the economics of favors abstract this paper examines the favors people perform for each other using a stochastic version of the infinitely repeated prisoner s dilemma rpd it is shown that the socially efficient outcome may not be consistent with an equilibrium because some favors are too expensive to perform on the other hand it is possible for some socially inefficient favors to be performed even so favor exchange relationships must be strictly pareto improving the model is also able to address situations in which there are market alternatives to the services being exchanged and when favors are exchanged among members of large groups or hierarchies

the effect of annuity insurance on savings and inequality this paper examines the amount of precautionary savings and wealth inequality arising from life span uncertainty by comparing saving behavior under perfect insurance arrangements with that arising under imperfect arrangements namely when longevity risk can be pooled only with members of one s own family the central findings of the paper are that 1 perfecting insurance arrangements can sharply lower savings in both intergenerationally altruistic and life cycle economies and that 2 in altruistic economies perfecting annuity insurance can greatly influence inequality indeed in the long run in our model switching from imperfect family insurance to perfect insurance can mean the difference between absolute inequality and absolute equality

day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

social network utility and the economics of risk the case of hiv abstract since hiv transmission is embedded in a pattern of risk some economists argue that the fact that aids shortens the life expectancy of the chronically indigent amounts to an economic if not an ethical boon a cost containment mechanism for social welfare expenditures e g philipson and posner 1993 we consider a rational model where the needs of the hiv population are met by individual resources public resources and network resources family and friendship contributions in this model impoverishment of altruistic network members leads to an increase in risky behaviors and a further spread of aids

intergenerational transfers and liquidity constraints a growing body of evidence indicates that liquidity constraints could affect a substantial proportion of u s consumers but little is known about why these constraints might exist an important but little explored issue is the relationship between inter vivos intergenerational transfers and liquidity constraints these transfers can ease borrowing constraints empirical transfer patterns match those predicted from a model in which transfers are allocated to liquidity constrained consumers in particular the distinction between current and permanent incomes of potential recipients is a key aspect of private transfer behavior the findings have important implications for our understanding of consumer behavior

risk and precautionary saving in two person households the existing literature on precautionary saving is based almost entirely on the assumption that the household acts as if it consisted of a single individual decision taker in reality saving decisions are typically taken by two person households this paper examines the implications of this observation for the existence of precautionary saving and shows that the assumption that the individual utility functions satisfy the conditions for precautionary saving to exist can imply that the household exhibits precautionary saving but only under strong assumptions on the type of risk change being considered

capital accumulation and the characteristics of private intergenerational transfers many recent studies of the process of family accumulation in general and household response to social security in particular have revealed growing dissatisfaction with the life cycle theory of saving see for example barro 1978 kotlikoff 1979 darby 1979 kotlikoff and summers 1981 kurz 1981 blinder gordon and wise 1981 david and menchik 1982 leimer and lesnoy 1982 an alternative to the life cycle hypothesis is expressed by defining the preference of each family over its own consumption as well as the welfare of the generations that follow thus each family consists of an infinite chain of generations who have interdependent preferences and for this reason we shall call it the inter generational hypothesis it was recently used by barro 1974 1978 to attack the conclusions of the life cycle hypothesis our purpose in this paper is to start the long road of studying the structure of the private inter generational transfer system with the aim of providing additional tests of the two competing hypotheses

financial decision making and cognition in a family context in this paper we studied the association of cognitive traits and in particular numeracy of both spouses on financial outcomes of the family we found significant effects particularly for numeracy for financial and non financial respondents alike but much larger effects for the financial decision maker in the family we also examined who makes these financial decisions in the family and why once again cognitive traits such as numeracy were an important component of that decision with larger effects of numeracy for husbands compared to wives

identity utility and cooperative behaviour an evolutionary perspective this paper provides an argument for the advantage of a preference for identity consistent behaviour from an evolutionary point of view within a stylized model of social interaction it is shown that the development of cooperative social norms is greatly facilitated if the agents possess a preference for identity consistent behaviour as compliance with cooperative norms in the long run has a positive effect on the agents pay offs it is argued that such a preference is evolutionarily advantageous notably the argument which assumes that agents always act in accordance with their preferences also accounts for the cost of those features that are crucial for the selection process

weekend effects on stock returns a reply the main contribution of our paper in this journal 2 was to point out that realized daily rates of return cannot be computed from only two consecutive closing prices the reason is institutional and has to do with settlement clearing procedures in general the payment for a stock purchased on any day except on friday will occur eight calendar days after the trade five business days for settlement one day for check clearing and two weekend days the situation is different for purchases made on friday payments cannot be made on saturday eight calendar days after the trade resulting in a delay of two more days therefore in computing realized daily rates of return the two day delay in payment cannot be ignored the rate of return computed from closing to closing prices has to be adjusted for two days of risk free interest a complete description of the adjustment procedure for each of the days of the week and for weeks with and without holidays is provided in table i of our paper 2 our main contribution in 2 is completely ignored by dyl and martin 1 there can be no argument that the realized rates of return have to be adjusted because of the settlement clearing procedures as we noted in our paper by performing the institutionally required adjustment part of the weekend effect is explained recognizing that adjustments of the sort presented should be made in computing realized returns an interesting question is whether the market indeed makes these adjustments it is precisely this question that dyl and martin seem to address and in this sense their work can be viewed as an extension rather than a criticism of our work while we can compare two days interest with the average magnitude of the weekend effect to see how much of the effect it might explain we cannot apply the tests dyl and martin propose because of the nature of the data our argument involves adjusting mondays and fridays for two days of risk free interest the average risk free rate for the period 1968 81 was around 8 per year the settlement clearing procedure was different before 1968 therefore two days interest is around 0 043 a magnitude that is so small relative to the large daily standard deviations that we cannot judge the significance for example based on dyl and martin s table i the difference on friday between the returns for the period before and after 1968 is 0 03 and it is associated with a t statistic of 0 68 hence a difference of 0 043 would be associated with a t statistic of less than one therefore the existing data do not enable us to test whether the market indeed makes appropriate adjustments

the strategic bequest motive although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation our understanding of bequest motives remains incomplete we develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries actions the model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers we present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries

altruistic versus egoistic behavior in a public good game this paper analyzes an evolutionary version of the public good game in which boundedly rational agents can use imitation and best reply decision rules several possibilities for both decision rules to be present in the population are considered i show that altruistic behavior might survive if switching between the decision rules occurs less often than the probabilities of errors in choosing a strategy and if local neighborhoods are not too small or too large

shaping intergenerational relationships the demonstration effect abstract according to the demonstration effect theory parents make intergenerational transfers to their elders in order to elicit a symmetric future behavior from their children in this paper we show that upstream transfers are expected to increase with low returns from alternative financial assets and with the donor s life expectancy the latter effect creates a greater incentive for daughters to care for parents

marry your like assortative mating and income inequality has there been an increase in positive assortative mating does assortative mating contribute to household income inequality data from the united states census bureau suggests there has been a rise in assortative mating additionally assortative mating aects household income inequality in particular if matching in 2005 between husbands and wives had been random instead of the pattern observed in the data then the gini coe cient would have fallen from the observed 0 43 to 0 34 so that income inequality would be smaller thus assortative mating is important for income inequality the high level of married female labor force participation in 2005 is important for this

is everything neutral in his well known analysis of the national debt robert barro introduced the notion of a dynastic family this notion has since become a standard research tool particularly in the areas of public finance and macroeconomics in this paper we critique the assumptions on which the dynastic model is predicated and argue that this framework is not a suitable abstraction in contexts in which the objective is to analyze the effects of public policies we reach this conclusion by formally considering a world in which each generation consists of a large number of distinct individuals as opposed to one representative individual we point out that family linkages form complex networks in which each individual may belong to many dynastic groupings the resulting proliferation of linkages between families gives rise to a host of neutrality results including the irrelevance of all public redistributions distortionary taxes and prices since these results are not at all descriptive of the real world we conclude

tough love and intergenerational altruism tough love and intergenerational altruism this article develops and studies a tough love model of intergenerational altruism we model tough love by modifying the barro becker standard altruism model in two ways first the child s discount factor is endogenously determined so lower childhood consumption leads to a higher discount factor later in life second the parent evaluates the child s lifetime utility with a constant high discount factor our model predicts that parental transfers will fall when the child s discount factor falls this is in contrast with the standard altruism model which predicts that parental transfers are independent of exogenous changes in the child s discount factor

bequests and the size of population when population is endogenous the consequences of interfamily bequests and endogenous population size for optimal and competitive population sizes and bequests are explored when individuals utility is a function of own consumption the number of children and the welfare of their children when a bequest benefits each member of a second generation family we show that competition leads to underprovision for future generations under a separability assumption the number of children is also shown to be too large

siblings strangers and the surge of altruism abstract we demonstrate how altruism can surge in a population of nonaltruists we assume that each individual plays a one shot prisoner s dilemma game with his or her sibling or with a stranger and that the probability that an individual survives to reproduce is proportional to his or her payoff in this game we model the formation of couples and the rule of imitation of parents and of nonparents we then ask what happens to the proportion of altruists in the population we specify a case where the unique and stable equilibrium is one in which the entire population will consist of altruists

the saving behaviour of a two person household the facts that wives are typically younger than their husbands and that women typically live longer than men imply that wives may have more incentive to save for old age than do husbands a theoretical model of the determination of household saving and portfolio choice is introduced which takes into account differences in preferences for saving the most important result is that the level and the composition portfolio of saving and the time path of consumption are dependent on the distribution of income within the household women typically live longer than men and wives are typically younger than their husbands these two facts imply that preferences about saving for old age in married households with forward looking members may differ between husband and wife this paper presents a theoretical analysis of saving and portfolio behaviour if the members of the household have differ ent preferences over future consumption as compared to current consump tion the analysis stands in contrast to unitary models of household intertemporal allocation which assume that the household has a single utility function thus this paper is a contribution in a novel context to the burgeoning literature on intra household decision making the base case analysis is for a simple two person husband and wife1 two period model in which there is only one asset saving it is assumed that because of the two facts given at the start of the introductory paragraph the husband discounts the future more than the wife in section ii the implications of a non cooperative decision making process for the base case are derived see ulph 1988 for a non cooperative model of demand and

earnings inequality and the changing association between spouses earnings increases in the association between spouses earnings have the potential to increase inequality as marriages increasingly consist of two high earning or two low earning partners this article uses log linear models and data from the march current population survey to describe trends in the association between spouses earnings and estimate their contribution to growing earnings inequality among married couples from 1967 to 2005 the results indicate that increases in earnings inequality would have been about 25 30 lower than observed in the absence of changes in the association depending on the inequality measure used three components of these changes and how they vary across the earnings distribution are explored

anomalies or illusions evidence from stock markets in eighteen countries abstract this paper examines five seasonal patterns in stock markets of eighteen countries the weekend turn of the month end of december monthly and friday the thirteenth effects we find a daily seasonal in nearly all the countries but a weekend effect in only nine countries interestingly the daily seasonal largely disappears in the 1980s the last trading day of the month has large returns and low variance in most countries many countries have large december pre holiday and inter holiday returns the january returns are large in most countries and a significant monthly seasonal exists in ten countries

anomalies weekend holiday turn of the month and intraday effects abstract this feature will report successful searches for disconfirming evidence economic anomalies as suggested by thomas kuhn an economic anomaly is a result inconsistent with the economics pa

do husbands and wives pool their resources evidence from the united kingdom child benefit common preference models of family behavior imply income pooling a restriction on family demand functions such that only the sum of husband s income and wife s income affects the allocation of goods and time testing the pooling hypothesis is difficult because most family income sources are not exogenous to the allocations being analyzed in this paper we present an alternative test based on a natural experiment a policy change in the united kingdom that transferred a substantial child allowance to wives in the late 1970s using family expenditure survey data we find strong evidence that a shift toward greater expenditures on women s clothing and children s clothing relative to men s clothing coincided with this income redistribution

saving risk sharing and preferences for risk saving decisions are made jointly by household members who generally earn risky incomes consequently to interpret saving patterns it is crucial to analyze the relationship between intrahousehold risk sharing and intertemporal choices to that end in this paper the household is characterized as a group of agents with possibly heterogeneous preferences making efficient decisions two results are obtained first it is shown that risk sharing can increase the amount saved by the household second i find that an increase in risk aversion and prudence of an individual member can reduce household risk aversion and prudence these results are consistent with the empirical evidence collected using the hrs

demonstration effect and dynamic efficiency can dynamic inefficiency be remedied by intergenerational family transfers the issue matters for the connection between fiscal policy and economic growth yet family transfers have mostly been narrowly cast as altruistic i show that an alternative motive the demonstration effect whereby parents transfer to mold preferences of children can generate vastly different results family transfers are positive under dynamic inefficiency these transfers are instrumental to depress capital accumulation so as to approach the golden rule capital stock intuitively family transfers from youth to old age reduce capital accumulation however family transfers are nil under dynamic efficiency unlike public debt both capital accumulation and welfare are not worsened

motivations to remit evidence from botswana in this article a theory of motivations to send remittances is described and tested with data from botswana altruism is one of the motivations tested and found to be an insufficient explanation for remittances among migrants in botswana a refinement of the model stipulates a modified altruism or enlightened self interest in this model the relationship between the migrant and family is tempered by an implicit understanding of mutual benefit the household strategy may be to encourage some members to migrate as a means of spreading risk and sharing gains the household strategy is similar to an insurance policy where migration is to places where market potential is high the risks incurred might be high the example is given of migration during a drought in botswana migrant remittances were greater in households with more cattle or households with more to lose drought alone was not statistically related to remittances increases in remittances were related to increased levels of education it is suggested that repayment was the motive for parents investment in migrants education migrants gains are identified as the potential for an inheritance the security of channeling investments through a trusted family member and security in having a home to return to it is pointed out that the altruism and family remittances from urban migration were strategies that bridged the simple dynamic of either urban development or rural development impacting on family welfare it is suggested that household models of economy adopt some measure to express the relationship of household wealth to remittances from urban migrants

responsible management incentive systems and productivity a disconnect remains between theories about responsible management and application in real life organizations part of the reason is due to the complexity and holistic nature of the field and the fact that many of the benefits of aligning business objectives with changing societal conditions are of an intangible nature human resource management is an increasingly important part of the field with benefits including talent retention higher levels of motivation and improvements in organizational cohesion this paper sets out an experiment run at a large spanish university to try to analyze the impact on worker productivity of a responsible management stance by an employer based on the corporate social performance model the paper examines the issue from the point of view of responsibilities responsiveness and outcomes and considers the cost benefit effect of incorporating a social responsibility variable into the wage structure to measure the impact on productivity

intergenerational income mobility in the united states social scientists and policy analysts have long expressed concern about the extent of intergenerational income mobility in the united states but remarkably little empirical evidence is available the few existing estimates of the intergenerational correlation in income have been biased downward by measurement error unrepresentative samples or both new estimates based on intergenerational data from the panel study of income dynamics imply that the intergenerational correlation in long run income is at least 0 4 indicating dramatically less mobility than suggested by earlier research copyright 1992 by american economic association

intraweek and intraday seasonalities in stock market risk premia cash and futures abstract the unique nature of the settlement procedures on the london stock exchange are utilised to directly investigate intraweek and intraday seasonalities in ex post risk premia rather than total returns and compare them with the corresponding intraweek and intraday seasonalities in the index futures market seasonalities in the occurrence of extreme price changes are also examined the results reported are based on about 4 years of hourly cash and futures data the analysis is conducted using both parametric and non parametric methods the observed empirical regularities have implications for explanations of seasonality based on market microstructure timing of news and psychological behavioural patterns it is also found that the stock market has not efficiently accounted for the interest costs inherent in its own settlement procedures

negative assortative matching of risk averse agents with transferable expected utility abstract i give necessary and sufficient conditions for expected utility to be transferable among agents with different state independent risk preferences who share a risk they cannot influence in an assignment game where participants choose partners based on risk aversion the conditions permit a simple proof that matching is negative assortative

family specific investments and divorce with dynamically inconsistent households marital contracts and policy abstract this paper bridges two distinct areas of inquiry the economic theory of the family and behavioral research on time inconsistent preferences motivated by anecdotal and survey evidence suggesting that present bias plays a role in intra household decision making we propose a model in which hyperbolic discounting couples engage in home production activities thereby accumulating family specific capital over time at any given point in time the gains to continued marriage depend on the accumulated stock of this capital and a temporary random shock to match quality couples whose match quality deteriorates may choose to divorce and this is more likely to happen if past investments in family specific capital have been low we obtain three main sets of results first present biased preferences induce couples to underinvest in family specific capital and to overdivorce second sophisticated couples but not naive ones may choose to enter marriage on terms which make divorce more costly to obtain third the inefficiencies in the behavior of time inconsistent couples can be completely undone by means of earnings and divorce taxes that vary over the marital life cycle

the intergenerational transmission of risk and trust attitudes recent theories endogenize the attitude endowments of individuals assuming that they are shaped by the attitudes of parents and other role models this paper tests empirically for the relevance of three aspects of the attitude transmission process highlighted in this theoretical literature 1 transmission of attitudes from parents to children 2 an impact of prevailing attitudes in the local environment on child attitudes and 3 positive assortative mating of parents which enhances the ability of a parent to pass on his or her attitudes to the child we focus on two fundamentally important attitudes willingness to take risks and willingness to trust others we find empirical support for all three aspects providing an empirical underpinning for the literature an investigation of underlying mechanisms shows that socialization is important in the transmission process various parental characteristics and aspects of family structure are found to strengthen the socialization process with implications for modeling the socialization production function and for policies focused on affecting children s non cognitive skills the paper also provides evidence that the transmission of risk and trust attitudes affects a wide variety of child outcomes implying a potentially large total effect on children s economic situation

the effect of social security on lifetime wealth accumulation and bequests this paper is an empirical study of the effects of social security on lifetime wealth accumulation and bequests using a sample of wisconsin males we have matched lifetime earnings records from income tax returns with their social security account records and their bequests obtained from probate court records since the cohort of males was born between 1890 and 1899 they represent a cohort that saw a great change in the size and coverage by occupation of the system hence there is substantial within cohort variation in social security wealth from which effects can be estimated for nearly 30 years the life cycle theory of savings has enjoyed an enormous amount of academic support in the no bequest variant individuals save with the sole intention of consuming their savings in later years the economy wide stock of capital can therefore be generated by this pattern without any reliance on bequests modigliani 1966 such a model will lead to rather strong predictions about the effect of a pay as you go public pension hereafter social security on private savings as feldstein 1974 points out social security should displace private savings as well as reduce macro saving since the programme is unfunded this result follows from the assumption that each household will consume all of its assets during its own lifetime some recent research however has been at odds with the no bequest variant of the life cycle model see kurz 1984 and included references darby 1979 claims that life cycle assets savings consumed later in the life cycle constitute only 13 29 per cent of total assets kotlikoff and summers 1981 report that the major share nearly 80 per cent of capital stock in the united states is due to intergenerational transfers 2 indeed these authors write life cycle models of savings that emphasize savings for retirement as the dominant form of capital accumulation should give way to models that illuminate the determinants of intergenerational transfers p 706 in addition recent empirical work suggests that people tend to accumulate or fail to significantly decumulate wealth wealth in old age a finding at odds with the strict life cycle model 3 given the potentially large role of bequests in the process of capital accumulation it is important to know how bequests are affected by the large public programme that social security has become even if social security depresses private savings among those near or at retirement if people bequeath it is conceivable that saving during retirement is augmented by the programme 4 aside from the issue of savings effects the response of people s bequests to their old age benefits might allow one to assess the target efficiency of the social security system since the original objective of the system was to ensure adequate levels of consumption among the elderly a finding that benefits

household intertemporal behaviour a collective characterization and a test of commitment in this paper a formal test of intra household commitment is derived and performed to that end two models of household intertemporal behaviour are developed in both models household members are characterized by individual preferences in the first formulation household decisions are always on the ex ante pareto frontier in the second model the assumption of intra household commitment required by ex ante efficiency is relaxed it is shown that the full efficiency household euler equations are nested in the no commitment euler equations using this result the hypothesis that household members can commit to future allocations of resources is tested using the consumer expenditure survey i strongly reject this hypothesis it is also shown that the standard unitary framework is a special case of the full efficiency model however if household members are not able to commit household intertemporal behaviour cannot be characterized using the standard life cycle model these findings have two main implications first policy makers can change household behaviour by modifying the decision power of individual household members second to evaluate programmes designed to improve the welfare of household members it would be beneficial to replace the standard unitary model with a characterization of household behaviour that allows for lack of commitment

weekly patterns in japanese stock returns this study investigates the day of the week effect in the japanese stock returns low tuesday and high wednesday returns are observed most of the positive returns arise during the nontrading period the monday effect is also observed in the week whose previous week is closed by friday trading low tuesday returns appear to be related to low monday returns in the u s the weekly pattern is more pronounced for the returns of smaller firms a reverse size effect is observed during the trading period

determinants of canadian bilateral aid allocations humanitarian commercial or political in this paper we examine the determinants of the allocation of canadian bilateral aid over the period 1984 2000 we draw on models of donor behaviour that allow us to incorporate humanitarian commercial and political considerations the trinity of mixed motives that affect canadian aid we find that allocations are moderately altruistic recipient country human rights and membership in the commonwealth and la francophonie also affect aid flows most strikingly our results suggest that canadian aid flows became less altruistic over this period and commercial motives became increasingly important jel classification h50 o10 les determinants des allocations de l aide humanitaire canadienne humanitaires commerciaux ou politiques ce memoire etudie les determinants de l allocation de l aide bilaterale canadienne dans la periode 1984 2000 on utilise des modeles de comportement de donateur qui permettent de prendre en considerations les motivations humanitaires commerciales et politiques la trinite de motifs mixtes qui affectent l aide canadienne on decouvre que les allocations sont moderement altruistes le fait pour un pays de defendre bien les droits de la personne et d etre membre du commonwealth et de la francophonie affecte les flux d aide plus important peut etre les resultats suggerent qu au cours de cette periode les flux d aide canadienne deviennent moins altruistes et les motifs commerciaux de plus en plus importants

motives for private transfers over the life cycle an analytical framework and evidence for peru abstract this paper tests for the motives for private income transfers we consider two motives altruism and exchange the question of private transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income using a household survey for peru we find that transfer amounts received increase with recipient pre transfer income which contradicts a key prediction of the strong form of the altruism hypothesis but is consistent with exchange we also find that capital market imperfections are likely to be an important cause of private transfers and that social security benefits crowd out the incidence of private transfers

collective labor supply and welfare the paper develops a general collective model of household labor supply in which agents are characterized by their own possibly altruistic preferences and household decisions are only assumed to be pareto efficient an alternative interpretation is that there are two stages in the internal decision process agents first share nonlabor income according to some given sharing rule then each one optimally chooses his or her own labor supply and consumption this setting is shown to generate testable restrictions on labor supplies moreover the observation of labor supply behavior is sufficient for recovering individual preferences and the sharing rule up to a constant finally the traditional tools of welfare analysis can be adapted to the new setting

an evolutionary explanation for rotten kids we explore how natural selection acts upon genes for cooperation altruism and selfishness in an prisoner s dilemma played by family members a key parameter determining behavior is that parents and children have different expectations of future offspring examining asexual and sexually reproducing populations we show that which strategy of cooperation and defection proves be stable depends on the relative reproduction potential of the players and what proportion of the population is young rotten kids with altruistic parents can be a stable outcome where reproductive success is the goal and natural selection may lead individuals to care about their unborn progeny jel d10 h31

the role of intergenerational transfers in aggregate capital accumulation this paper uses historical u s data to directly estimate the contribution of intergenerational transfers to aggregate capital accumulation the evidence presented indicates that intergenerational transfers account for the vast majority of aggregate u s capital formation only a negligible fraction of actual capital accumulation can be traced to life cycle or hump savings a major difference between this study and previous investigations of this issue is the use of more accurate longitudinal age earnings and age consumption profiles these profiles are simply too flat to generate substantial life cycle savings this paper suggests the importance of and need for substantially greater research and data collection on intergenerational transfers life cycle models of savings that emphasize savings for retirement as the dominant form of capital accumulation should give way to models that illuminate the determinants of intergenerational transfers

risk preferences in the psid individual imputations and family covariation unobserved heterogeneity greatly complicates empirical analysis in economics unobserved heterogeneity in preferences is particularly troublesome because there are so few theoretical restrictions on the distribution of preference parameters in the population therefore despite potential pitfalls we have developed direct survey measures of preference parameters based on hypothetical choices and appropriate econometric techniques for dealing with the inevitable measurement error in any such measures our work on survey measures of preference parameters focuses on risk tolerance robert b barsky f thomas juster kimball and shapiro 1997 bjks hereafter and kimball claudia r sahm and shapiro 2008 kss hereafter time preference and the elasticity of intertemporal substitution bjks and labor supply elasticities kimball and shapiro 2008

intra family transfers in japan intergenerational co residence distance and contact classified broadly two motives for intra family transfers exist altruism and selfishness this paper examines two selfish hypotheses the exchange motive strategic bequest motive and the demonstration effect using a new japanese microdata set analysis of the determinants of intergenerational co residence distance between residences and frequency of contact yields considerable support for the exchange motive but no support for the demonstration effect the findings are consistent with the exchange motive after distinguishing it from mutual altruism

private intergenerational contact in france and the demonstration effect this study analyses motives for intergenerational contact from adult children to their middle aged parents if these transfers may be explained either by altruism or by exchange we mainly focus on the demonstration effect where households take care of their own parents in order to elicit a future support from their children we test the model using a cross sectional survey from 1992 about private transfers in france according to the data the presence of children increases the amount of visits that respondents provide to their parents and the econometric results still hold after controlling for unobserved familial heterogeneity using fixed effects although this empirical evidence is consistent with the demonstration effect we suggest an alternative interpretation for the positive correlation based on the care of grandchildren

role of speculative short sales in price formation the case of the weekend effect we argue that short sellers aiect prices in a signi cant and systematic manner in particular we contend that speculative short sales contribute to the weekend eiect the inability to trade over the weekend is likely to cause these short sellers to close their speculative positions on fridays and reestablish new short positions on mondays causing stock prices to rise on fridays and fall on mondays we nd evidence in support of this hypothesis based on a comparison of high short interest stocks and low short interest stocks stocks with and without actively traded options ipos zero short interest stocks and highly volatile stocks in this paper we empirically examine whether speculative short sales aiect prices in a systematic manner the focus is on the weekend eiect that has remained an unexplained anomaly beginning with french 1980 and gibbons and hess 1981 there is much evidence in support of higher returns on fridays and lower returns on mondays keim and stambaugh 1984 nd that friday returns are lower when there is saturday trading ariel 1990 nds that a signi cantly larger number of stocks rises preholiday than postholiday empirical evidence related to more recent periods points to an insigni cant weekend eiect for large rms but continuance of the weekend eiect for an equally weighted index as documented herein 1 many potential explanations of the weekend eiect have been proposed and investigated measurement errors gibbons and hess 1981 and keim and stambaugh 1984 delay between trading and settlement in stocks dyl and martin 1985 and lakonishok and levi 1982 specialist related biases in prices keim and stambaugh timing of corporate releases after friday s close damodaran 1989 reduced institutional trading and greater individual trading on mondays

does the weekday effect of the yen dollar spot rates exist in tokyo london and new york an analysis of panel probability distribution using probability distribution techniques this article explores whether any differences exist between the returns and volatility of yen dollar spot markets in tokyo london and new york after the intraday returns were fit into probability distributions new york is found to have the highest return followed by london and then tokyo in estimating the peaks and widths of the distributions of volatility tokyo is found to have the lowest volatility in the log normal distribution while london and new york show similar volatility distributions implying similar investor risk return preference behaviour in the london and new york markets the findings also imply that arbitrage opportunities between london and new york could be trivial after estimating the panel distribution from monday to friday across the three markets we found that the monday effect disappears instead tuesday shows negative and significantly lower returns the friday weekend effect no longer exists instead thursday shows a positi

return autocorrelations around nontrading days we document a pattern in the serial dependence of security returns around nontrading days the correlation of returns the second day after a weekend or holiday with returns the first day after is unusually low and in many return series is negative implying a reversal of price movements we also document unusually large positive return autocorrelations the last day before and the first day after weekends and holidays the pattern has existed in equity returns for over 100 years and also exists in several futures markets implying that the pattern is robust to alternative market microstructures article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

effects of growing wage disparities and changing family composition on the u s income distribution abstract u s income inequality soared after 1979 the present paper estimates the contribution of increased earnings inequality to the surge in overall income inequality between 1979 and 1996 the direct contribution of increased earnings inequality is surprisingly modest even if male and female earnings inequality had remained unchanged at their 1979 levels about two thirds of the observed increase in overall u s inequality would have occurred other factors contributing to higher overall inequality include the growing correlation of husband and wife earned incomes and the increasing percentage of americans who live in single adult families families that typically have much more unequal incomes than husband wife families

reformulating the foundations of consumer choice theory and environmental valuation abstract the burgeoning field of environmental valuation has raised serious doubts about the fundamental axioms of consumer choice theory the general validity of the walrasian system and methodological individualism this paper examines these aspects of consumer choice theory paying particular attention to the pioneering contributions of georgescu roegen we argue that evidence from psychology game theory anthropology and contingent valuation surveys reveals a more complex pattern of decision making than that described by neoclassical utility theory we discuss the notions of the invariance of preferences non satiation the principle of complementarity lexicographic preferences and the hierarchy of wants with reference to environmental valuation we also discuss the notion of marginal utility of money the validity of the walrasian system and methodological individualism using scaling concept in hierarchy theory we then address the conflict between theory and reality by introducing a probabilistic binary choice scheme under uncertainty about environmental attributes we argue that these extensions are necessary to account for consumer choices revealed in environmental valuation surveys we conclude with the hope that a reformulation of consumer choice theory based on realistic models of human behavior can be the basis for a viable alternative to neoclassical welfare economics

motives for private income transfers private income transfers are becoming increasingly recognized as a key aspect of the u s economy the majority of private income transfers occur inter vivos i e between living persons but very little is known about this type of transfer behavior this paper tests alternative hypotheses concerning motivation for inter vivos transfers two motives are considered altruism and exchange evidence presented here casts doubt on the altruistic model of transfer behavior observed patterns for inter vivos transfers are more consistent with exchange related motives this finding has important implications for the effects of public transfer programs on the distribution of economic well being

the family inheritance and the intergenerational transmission of inequality unequal inheritance of material wealth is commonly considered a major cause of inequality in consumption however theoretical models of the intergenerational transmission of inequality by becker blinder and ishikawa imply that unequal inheritance may either increase or reduce consumption inequality differences in inherited wealth resulting from unequal parental incomes increase inequality in recipients consumption however unequal bequests caused by differences among families in the endowed ability of children or the costs of producing human capital are equalizing empirical results confirm these predictions the inheritance received by children is inversely related to both children s income and parental education thus bequests are compensatory in that ceteris paribus low income children inherit more than their advantaged contemporaries

the joint determination of household membership and market work the case of young men except in special cases market work and household membership are jointly chosen a nash bargaining model of family behavior is used to specify stochastic structural relationships two indirect utility functions and a market and a reservation wage function that jointly determine work consumption and household membership the maximum likelihood estimates of the implied trinomial probit model differ sharply from those obtained when either market work or household membership is taken as exogenous this application to white male youths from the national longitudinal surveys shows the insurance function of families parents insure their sons against poor market opportunities

marriage markets and assortative mating with household public goods theoretical results and empirical implications this paper analyzes marriage market equilibria when the gains from marriage result from joint consumption of household public goods assuming transferable utility within marriage the paper proves that marriage markets will be characterized by positive assortative mating on wealth when spouses differ only in endowments and the gains to marriage result only from public goods when spouses differ in wages and household public goods are produced at home the results imply offsetting effects with public good economies creating an incentive for positive assortative mating on wages and gains from specialization creating an incentive for negative assortative mating on wages the results help explain the persistent lack of empirical support for becker s prediction of negative assortative mating on wages and have implications for empirical analysis of all joint living arrangement decisions

are seasonal anomalies real a ninety year perspective in recent years there has been a proliferation of empirical studies documenting unexpected or anomalous regularities in security rates of return in addition to the widely studied relation between firm size and rate of return 1 these include seasonal regularities related to the time of the day harris 1986 the day of the week see ball and bowers 1986 cross 1973 french 1980 gibbons and hess 1981 jaffe and westerfield 1985 keim and stambaugh 1984 and lakonishok and levi 1982 the time of the month ariel 1987 and the turn of the year see haugen and lakonishok 1988 jones pearce and wilson 1987 lakonishok

on the demand for grandchildren tied transfers and the demonstration effect it is argued that parents provide help with housing downpayments in order to encourage the production of grandchildren and that such a subsidization emanates from the bdemonstration effect q a child s propensity to furnish parents with attention and care can be conditioned by parental example parents who desire such transfers in the future have an incentive to make transfers to their own parents in order to instill appropriate preferences in their children this generates a derived demand for grandchildren since potential grandparents will be treated better by their adult children if the latter have their own children to whom to demonstrate the appropriate behavior empirical work indicates behavior consistent with subsidization of the production of grandchildren and the demonstration effect

cooperation secret handshakes and imitation in the prisoners dilemma building on a j robson 1990 j theoret biol 144 379 396 we introduce into the repeated prisoners dilemma mutants who have the ability to send a costly signal i e the secret handshake before each round of the game and to condition their actions on whether or not they observe the same signal from their opponent we show that as mutation probabilities approach zero in the limit cooperation occurs a positive fraction of the time using simulations to study the behavior of the system with nonzero mutation probabilities we obtain similar results surprisingly in some cases an increased payoff to unilateral defection actually raises the level of cooperation journal of economic literature classification numbers c70 c72 d60

marital matching and earnings evidence from the unmarried population in sweden social scientists have devoted substantial research to economic basis for matching of men and women in marriage a common feature of existing studies is their reliance on samples of married couples the principal shortcoming of spouse data is that spouses earnings correlations are contaminated by the partners behaviors and other events that occur after marriage and affect their earnings this study addresses that problem by exploiting a longitudinal data file from the swedish population by selecting a sample of married couples in a given year we retreat through the file to years before the marriage using data from the spouses single years we apply the correlation methodology to their earnings evidence from the model supports positive assortative mating

how altruism can prevail in an evolutionary environment abstract we study environments in which an individual gets a higher payoff from defecting than from cooperating and where copies of an individual are more likely to appear the higher is the individual s payoff we demonstrate that even in single shot prisoner s dilemma models where cooperation benefits one s opponent at a cost to oneself evolution can sustain cooperative behavior between relatives or neighbors in addition we show that selfish individuals who conciously choose their actions may find it in their interest to be altruistic when there is some probability that their practices will be imitated both genetic and cultural inheritance appear to be blunt instruments that do not operate on individuals in isolation those who inherit a genetic tendency to cooperate are more likely than others to enjoy the benefits of cooperative siblings similarly with culturel inheritance altruism can prevail when individuals are likely to interact with others who share the same role model

detailed estimation of worklife expectancy for the measurement of human capital accounting for marriage and children abstract measuring an individual s human capital at a point in time as the present actuarial value of expected net lifetime earnings has a lengthy history calculating such measures requires accurate estimates of worklife expectancy here worklife estimates for men and women in the usa categorized by educational attainment race marital status parental status and current labour force status are presented race has a much larger impact on the worklife expectancy of men than women education is associated with larger worklife differentials for women the association between marriage and worklife expectancy is significant but of opposite sign for men and women married women men have a lower higher worklife expectancy than single women men parenthood is associated with a reduction in the worklife expectancy of women the association is smaller and varies from positive for some education marital status groups to negative for others for men

rigidity of social systems the tendency for the members of a corporation or government to be resistant to change is explored in a model that encompasses two endemic features of such systems first the social system is modeled as a hierarchy and implicit within it is a selection process that determines who advances to higher levels second an agent s behavior is partially determined by imitating those who have risen in the ranks a behavioral norm of being rigid is found to be more prevalent and robust than one of being flexible a more volatile environment may also induce agents to be more resistant to change admirandi sed imitandi to be admired but not imitated st augustine

volume and turn of the year behavior abstract this paper studies the trading characteristics of listed companies by size and year end behavior there were no transactions on nearly 25 of the days for the smallest decile even at the turn of year which is an active trading period for small companies as a result of low levels of trading and the regulations governing exchange specialists transaction prices and quotations of small listed companies may require several days to fully reflect equilibrium price changes the data confirm the existence of a year end seasonal pattern in rates of return for small companies and suggest that there may be a seasonal pattern for large companies as well

choosing between gifts and bequests how taxes affect the timing of wealth transfers abstract a number of theories have been advanced to explain the size and timing of intergenerational transfers one factor only recently explored is the effects of taxes and in particular the estate tax on such transfers this paper represents the first attempt to explore how capital gains and gift taxes in addition to the estate tax interact to influence incentives in the timing of transfers using estate tax data and exploiting variations in state inheritance gift and capital gains tax rates this paper finds taxes to be an important consideration in the choice between gifts and bequests in particular each of capital gains and gift taxes are found to be important determinants of the timing of transfers these findings are robust to a number of specifications that control for borrowing charitable bequests marital status and the portfolio composition of wealth transfers

weekend effects on stock returns a comment in a recent note in this journal lakonishok and levi 3 hereafter ll offer a partial explanation for the intraweek pattern of daily stock market returns observed by french 1 gibbons and hess 2 and others their hypothesis that the weekend effect abnormally high returns to common stocks on fridays and negative returns to common stocks on mondays can be explairned by settlement procedures and check clearing delays is an intriguing conjecture however the empirical evidence presented below supports the hypothesis that settlement clearing procedures are not a major determinant of this weekly pattern of stock market returns

for richer for poorer assortative mating and savings preferences do couples share the same values the social sciences have mainly concentrated on comparing the socioeconomic characteristics of spouses but rarely consider their attitudes to risk and time in this paper we use conventional measurements and an original method of scoring we find that spouses are very similar in their savings preferences even when we control for the individual characteristics our results suggest that most of this relationship comes from marital sorting these conclusions are decisive in explaining the decision process within households and its implications for wealth inequalities between households since homogamy causes a divide in the population

weekend effects on stock returns a note some researchers have apparently been surprised to discover that the distribution of stock returns depends on the day of the week kenneth french 3 for example in testing whether daily stock returns are generated by a trading time or calendar time hypothesis provided convincing evidence of a negative market return on mondays as french carefully notes this finding runs counter to both hypotheses since a trading time view would have expected stock returns equal on different days and a calendar time view would have higher expected returns on monday to compensate for the longer holding period in this paper we offer a partial explanation for the apparently puzzling discovery of different daily returns we argue that the expected stock returns as measured for example from closing to closing prices should depend on the day of the week in general we argue that the expected returns on mondays should be lower than would be implied simply by a trading time or calendar time model and the returns on fridays should be higher in addition we anticipate that holidays will have complex effects on stock returns on other days of the week our argument is based on the delay between trading and settlements in stocks and in clearing checks the explanation that we offer for different measured daily returns does not contradict the efficient market hypothesis as correctly adjusted expected returns should not differ according to the day of the week

nonmarket transfers and altruism abstract we examine altruistically motivated consumption transfers in an effort to account for nonmarket transfers we find that altruistic linkages lead to autonomous negotiation free transfers and that such transfers positively respond to stronger altruism we also find that given fairly natural assumptions concerning the altruism parameters mutual altruism does not necessarily result in group social harmony even though its rise narrows the conflict range in spite of enhanced transfers prompted by such a rise both parties may end up worse off these results help explain why in some social environments a shift toward market oriented transfers and exchanges may be quicker than in others as the disadvantages decline in utility associated with intragroup altruistic linkages outweigh the advantages