do relative income and income inequality affect consumptionq evidence from the villages of rural china abstract this article examines how a household s consumption rate is affected by its relative income and income inequality within a community based on the theory of social status seeking in consumption we test hypotheses related to these factors using a unique panel data set of rural households in china observed within a few hundred villages between 2003 and 2006 we find that the household s consumption rate is negatively related to the relative income position after controlling for the absolute income and positively related to the income inequality of the village we confirm these with different measurements of relative position

marriage meets the joneses relative income identity and marital status abstract this paper investigates the effect of relative income on marriage accounting flexibly for absolute income the ratio between a man s income and a local reference group median is a strong predictor of marital status but only for low income men relative income affects marriage even among those living with a partner a 10 percent higher reference group income is associated with a 2 percent reduction in marriage we propose an identity model to explain the results

discounts as a barrier to entry abstract to what extent can an incumbent manufacturer use discount contracts to foreclose efficient entry we show that off list price rebates that do not commit buyers to unconditional transfers like the rebates in eu commission v michelin ii for instance cannot be anticompetitive this is true even in the presence of cost uncertainty scale economies or intense downstream competition all three market settings where exclusion has been shown to emerge with exclusive dealing contracts the difference stems from the fact that unlike exclusive dealing provisions rebates do not contractually commit retailers to exclusivity when signing the contract jel d43 d86 k21 l13 l14 l42 l60

do positional goods inhibit saving evidence from a life cycle experiment abstract we investigate the effect of positional goods goods for which one s consumption relative to others matters on saving based on results from a life cycle consumption saving experiment in a group treatment we allow inter personal comparisons by assigning subjects to groups and displaying rankings based partly on consumption a baseline individual treatment is similar but without the additional information we find more under saving saving less than the optimal amount and lower money earnings for subjects in the group treatment both effects are economically relevant with magnitudes of roughly 6 7 of expected income and 7 8 of average earnings respectively additional analysis shows that the result is driven by those subjects who are not ranked in the top three in their group keeping up with the joneses and males in particular

social status in economic theory social distinction or status is an important motivation of human behaviour this paper provides a selective survey of recent advances in the economic analysis of the origins and consequences of social status concerns first a selection of empirical research from a variety of scientific disciplines is discussed to underpin the further theoretical analysis i then consider the origins and determinants of tastes for status discuss the endogenous derivation of such preferences for relative standing and assess the different formalizations of these preferences subsequently the consequences of preferences for status are studied for a variety of problems and settings the last section discusses a number of implications of status concerns for normative economics and public policy

on the long run evolution of inheritance france 1820 2050 this paper attempts to document and account for the long run evolution of inheritance we find that in a country like france the annual flow of inheritance was about 20 25 of national income between 1820 and 1910 down to less than 5 in 1950 and back up to about 15 by 2010 a simple theoretical model of wealth accumulation growth and inheritance can fully account for the observed u shaped pattern and levels using this model we find that under plausible assumptions the annual bequest flow might reach about 20 25 of national income by 2050 this corresponds to a capitalized bequest share in total wealth accumulation well above 100 our findings illustrate the fact that when the growth rate g is small and when the rate of return to private wealth r is permanently and substantially larger than the growth rate say r 4 5 vs g 1 2 which was the case in the 19th century and early 20th century and is likely to happen again in the 21st century then past wealth and inheritance are bound to play a key role for aggregate wealth accumulation and the structure of lifetime inequality contrarily to a widely spread view modern economic growth did not kill inheritance

recycling energy taxes impacts on a disaggregated labour market abstract this paper analyses the impacts of energy taxes whose revenue is recycled to reduce gross wages and increase employment the main novel feature of this paper is the attempt to assess the effectiveness of this fiscal reform by using a labour market model in which both skilled and unskilled workers are used in the production process this segmentation enables us to compare a policy which aims at reducing unskilled workers wages as in the original delors white book with a policy in which the environmental fiscal revenue is used to reduce the gross wage of all workers moreover two policy scenarios will be considered a non co operative one in which each country determines the optimal domestic energy tax to achieve a given employment target and a co operative one in which the energy taxes are harmonised to equalise marginal abatement costs in the eu and in which the employment target is set for the eu our results show that i an employment double dividend can be achieved in the short run only even if a trade off between environment and employment always exists ii the effect on employment is larger when the fiscal revenue is recycled into all workers gross wages rather than into unskilled workers only iii a co operative policy leads to even larger benefits in terms of employment provided that an adequate redistribution of fiscal revenues is adopted by eu countries

aggregate consumption function and public social security the first time series study for a developing country turkey this article is the first attempt in the literature to investigate the effects of public social security on aggregate consumption in a time series setting for a developing country turkey that has one of the most generous social security systems in the organization for economic cooperation and development oecd region in order to quantify the social security variable this article uses the social security wealth ssw series calculated for turkey in a separate study this study indicates that ssw is the largest part of the household wealth in turkey and therefore should not be ignored in the aggregate consumption studies the results show that its effect on consumption is positive and robust

wages seniority and the demand for rising consumption profiles abstract in many occupations wages rise faster than productivity over the life cycle other authors have suggested a variety of explanations for this pattern we argue that these explanations fail for at least two occupations commercial airline pilots and intercity bus drivers we then explore an alternative explanation based on the assumption that satisfaction depends on not only the level of consumption but also its rate of change we argue that upward sloping wage profiles are an expedient substitute for personal savings as a means for achieving upward sloping consumpion profiles

life cycle individual thrift and the wealth of nations this paper provides a review of the theory of the determinants of individual and national thrift that has come to be known as the life cycle hypothesis lch of saving applications to some current policy issues are also discussed part i deals with the state of the art on the eve of the formulation of the lch some 30 years ago part ii sets forth the theoretical foundations of the model in its original formulation and later amendment calling attention to various implications distinctive to it and sometimes counter intuitive it also includes a review of a number of crucial empirical tests both at the individual and the aggregate level part iii reviews some applications of lch to current policy issues though only in sketchy fashion as space constraints prevent fuller discussion this abstract was borrowed from another version of this item

are wages habit forming evidence from micro data although utility functions play a central role in economics the axiom that utility depends only on the absolute levels of its arguments is rarely tested this paper uses panel data on 2000 british employees who remain with the same employer and who are not promoted from one wave to the next it is shown that one important measure of well being overall job satisfaction is strongly positively correlated with the change in the worker s pay between waves but is unrelated to the current level of pay empirical tests suggest that a reference dependent satisfaction function where individual well being depends on current pay relative to past pay is more consistent with these regression results than are productivity or agency explanations of increasing wage profiles some evidence is presented of greater job satisfaction effects of pay rises for lower paid less well educated and younger workers these results provide some micro evidence consistent with the theory widespread in social science of habituation individuals may become used to any given level of consumption or income as such they tie in with the finding that a country s well being as measured by the average happiness of its citizens is only weakly correlated with its per capita gnp

intangible capital aspects of advertising and r d expenditures twenty years have passed since economists first emphasized the intangible capital aspects of advertising according to this view consumers tend to forget brands and continuous advertising is needed to maintain a given rate of sales thus advertising expenditures can be viewed as a capital good that depreciates over time and needs maintenance and repair 22 p 197 more recently weiss 25 among others has suggested that research and development r d costs might also be capitalized as such expenditures yield benefits mainly in the future 25 p 421 unfortunately most analyses of the intangible capital issue have been limited to advertising largely because no comprehensive data on r d were available until quite recently however important recent theoretical contributions on the topic and improvements in data availability now make it possible more completely to consider the intangible capital aspects of both advertising and r d expenditures here the intangible capital issue is investigated through use of a market valuation model in this approach significant future intangible capital effects of advertising and r d are suggested to the extent that current expenditures have significant effects on the market value of the firm given positive market value influences individual coefficient estimates can be used to estimate both the total stock of intangible capital as well as average annual depreciation rates for advertising and r d while these depreciation rate estimates are interfirm averages and undoubtedly err in individual instances they can be quite useful in indicating the general magnitude of corporate profit and tax misstatement due to current reporting and tax policies in section i below various articles closely related to this study are reviewed section ii develops a valuation model embodying intangible capital considerations the data are discussed in section iii and estimation results are presented in section iv and finally conclusions and implications for public policy are discussed in section v

exclusion via non exclusive contracts we establish that non linear vertical contracts can allow an incumbent to exclude an upstream rival in a setting that does not rely on the exclusivity of the incumbent s contracts with downstream firms or any limits on distribution channels available to the incumbent or rival the optimal contract we describe is a three part quantity discounting contract that involves the payment of an allowance to a downstream distributor and a marginal wholesale price below the incumbent s marginal cost for sufficiently large quantities the optimal contract is robust to allowing parties to renegotiate contracts in case of entry l exclusion par le biais des contrats non exclusifs nous etablissons que des contrats verticaux non lineaires peuvent permettre a un titulaire d exclure un rival en amont dans un cadre qui ne de pend pas de l exclusivite des contrats du titulaire avec les entreprises en aval ou des limites sur les canaux de distribution disponibles pour le titulaire ou un rival le contrat optimal que nous decrivons est un contrat de rabais en trois parties base sur la quantite pre voyant le versement d une indemnite a un distributeur en aval et un prix de gros marginal inferieur au cout marginal de l operateur historique pour des quantites suffisamment importantes le contrat optimal est robuste si on permet aux parties de renegocier les contrats en cas d entree

buyer power and exclusion in vertically related markets suppliers and consumer organizations have become increasingly concerned by the build up of buyer power of retailers in many markets a major concern is that strong retailers will abuse their power to exclude products and rival retailers from the market to be able to increase prices to consumers as a consequence remedies to limit buyer power are discussed and implemented in many countries in this paper we compare the incentives for exclusion and the effect on consumers prices under both buyer and seller power we study a model with a dominant upstream manufacturer and a competitive fringe of producers offering their products to two differentiated downstream retailers we compare the equilibrium outcome of this model when i the dominant supplier holds all the bargaining power and ii the retailers have all the bargaining power we show that full or partial exclusion of either the competitive product or downstream retailers occurs when inter and intrabrand competition are strong this is true both under seller and buyer power however in contrast to the received literature we find that buyer power weakly enhances welfare compared to seller power because buyer power will lead to both more product variety less exclusion and lower retail prices

contracting with externalities the paper studies inefficiencies arising in contracting between one principal and n agents when the utility of each agent depends on all agents trades with the principal when the principal commits to a set of publicly observable bilateral contract offers the arising inefficiency is due entirely to the externalities imposed on non signers in contrast when the principal s offers are privately observed the distortion is due to the externalities given agents equilibrium trades comparison of the two externalities determines the relative efficiency of the two contracting regimes in both cases we show that when n is large each agent can be treated as non pivotal provided that appropriate continuity assumptions are satisfied we also study the case in which the principal can condition each agent s trade on other agents messages we characterize the set of such mechanisms in which each agent s participation is voluntary when the principal can commit to any such mechanism she implements the first best outcome while threatening each deviator with the harshest possible punishment however in the presence of noise that goes to zero slower than n goes to infinity in the limit we obtain a generally inefficient outcome in which each agent feels non pivotal

savings and nutrition at low incomes while many development theorists assume saving propensities vary among different groups there has been limited theoretical justification for this view this paper analyzes two complementary theories stressing the effect on saving of physiological consequences of poor nutrition at low incomes one influence is on the probability of survival another is on workers productivity either effect means that the average propensity to save can rise with income issues considered include annuities exogenous changes in survival and efficiency implications for the efficiency wage theory of unemployment and distinctions between wage and nonwage income implications of nutritional effects for econometric specification of saving functions are stressed

interlocking relationships and quantity rationing as shown by rey and verge 2010 resale price maintenance can be used to maximize industry profit when competing manufacturers sell their brands through the same competing retailers the present article shows how quantity rationing non linear tariffs can be used to achieve the same outcome

robust predictions for bilateral contracting with externalities the paper studies bilateral contracting between one principal and n agents when each agent s utility depends on the principal s unobservable contracts with other agents we show that allowing deviations to menu contracts from which the principal chooses bounds equilibrium outcomes in a wide class of bilateral contracting games without imposing ad hoc restrictions on the agents beliefs this bound yields for example competitive convergence as n in environments in which an appropriately defined notion of competitive equilibrium exists we also examine the additional restrictions arising in two common bilateral contracting games the offer game in which the principal makes simultaneous offers to the agents and the bidding game in which the agents make simultaneous offers to the principal

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

competition with exclusive contracts and market share discounts we analyze firms that compete by means of exclusive contracts and market share discounts conditional on the seller s share of customers total purchases with incomplete information about demand firms have a unilateral incentive to use these contractual arrangements to better extract buyers informational rents however exclusive contracts intensify competition thus reducing prices and profits and in all pareto undominated equilibria increasing welfare market share discounts by contrast produce a double marginalization effect that leads to higher prices and harms buyers we discuss the implications of these results for competition policy jel d43 d83 d86 k21 l14 l42 in this paper we study firms that compete by means of exclusive contracts or mar ket share discounts i e discounts that depend on the seller s share of a customer s total purchases these are common yet seldom studied forms of competition the literature has mainly focused on incumbents use of exclusive contracts or marketshare discounts to deter new entrants whilst paying less attention to competitors deploying similar pricing strategies we show that exclusive contracts intensify competition reducing equilibrium prices whereas market share discounts have a double marginalization effect and hence result in higher prices these findings have a bearing on the current lively policy debate 1 fueled by the fact that antitrust authorities view competition by means of exclusive contracts or marketshare discounts with some suspicion to say the least the authorities main concern appears to be that a dominant firm can use exclusivity or market share discounts to eliminate not only potential competitors but also existing ones a prime instance of this is the case of intel intel whose main competitor amd has been operating for years in the microchip sector offered electronics manufacturers discounts that depended on their buying a minimum share of their total purchases of microchips from intel some customers to qualify for the discount had to opt for an exclusive supply contract that

intergenerational wealth mobility and the role of inheritance evidence from multiple generations this study estimates intergenerational correlations in mid life wealth across three generations and a young fourth generation and examines how much of the parent child association that can be explained by inheritances using a swedish data set we find parent child rank correlations of 0 3 0 4 and grandparents grandchild rank correlations of 0 1 0 2 conditional on parents wealth grandparents wealth is weakly positively associated with grandchild s wealth and the parent child correlation is basically unchanged if we control for grandparents wealth bequests and gifts strikingly account for at least 50 per cent of the parent child wealth correlation while earnings and education are only able to explain 25 per cent

a test of the relative income hypothesis the original permanent income and life cycle models were constructed around the view that savings rates are independent of the level of long run income 19 since then it has been well documented using household data that savings rates rise with long run income to be consistent with the empirical evidence modigliani suggests modifying the life cycle hypothesis to include a bequest motive his hypothesis however is that the share of lifetime resources that a household plans to devote to bequests is an increasing function of its lifetime resources relative to others in the same age cohort 17 the share of resources devoted to bequests is made a function of the relative and not the absolute level of resources so as to be consistent with menchik and david s empirical study of the bequest function 16 but if saving for bequests is influenced by relative income why not other forms of saving a simple model in which all types of saving are influenced by relative income was proposed by duesenberry in 1949 4 his basic hypothesis was that households are concerned about community consumption standards and that this concern leads to savings rates being an increasing function of a household s position in the income distribution although a per se desire for status is seen by some economists as inconsistent with rational behavior it is clear that a relative advantage is often instrumental in achieving absolute goals 6 7 10 11 22 while several policy implications of the relative income hypothesis have come to light 2 6 it has rarely been analyzed empirically the purpose of this paper is to present a test of the relative income model the hypothesis is that if income rank is really the variable driving savings rates then it should be possible to hold the level of income constant and still see the average propensity to save aps moving with income rank section ii presents a simple model of the savings decision in which concern for relative standing in the current consumption hierarchy is integrated into a permanent income framework the model is then used to explore the issue of functional form section iii discusses the data the equation to be estimated and the regression results section iv presents a summary and concluding remarks

upfront payments and exclusion in downstream markets although upfront payments are often observed in contracts between manufacturers and retailers little is known about their competitive effects or the role retailers play in securing them in this article we consider a model in which two competing retailers make take it or leave it offers to a common manufacturer we find that upfront payments are a feature of equilibrium contracts and in all equilibria only one retailer buys from the manufacturer these findings support the claims of small manufacturers who argue that they are often unable to obtain widespread distribution for their products because of upfront payments copyright 2007 rand

the demand boost theory of exclusive dealing this paper unifies various approaches to the analysis of exclusive dealing that so far have been regarded as distinct the common element of these approaches is that firms depart from efficient pricing raising marginal prices above marginal costs we show that with distorted prices exclusive dealing can be directly profitable and anticom petitive provided that the dominant firm enjoys a strong competitive advantage over rivals the dominant firm gains directly rather than in the future or in adjacent markets thanks to the boost in demand it enjoys when buyers sign exclusive contracts we discuss the implication of the theory for antitrust policy

does retailer power lead to exclusion this article examines whether retailer bargaining power and upfront slotting allowances prevent small manufacturers who have no bargaining power from obtaining adequate distribution in contrast to the findings of marx and shaffer 2007 who show that all equilibria involve limited distribution i e exclusion of a retailer we show that there is always an equilibrium in which full distribution is obtained provided that full distribution is the industry profit maximizing outcome the key feature leading to this differing result is that we do not restrict each retailer to offering the manufacturer a single tariff

buyer power and intrabrand coordination we analyze the competitive effects of vertical contracts in a contracting situation where rival retailers offer contracts to a manufacturer in contrast to bernheim and whinston 1998 who study the situation in which competing manufacturers offer contracts to a common retailer we find that two part tariffs even if contingent on exclusivity or not do not suffice to implement the monopolyoutcome richer arrangements including e g conditional fixed fees and upfront payments are thus required to internalize all contracting externalities the welfare implications are ambiguous on the one hand richer contracts ensure that no efficient retailer is excluded on the other hand they allow firms to maintain monopoly prices despite intrabrand competition simulations suggest that the latter effect may be more significant

psychological characteristics and household savings behavior the importance of accounting for latent heterogeneity abstract we employ a finite mixture model with maximum likelihood ml estimation to analyze latent heterogeneity in the relationship between psychological characteristics and household savings behavior in a one step ml estimation approach we estimate a class membership model and a behavioral model of the classes jointly adopting this approach enables us to simultaneously assess how socio demographic characteristics affect class membership probabilities and estimate class specific regression coefficients to test whether psychological characteristics predict savings behavior differently across latent classes we apply this approach to a representative sample of uk households n 3382 and identify two different latent classes striving versus established households we find that the relationship between psychological characteristics and savings behavior differs across these two classes demonstrating the importance of accounting for latent heterogeneity when studying the drivers of savings behavior our results have implications for policymakers attempting to improve household savings behavior