parents discount rates for child quality contemporary discussions of economic growth make human capital or knowledge accumulation its primary engine 25 human capital as the lead component of the stock of wealth defines a developed economy becker and murphy 4 show that human capital both increases and is increased by the scope of the market its rate of return rises with the size of its stock 5 human capital also plays significant roles in models of human fertility choice 40 population and environmental degradation 11 34 capital mobility 3 and endogenous technological progress 33 a substantial portion of an adult s human capital is accumulated during childhood children as children however cannot independently contract for the resources required to support investments in this human capital though nearly every society grants parents wide discretion about the nurture they provide their children little is understood about what motivates investment by one generation in another the relative importance of different investment modes or the discount rates which parents apply whatever the motivation and the mode because of the long time span between birth and adulthood parents discount rates potentially exert great leverage upon the investment decisions they make for their children knowledge of these discount rates is a prerequisite to acquiring an improved understanding of the internal decision processes of the household a collective decision unit which economics mostly treats as a black box 1 important policy questions as well as scientific accuracy and logical consistency demand knowledge of the discount rates parents apply to investments in their children healthier better educated and wealthier children have a better chance in life but there is no evident reason to suppose that intrafamily discount rates are socially optimal 2 many of the private reactions and behaviors which reinforce or temper the intended effects of public policies are internal to the household when these intended effects have a substantial temporal dimension parental discount rates will be influential for example increased public investments in children can be neutralized

quasi experimental price elasticities of cigarette demand and the bootlegging effect this paper updates the lyon and simon quasi experimental price elasticities of cigarette demand and studies their sensitivity to changes in the cigarette market over time as well as their sensitivity to the effects of bootlegging the results indicate a downward trend in these elasticities over time and an upward bias for states where bootlegging exists however once the comparison group is modified to include bootlegging free states only this difference over time and across groups becomes statistically insignificant

international trade and air pollution damages in the united states abstract this paper investigates the health and economic consequences of trade due to various air pollutants embodied in exports and imports we compare the us emissions generated for us exports and those that were avoided by importing an input output framework of the us economy is employed together with a comprehensive database on damages expressed in monetary terms generated by pollutants as estimated by muller et al 2011 we find that damages associated with international trade in 2002 were considerable the net result is that damages were avoided through trade and that these avoided damages amounted to 2 7 of the us trade deficit and 3 4 of the us value added associated with trade moreover the computed damage to value added ratios differed greatly across industries exports in some industries are so hazardous that more than half of the value added gained from extra exports disappeared due to environmental damages these findings imply that the us might benefit more from trade by increasing its exports more in low damage intensive products than in high damage intensive products

rates of time preference and valuations of the duration of life abstract this paper develops a multi period markov model of the lifetime choice of occupational fatality risks the empirical model analyzes the wage effects of job risks using the 1982 university of michigan panel study of income dynamics in conjunction with death statistics from the u s national traumatic occupational fatality survey evidence regarding workers intertemporal choices with respect to risks with long term implications is broadly consistent with rational behavior workers implicit real rate of time preference with respect to future life years equals approximately 11 percent this rate of time preference decreases with education

environmental accounting for pollution in the united states economy this study presents a framework to include environmental externali ties into a system of national accounts the paper estimates the air pollution damages for each industry in the united states an inte grated assessment model quantifies the marginal damages of air pol lution emissions for the us which are multiplied times the quantity of emissions by industry to compute gross damages solid waste com bustion sewage treatment stone quarrying marinas and oil and coal fired power plants have air pollution damages larger than their value added the largest industrial contributor to external costs is coal fired electric generation whose damages range from 0 8 to 5 6 times value added jel e01 l94 q53 q56

gender differences in firm performance evidence from new ventures in the united states abstract prior studies examining the performance of female and male owned firms have generally reported that female owned firms underperform male owned firms however it is conceivable that the performance measures used by previous studies and or their inability to control for key demographic differences may have contributed to this finding for example few studies use size adjusted performance measures and yet we know that female owned firms tend to be smaller than their male counterparts similarly risk is typically not considered even though evidence suggests that women tend to be more risk averse than men we use a longitudinal five year database of more than 4000 new ventures that began operations in the u s in 2004 to determine whether potential differences in the performances of female and male owned firms disappear when appropriate performance measures are used and important demographic differences are controlled for in the models the performance measures we examine include 4 year closure rates return on assets roa and a risk adjusted measure sharpe ratio univariate test results confirm our expectation based on both liberal and social feminist theory that there is no difference in the performance of female and male owned new ventures provided performance is appropriately measured further these results are supported by our multivariate analyses which control for demographic differences such as industry experience and hours worked our findings should be of interest to researchers financiers advisors and policy makers perhaps more importantly our findings should also ensure that women who are contemplating starting a new venture are not discouraged from doing so by a false belief that new ventures initiated by women are less likely to succeed than those initiated by men

efficient estimation of structural hedonic systems when a product or job is not homogeneous but instead embodies several different characteristics it is difficult to use price information about the product to learn anything about the structure of the supply and demand for the embodied characteristics s rosen 1974 highlighted this problem and suggested that the estimated slope of the price characteristic relation the marginal price could be used instead of standard prices in otherwise standard estimation of the supply and demand system however recently brown and h rosen 1982 brown 1983 and mendelsohn 1985 have pointed out that this method is applicable only when the marginal price depends on variables not found in the supply and demand equations in this paper we show that since the hedonic system matches consumers with high demand for the characteristic to firms with low costs of producing it exogenous variables from the supply equation are not valid instruments in the demand equation and vice versa therefore even when the brown rosen mendelsohn brm condition holds estimation of the identified system by standard simultaneous equations techniques will produce inconsistent estimates we then show that the system can be identified despite the absence of the standard instruments and develop an efficient estimator for the identified system since cross equation constraints make estimation of hedonic systems particularly vulnerable to specification error we also consider some specification tests in this section we consider a simple model with only one characteristic the extension to several characteristics is straightforward the basic model developed by rosen can be described as follows firms with different technologies produce products which provide consumers with varying levels of some characteristic z each consumer buys one unit of the good the product is such that an amount of z from two units of the good provides less utility than the same amount of z embodied in a single unit e g acceleration in a car safety in a job consumers

what can we learn from the grand policy experiment lessons from so2 allowance trading stable url http links jstor org sici sici 0895 3309 28199822 2912 3a3 3c69 3awcwlft 3e2 0 co 3b2 tthe journal of economic perspectives is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgtue jun 26 16 25 17 2007

discounting environmental health risks new evidence and policy implications abstract when environmental policy benefits accrue over a long time horizon the valuation problem becomes more complex some analysts support the use of financial market interest rates for discounting deferred health benefits while others argue against discounting altogether we address the discounting issue by estimating implicit discount rates for deferred health benefits exhibited by workers in their choice of job risk wage responses to variation in life years at risk provide direct estimates of the discount rate that workers apply to their future utility the estimated real discount rate equals approximately 2 consistent with financial market rates for the period

quality over quantity reexamining the link between entrepreneurship and job creation although much has been written about the quantity of jobs created by entrepreneurs scholars have yet to examine the quality of these jobs in this article the authors begin to address this important issue by examining nearly 5 000 businesses that began operations in 2004 they investigate the extent to which nascent employers provide what many think of as quality jobs those offering health care coverage and a retirement plan the authors find that because of small scale constrained resources and protection from institutional pressures start up companies do not provide their employees with either of these proxies for job quality and their likelihood of offering health or retirement benefits increases only marginally over their first six years of operation the finding that entrepreneurs impressive record of job creation is not matched by a similarly impressive outcome with respect to job quality challenges policymakers to ensure that entrepreneurs are encouraged to create quality employment opportunities in the course of creating new businesses abstract from author

misperceived job hazards and welfare abstract bayesian workers produce chemicals hazardously in one sector of a two sector economy having one safe sector adopting an expected ex post welfare perspective we show workers misperceptions of hazards entail a classic externality we characterise chemicals competitive monopoly and socially efficient outputs assuming workers receive identical wage accident compensation contracts under each the value of information which induces workers to place greater stress on firms safety records or sharpens their priors and extend the standard monopoly welfare loss index for sufficient conditions for monopoly to be preferred to competition in chemicals and for size ranking monopoly and efficient chemical outputs

dynamic inconsistency in valuing environmental goods abstract intertemporal tradeoffs continue to intrigue both academics and policy makers this paper explores patterns of dynamic inconsistency in valuing environmental goods we develop a model that predicts an individual will value extended access to an environmental good less than avoiding delayed access if time and money are complementary this value disparity results in a low marginal rate of time preference for avoiding delayed access and a high rate for acquiring extended access using the contingent valuation method we find behavior partially consistent with predictions marginal rates of time preference are highly situation and individual specific

time preference and life cycle consumption with endogenous survival we provide a structural theory of time preference and derive a functional form of intertemporal preferences by postulating that individuals make their life cycle consumption choices as if to maximize expected lifetime this yields a nontime separable expected utility representation where the inverse of the coefficient of intertemporal substitution exceeds the coefficient of relative risk aversion the rate of time preference depends on the inverse of expected remaining lifetime and the effect of age on the productivity of consumption in affecting health the preference formulation is applied in a standard intertemporal consumption model to illustrate the implied life cycle consumption choices

solving the phosphorus pollution puzzle synthesis and directions for future research despite the success of efforts to reduce phosphorus p pollution from point sources p from non point agricultural sources remains a vexing problem with many u s water bodies having impairments key to solving the p pollution puzzle is to take stock of progress to date the puzzle pieces available and the gaps to be filled in this paper we synthesize the state of knowledge on p pollution discuss the state of existing public programs and review economists contributions to informing p pollution policies we review the water quality valuation literature identifying limitations in the linkages to policy relevant environmental quality metrics we examine how and why p is used agriculturally along with recent advances in market based policy design and field testing we survey new knowledge in biology and engineering including improved understanding of the fate and transport of p in light of recent learning and persistent knowledge gaps we recommend directions for economic research to add needed pieces to the puzzle of how to protect our water bodies puzzle gaps meriting attention include mechanisms to target public funds more effectively in voluntary abatement programs policy design for emerging mitigation technologies new ways to implement performance based policies means to leverage social norms and behavioral cues changes in the pay the polluter paradigm and application of state of the art evaluation methods to conservation programs beyond the realm of public policy lies that of private supply chains where establishment of environmental standards holds additional promise rich research opportunities exist for economists in tandem with biologists engineers and others

consequences of the clean water act and the demand for water quality since the 1972 u s clean water act government and industry have invested over 1 trillion to abate water pollution or 100 per person year over half of u s stream and river miles however still violate pollution standards we use the most comprehensive set of files ever compiled on water pollution and its determinants including 50 million pollution readings from 240 000 monitoring sites and a network model of all u s rivers to study water pollution s trends causes and welfare consequences we have three main findings first water pollution concentrations have fallen substantially between 1972 and 2001 for example the share of waters safe for fishing grew by 12 percentage points second the clean water act s grants to municipal wastewater treatment plants which account for 650 billion in expenditure caused some of these declines through these grants it cost around 1 5 million 2014 dollars to make one river mile fishable for a year we find little displacement of municipal expenditure due to a federal grant third the grants estimated effects on housing values are smaller than the grants costs we carefully discuss welfare implications

valuing future risks to life environmental policies that alter future mortality rates may affect both current and future generations this paper examines willingness to pay for future risk reductions from the perspective of the current generation the life cycle consumption saving model implies that an individual discounts future risks to himself at the consumption rate of interest if capital markets are perfect the consumption rate equals the market rate of interest otherwise the consumption rate exceeds the market rate and numerical results suggest that the implied discount factor may be substantial the overlapping generations model implies that a member of the current generation discounts the value of risks to future generations at the rate at which current consumption is substituted for a bequest

local labor force education new business characteristics and firm performance it is often asserted that a highly educated workforce is vital to improving the competitive position of american businesses especially by boosting entrepreneurship to examine this contention we use population census data and a new panel data of startup firms to examine how the education and skill level of the local labor force are related to the creation and success of new businesses this paper studies relationship between education entrepreneurship and businesses outcomes and considers simultaneously both the education of the entrepreneur and of the workforce where the entrepreneurs operate their businesses consistent with this simultaneous focus our initial results indicate that more educated entrepreneurs tend to be located in metropolitan areas with more educated workforces moreover highly educated areas have above average entrepreneurship rates finally the level of education of entrepreneurs is strongly related to positive business outcomes especially for college graduates compared to those with less than a four year degree

the economics of risks to life this study asks two questions 1 what is the net value to the representative individual over his life time of activities that alter age specific mortality risks 2 what is the cost to the representative individual of activities that take a life at random at a given age results derived from an economic demographic model with full age specific accounting have a strong actuarial flavor alterations in the mortality schedule caused say by a medical breakthrough should be assessed on the utility of expected additional life years production and reproduction less expected social costs of support loss of life at a specific age due to an accident say should be assessed on the opportunity costs of expected lost years of living lost production and reproduction less expected social support costs the results show that current methods in general leave out an important social transfer term that value of a life lost is highly age dependent and that the degree of diminishing returns to consumption is crucial in calculations of the economic cost of risks

emissions trading electricity restructuring and investment in pollution abatement this paper analyzes an emissions trading program that was introduced to reduce smog causing pollution from large stationary sources using variation in state level electricity industry restructuring activity i identify the effect of economic regulation on pollution permit market outcomes there are two main findings first deregulated plants in restructured electricity markets were less likely to adopt more capital intensive environmental compliance options as compared to regulated or publicly owned plants second as a consequence of heterogeneity in electricity market regulations a larger share of the permitted pollution is being emitted in states where air quality problems tend to be more severe jel l51 l94 l98 q53 q58 when the us federal government first began regulating major sources of air pollution in the 1960s the conventional approach to meeting air quality standards involved establishing maxi mum emissions rates or technology based standards for regulated stationary sources however economists have long maintained that an emissions permit market could more efficiently coor dinate pollution abatement activities provided a series of assumptions are met over the past few decades market based cap and trade cat approaches to regulating emissions from industrial point sources have become a centerpiece of environmental regulation in the united states in the theoretical first best permit market equilibrium the total social cost of meeting an emis sions cap is minimized each firm chooses a level of pollution abatement such that its marginal cost of reducing pollution is set equal to the social marginal benefit from emissions reduction in practice preexisting distortions in product markets that are subject to cat regulation may interfere with the emissions permit market s ability to operate efficiently this paper studies the effects of electricity market regulation on permit market outcomes in the context of a major us emissions trading program the nox budget program the recent wave of electricity industry restructuring in the united states has resulted in significant interstate variation in economic regulation consequently facilities in the same cat program face very different economic regu lation and investment incentives in their respective electricity markets whereas rate base regu lated plants are guaranteed to earn a rate of return on prudent investments in pollution abatement equipment deregulated plants operating in restructured electricity markets are offered no such

new directions in entrepreneurship research with the kauffman firm survey data is a fundamental impediment to a better understanding of the multifaceted process of new firm creation with better data we can form a better understanding of the causes constraints and outcomes associated with the decision to launch a new business towards this end the kauffman foundation commissioned an eight wave panel of businesses that were formed in 2004 chronicling a single cohort s evolution from birth through important business milestones this issue of small business economics focuses on papers that use the kauffman firm survey to examine new research questions in entrepreneurship articles in this issue analyze new research topics in entrepreneurship as well as shed light on enduring questions in the literature

drunk driving after the passage of smoking bans in bars abstract using geographic variation in local and state smoke free bar laws in the us we observe an increase in fatal accidents involving alcohol following bans on smoking in bars that is not observed in places without bans although an increased accident risk might seem surprising at first two strands of literature on consumer behavior suggest potential explanations smokers driving longer distances to a bordering jurisdiction that allows smoking in bars and smokers driving longer distances within their jurisdiction to bars that still allow smoking perhaps through non compliance or outdoor seating we find evidence consistent with both explanations the increased miles driven by drivers wishing to smoke and drink offsets any reduction in driving from smokers choosing to stay home following a ban resulting in increased alcohol related accidents this result proves durable as we subject it to an extensive battery of robustness checks

power law distributions in entrepreneurship implications for theory and research a long held assumption in entrepreneurship research is that normal i e gaussian distributions characterize variables of interest for both theory and practice we challenge this assumption by examining more than 12 000 nascent young and hyper growth firms results reveal that variables which play central roles in resource cognition action and environment based entrepreneurship theories exhibit highly skewed power law distributions where a few outliers account for a disproportionate amount of the distribution s total output our results call for the development of new theory to explain and predict the mechanisms that generate these distributions and the outliers therein we offer a research agenda including a description of non traditional methodological approaches to answer this call

compensating wage differentials and the value of life abstract this paper examines the relationship between willingness to pay and compensating wage differential measures of the value of a statistical life it resolves some recently noted discrepancies between such measures

evidence of variable discount rates and non standard discounting in mortality risk valuation time discounting is central to the valuation of future health and mortality risks in public sector allocative decision making particularly for environmental policies with delayed health impacts using a risk risk trade off survey we elicit discount rates for fatality risks and establish discounting functional forms on both a sample and an individual level we find wide variation in implicit discount rates for fatality risk between individuals as well as between individual heterogeneity in discounting functional forms in aggregate the sample is best characterised by subadditive discounting our work has implications for the academic investigation of intertemporal choice involving mortality risks and potentially for the evaluation of policy options with delayed mortality risk outcomes a thought experiment cautions against the standard practice of assuming that exponential discounting characterises society s time preferences

quality of life and the wtp for an increased life expectancy at an advanced age abstract in this study we report an attempt to measure the value adult swedes impute to an increased survival probability at high ages a rating scale between the worst possible quality of life 1 and the best possible quality of life 10 is used to indicate the quality of life a person expects to achieve at an advanced age we find a highly significant correlation between this quality measure and the insurance premium a person is willing to pay in exchange for a programme increasing the expected length of life by one year conditional on having survived until the age of 75 years the maximum insurance premium the average person is willing to pay for such a programme is less than 1500 the willingness to pay increase with a person s age but at a low rate the implied average marginal rate of time preference is about 1 percent

discounting cognition and financial awareness new evidence from a change in the military retirement system the choice given military personnel between an immediate cash payment of 30 000 or a more generous retirement pension permits us to estimate individuals personal discount rates pdrs the resulting pdrs about 7 for enlisted personnel and 2 4 3 for officers are precise and are correlated with a variety of other financial behaviors the pdr is negatively related to educational attainment and the armed forces qualification test but cognition seems to operate through channels other than being better informed better informed individuals were not always measured to be more patient jel d91 d14

on what basis should health be discounted the discount rate to be applied in health care programmes should be based on the time preference rate for health and this same rate should be applied to costs as well due to the limited tradeability of health when eliciting its time preference rate the intertemporal choices must be framed in such a way as to resemble as closely as possible those facing health planners and decision makers

differences in education and earnings across racial and ethnic groups tastes discrimination and investments in child quality viewing the united states as comprising many racial and ethnic groups it is shown that group differences in earnings schooling and rates of return from schooling are striking and that the groups with higher levels of schooling also have higher rates of return these data are shown to be consistent with a child quality investment model but they are not consistent with the hypotheses that the primary determinants of schooling level are discrimination minority group status differences in time preference discount rates or tastes for schooling group differences in fertility and female labor supply are examined as partial determinants of investment in child quality policy implications are discussed this paper was originally presented at the 1987 annual meeting of the population association of america see population index vol 53 no 3 fall 1987 p 443 excerpt

heterogeneous rates of time preference and the decision to smoke individuals with higher personal rates of time preference will be more likely to smoke although previous studies have found no evidence of a relationship between smoking and rates of time preference analysis of implicit rates of time preference associated with workers wage fatality risk trade offs indicates that smokers have higher rates of time preference with respect to years of life current smokers have an implied rate of time preference of 13 8 as compared to 8 1 for nonsmokers current smokers who are blue collar workers have rates of time preference with respect to years of life of 16 3 compared to 7 8 for nonsmoking blue collar workers jel i12 d81 d91 smoking imposes substantial health risks many of which are not immediate and will also have long term effects on smokers well being recent estimates of the lost life expectancy due to smoking are 2 4 years for women and 4 4 years for men with some studies indicating even more substantial losses 1 given the latency period before many of the most severe smoking risks are manifested people with greater individual rates of time preference will be less influenced by the discounted value of the health losses and will be more likely to be smokers this paper examines whether this relationship between rates of time preference and smoking behavior is in fact borne out by developing empirical estimates of how smokers and nonsmokers discount years of life lost due to the fatality risks that they incur on the job a variety of researchers have theorized that individuals with higher rates of time preference

choice under uncertainty problems solved and unsolved ffifteen years ago the theory of choice under uncertainty could be considered one of the success stories of economic analysis it rested on solid axiomatic foundations it had seen important breakthroughs in the analytics of risk risk aversion and their applications to economic issues and it stood ready to provide the theoretical underpinnings for the newly emerging information revolution in economics 1 today choice under uncertainty is a field in flux the standard theory is being challenged on several grounds from both within and outside economics the nature of these challenges and of our profession s responses to them is the topic of this paper

survival versus consumption we develop an indirect method to estimate utility and willingness to pay wtp for reductions in the risk of death at various ages using a life cycle model of consumption we assume that an individual sets his consumption level each year so as to maximize his expected lifetime utility alternative assumptions about opportunities for borrowing and annuities characterize two polar types of societies in our robinson crusoe case an individual must be entirely self sufficient and annuities are not available in our perfect markets case an individual can borrow against future earnings and purchase actuarially fair annuities we show that under these assumptions wtp is the sum of livelihood discounted expected future earnings and consumer surplus to illustrate our methods we derive wtp for an average financially independent american man under plausible assumptions the model is calibrated to 1978 earnings e g 18 000 per year for men aged 45 54 with at least some income in the robinson crusoe case wtp increases from 500 000 at age 20 to a peak of 1 250 000 at age 40 and declines to 630 000 at age 60 in the perfect markets case age variations are less pronounced wtp is 1 050 000 at age 20 peaks at 1 070 000 at age 25 and declines to 600 000 at age 60 these results suggest that individuals value risks to their lives at several times the pro rata share of their future earnings

sales taxes and internet commerce we estimate the sensitivity of internet retail purchasing to sales taxes using ebay data our first approach exploits the fact that a seller s location and therefore the applicable tax rate is revealed only after a buyer has expressed interest in an item we document how adverse tax surprises reduce the likelihood of purchase and shift subsequent purchases toward out of state sellers we then use more aggregated data to estimate that every one percentage point increase in a state s sales tax increases online purchases by state residents by almost 2 percent while decreasing their online purchases from state retailers by 3 4 percent jel h71 l81 l86

efficient pollution regulation getting the prices right this paper argues for efficient environmental regulations that equate the mar ginal damage of pollution to marginal abatement costs across space the paper estimates the source specific marginal damages of air pollution and calculates the welfare gain from making the current sulfur dioxide allowance trading pro gram for power plants more efficient the savings from using trading ratios based on marginal damages are between 310 and 940 million per year the potential savings from setting aggregate emissions efficiently and from includ ing more sources of air pollution are many times higher jel h23 q53 q58

challenges from state federal interactions in us climate change policy with a focus on two sorts of regulation renewable electricity and clean energy standards and automobile fuel economy standards we analyze problematic interactions that arise when state policies are nested within the domain of federal policy here state efforts may fail to reduce greenhouse gas emissions nationally and may compromise cost effectiveness difficulties from overlapping regulations are avoidable through price as opposed to quantity based federal policy we identify some potentially positive interactions between state and federal policies and identify rationales for state action when federal and state policies do not overlap

free trade and global warming a trade theory view of the kyoto protocol this paper demonstrates how three important results in environmental economics true under mild conditions in closed economies are false or need serious amendment in a world with international trade in goods since the three results we highlight have framed much of the ongoing discussion and research on the kyoto protocol our viewpoint from trade theory suggests a re examination may be in order specifically we demonstrate that in an open trading world but not in a closed economy setting 1 unilateral emission reductions by the rich north can create self interested emission reductions by the unconstrained poor south 2 simple rules for allocating emission reductions across countries such as uniform reductions may well be efficient even if international trade in emission permits is not allowed and 3 when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions

altruism deficit policies and the wealth of future generations i introduction there is now a substantial body of evidence suggesting that altruistic financial bequests are zero for the vast majority of households 1 other studies seem to indicate that the financial bequests which are made are not likely to be altruistically motivated 2 while this evidence against the importance of altruistic financial bequests seems reasonably convincing it is by no means clear that the importance of altruism per se has been dismissed 3 for example the results reported in altonji hayashi and kotlikoff 1992 tables 14 17 indicate that extended family resources while not perfectly linked to own resources are important for explaining own consumption the authors do not reject the notion that substantial altruistically motivated transfers occur in the u s rather they suggest the altruistically motivated transfers which are made take the form of less than fully efficient human capital transfers to children if most altruistic transfers do take place via educational expenditures how does this affect the ricardian equivalence theorem robert barro 1974 1989 argues the presence of any altruistic transfer is sufficient to guarantee that intergenerational transfers caused by government policy are neutral other forms of intergenerational transfers such as inter vivos gifts to children support of children s education and so on can work in a similar manner therefore the ricardian results will hold even if many persons leave little in the way of formal bequests 1989 41 4 an alternative view however is expressed by allan drazen 1978 he argues if parents possess an insufficient mix of wealth and altruism intergenerational transfers could be exhausted before the efficient level of human capital investment is achieved if explicit or implicit loans between parents and children are not possible then the government may be able to improve welfare by generating intergenerational transfers from children to parents 5 a cut in the parents tax burden and an equal present value increase in the tax on the next generation is equivalent to a government enforced loan at the going market interest rate since educational expenditures are inefficiently low the return on human capital investment exceeds the loan rate therefore parents could put an amount less than the tax cut into their children s education and still leave the children with enough additional income to pay for the future tax increase thus a deficit policy serves to expand the consumption possibility set of the family viewed in this way drazen 1978 514 footnote 7 imagines an argument for a pareto optimal level of public debt issue 6 a third possibility was identified by nerlove razin and sadka 1988 who conduct the most explicit analysis of government transfers in an economy with altruistic but financial bequest constrained households they also find a transfer or implicit loan to parents from their children will make the parents unambiguously better off however they were the first to point out that a deficit policy may lower the welfare of the children although they fail to explain why thus even in the presence of altruistic transfers from parents to children the effect of deficits on the consumption of future generations is far from clear in this paper we wish to clarify the effect of intergenerational transfers on bequest constrained families the next section intuitively explains why a government loan or deficit policy generates an ambiguous effect on the children s consumption even though altruistic parents are fully capable of making both generations better off after the loan we also identify the key structural determinants of the change in the children s wealth due to the loan in section iii we extend the simple model of section ii to a more quantitatively realistic multi period life cycle simulation model of a bequest constrained household the simulation model is then used in section iv to examine how a government intergenerational transfer affects the consumption of each generation under various settings of the key structural determinants identified in section ii

the effectiveness of incomplete and overlapping pollution regulation evidence from bans on phosphate in automatic dishwasher detergent abstract this paper examines the effectiveness of command and control policies in the presence of incomplete and overlapping regulations we study how recent bans on phosphate in household dishwasher detergent affect pollution loads to waterways costs at wastewater treatment facilities and consumer behavior we show that the effectiveness of the bans in reducing effluent depends critically on regulations at receiving treatment facilities as cost minimizers facilities with an emissions standard on phosphorus face no incentive to deviate from the standard we show that bans have weak effects on effluent especially in the most polluted waterways we also use an early isolated ban in spokane washington to study the effect of the bans on consumers we find that this ban shifted approximately 40 of dishwasher detergent sales from spokane to bordering counties until a state wide ban was implemented using these estimates we find that the welfare loss to consumers from recent bans is likely greater than the cost savings to treatment plants