efficiency and equity effects of reforming the british system of direct taxation a utility based simulation methodology the simulation model presented in this paper shows how an estimated utility index defined over net income and leisure can be used to replicate labor supply behavior individual by individual this methodology is used to evaluate the efficiency and equity effects of two specific revenue neutral reforms of the british system of direct taxation the first reform involves abolishing the married m an s tax allowance the second abolishes this allowance only when the wife exhausts her own tax allowance the second reform is the most efficient and it may also be preferable on distributional grounds copyright 1988 by the london school of economics and political science

efficient methods of measuring welfare change and compensated income in terms of ordinary demand functions a utility maximizing consumer with a completely known system of ordinary demand functions q h p c is considered let p qo and p q be two arbitrary equilibrium situations the problem is to evaluate in which of the situations the utility is higher without knowing the utility function revealed preference theory tells that the ordinary demand functions which are in principle observable contain enough information to solve the problem remaining difficulties are therefore mainly computational we present how the compensated income c i c p qo and the compensated demand h p cl1 are calculated with arbitrary accuracy using only the ordinary demand system our two efficient algorithms also have interesting interpretations in terms of index numbers and consumer surplus measures

access to credit for non formal micro enterprises in botswana the literature on micro enterprises identifies a lack of capital as a primary constraint to enterprise development potentially botswana could be different as the commercial banking system has excess liquidity and the government has established relevant lending institutions and several financial assistance programmes on the basis of a 1992 survey of 1 140 micro enterprises engaged in non formal activities in seven urban centres and villages in botswana this study finds the situation in botswana to be similar to the conclusions reported in the literature for other countries there is a need for institutional changes which channel loanable funds to micro enterprises in a manner that addresses their respective capital constraints and encourages the entrepreneurs to become responsible savers and borrowers the article draws on the literature and on the experience of several successful micro enterprise loan schemes to outline the essential features of needed programme delivery changes

perceived price in residential water demand evidence from a natural experiment abstract under complicated billing structures the price to which consumers respond remains inconclusive in this paper i exploit a quasi experiment to estimate a causal effect of price for residential water customers during the introduction of increasing block rates for a north carolina utility perceived price is identified through a billing anomaly in which changes in marginal and average prices move in opposite directions empirical results contribute evidence that residential water customers respond to average price average price elasticity estimates vary from 0 43 to 1 14 across the distribution of consumption in triple difference models with an estimate of 0 31 in the tightest bandwidth of regression discontinuity specifications

the dual structure of incomplete demand systems integrability of incomplete demand systems is discussed the concepts of weak integrability quasi expenditure function quasi indirect utility function and quasi utility function are defined their relationships to the expenditure function indirect utility function and utility function are developed the dual structure of the quasi functions permits exact welfare analysis and reveals the conditional preference structure for the commodities of interest new results relating the uniqueness and exactness of consumer s surplus to the structure of the expenditure and indirect utility functions are obtained

a new method of estimating risk aversion i show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model i derive a formula for the coefficient of relative risk aversion in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor i bound the degree of complementarity using data on consumption choices when labor supply varies across states using labor supply elasticity estimates i find a mean estimate of 1 then show generating 2 requires that wage increases cause sharper labor supply reductions jel d81 j22

responses to changes in domestic water tariff structures a latent class analysis on household level data from granada spain a problem that affects the estimation of water demand functions is the presence of unobserved individual heterogeneity which means that a common demand function is unlikely to represent the behavior of all users we implement latent class models to estimate water demand functions for four groups of users who are classified according to their unobservable preferences this more flexible approach makes it possible to distinguish four different response patterns to changes in the drivers of water use including different price elasticities these results should be of particular interest to regulators who would like to tailor water demand management policy to heterogeneous users our analysis exploits household level panel data on residential water demand and consumers characteristics obtained by combining information from a survey of 1 465 domestic users in the city of granada and bimonthly price and consumption data supplied by this city s water supplier from the period 2009 2011

linking life cycle assessment to bioeconomic modelling with positive mathematical programming an alternative approach to calibration abstract increased attention has been paid to extending the use of agricultural life cycle assessment by linking it to bioeconomic models with positive mathematical programming previous extension studies might have provided insufficient support to potential users e g policymakers in finding effective means of operating an agriculture industry in a sustainable manner this is partly a result of the fact that orthodox positive mathematical programming involves numerous calibration methods that reproduce the original land area allocation at the reference point implying that they generate as many simulation results as the number of calibration methods themselves to have more of an impact the present study proposed a procedure for using simulation results to determine a calibration method as an illustration the proposed procedure was applied to an upland cropping system in hokkaido japan it was observed that the selected calibration method outperformed the average cost method the method used most frequently in practice for the specified dataset the procedure suggested in the present study proved to be more flexible than previous approaches with respect to the selection process of calibration methods and it could be regarded as a step toward harmonizing the extended use of life cycle assessment with bioeconomic modelling implications for bioeconomic models and agricultural life cycle assessments are then discussed the present study adds a new analytical method to the existing knowledge on the extended use of life cycle assessment with bioeconomic models

financing enterprise development in sub saharan africa this paper examines some critical gaps in the financial infrastructure in sub saharan africa which have contributed to the poor performance of productive investment by private agents it first analyses the performance of financial systems encompassing both formal and informal financial sectors in relation to the changing policy environment and key features of the financial market structure it then identifies those gaps in financial services that have been particularly detrimental to private investment enterprise growth and transformation finally the paper considers policy implications drawn from east asian experiences with respect to financial policies institutional arrangements and market integration measures for financing enterprise development copyright 2001 by oxford university press

a discrete continuous choice approach to residential water demand under block rate pricing reply waldman is quite correct in noting that the microeconomic theory of block rate pricing in hewitt and hanemann hh 1995 is given for the general case of a k block rate structure whereas the econometric theory is largely confined to the case of exactly two blocks the extension in waldman to the more general case of k blocks is correct although the extension itself could be even more general if it addressed the nonnegativity of demand as is demonstrated below that no apparent attention was paid to the nonnegativity of demand in hh may be attributed to the fact that the need to do so was negated by a fortuitous assumption in the earlier work although that assumption that the errors are multiplicative and lognormally distributed was only maintained and not tested in hh i now estimate two models with the more common assumptions of linear demand and additive and normally distributed errors both with and without a modification for

welfare evaluation and the cost of living index in the household production model the household production model provides a new framework for the theory of the household and most applications have focused on its implications for market and nonmarket behavior in this paper i examine the consequences of the new home economics for welfare analysis and in particular for the cost of living index in the household production framework market goods are combined with time to produce commodities these commodities rather than the market goods are the arguments of the household s preference ordering the demand for goods and time is a derived demand since goods are not desired for their own sake but only as inputs into the production of commodities this paper is an analysis of the implications of the household production model for welfare evaluation not a critique of the model hence it accepts the fundamental distinction between goods and commodities and assumes that commodities as well as goods are observable and measurable 2 the distinction between technology and tastes follows unambiguously from that between goods and commodities in orthodox demand theory the household s preference ordering is defined over the goods space and welfare analysis is based on those preferences the cost ofliving index is defined as the ratio of the minimum expenditures required to attain a particular indifference curve of this preference ordering under two price regimes in the household production model the preference ordering over the commodity space provides a corresponding basis for welfare evaluation one way to extend the notion of the cost of living index to the new framework is to define it as the ratio of the minimum expenditures required to attain a par

estimation and welfare analysis with large demand systems we develop an approach for estimating individual or household level preferences for a large set of quality differentiated goods and for constructing hicksian welfare measures within the demand system framework our approach uses a maximum simulated likelihood procedure to recover estimates of the structural parameters and a multistage monte carlo markov chain algorithm for constructing hicksian consumer surplus estimates we illustrate our approach with a recreation dataset consisting of day trips to 62 mid atlantic beaches

signals or noise explaining the variation in recreation benefit estimates this paper uses meta analysis to summarize the benefit estimates derived from travel cost recreation demand models after reviewing approximately 200 published and unpublished studies prepared from 1970 to 1986 77 were found to report either consumer surplus estimates or sufficient information to derive them using these estimates of the consumer surplus per unit of use from each study it was possible to evaluate the influence of variables describing the site characteristics the activities undertaken at each site the behavioral assumptions and the specification decisions the findings provide clear support for using econometric methods to summarize results from diverse empirical studies they highlight the important research issues in model development and offer a consistency check to the procedures used in benefit transfer analyses for policy evaluations

vsl reconsidered what do labor supply estimates reveal about risk preferences abstract we propose and illustrate a theoretically consistent framework for linking estimates of the value of a statistical life vsl to individual preferences our example suggests a method for using estimates of the labor supply elasticity to impute a vsl estimate

multiple policy instruments for sustainable water management in crop production a modeling study for the chinese aksu tarim region china s crop production sector faces severe water scarcity issues previous research has shown that effective water conservation policies exert strongly negative impacts on agricultural production and farmers income which make them politically unfeasible under chinese conditions to highlight ways out of this dilemma the present study tests three alternative water policies complemented by supportive agricultural policies to reduce the trade offs between water conservation and rural development policy goals using the case of the extremely arid aksu tarim region in northwest china a regional supply model is developed which serves as the analysis framework applied as stand alone water policies irrigated area tax water quota and water pricing differ clearly in effectiveness and efficiency combined with agricultural policies subsidies into multiple policy instruments the price based and quota based instruments mitigate the negative impacts on rural development goals targeting a water conservation rate of 20 the tested multiple policies perform alike on the level of the entire study region cotton production decreases by 15 cereals production remains stable and regional income decreases by 13 however at the sub regional level the impacts on water conservation production and income differ significantly between the alternative policy instruments and sub regions constituting a crucial challenge for practical water policy implementation

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

the ces utility function non linear budget constraints and labour supply results on female participation and hours the most recent efforts in the study of labour supply decisions have concentrated on the estimation of explicit utility indices as a means to overcome the specification and endogeneity problems created by non linear budget constraints the presence of non convexities and the interest in making welfare comparisons between individuals are additional reasons that make the use of explicit utility functions in either direct or indirect form an essential requirement for labour supply studies it is therefore important to consider carefully the available possibilities from a utility index we want flexibility and ease of estimation the stonegeary function has proved its relative worth in consumption studies but its performance has been disappointing when leisure is incorporated into the set of commodities abbot and ashenfelter i976 found that for part of their sample estimated available time was less than hours worked and these results have pervasively reappeared in subsequent studies using this function hausman i980 has recently proposed a utility function which yields a linear hours function this is an important contribution which facilitates the task of estimation enormously this paper argues that the ces utility function despite not generating a linear hours function is also very convenient for estimation purposes in fact it is shown below that to estimate the parameters of the utility function there is no need whatsoever for any explicit hours function labour supply responses by married women have been previously estimated with british data but none of the available results has taken full account of the joint decision on participation and hours and of the non linear shape of the budget constraint that the tax system generates layard et al i980 consider the joint decision in their estimation procedure but ignore the tax system greenhalgh i980 takes into account the non linearity of the budget constraint but estimates labour supply responses by a method which treats participation and hours of work as separate and independent decisions in the present paper on the other hand using an explicit utility index we propose an estimation method which takes into account both the tax system and the joint hours participation decision

informal financial markets under liberalization in four african countries abstract this paper presents survey evidence from four countries on how informal financial agents serve market niches that banks cannot readily reach their methodologies are effective in keeping down transaction costs and default risk relative to banks although informal agents exercise monopoly power in dualistic markets liberalization of repressive financial policies has had little effect on formal financial deepening while informal finance has continued to grow the paper concludes that informal financial institutions are an important vehicle for mobilizing household savings and financing small businesses and it recommends that informal finance be better integrated into financial development strategies

welfare measurement in the household production framework the household production approach to consumer behavior developed from the work of gary becker william gorman and kelvin lancaster has considerable descriptive appeal in modelling the decisions of households the approach derives from the observation that households frequently purchase market goods that do not yield utility directly but are combined to produce commodity service flows which the household values thus observed behavior is determined by household production technology as well as by tastes the advantage of this distinction is that we can pose reasonable hypotheses about characteristics of technology though we rarely possess useful a priori information regarding tastes the putative advantages of the household production approach are questioned on empirical and conceptual grounds by robert pollak and michael wachter 1975 they show that jointness in production or nonconstant returns to scale cause implicit commodity prices to depend on both tastes and technology raising serious econometric difficulties in the estimation of commodity demand functions in addition since commodity prices become functions of the commodity bundle consumed the analogy to traditional demand theory breaks down joint production occurs when a good enters several production processes simultaneously or equivalently when a good in one production process also enters directly into the individual s utility function the most common example is time which provides the context for all production processes and is often associated with the production of several commodities simultaneously since joint production in the household is likely to be pervasive the critique by pollak and wachter cannot be ignored in response to the comment by william barnett pollak and wachter 1977 suggest dispensing with the notion of commodity prices and treating the demand for commodities as a function of goods prices this approach confounds tastes and technology but it eliminates the troublesome concept of commodity prices as parameters when in fact they are likely to be endogenous in this paper we show that results from positive analysis such as the critique by pollak and wachter have implications for the use of the household production framework for welfare analysis the household production function approach has had considerable appeal for measuring welfare effects of public actions in the environmental and natural resource areas gardner brown john charbonneau and michael hay elizabeth wilman yet traditional approaches to welfare measurement are frequently inapplicable we argue that welfare measurement in this framework is complicated by the difficulties of unravelling tastes and technology we extend pollak and wachter s results by demonstrating that marshallian demand functions for commodities cannot be uniquely defined thus marshallian functions cannot be used to derive exact compensated functions in the manner of jerry hausman and of george mckenzie and i f pearce nor can compensating and equivalent variation measures be bounded by marshallian consumer s surplus estimates following robert willig in fact duality results that normally allow us to move between marshallian and hicksian functions are not assistant and associate professors respectively department of agricultural and resource economics university of maryland college park md 20742 this paper is scientific article no a3404 contribution no 6476 of the maryland agricultural experiment station we wish to thank darrell hueth james opaluch v kerry smith and elizabeth wilman for comments on an earlier draft

what s the use welfare estimates from revealed preference models when weak complementarity does not hold abstract in this paper we consider the theoretical and empirical ramifications of welfare measurement in revealed preference models when weak complementarity does not hold in the context of a kuhn tucker model of recreation demand we show that while it is possible to estimate preferences that do not appear to exhibit weak complementarity the calculation of welfare measurements from these models requires a cardinal interpretation of preferences that cannot be tested furthermore we reiterate the under appreciated fact that even traditional use value estimates require a cardinal restriction on preferences that while often intuitive also cannot be tested we demonstrate empirically that the choice of restrictions can have significant ramifications as use value estimates can vary based on the assumed preference structure

the econometrics of piecewise linear budget constraints a survey and exposition of the maximum likelihood method in this article maximum likelihood techniques for estimating consumer demand functions when budget constraints are piecewise linear are exposited and surveyed consumer demand functions are formally derived under such constraints and it is shown that the functions are themselves nonlinear as a result the econometric problems in estimating such functions are exposited and the importance of the stochastic specification is stressed in particular the specification of both unobserved heterogeneity of preferences and measurement error econometric issues in estimation and testing are discussed and the results of the studies that have been conducted to date are surveyed

reconsidering the economics of demand analysis with kinked budget constraints this paper has two objectives first we identify a problem with the ability of the discrete continuous choice framework and conditional demand functions to fully describe consumer preferences in the presence of kinked budget constraints second we propose and illustrate an alternative preference based method for estimating consumer responses to price changes under these conditions this framework recognizes that commitments to commodities such as pools or outdoor landscaping influence how water consumption responds to price changes as part of the long run consumption adjustments with microdata on household choices this approach could be used to design increasing block rate structures that recognize the differences in water consumption responses with these commitments

measuring price elasticities for residential water demand with limited information this paper exploits the seasonal and annual changes in marginal prices for water to estimate the price elasticity of demand by residential households for water it uses the changes in distributions of water used at the census block group levels in response to changes in marginal prices of water for matched months across years this strategy reduces the interaction effects of outdoor use and demographic factors in determining responsiveness to price by comparing years that vary in overall water availability the framework can recover measures of how responses to price vary with season and drought conditions the application is the urban phoenix metropolitan area jel h42 q25

nonuse values in benefit cost analysis benefit cost analysis bca is a pragmatic realization of the theory of welfare economics much of the research associated with bca has sought to expand the types of benefits that can be measured in dollar terms with this research there has been a progressive movement of goods and services from the set without measures usually designated as intangibles in bca terminology to the set with for example the recreational services provided by projects associated with dams for hydroelectric power or flood control were regarded as intangible until the development of the travel cost model for estimating the demand for outdoor recreation sites one of the current frontiers in bca research is associated with modeling and measuring nonuse benefits in contrast to the past efforts with intangibles research on this topic has remained controversial with few direct effects on the practice of applied welfare economics there are two principal reasons for this outcome first there has not been an accepted set of definitions for nonuse benefits and second applied studies with empirical estimates of nonuse benefits have until recently been non existent clearly these problems are related a consistent set of definitions is a necessary prerequisite for empirical implementation i will argue that consistent definitions for nonuse benefits have been elusive because the conceptual frameworks used in the literature to describe its primary components option value and existence values are not mutually consistent in the process of demonstrating this result i will describe the elements of a consistent framework for treating both use and nonuse benefits and apply it in explaining some of the problems with the available empirical estimates of nonuse benefits

enterprise inequality and economic development we characterize an equilibrium development process driven by the interaction of the distribution of wealth with credit constraints and the distribution of entrepreneurial skills when efficient entrepreneurs are relatively abundant a traditional development process emerges in which the evolution of macroeconomic variables accord with empirical regularities and income inequality traces out a kuznets curve if instead efficient entrepreneurs are relatively scarce the model generates long run distributional cycles driven by the endogenous interaction between credit constraints entrepreneurial efficiency and equilibrium wages

growth and barriers to growth among nairobi s small and medium sized garment producers abstract few of nairobi s small and medium sized garment enterprises actually grow understanding why this should be so requires recognition both of their common problems and of the variations in their organization and market relations two factors appear critical for the growth of all of the producers demand for new clothing and the firm s initial capital other growth constraints differ according to the type of firm space constraints are highlighted as especially important for businesses presently operating in market stalls the design of policy and donor interventions needs to consider both the commonalities and the differences among firms

the residential water demand effect of increasing block rate water budgets we investigate the effect of introducing a fiscally neutral increasing block rate water budget price structure on residential water demand we estimate that demand was reduced by around 17 although the reduction was achieved gradually over more than three years as intermediate steps we derive estimates of price and income elasticities that rely only on longitudinal variability we investigate how different subpopulations responded to the pricing change and find evidence that marginal rather than average prices may be driving consumption we also derive alternative rate structures that might have been implemented and assess their estimated demand effects

on measuring the value of a nonmarket good using market data we use line integral theory to lay out in a more general theoretical framework the conditions under which it is possible to measure with market data the welfare effects of a change in a nonmarket good we present in detail a numerical method of measuring the value of nonmarket goods using market data under either weak neutrality or weak complementarity our numerical method is more flexible than the existing analytical method because it can be used with any well behaved marshallian demand function and can be used even when the willig condition does not hold

property rights regimes in complex fishery management systems a choice experiment application the tonle sap wetland fishery was previously divided into 3 different management zones for conservation open access fishing and private fishing rights to the private fishing zone involved auctions for exclusive rights to temporarily designated plots this paper aims to explore the auction based system by investigating how this fishery management system affects different groups of small scale fishermen and how different characteristics of the fishing lots affect the bidding a choice experiment approach was used to model fishermen s choices in a hypothetical auction market by offering fishermen the choice between purchasing different potential fishing lots and a no purchase option implying fishing only in the communal fishing grounds the preferred latent class model with two segments of fishermen showed that the bidding behavior of the more privileged group out competes the other group irrespective of the lot characteristics this result suggests that it is unlikely that the redesign of the auction system itself would be an effective way of securing access to fishing resources for the two observed groups of fishermen this implies that open access fishing grounds and or other regulations may also be needed in future management as they serve an important role for the poorer segments

water demand under alternative price structures we estimate the price elasticity of water demand with household level data structurally modeling the piecewise linear budget constraints imposed by increasing block pricing we develop a mathematical expression for the unconditional price elasticity of demand under increasing block prices and compare conditional and unconditional elasticities analytically and empirically we test the hypothesis that price elasticity may depend on price structure beyond technical differences in elasticity concepts due to the possibility of endogenous utility price structure choice observed differences in elasticity across price structures may be due either to a behavioral response to price structure or to underlying heterogeneity among water utility service areas

phasing out of environmentally harmful subsidies consequences of the 2003 cap reform abstract subsidies linked to production have been classified as environmentally harmful by the oecd a core element of the eu 2003 common agricultural policy cap reform is to decouple income support from production this paper estimates the environmental consequences of this policy reform an agricultural sector model using a modified version of the positive mathematical programming method depicts the complex natural structural and political relationships of austrian farming changes in management measures can be analyzed with respect to their environmental effects by using appropriate indicators simulation results show that the 2003 cap reform will reduce the average cost of production and may improve environmental conditions regarding soil water and greenhouse gases when compared to a scenario without reform thus the new cap is likely to bring about outcomes which the previous reform agenda 2000 promised but did not deliver

activities in models of recreational demand scholars have taken divergent approaches to incorporating on site activities into their empirical specifications of site choice models we provide a framework for assessing this methodological heterogeneity through a model that explicitly allows individuals to choose both on site activities and site attributes this model not only conditions the marginal value of site attributes on the choice of an activity but also explicitly recovers the marginal rates of substitution across activities this eliminates previously unrecognized biases in the welfare analysis of changes in site attributes we test hypotheses generated by our model by comparing rival models of demand for access to beaches in costa rica

theory and estimation of the household production function for wildlife recreation abstract the household production function is an intuitively appealing way to model man s interaction with nature this paper models the interaction between the household s behavior and publicly provided inputs into wildlife recreation the paper shows how to compute benefits assuming that the household production function is known the household production function approach collapses to the simple travel cost approach when households are unable to substitute their own inputs for publicly provided inputs in addition the paper demonstrates the conditions under which the parameters of cost and preference functions can be identified the conditions for identification are quite restrictive when several choices are endogenous

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

integrating agri environmental programs into regional production models an extension of positive mathematical programming positive mathematical programming pmp has become a popular method for regional production models the standard approach estimates cost or production functions for each land use activity separately from each other this means that the same crop grown under two technologies is treated as if it were two separate crops which may lead to unsatisfying results for example if agri environmental programs are modeled we present an extended version of pmp that leads to more plausible results than the standard version in such cases the extended method is applicable to other problems where differences in the elasticity of substitution between activities are important

obstacles to developing indigenous small and medium enterprises an empirical assessment the article reports the results of field surveys conducted in sri lanka s leather industry and tanzania s furniture industry it outlines an approach to learning how small and medium enterprises smes perceive the impact of financial regulatory technical marketing and other input constraints and to evaluating the results in relation to other empirical indicators lack of access to finance emerges as the binding constraint for smaller less established firms in sri lanka and for all of tanzania s smes not only is informal financing limited for tanzania s firms even firms of adequate size and experience have difficulty borrowing from banks and if they do borrow have difficult relations with their lenders in tanzania regulatory and tax constraints appear largest for the smallest firms declining somewhat as firms grow because enforcement is comprehensive the bureaucratic burden of negotiating with government officials is greatest for small firms by contrast in sri lanka the regulatory burden rises with firm size because enforcement is more stringent for the larger and more visible firms constraints on physical inputs continue to inhibit sri lankan smes a legacy of excessive vertical integration by parastatals technical constraints are appraised as most significant by relatively educated entrepreneurs with some involvement in high quality market niches

cost pooling in australian grain handling a common property analysis the common property analysis of rausser zusman and foster is expanded and applied t australian grain transportation systems with a conservative decision rule a statically inefficient cost pooling system may lead to optimal investment decisions as benefits become pooled with ramsey pricing in contrast losers may veto many investment decisions so that allocations become equitable but technically inefficient efficiency gains from price policy reform may not be achieved unless accompanied by property right reallocation

household responses to increased water rates during the california drought this paper explores the use of fixed effects and maximum likelihood techniques to es timate household responses to water price in creases during the california drought estimates are based on bimonthly meter readings from 599 single family households in the alameda county water district over the period 1982 1992 before and after the introduction of a steeply increasing block rate price structure i find that household and monthly fixed effects models are not success ful in modeling water demand with these data however maximum likelihood models that ex plicitly consider the household s response to the rate structure result in plausible estimates of wa ter demand jel q25

measuring the income elasticity of water demand the importance of publication and endogeneity biases we present the first study that examines the effects of publication selection in the literature estimating the income elasticity of water demand paradoxically more affected by publication selection are the otherwise preferable estimates that control for endogeneity attempting to correct simultaneously for publication and endogeneity biases we find that the mean underlying elasticity is approximately 0 15 or less the result is robust to controlling for more than 30 characteristics of the estimates and accounting for model uncertainty the differences in the reported estimates are systematically driven by differences in the tariff structure regional coverage data granularity and control for temperature

revealed preference for public goods the most serious problem for the modern theory of optimal public expenditure is that although it has to be based on some social welfare function individual preferences for public goods which constitute the elements of any individualistic social welfare function are hard to assess it is argued that since every individual can freely participate in the consumption of a public good there is an incentive for him to either underreport or overreport his preferences depending on how the reported preferences are used in the financing process of the public good i this argument will be correct if an individual s preferences for public goods can be expressed only directly in many cases however the consumption of a public good has some technical or objective relationship with the consumption of some private goods thus the benefit an individual derives from free highways depends on how much he spends on a car and gasoline even the benefit an individual derives from the judicial system depends on how much he spends to hire the services of lawyers also an individual can enjoy the same security police provide by hiring private guards and installing locks and so on in these cases if we know the technical relationships between the consumption of private goods and the consumption of public goods then from the market data relating the amounts of private goods bought to prices and the data on the existing amounts of public goods we might be able to infer i the amounts of final goods consumed say the number of trips from one point to another the degree of justice the security from robbery etc and ii their opportunity costs which the individual was willing to pay but if we succeed in this inference then all that remains to be done in order to find the individual s utility function will be to integrate back the relationship between the amounts of final goods consumed and their opportunity costs a trivial example can be provided by assuming that each public good is perfectly substitutable with a private good let yi be the quantity of the ith public good and xi be the quantity of a private good which is a perfect substitute for the ith public good then the benefit derived from the ith public good and its perfect substitute can be measured by xi yi suppose we have ascertained an individual consumer s demand functions for private good when all the yi are zero we know from the revealed preference theory that if these demand functions satisfy a certain condition namely the symmetry of the slutsky matrix then there exists a utility function unique up to a monotone transformation

growth constraints on small scale manufacturing in developing countries a critical review abstract the question raised in this review is whether small scale producers in developing countries can expand or whether they are up against constraints which stunt their growth most of the literature has been optimistic on this score while internal constraints e g lack of managerial ability or external constraints e g discrimination from government are identified expansion is seen as an open ended process in other contributions this view has been severely criticized some allege that the small producers are exploited through various mechanisms others suggest that their road to expansion is blocked as a result of factors such as the pre existence of very advanced technology the control of large firms over product markets or difficulties in access to raw materials in discussing the arguments put forward in the debate an attempt is made to assess their theoretical bases and examine the extent to which they are supported empirically while most studies express explicitly or implicitly a definite view on the growth potential of small producers such judgement is rarely based on a comprehensive examination of the context which determines this potential

institutional barriers to policy reform in egypt the case of the agricultural machinery industry abstract economic reform has been on the egyptian policy agenda since the mid 1970s but progress has been slow in part due to strong regulatory and institutional obstacles the experience of the agricultural machinery manufacturing industry displays this problem an economic analysis of manufacturing threshers shows that while the impact of price policies was about neutral institutional barriers effectively taxed the industry 15 22 the greatest obstacle was access to marketing credit from the state owned principal bank for development and agricultural credit access to materials and difficulties with tax authorities also hampered the industry

informality size and regulation theory and an application to egypt the paper shows how when the enforceability of regulationsis size sensitive price competition can lock firms into informality and thus smallness depending on the form of the production function in thatcontext exogenous help packages targeted to informal firms promote micro and small enterprises i e increase their numbers but do not develop them i e foster their growth the help only generates ashort term span of abnormal profits for existing informal firms and a long term income transfer toward informal market consumers the model istested in the context of egypt s micro and small enterprise sector

community pressure and clean technology in the informal sector an econometric analysis of the adoption of propane by traditional mexican brickmakers abstract in many developing countries the informal sector comprised of low technology unlicensed micro enterprises is a major source of pollution environmental management in this sector is exceptionally challenging though clean technologies offer a means of mitigating the problem to our knowledge there has been no rigorous empirical research on why informal or even small scale firms do and do not adopt them as a first step toward filling this gap this paper presents the results of an econometric analysis of the diffusion of propane among informal traditional brickmakers in cd juarez mexico a leading source of air pollution owing to their reliance on cheap highly polluting fuels such as used tires and scrap wood the two key policy implications of our analysis are that 1 it is possible to successfully promote the adoption of a clean technology by intensely competitive informal firms even when the new technology significantly raises variable costs and 2 community pressure applied by competing firms and private sector local organizations can generate incentives for adoption

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