money and capital abstract the effects of money anticipated inflation on capital formation is a classic issue in macroeconomics previous papers adopt reduced form approaches putting money in the utility function or imposing cash in advance but using otherwise frictionless models we follow instead a literature that tries to be explicit about the frictions making money essential this introduces new elements including a two sector structure with centralized and decentralized markets stochastic trading opportunities and bargaining these elements matter quantitatively and numerical results differ from findings in the reduced form literature the analysis also reduces a gap between microfounded monetary economics and mainstream macro

financial development income inequality and the redistributive effects of monetary policy abstract how should financial systems be designed to limit income inequality does the redistributive impact of inflation depend on the extent of financial development should optimal monetary policy vary across countries with different levels of financial development in order to address these questions we develop a monetary growth production model with heterogeneous agents in our economy optimal policy needs to weigh the effects of policy across two groups capital owners and individuals who hold liquid assets in this environment we compare various economies that are identical in every aspect except for their level of financial development interestingly we generally find that economies at the highest stages of financial development economies in which money bonds and claims to capital are traded experience the highest amount of capital formation and social welfare as long as inflation is low yet regardless of the extent of financial development there are generally redistributive consequences from inflation moreover the model tends to predict that economies with relatively small stock markets produce the highest levels of income inequality empirical work examining the role of money growth and the implications of financial development across countries is consistent with predictions from the model

earnings inequality among males in the united states trends and the effect of labor force growth we analyze the variance of log earnings within labor force cohorts of u s males with particular attention to the influence of labor force growth rates estimates with data from the 1968 79 current population surveys reveal increases in earnings inequality within labor force cohorts even after we control for the level of education experience and unemployment a model of human capital investment is used to analyze differences among cohorts in the life cycle profile of the variance of log earnings it is shown that a pattern of sharply increasing and then declining labor force growth rates will tend to raise the return on human capital investment and thereby increase the variance of postschooling investment and log earnings early in the life cycle this positive effect on relative earnings inequality should decline with experience and possibly become negative because of the post world war ii baby boom and baby bust recent labor force entrants have faced just such a pattern of actual and projected labor

poverty in eastern europe in the years of crisis 1978 to 1987 poland hungary and yugoslavia eastern europe experienced an economic crisis between 1978 and 1987 declining income led to substantial increases in poverty rates in poland and yugoslavia while poverty in hungary remained at about the same level as before the crisis in all three countries urban poverty increased as the economic condition of state sector workers deteriorated to a much greater extent than that of agricultural and mixed households the increased poverty was entirely explained by declining income because the overall income distribution did not change or in some cases improved

soft skills hard skills and the black white wage gap this study examines the relative importance of soft skills versus hard skills across occupations and its impact on the observed wage gap between blacks and whites in the united states it posits that the black white pay gap may vary across occupations that require the use of different types of skills we classify occupations into hard skill intensive versus soft skill intensive jobs using the skill content measures of different occupations from the occupational information network o net we then use data from the national longitudinal survey of youth nlsy and current population survey cps to investigate the impact of job skill type on the wage gap consistent with our theoretical predictions we show that this wage gap in white collar jobs is smaller for hard skills jobs than it is for soft skills jobs moreover we demonstrate that in response to variations in the wage gap across different occupations blacks are more likely to self select themselves into hard skills jobs ceteris paribus this shows not only that discrimination against blacks varies across occupations but also that such discrimination induces the self selection of blacks into certain occupations moreover this finding highlights the role played by co worker customer discrimination in explaining the racial wage gap in the u s labor market jel j15 j31

down and out in north america recent trends in poverty rates in the united states and canada this paper examines why canadian poverty rates fell relative to u s poverty rates during the periods 1970 1979 and 1979 1986 during the 1970s the principal reason for declining canadian poverty rates is higher economic growth during the 1980s however differences in government transfer policy are the main cause of relative poverty change in the two countries virtually all of the 3 3 point fall in relative canadian u s poverty rates from 1979 to 1986 can be attributed to expansions in the canadian transfer system and simultaneous contractions in u s transfers

stock markets and development this paper asks if financial development especially stock market development affects the level and or the growth rate of economic activity it finds a substantial effect on both current wisdom suggests that the growth effects of financial intermediation could be either permanent or transitory for instance the greenwood jovanovic 1990 henceforth gj model has an ak stucture with no diminishing returns to the reproducible factor and a permanent exogenous improvement in financial structure would cause a permanent increase in the rate of growth on the other hand if the returns to the reproducible factor did diminish better intermediation could lead only to level effects since one should not a priori exclude either growth effects or level effects we shall look for both our search for growth effects will use the gj model our search for level effects will rely on an amended version of the mankiw romer and weil 1992 henceforth mrw structure

liquidity risk and banks asset composition implications for monetary policy monetary growth models in which the government is a net debtor demonstrate that inflation adversely affects capital formation through the crowding out effect interestingly the results are at odds with empirical evidence in particular recent studies point to an asymmetric relationship between inflation and the real economy across countries specifically inflation and output are negatively correlated in poor countries in contrast inflation is associated with higher levels of economic activity in advanced economies i present a monetary growth model with public debt where the exposure to risk is inversely related to the level of income in this setting i demonstrate that the effects of monetary policy depend on the level of capital of the economy in poor countries banks portfolios consist primarily of government liabilities therefore a higher rate of money creation inhibits capital formation in these economies in contrast banks devote more resources toward productive uses in advanced countries consequently monetary policy generates a tobin effect

reconciling bagehot and the fed s response to september 11 bagehot 1873 states that to prevent bank panics a central bank should provide liquidity at a very high rate of interest in contrast most of the theoretical literature on liquidity provision suggests that central banks should lend at an interest rate of zero this is broadly consistent with the federal reserve s behavior in the days following september 11 2001 this paper shows that both policies can be reconciled with commodity money as in bagehot s time liquidity is scarce and a high price allows banks to self select in contrast the fed has a virtually unlimited ability to temporarily expand the money supply so self selection is unnecessary

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

slipping into and out of poverty the dynamics of spells this paper examines the dynamics of poverty previous analyses have examined either fluctuations in the male heads earnings or the frequency of poverty periods over a fixed time frame our approach depends on a definition of spells of poverty using this methodology we find that the majority of poor persons at any time are in the midst of a rather long spell of poverty the methodology also allows us to estimate that less than 40 percent of poverty spells begin because of a drop in the heads earnings while 60 percent of the spells end when the heads earnings increase thus researchers must focus on household formation decisions and on the behavior of secondary family members there has been a dramatic resurgence recently of discussion of the underclass the discussion is reminiscent of debates about poverty during the 1960s when the notions of a culture of poverty particularly as popularized by michael harrington s other america 1962 dominated both intellectual and policy thinking the idea of an underclass seems inconsistent however with much of the research on the dynamics of poverty during the 1970s that research using new longitudinal data seemed to show that the bulk of the poor were poor for only a few years the research also showed that the poor were a very heterogeneous group including a small minority of persistently poor the persistence of poverty is of interest both for understanding the phenomenon and for developing policy claims about dependency and separate life styles among the poor rest on assumptions about the long term nature of poverty questions

inflation and asset returns sustained inflation is detrimental to long run growth and the financial system a recent theoretical literature suggests that high inflation implies low real returns on assets these low returns exacerbate informational frictions interfering with the functioning of financial markets and the allocation of investment we investigate the plausibility of an inverse relationship between inflation and real returns inflation and nominal equity returns are negatively correlated or uncorrelated for all low to moderate inflation economies examined safe nominal rates of return and inflation are only weakly positively correlated however for high inflation economies inflation and nominal returns are strongly positively correlated

a utility based analysis of the wage subsidy program abstract because the poverty line is usually defined in terms of income two families may be classified as having poverty level incomes even though their hours of work and therefore their utilities may be very different this paper compares a government income support program that defines the poverty line in terms of utility with several other support programs that define the poverty line in terms of income through the use of the wage solution of the indirect utility function we find the amount of wage subsidy required to raise a subpoverty line family to the poverty line as defined by the utility function this subsidy is compared with wage subsidies based on directly observable quantities such as income

who pays for obesity adult obesity is a growing problem from 1962 to 2006 obesity prevalence nearly tripled to 35 1 percent of adults the rising prevalence of obesity is not limited to a particular socioeconomic group and is not unique to the united states should this widespread obesity epidemic be a cause for alarm from a personal health perspective the answer is an emphatic yes but when it comes to justifications of public policy for reducing obesity the analysis becomes more complex a common starting point is the assertion that those who are obese impose higher health costs on the rest of the population a statement which is then taken to justify public policy interventions but the question of who pays for obesity is an empirical one and it involves analysis of how obese people fare in labor markets and health insurance markets we will argue that the existing literature on these topics suggests that obese people on average do bear the costs and benefits of their eating and exercise habits we begin by estimating the lifetime costs of obesity we then discuss the extent to which private health insurance pools together obese and thin whether health insurance causes obesity and whether being fat might actually cause positive externalities for those who are not obese if public policy to reduce obesity is not justified on the grounds of external costs imposed on others then the remaining potential justification would need to be on the basis of helping people to address problems of ignorance or self control that lead to obesity in the conclusion we offer a few thoughts about some complexities of such a justification

work and welfare as determinants of female poverty and household headship this paper formulates and estimates a model of the determinants of female household headship headship responds to variations in the levels of well being a woman can expect if she marries or if she heads her own household the authors measure the opportunity cost of female headship and the effects of welfare benefits and womens work in the market on female headship and poverty they find that if welfare benefits were reduced there would be small reductions in the proportion of women heading households for whites and nonwhites but a substantial increase in poverty for nonwhites they also find that wives work in the market reduces poverty and female headship for nonwhites and reduces poverty but increases headship for whites the study is based on 1975 u s data excerpt

poverty alleviation as an economic problem economists distinguish between technological problems in which variable means confront a given end and economic problems in which given means are allocated across competing ends james buchanan and f a hayek each offer constructive criticisms of the standard definition of an economic problem arguing that economists too easily slide into mechanistic and teleological thinking building on these accounts we argue that there are three key dimensions to the economic problem exchange coordination and governance we then make a case that poverty alleviation is more like an economic problem than a technological one an economic problem with a small e we survey empirical evidence from economics anthropology and sociology indicating that poverty is not a simple lack of objectively identifiable resources but rather a multidimensional and socially embedded phenomenon understanding what poverty alleviation would even look like requires thinking through problems of exchange coordination and governance

optimal monetary policy and economic growth abstract a question at the center of many analyses of optimal monetary policy is why do central banks never implement the friedman rule to the list of answers to this question we add neoclassical production specifically the tobin effect as one possible explanation to that end we study an overlapping generations economy with capital where limited communication and stochastic relocation create an endogenous transactions role for fiat money we assume a production function with a knowledge externality romer style that nests economies with endogenous growth ak form and those with no long run growth the diamond model the tobin effect is shown to be always operative under crra preferences a mild degree of social increasing returns is sufficient but not necessary for some positive inflation to dominate zero inflation and for the friedman rule to be sub optimal irrespective of the degree of risk aversion

inequality in five countries in the 1980s the role of demographic shifts markets and government policies this paper uses luxembourg income study lis data to examine levels of and trends in income inequality in canada the netherlands sweden the united kingdom and the united states inequality increased in sweden the united kingdom and the united states but did not increase in canada and the netherlands increased inequality of household heads earnings and increased shares of spouses earnings in family income account for much of the observed increases in income inequality the public sector can in general be assigned a moderating effect on these changes demographic shifts are not assigned any major role in inequality changes excerpt

the economic causes of obesity a survey abstract obesity rates have increased dramatically over the last 30 years rising obesity has developed into a considerable worldwide public health problem with significant economic and social consequences accordingly obesity has become a subject of economic research this paper provides a broad survey of the recent and growing economic literature on the causes of obesity the literature both theoretical and empirical overall aims to explain the rising obesity trend and to identify the factors that contribute to obesity also surveyed are non economic causes and consequences of obesity and the interconnection with economic influences an understanding of the causes of obesity allows policies to be considered that might stem the global increase in obesity

consumption needs and inequality most empirical studies demonstrating a u turn in inequality in the united states are based on the distribution of income however utility is derived from the consumption of goods and services and there are many reasons to expect the distribution of expenditure to be different from the distribution of income the author demonstrates that consumption based inequality indexes actually decrease over the postwar era this conclusion differs from the stylized facts because of differences in the income and expenditure distributions differences also arise from the inclusion of equivalence scales to account for the different needs of heterogeneous households copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

below the line poverty in latin america abstract despite gains in basic welfare indicators poverty remains prevalent in latin america this paper surveys existing data on poverty in the region and discusses the relationship between growth inequality and poverty given the inequality of income distribution in latin america and the slow growth of output policies to overcome poverty must involve more efficient allocation of government resources redistribution and foreign aid

liquidity risk and financial competition implications for asset prices and monetary policy abstract this paper studies the implications of banking competition for capital markets and monetary policy in particular i develop a two sector monetary growth model in which a group of agents is exposed to liquidity shocks and money is essential banks insure depositors against such risk and invest in the economy s assets in this setting i compare an economy with a perfectly competitive banking sector to an economy with a fully concentrated financial sector unlike previous work banks can have market power in both deposits and capital markets compared to a perfectly competitive financial sector i demonstrate that a monopolistic banking system can have substantial adverse consequences on capital formation assets prices and the degree of risk sharing furthermore multiple steady states can emerge and the economy becomes subject to poverty traps more importantly market power in financial markets may overturn the tobin effect present under a perfectly competitive financial sector this necessarily happens in economies with high degrees of liquidity risk and low levels of capital formation

inequality and poverty economists tend to be quite egalitarian in their evaluation of social issues according to one survey 71 percent of american economists believe the distribution of income in the united states should be more equal and 81 percent feel that redistribution of income is a legitimate role for government support for these positions is even stronger among economists with academic affiliations and stronger still among economists with elite academic affiliations of course as economists we also have a healthy regard for economic efficiency we are concerned with the size of the economic pie as well as with its distribution borrowing from the title of alan blinder s recent book 1 economists can be characterized as having hard heads and soft hearts hardheaded in our emphasis on efficiency and soft hearted in our concern with equality the hard headed soft hearted approach is familiar to economists who argue that it is reasonable to sacrifice a bit of efficiency in return for greater equality in principle this position seems unobjectionable but i intend to argue that we may have gone too far in attempting to promote economic equality through government policies in taking this position i run the risk of being labeled hard hearted and perhaps soft headed as well an important part of my argument however is based on distinguishing between economic inequality within the large nonpoor part of the population and the poverty that afflicts a small portiop of our population i fav9r a role for government in helping the truly needy but i will attempt to show that extending that role to permit redistribution among the general population is often counterproductive

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

multivariate exogeneity tests and poverty abstract many recent studies presume direction of the relationship between poverty and other economic factors is one way that is they assume that the various economic phenomena cause or affect poverty and that there is no feedback however if feedback is present it is possible that the level of poverty or the perception of poverty may not only impact public policy decisions aimed at eradicating poverty but may have indirect effects on other economic variables as well we test that hypothesis in this paper using multivariate exogeneity tests

the effects of open market operations in a model of intermediation and growth we examine an otherwise standard model of capital accumulation to which spatial separation and limited communication create a role for money and shocks to portfolio needs create a role for banks in this context we examine the existence multiplicity and dynamical properties of monetary equilibria with positive nominal interest rates moderate levels of risk aversion can lead to the existence of multiple monetary steady states all of which can be approached from a given set of initial conditions in addition even if there is a unique monetary steady state monetary equilibria can be indeterminate and oscillatory equilibrium paths can be observed thus financial market frictions are a potential source of both indeterminacies and endogenously arising economic volatility we also consider the consequences of monetary policy actions that rearrange the composition of government liabilities contractionary monetary policy activities can have complicated consequences depending especially on the nature of the steady state equilibrium that obtains when there are multiple steady states under plausible conditions however a permanent contractionary change in monetary policy raises both the nominal rate of interest and the rate of inflation and reduces long run output levels thus liquidity provision by a central bank just as by the banking system as a whole can be growth promoting loose monetary policy also is conducive to avoiding development trap phenomena

has children s poverty become more persistent iffood stamp benefits are counted as income there is little change in estimates ofpersistent povertyfor children between the late 1960s and early 1980s however the absence of change in persistent poverty masks a number of important changes in the demographic and statistical structure ofpersistent poverty these changes include increasing inequality in the distribution of permanent socioeconomic position greater dependence on social assistance and the more familiar demographic changes such as increased numbers of single parent families higher educational attainments of parents and decline in family size

afdc benefits and the inter urban variation in poverty among female headed households the percentage of families headed by females in poverty varies widely across metropolitan areas for example 8 37 of all families in albany georgia were female headed and in poverty in 1980 while in sheboygan wisconsin the figure was 1 1 though not as dramatic as this interregional difference intra regional variation can also be significant in detroit michigan 4 90 of families were femaled headed and in poverty and in the closest interstate metropolitan area toledo ohio the figure was 3 77 recent research into the behavior of low income femaleheaded families suggests that state benefit differentials in aid to families with dependent children afdc may in part be responsible in this paper we construct a model that explains an important and overlooked implication of non uniform benefit standards among states the inter urban variation in the size of the potential and actual afdc recipient population particular attention is given to 1 the impact of interurban differences in real afdc payments 2 the potential of afdc to alter the number of female headed families in poverty and 3 the relative importance of other urban characteristics in explaining the size of the potential and actual afdc recipient population the model uses 1980 census data and is estimated for all standard metropolitan statistical areas for which we were able to obtain data

trickling down the rising tide new estimates of the link between poverty and the macroeconomy this paper uses pooled time series regressions of regional data to reexamine the link between poverty and the macroeconomy the use of disaggregated data provides additional degrees of freedom and permits the inclusion of controls for demographic changes and increased income inequality the results indicate a stronger relationship between poverty rates and the macroeconomy in the 1980s than that found in prior research and confirm that the dramatic reduction in unemployment during the late 1990s was instrumental in reducing poverty rates the estimated results for the 1990s imply a 0 4 0 9 increase in the poverty rate for each 1 increase in the unemployment rate

interrelationship between poverty and the wildland urban interface in metropolitan areas of the southern us this research disentangles the relationship between wildland urban interface wui area and poverty in metropolitan areas of the southern us where urban sprawl has intensified and high poverty regions have persisted results confirm that the enlargement of wui areas increases urban poverty which in turn causes wui areas to expand this finding validates the underlying hypothesis expansion of the wui excludes people in poor inner city neighbourhoods from educational and economic opportunities that occur in suburban areas and the problems related to inner city poverty push the rich away from the inner city

economic inequality new methods for new trends two positions dominate the debate over the recent increases in economic inequality in the united states the job skill mismatch thesis attributes rising inequality to growth in the number of high skill high wage jobs that leaves less skilled workers behind the polarization thesis in contrast argues that the service shift generates growth in the number of both high wage and low wage jobs and declines in the middle standard summary measures of distributional inequality cannot discriminate between these depictions of where job growth is occurring we propose new methods for measurement that provide both summary and detailed information about the distributional shifts in earnings and aframework for statistical inference using data from the curent population survey cps on yearly earnings from 1967 to 1987 we show that the trends in distributional inequality vary considerably by race gender and time while the evidence provides more support for the polarization argument this thesis needs refinement if it is to account for the variations in changing inequality observed here

a budget based definition of poverty an approach to defining poverty through a basic needs budget bnb is presented which takes account of families differing needs for child care and transportation and of regional differences in housing costs taxes and noncash benefits from governmental and private sources are also accounted for the bnb poverty rate for single parents for 1989 is 47 percent compared to 39 percent under the official method almost a quarter of single parents holding full time jobs are counted as poor under the bnb method radical reduction in both the welfare rolls and the poverty rate would require government assurance of child care and medical care to single parents

banking in a matching model of money and capital we introduce banks in a model of money and capital with trading frictions banks offer demand deposit contracts and hold primary assets to maximize depositors utility if banks operating costs are small banks reallocate liquidity eliminating idle balances and improving the allocation at moderate costs idle balances are reduced but not eliminated at larger costs banks are redundant a central bank policy of paying interest on bank reserves can reverse inflation s distortionary effects and increase welfare but only when costs are small the threshold levels of banks costs increase with inflation suggesting inflation and banks utilization are positively associated

on the relative weil being of the nonmetropolitan poor an examination of alternate definitions of poverty during the 1990s using foster greer thorbecke poverty indices this paper shows that although the incidence of poverty was higher in nonmetropolitan than metropolitan areas throughout the 1990s the poverty gap index was only statistically significantly higher in nonmetropolitan areas in six of the 10 years and the squared poverty gap index was worse in only three years this paper also provides design corrected standard errors for the indices which result in more than doubling the uncorrected estimates an examination of the ratio of the poverty gap to the head count index establishes that the average shortfall of the poor as a fraction of the poverty line was worse in the metropolitan areas during all 10 years of the 1990s similarly the distribution of income divided by the poverty line indicates that disproportionately more of the nonmetropolitan poor subsisted on incomes near the poverty line whereas the metropolitan poor were relatively more likely to be living in extreme poverty

measuring the intensity of poverty among subpopulations applications to the united states this paper proposes an approach to measuring the intensity of poverty within a group relative to that of the population to which the group belongs a poverty intensity index is presented which is easy to interpret and satisfies a number of desirable properties the intensity of poverty among racial and residential groups in various geographical locations is measured using 1980 united states census data

the stock market monetary policy and economic development author affiliation edgar a ghossoub department of economics university of texas at san antonio san antonio tx 78249 usa e mail edgar ghossoub utsa edu robert r reed dagger department of economics finance and legal studies 200 alston hall university of alabama tuscaloosa al 35487 e mail rreed cba ua edu corresponding author acknowledgment we thank two anonymous referees and the co editor kent kimbrough for their insightful comments 1 introductiona vast amount of research in macroeconomics studies the role of financial markets for economic development for example king and levine 1993 document that active banking systems help economies achieve higher rates of growth 1 in addition to banking systems other measures of financial development are important notably levine and zervos 1998 conclude that stock market liquidity promotes activity 2 however minier 2003 identifies nonlinearities in the relationship between stock market activity and growth in particular minier concludes that there are threshold effects from financial development to economic performance beyond a threshold level of financial development growth and stock market activity are positively related however the correlation is not observed in countries with small stock markets consequently access to a stock market may result in a significant increase in economic activity or it may have little impact 3in addition to the stage of financial development monetary policy also affects the development process while initial studies indicate that inflation is generally associated with slower economic progress more recent research concludes that the effects of monetary policy vary across countries bae and ratti 2000 observe that higher rates of money growth are correlated with lower levels of output in argentina and brazil in contrast bullard and keating 1995 point out that inflation may be associated with an increase in output in low inflation countries in particular the recent work of ahmed and rogers 2000 finds evidence of a tobin effect for the united states 4 5why does the impact of financial development vary across countries furthermore why does the effect of monetary policy also differ across countries in this article we demonstrate that the impact of financial development depends on the services provided by various financial markets that is the economic functions of banks may be substantially different than stock markets although different types of financial markets fulfill unique allocative functions there has been surprisingly little attention devoted to studying the ways in which asset markets collectively interact from a general equilibrium perspective 6 furthermore previous work does not address how the role of monetary policy depends on the extent of financial market development we attempt to fill this gap by developing a monetary growth model that incorporates money bank deposits and equity 7 as in schreft and smith 1998 spatial separation and limited communication create a role for money and commercial banks in our economy young individuals are subject to random relocation shocks as money is the only asset that can cross locations relocated agents must liquidate all their asset holdings into currency thus random relocation is analogous to the liquidity preference shocks in diamond and dybvig 1983 as a result our model illustrates the risk pooling role of financial intermediaries in contrast to banks we consider that the stock market promotes economic development by establishing a market in which capital can be transferred across time for example this may reflect specialization of factor inputs to illustrate such ideas we consider the following motivation individuals in the economy have specialized production technologies

the causal link between financial incentives and weight loss an evidence based survey of the literature obesity and overweight are linked to diseases that cost society a significant amount of resources while behavior modification can reduce the problem instigating such lifestyle changes is an uneasy task one potential way to reduce the problem is through the use of financial incentives in this survey we review the available evidence properly emphasizing studies that credibly yield meaningful estimates of the effect of financial incentives on weight loss we find that the scientific literature on the subject has not yet satisfactorily settled whether such a mechanism is effective at eliciting the desired behavioral and health outcomes we therefore advocate a rigorous large scale randomized experiment to provide reliable estimates of the effect

monetary policy and banking structure in this paper i examine the differences in optimal monetary policy in various banking systems in particular i compare two monetary economies one with a competitive banking system and the other with a monopolistic one in addition the optimality of the discount window policy is considered it is shown that the friedman rule is the optimal monetary policy in a monopolistic banking economy and the zero inflation policy is optimal in a competitive banking economy under appropriate parameters in addition the combination of the friedman rule and the discount window policy can achieve efficient allocation in both banking systems

the size distribution of the banking sector and the effects of monetary policy abstract in recent years the industrial organization of the banking system has received a large amount of attention in particular it is generally viewed that the size distribution of the banking sector has changed where it is dominated by a small number of large institutions in this paper we develop a model of imperfectly competitive banks that differ in terms of the size of their deposit base such differences are important for aggregate credit market activity and the effects of monetary policy notably we explain how the optimal size distribution of the banking system involves trade offs from distortions in credit markets due to imperfect competition across banking markets second the effects of monetary policy on credit market activity are weaker in an economy dominated by a small number of large banks empirical analysis examining the role of concentration among the current members of the european monetary union is consistent with the predictions of the model

the evolution of cash transactions some implications for monetary policy this paper considers the implications for monetary policy of a decreasing demand for outside money it finds that even perpetual declines in the demand for base money pose no threat to the traditional methods employed for conducting monetary policy the effects of such reductions in the demand for central bank liabilities however do depend on how monetary policy is conducted four monetary policy regimes are analyzed with a policy of nominal interest rate targeting a secular decline in the volume of cash transactions unambiguously leads to accelerating inflation a policy of maintaining a fixed composition of government liabilities leads to accelerating decelerating inflation if agents have sufficiently high low levels of risk aversion inflation targeting produces falling nominal and real interest rates while a policy of fixing the rate of money growth can easily lead to indeterminacy and endogenous oscillation in interest rates it is argued that a policy of fixing the composition of government liabilities has several advantages if it is known that agents are not too risk averse and that the asymptotic demand for base money is small if this information is not known then interest rate or inflation targeting have an advantage because their consequences are not sensitive to such environmental features

dollarization and the inflation threshold this paper analyzes the relationship among inflation dollarization financial intermediation and real activity empirical evidence suggests non linearity in the eects of inflation on financial intermediation and real activity i e the existence of an inflation threshold evidence also suggests that one way in which inflation aects financial intermediation in high inflation economies is through the substitution of dollars under the mattress for savings in domestic banks our model captures these empirical regularities inflation and real activity are positively related at low levels of inflation when the inflation rate exceeds certain threshold however agents substitute in their portfolios dollars a non productive asset of constant value that also provides liquidity services for deposits issued by domestic banks this substitution reduces the scale of financial intermediation and the capital investment in the economy as a consequence at high levels of inflation the levels of capital stock and output become negatively related to the inflation rate

aggregate poverty measures the way poverty is measured is important for an understanding of what has happened to poverty as well as for anti poverty policy evaluation sen s 1976 pathfinding work has motivated many researchers to focus on the way poverty should be measured a poverty measure argued by sen should satisfy certain properties or axioms and the desirability of a poverty measure should be evaluated by these axioms during the last two decades many researchers have adopted the axiomatic approach pioneered by sen to propose additional axioms and develop alternative poverty measures the objective of this survey is to provide a clarification on the extensive literature of aggregate poverty measures in this survey we first examine the desirability of each axiom the properties of each poverty measure and the interrelationships among axioms the desirability of an axiom cannot be evaluated in isolation and some combination of axioms may make it impossible to devise a satisfactory poverty measure some axioms can be implied by other axioms combined and so are not independent some others are ad hoc and are disqualified as axioms for poverty measurement based on the interactions among axioms we identify the core axioms which together have a strong implication on the functional form of a poverty measure we then review poverty measures that have appeared in the literature evaluating the interrelationships among different measures and examining the properties of each measure the axioms each measure satisfies violates are also summarized in a tabular form several good poverty measures which have not been documented by previous surveys are also included

statistical tests of changes in u s poverty 1975 to 1990 since president lyndon johnson declared the war on poverty three decades ago scholars have devoted many volumes to analyzing characteristics of poverty evaluating effectiveness of antipoverty policies and measuring changes in poverty unfortunately most poverty studies have focused primarily on the incidence of poverty rather than on both the incidence of poverty and the income distribution within the poor population although a k sen s 23 seminal work on measurement of poverty demonstrated the importance of constructing and using a distribution sensitive poverty measure in evaluating poverty the u s federal government still uses the proportion of poor as virtually the only indicator of poverty with few exceptions such as bishop formby and smith 5 most recent scholarly works on poverty issues including sawhill 21 hanratty and blank 17 and slesnick 24 are also concerned exclusively with the incidence of poverty and use a single poverty line in this study we demonstrate that a more comprehensive look at poverty using distribution sensitive measures and multiple poverty lines yields a different picture of poverty changes over time compared to what official u s statistics portray practically the comparison of poverty changes can be decomposed into three parts 1 setting a poverty line an income threshold below which a person is defined as poor this step is also called the identification of the poor and is very important in poverty study 2 choosing a method to aggregate individual poverty into overall poverty different methods of aggregating may lead to different conclusions about poverty changes therefore an appropriate method is essential for poverty study and 3 statistical inference since conclusions about poverty changes are drawn from a random sample of the population it is important to know whether the estimated poverty

identifying monetary policy shocks with changes in open market operations abstract in this paper we reexamine the effects of monetary policy shocks by exploiting the information contained in open market operations a sticky price model is developed where money is the counterpart of securities deposited at the central bank the model s solution reveals that a rise in central bank holdings of open market securities can be interpreted as a monetary expansion estimates of vector autoregressions for us data are further provided showing that reactions to an unanticipated rise in open market securities are consistent with common priors about a monetary expansion i e a decline in the federal funds rate a rise in output and inertia in price responses compared to federal funds rate shocks prices do not exhibit a puzzling behavior and a larger fraction of the gdp forecast error variance can be attributed to open market shocks however the explanatory power of the latter has decreased since federal funds rate targets have been announced

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

consumption and poverty how effective are in kind transfers the ability of in kind transfers to alleviate poverty depends on accurate targeting as well as recipients valuations of the benefits using data from the consumer expenditure surveys the efficiency of in kind transfers is examined in a microsimulation framework in which recipients are identified as those who have the lowest consumption in this framework in kind transfers of food capital services which includes housing and consumer services are an effective means of providing support to the poor even at high levels of subsidization the multiple good transfers that are considered are essentially equivalent to cash grants copyright 1996 by royal economic society

junk food home cooking physical activity and obesity the effect of the fat tax and the thin subsidy abstract in an effort to reduce the growing prevalence of obesity a tax on junk foods known as fat tax has been proposed the revenue from which could be used to finance a thin subsidy for healthy foods or exercising equipment the present paper addresses the fat tax and thin subsidy within a food intake rational choice model assuming that healthy meals are cooked at home with purchased ingredients and time input the paper examines the effects on obesity of a tax on junk food meals and a subsidy to cooking ingredients distinguishing between a weight conscious and a non weight conscious individual and between a weight conscious individual who is physically active and physically inactive the results show that for a non weight conscious individual a fat tax will unambiguously reduce obesity whereas a thin subsidy may increase obesity however for a weight conscious individual particularly one who is physically active even a fat tax may increase obesity as it may reduce not just the consumption of junk food but also the time devoted to physical activity the paper explores conditions under which obesity will rise fall or remain intact following the introduction of a fat tax or a thin subsidy

differences in wage distributions between canada and the united states an application of a flexible estimator of distribution functions in the presence of covariates we construct a tractable flexible functional form estimator of cumulative distribution functions for non negative random variables which admits large numbers of covariates the estimator adopts and extends techniques from the spell duration literature for estimating hazard functions to distribution functions for wages earnings and income we apply these methods to investigate sources of wage inequality for full time male workers between canada and the united states finding that the canadian wage density has a thinner left tail because low educated workers have higher pay and a thinner right tail because of a lower proportion of highly educated workers unions appear to play a large role in these outcomes