evaluating welfare reform in the united states this paper reviews the economic literature on welfare reform over the 1990s a brief summary of the policy changes is followed by a discussion of the methodological techniques that analyze the effects of these changes on outcomes the paper then critically reviews the econometric and experimental literature on caseload changes labor force changes poverty and income changes and family formation changes a growing body of evidence suggests that recent policy changes have influenced economic behavior and well being one particular set of new style welfare programs seems to show especially promising results with significantly increased work and earnings and reduced poverty

information rational expectations and macroeconomic modelling book reivewed in this article thomas j sargent 1987 dynamic macroeconomic theory m hashem pesaran 1987 the limits to rational expectations

accounting for the decline in afdc caseloads welfare reform or the economy we use state level monthly panel data to assess the relative contributions of the macroeconomy and welfare reform in accounting for the 1993 96 decline in aid to families with dependent children afdc caseloads our results suggest that the decline in per capita afdc caseloads is attributable largely to the economic conditions in states and not to waivers from federal welfare policies nationwide we attribute 66 percent of the decline to the macroeconomy however we do find substantial heterogeneity in the impact and timing of alternative waivers on afdc caseloads states with waivers impacting parental responsibilities experienced greater caseload declines than states with waivers that made work more attractive overall our model predicts that had it not been for the influence of economic factors welfare reform would not have led to any decrease in aggregate caseloads

the employment dynamics of different population groups over the business cycle abstractwe examine differences in employment dynamics across population groups using bayesian vector autoregressions we document that groups who are particularly strongly affected by business cycle fluctuations males young people non whites the less educated and workers in blue collar occupations also tend to be affected early in the build up of a boom or bust we further identify the drivers of the different cyclicalities across population groups supply shocks seem to be most important for the heterogeneous employment fluctuations and particularly for the early effects of recessions and booms on the most affected groups dynamics in sectoral activity and in hiring rates can help to understand our findings

wages and employment under trade unionism microeconomic models and macroeconomic applications the first part of this paper is a critical survey of microeconomic research into behavioural models of trade unionism although certain formulations of union objectives and models of wage and employment determination in unionized markets have found favor with economists unfortunately only a little is known about their empirical relevance the second part of this paper deals with the daunting problems of applying these models at the macroeconomic level one such model is estimated with data from sweden s mining and manufacturing sector from 1968 to 1982

some neglected social costs of government spending in farm programs economic welfare analyses of farm programs typically assume that the direct social opportunity cost of subsidy payments is one dollar per dollar of government spending recent literature suggests that the marginal opportunity cost of a dollar of u s federal government spending is more likely to be in the range of 1 20 to 1 50 this implies that the net social costs of farm programs that involve government spending are significantly greater than the typical estimates in addition the normative efficiency ranking of alternative policies is sensitive to the marginal opportunity cost of government spending

identifying deprivation profiles in spain a new approach usually an indirect approach for measuring deprivation or poverty is used with poverty lines however some studies have used a direct approach to measure deprivation or poverty the aim of this study is improving the identification of the poor people the central point of the concept of deprivation used is related to the opportunity to have or do something therefore deprivation means an inability to get the goods facilities and opportunities which are usual in the household environment since all of the needed variables are categorical the latent class model is used to solve this problem because it is the best model to achieve this objective

marriage divorce and reciprocity based cooperation this paper considers partnership formation partnership dissolution and reciprocity based cooperation by couples in the form of voluntary transfers to smooth consumption while risk sharing is one benefit of having a partner it is also limited by the endogenous risk of separation the equilibrium formation and dissolution of partnerships are determined simultaneously with cooperative behavior publicly provided earnings insurance is shown to increase the turnover rate in the marriage market as well as to reduce the steady state marriage rate and the implicit financial cooperation between partners

impact of infrastructure expenses in strategic sectors for brazilian poverty abstract this paper analyzes the impact of infrastructure investments in the reduction of poverty in brazil controlled through other determinants such as economic growth income inequality average schooling years unemployment rate and state budgets from 1995 to 2011 a model for a dynamic panel data estimated by the generalized method of moments gmm in two steps as developed by arellano bond 1991 and blundell bond 1998 found among other conclusions a significant inverse relation between public investment in infrastructure and poverty the granger causality test for panel data proposed by hurlin and venet 2001 2004 and hurlin 2004 2005 reinforced results validation

the need to rethink agricultural policy in general and to perform some radical surgery on commodity programs in particular there were some 6 8 million farmers in the united states in 1935 this was the highwater mark for the number of farms in the united states of this total there were a good number of small low production farms in the south one mule sharecropper farms and a good number of small subsistence farms in appalachia and the cut over regions of the lake states at the other end of the size scale there were some very large farms often of the corporate type in california south texas and along the mississippi delta but the overwhelming number of farms in the united states in the mid 1930s were moderate sized family farms in the midwest these farms tended to run between 100 and 200 acres in size in the typical case the family provided the labor and the management of the farming operation and had some equity in it this was a period of deep dark depression

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

development and income distribution the case of puerto rico abstract using data spanning half a century the study addresses the trends and factors behind changes in income distribution in one of the earliest examples of development through integration to the world economy results show remarkable income growth that generated an ambiguous long term change in inequality but a drastic reduction in poverty public transfers played a decisive role in restraining growth in inequality and in reducing poverty levels that were also affected favorably by changes in the distribution of female earned income finally although rising schooling levels and their absolute returns increased households income generating capacities the realization of the potential was hindered by increasing levels of unemployment and economic inactivity

what are the distributional implications of halving poverty in south africa when growth alone is not enough the united nations millennium declaration commits to halving extreme poverty between 2000 and 2015 the south african government has set a goal of halving poverty by 2014 although the meaning of this goal has not yet been defined this article frames government s stated target of halving poverty by 2014 in terms of specific measures of the poverty gap and poverty headcount ratio using income and expenditure survey microdata with the poverty line as defined here approximately half the south african population falls below the poverty line despite this the aggregate poverty gap is surprisingly small at about 3 of gross domestic product projections of poverty in 2014 under various growth scenarios indicate that growth alone will be insufficient to halve poverty by then and that any worsening of distribution will put the target of halving poverty by 2014 far beyond reach however projections of the effects of a range of growth and distributional scenarios on poverty using a new method for simulating

food costs and the 1988 us drought abstract alternative government stock policies are evaluated in terms of their effects on the us livestock sector and consumer food prices before and after the 1988 drought using a comprehensive model of the us agricultural sector stock levels associated with the food security act of 1985 fsa85 are compared with those of a reduced stock policy this option reduced government corn stocks to zero and lowered overall stocks by almost 2 million bushels prior to the drought saving taxpayers about 15 billion compared to the observed level of spending associated with fsa85 however consumers were projected to spend almost 40 billion more following the drought in higher food particularly meat costs because of the dramatic shock lower corn stocks would have on corn prices and the livestock sector

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

targeting transfers through restrictions on recipients our objective is to design transfer programs that maximize some social welfare function following the optimal income tax formulation we assume that a random process endows individuals with characteristics that influence welfare such as ability to earn income medical condition or unmonitorable income the goal is to maximize the utility of a randomly chosen individual other individualistic social welfare functions would lead to equivalent results if the random characteristics were observable a first best outcome could be achieved by making them the basis for lump sum transfers in practice however we can observe only indicators of these characteristics such as earnings medical expenditures or consumption patterns the challenge for policy is to design an efficient second best transfer program based on indicators in this paper we argue that 1 an optimal transfer program in general must sacrifice productive efficiency to target efficiency this is done by imposing restrictions on the choices made by intended beneficiaries 2 a program that incorporates restrictions such as means tested in kind transfers commodity specific taxes and subsidies and even ordeals i e the imposition of deadweight costs to qualify for a transfer will perform better than programs that rely solely on income taxes and cash transfers

policy watch the 1996 welfare reform welfare reform legislation was passed in the summer of 1996 four key research questions that the new law presents to social scientists are as follows 1 can states design and operate better programs than afdc this includes questions about the ability of afdc women to work a significant number of hours the legislation s effect in areas of concentrated urban poverty and the extent to which women will be able to improve their families economic status under the legislation 2 will jobs be available 3 how will the new block grant affect states fiscal situation and 4 what new research methodology questions does this legislation introduce

does monetary policy affect relative educational unemployment rates this paper examines the empirical relationship between relative educational unemployment rates and monetary policy such an examination is warranted because policymakers attempts to understand the distributional effects of monetary policy may be confounded by vintages of the theoretical literature that offer contrasting views of how skill based relative unemployment with unemployment of the less skilled in the numerator might behave over the business cycle a traditional view emphasizes characteristics of labor markets that could induce countercyclical movements in skill based relative unemployment for example arthur okun 1973 argues that an important benefit of high levels of aggregate economic activity is that opportunities for employment in the high quality jobs sector open up to the relatively unskilled a mechanism for the relative improvement of the employment prospects of the unskilled is changes in hiring standards of high quality job providers that occur over the cycle changes that occur during expansion and boom periods mentioned by okun include accepting younger and less experienced workers or workers without diplomas and more intensive screening of applicants a forceful statement of this highpressure economy view is contained in rebecca blank 2000 a more recent view of the impact of technological adoption could have quite different implications for movements in skill based relative unemployment over the cycle for example dale mortensen and christopher pissarides 1999 show that in their equilibrium search and matching framework the relationship between skill and unemployment is convex in the presence of labor market policies such as unemployment compensation in this environment skill biased technology shocks increase overall unemployment rates with a disproportionate share of the unemployment falling on the unskilled in his popular account of the matter krueger 2002 ties cyclical investment in new technologies to the conduct of monetary policy thereby linking relative educational unemployment to monetary policy my answer to the title question emerges from quantitative results designed to assess the dynamic effect on relative educational unemployment of a monetary policy surprise controlling for supply shocks and the introduction of new technical ideas these findings appear to resolve some of the tension between alternative views on relative unemployment dynamics in favor of the high pressure economy hypothesis discussants seth b carpenter federal reserve board jonah b gelbach university of maryland bridget terry long harvard university

growth elasticity of poverty direct estimates from recent data using recent poverty data for developing countries elasticity of 2 poverty headcount with respect to the growth of gross domestic product gdp per capita is directly calculated for the 1990s and the 2000s the global estimate is around 0 84 which is much smaller in absolute magnitude than what some highly influential studies have reported or used for the poverty dense south asia region the elasticity is of the order of 0 22 which is a dramatic contrast from the previous estimates for india where the number of poor people is by far the largest of any country and where the poverty rate is higher than even in sub saharan africa ssa the elasticity is of the order of 0 13 which is an even bigger contrast from earlier studies policymakers and researchers are urged to keep these estimates in mind while judging the likely effect of income growth on poverty and to discount poverty reduction claims based on higher elasticity estimates that have been reported or used in many influential studies i

the effect of robust growth on poverty a nonlinear analysis previous research has shown that economic growth should help to reduce the rate of poverty however a number of recent studies have found that the economic expansion of the 1980s had no statistically significant effect on aggregate poverty it is shown that both a threshold regression and a fourier approximation provide a better empirical model of poverty than the standard linear model it is noteworthy that the nonlinear specifications show a large and significant effect on poverty of the 1980s expansion

distinguished lecture on economics in government fighting poverty lessons from recent u s history in his 1964 state of the union address his first after assuming the presidency president lyndon johnson declared a war this administration today here and now declares unconditional war on poverty in america the result of johnson s declaration was a series of major legislative changes whose success or failure is still hotly debated by the mid 1990s the focus of policy concern had shifted from fighting poverty to reducing welfare dependence however one might argue that the 1990s rather than the 1960s were truly the decade in which the united states fought a war on poverty the 1990s were a time of substantial legislative change in programs designed to assist low income families at the same time a remarkable change also occurred in the behavior of low income families with plummeting use of public assistance and substantial increases in labor market involvement i will start by documenting the magnitude and speed of these behavioral changes during the 1990s and then investigate the role of both the macroeconomy and policy in producing these outcomes i end by discussing how these changes may or may not translate into improvements in long term family well being

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

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

efficient redistribution through commodity markets efficiency in redistribution is measured in terms of deadweight loss generated per dollar of economic surplus transferred between consumers and producers of a commodity by means of market intervention the implications of supply and demand elasticities for efficiency in redistribution are examined with special attention to the comparison of production control and deficiency payment programs the results may be used to aid in the evaluation of commodity programs and as a basis for consideration of the hypothesis that observed policies are efficient given the political power of interest groups

output the stock market and interest rates this paper develops a simple model of the determination of output the stock market and the term structure of interest rates the model is an extension of the is lm model and borrows from it the assumption that output is determined by aggregate demand and that the price level can only adjust over time to its equilibrium value however whereas the is lm emphasizes the interaction between the interest rate and output this model emphasizes the interaction between asset values and output asset values rather than the interest rate are the main determinants of aggregate demand and output current and anticipated output and income are in turn the main determinants of asset values it is this interaction that the model intends to capture its goal is to characterize the joint response of asset values and output to changes in the environment such as changes or announcement of changes in monetary and fiscal policy as the above brief description makes clear anticipations are central to the story the assumption made in this paper will be one of rational expectations the paper is organized as follows section i describes the model and sections ii iv characterize the behavior of the economy under the extreme but convenient assumption that prices are fixed forever sections v and vi extend the analysis to the case where prices adjust over time to their equilibrium value

man cessions fiscal policy and the gender composition of employment recessions are man cessions as men are disproportionately exposed to cyclical employment fluctuations we provide evidence that fiscal expansions stimulate predominantly female employment implying a further destabilization of the gender composition of employment in recessions our findings can be understood as a consequence of differences in the industry occupation mix of employment by gender

disequilibrium buffer stock models a survey abstract this paper surveys the growing literature on buffer stock models of the monetary transmission process the first part indicates the basic issue of how assumed exogenous changes in the money supply work their way through the economic system via disequilibrium in the money market after a brief historical development buffer stock models are divided into four types depending upon whether the disequilibrium arises in stocks and or flows and to whether changes in the money stock are purely exogenous the empirical implications including how buffer stock models explain the recent behaviour of money demand functions are given theoretical and empirical criticisms of the models are presented in terms of the classification system the survey concludes that whilst the buffer stock notion is an interesting idea the current models do not lend themselves to empirical testing and those models which do have performed poorly

do measures of monetary policy in a var make sense no in many vector autoregressions vars monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the u s federal reserve s reaction function furthermore the residuals from these regressions show little correlation across various vars or with funds rate shocks that are derived from forward looking financial markets my results provide a sharp critique of current monetary vars

stabilization with exchange rate management stabilization programs in open economies typically consist of two stages in the first stage the rate of currency devaluation is reduced but the fiscal adjustment does not eliminate the fiscal deficit that causes growth of debt and loss of reserves making a future policy change necessary only later at a second stage is this followed by either an abandonment of exchange rate management or by a sufficiently large cut in the fiscal deficit we study how different second stage policy changes affect economic dynamics during the first stage these changes include tax increases budget cuts on traded and nontraded goods and increases in the growth rate of money

educational attainment and the cyclical sensitivity of employment this article examines whether there are educational premiums on the quantity side of the labor market we document four findings 1 trend employment patterns shifted for most educational levels post 1977 2 the lower the level of educational attainment the more volatile the employment ratio 3 the volatility of employment for female high school dropouts increased over time even as the economy became less volatile and 4 since 1984 the responses of skilled and unskilled employment to the business cycle have become more alike this latter finding is consistent with a reduced degree of capital skill complementarity during this period

real exchange rate overshooting and the output cost of bringing down inflation implementing a gradualist policy of monetary contraction in an open economy with a freely floating exchange rate but with nominal inertia in domestic labor costs can lead to prompt and substantial changes in the nominal and real exchange rate one of the virtues claimed for such exchange rate overshooting however is its immediate effect on the price level and so on domestic wage and price inflation in this paper we show that in a model which is super neutral and has nominal inertia in both the level of labor costs and their trend or core rate of growth this early overshooting of the exchange rate does not succeed in cutting the output costs of reducing steady state inflation those output and unemployment costs which are initially avoided by over valuing the currency have to be paid later when this overvaluation is corrected relative to other policies which achieve the same effect on steady state inflation exchange rate overshooting brings inflation down more quickly this abstract was borrowed from another version of this item

a simple general equilibrium version of the baumol tobin model this paper presents a simple general equilibrium model that includes optimizing choices of the frequency of trips to the bank the model is used to analyze the effect of inflation on the capital stock the interest elasticity of money demand the optimum quantity of money and the welfare costs of inflationary finance

the cleansing effect of recessions the authors investigate industry response to cyclical variations in demand production units that embody the newest process and product innovations are continuously being created and outdated units are being destroyed although outdated units are the most likely to turn unprofitable and be scrapped in a recession they can be insulated from the fall in demand by a reduction in creation the structure of adjustment costs plays a determinant role in the responsiveness of those two margins the calibrated model matches the relative volatilities of the observed manufacturing job creation and destruction series and their asymmetries over the cycle copyright 1994 by american economic association

the impact of welfare on young mothers subsequent childbearing decisions the impact of welfare on fertility in the united states is explored focusing on the theory that some women have many children to increase their incomes and to prolong their stay on welfare rolls the author examines the relationship between welfare and births to women who already have a child using data on young mothers from the national longitudinal survey of youth nlsy i find that variations in welfare benefit levels and the incremental benefit have no statistically significant impacts on the subsequent childbearing decisions of young mothers in general nor on the subsequent childbearing decisions of women who received welfare in particular furthermore mothers who received welfare to support their first children are no more likely to have additional children in any given year through the age of 23 excerpt