occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

shills and snipes online auctions with a fixed end time often experience a sharp increase in bidding towards the end despite using a proxy bidding format we provide a novel explanation of this phenomenon under private values we study a correlated private values environment in which the seller bids in her own auction shill bidding bidders selected randomly from some large set arrive randomly in an auction then decide when to bid possibly multiple times over a continuous time interval a submitted bid arrives over a continuous time interval according to some stochastic distribution the auction is a continuous time game where the set of players is not commonly known a natural setting for online auctions we show that there is a late bidding equilibrium in which bids are delayed to the latest instance involving no sacrifice of probability of bid arrival but shill bids fail to arrive with positive probability and in this sense optimal late bidding serves to snipe the shill bids we show conditions under which the equilibrium outcome is unique our results suggest that under private values the case against shill bidding might be weak

changing asset endowments and smallholder participation in higher value markets evidence from certified coffee producers in nicaragua this paper examines the capacities of smallholders in nicaragua to exploit new linkages to certified coffee markets following the coffee crisis data on livelihood assets were collected from 292 households which were clustered to test how differences in outcomes asset building reflect variations in initial asset endowments the results suggest that most households built particular elements of their asset base and increased their resilience to future shocks however households struggled to make effective use of the gains for intensifying their livelihoods of the least endowed households few made investments in the scale or productivity of coffee and most continued to depend heavily on subsistence production and seasonal off farm income for survival in conclusion improved market access alone even under relatively favorable market conditions and with considerable external support will have uncertain impacts on rural poverty if the underlying constraints on household assets and investments are not addressed concurrently

the economics of poverty traps and persistent poverty an asset based approach abstract longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty while a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty this paper develops an asset based approach to poverty analysis that makes it possible to distinguish deep rooted persistent structural poverty from poverty that passes naturally with time due to systemic growth processes drawing on the economic theory of poverty traps and bifurcated accumulation strategies this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long term persistent structural poverty as well as relevant extensions of the popular foster greer thorbecke class of poverty measures the paper closes with reflections on how asset based poverty can be used to underwrite the design of persistent poverty reduction strategies

when does cheating on mail in bids pay a guide for the dishonest auctioneer abstract in english auctions an auctioneer sometimes receives second price bids from bidders who cannot attend the auction these bids are referred to as mail in bids left bids or bookbids and are commonly handled by an auctioneer s assistant in this paper i consider auctions where there is one bid left with the auctioneer in an english auction with no reserve the auctioneer can increase his revenue by cheating at least partially through phantom bids or large bidding increments on the bookbid when the bookbidder s valuation is more likely to be the highest than the second highest among all valuations this is true even if in equilibrium this cheating is perfectly anticipated this implies that the acquisition of a good reputation is not a sufficient incentive for honest auctioneer behavior

multidimensional measures of well being standard of living and quality of life across countries summary using sen s capability approach we propose to measure two components of well being standard of living and quality of life unlike the undp human development index the two indices do not mix measures of resource availability and of functioning and capability the empirical results for 170 countries are based on two multidimensional analyses the totally fuzzy analysis and the factorial analysis of correspondences the paper also compares our results with the hdi and gdp per capita it focuses on africa presents policy implications and discusses aggregation and redundancy in multidimensional indices

the shill bidding effect versus the linkage principle abstract the analysis of second price auctions with externalities is utterly modified if the seller is unable to commit not to participate in the mechanism for the general symmetric model introduced by milgrom and weber p milgrom r weber a theory of auctions and competitive bidding econometrica 50 1982 1089 1122 we characterize the full set of separating equilibria that are symmetric among buyers and with a strategic seller being able to bid in the same way as any buyer through a so called shill bidding activity the revenue ranking between first and second price auctions is different from the one arising in milgrom and weber the benefits from the highlighted linkage principle are counterbalanced by the shill bidding effect

welfare dynamics in rural kenya and madagascar this paper presents comparative qualitative and quantitative evidence from rural kenya and madagascar in an attempt to untangle the causality behind persistent poverty we find striking differences in welfare dynamics depending on whether one uses total income including stochastic terms and inevitable measurement error or the predictable structural component of income based on a household s asset holdings our results suggest the existence of multiple dynamic asset and structural income equilibria consistent with the poverty traps hypothesis furthermore we find supporting evidence of locally increasing returns to assets and of risk management behaviour consistent with poor households defence of a critical asset threshold through asset smoothing

the effect of shill bidding upon prices experimental evidence this paper explores through a series of experiments the effect of shill bidding upon revenues and prices in auctions we study the practice of shill bidding in a common value framework our findings are consistent with the prediction that if bidders are aware of the possibility of seller participation in an auction profits will be reduced on average we also study factors that affect bidder and seller participation decisions shill bidding can alleviate the problem of the winner s curse by lowering the price and it can thus provide benefits to bidders

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

contractual structure and wealth accumulation can historical wealth distributions affect long run output and inequality despite rational saving convex technology and no externalities we consider a model of equilibrium short period financial contracts where poor agents face credit constraints owing to moral hazard and limited liability if agents have no bargaining power poor agents have no incentive to save poverty traps emerge and agents are polarized into two classes with no interclass mobility if instead agents have all the bargaining power strong saving incentives are generated the wealth of poor and rich agents alike drift upward indefinitely and history does not matter eventually d31 d91 i32 o17 q15

converting asset holdings into livelihood an empirical study on the role of household agency in south africa summary this paper analyzes the complexities of converting assets into livelihood and the role that agency constraints play drawing inspiration from the capabilities approach and using household data from south africa linkages between assets and agency are identified by decomposing asset endowments impact on future livelihood by employing a method of path analysis akin to early heritability of traits studies theoretical asset based studies of chronic poverty are bridged with capabilities literatures the interaction between assets and agency is shown to be as important as asset to asset complementarities the results have wide ranging policy implications

monopoly and the preemption of competitive recycling the paper shows that a monopolistic primary producer of a recycleable material will choose to preempt market entry by competitive recyclers unless the cost of producing virgin ingot is very high compared to the cost of reconditioning used material unlike earlier results it is shown that in the absence of transaction costs on scrap sales competition by independent recyclers fails to reduce price below its full monopoly level moreover if transaction costs are present the mere threat of entry by independent recyclers may raise the price above that level

chronic poverty in south africa incidence causes and policies abstract the purpose of this article is threefold first to summarize recent research that helps distinguish chronic from transitory poverty in south africa second to identify groups that are especially prone to chronic poverty in south africa and venture estimates as to how many such people there are and third to examine how an understanding of chronic poverty could enhance the fight against poverty generally the article makes the case that in taking the lead in the fight to eradicate poverty the government would be wise to disaggregate the poor according to those who are chronically and transitorily poor two policy areas are discussed in light of this recommendation namely the unemployment crisis and the prospects for future growth in the formal and informal sectors and rural land reform and the policy choices it presents the article begins with a brief historical sketch and an overview of socioeconomic policies since 1994

poverty traps and nonlinear income dynamics with measurement error and individual heterogeneity theories of poverty traps stand in sharp contrast to the view that anybody can make it through hard work and thrift however empirical detection of poverty traps is complicated by the lack of long panels measurement error and attrition this paper shows how dynamic pseudo panel methods can overcome these difficulties allowing estimation of non linear income dynamics and testing for the presence of poverty traps the paper explicitly allows for individual heterogeneity in income dynamics to account for the possibility that particular groups of individuals may face traps even if the average individual does not these methods are used to examine the evidence for a poverty trap in labor earnings income and expenditure in mexico and are compared to panel data estimates from a short rotating panel the results do find evidence of nonlinearities in household income dynamics and demonstrate large bias in the panel data estimates nevertheless even after allowing for heterogeneity and accounting for measurement error the paper finds no evidence of the existence of a poverty trap for any group in the sample

optimal reservation prices in auctions the risk neutral independent private values ipv auction model produces curious results regarding the use of reservation prices no matter how many bidders the seller should announce a fixed reservation price above his true value this is notable since the seller gains by adopting an inefficient institution and puzzling because it conflicts with common practice the authors relax the ipv assumption characterize optimal reservation prices in a richer class of auctions and show that when information is correlated the seller s optimal reservation price converges to his true value often monotonically and rapidly as the number of bidders grows copyright 1996 by royal economic society

is transient poverty different evidence for rural china we define transient poverty as the component of time mean consumption poverty at household level that is directly attributable to variability in consumption this can be thought of as a measure of vulnerability to falling consumption the non transient component then depends solely on mean consumption over time and we call this chronic poverty using robust semi parametric methods and household panel data for rural china we test whether transient poverty is determined by a process that is similar to chronic poverty commonly identified causes of poverty in this setting have weak explanatory power for transient poverty and some of the factors determining transient poverty do not matter to chronic poverty or even have the opposite effect successful policy responses to chronic poverty may still leave considerable transient poverty

poverty livelihood and class in rural south africa abstract using data from a national living standards survey undertaken in late 1993 this paper disaggregates and explores the economics of livelihood generation and class in rural south africa in an effort to contribute to the ongoing and vociferous debate in south africa about poverty and its alleviation pursuant to the suggestion of participants in a recent participatory poverty assessment this paper analyzes what might be termed the class structure of poverty after exploring the range of claiming systems and livelihood tactics available in rural south africa the paper offers a first look at who the poor are by disaggregating the rural population into discrete livelihood strategy classes non parametric regression methods are used to then estimate and graphically explore the nature of the livelihood mapping between endowments and real incomes in addition to identifying those endowment combinations that map to consumption levels below the poverty line the asset basis of poverty the topography of the estimated livelihood mapping helps identify the constraints that limit household s ability to effectively utilize their assets and endowments these results suggest that poverty is a matter of not only having few assets but also of constraints which limit the effectiveness with which those assets are used and poverty and livelihood policy needs to be designed accordingly

exploring poverty traps and social exclusion in south africa using qualitative and quantitative data abstract recent theoretical work hypothesises that a polarised society like south africa will suffer a legacy of ineffective social capital and blocked pathways of upward mobility that leaves large numbers of people trapped in poverty to explore these ideas this paper employs a mix of quantitative and qualitative methods novel econometric analysis of asset dynamics over the 1993 98 period identifies a dynamic asset poverty threshold that signals that large numbers of south africans are indeed trapped without a pathway out of poverty qualitative analysis of this period and the period 1998 2001 more deeply examines patterns of mobility and confirms the continuation of this pattern of limited upward mobility and a low level poverty trap in addition the qualitative data permit a closer look at the specific role played by social relationships while finding ample evidence of active social capital and networks these are more helpful for non poor households for the poor social capital at best helps sta

estimating monopoly behavior with competitive recycling an application to alcoa this article develops a structural model of the aluminum industry during the period between world war i and world war ii it takes into account both the intertemporal nature of alcoa s cost minimization problem and the competitive recycling sector the model enables estimation of alcoa s degree of market power while allowing for the effect of competition from recycled aluminum previous work has emphasized alcoa s control over the size of the secondary sector in the long run as a source of market power for alcoa the results here indicate that alcoa could exert little influence in this regard but nonetheless had substantial market power

one kind of freedom poverty dynamics in post apartheid south africa abstract a 1993 south african living standards survey documented the legacy of apartheid in the form high levels of inequality and human insecurity drawing on a 1998 re survey of households in the 1993 study this paper explores whether this legacy has been superseded or whether apartheid s end has been only one kind of freedom that has left households in a poverty trap from which they cannot escape after proposing a theoretically grounded dynamic poverty typology that distinguishes stochastic from structural poverty transitions the paper goes on to estimate that significant numbers of the south african poor are potentially trapped in a structural poverty trap and lack the means to escape poverty over time

monopoly power and the recycling of raw materials due to increased interest in resource conservation the recycling of raw materials has grown in significance in most industrialized economies in general recycled raw materials require a smaller net input of other basic resources such as energy than do the original primary materials as a consequence the long run cost trends seem to favor an ever higher use of secondary materials over primary materials many of the industries currently practicing recycling are highly concentrated i e aluminium steel newsprint motor oil and other metals with a few exceptions1 the impact of recycling on industry output and price remains largely unexplored the welfare implications of a monopolist confronted by an independent and competitive secondary materials sector are not exactly new concerns in the field of anti trust economics the problem was given its sharpest judicial focus in the famous aluminium company of america alcoa case of 1945 the celebrated jurist learned hand ruled that alcoa did constitute an illegal monopoly under the law since it ultimately had control of the secondary ingot sector through the stock of scrap aluminium milton friedman has suggested however that judge hand was in error and that a competitive recycling sector would tend to push the price of aluminium down to the marginal cost of virgin aluminum production 3 pp 278 79 two authors of a more contemporary genre have drawn conclusions that differ substantially on the important issue of whether or not the procompetitive effects of the recycling sector will be sufficient to achieve pareto optimal results gaskins concludes that the existence of a competitive secondhand market makes things worse in the short run and does not substantially lower the price of aluminum in the long run 4 p 255 alternatively swan finds conditions under which the price of aluminum would be driven down to the marginal cost of virgin aluminum ingot production 7 p 83 gaskins formulates a dynamic model of the aluminurm industry where he considers the impact of recycling on alcoa s monopoly power the critical assumptions of gaskin s model are a linear demand curve with time stationary elasticity and a linear secondary ingot supply function in addition the

phantom bidding against heterogeneous bidders abstract if ipv bidders are distributionally heterogeneous then a revenue maximizing english auctioneer will in general find it optimal to use a non constant reserve price that is a function of the observed bid sequence an example is provided

some evidence on late bidding in ebay auctions i introduction bidding in the last minutes or seconds of an auction is a common strategy pursued in online auctions with fixed end times for instance roth and ockenfels 2002 2006 observed bids in the last minute and last 10 sec in 37 and 12 of ebay auctions respectively bajari and hortacsu 2003 documented a similar pattern roth and ockenfels 2002 put forth several explanations of late bidding in their study of ebay auctions with fixed end times and amazon auctions with flexible end times 1 they find evidence consistent with the following three explanations of late bidding 1 last minute bidding constitutes an optimal response to the presence of a bidder or bidders who submit multiple bids in one auction 2 bidding late is an efficient strategy that deprives the incremental bidder of sufficient time to respond 2 late bidding might be an optimal strategy for well informed bidders experts who want to protect their private information concerning the value of a particular item assume that only experts can recognize the true resale value of the auctioned item e g antique furniture when the expert bids early in the auction her bid might be a signal for other bidders that the object is unusually valuable bidding just before the end of a fixed end time auction allows the expert who can be recognized by her frequent participation or high feedback number to profit from her information without leaving other bidders enough time to closely examine the item and bid 3 last minute bidding could result from implicit collusion among bidders against the seller giving higher payoff to the successful bidder for instance assume that you want a new computer it is worth 1 000 to you and you believe one other bidder is willing to pay 1 000 if both of you use the proxy bidding system 3 the price quickly rises to 1 000 even if the tie is resolved in your favor this is no bargain but suppose you bid 300 early on and your competitor bids 500 in the last minute you then bid 600 but take a chance that your bid might not be transmitted before the auction closes even if you get the computer for 600 only half the time assuming that there are many auctions for the same computer running approximately at the same time it is better than paying 1 000 the aim of this paper is to test the explanations of late bidding proposed by roth and ockenfels 2002 after describing and exploring the primary data set in sections ii and iii respectively section iv tests whether late bidding creates collusive gains we examine whether the prices in auctions with late bids are systematically lower than the prices in the remaining auctions section v proposes a duration model to analyze the effects of multiple bidding hypothesis 1 and expertise hypothesis 2 on the timing of the last or winning bid the number of seconds the last or winning bid arrived before the end of the auction 4 section vi concludes ii data this paper uses two data sets collected from ebay by a spider program the primary data set contains all ebay auctions in categories reported in table 1 that were listed on ebay on a particular day out of the 140 000 auctions downloaded we exclude those that did not receive any bid 46 8 auctions with the buy it now option 5 17 4 auctions in currencies other than u s dollars 7 9 dutch auctions 5 9 auctions in which the reserve price was not met 6 3 5 and those where identities of bidders were not disclosed 1 2 the number of remaining auctions for each category is given in table 1 this paper employs the following variables tprice the total price in dollars paid by the winner i e the winning price in the auction plus shipping and handling cost 7 bidcount the number of bids per auction bidders the number of bidders who placed their bids in the auction dmultbid dummy variable that identifies the occurrence of multiple bidding sellerrat seller s rating feedback score in thousands 8 auctionlen auction s duration in days with the precision of seconds lastbtend the number of seconds the last bid was received before the auction closed also referred to as the duration of the last bid lastfeedb the rating feedback score of the last bidder in thousands

stochastic wealth dynamics and risk management among a poor population we use herd history data collected among pastoralists in southern ethiopia to study stochastic wealth dynamics among a poor population although covariate rainfall shocks plainly matter household specific factors including own herd size account for most observed variability in wealth dynamics we find no support for the tragedy of the commons hypothesis past studies may have conflated costly self insurance with stocking rate externalities biophysical shocks move households between multiple dynamic wealth equilibria the lowest suggesting a poverty trap according to nonconvex path dynamics these findings have broad implications for development and relief strategies among a poor population vulnerable to climatic shocks a vast economic literature on risk management rests explicitly or implicitly on the classic friedmanite permanent income hypothesis studies of portfolio management consumption smoothing social insurance and the like all depend on the canonical assumption that stochastic income realisations are drawn from a stationary income distribution leading to consumption smoothing off a stable asset base the possibility of asset accumulation connects this literature to the immense literature on the theory and empirics of economic growth

the inheritance of inequality how level is the intergenerational playing field what are the causal mechanisms that underlie the intergenerational transmission of economic status are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair these are the questions we will try to answer

editorial human capital and human capability i would like to comment on the connection as well as contrast between two distinct but related areas of investigation in understanding the processes of economic and social development the accumulation of human capital and the expansion of human capability the former concentrates on the agency of human beings through skill and knowledge as well as effort in augmenting production possibilities the latter focuses on the ability of human beings to lead lives they have reason to value and to enhance the substantive choices they have the two perspectives cannot but be related since both are concerned with the role of human beings and in particular with the actual abilities that they achieve and acquire given her personal characteristics social background economic circumstances etc a person has the ability to do or be certain things that she has reason to value the reason for valuation can be direct the functioning involved may directly enrich her life such as being well nourished or being healthy or indirect the functioning involved may contribute to further production or command a price in the market the human capital perspective can in principle be defined very broadly to cover both types of valuation but it is typically defined by convention primarily in terms of indirect value human qualities that can be employed as capital in production in the way physical capital is in this sense the narrower view of human capital approach fits into the more inclusive perspective of human capability which can cover both direct and indirect consequences of human abilities consider an example if education makes a person more efficient in commodity production then this is clearly an enhancement of human capital this can add to the value of production in the economy and also to the income of the person who has been educated but even with the same level of income a person may benefit from education in reading communicating arguing in being able to choose in a more informed way in being taken more seriously by others and so on the benefits of education thus exceeds its role as human capital in commodity production the broader human capability perspective would record and value these additional roles the two perspectives are thus closely related but distinct the significant transformation that has occurred in recent years in giving greater recognition to the role of human capital is helpful for understanding the relevance of the capability perspective if a person can become more productive in making commodities through better education better health and so on it is not unnatural to expect that she can also directly achieve more and have the freedom to achieve more in leading her life both perspectives put humanity at the center of attention altogether this involves to a great extent a return to an integrated approach to economic and social development championed particularly by adam smith both in the wealth of nations and in the theory of moral sentiments in analysing the determination of production possibilities smith emphasized the role education as well as division of labor learning by doing and skill formation the development of human capability in leading a worthwhile life as well as in being more productive is quite central to smith s analysis of the wealth of nations indeed adam smith s belief in the power of education and learning was peculiarly strong regarding the debate that continues today on the respective roles of nature and nurture smith was an uncompromising nurturist and this fitted in with his massive confidence in the improvability of human capabilities

recycling and market power a more general model and re evaluation of the evidence abstract this paper presents a more general model of the recycling problem and uses it to re examine the alcoa antitrust case of 1945 there are three primary empirical results 1 in the alcoa scenario the recycling problem had been in a steady state since the early 1920 s 2 the primary source of alcoa s market power in contrast to previous work was that most of the aluminum sold by alcoa was used in goods that were not economical to recycle and 3 the existing competitive secondary market was welfare reducing relative to a monopoly in all aluminum production

the winner s curse reserve prices and endogenous entry empirical insights from ebay auctions internet auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce we examine a unique data set of ebay coin auctions to explore the determinants of bidder and seller behavior we begin by documenting a number of empirical regularities in our data set of ebay auctions next we specify and estimate a structural econometric model of bidding on ebay using our parameter estimates from this model we measure the extent of the winner s curse and simulate seller revenue under different reserve prices