auctions respectively each study also manipulated a situational variable wait time at each price step the two auctions realized different average prices for the same item set average bids were higher in the descending versus ascending auction in several study conditions in both auction formats bidders primed with thrill versus prudence bid higher but more precise and or salient values attenuated this goal effect among other results in the descending auction longer wait times elicited higher bids from bidders primed with thrill but not prudence in the ascending auction longer wait times produced lower bids for bidders primed with prudence but not thrill these findings on consumer bidding behavior have practical implications for auction design

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

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

the effect of child support payments on the labor supply of female family heads an econometric analysis recent census bureau statistics show that women who receive child support payments have higher earnings and work longer hours than women who do not does this suggest that child support unlike all other nonwage income does not deter work effort or are women who receive it simply different we use 1979 1982 cps data on divorced or separated women to estimate the determinants of hours worked when afdc participation and child support are endogenous we find evidence of unobservable differences between women who receive child support and those who do not controlling for these both child support and other nonwage income appear to reduce hours worked but the deterrent effect of child support is considerably less

how much does country matter an analysis of firms growth options recent international strategy research emphasizes the importance of understanding the effects of geographic location on firms strategies and performance outcomes we contribute to this research by providing empirical evidence that the interplay of country and industry effects matters substantially in explaining the variation in the value of growth options of firms based in different countries our results show that country industry effects are the second largest source of variation following firm effects while industry and country effects are relatively small when considered in their own right that valuable growth options are tied to country and industry interactions has important implications for international strategy research and practice

social approval values and afdc a re examination of the illegitimacy debate this paper models the fertility decision of individuals who differ in their wage rate and their intensity of preferences for rearing children and whose utility of having a child out of wedlock depends on the level of social approval associated with doing so this social approval in turn is a function of the fraction of individuals in previous generations that chose to have children out of wedlock the model is a straightforward extension of the typical rational choice model that motivates much of the empirical literature a literature that has cast doubt on a strong link between afdc and illegitimacy however the model introduces elements from epidemic models that many have in mind when arguing for such a link as a result the predictions of this extended model are consistent with empirical findings while at the same time linking the rise in illegitimacy solely to government welfare programs specifically a program similar to afdc is introduced into an economy with low illegitimacy rates and a trans

welfare dependence and recidivism in an era of welfare reform this study examines the dynamics of welfare programme participation during the initial period 1993 1995 of programme reforms at the state level in iowa the programme changes for the state were remarkably similar to the national reforms implemented in the usa in 1996 analysis of the family investment program fip participation over the programme s first two years show that on average recipients stayed fewer months in the second year compared with the first although a relatively large share of participants 36 stayed on for the full two years fixed effect and semiparametric duration models are used to examine welfare dependence and recidivism respectively results indicate that income from wages and child support are significant factors in reducing welfare participation child support and wage income are crucial in determining the chances of exiting and of staying off the programme especially during the early months of the exit

the probability of dependence on public assistance despite almost incessant discussion of welfare reform see levy 1978 and department of health and social security 1978 traditional systems of income support and their associated problems remain largely intact the most intractable difficulty has been the conflict between the desire to reduce costs by concentrating benefits on the poorest families and the desire to preserve work incentives by not withdrawing benefits too rapidly if a recipient family starts earning hanoch and honig 1978 show that the incentive effect of income support schemes is theoretically ambiguous levy 1979 investigates the labour supply issue empirically this paper looks at the whole issue of welfare dependency using data on american families receiving benefits under the largest scheme of public assistance aid to families with dependent children afdc we concentrate on an important group of poor families those without fathers and examine in particular the following issues a the effectiveness of afdc in selecting the very poorest families for the largest benefits b the extent to which the number of recipients is influenced by the generosity of benefits and the implicit tax on earnings c the extent to which recipients take advantage of the opportunity to supplement benefits with earnings d whether the implicit tax on earnings discourages families from working e whether the disproportionate share of blacks among recipients reflects a difference in attitudes about work and welfare between blacks and whites or whether it is explained by the adverse circumstances of blacks four different levels of dependence are considered none partial i e benefits less than earnings substantial i e benefits more than earnings and total the probability of each level of dependence is taken as a function of family characteristics including earning potential and of the characteristics of the afdc system section i describes a theory of family behaviour based on the assumption that observed differences in the behaviour of apparently identical families reflect an underlying distribution of unobserved differences section ii discusses the statistical method used to estimate the probabilities a straightforward generalization of logit analysis section iii presents and interprets the statistical results and section iv summarizes our answers to the five issues posed above two comments on the choice and use of the data should be made before proceeding the choice of data for 1967 was influenced not only by the availability of two surveys the survey of economic opportunity and a survey of afdc recipients but also by the fact that 1967 was the last year in which afdc was a relatively pure scheme subsequent legislation imposed constraints on the extent to which states could withdraw benefits as recipients incomes rose more recently the explosion in the size of the food stamp programme still very small in

an empirical examination of multinational corporate capital structure this paper examines whether there are systematic differences in the traditional capital structure determinants between mncs and dcs and if there are additional uniquely international factors that may help explain the capital structure choice of multinational corporations the results suggest that specific international factors such as political risk and exchange rate risk are relevant to the multinational capital structure decision that multinationals have higher agency costs than purely domestic firms and that international diversification does not lower earnings volatility for multinational corporations

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

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

did canadian welfare reform work the effects of new reform strategies on social assistance participation this paper measures the extent to which declines in social assistance sa participation were associated with novel and aggressive reforms referred to as new reform strategies work requirements diversion earning exemptions and time limits controlling for province specific benefit levels eligibility requirements gdp growth labour market conditions and demographics sa participation rates were more than one percentage point lower equivalent to a 13 decline in provinces with new reforms work requirements with strong sanctions had the sharpest negative associations new reform strategies explain at least 10 of observed declines in sa participation twice that of benefit levels and eligibility requirements

rationalizing child support decisions the authors provide a framework within which the child support compliance decisions of noncustodial fathers and the child support awards set by institutional agents can be coherently interpreted the model of child support transfers is able to capture qualitatively the features of the monthly payment distribution estimated parental decision rules are used to infer the implicit weights given by institutional agents to the postdivorce welfare of parents and children the authors find that the weight attached to the combined welfare of the custodial mother and child is significantly less than the weight given to the father s welfare in most sample cases copyright 1995 by american economic association

the determinants of welfare participation of female heads of household in canada this paper assesses the impact on the probability of welfare participation of budget constraint variables such as the expected wage welfare benefit level and implicit welfare tax rate the empirical results are based on a model of welfare participation that is estimated using a sample of female heads of household in canada the coefficients on the budget constraint variables are significant and carry signs that are generally consistent with the predictions of the model and the results of related studies based on data from the united states in addition to the budget constraint variables which include important policy tools a wide range of sociodemographic variables are included in the specification

multinational corporations vs domestic corporations international environmental factors and determinants of capital structure this paper examines whether or not u s based multinational corporations mncs have different capital structures than u s domestic corporations dcs and if so what causes the differences in explaining the difference between the capital structures of mncs and dcs previous studies tended to directly discuss the relationships between international environmental factors e g political risk foreign exchange risk and the capital structure a framework of analysis is proposed in this paper that examines the influence of environmental factors on the firm related capital structure determinants e g agency costs bankruptcy costs that in turn affect the capital structure of the mnc among the determinants that are examined more emphasis is placed on the discussion of agency costs since no previous studies have applied this concept in the international arena empirical tests were conducted to investigate whether mncs are significantly different from dcs regarding agency costs of debt bankruptcy costs and capital structure contrary to conventional wisdom the empirical findings show that mncs do not have lower bankruptcy costs and that they tend to have lower debt ratios than dcs

the wisconsin child support assurance system estimated effects on poverty labor supply caseloads and costs the economic impact of a child support assurance system csas is simulated with microdata on custodial families in wisconsin the csas includes a uniform child support standard automatic wage withholding a minimum child support benefit and wage subsidy for eligible families the simulation incorporates a model of the labor supply decision representing the custodial parent s choice of whether to participate in csas or in the current afdc system the results suggest that csas can significantly reduce poverty as well as welfare caseloads if child support collections increase by one half of the difference between estimated ability to pay child support and current collections csas will be less costly than the current system

absorptive capacity socially enabling mechanisms and the role of learning from trial and error experiments a tribute to dan levinthal s contribution to international business research the concept of absorptive capacity ac of firms cohen and levinthal 1989 and 1990 is a foundational feature of organizational learning and adaptation that has had enormous influence in international business ib and innovation studies and management research in general in this tribute to dan levinthal we discuss the close connection between ac and learning two areas central to dan levinthal s research in relation to different contexts where ac comes into play in extant ib research we discuss four specific aspects of the nexus of ac and learning in the context of ib 1 bridging between intra and inter firm learning 2 a routine based framing of ac that emphasizes processes and capabilities underlying seeking assimilating and innovation in a global setting 3 the role of socially enabling mechanisms and 4 the logic of learning through trial and error experiments within firms and countries

the effect of welfare and wage levels on the location decisions of female headed households abstract this paper develops and estimates a model designed to calculate the impact of welfare benefit levels wages and tax rates on the location choices of female headed households the empirical model assumes that women simultaneously choose both where they will live and whether or not they will participate in the welfare system based on their expected income and expected hours of work for each location participation possibility these income and hours expectations depend in turn on the welfare benefits wage and tax rates facing each household in each location it is found that both regional welfare levels and wage rates have a significant effect on the location decisions of this population the probability of a typical female headed household with little outside income leaving an area with low welfare payments and low wages can be as much as 12 points higher over a 4 year period than the probability of leaving a high welfare high wage area

applying the economic model of crime to child support enforcement a theoretical and empirical analysis child support noncompliance affects both the family and the taxpayer this papers models the decision to pay based on expected utility maximization the amount unpaid is determined jointly with the expected enforcement probability a two stage estimation technique requiring ordinary least squares and probit is used the author improves upon previous problems with measurement error and sex restricted data in deterrence and child support studies the treatment of endogenous deterrence variables as exogenous and the use of aggregate data he finds a joint relationship between the amount unpaid and the enforcement probability policies are suggested for increasing compliance and payments to the family copyright 1988 by mit press

the political economy of targeting one of the most widely used method of targeting is to reduce welfare benefits as income rises although the need for such targeting is clear enough it also entails two important difficulties firstly the prospect for the recipients of losing part of their benefits if they were to earn more can be a deterrent to work harder secondly by reducing the number of recipients targeting reduces the political support for taxation and redistribution the purpose of this paper is to study the voting equilibrium of the degree of targeting and the level of taxation in an economy where labour supply is variable the analysis reveals that targeting may be fatal for redistribution even though it rejects strictly less than the richest half of the population and that it is not possible for a coalition of the extremes to form and reject the middle income group from the welfare system moreover because targeting affects labour supply we find that pareto improvements are possible when targeting is either too low or too high we also find that voting simultaneously over taxation and targeting is favourable to the poor in the sense that they can converge to their most preferred policy by successively forming a majority coalition with the rich to increase targeting and with the middle to increase taxation

the impact of state economic differentials on household welfare and labor force behavior abstract this paper calculates state specific income expectations for low income households using a simultaneous model of household labor force and welfare participation decisions a variety of simulations indicate the interlocking effects of existing state differences in welfare wages and taxes on work welfare choices and income significant differences among similar households in different states occur equalization of welfare benefits eliminates some but not all of these differences but generates potentially serious policy problems for the states

on reforming the welfare system abstract using a simulation model for a small open economy quebec 1986 various negative income tax nit and workfare schemes are compared from the point of view of efficiency and equity the main finding is that there exist workfare schemes that are superior both to the quebec regime of 1986 and to a nit characterized by a 100 percent implicit tax rate however these workfare schemes are dominated by some nit programs this suggests that it may be necessary to have work requirements that vary across socio demographic classes for a workfare plan to be superior to any nit combining workfare with an nit could also be the prescription

a comparison of the labor supply findings from the four negative income tax experiments between 1968 and 1982 the united states federal government sponsored four negative income tax experiments this paper provides a set of consensus estimates of the labor supply responses to these experiments it is found that despite the wide range of treatments and evaluation methodologies the results are remarkably consistent on average husbands reduced labor supply by about the equivalent of two weeks of full time employment wives and single female heads reduced labor supply by about the equivalent of three weeks of full time employment youth reduced labor supply by about the equivalent of four weeks of full time employment estimated income and substitution effects are quite similar to those obtained from nonexperimental studies

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

the measurement of the degree of foreign involvement this paper extends errunza and senber 1984 in assessing the relationship between alternative measures of the degree of foreign involvement dfi and the conditions under which the use of a specific measure will not affect the outcome of empirical studies on corporate international diversification the results suggest that among 21 pairs of seven most widely used series of dfi only three series foreign assets foreign earnings and foreign tax ratios in two pairs are equivalent evidence of constant returns to scale between the ratio of foreign to total assets and the ratio of foreign to total earnings is also discussed

simultaneously modeling the supply of weeks and hours of work among female household heads this paper explores the differential nature of labor supply decisions regarding weeks of work per year and hours of work per week among female household heads a model of labor supply that separates the weeks hours decision is presented and estimated allowing for simultaneity in the weeks hours decision as well as for the presence of either fixed costs or weeks and hours constraints the results indicate that not only are weeks and hours decisions separate from the labormarket participation decision but they are also quite different from each other although they appear to be simultaneously determined

are multinational corporations safer the failure probabilities of a sample of multinational corporations mncs are derived and compared with those of a control group of domestic corporations dmcs the results suggest that the mean insolvency probability of dmcs is significantly higher than that of the mncs it is also observed that mncs are significantly more capitalized and the standard deviation of their equity as well as their average systematic risk are also significantly lower furthermore the average insolvency probability of the dmcs is more sensitive to changes in the values of the parameters than those of the mncs

child support enforcement and welfare caseloads although there is a large body of research devoted to the issue of the determinants of welfare caseloads none of these studies has incorporated the effects of child support enforcement cse we employ annual state panel data from 1980 to 1999 and find that states with more effective cse have significantly lower welfare caseloads the improvement in cse over this period reduces welfare caseloads by about 9 percent in 1999 we also discover that individual child support variables may not be good indicators of state cse vigor and that a cse index that includes multiple dimensions of cse is more likely to capture the multiplicative functions of cse

the impact of welfare benefits on the conjugal status of single mothers in canada estimates from a hazard model this paper focuses on the determinants of the likelihood of a remarriage marriage for female heads with children using retrospective data from statistics canada s 1990 family history survey the study attempts to identify which socioeconomic characteristics of single mothers are conducive to conjugal union formation formal or informal particular attention is given to external time varying economic covariates so as to disentangle the impact they exert on single mothers propensity to start living with a new partner the empirical analysis is carried out using a proportional hazards model which permits the estimation of the effects of various covariates on the hazard of exiting single parenthood the most striking result is the strong effect of provincial welfare benefits on conjugal union formation however the analysis reveals that single motherhood far from representing a final state remains a transitory situation for a majority of women

the effects of international operations on the market value of the firm theory and evidence this paper investigates the existence of monopoly rents associated with international operations in a market value theoretic framework the benefits of international operations evolve from such factors as 1 imperfections in the product and factor markets 2 differential international taxation and 3 imperfections in the financial markets in this paper these factors are subject to an equilibrium analysis in the context of recent advances in financial theory in particular imperfections in the financial sector arising from corporate international diversification are examined in a framework which allows a supply adjustments by multinational firms and b the interaction of barriers to international capital flows faced by both firms and investors taking the u s capital market and investors as a base we then specify the conditions under which the foregoing imperfections get priced out in an equilibrium these pricing effects cannot be detected empirically through the methodologies employed by the existing studies which examine the effects of corporate international diversification indeed it was an attempt to rescue the limitations of these studies which initially motivated our paper the existing empirical inquiries into this area rely on traditional risk adjusted performance measures e g 7 or international analogs of return generating processes e g 1 8 instead at the empirical level we employ a value based method which is in the same vein of the thomadakis 17 approach developed to identify the monopoly benefits of industrial market structure we conduct the tests over subperiods characterized by differential government controls in an attempt a to separate the pure financial motives for multinationality from other motives and b to detect if the benefits of international operations carry through recent periods

bringing institutions into performance persistence research exploring the impact of product financial and labor market institutions this study challenges the implicit assumption of homogeneity in national institutional environments made in past studies of firm performance persistence we propose that home country institutions matter we focus on the impact of formal institutions in the product financial and labor markets arguing that they affect the size of pools of exchange partners and the types of exchanges allowed and condoned ultimately these restrictions affect competitive intensity among firms and firm performance persistence using data for over 10 000 firms from 33 countries over a 10 year time frame we show that antitrust law strength a product market institution designed to prevent collusion among firms is associated with decreases in performance persistence unskilled labor market flexibility a labor market institution that reduces legal constraints imposed on residual claimants managers and owners to take necessary actions to maintain or enhance profitability is associated with increases in performance persistence product liability law effectiveness another product market institution and corporate control market development a financial market institution are positively associated with performance persistence only in the case of mnes the two remaining financial and labor market institutions public equity market development respectively skilled labor market availability have a positive respectively negative impact for domestic firms only

an alternating recognition model of english auctions we present an alternative abstraction of an english oral ascending auction to the standard in milgrom and weber 1982 that accords more closely with practices in some auction markets in particular the assumptions that exits are irrevocable and necessarily public are dropped making endogenous the decision to compete silently and privately or openly in the model the price rises in a stylization of an auctioneer alternately recognizing two bidders who affirm willingness to pay the current price the auctioneer pays attention to other bidders only when a recognized bidder exits such exits may be temporary although we construct an equilibrium in which there is no benefit to exit and reentry the number of public exits is stochastic frequently a losing bidder will remain silent giving no indication of his willingness to pay and hence yielding no useful inference about his private information thus the source of the expected revenue advantage of english auctions over second price auctions is only stochastically available moreover when public exits are incomplete the ordinal rank of the bidder whose private information can be inferred is unknown making that information less valuable consequently the simpler formula for expected revenue in second price auctions may be the preferred approximation for english auctions

an untold story the characteristics of welfare use in british columbia the dynamics of welfare participation are analyzed using a unique longitudinal data set derived from provincial administrative records over the period 1980 92 the principal findings are that the majority of welfare spells are experienced by single men and women without children and that while most welfare spells are short there is a high incidence of recidivism although continuous long term use and dependence on welfare is not characteristic of most recipients experiences the program does not provide an effective route to financial independence since most users periodically return to the program

welfare participation and labour market behaviour in canada in this paper bivariate probit estimation procedures and nonindependent selectivity adjustments are employed to investigate the determinants of the joint welfare participation labor supply decisions made by single males single females lone fathers and lone mothers using data from the 1988 89 labour market activity survey the bivariate probit results indicate that the welfare and labor force participation decisions are not independent welfare program parameters however such as the basic allowance and the program tax rate generally do not appear to influence the welfare participation labor force participation or hours worked decisions rather these decisions are more strongly associated with personal characteristics and labor market conditions

the evolution of welfare participation among canadian lone mothers 1973 1991 canadian lone mothers under age thirty five exhibited an increasing reliance on welfare income along with stagnant wages and declining levels of market work and earnings between 1973 and 1991 in contrast lone mothers age thirty five and over exhibited a decreasing reliance on welfare income along with rising levels of market work wages and earnings a key factor accounting for rising welfare use among younger lone mothers was a decline in wages relative to welfare benefits accompanied by a mixed pattern of demographic change falling family size offset by growing proportions of lone mothers who are never married much of the declining welfare use among older lone mothers can be explained by decreasing family size and increasing education accompanied by market wages that grew at the same rate as welfare benefits

debt taxes and international equilibrium abstract this paper employs an extended miller model to analyze capital structure decisions of individual firms in a two country setting miller equilibria are generally not consistent with an international equilibrium if the tax subsidy of debt differs across countries the most obvious reason for differential tax subsidies is differences between national corporate tax rates we also identify differential tax subsidies of debt if inflation rates differ across countries for both cases we examine the adjustment process from national equilibria to an international equilibrium without and with barriers to international investment we derive the relationship between the equilibrium yields on debt and equity in the two countries and discuss the fisher hypothesis that real returns do not depend upon inflation in a two country miller world

welfare benefits and lone parents employment in great britain the analysis pools ten years of general household surveys to identify the effects of britain s welfare benefit system on a lone mother s probability of employment it confirms the prediction that because of the implicit 100 percent tax rate in the system higher nonlabor income other than welfare benefits increases the probability while a higher benefit guarantee reduces it the analysis also confirms that among women who could never be eligible for benefits higher nonlabor income reduces the probability of employment and the guarantee has no effect

monitor objectivity with important clients evidence from auditor opinions around the world we examine whether monitors are likely to compromise their monitoring objectivity in the face of economically important clients in international business settings in the context of external auditing and assurance services we measure monitor objectivity by whether auditors are more or less likely to issue to their important clients modified audit opinions that is audit opinions provided to outside investors about the firm that demotes explicit areas of concern using a large cross country sample we document that auditors are more likely to issue modified opinions to their economically important clients relative to other clients furthermore we find that this association is stronger 1 for big n auditors 2 for multinational audit clients and 3 in countries with stronger legal regimes these results suggest that monitors prioritize the protection of their reputation over lucrative economic relationships and such information certification function is more pronounced for international auditors multinational client firms and in strong legal regimes

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

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

rational choice culture of poverty and the intergenerational transmission of welfare dependency it has now become evident that contrary to the expectations of the proponents of the great society a significant number of recipients of transfer benefits have welfare careers that last for many years prolonged reliance on welfare has generated a wide range of issues related to the process and patterns of welfare dependency and has raised questions about how best to reform welfare policy for example it has been suggested that welfare use is addictive creating a welfare culture that is transmitted across generations glicken 7 31 states that most recipients of afdc benefits are those people whose parents were recipients people who have been socialized into the welfare system as children duncan hill and hoffman 5 469 on the other hand investigate the patterns of welfare dependence among afdc recipients and conclude that t he stereotype of heavy welfare dependence being routinely passed from mother to child is contradicted other studies 2 24 have suggested that there are significant racial differences in the duration of time on welfare pointing to a race based dependency pattern rank 24 for example finds that black women remain on welfare for significantly longer periods than white women specifically he finds the median number of months on welfare to be 21 6 months for white women and 45 2 for black women 2 other studies have suggested that long time welfare use

child support welfare dependency and women s labor supply this study evaluates the potential effectiveness of alternative child support policies in reducing welfare program participation employing longitudinal data from the panel study of income dynamics the analysis addresses the simultaneity of women s decisions regarding welfare participation labor force participation and annual hours of work following marital breakup the estimation framework accounts for the endogeneity of child support payments with female labor supply and for the selection bias due to differential rates of remarriage among divorced separated women results show that higher child support payments would i decrease welfare participation and ii increase average hours of work the empirical estimates are used to assess the potential effects of adopting alternative child support policies such as the wisconsin child support assurance system these results suggest that large potential welfare cost savings are attainable but significant reductions in welfare participation rates would only be achieved through substantial improvements in child support enforcement or through government assured child support payments

a problem with the negative income tax abstract the goal of a negative income tax is to increase the work incentives of welfare recipients this note points out that it may not do so and empirical simulations show that this is a real world possibility

why did child support award levels decline from 1978 to 1985 we use data from the panel study of income dynamics to examine trends in the receipt of child support and the determinants of trends between 1968 and 1997 the findings suggest that political demographic and economic forces all exerted downward

slow dutch auctions theorists have long believed that dutch auctions are strategically equivalent to standard sealed bidding however in recent controlled experiments with actual dutch and sealed bid internet auctions of collectibles the dutch auctions produced significantly more revenue we believe that this happened in part because the internet dutch auctions are a slow process in which bidders incur incremental transaction costs if they delay bidding this paper presents models of slow dutch auctions that include these costs and explain this belief we first present a decision theoretic model of a slow dutch auction while simple the decision theoretic model is fairly general and provides the basic intuition underlying our revenue results we then develop a game theoretic model of a slow dutch auction we derive two symmetric payoff equivalent equilibria of the game in the absence of a cost of return and then consider the more general case of costly return when the cost of return is in an appropriate range the seller s expected revenue is an increasing function of that cost

establishing the micro foundations of a macro theory information movers and the competitive local market for public goods e tiebout model of competition in the local market for public goods is an important and controversial theory the current debate revolves around the apparent disparity between macro 5 x empirical studies that show greater efficiency in the supply of public goods in polycentric regions compared to consolidated ones and micro evidence of widespread citizen consumer ignorance which has been used to argue that individual actions cannot plausibly lead to efficiency enhancing competition between local governments we argue that competitive markets can be driven by a subset of informed consumers who shop around between alternate suppliers and produce pressure for competitive outcomes from which all consumers benefit using data from a survey of overfive hundred households we analyze the role of these marginal citizen consumers and incorporate the costs of information gathering and the strategic interests of local governments into the competitive market model

effective tax rates and guarantees in the afdc program 1967 1982 estimates of effective tax rates on earned and unearned income and estimates of effective guarantees in the afdc program by state are provided for the period 1967 1982 the results indicate that effective real guarantees fell every year from 1967 to 1981 but stabilized in 1982 effective tax rates on unearned income rose steadily from 1967 to 1981 and took a particularly large additional jump in 1982 effective tax rates on earned income fell after 1967 but then gradually rose throughout the 1970s until 1982 when they took a much larger jump thus guarantees fell and tax rates rose over the 1970s as tight budgets forced states to restrict benefits and in the early 1980s tax rates were pushed even higher by federal legislation

competing trade mechanisms and monotone mechanism choice abstract we investigate the choice between posted prices and auctions of competing sellers with private valuations assuming that buyers face higher hassle costs in auctions we show the existence of monotone pure strategy equilibria where sellers offer posted prices rather than auctions if and only if they have a sufficiently high reservation value posted prices sell with lower probability but yield a larger revenue in case of trade using an empirical strategy to compare revenues of posted prices and auctions that takes selling probabilities explicitly into account we find our theoretical predictions supported by data from ebay auctions on ticket sales for the euro 2008 european football championship

does child support enforcement reduce divorce rates a reexamination during the 1990s expenditures on child support enforcement increased dramatically as did the amount of money collected in these efforts this paper examines whether there is a link between the child support enforcement program and the divorce behavior of married couples with children previous work notably that of nixon 1997 found a significant negative effect of child support enforcement policy on the probability of divorce however using a panel of state divorce rates and policy variables i find that contrary to this previous study child support enforcement policy has no significant impact on divorce rates

why is the rate of single parenthood lower in canada than in the u s a dynamic equilibrium analysis of welfare policies a critical question in the design of welfare policies is whether to target aid according to household composition as was done in the u s under the aid to families with dependent children afdc program or to rely exclusively on means testing as in canada restricting aid to single mothers for instance has the potential to distort behavior along three demographic margins marriage fertility and divorce we contrast the canadian and the u s policies within an equilibrium model of household formation and human capital investment on children policy differences we consider are eligibility dependence of transfers on the number of children and generosity of transfers our simulations indicate that the policy differences can account for the higher rate of single parenthood in the u s they also show that canadian welfare policy is more effective for fostering human capital accumulation among children from poor families interestingly a majority of agents in our benchmark economy prefers a welfare system that targets single mothers as the u s system does yet does not unlike the u s system make transfers dependent on the number of children

participation in the afdc program and the stigma of welfare receipt estimation of a choice theoretic model one of the important issues in policy discussions of the present welfare system and of welfare reform alternatives concerns the degree to which low income families eligible for welfare will in fact participate in the major program in the current system aid to families with dependent children afdc participation rates have risen over time particularly in the late 1960 s but have never been 100 percent explaining such changes in participation rates is an important subject of investigation because a participation rates lead directly to caseload sizes and thus to the possibility of a welfare explosion and b the estimates of the effect of welfare program tax rates and guarantees 10 are strictly applicable only to participants and not to non participants the most likely explanation for this seemingly irrational phenomenon of families rejecting an increase in disposable income lies in the stigma of welfare receipt for many families consider welfare participation to be demeaning socially undesirable and or destructive of self respect and feelings of self worth however although there has been considerable discussion of the nature of stigma 13 particularly in the sociological literature 11 there is a need to establish a firm theoretical base for the phenomenon and to formally investigate its properties in this paper a model of welfare participation is developed which incorporates stigma and thus establishes such a theoretical base and estimates of the parameters of the model are obtained there are two key characteristics of the model first participation in a welfare program is introduced into the utility function under the assumption that stigma represents a distaste for welfare the desire to participate is thus formulated within a traditional consumer

child support welfare dependency and poverty female headed families have among the highest poverty rates of any major demographic group in the united states the purpose of this paperis to investigate empirically the effectiveness of current child support enforcement policies and to determine their role in reducing poverty and welfare dependency a special supplement to the april 1982 current population survey provides the data for the analysis the results indicate that child support enforce ment may represent an effective means for re ducing welfare program costs but isunlikely to have a dramatic effect on either welfare de pendency or poverty copyright 1986 by american economic association

real options in multinational corporations organizational challenges and risk implications in this study we investigate how multinationality affects firms risk levels our investigation builds on the idea from real options theory that international operations offer switching options to multinational corporations yet we also emphasize different sources of coordination costs that can mitigate the benefits of operational flexibility the findings from tobit models accounting for self selection underscore the importance of unobserved heterogeneity in the relationships between international investments and risk levels consistent with the coordination costs surrounding international operations we find that the relationship between multinationality and downside risk is curvilinear risk first declines and then increases as a firm s portfolio of international investments becomes extensive in addition downside risk is an increasing function of the average cultural distance between a firm s home base and the host countries in which its foreign subsidiaries operate

modeling competitive bidding a critical essay in analyzing bidding modeling matters this paper is a critical analysis of the models available to aid competitive bidding decision making bidding strategy and auction design in real transactions after an introductory overview this paper describes the contexts in which auctions arise reviews the mainstream theory of single isolated auctions and discusses the important work involved in enrichment of this theory in doing so it indicates results that have been obtained and the sort of changes in analytical approach that are needed to tackle other critical enrichments the paper summarizes briefly what is known about the direct use of models by bidders and auction designers a general theme of this paper is that enriched models are needed to bring bidding theory closer to direct applicability in decision making

work incentives in the afdc system an analysis of the 1981 reforms the road to welfare reform increasingly appears to be one of the rockier paths the united states has traversed indeed by all outward appearances it is not even clear whether the current path runs uphill or downhill as far as work incentives in the welfare system are concerned economists of all political persuasions from milton friedman to james tobin have agreed that the uphill direction is that which leads to lower tax rates i e lower benefit reduction rates however as with free trade the near unanimity of opinion among economists has strangely only occasionally persuaded a majority of the nation s representatives to vote to go uphill the legislative history so illustrates from 1935 when the aid to families with dependent children afdc program was enacted to the 1967 social security amendments the tax rate in the program was 100 percent that is benefits were reduced by one dollar for every extra dollar earned with the 1967 amendments congress lowered the tax rate to 67 percent and in the heady atmosphere of the 1960 s it was expected that further progress in this direction would be made and that the tax rate would be lowered further indeed the family assistance plan subsequently proposed by president nixon would have lowered tax rates however the legislation passed the house but not the senate the ford administration considered welfare reform proposals internally but never proposed legislation while the carter administration proposed a massive welfare reform plan that met with no legislative success welfare reform was finally achieved in 1981 when the omnibus budget reconciliation act obra was enacted but obra increased the tax rate back to 100 percent the level prevailing prior to 1967 in retrospect it appears that 1967 marked the end not the beginning of legislative progress on work incentives in the welfare system in this paper i shall report the results of recent research that complicates the issue considerably by questioning whether lower tax rates do in fact provide work incentives the findings themselves seesaw not unlike the path of welfare reform itself first on a theoretical basis it appears that lower tax rates in a welfare program do not necessarily increase labor supply in the low income population as a whole contrary to the conventional wisdom in fact it also appears that members of the reagan administration were aware of this all along well in advance of the economics profession this theoretical ambiguity has fairly fundamental implications for the work incentive issue in welfare reform second nevertheless the empirical resolution of the ambiguity provided by existing econometric estimates in the labor supply literature and by estimates of the effect of afdc on labor supply indicates that a lower tax rate would indeed increase labor supply in the low income population as a whole and that a higher tax rate would decrease it thus the conventional wisdom is correct even though based upon an incorrect tdiscussants henry aaron the brookings institution and university of maryland harold watts columbia university edward gramlich university of michigan

excess market value the multinational corporation and tobin s q ratio the results of this study show that there is a positive and significant relationship between excess market value of multinational corporations and the degree of international involvement as measured by foreign sales percentage however the excess market value is not determined by the number of foreign subsidiaries nor the interaction between foreign sales and the number of foreign subsidiaries the relationship between excess market value and the two frequently used measures of monopoly power concentration ratio and the lerner index was also examined this study found that the lerner index contributes significantly in explaining excess market value but concentration ratio does not furthermore the positive and significant coefficients of advertising and r d intensity serve as evidence that product market imperfections appear to play a bigger role in explaining the excess market value experienced by mncs during our sample period

child support payment behavior an econometric decomposition growing concern about the cost to families and society from child support noncompliance has resulted in a flurry of scholarly articles and in welfare reform legislation addressing child support the attention has been drawn from reports showing that almost 2 3 million women of the 4 4 million owed support in 1985 did not receive all they were owed many receiving no payment at all 17 the implications of this are far reaching it is well known that over half of all female headed families have children in poverty and many of these families will end up drawing aid to families with dependent children payments child support could help shift the burden from general tax revenues to the responsible father for the family the benefits of additional income may result in reduced stress on the mother and less disruption in the lives of the children taking a longer run view greater family income has been linked to more years of schooling and higher wage rates in the early part of a child s career 7 higher payments of child support then may serve to increase current parental income and help reduce future poverty in this paper we use a more efficient estimator to model child support behavior than has been used the technique allows the extraction of more information from the data than previously has been possible in particular the marginal impact of changes in variables on the probability of being a nonpayer partial payer or full payer and on the expected amounts paid we show the usual practice of combining individuals who only pay a part of their order with those who pay all of their order into one group may lead to misleading policy conclusions the combining of these groups does give a sense of the total amount that can be collected across individuals often as important though are compliance issues centered on those not paying all of their support order while attention has been paid to those paying none of their order partial payers have been ignored in the literature in the course of our work we find support for the effectiveness of the federal child support enforcement program csep in increasing compliance with support

policy watch proposals for time limited welfare this paper summarizes the clinton administration s welfare reform proposal and views the available evidence on the effects of time limiting cash assistance and requiring work among long term aid to families with dependent children users the reforms are designed to increase employment among aid to families with dependent children recipients given changes in the labor market for less skilled workers it is not clear that this will increase income among these families the reform proposals would shift antipoverty spending toward work subsidies child support collection efforts and subsidized jobs that support mandated employment it is unclear that this will produce either a cheaper or more effective antipoverty system than the current one

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices

a stackelberg model of child support and welfare this article models the child support and welfare decisions of never married parents on welfare as a stackelberg game the mother chooses whether to exit welfare report paternity and to obtain a formal child support order if a child support order is obtained the father chooses whether to comply with the order simulation results from the structural parameters indicate that increasing the child support disregard increases paternal compliance slightly and affects maternal paternity reporting more significantly effects are limited however by low paternal incomes results also indicate that high award amounts can decrease expected child support payments to women on welfare