why is the market for long term care insurance so small abstract long term care represents one of the largest uninsured financial risks facing the elderly in the united states we present evidence of supply side market failures in the private long term care insurance market in particular the typical policy purchased exhibits premiums marked up substantially above expected benefits it also provides very limited coverage relative to the total expenditure risk however we present additional evidence suggesting that the existence of supply side market failures is unlikely by itself to be sufficient to explain the very small size of the private long term care insurance market in particular we find enormous gender differences in pricing that do not translate into differences in coverage and we show that more comprehensive policies are widely available if seldom purchased at similar loads to purchased policies this suggests that factors limiting demand for insurance are also likely to be important in this market our evidence also sheds light on the likely nature of these demand side factors

dollar depreciation and us industry performance abstract this study analyzes the effects of the real exchange rate and the real interest rate on domestic sales exports and imports for 19 manufacturing industries and selected non merchandise sectors in the usa the estimates are combined with a simulation of an exogenous dollar depreciation to infer net industry effects of a non policy induced drop in the value of the dollar the results indicate that the direct impacts of the depreciation are concentrated in net exports with only limited effects on home sales hoewver the indirect effects of the depreciation which work through the domestic interest rate and foreign and domestic income and prices have a significant impact on domestic sales as well as net trade in both merchandise and non merchandise sectors

political risk national defense and the dollar the federal reserve board s trade weighted real exchange rate index is highly correlated with the u s defense budget share of gnp this paper provides evidence that the correlation is not spurious political risk associated with holding wealth in the united states varies inversely with u s military security and due to the soviet military threat to the west is a major argument in foreign asset demand functions

internalizing neighborhood externalities the effect of subdivision size and zoning on residential lot prices abstract though land development regulations potentially control neighborhood externalities the developer of a residential subdivision contributes to that control by developing a larger parcel of land this paper reports estimates of the effect of parcel size on the sale price of developed building lots the results indicate that adding an acre to the median development increases lot prices by about 3 amenities appear to be income normal and the return to parcel size is greater in unincorporated areas perhaps due to less intensive governmental control over externalities

eldercare hours work hours and perceived filial obligations in this paper we take a fresh look at the magnitude of the trade off between caring informally for a parent and paid work we adopt a simultaneous approach with a primary focus on how hours of car

caregivers in the family daughters sons and social norms daughters are the principal caregivers of their dependent parents in this paper we study long term care ltc choices by bargaining families with mixed or same gender siblings ltc care can be provided either informally by children or formally at home or in an institution a social norm implies that daughters suffer a psychological cost when they provide less informal care than the average child we show that the laissez faire lf and the utilitarian first best fb differ for two reasons first because informal care imposes a negative externality on daughters via the social norm too much informal care is provided in lf second the weights children and parents have in the family bargaining problem might differ in general from their weights in social welfare we show that the fb allocation can be achieved through a system of subsidies on formal home and institutional care except when children and parents have equal bargaining weights these subsidies are gender speci fic and refl ect pigouvian as well as paternalistic considerations

ageing health and health care the population in the developed world has experienced a significant increase in life expectancy over the last 50 years simultaneously while the onset of comorbidities has been deferred to older age groups health care expenditure has grown dramatically primarily owing to the advancement of medical technology and the expansion of individual income levels along with population ageing in the wake of increased longevity however the contribution of population ageing to health expenditure growth is subject to some theoretical and empirical scrutiny this paper takes the question of ageing and health and health care to the data to evaluate the net impact of ageing we focus on two main questions namely the welfare valuation of longevity improvements for various oecd countries along with the red herring hypothesis which suggests that population ageing has a small and almost negligible impact on health care expenditure our estimates lead us to suggest an average gain in longevity of 4 5 years since 1980 corresponding to about 13 5 per cent of lifetime income of a 20 year old in 2000 furthermore we confirm a weak red herring claim that is that population ageing accounts for only a 0 5 per cent annual growth rate of health care expenditure finally we find that the rise in longevity leads to a further demand for life prolonging medical care

uninsured by choice a choice experiment on long term care insurance abstract we examine evidence from two unique discrete choice experiments dce on long term care insurance and values several of its relevant attributes more specifically the experiments examine choices made by a large sample made of 15 298 individuals in the united states with and without insurance we study the valuation of a number of insurance attributes namely the daily insurance benefit insurance coverage the compulsory and voluntary nature of the insurance policy design alongside the costs insurance premium and health requirements this paper elicits both respondents preferences and willingness to pay wtp for these care insurance s attributes using a random parameter logit model and assesses the heterogeneity of choice responses using demographic socioeconomic and attitudinal motivations to segment response to insurance choices we find that an increase in the insurance premium by an additional 100 would reduce insurance uptake by 1pp insurance policy uptake is higher when it provides benefits for the lifetime the monthly marginal wtp being 178 64 and voluntary the monthly marginal wtp increases by an extra 74 71 as opposed to universal and when it forgoes health checks the monthly marginal wtp increases by an extra 28us

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

an exploration in the theory of exchange rate regimes three exchange rate regimes a float a one sided peg and a cooperative peg are evaluated and compared in terms of efficiency and welfare levels the framework of analysis embodies country specific monies with the money of each country being used to transact in its commodity markets and its currency denominated bonds welfare levels depend only on consumption levels in the presence of perfect foresight all equilibrium allocations are pareto efficient in a floating exchange rate regime the perfect foresight equilibrium allocation coincides with an equilibrium of a costless barter economy the same result holds in a one sided peg if the pegging country s exchange rate stabilizing authority breaks even over time in a cooperative peg regime there is a different equilibrium allocation for each combination of exchange rate levels and monetary policies problems of policy coordination and conflicts in desired monetary policies are discussed

international portfolio nondiversification and exchange rate variability abstract incomplete international portfolio diversification is implied by an equilibrium models of exchange rates with nontraded goods the model can also explain the greater correlation between consumption and income within a country than between consumption across countries nontraded goods make more stringent the elasticity conditions required to explain exchange rate variability resulting from current productivity disturbances though not from disturbances to fiscal policies or the prospective return to investment the model is also consistent with international real interest rate differentials changes over time in the current account and relative wealth across nations and observed time series properties of exchange rates

ageing and the welfare state securing sustainability over the next four decades increasing old age dependency ratios will exert an enormous upward pressure on welfare spending in most developed countries as this is mainly due to existing unfunded public pension schemes many countries have embarked on far reaching reforms in this area strengthening actuarial fairness modifying indexation rules adding elements of pre funding and last but not least attempting to extend the period of economic activity efforts to contain costs may also be relevant with regard to public expenditure on health and long term care but thus far no country has started to really deal with these issues still some countries have made substantial progress in securing the long term sustainability of their welfare systems what remains to be considered is re constructing the system of intergenerational transactions as a potential way of removing disincentives to raise children and invest in their human capital in the long run

the response of real exchange rates to various economic shocks substantial fluctuations in real exchange rates i e deviations from purchasing power parity ppp which closely mirror movements in nominal rates have been one of the most notable international economic events since the breakdown of the bretton woods system dornbusch s disequilibrium theory 9 which presumes different speeds of adjustment in assets and goods markets offers an explanation for temporary deviations from ppp only models assuming ppp as a long run relationship have not been successful in interpreting the movements of the real exchange rates although studies conducted for countries experiencing high or hyper inflation provide evidence favoring ppp 42 30 29 the empirical evidence on ppp for industrialized low inflation countries is not generally favorable 1 this is consistent with the view that ppp may hold better in high inflation countries where the disturbances to their economies are mostly monetary in origin 31 123 24 but ppp may not hold well when the real disturbances which change equilibrium relative prices dominate statistical evidence indicates that the real exchange rates of many countries are likely to be nonstationary or have long memory that is changes in the real values of many currencies tend to persist for very long period of time this persistence implies that fluctuations in the real exchange rates are largely due to long lasting effect of real disturbances after revealing that ppp does not hold as a long run concept for several exchange rates flynn and boucher 12 121 suggest that one possible explanation is that there are time varying real factors that are omitted from the ppp relationship there are several well established reasons why the real exchange rates may change in response to real disturbances in the first place permanent exogenous shocks to the tradable sector of the economy call for changes in competitiveness for instance a rise in the real price of oil will worsen the balance of trade position of a net oil importing country and therefore call for a real depreciation of the currency of the country in order to improve its competitive position 32 second when countries are growing at different rates productivity bias will typically result in

how does a new sports stadium affect housing values the case of fedex field this study investigates how the construction of a sports stadium affects residential housing values hedonic analyses are conducted to assess the price differentials between housing units in close proximity to fedex field home of the washington redskins and comparable units away from it using a difference in difference approach the study finds that properties near fedex field sold at a discount however this price differential was narrowed after the completion of the stadium contrary to neighborhood activists concern that sports venues adversely affect property values the findings of this study indicate that a new stadium improves housing values in the surrounding area

quantity premium in real property markets in this paper a theory of nonlinear pricing is tested using 1993 land market data in residential districts of the osaka metropolitan area it is shown that quantity premia prevail in real property markets i e larger lots are proportionately more expensive this is due to irreversibility in changing lot size and an oligopolistic market structure with nondecreasing marginal utility of lot size

extending the concept of the resource curse natural resources and public spending on health this paper extends the concept of the resource curse by studying whether and through which transmission channels natural resource wealth affects social spending even though the availability of vast natural capital reserves has commonly been linked to the neglect of human development most of the literature has continued to focus on economic performance this paper is the first to empirically investigate the link between natural resource wealth and public health expenditures in light of the hypothesis that resource wealth as a source of unearned state income enhances state autonomy and increases volatility which leads to policies that fail to prioritize human development using a large panel dataset of world countries covering the period from 1995 to 2009 we find a robust significant inverse relationship between natural resource dependence and even abundance and public health spending over time the effect remains significant after controlling for state autonomy volatility and other factors these findings have implications for national authorities as well as the extractive industry governments should be made accountable for natural resource wealth and correct taxation could provide additional resources earmarked for health the extractive industry could increase their investments in sustainable corporate social responsibility operations specifically in the health sector

currency prices terms of trade and interest rates a general equilibrium asset pricing cash in advance approach currency prices terms of trade and interest rates a general equilibrium asset pricing cash in advance approach

gender role attitudes and the labour market outcomes of women across oecd countries this paper uses data from the world value surveys 1990 1995 1999 to investigate the impact of gender role attitudes and work values on women s labour market outcomes across 25 oecd countries anti egalitarian views are found to display the strongest negative association with female employment rates and the gender pay gap these views are however softening among recent cohorts on the other hand perceptions of women s role as homemakers which are likely formed in youth and linked to religious ideology are more persistent over time they could be implicated in the recent slowdown of the gender convergence in pay finally the unavoidable clash between family values and egalitarian views that takes the form of an inner conflict for many women the so called mother s guilt is another obstacle in the path towards greater gender equality in the labour market copyright 2005 oxford university press

is zoning a negative sum game zoning is well known as a key instrument of planning regulation which is environmental regulation in its broadest sense zoning in terms of economic theorisation is normally justified by the pigovian welfare economics theses of market failure notably

optimal lot size and configuration abstract the developer chooses lot size and shape to maximize profit subject to institutional constraints the price structure for lots is exogenous and cobb douglas in form costs of land development are assumed to be both proportional to frontage and to lot area the constraints are the minimum lot area from zoning and the minimum lot depth from subdivision ordinances numerical and empirical results support this theory of optimal development one implication is that lower frontage cost from technological change may have led to wider shallower lots a result also consistent with lower land rent in a conventional urban model

multiple dimensions of private information evidence from the long term care insurance market we demonstrate the existence of multiple dimensions of private information in the long term care insurance market two types of people purchase insurance individuals with private information that they are high risk and individuals with private information that they have strong taste for insurance ex post the former are higher risk than insurance companies expect while the latter are lower risk in aggregate those with more insurance are not higher risk our results demonstrate that insurance markets may suffer from asymmetric information even absent a positive correlation between insurance coverage and risk occurrence the results also suggest a general test for asymmetric information

how strong are bequest motives evidence based on estimates of the demand for life insurance and annuities this paper presents new empirical evidence in support of the view that a significant fraction of total saving is motivated by the desire to leave bequests specifically i find that social security annuity benefits significantly raise life insurance holdings and depress private annuity holdings among elderly individuals these patterns indicate that the typical household would choose to maintain a positive fraction of its resources in bequeathable forms even if insurance markets were perfect evidence on the relationship between insurance purchases and total resources reinforces this conclusion

medical care costs how much welfare loss hardly a week goes by without a front page newspaper article on rising health care costs and the uninsured in this article i focus mainly on costs arguing that the issue has been somewhat misconceived while the level of medical care spending in the u s is a cause for concern the welfare losses associated with rises in that level of spending may not be as large as the public rhetoric can make them seem in fact cost containment may not be as urgent as is widely supposed and some proposed cost containment policies may result in welfare losses for the insured and even increase the number of uninsured

the economics of risks to life this study asks two questions 1 what is the net value to the representative individual over his life time of activities that alter age specific mortality risks 2 what is the cost to the representative individual of activities that take a life at random at a given age results derived from an economic demographic model with full age specific accounting have a strong actuarial flavor alterations in the mortality schedule caused say by a medical breakthrough should be assessed on the utility of expected additional life years production and reproduction less expected social costs of support loss of life at a specific age due to an accident say should be assessed on the opportunity costs of expected lost years of living lost production and reproduction less expected social support costs the results show that current methods in general leave out an important social transfer term that value of a life lost is highly age dependent and that the degree of diminishing returns to consumption is crucial in calculations of the economic cost of risks

the rent gradient for manufacturing abstract rent gradients for manufacturing are estimated using actual rent and value figures for cincinnati distance to the city center is found to be of no importance in explaining rent or value variations

comovements in budget deficits money interest rates exchange rates and the current account balance some empirical evidence most applications of structural vars and cointegration to the study of the short and long run relationships among macroeconomic variables in an open economy context do not include budget deficits or fiscal innovations as one of the key variables this paper attempts to rectify this omission by incorporating budget deficits into the analysis of the comovements in macroeconomic variables budget deficits money interest rates exchange rates and the current account balance in the short and long runs using a var approach empirical results suggest that a larger proportion of variations in the interest rate differential between financial centres as well as of variations current account balances of countries are accounted for by monetary innovations rather than by fiscal innovations however fluctuations in real exchange rates are better explained by fiscal innovations

money and asset prices in a cash in advance economy an asset pricing model with money introduced via a cash in advance constraint is presented the monetary velocity is variable hence money demand does not obey the trivial quantity equation the effects of disturbances in output and money growth on real balances the price level and interest rates are examined monetary policy has effects on real asset prices the fisher relation and the premium on nominal bonds are discussed the precise role of the timing of information and transactions for properties of price levels and interest rates are clarified

family ties and the crowding out of long term care insurance insurance for long term care ltc has developed only moderately compared to other areas of welfare which has been explained variously as the result of market failures public misconceptions of the risk of ltc needs and intergenerational contracts this paper offers a cultural explanation for the limited ltc insurance development in europe it argues that family ties by enhancing informal care giving duties inhibit individuals expected public and private insurance coverage the empirical analysis of the paper exploits cross country and sub group variability of a representative database of european union member states containing records on ltc coverage and family structure drawing upon two measures of familistic culture or family ties we find a negative association between family ties and expected coverage of ltc for different sub samples these results are robust to a set of checks for different definitions of family ties and controls and for a sub sample of first and second generation migrants policy implications suggest that widespread expansion of ltc coverage might need to accommodate existing familistic cultural norms to avoid insurance crowding out

the rational nonpurchase of long term care insurance only a tiny fraction of the nonpoor population currently purchases private insurance coverage against long term care ltc costs studies generally attribute the failure to purchase private coverage to unawareness by potential purchasers of the benefits of coverage and a misperception that medicare currently covers long term care i explore alternative reasons for failure to purchase coverage by well informed expected utility maximizing risk averse individuals for whom ltc is associated with a large increase in mortality and for whom family members represent an alternative source of care there may be no demand for ltc insurance even if it is made available at actuarially fair premiums because the main consequence of coverage is to enhance the expected value of one s estate

an analysis of minimum frontage zoning to preserve lakefront amenities the development of lakefront property in northern wisconsin has prompted in several towns minimum frontage zoning stricter than the state standard such zoning generates an economic loss by constraining development development effect and an economic gain by preserving environmental amenities amenity effect estimation of a hedonic price function for lakefront property in northern wisconsin quantifies these competing effects the estimation indicates that at the current margin the economic loss from the development effect is negligible and the economic gain from the amenity effect may be considerable raising frontage prices by an average of 21 5

comovements of budget deficits exchange rates and outputs of traded and non traded goods i introduction the total united states budget deficit was roughly zero at the beginning of 1981 after some ups and downs the deficit reached 140 billion in early 1985 and remained high compared to deficit levels experienced in peacetime years prior to 1981 during the period 1981 1985 the u s dollar appreciated sharply relative to foreign currencies in both nominal and real terms the current account of the u s balance of payments moved from a surplus of 6 0 billion in 1981 into a series of large recurrent deficits reaching an annual rate of 120 billion by mid 1985 the simultaneous occurrence of these events suggests that budget deficits cause a country s currency to appreciate which in turn reduces the country s international competitiveness stories are reported in the popular financial press and conventional wisdom is used to link these events using the identities of national income accounts it is shown that budget deficits must crowd out domestic spending by raising the domestic saving investment gap in addition the deficits can be financed by the rest of the world through the generation of a deficit in the current account of the balance of payments typically it is argued that the rise in the rate of interest and real appreciation of the dollar are necessary in order to bring about the saving investment gap and the current account deficit needed to finance the large u s budget deficits this paper attempts to provide an alternative structural explanation of these comovements in exchange rates and government budget deficits my model expands on previous work to include fiscal policy considerations in a stochastic setup it shows that within a simple two country cash in advance constraint model it is possible to have a positive correlation between increases in the budget deficit and exchange rate appreciation additionally it is possible to have a negative correlation between exchange rate appreciation and a reduction in domestic traded goods production the implication then is that the usual twin deficits argument about the linkages between budget deficits exchange rates and trade deficits is only one of a number of possible explanations of the correlations that appear in the data of the 1980s the model i have used in this paper is as far as i know the first international general equilibrium monetary asset pricing model with endogenous budget deficits most of the explanations that relate exchange rates and the federal government s budget deficit or the trade deficit are based on a particular disequilibrium theory of exchange rates the model of this paper however is based on an equilibrium model of exchange rates it is based on simple economic principles it uses the national accounts definition of the government s nominal budget deficit as an increase in the dollar value of the government s holdings of money and bonds a change in the domestic productivity of traded goods and the money supply yields a change in both the nominal price of bonds and the government budget deficit a change in the supply of domestically produced traded goods also yields changes in their relative price the real exchange rate repeated disturbances to the supply of traded goods and the money supply create a correlation between budget deficits and real exchange rates recently branson and love 1988 and ceglowski 1989 among others blame the real exchange rate as the primary cause of u s industries weak performance in the 1980s it is important to realize the real exchange rate itself is an endogenous variable its behavior as i will show is a result of underlying economic changes hence it is incorrect to blame decreased u s competitiveness on the real exchange rate moreover most popular models which presume a relationship between budget deficits and real exchange rates attribute no role to the monetary sector this paper demonstrates the importance of bringing both monetary and real sectors into the model in order to analyze such relationships

health care expenditure in the last months of life in oecd countries a considerable share of health care expenditure hce is spent for the care of the terminally ill this paper derives the demand for hce in the last 2 years of life from a model that accounts for age mortality risk and wealth the empirical tests are based on data of deceased members of a major swiss sick fund the empirical evidence confirms most of the hypotheses derived from the model i e i hce increases with closeness to death ii for retired individuals hce decreases with age and iii low income individuals as compared to high income individuals incur lower hce in the last months of life

the value of life and the rise in health spending over the past half century americans spent a rising share of total economic resources on health and enjoyed substantially longer lives as a result debate on health policy often focuses on limiting the growth of health spending we investigate an issue central to this debate is the growth of health spending a rational response to changing economic conditions notably the growth of income per person we develop a model based on standard economic assumptions and argue that this is indeed the case standard preferences of the kind used widely in economics to study consumption asset pricing and labor supply imply that health spending is a superior good with an income elasticity well above one as people get richer and consumption rises the marginal utility of consumption falls rapidly spending on health to extend life allows individuals to purchase additional periods of utility the marginal utility of life extension does not decline as a result the optimal composition of total spending shifts toward health and the health share grows along with income in projections based on the quantitative analysis of our model the optimal health share of spending seems likely to exceed 30 percent by the middle of the century

the structure of urban land prices abstract recognition of the existence of nonlinear land prices has an impact on the measurement of the rate at which land price declines with distance from the urban center it is hypothesized that concave parcel prices have given rise to overly large estimates of the rate of price decline with distance because parcel sizes increase with distance and increased parcel sizes would be associated with lower unit prices as a result of the concavity of the land price function this hypothesis is empirically tested using vacant residential commercial and industrial land sales from within cook county illinois an important finding is that allowing for concavity greatly reduces although it does not eliminate measured rates of price decline with distance

a comment on zoning returns to scale and the value of undeveloped land this paper revisits the relationship between land value and parcel size the authors demonstrate that using a simple arbitrage equilibrium argument the value size relationship is convex concave whenever land assembly subdivision is possible they also explore further the impact of zoning on market outcomes copyright 1993 by mit press

ageing in place exploring elderly people s housing preferences in spain the greater visibility of societal ageing and higher share of individuals with disabilities have created new challenges for housing and urban policies housing needs can influence individual choice of living environment and the willingness to undertake housing improvements this is especially relevant in southern european countries where the family is still the main provider of care for the elderly this study makes an empirical analysis of the underlying preferences for housing and perceptions of housing suitability in the event of dependency in old age drawing upon a new representative database of the spanish population it explores whether preferences are stable for different age groups and different levels of individual affluence calculated in terms of income and housing assets the study found preferences for ageing in place which became stronger as individuals grew older the effect of affluence or the wealth effect was considerable acting independently and exhibiting higher health needs

capital flows investment and exchange rates abstract this paper incorporates international capital flows into a two country monetary general equilibrium model of asset prices with investment and production we calculate theoretical covariances between investment the current account the exchange rate and the terms of trade these covariances depend upon the coefficient of relative risk aversion the magnitude and sign of a country s net international indebtedness other properties of tastes and technologies and the stochastic processes on disturbances to productivity and monetary growth rates international capital flows arise from changes in world wealth and its relative composition in foreign and domestic assets