labor market returns to two and four year college the paper examines labor market returns to a two and four year college education analysis of the 1972 national longitudinal survey of youth observation that the average person who attended a two year college earned about 10 percent more than those without any college education comparison with the wages of those who attended a four year college education

a note on cost share equilibrium and owner consumers the contributions of j farrell econ letters 19 1985 303 306 and a mas colell and j silvestre j econ theory 47 1989 239 256 have studied the implications of two unanimity principles when a firm is owned by the consumers interestingly both approaches lead to what j e roemer and j silvestre the proportional solution for economies with both public and private ownership mimeo university of california davis 1991 call proportional allocations we compare these approaches and analyze how well they serve as equilibrium foundations for proportional allocations in a nutshell the conclusion is that farrell s unanimity principle is simpler than mas colell and silvestre s but assuming that the cost function is convex the latter always works i e equilibrium exists and yields proportional allocations while the former may not equilibrium may not exist in other words proportional allocations may not be supportable as equilibria

wicksell lindahl and the theory of public goods wicksell s and lindahl s ideas on public goods and decisions are reviewed in light of later developments in the theoretical economics literature i begin by discussing their normative ideals in particular the notion of justness and the sources of the difficulties in reaching them wicksell s and lindahl s ideal states as well as the obstacles that they perceive are compared to more recent views on free riding and on the behavior of elected representatives their views on political bargaining are then related to later concepts in particular to the core of the economy

racial labor market gaps the role of abilities and schooling choices this paper studies the relationship between abilities schooling choices and black white differentials in labor market outcomes the analysis is based on a model of endogenous schooling choices agents schooling decisions are based on expected future earnings family background and unobserved abilities earnings are also determined by unobserved abilities the analysis distinguishes unobserved abilities from observed test scores the model is implemented using data from the nlsy79 the results indicate that even after controlling for abilities there exist significant racial labor market gaps they also suggest that the standard practice of equating observed test scores may overcompensate for differentials in ability

efficiency with non convexities extending the scandinavian consensus approaches there are two distinct scandinavian consensus approaches to public good supply both based on agents willingness to pay a wicksell foley public competitive equilibrium arises from a negative consensus in which no change of public environment together with associated taxes and subsidies which finance it will be unanimously approved alternatively in a lindahl or valuation equilibrium charges for the public environment induce a positive consensus to allow general non convexities to be regarded as aspects of the public environment we extend recent generalizations of these equilibrium notions and prove counterparts to both the usual fundamental efficiency theorems of welfare economics

the political economy of resource driven growth abstract in recent decades resource poor countries have out performed resource abundant ones a stylised facts model of competitive industrialisation describes the long run development of a resource poor country with a political state that is developmental only minor change is required to adapt the model to trace the development trajectory of a resource abundant country with a similar political state however most resource abundant countries engender a political state that is factional or predatory and distorts the economy in the pursuit of rents a staple trap model describes the development trajectory under these conditions the model predicts a growth collapse from which recovery is protracted especially for small economies that lack a niche trade link with a large economy

the equivalence of core and cost share equilibria in an economy with a public good abstract the central result of this paper is a refinement of an equivalence theorem in mas collell quart j econ 94 1980 625 641 for the core of a finite economy with a public good it is shown that an allocation belongs to the core if and only if it is a cost share equilibrium i e is supported by a monotonic cost share system we also characterize the set of core allocations which can be supported by a linear cost share system it turns out that the set of linear cost share equilibria which are in one to one correspondence with the lindahl foley equilibria is determined by uniform upper and lower bounds on the relative marginal rate of substitution for the public good

incentive mechanism design for production economies with both private and public ownerships in this paper we dealwith the probl em of incentive mechanism design which yields efficient allocations for general mixed ownership economies when preferences individual endowments and coalition patterns among individuals are unknown to the planner we do so by doubly implementing the proportional solution for economies with any number of private sector and public sector commodities and any number of individuals as well as the coexistence of privately and publicly owned firms with general convex production possibility sets furthermore the mechanisms work not only for three or more agents but also for two agent economies journal of economic literature classification numbers c72 d61 d71 d82 2000 academic press

cost share equilibria a lindahlian approach abstract we offer a new formalization of lindahl s equilibrium notion for public goods which yields an endogenous theory of profit distribution in line with the benefit approach to taxation increasing returns in the production of public goods are not a priori excluded our equilibrium notion coincides with kaneko s ratio equilibrium for economies with only one public good by reinterpreting the commodity space the equilibrium concept can be applied to economies with purely private goods or with externalities in the pure private good case our concept singles out allocations that are efficient and where individual net payments agree with average cost

on the inefficiency of two part tariffs the partial equilibrium literature on two part tariffs suggests that if a commodity is produced under increasing returns efficiency can be achieved through marginal cost pricing and a suitable choice of entry fees fixed charge which may vary from consumer to consumer we show that this partial equilibrium intuition cannot be extended beyond some special cases even with a consumer specific fixed charge it is possible that none of the equilibria yield pareto efficiency furthermore it may be impossible to achieve pareto efficiency through any specification of taxes which are levied solely to cover losses hotelling 1939 and lerner 1944 among others see for example the surveys by ruggles 1949 1950 argued that firms operating under increasing returns to scale should be regulated to equate their marginal cost to the price of the output and the resulting losses financed through lump sum taxes being concerned primarily with efficiency issues the proponents of the marginal cost pricing principle did not advocate any particular distribution of the lump sum taxes among the consumers after the ensuing debate see for example ruggles 1950 there seems to have been a general agreement that marginal cost pricing is necessary for efficiency while admitting this coase 1946 presented an illuminating analysis of the drawbacks of what he called the hotelling lerner solution and also proposed an alternative solution it will be useful to begin by briefly recalling coase s criticism of the hotelling lerner solution apart from the practical problem of collecting lump sum taxes he emphasized two distinct drawbacks of the hotelling lerner scheme he claimed that this solution would not necessarily guarantee efficiency in the sense that it might lead to a marginal cost pricing equilibrium in which a positive amount of the commodity was produced whereas it would be better not to produce the commodity at all this can be restated simply as the argument that in the presence of non convexities marginal conditions need not guarantee global optimality there may be several marginal cost pricing equilibria some efficient and some inefficient as such this phenomenon can hardly be ruled out coase s second objection to the hotelling lerner solution was that it could effectively alter the income distribution if for instance a lump sum tax was imposed on all the consumers but only some of them consumed the commodity produced by the firm operating under increasing returns to scale then there would effectively be a redistribution in favour of those who consumed this subsidized commodity it was natural to keep the issue of efficiency separate from that of equity and coase argued that the hotelling lerner solution

ratio lindahl equilibria and an informationally efficient and implementable mixed ownership system abstract in this paper we formalize an informationally efficient and implementable mixed ownership economic institutional framework by using the ratio lindahl equilibrium that yields pareto efficient and individually rational allocations for public goods economies with general variable returns we consider the incentive aspects of the system by giving an incentive compatible informationally efficient and privacy preserving mechanism whose nash allocations coincide with ratio lindahl allocations moreover the mechanism is well behaved in the sense that it uses an individually feasible balanced and continuous outcome function and further has a message space of minimal dimension

the pure theory of public goods efficiency decentralization and the core the authors extend the findings of mas colell on valuation equilibria and the relationship of cost share equilibria with the core they allow for any finite number of private goods and a set of public projects without any structure the authors show the two welfare theorems for valuation equilibrium the inclusion of the set of cost share equilibria in the core and the nonequivalence of these two sets for an economy with a finite number of agents copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

estimating marginal returns to education this paper estimates marginal returns to college for individuals induced to enroll in college by different marginal policy changes the recent instrumental variables literature seeks to estimate this parameter but in general it does so only under strong assumptions that are tested and found wanting we show how to utilize economic theory and local instrumental variables estimators to estimate the effect of marginal policy changes our empirical analysis shows that returns are higher for individuals with values of unobservables that make them more likely to attend college we contrast our estimates with iv estimates of the return to schooling

heterogeneous economic returns to post secondary degrees evidence from chile we analyze the economic returns to post secondary degrees in chile we posit a schooling decision model with unobserved ability degree specific tuition costs and earnings we use administrative records to carry out our empirical analysis our results show positive average returns to post secondary education especially for five year degrees however we also uncover significant heterogeneity we document how unobserved characteristics ability determine the economic benefits of first and second best choices even leading to negative returns to post secondary degrees our findings illustrate the importance of allowing for heterogeneous treatment effects and individuals choices when examining the returns to education

implementation of balanced linear cost share equilibrium solution in nash and strong nash equilibria abstract this paper considers the incentive aspect of the balanced linear cost share equilibrium blcse which yields an endogenous theory of profit distribution for public goods economies with convex production technologies we do so by presenting an incentive compatible mechanism which doubly implements the blcse solution in nash and strong nash equilibria so that nash allocations and strong nash allocations coincide with blcse allocations the mechanism presented here allows not only preferences and initial endowments but also coalition patterns to be privately observed in addition it works not only for three or more agents but also for two agent economies

reward patterns of fair solutions abstract the solutions proposed in the literature on fair allocations are sensitive to the preference profiles of the agents as a consequence each of them displays a specific distribution pattern which may be interpreted as rewarding certain kinds of preferences at the expense of others in the basic models with private goods and decreasing returns the equal income competitive equilibrium tends to favor the eccentric preferences whereas most egalitarian equivalent solutions tend to reward the agents who like particular resources the identification of the rewarding pattern of each mechanism sheds light on its ethical content and may help select the adequate solution in concrete applications in this analysis a preference monotonicity property turns out to be satisfied by many solutions

life cycle schooling and dynamic selection bias models and evidence for five cohorts of american males this paper examines an empirical regularity found in many societies that family influences on the probability of transiting from one grade level to the next diminish at higher levels of education we examine the statistical model used to establish the empirical regularity and the intuitive behavioral interpretation often used to rationalize it we show that the implicit economic model assumes myopia the intuitive interpretive model is identified only by imposing arbitrary distributional assumptions onto the data we produce an alternative choice theoretic model with fewer parameters that rationalizes the same data and is not based on arbitrary distributional assumptions

dynamic labour force participation of married women and endogenous work experience this paper presents and estimates a dynamic model of married women s labour force participation and fertility in which the effect of work experience on wages is explicitly taken into account because current participation alters future potential earnings the investment return to work will be an important factor in the current work decision in any forward looking behavioural model the model is estimated using the national longitudinal surveys mature women s cohort we use the estimates of our model to predict changes in the lifecycle patterns of employment due to changes in schooling fertility husband s income and the magnitude of the experience effect on wages we find that although work experience increases the disutility of further work the effect is overwhelmed by the positive effect of experience on wages leading to persistence in the employment patterns of these women in addition we find that an increase in young children and in husband s income substantially reduces participation while increased schooling has a powerful positive impact on participation this paper presents an estimable structural dynamic model of married women s labour force participation and fertility in which wages are stochastic and work experience or cumulative participation is endogeneous the model is structural in the sense that the parameters which are estimated are contained in the fundamental relationships governing behaviour namely the utility function and the constraints the model is contained in the class of models which describe the life cycle capital accumulation process with endogeneous labour supply such as weiss 1972 and heckman 1976 it is closest in spirit to that of weiss and gronau 1981 1 the basic feature of their model and ours is that labour market participation affects future wages which then affects future participation the investment return to current work will necessarily be taken into account in any forward looking optimizing model as weiss and gronau note estimates of labour supply models have ignored the inherent behavioural dynamics associated with a positive wageexperience profile there is no adequate empirical treatment of the human capital investment dimension of the labour force participation decision in the literature heckman and willis 1977 have studied a sequential discrete choice model of the labour force participation of married women in a reduced form framework their work

equity as a prerequisite for stability of cooperation on global public good provision analysing cooperative provision of a global public good such as climate protection we explore the relationship between equitable burden sharing on the one hand and core stability on the other to assess the size of the burden which a public good contribution entails for a country we make use of a specific measure based on moulin econometrica 55 963 977 1987 in particular we show that a pareto optimal allocation which is not in the core can always be blocked by a group of countries with the highest moulin sacrifices in this sense it is the overburdening and thus unfair treatment of some countries that provides the reason for core instability by contrast a pareto optimal allocation is in the core if the public good contributions are fairly equally distributed according to their moulin sacrifices the potential implications of our theoretical analysis for global climate policy are also discussed

asset policies during an oil windfall some simple analytics many developing countries are currently experiencing oil windfalls whether due to discoveries or to price effects such windfalls pose a series of policy dilemmas the literature has focused on one of these the choice between using windfall savings for public capital formation and investment in foreign assets there are good theoretical reasons for investing a substantial part of the windfall initially abroad the return to investment would fall below the world interest rate if the windfall were to be used entirely for domestic investment investing abroad offers an escape from diminishing returns foreign assets can be repatriated gradually and used for domestic investment however in practice the efficient balance between domestic and foreign assets is politically difficult to sustain also even if politically feasible this strategy is inefficient due to the failure to expand the private capital stock equipment the policy problem is that the government cannot undertake such investment itself and trying to induce private agents to undertake equipment investment by transferring part of the windfall to them is likely to fail as a result of information problems we argue that domestic debt repayment solves this dilemma it has the added advantage of making foreign asset accumulation difficult to reverse 2005 blackwell publishing ltd

dynamic procedures and incentives in public good economies in this paper we consider economies involving one public good one private good and convex technology and propose an informationally decentralized dynamic nontatonnement procedure that converges in general from the initial endowments to an allocation in the core of the economy we then consider a general class of procedures and show that there exists none in the class that is locally incentive compatible and individually rational these results show that there exists a trade off between the requirements of local incentive compatibility and equitable cost sharing

regulating the anticommons insights from public expenditure theory this article offers a new interpretation of the traditional cournot complements problem or anticommons by using the theory of public goods to gain a perspective on the problem specifically i examine the pricing strategies and regulation of multiple monopolies that produce products which consumers view as perfect complements i show that collusion by the firms increases total social welfare and that the collusion problem can be reinterpreted as a problem of provision of public goods from the point of view of the firms i take this insight further and derive the familiar concepts of the samuelson marginal condition and the ratio equilibrium for the firms i compare these outcomes to the first best solution and then apply incentive compatible mechanisms to strategically implement the pareto superior ratio equilibrium outcome and the optimal marginal cost pricing outcome finally i show how this methodology can be applied to the more familiar cournot model of oligopoly

what is benefit taxation abstract benefit taxation is a system in which individuals are taxed according to the benefits they receive from public expenditures this paper describes an alternative to the standard lindahl method of determining the distribution of individual benefits from government provided public goods and uses this alternative to calculate benefit taxes this alternative avoids some of the paradoxial features of lindahl pricing and generates outcomes in which all consumers benefit from reduced costs of providing public goods an illustrative calculation shows that benefit taxes defined in this way may be quite regressive

the rising college premium in the eighties return to college or return to unobserved ability the changes in the distribution of earnings during the 1980s have been studied extensively the two most striking characteristics of the decade are a a large increase in the college high school wage gap and b a substantial rise in the variance of wage residuals while this second phenomenon is typically implicitly attributed to an increase in the demand for unobserved skill most work in this area fails to acknowledge that this same increase in demand for unobserved skill could drive the evolution of the measured college premium in its simplest form if higher ability individuals are more likely to attend college then the increase in the college wage premium may be due to a increase in the relative demand for high ability workers rather than an increase in the demand for skills accumulated in college this paper develops and estimates a dynamic programming selection model in order to investigate the plausibility of this explanation the results are highly suggestive that an increase in the demand for unobserved ability could play a major role in the growing college premium the changes in the distribution of earnings during the 1980s have been studied extensively the two most striking characteristics of the decade are a a large increase in the college high school wage gap and b a substantial rise in the variance of wage residuals while this second phenomenon is typically implicitly attributed to an increase in the demand for unobserved skill most work in this area fails to acknowledge that this same increase in demand for unobserved skill could drive the evolution of the measured college premium in its simplest form if higher ability individuals are more likely to attend college then the increase in the college wage premium may be due to an increase in the relative demand for high ability workers rather than an increase in the demand for skills accumulated in college this paper develops and estimates a dynamic programming selection model in order to investigate the plausibility of this explanation the results are highly suggestive that an increase in the demand for unobserved ability could play a major role in the growing college premium there are at least two reasons to be interested in this topic first for policy makers intent on helping the american workforce adjust to the changing wage structure this distinction is crucial if the value added of attending college truly rises they may consider policies aimed at subsidizing the skills learned in college however if it results from an increase in the payoff to other types of skills then policies focused on skill acquisition earlier in life would be more appropriate second it will also aid in understanding the

economic policy changes and wage differentials in latin america abstract this article presents estimates of the impact of changes in liberalization policies on wage differentials by schooling level using a new high quality data set for 18 latin american countries for 1977 98 the method controls for all fixed and time varying country characteristics some of which may affect the policies themselves the results indicate that liberalizing policy changes overall have had a short run disequalizing effect of expanding wage differentials although this effect tends to fade away over time this disequalizing effect is due to the strong impact of domestic financial market reform capital account liberalization and tax reform however privatization contributed to narrowing wage differentials and increasing trade openness had no significant effect on wage differentials technological progress rather than trade flows appears to be a channel through which policy changes are affecting inequality

aid allocation and poverty reduction the authors derive a poverty efficient allocation of aid and compare it with actual aid allocations they build the poverty efficient allocation in two stages first they use new world bank ratings of 20 different aspects of national policy to establish the current relationship between aid policies and growth onto that they add a mapping from growth to poverty reduction which reflects the level and distribution of income they compare the effects of using headcount and poverty gap measures of poverty they find the actual allocation of aid to be radically different from the poverty efficient allocation in the efficient allocation for a given of poverty aid tapers in with policy reform in the actual allocation aid tapers out with reform in the efficient allocation aid is targeted disproportionately to countries with severe poverty and adequate polices the type of country where 74 percent of the world s poor live in the actual allocation such countries receive a much smaller share of aid 56 percent than their share of the world s poor with the present allocation aid is effective in sustainably lifting about 30 million people a year out of absolute poverty with a poverty efficient allocation this would increase to about 80 million people even with political constraints introduced to keep allocations for india and china constant poverty reduction would increase to about 60 million reallocating aid is politically difficult but it may be considerably less difficult than quadrupling aid budgets which is what the authors estimate would be necessary to achieve the same impact on poverty reduction with existing aid allocations

equivalence of the core and competitive equilibrium in a tiebout economy with crowding types abstract we propose a new model of a local public goods economy with differentiated crowding the new feature is that taste and crowding characteristics of agents are distinguished from one another we prove that if the economy satisfies strict small group effectiveness then the core is equivalent to the set of tiebout equilibrium outcomes equilibrium prices are defined to depend solely on crowding characteristics this implies that only publicly observable information and not private information such as preferences is needed to induce agents to sort themselves into efficient jurisdictions thus our model allows us to satisfy bewley s 6 anonymity requirement on taxes in his well known criticism of the tiebout hypothesis