the butterfly effect of small open economies abstract the rational expectations equilibrium of a small open economy can be subject to indeterminacy if foreign monetary policy does not satisfy the taylor principle we study the implications of foreign induced indeterminacy in the two country version of the sticky price small open economy model our main finding is that smallness is a property of the unique rational expectations equilibrium of the large economy and not a general property of the small open economy model if the large economy fails to anchor expectations shocks to the small economy can affect the large one this form of indeterminacy gives rise to a butterfly effect additional assumptions are required to preserve the smallness of the small economy

strategic pricing signalling and costly information acquisition abstract consider a market where an informed monopolist sets the price for a good or asset with a value unknown to potential buyers upon observing the price buyers may pay some cost for information about the value before deciding on purchases under a belief restriction which generalizes the idea of the cho kreps intuitive criterion we establish a version of the grossman stiglitz paradox there is no separating equilibrium with fully revealing prices yet we also resolve the paradox there is a unique equilibrium and as the cost of information becomes small the equilibrium approaches the full information outcome and prices become perfectly revealing

a century of research on agricultural markets this article provides a perspective on major innovations in research on agricultural markets over the past century we review research on market structure and performance vertical coordination arrangements and institutions for producer collective action contributions to empirical modeling of agricultural price determination and marketing margins are also evaluated as are innovations in research on spatial market relationships and the role of storage finally we discuss contributions to understanding market information systems and the functioning of market based mechanisms for agri

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

the determinants of earnings a behavioral approach we survey the determinants of earnings and propose a framework for understanding labor market success we suggest that the advantages of the children of successful parents go considerably beyond the benefits of superior education the inheritance of wealth or the genetic inheritance of cognitive ability we suggest that noncognitive personality variables such as attitudes towards risk ability to adapt to new economic conditions hard work and the rate of time preference affect both earning and the transmission of economic status across generations

high and declining prices signal product quality high and declining prices signal a high quality product high prices are the efficient means of signaling because the consequent loss of sales volume is most damaging for lower cost lower quality products as time passes and the number of informed consumers increases the signaling distortion lessens resulting in a declining price profile the prediction of high and declining prices is robust across a variety of dynamic models and is consistent with recent empirical findings copyright 1991 by american economic association

does schooling cause growth a number of economists find that growth and schooling are highly correlated across countries a model is examined in which the ability to build on the human capital of one s elders plays an important role in linking growth to schooling the model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on mincerian returns to education the upshot is that the impact of schooling on growth explains less than one third of the empirical cross country relationship the ability of reverse causality to explain this empirical relationship is also investigated

if exchange rates are random walks then almost everything we say about monetary policy is wrong the key question asked by standard monetary models used for policy analysis how do changes in short term interest rates affect the economy all of the standard models imply that such changes in interest rates affect the economy by altering the conditional means of the macroeconomic aggregates and have no effect on the conditional variances of these aggregates we argue that the data on exchange rates imply nearly the opposite the observation that exchange rates are approximately random walks implies that fluctuations in interest rates are associated with nearly one for one changes in conditional variances and nearly no changes in conditional means in this sense standard monetary models capture essentially none of what is going on in the data we thus argue that almost everything we say about monetary policy using these models is wrong replaces working paper no 650

the o ring sector and the foolproof sector an explanation for skill externalities abstract differences in worker skill cause modest differences in wages within a country but are associated with massive differences in productivity across countries hanushek and kimko 2000 i build upon kremer s 1993 o ring theory of production to explain this stylized fact i posit that there are two kinds of jobs o ring jobs where strategic complementarities to skill are large and a diminishing returns foolproof sector where two mediocre workers provide the same effective labor as one excellent worker both production functions are available to each country in equilibrium an econometrician would only see small returns to skill within a country in a world where countries vary only slightly in the average skill of workers these assumptions are sufficient to generate massive differences in cross country income inequality while generating only small amounts of intra country income inequality

two part pricing for experience goods in the presence of adverse selection abstract because customers learn something when they purchase an experience good for the first time a firm selling experience goods may face different demand curves from new and repeat customers the firm can exploit these differences by using a two part pricing strategy to price discriminate between new and repeat customers the firm may also use a two part pricing strategy to mitigate the information problems of adverse selection when its quality is uncertain the analysis is particularly applicable to service markets where customers and firms seek long term relationships and firms maintain customer records which facilitate price discrimination

solving linear rational expectations models with predictable structural changes abstract standard solution methods for linear stochastic models with rational expectations presuppose a time invariant structure consequently credible announcements that entail future changes of the structure cannot be handled by standard solution methods this paper develops the solution for linear stochastic rational expectations models in the face of a finite sequence of anticipated structural changes these events encompass anticipated changes to the structural parameters and also anticipated additive shocks we apply the solution to some examples of practical relevance to monetary policy

how should food safety certification be financed an analytical framework where consumers are imperfectly informed about the safety of products is used to investigate the welfare effects of a public certification system several certification fees under alternative structures of certification cost are analyzed by maintaining competition among numerous sellers voluntary certification financed by a per unit fee is efficient and sufficient to signal product safety however mandatory certification linked with a fixed user fee may be necessary if a seller wields monopoly power further certification by a single private agency results in a distorted fee copyright 2001 oxford university press

iq and income inequality in a sample of sibling pairs from advantaged family backgrounds the bell curve richard herrnstein and murray 1994 presented data on the independent effect of iq on a wide variety of social and economic outcomes for members of the national longitudinal survey of youth nlsy to control for socioeconomic background we constructed an index using the standard three indicators parental education occupation and income among the many threads in the response to the bell curve the following question arose how much would the independent effect of iq have been attenuated if a broader set of family background variables had been used as controls to test this sanders korenman and christopher winship conducted a fixedeffects analysis of the large number of siblings within the nlsy in effect controlling not just for socioeconomic status but for everything in the shared environment of the family the results were that w ith a few exceptions the fixed effects estimates for afqt the cognitive test used in the nlsy are remarkably similar to the standard ols and logit estimates korenman and winship 2000 p 146 the independent effect of iq is robust across methods i subsequently conducted my own analysis of the nlsy siblings for a publication on income inequality and iq murray 1998 in the course of that work another aspect of sibling analysis struck me the procedure which is used in this paper as well begins by identifying every sibling pair in which one sibling had scored in the normal range defined as a tested iq of 90 109 and the other member of the pair had scored somewhere outside that range those in the normal range were used as the reference group against which sibling outcomes were compared i then limited the sample to full biological siblings to take genetics out of the picture and further limited the sample to sibling pairs in which the siblings had lived with both biological parents for at least seven years after birth to minimize differential family backgrounds arising from divorce and remarriage both limits on the sample were essential to preserve the virtues of the sibling comparison but notice what had been done in the process in applying those conditions the sibling sample represented a population in which all parents were wed when the child was born zero illegitimacy and all young children were brought up by both biological parents during their most formative years zero early divorce such a population is one that has achieved much of what we ideally want to achieve through social policy the thought occurred to me why not complete the process having already created a sample without illegitimacy and early divorce why not slay as well the great beast of social policy poverty to achieve that i lopped off the sibling pairs whose parents were anywhere in the bottom 25 percent of the income distribution as of 1978 1979 when the nlsy began this produced a sample of 733 sibling pairs who grew up in households which by 1978 1979 had a median parental family income of 64 586 and a minimum income of 30 486 expressed in 2000 dollars for practical purposes i had by this process nearly achieved the utopia of income distribution as defined by many one in which the lowest income is half the median income i hereby dub these 733 pairs the utopian sample it is utopian not just because it has virtually no illegitimacy divorce and poverty the way it has been selected has also necessarily effected drastic improvements in the neighborhoods peers and educational systems which the youths attended the members of the utopian sample had a big edge in their potential access to college both economically and because the sample is highly selected for the kind of parents who actively encourage their children to continue their educations the same selection factors mean that i have created a sample in american enterprise institute 1150 17th street n w washington dc 20036

iq and economic growth further augmentation of mankiw romer weil model abstract solow s growth model is further augmented to include iq in addition to proxies for education and health the estimates indicate that iq variable greatly erodes the size and significance of education and health parameters and dominates even a measure of institutional quality

iq in the production function evidence from immigrant earnings the cross country growth literature especially sala i martin 1997 sala i martin doppelhofer and miller 2004 has found that traditional education measures rarely have a robust relationship with growth and productivity elementary education being a rare exception by contrast a new empirical growth literature jones and schneider 2006 lynn and vanhanen 2002 ram 2007 weede 2004 weede and kampf 2002 has shown that a nation s average iq has a remarkably robust relationship with its productivity figure 1 that a test designed by psychologists should have such a robust relationship with economic variables is a puzzle that demands explanation for instance jones and schneider showed that national average iq was more robust than other human capital variables and was statistically significant at the 1 level in all 455 growth regressions that controlled for all 18 factors that passed sala i martin doppelhofer and miller s 2004 robustness tests of course as with all the growth regression literature a key difficulty is disentangling cause and effect thus in this article we run no growth regressions whatsoever instead we perform a simple calibration of the iq productivity relationship based on widely agreed upon microeconomic parameters that means we can directly estimate one causal channel running from cognitive ability to productivity in the process we learn the following 1 if one knows the average iq of a nation s citizens as estimated by lynn and vanhanen 2002 2006 one can predict the average wages that immigrants from that country will earn upon their arrival in the united states whether or not one controls for immigrant education and even if the test is completely visual rather than verbal in other words national average iq predicts part of what hendricks 2002 calls unmeasured worker skill 2 we find that a 1 point increase in national average iq predicts 1 higher immigrant wages precisely the value found repeatedly in microeconometric studies note that by construction 1 iq point approximately equal to 1 15th of a standard deviation within any large national population together points 1 and 2 provide further evidence that cross country iq tests are valid predictors of worker productivity 3 when iq is added to the production function in the form implied by traditional externality free human capital theory differences in national average iq are quantitatively significant in explaining cross country income differences that said our productivity accounting exercise does not resolve the puzzle of why high iq countries are 15 times richer than low iq countries in a related vein hanushek and kimko 2000 use national math and science test scores to verify that cognitive skills appear to matter more for groups than for individuals like us they use immigrants to the united states as a way to test whether immigrants bring their home country productivity levels along with them when they immigrate to the united states when they interpret their results within a solow type framework they conclude that the cross country growth equation results are much larger than the corresponding results for individual earnings in sum our article rigorously explores the quantitative magnitude of the puzzle uncovered by hanushek and kimko 2000 and hanushek and woessman 2007 but by using iq tests rather than other widely used math and science test scores we can often double our sample size while simultaneously using the most widely analyzed best understood form of cognitive test we begin with an overview of the recent psychological literature on the validity of iq tests and then proceed to our discussion of the link between iq and immigrant wages the discussion of iq and immigrant wages yields a key parameter gamma the iq semi elasticity of wages which we use in our development accounting exercise we then discuss the questions of reverse causality and trends in the iq productivity relationship over the past 40 yr and conclude by discussing how our results fit into the growth literature

welfare gains from quality certification of infant foods results from a market experiment in mali in low income countries malnutrition is often most severe among infants of six to twenty four months they need higher density foods than the family diet but density is a credence attribute we hypothesize that the premium now paid for heavily advertised brands reflects demand for quality assurance which could be provided at lower cost to competing firms through third party certification we use a new market experiment to find that mothers average willingness to pay for certification is about 1 75 kg or four times its cost so that total economic surplus gains from introducing certification to mali would be on the order of 1 million annually

pleasures of cockaigne quality gaps market structure and the amount of grading the article explores under what circumstances high quality producers would not voluntarily submit to grading when low quality firms would readily do so and under what conditions high quality firms would have a lesser proportion of their output graded than would their low quality counterparts it also investigates how market structure affects the decison to grade establishing that a competitive industry carries out the optimal amount of grading when some firms have finite market shares the industry engages in excessive grading

the combination of gravity and welfare approaches for evaluating nontariff measures this article explores the link between gravity and welfare frameworks for measuring the impact of nontariff measures first an analytical approach suggests how to combine a gravity equation with a partial equilibrium model to determine the welfare impact of nontariff measures second an empirical application focuses on the effects of a standard that caps antibiotic residues in crustaceans in the united states the european union canada and japan while the econometric estimation of the gravity equation reports a negative impact on imports welfare evaluations show that in most cases a stricter standard leads to an increase in both domestic and international welfare

imperfect product testing and market size we consider an imperfect test of product quality and ask how it interacts with adverse selection to affect market size although one might expect adverse selection to be mitigated there are scenarios where it is exacerbated also two counter intuitive comparative static results emerge first a small increase in the test cost can increase the equilibrium expected profits earned by sellers of higher quality units and so expand the market second the equilibrium expected profits earned by sellers with lower quality units can be increased by a small improvement in the accuracy of an imperfect test

is the test score decline responsible for the productivity growth decline the test score decline between 1967 and 1980 was large about 1 25 grade level equivalents and historically unprecedented new estimates of the trends in academic achievement of the effect of academic achievement on productivity and of trends in the quality of the work force are developed the test score decline did not cause the post 1965 productivity growth slowdown but it did contribute to its perpetuation if test scores had continued to grow after 1967 at the rate prevailing in the previous quarter century labor force quality would have been 2 9 percent 86 billion greater in 1987 5 5 percent greater in 2000 and 6 7 percent greater in 2010 copyright 1989 by american economic association

financial shocks and the maturity of the monetary policy rate abstract monetary policy is typically formulated with a very short term interest rate while longer rates matter in the transmission mechanism we show that financial market shocks impact less on the macroeconomy if policy is set with a longer rate

multidimensional separating equilibria and moral hazard an empirical study of national football league contract negotiations this paper empirically tests for a multidimensional separating equilibrium in contract negotiations and tests for evidence of the moral hazard inherent in many contracts using contract and performance data on players drafted into the national football league from 1986 through 1991 we find evidence that players use delay to agreement and incentive clauses to reveal their private information during contract negotiations in addition our empirical tests of the moral hazard issue indicate that a player s effort level is influenced by the structure of his contract

quality signaling through certification in developing countries this paper studies how signaling the credence attributes of consumer goods distorts their market equilibrium in developing countries costs of certification sunk in order to achieve credibility play a key role in producing an oligopolistic market leading to high prices that form a barrier for consumers in the south to lower the cost certification is better achieved by a single independent body which can be financed either by end consumers through a fee or by public subsidies the paper identifies the conditions under which each funding mechanism is most efficient taking into account the government s budget constraint the theoretical analysis is motivated with reference to agricultural seed certification

imperfect credibility and the zero lower bound as the nominal interest rate cannot fall below zero a central bank with imperfect credibility faces a significant challenge to stabilize the economy in a new keynesian model during a large recession we characterize the optimal monetary policy at the zero lower bound for the nominal interest rate if credibility is imperfect confronting monetary policy communication of the u s federal reserve and the swedish riksbank with such a framework the credibility of both institutions is shown to have been low in the aftermath of the 2008 economic crisis

the effectiveness of conventional and unconventional monetary policy evidence from a structural dynamic factor model for japan abstract i investigate the effectiveness of both conventional and unconventional japanese monetary policy measures targeting either the short term interest rate or the monetary base using a 1985 2014 data set covering 135 variables the analysis is based on a structural dynamic factor model an expansionary monetary policy shock identified via theoretically plausible sign restrictions is found to significantly increase real and nominal economic activity with regard to the policy instrument its effectiveness differs a shock that decreases the short term interest rate has a strong positive effect on output and a modest effect on prices a monetary policy shock that raises the monetary base has a positive but weak and rather transitory effect on output and a strong effect on goods and stock prices

the economics of eco labeling standards costs and prices abstract the existing eco label landscape is fragmented because of the presence of numerous labels with different standards and is a pre competitive environment for firms to play in with many unanswered questions different standards eco labels are built around have different effects on credibility and legitimacy costs and benefits and ability to achieve sustainability goals of eco labeling focusing on eco label standards and using a hotelling type horizontal differentiation model we identify standards specific issues for and characterize primary barriers to eco labeling some of the major findings are as follows 1 more rigorous environmental standards enforced by higher integrity labels do not necessarily translate into higher selling prices 2 higher prices commanded by labeled products do not guarantee that a firm will derive higher profits from eco labeling 3 auditing fees paid per product unit being inspected for ensuring compliance with an eco label standard rather than participation fees paid up front is the primary de facto barrier to business involvement in eco labeling and 4 customers willingness to pay price premiums for eco labeled products is not a sufficient condition to generate a premium in the market

human capital and the wealth of nations we reevaluate the role of human capital in determining the wealth of nations we use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary across countries our model can explain differences in schooling and earnings profiles and consequently estimates of mincerian rates of return across countries we find that effective human capital per worker varies substantially across countries cross country differences in total factor productivity tfp are significantly smaller than found in previous studies our model implies that output per worker is highly responsive to changes in tfp and demographic variables jel e23 i25 j24 j31 o47 no question has perhaps attracted as much attention in the economics literature as why are some countries richer than others much of the current work traces back to the classic work of solow 1956 solow s seminal paper suggested that differ ences in the rates at which capital is accumulated could account for differences in output per capita more recently following the work of lucas 1988 human capital disparities were given a central role in the analysis of growth and development however the best recent work on the topic reaches the opposite conclusion klenow and rodriguez clare 1997 hall and jones 1999 parente and prescott 2000 and bils and klenow 2000 argue that most of the cross country differences in output per worker are not driven by differences in human capital or physical capital rather they are due to differences in a residual total factor productivity tfp in this paper we revisit the development problem in line with the earlier view we find that factor accumulation is more important than tfp in accounting for relative incomes across countries the key difference between our work and previous analyses is in the measurement of human capital the standard approach largely inspired by the work of mincer 1974 takes estimates of the rate of return to schooling as building blocks to directly measure a country s stock of human capital implicitly this method assumes that the marginal contribution to output of one additional year

a macro finance model of the term structure monetary policy and the economy this paper develops and estimates a macro finance model that combines a canonical affine no arbitrage finance specification of the term structure with standard macroeconomic aggregate relationships for output and inflation from this new empirical formulation we obtain several interesting results 1 the latent term structure factors from finance no arbitrage models appear to have important macroeconomic and monetary policy underpinnings 2 there is no evidence of monetary policy inertia or a slow partial adjustment of the policy interest rate by the federal reserve and 3 both forward looking and backward looking elements play important roles in macroeconomic dynamics

no such thing as a free safe lunch the cost of food safety regulation in the meat industry this study develops theoretical and econometric cost function models for the meat industry to test the hypothesis of safety exogeneity i e that product safety does not affect productive efficiency using plant level data from the census of manufactures this hypothesis is rejected estimates of the impacts of food safety regulation on variable cost of production in the beef pork and poultry industries show that the efficiency costs of food safety regulations could plausibly exceed benefits estimated by the u s department of agriculture costs of regulation per pound of meat are found to be size neutral for all but the smallest plants copyright 2000 oxford university press

on the economics of labels how their introduction affects the functioning of markets and the welfare of all participants are labels good or bad for consumers and firms the answer may seem straightforward since labels improve information yet economic theory reveals situations where their introduction reduces the welfare of at least some market participants this essay reviews the theoretical literature on labels in order to identify and explain the main reasons that may cause labeling to produce undesirable side effects in contrast to earlier reviews that either concentrate on narrow topics or treat the subject in a more or less informal way we bring together the main results from all the relevant topics by presenting and discussing the assumptions and model building techniques that underpin them the advantage of this approach is that it identifies the origin of the differences between results thus allowing the synthesis of results that sometimes appear even to be contradictory we focus on quality labels and examine the impact of labeling on market structure the side effects of costly certification issues related to the label s trustworthiness the rationale for mandatory vs voluntary labeling the level at which the label s standard is set according to the agency that selects it the political economy of labels that is pro or anti label lobbying lobbying to affect the label s standard and lobbying in favor or against the label s mandatory imposition these topics cover a wide range of applications including genetically modified organism gmos organic produce geographic indicators controlled origin eco labels etc we conclude by identifying topics that require further research

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

why do europeans work much less it is taxes and government spending i introduction the reason why europeans work less than americans is the subject of intense discussion in recent literature prescott 2004 cardia kozhaya and ruge murcia 2003 and roeger and de fiore 1999 emphasize the negative effects of high taxes in europe other authors like blanchard 2004 and alesina glaeser and sacerdote 2005 point to differences in the desire for leisure cultural differences or differences in unionization and labor market regulations may be at the basis of a higher european taste for leisure freeman and schettkat 2005 explain higher employment in the united states as the result of a much more extensive shift of traditional household production to the market lower taxes on wages and higher degrees of labor market flexibility in the united states may be among the factors that have contributed to this shift there is no doubt that these hypotheses contain relevant elements to account for the employment differences between europe and the united states however they are also incomplete first of all each of these hypotheses will have difficulty explaining employment in the nordic countries countries like sweden norway and denmark also have high taxes which increased during the last decades according to nicoletti and scarpetta 2005 they also combine many of the european labor and product market rigidities yet as we show in table 1 for 19952004 the average employment rate in persons in the nordic countries is about the same as in the united states the employment rate in hours is lower than in the united states but it is still much higher than in the core countries of the euro area or in convergence countries like spain and ireland second these explanations ignore the other side of the performance gap between europe and the united states they neglect per capita growth differences a coherent theory should also be able to explain why in the last decade most of the core countries of the euro area have had lower potential per capita growth than the united states while again several of the nordic countries have performed at least as well as the united states or even better table 1 1 our contribution in this paper is double first we explain not only employment differences between the united states and europe as most of the above mentioned literature does but also employment differences within europe 2 second our explanation also accounts for per capita growth differences a critical explanatory variable in our analysis is the composition of fiscal policy taxes are important but not only taxes the allocation of government spending to productive or nonproductive purposes is at least as important by contrast our results would suggest that any differences in taste for leisure or labor market rigidity are not critical the structure of the paper is as follows in section ii we develop a theoretical model that explains both employment and long run growth within a coherent framework we basically build on seminal work by barro 1990 we show the impact of income taxes transfers in the case of nonemployment and productive government expenditures in section ill we calibrate the model on actual data and compare its predictions with the facts reported in table 1 it should be clear from the outset that we take fiscal policy differences across countries as given we investigate their effects on employment and growth but we do not try to explain why policy differs this approach is not unusual in related literature like roeger and de fiore 1999 cardia kozhaya and ruge murcia 2003 and prescott 2004 section iv concludes the paper anticipating we find that our model explains well employment in the united states is higher than in the core euro area thanks to lower income tax rates and much lower transfers in the case of nonemployment the nordic countries have higher employment than the core euro area mainly thanks to a higher share of productive government expenditures and lower nonemployment transfers

long term interest rates risk premia and unconventional monetary policy abstract we study two kinds of unconventional monetary policies announcements about the future path of the short term rate and long term nominal interest rates as operating instruments of monetary policy we do so in a model where the risk premium on long term debt is in part endogenously determined we find that both policies are consistent with unique equilibria that at the zero lower bound announcements about the future path of the short term rate can lower long term interest rates through their impact both on expectations and on the risk premium and that long term interest rate rules perform as well as and at times better than conventional taylor rules with simulations we show that long term interest rate rules generate sensible dynamics both when in operation and when expected to be applied

how important is human capital for development evidence from immigrant earnings this paper offers new evidence on the sources of cross country income differences it exploits the idea that observing immigrant workers from different countries in the same labor market provides an opportunity to estimate their human capital endowments these estimates suggest that human and physical capital account for only a fraction of cross country income differences for countries below 40 of the us output per worker less than half of the output gap relative to the us is attributed to human and physical capital

the evolution of human life expectancy and intelligence in hunter gatherer economies the economics of hunting and gathering must have driven the biological evolution of human characteristics since hunter gatherer societies prevailed for the two million years of human history these societies feature huge intergenerational resource flows suggesting that these resource flows should replace fertility as the key demographic consideration it is then theoretically expected that life expectancy and brain size would increase simultaneously as apparently occurred during our evolutionary history the brain here is considered as a direct form of bodily investment but also crucially as facilitating further indirect investment by means of learning by doing

ethics welfare and markets an economic analysis the present article examines society s welfare when goods with identical physical attributes can be produced using two alternative technologies one of them less ethically desirable but less expensive for at least some producers for the scenario where identification costs must be borne by producers and consumers of the high quality good the outcome under unregulated markets is identical to the optimal solution of a central planner constrained to neither ban the undesirable technology nor segregate the low quality good however under certain circumstances the unregulated market equilibrium may be improved upon by government intervention that shifts the burden of identification costs to the producers of the low quality good or which bans the production of the low quality good the optimal intervention needs to be determined case by case and depends on consumer preferences relative production costs and relative costs of identification and fraud prevention

are entrepreneurship and cognitive skills related some international evidence do national differences in cognitive skills cs predict a nation s likelihood of generating high quality entrepreneurs who create and expand high value businesses we answer this question by estimating cross country regressions that use the acs and szerb global entrepreneurship development index gedi and a measure of national cs after including conventional controls we find for a sample of 60 countries that our measure of cs robustly predicts the gedi unconditional correlation 0 65 standardized beta 0 42 an index that gives weight to both entrepreneurial attitudes within a nation and the institutional and economic prerequisites for creating high value high growth firms we find that this result also holds for an alternative measure of entrepreneurship

the personal discount rate evidence from military downsizing programs the military drawdown program of the early 1990s provides an opportunity to obtain estimates of personal discount rates based on large numbers of people making real choices involving large sums the program offered over 65 000 separatees the choice between an annuity and a lump sum payment despite break even discount rates exceeding 17 percent most of the separatees selected the lump sum saving taxpayers 1 7 billion in separation costs estimates of discount rates range from 0 to over 30 percent and vary with education age race sex number of dependents ability test score and the size of payment

a market based approach to child nutrition mothers demand for quality certification of infant foods in bamako mali this paper analyses the potential impact of introducing quality certification to the market for infant foods in a very low income country where malnutrition is widespread using an experimental economics approach we find that a program to sample test and certify the nutrient density of products could promote a more competitive market for low cost fortified foods and be implemented on a self financing basis yielding net economic benefits on the order of us 1 million per year in the city of bamako we find that mothers demand for quality information rises with their education and income level but is higher than the estimated cost of certification even among the very poor and uneducated