program trading and expiration day effects the arbitrage between index futures and the underlying cash index and the cash settlement feature of index futures contracts which requires arbitrageurs to unwind positions in the stock market are thought to be at the heart of the abnormal stock price movements during the triple witching hour the last hour of trading on days on which index futures index options and options on index futures expire simultaneously during 1984 and 1985 volume was substantially higher than normal in the last hour of trading on those quarterly fridays open interest in the expiring futures contracts on the expiration day amounted to about 40 per cent of the average month end open interest the incremental stock market volume however was approximately one third the volume that would be inmplied if the entire expiration day open interest were traded in the stock market analysis of stock market price changes in the last hour of expiration days and the first halfhour of the following day indicates that the volatility of price changes was significantly higher on expiration days with the stock market tending to fall stocks not in the sp index option expirations themselves did not lead to abnormal market movements when the magnitude of price effects was measured by the degree of reversal in prices on the morning after the expiration day the average magnitude of the price effect in the 10 most recent quarterly futures contract expirations examined was about 0 4 per cent of the closing index value at expiration the average expiration day price effect of 0 4 per cent is not large considering that a price impact of approximately 0 25 per cent of the value of the transaction can be expected on the basis of the bid ask spread once this market impact cost is drawn out the average expiration day price impact falls to about 0 15 per cent of the value of the transaction an amount representing the additional cost of liquidity furthermore price impacts in excess of those found on expiration days are frequently encountered in large block transactions where the cost of providing liquidity also increases on expiration days however transactions in many stocks occur simultaneously so the market as a whole is affected

the time pattern of hedging and the volatility of futures prices the paper proposes a multi period model of hedging which allows for a futures position to be revised within the cash market holding period within this framework we assess the robustness of the two period theory of hedging when generalized to many periods we characterize the normal time path of a hedge and the way it is affected by the requirement that futures accounts mark to market daily finally we show how the resolution of production uncertainty over time affects hedging behavior and determines the volatility of futures prices in the large literature on hedging in futures markets the principal analytical accounts of hedging are framed in a two trade date setting an agent commits himself now to a future purchase or sale of a good whose cash price later is uncertain this risk is hedged by purchase or sale of an appropriate number of futures contracts and holding this futures position until the cash transaction is realized in the present paper we formulate a multi period model of hedging which allows for the futures position to be revised within the cash market holding period the resulting analysis captures an important institutional reality that is absent in a two trade date model namely the fact that the day to day fluctuations of the futures price will generate a series of random cash flows over the period during which a futures position is held this is due to the requirement that futures accounts mark to market daily within this framework we address a number of issues first we assess the robustness of the two period theory of hedging when generalized to many periods second we characterize the normal time path of a hedge and contrast futures and forward contracts from the perspective of an individual hedger finally we show how the resolution of production uncertainty over time affects hedging behaviour and determines the volatility of futures prices while the literature on asset demand in a multiperiod setting is large futures markets are specifically treated in a limited number of studies grauer and litzenberger 1976 are concerned principally with characterizing the relation of spot and futures prices in a market for a storable periodically produced commodity they offer a rationale for positive stock holding in markets where spot price exceeds the futures price richard and sundaresan 1980 are also concerned primarily with characterizing price behaviour since they posit identical consumers in equilibrium individual holdings of futures are zero there is no hedging activity in the sense that we understand it breeden 1980b analyzes the optimal futures position sizes in a multiperiod setting his framework is more general than ours in that his is a multi good multi asset model where preferences

socio economic status health and lifestyle abstract the role of lifestyle in mediating the relationship between socio economic characteristics and health has been discussed extensively in the epidemiological and economic literatures previous analyses have not considered a formal framework incorporating unobservable heterogeneity in this paper we develop a simple economic model in which health is determined partially by lifestyle which depends on preferences budget and time constraints and unobservable characteristics we estimate a recursive empirical specification consisting of a health production function and reduced forms for the lifestyle equations using maximum simulated likelihood msl for a multivariate probit mvp model with discrete indicators of lifestyle choices and self assessed health sah on british panel data from the 1984 and 1991 health and lifestyle survey hals we find that sleeping well exercising and not smoking in 1984 have dramatic positive effects on the probability of reporting excellent or good sah in 1991 and that these effects are much larger having accounted for endogeneity the failure of epidemiological analyses to account for unobserved heterogeneity can explain their low estimates of the relevance of lifestyle in the socio economic status health relationship indicators for prudent alcohol consumption and eating breakfast in 1984 are not found to be statistically significant determinants of sah in 1991

international transmission of information evidence from the euroyen and eurodollar futures markets abstract this paper examines the information transmission between japan and the us by using the tokyo euroyen and chicago eurodollar futures these two interest rate futures markets provide a better understanding of international information transmission than stock markets which have been shown to exhibit nonsynchronous trading and market segmentation the results show that traders in tokyo chicago use information that is revealed overnight in chicago tokyo the bivariate egarch t model provides no evidence of volatility spillovers in either direction suggesting that the opening price rapidly reflects foreign information the overall results support the hypothesis that the domestic market efficiently adjusts to foreign news the results are also broadly consistent with the covered interest arbitrage effects

modelling health income and income inequality the impact of income inequality on health and health inequality a framework is developed to analyse the impact of the distribution of income on individual health and health inequality with individual health modelled as a function of income and the distribution of income it is demonstrated that the impact of income inequality can generate non concave health production functions resulting in a non concave health production possibility frontier in this context the impact of different health policies are considered and it is argued that if the distribution of income affects individual health any policy aimed at equalising health which does not account for income inequality will lead to unequal distributions of health this is an important development given current uk government attention to reducing health inequality

a re examination of the meaning and importance of supplier induced demand abstract despite twenty years of work on supplier induced demand sid there has been little discussion or investigation of how inducement affects the health of patients we develop a conceptual framework for sid which includes the clinical effectiveness of the health services utilized as well as the effectiveness of the agency relationship between the physician and the patient the framework is used to identify several conceptually distinct types of utilization each with its own policy implications which have been intermingled in the sid literature after examining each type of utilization we conclude that a continued focus by health economists on the phenomenon of inducement even within an extended conceptual framework may be too limited for the development of policies regarding health service utilization

stature and the standard of living research on the standard of living now emphasizes alternatives or supplements to the national income accounts this paper reviews the results of two decades of research using stature as a measure of health aspects of human welfare after comparing and contrasting stature with per capita income i consider height patterns discovered by economic historians that challenge traditional beliefs about the past including long term trends cycles in heights and the dreadfully small stature of slave children that was followed by catch up growth the paper concludes with comparisons to work in development economics and suggestions for research

health behavior health knowledge and schooling the positive correlation between schooling and good health is well documented one explanation is that schooling helps people choose healthier life styles by improving their knowledge of the relationship between health behaviors and health outcomes that is schooling improves the household s allocative efficiency in producing health this empirical study uses direct measures of health knowledge to test this explanation part of the relationship between schooling and the consumption of cigarettes alcohol and exercise is explained by differences in health knowledge however most of schooling s effects on health behavior remain after differences in knowledge are controlled for

a bivariate markov regime switching garch approach to estimate time varying minimum variance hedge ratios this article develops a new bivariate markov regime switching bekk generalized autoregressive conditional heteroscedasticity garch rs bekk garch model the model is a state dependent bivariate bekk garch model and an extension of gray s univariate generalized regime switching grs model to the bivariate case to solve the path dependency problem inherent in the bivariate regime switching bekk garch model we propose a recombining method for the covariance term in the conditional variance covariance matrix the model is applied to estimate time varying minimum variance hedge ratios for corn and nickel spot and futures prices out of sample point estimates of hedging portfolio variance show that compared to the state independent bekk garch model the rs bekk garch model improves out of sample hedging effectiveness for both corn and nickel data we perform white s 2000 data snooping reality check to test for predictive superiority of rs bekk garch over the benchmark model and find that the difference

the irrelevance of inference a decision making approach to the stochastic evaluation of health care technologies the literature which considers the statistical properties of cost effectiveness analysis has focused on estimating the sampling distribution of either an incremental cost effectiveness ratio or incremental net benefit for classical inference however it is argued here that rules of inference are arbitrary and entirely irrelevant to the decisions which clinical and economic evaluations claim to inform decisions should be based only on the mean net benefits irrespective of whether differences are statistically significant or fall outside a bayesian range of equivalence failure to make decisions in this way by accepting the arbitrary rules of inference will impose costs which can be measured in terms of resources or health benefits forgone the distribution of net benefit is only relevant to deciding whether more information is required a framework for decision making and establishing the value of additional information is presented which is consistent with the decision rules in cea this framework can distinguish the simultaneous but conceptually separate steps of deciding which alternatives should be chosen given existing information from the question of whether more information should be acquired it also ensures that the type of information acquired is driven by the objectives of the health care system is consistent with the budget constraint on service provision and that research is designed efficiently

evaluation of the subjective probabilities of survival in the health and retirement study in the health and retirement study respondents were asked about the chances they would live to 75 or to 85 we analyze these responses to determine if they behave like probabilities of survival if their averages are close to average probabilities in the population and if they have correlations with other variables that are similar to correlations with actual mortality outcomes we find that generally they do behave like probabilities and that they do aggregate to population probabilities most remarkable however is that they covary with other variables in the same way actual outcomes vary with the variables for example respondents with higher socioeconomic status give higher probabilities of survival whereas respondents who smoke give lower probabilities we conclude that these measures of subjective probabilities have great potential use in models of intertemporal decision making under uncertainty

equity and equality in health and health care this paper explores four definitions of equity in health care equality of utilization distribution according to need equality of access and equality of health we argue that the definitions of need in the literature are inadequate and propose a new definition we also argue that irrespective of how need and access are defined the four definitions of equity are in general mutually incompatible in contrast to previous authors we suggest that equality of health should be the dominant principle and that equity in health care should therefore entail distributing care in such a way as to get as close as is feasible to an equal distribution of health

sex discrimination and competition in product and labour markets theoritical explanations for wage discrimination collapse in the long run because competition should drive discriminations firms out of the market in product markets with imperfect competition em

decomposing world health inequality this study explores global inequality in health status and decomposes it into within and between country inequality we rely on standardized height as our health indicator since it avoids the measurement pitfalls of more traditional measures of health such as morbidity mortality and life expectancy it also avoids measurement problems associated with using monetary variables such as income or expenditure across time or place to compare welfare our calculation of world height inequality indicates that in contrast with similar research on income inequality within country variation is the source of most inequality rather than the differences between countries

the distribution of health and income a theoretical framework a general framework is developed to analyse variations in the distribution of population health where individual health is modelled as a function of income conditional upon the level of another factor such as health related behaviour results are derived for the response of the level of average health in a population and the degree of health inequality to alternative health promotion policies and equiproportionate income growth qualitative results are shown to depend on characteristics of the individual health production functions and the frequency distribution of the other factor at each income level these results are independent of the distribution of income the discussion focuses on the implications of these results for contemporary research into inequalities in health and income

the meaning of death some simulations of a model of healthy and unhealthy consumption simulations of a model of healthy and unhealthy consumption are used to investigate the impact of various terminal conditions on life span pathways of health related consumption and health a model in which life span and the death stock of health are fixed is compared to versions in which i the death stock of health is freely chosen ii life span is freely chosen iii both the death stock of health and life span are freely chosen the choice of terminal conditions has a striking impact on optimal plans results are discussed with reference to the existing demand for health literature and illustrate the application of iterative processes to determine optimal life span the role played by the marginal value of health capital in determining optimal plans and the importance of checking the second order conditions for the optimal choice of life span

a model of the demand for longevity and the value of life extension we specify a demand function for longevity or quantity of life along with corresponding demand functions for indicators of quality of life and a value of health and life extension function we show that the demand for health must be derived in conjunction with that for longevity and the related consumption plan and that all choices depend on initial individual endowments and terminal conditions our comparative dynamics predictions indicate that optimal health and longevity are increasing functions of endowed wealth rather than necessarily current income that improvements in opportunities to produce health can accentuate the differences between endowed health and attained longevity levels and that the value individuals ascribe to their health may be increasing over a good portion of their life cycle we use this model to analyze observed empirical variations in levels and trends of life expectancy and in exposure to health risks across different population groups

price and volatility spillovers in scandinavian stock markets abstract new evidence is provided on price and volatility spillovers among the danish norwegian swedish and finnish stock markets the impact of good news market advances and bad news market retreats is described by a multivariate exponential generalized autoregressive conditionally heteroskedastic egarch model volatility transmission is asymmetric spillovers being more pronounced for bad than good news significant price and volatility spillovers exist but they are few in number

program trading and market volatility a report on interday relationships ten months of daily observations on stock market volatility and program trading on the nyse reveal no relation between volatility and program trading intensity the days on which volatility was high were not systematically the days on which program trading intensity was high this is evident both from casual observation of the data and from analyses of the correlation and regression results there does appear to be however a positive relation between the intensity of dot volume relative to nyse volume and volatility there also appears to be a positive relation between the intensity of non program dot volume relative to nyse volume and volatility this suggests that very volatile days are also days when the retail customer generated dot order flow is large relative to institutional block trades which are not dot delivered

why are some people healthy and others not the determinants of health of populations each topical chapter in this volume crystallizes the findings of a five year study under the auspices of the population health program of the canadian institute for advanced research that probed the links between social hierarchy the macroenvironmental factors in illness patterns the quality of the microenvironmental and other determinants of health in its aggregate this volume will prove essential to an understanding of the underlying public health issues for the next several decades

economic valuation of health for environmental policy comparing alternative approaches introduction and overview protecting human health is a primary goal of environmental policy and economic evaluation of health can help policy makers judge the relative worth of alternative actions economists use two distinct approaches in normatively evaluating health whereas environmental economists use benefit cost analysis supported by monetary valuation in terms of willingness to pay health economists evaluate interventions based on cost effectiveness or cost utility analysis cea using quality adjusted life years qaly or similar indexes this paper provides background on the controversy about the relative merits of these approaches and introduces the remaining papers in the special issue these papers with one exception were presented at a conference sponsored by the department of economics at the university of central florida with support from the us environmental protection agency although cea might not lead to substantially different implications for environmental policy than benefit cost analysis and qaly may provide a benefit transfer tool to fill gaps in the morbidity valuation literature the papers in this issue raise serious concerns about the suitability of qaly based cea for environmental regulatory analysis qaly does not in general appropriately represent individual preferences for health and cea is neither independent of income distribution nor adequate to assess efficiency

product market imperfections job content differences and gender employment discrimination at the management level some evidence from the canadian manufacturing sector in 1971 and 1981 this paper presents a regression model of the relative employment level of female managers using data for 1971 and 1981 on a forty one industry sample drawn from the canadian manufacturing sector the object of the analysis is to test the neoclassical proposition that employment discrimination here against females is fostered by imperfect product market conditions in addition the model allows for the open nature of the canadian economy and for interindustry differences in the job and skill content of managerial occupations the results support the neoclassical view and as well emphasize the importance of post secondary education to the employment of females at the management level

wealthier is healthier we estimate the effect of income on health using cross country timeseries data on health infant and child mortality and life expectancy and income per capita we use instrumental variables estimates using exogenous determinants of income growth to identify the pure income effect on health isolated from reverse causation or incidental association the long run income elasticity of infant and child mortality in developing countries lies between 0 2 and 0 4 using these estimates we calculate that over a half a million child deaths in the developing world in 1990 alone can be attributed to the poor economic performance in the 1980s

health and income a robust comparison of canada and the us abstract this paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time it is the first application of which we are aware of methods to compare multidimensional distributions of income and health using procedures that are robust to aggregation techniques the paper s approach is more general than comparisons of health gradients and does not require the estimation of health equivalent incomes we illustrate the approach by contrasting canada and the us using comparable data canada dominates the us over the bottom part of the bi dimensional distribution of health and income though not generally over the uni dimensional distributions of health or income the paper also finds that welfare for both canadians and americans has not unambiguously improved during the last decade over the joint distribution of income and health in spite of the fact that the uni dimensional distributions of income have clearly improved during that period

an analysis of the implications for stock and futures price volatility of program trading and dynamic hedging strategies the notion that a real security is redundant when it can be synthesized by a dynamic trading strategy ignores the informati onal role of real securities markets portfolio insurance uses a dyna mic strategy to synthesize a european put the absence of trading in an appropriate real put option prevents the transmittal of informatio n to market participants about the future price volatility associated with current dynamic hedging strategies less information is transmi tted to potential liquidity providers it will therefore be more di fficult for the market to absorb the trades implied by the dynamic he dging strategies and the stocks future price volatility will rise copyright 1988 by the university of chicago

international trade and industrial organization this survey reviews recent contributions to the interface between international trade and industrial organization import competition places a substantial limit on domestic market power in the short run competitive conditions can influence the speed and efficiency of a domestic market s adjustment to international disturbances exports effects on competition among national sellers are unclear and depend on the scope for price discrimination models of trade with monopolistic competition explain intra industry trade and also the widely observed sensitivity of firm size to market size exposure to trade also increases the technical efficiency of production diverse policy issues turn on the distinction between national and global welfare and the scope for commitment

uncertainty and the demand for medical care abstract this paper provides an analysis of the effects of uncertainty on the demand for medical care using a simplified version of grossman s human capital model of the demand for health two types of uncertainty are analysed the uncertainty surrounding the incidence of illness and the uncertainty surrounding the effectiveness of medical care in the first the consumer s basic level of health is assumed to be a random variable in the second the effectiveness of medical care is assumed to be random comparative static results are reported indicating the effects on the demand for medical care of both increases in the means of these distributions and mean preserving spreads of the distributions

the effect of income growth and inequality on health inequality theory and empirical evidence from the european panel governments of eu countries have declared that they would like to couple income growth with reductions in social inequalities in income and health we show that theoretically both aims can be reconciled only under very specific conditions concerning the type of growth and the income responsiveness of health we investigate whether these conditions were met in europe in the 1990s using panel data from the european community household panel we demonstrate that i in most countries the income elasticity of health was positive and increases with income and ii that income growth was not pro rich in most eu countries resulting in small or negligible reductions in income inequality the combination of both findings explains the modest increases we observe in income related health inequality in the majority of countries

intraday volatility in the stock index and stock index futures markets we examine the intraday relationship between returns and returns volatility in the stock index and stock index futures markets our results indicate a strong intermarket dependence in the volatility of the cash and futures returns price innovations that originate in either the stock or futures markets can predict the future volatility in the other market we show that this relationship persists even during periods in which the dependence in the returns themselves appears to weaken the findings are robust to controlling for potential market frictions such as asynchronous trading in the stock index our results have implications for understanding the pattern of information flows between the two markets article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

mark pauly on welfare economics normative rabbits from positive hats mark pauly s pauly 1994a editorial comment on labelle et al 1994a sows seeds whose harvest is a dangerous confusion of intellectual categories out of that confusion he dismisses as irrelevant an approach to the evaluation of social arrangements in health care that we and many others consider a useful normative framework and that is increasingly widely used this abstract was borrowed from another version of this item

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

defining health inequality why rawls succeeds where social welfare theory fails while there has been an important increase in methodological and empirical studies on health inequality not much has been written on the theoretical foundation of health inequality measurement we discuss several reasons why the classic welfare approach which is the foundation of income inequality analysis fails to provide a satisfactory foundation for health inequality analysis we propose an alternative approach which is more closely linked to the who concept of equity in health and is also consistent with the ethical principles espoused by rawls a theory of justice harvard university press cambridge ma 1971 this approach in its simplest form is shown to be closely related to the concentration curve when health and income are positively related thus the criteria presented in our paper provide an important theoretical foundation for empirical analysis using the concentration curve we explore the properties of these approaches by developing policy scenarios and examining how various ethical criteria affect government strategies for targeting health interventions

economic evaluation of health care programmes is cea better than cba it has been noted earlier that during the same period that the contingent valuation cv method evolved and became the most commonly used method of valuing environmental projects the development in health economics was instead been towards cost effectiveness analysis cea recently there has been a growing interest in the use of cea where qalys quality adjusted life years are used as a measure of effectiveness as the method of evaluation for environmental projects the purpose of this paper is to answer the question is cea a superior method to cba both theoretically and empirically to provide information to decision makers for use in decisions on resource allocation in health the paper deals with the following topics the underlying theoretical foundation for cea is cea free of income distribution considerations is qaly a superior measure to wtp the usefulness of incremental ce ratio icer to determine resource allocation the paper concludes that there is neither theoretical nor practical support for the claim about the superiority of cea

estimating a household production function heterogeneity the demand for health inputs and their effects on birth weight the household production literature emphasizes that technical or biological processes condition input selection by households in their production activities along with prices and income exogenous variations in health to the extent that they are perceived by individuals heterogeneity lead to correlations between inputs and health outcomes that cannot be used to derive causal conclusions therefore estimates of health technology must be obtained from a behavioral model in which health inputs are themselves choices consistent estimates are reported of the effect of endogenous inputs such as medical care smoking and fertility on birth weight and fetal growth in the presence of health heterogeneity

rising inequalities in income and health in china who is left behind during the last decades china has experienced double digit economic growth rates and rising inequality this paper implements a new decomposition on the china health and nutrition panel survey 1991 2006 to examine the extent to which changes in level and distribution of incomes and in income mobility are related to health disparities between rich and poor we find that health disparities in china relate to rising income inequality and in particular to the adverse health and income experience of older wo men but not to the growth rate of average incomes over the last decades these findings suggest that replacement incomes and pensions at older ages may be one of the most important policy levers in combating health disparities between rich and poor chinese

the normative economics of health care finance and provision whereas in many countries the crisis in medical care has been seen in terms of excess spending on health services in the uk it has been seen at least by most of those who manage and work in the nhs as a crisis of underfunding this has come about as the result of the government s successful attempts to restrain the rate of growth of real spending on the nhs which in turn reflects the government s belief that its principal effective weapon against what it perceives to be inefficiency in the nhs is to challenge management itself reformed and to some extent liberated by systematic financial squeezes the same concern has given rise to a host of proposals for reform of the nhs most of which involve a much greater role for private insurance private finance of other kinds such as out of pocket payments and private provision of health care itself

expiration and maturity effect empirical evidence from the spanish spot and futures stock index the paper studies how the time remaining to the expiration date of derivative markets affects the volatility of the ibex 35 index expiration effect and its futures market maturity effect the innovation of the study lies in both effects being studied together for the spanish stock market using bivariate ecm garch including dummy variables that express the time left to expiration day the results obtained show that during the week of the expiration day the conditional variance of both markets increases without presenting any significant behaviour in the correlation level during the second week however the conditional variance diminishes and the degree of correlation between both markets increases

performance in living standards abstract our ultimate objective is to enhance the standard of living of our societies but the standard of living has different meanings for different people a thorough investigation of the concept of the standard of living has been made only recently by sen who defines it in terms of functioning and capabilities functioning is an achievement whereas capability is the ability to achieve the main objective of the present paper is to compare achievements levels and improvement changes in the standard of living across countries using an axiomatic approach an achievement index is derived which accomodates the view that a further increase in the standard of living of a country when it is already at a higher level signifies an achievement greater than that of another with an equal increase but from a lower base the paper also tests for the statistical relationship between indicators of the countries standards of living so derived in their capita gdp the question posed is whether the aggregate income which provides people with the means to achieve a better life can be used as proxy measure of the standard living and extent to which the country s improvement in the standard of living can be explained by the levels and changes in the per capita income the analysis presented in the paper is based on the data from 80 developing countries

intergenerational health mobility an empirical approach based on the echp despite the importance of the study of health mobility few attempts have been made to measure intergenerational mobility not only in the european union but also in other countries such as united states this article is focused on the study of intergenerational health mobility using data from the european community household panel echp in particular the relationships between self assessed health of parents and their sons are analysed the evidence obtained suggests that in spain sons reported health depends significantly on the self assessed health of their fathers

competition small business financing and discrimination evidence from a new survey we analyze credit applications loan denials and interest rates paid by small businesses across owner gender race and ethnicity in addition we examine data from owners who said they did not apply for credit because they believed that their applications would have been turned down after controlling for a rich set of explanatory variables including personal and business credit histories substantial differences in denial rates between firms owned by african americans and white males remain moreover consistent with becker s classic theories 1957 we find evidence that increases in competition in the firm s local banking market reduces these differences

simple analytics of productive consumption productive consumption adds to utility and income at the same time the shadow price of a productive good is equal to its money price less its marginal product as more of the good is consumed its shadow price rises because of diminishing productivity and the consumer s full income also rises because the marginal product is positive this paper uses a simple method to derive the comparative statics of the demand system when shadow prices and full income are endogenous the direction of the overall bias induced by endogenous prices and income is found to be determinate we demonstrate that the demand for productive goods tends to be relatively unresponsive to exogenous changes in prices and income we also show that labor supply will be relatively unresponsive to wage and unearned income if market work causes fatigue

a review article the case against the use of the sum of compensating variations in cost benefit analysis this paper presents a case against the use of the sum of compensating varia tions as a cost benefit test we argue that 1 the ethical judginents implied by the test are not defensible 2 positive sums of compensating variations occur without potential pareto improvements resulting in social preference reversals without simultaneous scitovsky re versals 3 when lump sum transfers are feasible a positive sum of compensating variations is necessary but not sufficient for a potential pareto improvement 4 in order to eliminate preference reversals and intransitivities all households must have almost identical quasi homothetic preferences a condition that is not satisfied in real economies