workfare wellbeing and consumption evidence from a field experiment with kenya s urban poor abstract restrictions like work requirements and constraints on voucher transfers are often used in social welfare systems but little empirical evidence exists on their impact on wellbeing we conducted a 10 day randomized experiment with 432 individuals living below the poverty line in the kawangware settlement of nairobi kenya testing two elements of social welfare design workfare versus welfare and restricted versus unrestricted vouchers participants were randomly assigned to a work condition involving daily work for unrestricted vouchers or one of two wait conditions involving daily waiting for vouchers that were either unrestricted or partially restricted to staple foods we find that working improved psychological wellbeing relative to waiting suggesting that the means of implementing welfare programs may have important effects on individuals beyond the impact of monetary benefit alone furthermore although the restrictions were inframarginal partially restricted vouchers crowded in spending on staple foods suggesting the existence of a flypaper effect in spending from restricted vouchers

the realization effect risk taking after realized versus paper losses abstract understanding how prior outcomes affect risk attitudes is critical for the study of choice under uncertainty a large literature documents the significant influence of prior losses on risk attitudes the findings appear contradictory some studies find greater risk taking after a loss whereas others show the opposite that people take on less risk i reconcile these seemingly inconsistent findings by distinguishing between realized versus paper losses using new and existing data i replicate prior findings and demonstrate that following a realized loss individuals avoid risk if the same loss is not realized a paper loss individuals take on greater risk jel d11 d14 d81 g11

employer stock and 401 k plans the sharp decline in the stock prices of several firms at which employees held a large fraction of their 401 k plan assets in company stock including enron global crossing lucent and polaroid has sparked a public policy debate about investment options in 401 k plans at many large firms particularly those with retirement saving plans that combine elements of an employee stock ownership plan esop with a traditional 401 k a substantial fraction of defined contribution retirement plan assets are held in company stock such undiversified holdings are a source of concern because they raise the volatility of the retirement wealth for employees and expose some workers to the prospect of very small retirement values holding an undiversified position in employer stock may be particularly costly because of the potential correlation between company stock returns and the value of the worker s human capital which may depend on the company s prospects this paper reviews the extent of undiversified company stock investments in 401 k plans evaluates the cost of such investments from an employee s perspective and discusses a range of policy actions that could address the excessive concentration of retirement plan assets

does decentralization contribute to efficiency evidence from oecd countries abstractthis article provides evidence on the relationship between fiscal decentralization and technical efficiency we begin the first stage of this study with a data envelopment analysis to obtain technical efficiency estimates for a sample of 23 oecd countries over the period 1992 2009 in a second stage we explore the effects of fiscal decentralization and other control variables on technical efficiency the results including all the control variables reveal a statistically significant negative relationship between fiscal decentralization of public expenditure and technical efficiency

one size fits all decentralization corruption and the monitoring of bureaucrats summary the majority of theoretical and empirical studies on the relationship between decentralization and corruption argue that the devolution of power might be a feasible instrument for use in keeping corruption at bay we argue that this result crucially depends on the effectiveness of monitoring bureaucrats behavior the benefits of decentralization only occur if there is a supervisory body such as a free press which is often lacking in a substantial number of countries using cross country data we analyze the relationship between decentralization and corruption taking different degrees of the freedom of the press into account our main finding is that decentralization counteracts corruption in countries with high degrees of freedom of the press whereas countries without effective monitoring suffer from decentralization our policy implication is that a free press is a necessary pre condition for successful decentralization programs

home energy use in nine oecd countries 1960 1980 abstract government institutions and individuals have responded to fluctuations in energy supply and price with the implementation of policies and the initiation of conservation while these activities have resulted in noticeable conservation of energy primarily through behavioural actions further savings could be achieved through the exchange of information regarding promising policies and technologies toward this end data on residential sector energy use for nine oecd countries canada denmark france west germany italy japan sweden the uk and the usa have been collected over the period 1960 1980 and have been analysed using both indicators of energy use intensity and econometric methods

why countries are fiscally decentralizing this paper models and empirically investigates underlying forces that promote governmental decentralization or effective federalism in the world over the last 25 years a move to a federal system is based on the demand by hinterland regions for local autonomy which increases with national income growth greater relative hinterland population and increasing national population it is influenced as well by the degree of democratization nationally and locally decentralization is measured by both institutional indices indicating greater devolution of power to local governments and the share of local governments in national government consumption empirically the paper finds that decentralization changes in ways predicted in particular it increases with economic growth country size and population institutional structures based on colonial experience and initial constitutional provisions also matter

political decentralization economic growth and regional disparities in the oecd ezcurra r and rodriguez pose a political decentralization economic growth and regional disparities in the oecd regional studies recent scholarly work has addressed whether decentralization affects economic growth and regional disparities by typically resorting to fiscal decentralization while disregarding political decentralization indices this article covers this gap by investigating the association between different political decentralization indices with two measures of economic performance changes in gross domestic product gdp per capita and in territorial inequalities the results suggest a lack of statistical relationship between political decentralization and economic growth regardless of how political decentralization is measured in the case of regional disparities the results depend on the index used and range from the absence of a link to a positive association between both factors ezcurra r and rodriguez pose a oecd

the flypaper effect what happens to a state s spending when it receives an unconditional grant from the federal government the standard theoretical analysis predicts that the increase in spending will be the same as that generated by an equivalent increase in local incomes or roughly 5 10 percent for most states in contrast numerous empirical analyses have found that spending increases by much more with some estimates near 100 percent this result is known as the flypaper effect since the money appears to stick where it hits the authors review this evidence as well as other studies that find similar behavior in firms

microenterprise growth and the flypaper effect evidence from a randomized experiment in ghana standard models of investment predict that credit constrained firms should grow rapidly when given additional capital and that how this capital is provided should not affect decisions to invest in the business or consume the capital we randomly gave cash and in kind grants to male and female owned microenterprises in urban ghana for women running subsistence enterprises we find no gain in profits from either treatment for women with larger businesses we strongly reject equality of the cash and in kind grants only in kind grants cause growth in profits suggesting a flypaper effect whereby capital coming directly into the business sticks there but cash does not the results for men also suggest a lower impact of cash but differences between cash and in kind grants are less robust there is suggestive evidence that the difference in the effects of cash and in kind grants is associated more with lack of self control than with external pressure

residential energy demand in brazil by income classes issues for the energy sector abstract due to the lack of reliable statistical information the majority of analyses concerning the structure of developing countries energy market of developing countries do not disaggregate the demand by income classes this component offers important strategies for energy planning in these countries by making it possible to quantify the portions of society which have not entered the energy market and are more affected by internal energy price rises this approach also emphasizes that the bulk of energy is consumed by a small fraction of the population while a significant proportion of households do not benefit from energy services issues such as energy conservation pricing and energy distribution and the impact of technological changes must be dealt with differently in developing countries including the characteristics of the structure of their energy markets according to income classes

local decentralization and local economic growth a cross sectional examination of us metropolitan areas this paper builds on the growing empirical literature that explores the relationship between government structure and economic growth it uses a new data set of 314 us metropolitan areas to examine the relationship between local decentralization and local economic growth the results indicate a negative relationship between the central city share of metro area population and economic growth and a positive relationship between both the number of municipalities per 100 000 residents and the number of counties per 100 000 residents and economic growth those findings provide support for the hypothesis that decentralization enhances economic growth

regional unemployment and employee loyalty evidence from 12 uk regions abstractthis study investigates the relationship between unemployment and employee loyalty across uk regions it is argued that higher regional unemployment depresses wages and increases the cost of a potential job loss thus providing an incentive for employees to be loyal to their employer using data from the work and employment relations survey wers the results confirm the positive association between regional unemployment and employee loyalty a disaggregated analysis by type of business reveals that this association is stronger in the private sector the study adds a spatial dimension to an emergent literature that examines how unemployment affects the employed

fiscal decentralization and economic growth abstract fiscal decentralization may indeed have a direct impact on economic growth but the theoretical underpinnings for this relationship remain largely undeveloped a fair summary of the empirical search for a direct relationship between fiscal decentralization and economic growth is that it remains an open question much less attention has been devoted in the literature to the indirect channels through which fiscal decentralization may affect economic growth we argue that much work remains to be done before policy advisors and decision makers can formulate and implement decentralization programs on the basis of improving the rate of economic growth

portfolio choice and trading in a large 401 k plan we study nearly 7 000 retirement accounts during the april 1994 august 1998 period several interesting patterns emerge most asset allocations are extreme either 100 percent or zero percent in equities and there is inertia in asset allocations equity allocations are higher for males married investors and for investors with higher earnings and more seniority on the job equity allocations are lower for older investors there is very limited portfolio reshuffling in sharp contrast to discount brokerage accounts daily changes in equity allocations correlate only weakly with same day equity returns and do not correlate with future equity returns

conservation potential of compact fluorescent lamps in india and brazil abstract we evaluate the conservation potential of compact fluorescent lamps cfls for managing the rapidly increasing electrical energy and peak demand in india and brazil the analysis is undertaken from the three separate perspectives of the national economies the consumers and the utilities we find that because residential electricity is subsidized the consumers have little or no incentive to purchase and install the cfls unless they too are subsidized however the benefits of cfl installation to the utility are so large that subsidizing them is a paying proposition for the utility in almost all cases we then explore the barriers to immediate large scale introduction of these lamps in the two countries specific technical and marketing problems are identified and discussed which would require solution before such an introduction can be attempted lastly we list the range of policy instruments in addition to a subsidy scheme that can be used for promoting the diffusion of these lamps in the domestic and commercial sectors

mental accounting of public funds the flypaper effect in the lab abstract we report evidence from a series of laboratory experiments that focus on mental accounting of public funds groups of three players decide upon how much to redistribute within the group we measure the preference to redistribute when transfers are made either out of individual accounts the players own money or out of a common account the group s money since the common account is dissolved after each round and paid out to individuals its size should not affect the decision to redistribute the experiment is designed to control for anchoring as a potential confounding effect we find that the size of the common account significantly affects redistribution behavior specifically the transfer increases in the size of the common account this effect is significantly more pronounced when the transfer is paid out of the common account instead of the individual account we interpret these findings as evidence for a flypaper effect due to mental accounting

regional economic disparities and decentralisation the study of the influence of decentralisation on economic growth has received some attention in recent years but very few studies deal with its impact on regional inequalities this paper analyses the impact of both fiscal and political decentralisation on regional inequalities using alternative measures for a sample of 17 oecd countries in order to check for other possible influences the study also includes measures of public sector size and the type of party in government the final section studies the relevance of fiscal decentralisation in the regional convergence process observed by several authors during the past two decades the research reveals a strong negative correlation between decentralisation especially fiscal decentralisation and regional inequalities and also a positive influence of decentralisation on regional convergence

fiscal decentralization and economic growth reconsidered recent studies examining the relation between fiscal decentralization and economic growth have failed to take account of the extent of the independent taxing powers available to sub national governments and thus have substantially overstated the degree of effective decentralization results from a cross section study of 19 oecd member countries suggest that when the measure of fiscal decentralization is limited to the revenues over which sub national governments have full autonomy its impact on economic growth is not statistically significant

decentralization fueling the fire or dampening the flames of ethnic conflict and secessionism political decentralization is widely believed to reduce ethnic conflict and secessionism in the world today yet decentralization is more successful in reducing conflict and secessionism in some countries than in others in this article i explore why this difference occurs i demonstrate using a statistical analysis of thirty democracies from 1985 to 2000 that decentralization may decrease ethnic conflict and secessionism directly by bringing the government closer to the people and increasing opportunities to participate in government but that decentralization increases ethnic conflict and secessionism indirectly by encouraging the growth of regional parties regional parties increase ethnic conflict and secessionism by reinforcing ethnic and regional identities producing legislation that favors certain groups over others and mobilizing groups to engage in ethnic conflict and secessionism earlier versions of this article were presented at harvard university and the center for the study of democratic politics at princeton university the author would like to thank sandra alfonso leon james alt micah altman barry friedman shigeo hirano simon hug gary king rose rozaghian tulia falleti and two anonymous reviewers for their very helpful comments

individual account investment options and portfolio choice behavioral lessons from 401 k plans abstract this paper examines how the menu of investment options made available to workers in defined contribution plans influences portfolio choice using unique panel data of 401 k plans in the u s we present three principle findings first we show that the share of investment options in a particular asset class i e company stock equities fixed income and balanced funds has a significant effect on aggregate participant portfolio allocations across these asset classes second we document that the vast majority of the new funds added to 401 k plans are high cost actively managed equity funds as opposed to lower cost equity index funds third because the average share of assets invested in low cost equity index funds declines with an increase in the number of options average portfolio expenses increase and average portfolio performance is thus depressed all of these findings are obtained from a panel data set enabling us to control for heterogeneity in the investment preferences of workers across firms and across time

portfolio selection with mental accounts and background risk abstract das et al 2010 develop a model where an investor divides his or her wealth among mental accounts with motives such as retirement and bequest nevertheless the investor ends up selecting portfolios within mental accounts and an aggregate portfolio that lie on the mean variance frontier importantly they assume that the investor only faces portfolio risk in practice however many individuals also face background risk accordingly our paper expands upon theirs by considering the case where the investor faces background risk our contribution is threefold first we provide an analytical characterization of the existence and composition of the optimal portfolios within accounts and the aggregate portfolio second we show that these portfolios lie away from the mean variance frontier under fairly general conditions third we find that the composition and location of such portfolios can differ notably from those of portfolios on the mean variance frontier

decentralization and economic growth revisited an empirical note abstract although it is theoretically expected that decentralization leads to efficient provision of local public services and stimulates economic development there is a mixed picture of the decentralization effect on economic growth across earlier empirical studies using the instrument variables iv technique with the latest cross country data for the period from 1997 to 2001 this paper found that fiscal decentralization has a significant positive impact on per capita gdp growth therefore when the focus is placed on the latest information on the economic situation in the latter 1990s decentralization particularly on the fiscal expenditure side is instrumental in economic growth

agglomeration and economic development import substitution vs trade liberalisation this paper analyses a model of economic development in which international differences in industrial structure and income are caused by the agglomeration of industry in a subset of countries economic development may not be a gradual process of convergence by all countries but instead involve countries moving sequentially from the group of poor countries to the group of rich countries the role of trade policy in promoting industrialisation is studied while both import substitution and unilateral trade liberalisation may be successful in attracting industry they attract different sectors and welfare levels are higher under trade liberalisation

on the asset allocation of a default pension fund we characterize the optimal default fund in a dened contribution dc pension plan using detailed data on individuals and their holdings inside and outside the pension system we nd substantial heterogeneity among default investors in terms of labor income nancial wealth and stock market participation we build a life cycle consumption savings model incorporating a dc pension account and realistic investor heterogeneity we examine the optimal asset allocation for dierent realized equity returns and investors and compare it with age based investing the optimal asset allocation leads to less inequality in pensions while it moderates the risks through active rebalancing

mental accounting in portfolio choice evidence from a flypaper effect this paper documents a lack of coordination between the asset allocations of different financial accounts in a household portfolio our findings are predicted by the theory of mental accounting richard h thaler 1985 1990 1999 agents sometimes make decisions about individual accounts in their portfolio without considering their other accounts the setting for our analysis is a large u s firm when an employee at this firm makes a 401 k contribution the company makes a matching contribution proportional to the employee s contribution up to a match threshold in march 2003 the firm changed its 401 k matching rules creating a natural experiment both before and after the rule change the initial allocation of participants own contribution flows was determined by the participants 1 the change in march 2003 was to the policy determining the initial asset allocation of the employer match contributions in the first regime before march 2003 the firm directed matching contribution flows entirely into employer stock this was not a binding restriction as participants could freely reallocate their match balances after matching contributions were made although in practice participants rarely did so in march 2003 the company changed its match policy requiring new enrollees to actively choose the asset allocation for both their own and match contribution flows the change between these regimes was economically neutral any allocation of balances in one regime could be replicated in the other nevertheless allocations to employer stock differed vastly across the two regimes employees who enrolled in february 2003 just before the regime change allocated 23 of their own contribution flows to employer stock since all of their match contributions were directed into employer stock this resulted in a 56 total 401 k allocation to employer stock combining the own contribution and match contribution accounts few of these february enrollees made subsequent trades to reduce their employer stock balances in either account employees who enrolled in march 2003 right after the change allocated 23 of their total own plus match contribution flows to employer stock notice that own contribution allocations to employer stock in the first regime precisely match the combined allocation of own and match contributions in the second regime 23 in both cases even though combined allocations differ greatly across the regimes these results imply that each dollar of employer stock contributed to enrollees through the match in the first regime increased the employees total holdings of employer stock by a full dollar rather than being offset by reduced employer stock holdings elsewhere or being sold off directly in other words money sticks where it hits a phrase attributed to arthur okun generating an asset allocation flypaper effect that is akin to the flypaper effects of public finance corporate finance and intra household consumption 2 after considering several explanations for the asset allocation flypaper effect we conclude that it is due in part to mental accounting our results can be explained by the following simple model in the first regime new enrollees actively allocated only their own contribution flows effectively ignoring the fact that their matching contributions were entirely directed into employer stock in the second regime the match allocation became salient because new enrollees were required to choose both their match and own contribution allocations during the enrollment process this caused enrollees to consider their entire 401 k portfolio instead of just their own contribution accounts as a result the fraction of total contributions allocated to employer stock under the second regime equaled the fraction of own contribution flows allocated to employer stock under the first regime the average participant allocated roughly one quarter of assets to employer stock in whatever accounts were salient whether the set of salient accounts was narrow regime one or broad regime two the dependence of portfolio outcomes on account salience is inconsistent with investors having a clear target asset allocation for their entire portfolio which they efficiently implement through their investment choices in accordance with much prior research we also find that investors are quite passive rarely reallocating their portfolios 3 however our central finding concerns asset allocation decisions made at enrollment a point when people have overcome their passivity and are taking action investor passivity thus cannot account for the unresponsiveness of own contribution allocations to the match allocation at enrollment under the first regime although passivity helps explain why these initial decisions are rarely reversed subsequently

spatially rebalancing the uk economy towards a new policy model martin r pike a tyler p and gardiner b spatially rebalancing the uk economy towards a new policy model regional studies the current uk government has announced its intention to rebalance the national economy spatially to create a northern powerhouse to rival that in london and the south east this imbalance is in fact a longstanding problem that 90 years of regional policy has not resolved this paper argues that the entrenched nature of the uk s spatial imbalance derives in part from the centralized nature of the national political economy and that only a bold and radical change in that political economy based on a devolution and decentralization of or economic financial and political power is called for

which countries have state religions among 188 countries 72 had no state religion in 2000 1970 and 1900 58 had a state religion throughout and 58 had 1 or 2 transitions we use a hotelling spatial competition model to analyze the likelihood that the religion market would be monopolized similar forces influence a government s decision to establish a state religion consistent with the model the probability of state religion in 1970 and 2000 is increasing with the adherence rate to the main religion has a nonlinear relation with population and has little relation with per capita gdp the probability of state religion decreases sharply under communism but lagged communism has only a weak effect with costly adjustment for institutions the probability of state religion in 1970 or 2000 depends substantially on the status in 1900 this persistence is much stronger for countries with no major regime change than for countries with such a change

beyond the fiction of federalism macroeconomic management in multitiered systems recent research on federalism is extremely divided while some tout the benefits of market preserving federalism others point to the fragmentation and incoherence of policy in federal states this research bridges the divide by analyzing the political and fiscal structures that are likely to account for the highly divergent economic experiences of federal systems around the world to test these propositions the authors use an original data set to conduct analyses of budget balance and inflation in fifteen federations around the world from 1978 through 1996 the empirical research suggests that the level of fiscal decentralization the nature of intergovernmental finance and vertical partisan relations all influence macroeconomic outcomes the findings have broad implications for the widespread move toward greater decentralization and for the theoretical literatures on federalism and macroeconomics

fiscal decentralization and economic growth a cross country study abstract we use a panel data set of 46 countries over the 1970 1989 period to investigate the relationship between fiscal decentralization and economic growth we find a negative relationship between fiscal decentralization and growth in developing countries but none in developed countries several explanations are offered for our findings

consumer financial protection the recent financial crisis has led many to question how well businesses deliver services and how well regulatory institutions address problems in consumer financial markets this paper discusses consumer financial regulation emphasizing the full range of arguments for regulation that derive from market failure and from limited consumer rationality in financial decision making we present three case studies of mortgage markets payday lending and financing retirement consumption to illustrate the need for and limits of regulation we argue that if regulation is to be beneficial it must be tailored to specific problems and must be accompanied by research to measure the effectiveness of regulatory interventions

borrowing on the wrong credit card evidence from mexico abstract we establish new facts about the way consumers allocate debt among their credit cards using data for a representative sample of cardholders in mexico we find that relative prices are weak predictors of the allocation of debt purchases and payments consumers allocate a large fraction of their debt to high interest cards incurring a cost of 31 percent above the minimum using an experiment we find that consumers do not substitute in the price margin although they respond to salient temporary low interest offers we conclude that limited attention and mental accounting best rationalize our results and discuss implications for the market jel d14 g21 o12 o16

the structure of electricity demand in the brazilian household sector abstract the present structure of residential electricity demand is analysed by electricity consumption classes and end uses nearly 70 of households consume less than 150 kwh month and are responsible for 35 of total residential demand other determinants of electricity use such as income and place of residence are also discussed it is found that electricity demand is increasing faster than income as the country reaches appliances saturation in upper consumption levels water heating and refrigeration account for the major part of residential consumption residential conservation efforts have started introducing more efficient lighting equipment and refrigerators but further work will have to be done to speed up the diffusion of efficient technology at costs that can be paid by consumers

the law and economics of company stock in 401 k plans abstract some 11 million participants in 401 k plans invest more than 20 percent of their retirement savings in their employer s stock yet investing in the stock of one s employer is risky single securities are riskier than diversified portfolios and an employee s human capital typically is positively correlated with the company s performance in the worst case scenario workers can lose their jobs and much of their retirement wealth simultaneously for workers who expect to work for a company for many years a dollar of company stock can be valued at less than 50 cents after accounting for risk however employees still invest voluntarily in their employer s stock and many employers insist on making matching contributions in stock we provide evidence that employees underestimate the risk of owning company stock while employers overestimate the benefits associated with employee stock ownership we then analyze the likely effects of current and proposed regulations in this context

optimal defaults and active decisions defaults often have a large influence on consumer decisions we identify an overlooked but practical alternative to defaults requiring individuals to make an explicit choice for themselves we study such active decisions in the context of 401 k saving we find that compelling new hires to make active decisions about 401 k enrollment raises the initial fraction that enroll by 28 percentage points relative to a standard opt in enrollment procedure producing a savings distribution three months after hire that would take 30 months to achieve under standard enrollment we also present a model of 401 k enrollment and derive conditions under which the optimal enrollment regime is automatic enrollment i e default enrollment standard enrollment i e default non enrollment or active decisions i e no default and compulsory choice active decisions are optimal when consumers have a strong propensity to procrastinate and savings preferences are highly heterogeneous financial illiteracy however favors default enrollment over active decision enrollment