benefit entitlement and unemployment duration the role of policy endogeneity abstract the potential duration of benefits is generally viewed as an important determinant of unemployment duration this paper evaluates a unique policy change that prolonged entitlement to regular unemployment benefits from 30 weeks to a maximum of 209 weeks for elderly individuals in certain regions of austria in the evaluation we explicitly account for the fact that the program was an endogenous policy response to deteriorating labor market conditions for older workers in certain regions and sectors the main results are i rebp reduced the transition rate to jobs by 17 ii accounting for endogenous policy adoption is important and quantitatively significant

extended benefits and the duration of ui spells evidence from the new jersey extended benefit program abstract this paper examines the impact on the duration of unemployment insurance receipt of a politically motivated program that offered 13 weeks of extended benefits for 6 months in 1996 using state level data and individual administrative records from before during and after the program we find that it raised the fraction of claimants who exhausted their regular benefits by 1 3 percentage points had the program run long enough to affect claimants from the first day of their spell the fraction exhausting would have risen by 7 percentage points and the average recipient would have collected regular benefits for one extra week

why do different countries choose a different public private mix of educational services we observe a wide range across countries in the percentage of total enrollments that attend private rather than public schools this paper seeks to explain 1 the systematically higher proportion of private enrollments pvt in developing as compared with developed countries at the secondary level and 2 the seemingly random variation across countries within a given level of education and stage of development i argue that the latter is due to differentiated demand and nonprofit supply both of which stem from cultural heterogeneity especially religious heterogeneity in contrast the large pvt at the secondary level in developing countries is hypothesized to stem from limited public spending which creates an excess demand from people who would prefer to use the public schools but are involuntarily excluded and pushed into the private sector the limited public spending on secondary education in turn is modelled as a collective decision which is strongly influenced by the

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

an economic rationale for public education the value of commitment abstract this paper offers an explanation for the widespread phenomenon of uniform public schooling which is viewed here as a way for the government to precommit itself to restraints on future income redistribution such precommitment is likely to enhance accumulation of human capital to bolster economic growth and under certain circumstances to constitute a preferred choice for a majority of voters

immigration redistribution and universal suffrage the effect of immigration on redistribution has been widely debated this paper contributes to this debate by testing two explanations which are that i immigration tends to reduce redistribution due to people s higher levels of xenophobia and that ii immigration affects redistribution because immigrants do not have the right to vote since the demand for redistribution depends on the expected gap between median voter income and mean income immigrants affect the demand for redistribution because as non citizens they do not change the median voter s income but as economic stakeholders they do affect the mean income four empirical consequences of i and ii are tested at the individual level evidence from the european values survey in 45 countries confirms ii showing that immigrants expected competitiveness on the labor market affects preferences for redistribution and that it is amplified when the perceived number of immigrants is high in contrast i is globally rejected since the impact of the citizens declared level of solidarity with immigrants tends to be weak and depends on the type of measurement or specification used

persistence survival and growth a closer look at 20 years of fast growing firms in austria for survival persistence and growth hifs show a much higher persistence than hgfs the average growth rate after the high growth episode is quite modest for both hifs and hgfs policy implications of the ndings are discussed

the political intergenerational welfare state abstract using a three period overlapping generations economy framework we characterize an intergenerational welfare state with endogenous education and pension under voting we show that although politically establishing pay as you go payg social security in isolation in a dynamically efficient economy will always reduce the capital investment and therefore the social welfare as expected in contrast politically implementing education pension policy package instead can improve both human and physical capital accumulation and social welfare over laissez faire however for this the political influence of the old has to be small thus limiting the size of the payg social security program

market externalities of large unemployment insurance extension programs we provide evidence that unemployment insurance affects equilibrium conditions in the labor market which creates significant market externalities we provide a framework for identification of such equilibrium effects and implement it using the regional extension benefit program rebp in austria which extended the duration of ui benefits for a large group of eligible workers in selected regions of austria we show that non eligible workers in rebp regions have higher job finding rates lower unemployment durations and a lower risk of long term unemployment we discuss the implications of our results for optimal ui policy jel e24 j64 j65 r23

unemployment insurance and male unemployment duration in canada a model of unemployment duration is estimated with weekly micro data on canadian men entitlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment the probability of a worker leaving unemployment declines with the duration of unemployment holding unemployment insurance entitlement constant when entitlement is allowed to vary the probability of leaving first falls and then generally rises with unemployment duration these results are robust with respect to allowing for person specific unobserved heterogeneity and alternative specifications of duration dependence

the impact of the potential duration of unemployment benefits on the duration of unemployment abstract this paper examines the impact of the potential duration of unemployment insurance ui benefits on unemployment in the united states first we use a large sample of household heads to examine differences in the unemployment spell distributions of ui recipients and nonrecipients sharp increases in the escape rate from unemployment both through recalls and new job acceptances are apparent for ui recipients around the time of benefits exhaustion such increases are not apparent at similar points of spell duration for nonrecipients second our analysis of accurate administrative data from 12 states indicates that a one week increase in potential benefit duration increases the average duration of the unemployment spells of ui recipients by 0 16 to 0 20 weeks

state infrastructure and productive performance recent research on productivity growth has focused on public infrastructure and its impact on economic growth and productivity the authors construct a model of firms technology and behavior taking advantage of the analytical framework provided in the cost function based applied production theory literature and apply it to state level data for u s manufacturing they find that infrastructure investment provides a significant return to manufacturing firms and augments productivity growth the net benefits of infrastructure investment may or may not be positive depending upon the social costs of infrastructure investment and the relative growth rates of output and infrastructure copyright 1996 by american economic association

politico economic equilibrium and economic growth abstract we propose a notion of dynamic politico economic equilibrium which builds on two key assumptions policies are determined sequentially and agents are fully rational in their roles as both consumers and voters we examine a simple model of endogenous growth and infinitely lived agents where taxes on income are endogenous and where growth critically depends on the initial distribution of asset holdings we relate our equilibrium definition and results to existing literature on time consistency and on political economy and growth we show that our equilibria are time consistent and we argue that the choice of equilibrium concept might have important quantitative implications

estimating and testing a model of welfare participation the case of supplementary benefits in britain evidence of incomplete participation in welfare programmes is often displayed this paper analyses how such apparent failures to participate can be explained by the presence of random errors in assessing benefit eligibility by income underreporting by benefit misreporting and by participation costs we apply the model to the receipts of supplementary benefits in britain a bivariate extension of the use of generalized residuals in testing the robustness of limited dependent variable models is provided and fails to reject a number of our stochastic assumptions

infrastructure investment a review essay economists try not to be faddists but they often cannot help themselves while work on a topic should mirror the prospective importance of the topic that situation seems to occur with disappointing frequency instead the usual pattern is that some reasonably important topic will be totally ignored for the longest time then recognized and then the subject of a flurry of work all out of proportion to its likely long run importance nowhere has this speculative bubble of economic research been more clearly illustrated than with infrastructure investment macroeconomists havelong felt that the stock of public capital is an important factor input in the production of total output macroeconomists have known that u s productivity growth slowed dramatically in about 1973 and macroeconomists should have known that united states investment in public capital has been down since the late 1960s yet analysis of the u s productivity slowdown completely ignored infrastructure investment for the first fifteen years of this slowdown concentrating instead on energy prices social regulation the composition of the work force research and development different rates of obsolescence of the private capital stock and any number of other matters the public capital stock was hardly ever even mentioned as a potential factor in the productivity slowdown aschauer changed all that he wrote a series of papers 1989a 1989b 1989c that put these two movements together econometrically infrastructure investment turned down and aggregate productivity turned down slightly later both in the united states and in some other developed countries his work hit the magic button those who had worried about the productivity puzzle for fifteen years welcomed a new suspect those who were worried about low rates of u s national saving welcomed a new way to make their argument even more forcefully than with official figures on saving and investment which do not count infrastructure investment as investment political liberals and liberal politicians saw a way to rescue government spending and projects from the assaults of reaganism and even a way to avoid oth

productivity enhancing public investment and benefit taxation the case of factor augmenting public inputs government expenditure on public inputs such as human capital formation and public infrastructure can significantly affect productivity an interesting and highly relevant policy question is whether such expenditure should be financed according to the benefit taxation principle focusing on factor augmenting public inputs in this paper we derive the specification of the appropriate set of benefit taxes rather than fall on industries according to the degree to which the public input increases their productivities these taxes must take the form of differential taxes on factor incomes jel classification h21 h54 les investissements publics accroissant la productivite et l imposition des avantages le cas des intrants publics qui augmentent la productivite des facteurs de production les depenses gouvernementales en intrants publics comme la formation de capital humain ou les infrastructures publiques peuvent affecter de maniere significative la productivite une question interessante et pertinente de politique publique est de savoir si des telles depenses devraient etre financees a l aide d un impot sur les avantages ainsi derives mettant l accent sur les intrants publics qui augmentent la productivite des facteurs ce memoire definit la specification des impots appropries sur les avantages tires de l investissement public plutot que de retomber sur les industries selon le degre d accroissement de productivite qui s ensuit ces impots doivent prendre la forme de taxes differentielles sur les revenus des divers facteurs de production

municipal government approaches to service delivery an analysis from a transactions cost perspective municipal governments are less likely to contract out for service delivery if citizen preferences for the service are heterogeneous this conclusion is based on an analysis that extends to the public sector the empirical industrial organization literature on transaction costs and the make or buy decision faced by private firms service delivery practices for sixty three municipal services are examined the findings are consistent with the proposition that the cost for writing and monitoring contracts may be an important consideration in municipal service delivery approach and that bureaucratic supply may not be as inefficient as some previous studies indicate

seniority wages and the role of firms in retirement in general retirement is seen as a pure labor supply phenomenon but firms can have strong incentives to send expensive older workers into retirement based on considerations about wage costs and replacement costs we discuss steep seniority wage profiles as incentives for firms to dismiss older workers before retirement conditional on individual retirement incentives e g social security wealth accrual rates or health status the steepness of the wage profile will have different incentives for workers as compared to firms to maintain the employment relationship using an instrumental variable approach to account for selection of workers in our firms and for reverse causality we find that firms with higher labor costs for older workers have on average a lower job exit age and a higher incidence of golden handshakes author s abstract

labor market effects of unemployment insurance design with the emergence of the great recession unemployment insurance ui is once again at the heart of the policy debate in this paper we review the recent theoretical and empirical evidence on the labor market effects of ui design we also discuss policy issues related to ui design including the structure of benefits the role of liquidity constraints and the pros and cons of a ui system in which the generosity of ui benefits is varying over the business cycle finally we identify potential areas of future research

public education reform community or national funding of education abstract i use a political economy model of public funding of education to evaluate the welfare implications of a move from a community to a nation wide funding policy broadening the scope of education finance has intragenerational redistribution effects as well as intergenerational effects previous studies have emphasized the intragenerational redistribution effects of moving from local to state financed systems while holding factor prices fixed the model in this paper includes a social security system and allows factor prices to vary endogenously i examine the welfare effects of broadening the scope of financing from a community to a nation wide system and find that there are very large welfare gains as voters internalize the effect of the education policy on both factor prices and social security benefits i also focus on the intergenerational distributional effects finding that significant welfare gains occur despite the displacement of the median voter to an older agent that cares less about children s well being

self interest and public funding of education abstract the objective of this paper is to study whether publicly funded education can emerge as a political and economic equilibrium in an overlapping generations economy in which selfish agents vote for public funding of education the presence of complementarities between capital and labor in the production function implies that by improving the skills of next period s workers public funding of education increases the return on capital as a result savers will support a publicly financed education system in order to enhance their future income a version of the model calibrated using u s data generates large shares of gnp allocated to education hence the non altruistic incentive to support public education is quantitatively important

dynamics of public infrastructure industrial productivity and profitability a restricted equilibrium framework is utilized to estimate the contribution of public investment in infrastructure to private sector profitability a restricted cost function in translog form which treats labor and materials as variable inputs and private capital and public sector capital stock in transportation communications and electricity as quasi fixed inputs is specified a system of non linear equations comprising variable cost function and derived input demand equations is estimated using data from 1970 to 1987 for twenty six mexican three digit manufacturing industries the divergence of private and public capital stocks from their static equilibrium levels is estimated the net rate of return to fixed factors is also calculated estimates of allocative efficiency are derived the study further provides estimates of short run and long run scale economies output elasticity of factors measures of productivity growth and technical change economic significance and policy implications of the findings are also presented copyright 1992 by mit press

intertemporal output and employment effects of public infrastructure capital evidence from 12 oecd economies this paper utilises an intertemporal optimisation framework to study the effects of public infrastructure capital on output supply and input demands in 12 oecd countries we find that in all 12 countries i public capital has positive long run effects on both output supply and input demands ii its mean short run rates of return are fairly low while the corresponding long run rates are much higher but declining over time these findings underscore important under investment gaps in infrastructure during the 1970s and 1980s these gaps however narrowed down significantly in a few cases completely by the early 1990s

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

a political theory of government debt and deficits in a neo ricardian framework in the presence of different abilities and therefore different bequests some individuals are bequest constrained even in a neo ricardian world such individuals vote for taxes on future generations through the issuance of bonds thereby increasing their current consumption this produces some crowding out of capital reduces wage rates and increases the interest rate as a consequence even unconstrained individuals are no longer indifferent to the size of government debt the paper derives conditions that are conducive to larger debt and deficits when each of the living generations determines current taxes social security benefits and the national debt by majority rule copyright 1989 by american economic association

canadian manufacturers relative productivity performance 1907 1990 in this paper i calculate tfp ratios for a sample of canadian manufacturers relative to their american counterparts on an annual basis throughout most of the twentieth century the data used to calculate these ratios are drawn from both industry level and firm level statistical sources i find that in contrast to the relative labour productivity evidence in the literature when tfp is used as the measuring stick there is virtually no evidence of consistent and substantial relative technical inefficiency on behalf of the canadian manufacturers represented in my sample jel classification d24 n60 dans ce memoire l auteur calcule les ratios de la productivite totale des facteurs de production ptf des manufacturiers canadiens par rapport a celle de leurs collegues americains sur une base annuelle pour la plus grande partie du vingtieme siecle les donnees utilisees sont tirees des sources statistiques tant au niveau de l industrie que de l entreprise on montre que contrairement a ce que suggere la litterature specialisee a propos de la productivite relative du travail quand la ptf est utilisee comme etalon de mesure on ne trouve vraiment pas vraiment de resultats qui suggereraient une inefficacite technique relative substantielle et persistante des manufacturiers canadiens de l echantillon

early retirement policy in the presence of competing exit pathways evidence from pension reforms in finland i study the effects of changes in the eligibility age thresholds for unemployment and part time pensions and the effect of tightening medical criteria for disability pension eligibility in finland particular attention is paid to the spillover effects of the pension reforms these pension reforms jointly raised the average age at which workers leave employment by 3 9 months mainly due to a sharp drop in disability pension enrolment from age 58 upwards and a lower incidence of unemployment at younger ages these effects are heterogeneous much of which is attributable to the spillover effects that vary across individuals

ends against the middle determining public service provision when there are private alternatives abstract public provision of a service coexists with private market provision the quality of public provision is determined by majority vote preferences are not single peaked owing to the presence of private alternatives we identify two cases in one majority voting equilibrium always exists and the median income voter is pivotal in the other a necessary condition for equilibrium indentifies the pivotal voter who must have income below the median when equilibrium exists a coalition of middle income households who consume the public alternative will be opposed by a coalition of rich and poor households with the rich choosing private consumption

public infrastructure and regional economic development a simultaneous equations approach an analysis of how central bank exchange market intervention can affect both the level of exchange rates and the risk premium in asset returns showing how the risk premium is related to the conditional variances of intervention and other exogenous processes

endogenous growth with public education abstract we investigate balanced aggregate growth in a model in which new knowledge is produced as an intermediate input and becomes embodied in all workers knowledge is a public input in the public goods sense we examine the institutional arrangement of taxing all labor income to pay for new knowledge production an optimal tax rate is characterized

does school quality matter returns to education and the characteristics of public schools in the united states this paper estimates the effects of school quality measured by the pupil teacher ratio average term length and relative teacher pay on the rate of return to education for men born between 1920 and 1949 using earnings data from the 1980 census we find that men who were educated in states with higher quality schools have a higher return to additional years of schooling rates of return are also higher for individuals from states with better educated teachers and with a higher fraction of female teachers holding constant school quality measures however we find no evidence that parental income or education affects average state level rates of return

public sector capital and the productivity puzzle a number of studies have suggested a quantitatively important relationship between public sector capital accumulation and private sector productivity with the most compelling evidence derived from analyses of state level data estimates herein of production functions that use standard techniques to control for unobserved state specific characteristics however reveal essentially no role for public sector capital in affecting private sector productivity only estimates of state production functions that do not include such controls find substantial productivity impacts this result reconciles existing econometric estimates with the findings of hulten and schwab based on growth accounting techniques as such techniques effectively control for state specific effects region level estimates are essentially identical to those from state data suggesting no quantitatively important spillover effects across states copyright 1994 by mit press

unemployment insurance and job duration in canada we use data from the canadian 2 year longitudinal labour market activity survey of 1986 87 to estimate the effect of the unemployment insurance ui system on job duration particular attention is focused on the entrance requirements of the ui system which relate eligibility for ui benefits to an individual s recent employment history the article makes operational the ui entrance requirement provisions which take into account variations in the regional unemployment rate controlling for many personal and job characteristics we find evidence that a significant number of jobs terminate when they have reached the duration that would permit a ui claim

benefit duration and unemployment entry a quasi experiment in austria apart from being an important aspect of job search behavior of individuals potential bene t duration can also have e2ects on unemployment entry rates in this paper the causal connection between the two is investigated for the case of austria using a quasi experimental situation that arose following the enactment of a law that extended bene t duration for older workers in speci c regions of the country unemployment entry is found to have risen between 4 and 11 percentage points due to the new law several robustness checks are presented to see if a causal interpretation of this result is possible preliminary analysis shows that this increase in unemployment entry can be best understood not as voluntary quits but layo2s by rms who want to get rid of high tenured and expensive older workers c

to segregate or to integrate education politics and democracy how is the quality of public education affected by the presence of private schools for the rich theory and evidence suggest that the link depends crucially on the political system we develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures we find that the presence of a large private education sector benefits public schools in a broad based democracy where politicians are responsive to low income families but crowds out public education spending in a society that is politically dominated by the rich the main predictions of the theory are consistent with state level data and micro data from the u s as well as cross country evidence from the programme for international student assessment study

an explanation for public provision of schooling the importance of indoctrination this article was completed while i was a national fellow at the hoover institution and represents the unpublished theory and cross country empirical sections from my 1984 university of california los angeles dissertation armen alchian harold demsetz gertrud fremling david friedman robert hansen ben klein ed lazear russell roberts finis welch e g west an unusually helpful anonymous referee from this journal and the participants in seminars at auburn university the university of california at los angeles and at davis california state university at hayward and northridge the hoover institution george mason university the university of houston southern methodist university the u s department of education texas a m university and the 1987 public choice meetings in tucson arizona provided valuable discussions i would like to thank maury pearl for very helpful research assistance any remaining errors are of course my responsibility

productivity in manufacturing industries canada japan and the united states 1953 1986 was the productivity slowdown reversed this paper analyzes total factor productivity growth and trends in relative efficiency levels in the national two digit manufacturing industries of japan canada and the united states during the last quarter century the well known slowdown in productivity growth rates in the 1973 80 period was a common phenomenon across the three countries but was felt most strongly in japan and least in canada while the 1980s saw a pick up in productivity growth over the slowdown period growth in productivity has not returned to the pre 1973 level the productivity slowdown and any subsequent increase in productivity growth rates have been correlated across industries in the three countries to a very high degree

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

financing higher education and majority voting abstract this paper examines the state funding of higher education treated as an investment good generating an externality under majority voting the model considers a single cohort over two periods individuals maximise net lifetime income subject to the government s budget constraint with a proportional tax cyclical voting does not occur despite double peaked preferences comparative static results are obtained a fall in non education expenditure leads to a fall in the choice of grant and a positive externality is a necessary though not sufficient condition for ensuring majority support for some positive level of the grant

public infrastructure and the productive performance of canadian manufacturing industries this article examines the effects of public infrastructure on the productive performance of 12 two digit canadian manufacturing industries a flexible cost function incorporating public capital infrastructure is estimated for each industry separately using annual time series data for 1961 1995 the effects of public infrastructure on productivity are measured in terms of both cost saving dual and output augmenting primal measures we also investigate how public capital influences the input demand and cost structure in each industry and calculate the rate of return to public capital the empirical results provide strong evidence of the important role public infrastructure plays in the productivity of manufacturing industries the public capital serves as a substitute for both private capital and labor in most industries the rates of return to public capital are significant and vary over the years

how changes in unemployment benefit duration affect the inflow into unemployment we study the effect of an unexpected reduction in maximum unemployment benefit duration on the inflow into unemployment of elderly workers in the netherlands we analyze the reduction as if it was a natural experiment finding substantial effects

job search requirements for unemployed at the end of working life effects on unemployment dynamics and self employment probabilities this paper investigates the extent to which job search requirements in unemployment insurance u i increase the probability of self employment as a retirement route for causal identification we apply a difference in differences approach using a dutch 2004 policy reform that introduced job search requirements in u i for persons aged 57 5 and older unemployment dynamics and self employment probabilities are studied using a dynamic multinomial logit model with unobserved heterogeneity the results suggest that job search requirements stimulated people to exit unemployment and discouraged older workers to enter unemployment the probability of self employment as an exit route to retirement increased relative to u i but not relative to paid employment

measuring the contribution of public infrastructure capital in sweden the authors purpose is to examine ways of evaluating and measuring the contribution of public infrastructure capital to private sector output and productivity growth in sweden they do this by specifying and implementing empirically a number of alternative econometric models using annual data for sweden from 1960 to 1988 applying a dual cost function approach they find that increases in public infrastructure capital ceteris paribus reduce private sector costs the authors compute that amount of public infrastructure capital that would rationalize the cost savings incurred by the private business and manufacturing sectors and find that the amount that can be rationalized in this manner is less than what was in fact available in 1988 but that the extent of excess public infrastructure capital has been falling in the 1980s copyright 1992 by the editors of the scandinavian journal of economics

public investment optimal provision of hicksian public inputs a considerable portion of government spending is devoted to commodities that are not public goods but that directly affect production possibilities examples include public infrastructure like roads and dams educational facilities and research projects in basic science and some forms of information such commodities are public inputs in a small open economy context the focus of this paper is on those that are hicksian in nature an interesting decomposition of the beneficial impact of a hicksian public input is developed then first best and second best optimality conditions for public inputs that are comparable to those for collective consumption goods are derived

productiveness and welfare implications of public infrastructure a dynamic two sector general equilibrium analysis abstract this paper develops a dynamic general equilibrium model that provides an internally consistent micro foundations framework where various effects of infrastructure policy changes can be studied devoting additional resources to infrastructure investment can payoff in terms of sizable increases in gdp and private investment in addition to this the model also makes predictions concerning changes in the welfare of agents resulting from additional infrastructure investment specific policy recommendations that attain highest welfare gains are computed the recommendation is that on average an additional 4 of gdp per year should be devoted to public investment in the latin american countries in the sample

aging population and education finance abstract conventional wisdom suggests that aging of population will increase political pressure to tilt the composition of social spending in favor of the elderly while potentially sacrificing other publicly provided goods such as education this view seems to be supported by recent empirical findings that per child public education spending tends to be lower in us jurisdictions with higher fraction of elderly residents do these cross sectional findings also carry the dynamic implication that longevity will lead over time to waning political support for funding of public education this paper challenges such implication we present a model that is consistent with the aforementioned cross sectional regressions yet predicts an overall positive impact of increasing longevity on public education funding and economic growth

education as a deterrent to crime education conveys a civic externality a benefit to society over and above the benefit to the student in enhancing his future earning power students are taught not only to be productive but to be law abiding and loyal to their country the civic externality is incorporated into an anarchy model where people choose to be farmers or bandits and schooling inculcates a distaste for a life of crime estimates of the return to education are biased down when the civic externality is overlooked public schooling can sometimes convey public benefits that private schooling even with a voucher scheme cannot

wait unemployment in europe unemployment michael burda the sustained increase in unemployment rates in western europe is a major policy problem not least because of the increasing significance of long term unemployment a large part of cross country differences in long term unemployment rates can be predicted by a simple model of wait unemployment potential workers may refuse low paying jobs and invest in unemployment if this increases the chance that they will subsequently be offered a higher paying job this investment decision is sensitive both to the level of unemployment benefit and to its duration and coverage of the labour force more generous unemployment benefit will tend to increase average unemployment rates the analysis can also explain how increases in the labour force contribute to unemployment and why service sector employment has grown more slowly in europe than in the us over the past 15 years unemployment benefit is not set in a vacuum the paper also considers forces governing the evolution of benefit rates and entitlements during the period

the effect of unemployment compensation on unemployment duration in germany in west germany during the 1980s law changes cut the level of unemployment compensation for the unemployed without children and extended the duration of unemployment insurance for unemployed aged over 41 analysis of these changes using the german socioeconomic panel shows that transitions from unemployment for those under 49 were particularly responsive to extensions of unemployment insurance the implied elasticity for escapes of men to employment is similar to estimates for men in the united states suggesting that differences in the potential duration of unemployment insurance only partially explain the difference in spell lengths between germany and the united states

cash on hand and competing models of intertemporal behavior new evidence from the labor market this paper presents new tests of the permanent income hypothesis and other widely used models of household behavior using data from the labor market we estimate the excess sensitivity of job search behavior to cash on hand using sharp discontinuities in eligibility for severance pay and extended unemployment insurance ui benefits in austria analyzing data for over one half million job losers we obtain three empirical results 1 a lump sum severance payment equal to two months of earnings reduces the job finding rate by 8 12 on average 2 an extension of the potential duration of ui benefits from 20 weeks to 30 weeks similarly lowers job finding rates in the first 20 weeks of search by 5 9 and 3 increases in the duration of search induced by the two programs have little or no effect on subsequent job match quality using a search theoretic model we show that estimates of the relative effect of severance pay and extended benefits can be used to calibrate and test a wide set of intertemporal models our estimates of this ratio are inconsistent with the predictions of a simple permanent income model as well as naive rule of thumb behavior the representative job searcher in our data is 70 of the way between the permanent income benchmark and credit constrained behavior in terms of sensitivity to cash on hand

the timing of redistribution we investigate whether late redistribution programs that can be targeted toward low income families but that may distort savings decisions can dominate early redistribution programs that cannot be targeted as a result of information constraints we use simple two period overlapping generations models with heterogeneous agents under six policy regimes a model calibrated to the u s economy benchmark two early redistribution lump sum regimes two targeted late redistribution regimes and finally a model without taxes and redistribution redistribution programs are financed by a labor tax on the young generation and a capital tax on the old generation we argue that if the programs are small in size late redistribution can dominate early redistribution in terms of welfare but not in terms of real output better targeting of low income households cannot completely offset savings distortions in addition we find that the optimal transfer and tax policy implies a capital tax of 100 and transfers exclusively to the young generation