a dominance approach to the appraisal of the distribution of well being across countries abstract this paper proposes a dominance approach to study inequality of well being across countries we consider a class of well being indices based on the three attributes used in the hdi human development index indices are required to satisfy preference for egalitarian marginal distributions of income health and education alep substitution of attributes and priority to poor countries in allocating funds to enhance health and education we exhibit sufficient conditions for checking dominance over the defined class of well being indices we apply our method to country data from 2000 to 2005 the deterioration in health conditions in poor countries is why welfare improvements at the world level cannot be ascertained

decomposition of moral hazard this study seeks to simulate the portion of moral hazard that is due to the income transfer contained in the coinsurance price reduction healthcare spending of uninsured individuals from the meps with a priority health condition is compared with the predicted counterfactual spending of those same individuals if they were insured with either 1 a conventional policy that paid off with a coinsurance rate or 2 a contingent claims policy that paid off by a lump sum payment upon becoming ill the lump sum payment is set to be equal to the insurer s predicted spending under the coinsurance policy the proportion of moral hazard that is efficient is calculated as the proportion of total moral hazard that is generated by this lump sum payment we find that the efficient proportion of moral hazard varies from disease to disease but is the highest for those with diabetes and cancer

financial collapse a lesson from the great depression abstract we analyze financial collapses such as the one that occurred during the u s great depression from the perspective of a monetary model with multiple equilibria the multiplicity arises from the presence of a strategic complementarity due to increasing returns to scale in the intermediation process intermediaries provide the link between savers and firms who require working capital for production fluctuations in the intermediation process are driven by variations in the confidence agents place in the financial system from a positive perspective our model matches quite closely the qualitative changes in important financial and real variables the currency deposit ratio ex post real interest rates deflation and production over the great depression period an experience often attributed to financial collapse further we assess whether the policy prescription advocated by friedman and schwartz adding liquidity to the banking system through increases in the money supply would have overcome strategic uncertainty and thus avoided a financial collapse

inter vivos transfers and exchange most parents divide their bequests equally among their children whereas inter vivos transfers are usually unequal we propose that exchange is better for inducing inter vivos transfers than bequests inter vivos transfers can be adjusted quickly to the amount of care are less costly than writing a will and can be kept secret from other family members and the public the results from national longitudinal data show that as expected if a parent gives any inter vivos transfers she is more likely to give to children who provide informal care informal care has no effect on the equality of intended bequests

the effect of physician advice on alcohol consumption count regression with an endogenous treatment effect although there are encouraging trends alcohol abuse continues to be a significant public health problem econometric studies of alcohol demand have yielded a great deal of information for alcohol abuse prevention policy these studies suggest that higher alcohol taxes and stricter drunk driving policies can reduce heavy drinking and drunk driving in this paper we explore the role physician advice plays in the campaign to prevent alcohol related problems compared to alcohol taxation physician advice is a more precisely targeted intervention that does not impose extra costs on responsible drinkers compared to the resource costs of arresting processing and punishing drunk drivers physician advice may be a lower cost intervention to provide a basis for alcohol policy analysis we use an alcohol demand framework to test whether physician provided information about the adverse consequences of alcohol abuse shifts demand to more moderate levels there are three aspects of our alcohol demand model that complicate the estimation 1 the dependent variable is non negative it is a count variable number of drinks consumed 2 a non trivial number of sample observations have zero values for the dependent variable and 3 because the data we use is non experimental the treatment variable indicating receipt of advice from a physician may be endogenous we implement an estimation method that is specifically designed to deal with these three complicating factors our results show that advice has a substantial and significant impact on alcohol consumption by males with hypertension and that failing to account for the endogeneity of advice masks this result copyright 2001 john wiley sons ltd

supply side and demand side cost sharing in deregulated social health insurance which is more effective abstract microeconomic theory predicts that if patients are fully insured and providers are paid fee for service utilization of medical services exceeds the efficient level moral hazard effect in switzerland both demand side and supply side cost sharing have been introduced to mitigate this problem analyzing a panel dataset of about 160 000 adults we find both types of cost sharing to be effective in curtailing the use of medical services however when moral hazard mitigation is traded off against risk selection the minimum deductible supply side cost sharing option ranks first followed by the medium deductible demand side alternative making the supply side option somewhat more effective

has the world moved forward a robust multidimensional evaluation this paper presents a multidimensional normative framework to evaluate whether the world moved forward between 1980 and 2008 we focus on the robustness of the results when attributing different weights to the different dimensions population weighted international welfare has not worsened over this period however the trend in the underlying inequality is ambiguous once sufficient weight is given to longevity and or income c 2010 elsevier b v all rights reserved

coordinating regime switches the canonical model of strategic complementarities between individual actions which exhibits multiple equilibria under perfect information is extended with heterogeneous agents and imperfect information agents observe their own cost of action and the history of the levels of aggregate activity the distribution of individual characteristics evolves through a random process and individuals are rational bayesians under plausible conditions there is a unique equilibrium with phases of high and low activity and random switches applications may be found in macroeconomics and revolutions

bequests and informal long term care evidence from hrs exit interviews informal long term caregiving for frail elderly individuals by their children may induce parents to compensate their children for their help to test this hypothesis i use the exit interview from the health and retirement study hrs my results show that the decision to care for one s parents has a significant positive impact on the incidence and amount of bequests received in addition increasing the amount of care relative to one s siblings significantly increases the proportion of bequest within a family furthermore i find that the positive nexus of caregiving and bequest requires a written will as a contract between the parent and the helping child

how does women s life satisfaction respond to retirement a two stage analysis we quantify the adjustment of women s life satisfaction to retirement as a two stage process the transition to retirement leads to an immediate increase in women s life satisfaction after becoming retired their life satisfaction declines with the duration of retirement

organic label bargaining power and profit sharing in the french fluid milk market the paper determines how the value added created by an organic label is shared in a vertical chain among manufacturers and retailers using purchase data on the french fluid milk sector we develop a structural econometric model of demand and supply that takes into account the bargaining power between manufacturers and retailers our results suggest that the organic label segment is more profitable as it permits the existence of higher margins moreover an organic label allows manufacturers to achieve more bargaining power relative to retailers and hence to obtain a higher share of total margins the econometric model is then used to assess the impact of an environmental policy in favor of the organic segment based on a mechanism of price support our results suggest that while a subsidy policy towards organic products benefits both manufacturers and retailers a tax policy toward conventional products benefits manufacturers of national brands at the expense of retailers and manufacturers that provide the private labels the benefits of such policies on the environment is relatively small all such policies tend to increase the impact on global warming and land use but reduce the impact on eutrophication acidification and energy use

investment dynamics with common and private values abstract we study a dynamic investment game with two dimensional signals where each firm observes its continuously distributed idiosyncratic cost of investment and a discrete signal correlated with common investment returns we demonstrate that the one step property holds and provide an equilibrium existence characterization result reversals are possible where a large number of firms investing in a given round becomes bad news about investment returns welfare is compared to static and rigid timing benchmarks and computed for large economies

a test of the structure of pac contracts an analysis of house gun control votes in the 1980s enactment of the bill was a major victory for the national rifle association which had worked for years to win relaxation of the landmark gun control act of 1968 congressional quarterly almanac 1986 p 82 i introduction every election the same political action committees pacs contribute millions of dollars to candidates for office well informed participants in the political process surely must get value for their money yet empirical research fails to provide systematic evidence that campaign contributions influence congressional roll call votes 1 a mischaracterization of the exchange between pacs and politicians may produce these contradictory results empirical studies of roll call voting typically use pac contributions from only one election cycle earlier studies generally assume prepayment in the prior congress while more contemporary studies assume a spot exchange recent empirical work however suggests another possibility interest groups may buy current influence with money spent over multiple election cycles stratmann 1995 shows that contributions from both the current and the previous election cycles influence floor votes on agricultural price supports snyder 1990 1992 presents evidence that interest groups make long term investments in politicians previous studies by arbitrarily imposing a payment structure may have produced erroneous estimates of the influence of pac money on legislative votes we examine roll call votes on gun control in the u s house of representatives during the 1980s to determine whether pacs make spot market purchases prepay for votes in the prior election cycle or make long term investments we investigate whether pac contributions have a durable long term investment effect as snyder 1992 suggests we consider two types of evidence concerning the campaign contribution contract first we examine the pattern of expenditures by the two dominant interest groups concerned with gun control the national rifle association nra and hand gun control hgc their expenditures provide strong evidence against the spot market exchange hypothesis both groups made significant expenditures in sessions of congress in which no floor vote occurred nor were these expenditures purchasing services such as committee work in a spot market exchange further 1986 nra expenditures are significantly higher for first term representatives which is consistent with long term investments but contradicts a spot exchange since freshmen have the least influence to sell second we include expenditures from both the current and the five previous election cycles as separate independent variables in a model of roll call voting to date no empirical paper tests whether pac money from more than two cycles influences roll call voting and only stratmann 1995 and grenzke 1989 use a model that specifies money from more than one cycle in an equation explaining roll call votes our probit estimates indicate that nra expenditures in the three most recent election cycles and hgc expenditures in the two most recent cycles buy votes the independent effect of expenditures from different cycles suggests that contributions are neither an unqualified one session prepayment nor a spot exchange the influence of nra expenditures two sessions prior to the roll call votes is evidence of a long term investment the literature on the determinants of roll call voting assumes that pac contributions alter representatives votes interest groups might instead simply provide campaign assistance to their supporters to affect the composition of congress stratmann 1991 bronars and lott 1997 if a difficult to quantify variable and thus omitted from regressions signals a representative s true position and interest groups make campaign contributions on the basis of this variable pac contributions might appear to influence votes the pattern of contributions and votes on gun control however indicates attempts by the nra and hgc to influence votes not merely the composition of congress

two stage residual inclusion estimation addressing endogeneity in health econometric modeling the paper focuses on two estimation methods that have been widely used to address endogeneity in empirical research in health economics and health services research two stage predictor substitution 2sps and two stage residual inclusion 2sri 2sps is the rote extension to nonlinear models of the popular linear two stage least squares estimator the 2sri estimator is similar except that in the second stage regression the endogenous variables are not replaced by first stage predictors instead first stage residuals are included as additional regressors in a generic parametric framework we show that 2sri is consistent and 2sps is not results from a simulation study and an illustrative example also recommend against 2sps and favor 2sri our findings are important given that there are many prominent examples of the application of inconsistent 2sps in the recent literature this study can be used as a guide by future researchers in health economics who are confronted with endogeneity in their empirical work

retirement effects on health in europe what are the health impacts of retirement as talk of raising retirement ages in pensions and social security schemes continues around the world it is important to know both the costs and benefits for the individual as well as the governments budgets in this paper we use the survey of health ageing and retirement in europe share dataset to address this question in a multi country setting we use country specific early and full retirement ages as instruments for retirement behavior these statutory retirement ages clearly induce retirement but are not related to an individual s health exploiting the discontinuities in retirement behavior across countries we find significant evidence that retirement has a health preserving effect on overall general health our estimates indicate that retirement leads to a 35 percent decrease in the probability of reporting to be in fair bad or very bad health and an almost one standard deviation improvement in the health index while the self reported health seems to be a temporary impact the health index indicates there are long lasting health differences

the quantity and quality of life and the evolution of world inequality gdp per capita is usually used to proxy for the quality of life of individuals living in different countries welfare is also affected by quantity of life however as represented by longevity this paper incorporates longevity into an overall assessment of the evolution of cross country inequality and shows that it is quantitatively important the absence of reduction in cross country inequality up to the 1990s documented in previous work is in stark contrast to the reduction in inequality after incorporating gains in longevity throughout the post world war ii period health contributed to reduce significantly welfare inequality across countries this paper derives valuation formulas for infra marginal changes in longevity and computes a full growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000 incorporating longevity gains changes traditional results countries starting with lower income tended to grow faster than countries starting with higher income we estimate an average yearly growth in full income of 4 1 percent for the poorest 50 percent of countries in 1960 of which 1 7 percentage points are due to health as opposed to a growth of 2 6 percent for the richest 50 percent of countries of which only 0 4 percentage points are due to health additionally we decompose changes in life expectancy into changes attributable to 13 broad groups of causes of death and three age groups we show that mortality from infectious respiratory and digestive diseases congenital perinatal and ill defined conditions mostly concentrated before age 20 and between ages 20 and 50 is responsible for most of the reduction in life expectancy inequality at the same time the recent effect of aids together with reductions in mortality after age 50 due to nervous system senses organs heart and circulatory diseases contributed to increase health inequality across countries

multidimensional affluence theory and applications to germany and the us this article suggests multidimensional affluence measures for the top of the distribution in contrast to commonly used top income shares they allow the analysis of the extent intensity and breadth of affluence in several dimensions within a common framework we illustrate this by analysing the role of income and wealth as dimensions of multidimensional well being in germany and the us in 2007 as well as for the us over the period 1989 2007 we find distinct country differences with the country ranking depending on the measure while in germany wealth predominantly contributes to the intensity of affluence income is more important in the us

does health insurance reduce illness related worker absenteeism the objective of this article is to examine whether having health insurance reduces illness related absenteeism among older workers a nationally representative sample of 1780 workers in the united states aged 52 64 are drawn from the 2004 2006 health and retirement study hrs binary logistic regressions and censored tobit models are estimated for workers likelihood of missing work days due to illness and the number of illness related work days missed respectively while explicitly addressing the possibility of insurance selection effects the findings suggest that over a 12 month period older workers without health insurance are as likely as insured workers to miss work days due to illness and there are no differences in the number of days missed between insured and uninsured workers however there is strong evidence that poor baseline health onset of new diseases and longer hospitalization significantly increase an older worker s absenteeism at work these results suggest that having health ins

globalization and its challenges rudi was born and grew up in krefeld germany he was an undergraduate at the university of geneva and completed his ph d at the university of chicago in 1971 which is where we met he was a student of robert mundell and both the subject matter the development of the mundell fleming model and the elegance and insights of his early work reflected mundell s influence he taught at the university of rochester and at the university of chicago before accepting an offer from mit in 1975

what is social inequality and why does it matter evidence from central and eastern europe as distinct from income or wealth inequality social inequality is currently poorly understood and at best unevenly measured we conceptualize social inequality as the relative position of individuals along a number of dimensions that measure achieved outcomes and innovatively expectations about future outcomes using data from 12 central and eastern european countries we find that cross national patterns of social inequality differ significantly from patterns derived from income inequality measures moreover our measure of social inequality is much better correlated than income inequality with other country differences such as higher levels of economic performance and human development and stronger political institutions

in the same boat but not equals the heterogeneous effects of parental income on child labour this paper examines the impact of parental income on child labour the empirical literature has found conflicting results regarding whether poverty leads parents to send their children to work mos

does privatisation of vocational rehabilitation improve labour market opportunities evidence from a field experiment in sweden this paper analyses if privatisation of vocational rehabilitation can improve labour market opportunities for individuals on long term sickness absence we use a field experiment performed by the p

crop diversity household welfare and consumption smoothing under risk evidence from rural uganda abstract in the wake of climate change there is now a resurgence of interest in the promotion of crop diversification as a climate smart agricultural practice in sub saharan africa the development economics literature suggests that increasing crop diversity is an effective risk management and consumption smoothing strategy in a context characterized by repeated exposure to shocks but weak institutional innovations using panel survey data from rural uganda merged with historical weather data this paper sheds light on the household welfare and consumption smoothing effects of crop diversity we employ instrumental variables methods to control for unobserved heterogeneity and potential reverse causality our study finds that crop diversification is a welfare enhancing strategy that increases consumption and aggregate household diets instrumental variables quantile regression results show that crop diversification generates higher consumption benefits for poorest households in the lower quantile of the consumption distribution than for relatively richer households crop diversification also improves consumption smoothing through reducing households reliance on less effective strategies such as informal insurance and involuntary diet changes as risk coping mechanisms overall the findings suggest that transforming agriculture towards a more diversified cropping system is a viable pathway for improving diets welfare risk management and the resilience of rural households

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

child income appropriations as a disease coping mechanism consequences for the health education relationship this paper analyses the relationships between hiv aids and education taking into account the appropriative nature of child income using a theoretical model we show that considering remittances from one s child as an insurance asset can reverse the usual negative relationship between disease prevalence and educational investment this prediction confirms the results of an empirical study conducted on data compiled from the demographic and health survey dhs database for 12 sub sahara african countries for children aged between 7 and 22 years old using regional hiv prevalence as a measure of health risk we find that the sign of the slope between health risk and the enrolment of children is not constant splitting the data based on expected remittance patterns for example rural versus urban we obtain that the effect is most likely driven by household characteristics related to child income appropriation

estimating the moral hazard effect of supplemental medical insurance in the demand for prescription drugs by the elderly almost all persons over the age of 65 are insured under the medicare program for inpatient drug consumption this national insurance plan does not however generally cover the purchase of outpatient prescription drugs rx in 1992 more than onethird of all outpatient drug expenditures in the united states were incurred by medicare enrollees yet approximately 50 percent of the elderly did not have any coverage for this type of treatment daniel waldo 1994 in response to this and other gaps in medicare coverage private firms have offered insurance instruments specifically designed to fill such voids commonly known as medigap policies in addition to this form of financial protection contingent upon state of residency and economic status elderly persons may qualify and obtain coverage for rx through medicaid or a state sponsored drug program however even with these incomeand wealth sensitive options many relatively poor elderly are faced with significant outof pocket drug expenditures coverage is concentrated among those elderly with income over 200 percent of poverty and those below the poverty line stephen long 1994 the most vulnerable elderly seem to be protected from the financial hardship of excessive rx expenses through medicaid coverage but private supplemental insurance is potentially too expensive for seniors near the poverty line to alleviate this burden 11 states currently offer some form of rx insurance that is targeted at those elderly or disabled persons who are relatively poor but do not qualify for medicaid at the national level policymakers and interest groups have advocated adding coverage to the medicare program to assess such programmatic changes an accurate forecast of the potential change in rx usage is needed in this paper we use a 1990 sample of medicare enrolled pennsylvanians who may have private medigap insurance or coverage under the state s rx program to estimate the amount by which the rx demand of the average individual would change in the presence of insurance coverage ceteris paribus such a residual increase in the consumption of a medical commodity has been labeled the moralhazard effect of health insurance the estimation of this effect requires a nonstandard regression technique because insurance coverage for rx and those types of treatments that are complementary or substitutable for prescriptions may be endogenously determined those persons with a higher demand for drugs are more likely to demand supplemental insurance for rx coulson and terza department of economics pennsylvania state university university park pa 16802 neslusan division of economic research at the social security administration 4301 connecticut avenue n w washington dc 20008 stuart department of health policy and administration pennsylvania state university university park pa 16802 funding for survey design and implementation used in this research was supported by grants from the pew charitable trusts and the health care financing administration grant no 88 01439 001 the views expressed herein are not necessarily endorsed by either these agencies or the social security administration 1the now repealed medicare catastrophic coverage act of 1988 as well as many of the recent healthcare reform proposals would have provided for outpatient rx coverage for the elderly 122

estimation of input distance functions a system approach this article offers a methodology to address the endogeneity of inputs in the input distance function idf formulation of the production processes we propose to tackle endogenous input ratios appearing in the normalized idf by considering a flexible simultaneous system of the idf and the first order conditions from the firm s cost minimization problem our model can accommodate both technical and input allocative inefficiencies amongst firms we also present the algorithm for quantifying the cost of allocative inefficiency we showcase our cost system based model by applying it to study the production of norwegian dairy farms during the 1991 2008 period among other things we find both an economically and statistically significant improvement in the levels of technical efficiency among dairy farms associated with the 1997 quota scheme change which a more conventional single equation stochastic frontier model appears to be unable to detect

measuring incoordination adjusted sustainability performance during the urbanization process spatial dimensional perspectives abstract urbanization sustainability is intrinsically against incoordination in two distinct forms incoordination across sustainability dimensions and geographical spaces in sustainability performance however the rapid urbanization particularly in those developing countries such as china has been bringing along the problems of dimensional incoordination and spatial incoordination to date existing studies do not address these two forms of incoordination while assessing the sustainable urbanization this paper therefore introduces a measurement model to evaluate the incoordination adjusted sustainability performance during the urbanization process the proposed model is established based on the examinations of the weak strong sustainability perspective and the principle of spatial justice theory the atkinson measure is employed to develop the model a case study of the chongqing city is conducted to illustrate the process of applying the proposed model the outcomes from the case study reveal that the model proposed is effective in gauging and monitoring the status and trajectories of sustainability incoordination during the urbanization process

short run expectational coordination fixed versus flexible wages this paper considers a simple three goods model and focuses attention on the expectational stability of its equilibria the setting allows us to describe stylized general equilibrium macro interactions firms hire workers and then sell production to buyers whose purchasing power depends on the firms previous decisions we assess expectational stability from an eductive learning procedure that reflects basic rationality considerations from our viewpoint on coordination we compare the merits of fixed wages versus flexible wages although in both cases the same factors supply and demand elasticities marginal propensity to save are effective expectational coordination is often more successful with flexible wages

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

estimates of returns to scale elasticity of substitution and the thrifty food plan meal poverty rate from a direct household meal production function abstract many nutritional policies are designed to make home food production more affordable and yet very little is actually known about the home food production process a better understanding of home food production can be used to help explain shortcomings in current nutrition policies and consequently help in designing better nutrition policies this paper provides results from several home meal production function specifications that are rather robust the median returns to scale and elasticity of substitution between money and time is in the 1 2 1 9 range and 33 56 range respectively indicating increasing returns to scale but difficulty in substituting money for time in home meal production a home meal poverty rate is estimated which is the percentage of the sample that produces fewer meals at home than consistent with dietary guidelines the estimated home meal poverty rate is about 85 which is consistent with recent research taking a less rigorous approach though the approach taken here is novel the overall message is consistent with the recent literature time is a more important factor in achieving nutritional targets than money

illegal drug use and employment this article investigates the relationship between employment and the use of marijuana and cocaine for males in national longitudinal survey of youth data from 1984 and 1988 previous studies yielding mixed evidence may have inadequately accounted for the simultaneity between drug consumption and employment i implement an instrumental variable procedure that identifies drug use with variables that are empirically unrelated to employment including the regional cocaine price and a state marijuana decriminalization indicator results indicate that the use of each drug substantially reduces the likelihood of employment exogeneity tests reveal that standard probit estimates are severely biased toward zero

inequality of wellbeing a multidimensional approach an important aspect of multidimensional wellbeing distributions is the correlation between different dimensions we propose two indices for measuring multidimensional inequality derived from two underlying social evaluation functions these functions aggregate both across dimensions and across individuals the social evaluation functions differ only with respect to the sequencing of aggregation aggregating first across dimensions is more attractive since it allows the inequality index to depend on the correlation between dimensions we illustrate both indices and the impact of correlation sensitivity using russian household data between 1995 and 2005 for four dimensions of wellbeing expenditure health schooling and housing quality

retirement and health behaviour this article investigates whether and to what extent retirement changes health behaviour for identification we use an instrumental variable approach that exploits exogenous variations in the early

retirement personality and well being this study investigates how two sources of individual heterogeneity personality and gender impact the well being effects of retirement using data on older men and women from the british household panel survey and its continuation understanding society we estimate the causal effect of retirement on satisfaction with overall life and domains of life in the presence of personality characteristics as retirement is often considered to be a choice and thus may be endogenous to individual level characteristics we use the eligibility ages for basic state pension in the united kingdom as instruments for retirement we find that retirement increases leisure satisfaction of both males and females but not necessarily life satisfaction and income satisfaction we further show that certain personality characteristics affect the well being of female retirees for males however personality does not seem to matter in how they cope with retirement jel i31 j26 a12 c23

labor market effects of marijuana and cocaine use among young men using data on marijuana and cocaine use from the 1984 national longitudinal survey of youth the authors examine the hypothesis that drug use reduces labor market productivity as measured by wages from an analysis that controls for the probability of employment and the endogeneity of drug use they find that although long term and on the job use of marijuana negatively affected wages the net productivity effect for all marijuana users both those who engaged in long term or on the job use and those who did not was positive no statistically significant association was found between cocaine use and productivity

the world distribution of income falling poverty and convergence period we estimate the world distribution of income by integrating individual income distributions for 138 countries between 1970 and 2000 country distributions are constructed by combining national accounts gdp per capita to anchor the mean with survey data to pin down the dispersion poverty rates and head counts are reported for four specific poverty lines rates in 2000 were between one third and one half of what they were in 1970 for all four lines there were between 250 and 500 million fewer poor in 2000 than in 1970 we estimate eight indexes of income inequality implied by our world distribution of income all of them show reductions in global inequality during the 1980s and 1990s

consumer confidence and economic fluctuations if consumers become pessimistic about the state of the economy can there be a slowdown in output even if their pessimism is not based on economic fundamentals recent macroeconomic models show the answer is yes if there are strategic complementarities and multiple equilibria we investigate the link between consumer confidence and economic fluctuations using vector autoregressions in all models after controlling for economic fundamentals the hypothesis that consumer sentiment does not cause gnp in the granger sense can be rejected variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of gnp

social security income and the utilization of home care evidence from the social security notch this paper exploits social security law changes to identify the effect of social security income on the use of formal and informal home care by the elderly results from an instrumental variables estimation strategy show that as retirement income increases elderly individuals increase their use of formal home care and become less likely to rely on informal home care provided to them by their children this negative effect on informal home care is most likely driven by male children withdrawing from their caregiving roles the empirical results also suggest that higher social security benefits would encourage the use of formal home care by those who would not have otherwise used any type of home care and would also encourage the use of both types of home care services among elderly individuals

the evolution of world inequality in well being in this paper we use the tools offered by the recent literature on multidimensional inequality measurement to investigate the evolution of the inequality in well being across different countries during 1975 2000 we focus on three important dimensions of life standard of living health and education inequality in the three dimensions shows a different trend during 1975 2000 we propose a flexible measure of well being to quantify the evolution of overall intercountry well being inequality the empirical results are sensitive to different normative choices on the trade offs between the different dimensions especially the concave transformation of income turns out to be decisive for the evolution of world inequality in well being

economies of scale in banking indeterminacy and monetary policy this paper investigates economies of scale es in financial intermediation as a source of equilibrium indeterminacy consumption in the model can be purchased with currency and deposits and es in intermediation implies that deposit costs are decreasing in aggregate deposits the results suggest that indeterminacy does not depend on a large degree of es nor a large intermediation sector but on monetary policy and the determination of nominal interest rates monetary policies not targeting nominal rates allow for indeterminacy to arise for any degree of es while policies targeting nominal rates eliminates indeterminacy for all degrees of es

ageing cognitive abilities and retirement we investigate the relationship between ageing cognitive abilities and retirement using the survey on health ageing and retirement in europe share a household panel that offers the possibility of comparing several european countries using nationally representative samples of the population aged 50 the human capital framework suggests that retirement may cause an increase in cognitive decline since after retirement individuals lose the market incentive to invest in cognitive repair activities our empirical results based on an instrumental variable strategy to deal with the potential endogeneity of retirement confirm this key prediction they also indicate that education plays a fundamental role in explaining heterogeneity in the level of cognitive abilities

good and bad growth the human development reports abstract the 1996 human development report undp 1996 is about economic growth and human development in keeping with past reports in the series it emphasizes the diversity of country performance in improving human development indicators at given rates of growth this article reviews what the human development reports have said on this topic looking at how well the main messages have been supported by data and analysis and how compelling they are as a basis for public action

what do normative indices of multidimensional inequality really measure we argue that normative indices of multidimensional inequality do not only measure a distribution s extent of inequity i e the gaps between the better off and the worse off but also its extent of inefficiency i e the non realized mutually beneficial exchanges of goods we provide a decomposition that allows quantifying these two parts of inequality exact formulas of the inequity and inefficiency components are provided for a generic class of social welfare functions the inequity component turns out to be a two stage measure which applies a unidimensional inequality measure to the vector of well being levels we critically discuss two prominent transfer principles viz uniform majorization and correlation increasing majorization in the light of the decomposition a decomposition of inequality in human development illustrates the analysis

trial and settlement a study of high low agreements this paper presents the first systematic theoretical and empirical study of high low agreements in civil litigation a high low agreement is a private contract that if signed by litigants before the conclusion of a trial constrains the future damages payment to lie between a minimum and a maximum amount whereas the existing literature describes litigation as a choice between trial and settlement our examination of high low agreements a relatively new phenomenon in civil litigation introduces partial or incomplete settlements in our theoretical model trial is both costly and risky when litigants have divergent subjective beliefs and are mutually optimistic about their trial prospects cases may fail to settle in these cases high low agreements can be in the litigants mutual interest because they limit the risk of outlier damages awards while still allowing for an optimal degree of speculation using unique insurance claims data from a national insurance company we describe the features of these agreements and empirically investigate the factors that may influence whether litigants discuss or enter into high low agreements our empirical findings are consistent with the predictions of the theoretical model we also explore extensions and alternative explanations for high low agreements including their use to mitigate excessive offsetting trial expenditures

national capital city location and subsidiary portfolio expansion the negative effect of geographic distance to the capital city at inception on the speed of subsequent investments a multinational enterprise develops its subsidiary portfolio by investing in new foreign markets and subsequently pursuing further investments within these host countries we find that firms which locate their first equity investment closer to the national capital city can subsequently expand their subsidiary portfolio within the host country at a higher speed this effect is particularly strong in emerging economies further analyses of various contingencies support the robustness of our findings we discuss different theoretical mechanisms which could cause these effects in particular face to face interactions with governmental actors and opportunities to develop political connections our research contributes to the literature on internationalization processes by analyzing how the initial location choice affects the development of the subsidiary portfolio

current account adjustment in developing countries the role of exchange rate regimes i introduction an important question in open economy macroeconomics is whether exchange rate rigidity hinders current account adjustment also known as the friedman hypothesis according to friedman 1953 a flexible exchange rate regime facilitates current account adjustment while a fixed exchange rate regime delays the adjustment process this hypothesis has stimulated extensive research on the relationship between exchange rate regimes and current account reversals e g adalat and eichengreen 2007 de haan schokker and tcherneva 2008 milesi feretti and razin 2000 pancaro and rueffer 2009 while existing studies have made significant contributions to the literature they largely focus on the determinants of current account reversals rather than the duration of current account deficit spells emphasized in the friedman hypothesis does a country s exchange rate regime really matter to how long it stays in a high current account deficit state and if so to what extent does the fixed exchange rate regime delay the adjustment process this article addresses the above important questions by empirically evaluating the role of exchange rate regimes on the duration of high current account deficit spells in developing countries given the prevalence of large and persistent current account deficits across countries over the last few decades understanding the impact of exchange rate regimes on the duration of high deficit spells is particularly important and pertinent specifically we identify high current account deficit spells and employ hazard models to examine whether a fixed exchange rate regime increases the duration of high deficit spells and thus delays current account adjustment 1 a novelty of this approach is that by estimating hazard models we can explicitly test for the effect of exchange rate regimes on the duration of high current account deficit spells which is more in the spirit of the friedman hypothesis on the basis of a large dataset with annual observations for 95 developing countries over the period 1971 2004 we find strong evidence that in developing countries fixed exchange rate regimes are associated with longer duration of high deficit spells and hence significant delays in the adjustment to high current account deficits this finding is robust to alternative exchange rate regime classifications and different model specifications furthermore we show that fixed exchange rate regimes delay current account adjustment only in the hard peg case but not in the soft peg case from a policy perspective this suggests that only the corner solution of a very rigid exchange rate regime delays the current account adjustment but not if the regime allows for some flexibility in the exchange rate adjustment our findings thus lend strong support to the friedman hypothesis the remainder of the article proceeds as follows after a brief review of the relevant literature in section ii section iii provides a description of our dataset and defines high deficit spells in section iv we discuss the methodological issues involved in the duration analysis the empirical results are presented in section v and section vi concludes ii the literature on exchange rate regimes and current account adjustment the discussion on the relationship between exchange rate regimes and current account adjustment goes back to friedman s seminal work in the 1950s friedman 1953 argues that nominal exchange rate flexibility expedites current account adjustment while nominal exchange rate rigidity delays the adjustment under a flexible exchange rate system where the exchange rate is allowed to vary freely a rising current account deficit would induce the depreciation of domestic currency which in turn leads to an increase in exports a decrease in imports and a rapid convergence to a balanced current account in the case of fixed exchange rate regimes where exchange rates are not allowed to vary countries have to rely solely on internal price adjustment mechanisms to produce corrective movements in their current accounts

the dynamic effects of retirement on well being in this paper we examine whether and to what extent people anticipate their retirement and adapt to it over time for identification we use an instrumental variable approach that exploits the eligi

welfare as equity equivalents equity or its counterpart inequity plays a fundamental role in the evaluation of social welfare in different dimensions in this paper we revisit the concept of inequity in the sense of unequal distributions across individuals time and states of the world using a unified framework that generalizes the standard expected discounted utilitarianism approach we propose a general measure of welfare as equity equivalents and a corresponding inequity index we show that allowing for different attitudes toward inequity across different dimensions covers a scope of possible inequity preferences with different interpretations we then prove that the order of aggregation across the different dimensions matters for welfare evaluations finally we show that many of the welfare theoretical approaches recently developed in the literature can be interpreted as special cases of this general framework

forced displacement and technology adoption an empirical analysis based on agricultural households in bosnia and herzegovina we use the bosnian living standards measurement study lsms survey to show that conflict induced displacement of agricultural households dramatically affects the adoption of new technologies in agriculture we exploit the heterogeneity in the level of violence in the pre war location to account for selection bias this natural experiment seems to be a source of exogenous variation in our case because violence aims at ethnic cleansing without economic consideration we find that the displaced are less likely than stayers to adopt fertiliser and pesticide

the comparison of multi dimensioned distributions of economic status the literature on inequality measurement has been largely concerned with single dimensioned indicators this paper explores some of the issues which arise when there are several dimensions to inequality and these are not readily reduced to a single index concentrating particularly on the two dimensioned case we make use of results on multi variate stochastic dominance in portfolio theory extending these and applying them to the measurement of inequality the use of the dominance conditions is illustrated by an application to the international distribution of income and life expectancy

estimating the effect of individual time preferences on the use of disease screening economists have long been interested in evaluating the role that time preferences play in a wide range of economic decisions in the health care arena time preferences may be an especially important determinant of many decisions particularly the use of preventative health care one potential barrier to patient adoption of preventative screening regimens is that they impose current costs on consumers with the hope of lower costs in the future using data from a national survey we jointly estimate latent discount rate and preventative service demand models using a limited information maximum likelihood estimator iterated m estimator the results suggest that discount rates are generally inversely related to the likelihood of most screening tests

estimation in a class of simultaneous equation limited dependent variable models estimation in a class of simultaneous equation limited dependent variable models is considered the minimum chi squared method is used to compare the asymptotic relative efficiency of marginal and new conditional maximum likelihood estimators for this class of models efficient minimum chi squared estimation procedures are described a two step algorithm based on a conditional maximum likelihood estimator provides a natural framework for both computing a linearized and locating the joint maximum likelihood estimator the unimodality of the simultaneous equation tobit likelihood function is proved and this model is used to illustrate the empirical application of some of the estimators considered in the paper the relative efficiency of these estimators in the simultaneous equation tobit model is examined in a set of monte carlo experiments many applications of microeconomic theory to individual data face the joint problems of censoring and simultaneity in particular the dependent variable under investigation may not be continuously observed and some of the conditioning variables representing the outcome of other decisions by the individual may be simultaneously determined smith and blundell 1986 developed an asymptotically efficient test for exogeneity or simultaneity in the simultaneous equation tobit model as a byproduct a conditional maximum likelihood estimator was obtained which is consistent under the alternative hypothesis of simultaneity nelson and olsen 1978 amemiya 1978 1979 and heckman 1978 consider a number of consistent marginal maximum likelihood estimators based on marginal maximum likelihood estimators of the reduced form parameters for the probit and tobit models in contrast the estimator derived from smith and blundell 1986 is based on the corresponding conditional maximum likelihood estimators this paper is concerned with estimation in a class of simultaneous limited dependent variable regression models which includes the simultaneous probit and tobit models as special cases analogous marginal and conditional maximum likelihood estimators to those of nelson and olsen 1978 amemiya 1978 1979 heckman 1978 and smith and blundell 1986 are derived and other new estimators are suggested the minimum chi squared approach discussed by ferguson 1958 malinvaud 1970 and rothenberg 1973 is used to compare the asymptotic relative efficiency of various estimators considered a simple two step algorithm based on the conditional maximum likelihood

the role of birth order in child labour and schooling does when a child was born relative to his or her siblings affect whether the child attends school or participates in child labour we investigate this question by estimating the causal effect of birth order on the probabilities of school attendance and child labour participation to address the potential endogeneity of family size we use instrumental variable approach where the proportion of boys in the family is used to instrument family size using a longitudinal household survey data from ethiopia we estimate unobserved effects bivariate probit instrumental variable model of school attendance and child labour choices the results suggest that the probability of child labour participation decreases with birth order but we find no evidence that suggests birth order affects the probability of school attendance however among children who are going to school hours spent studying increases with birth order results from complementary time use analysis reveal that there is no birth order effect on hour

composite indices of physical quality of life basic needs fulfilment and income a principal component representation abstract in the context of international comparisons the multivariate method of principal components is suggested for computing composite indices of economic development that capture per capita income basic needs fulfilment and other possible indicators of well being the method is conceptually appealing easy to apply and seems promising in several directions two illustrative applications are given one develops a composite index based on the three pqli constituents and per capita gnp for 147 countries in the other a composite index of basic needs fulfilment is first computed for 82 countries and then a more inclusive measure that also takes account of per capita gnp is derived

private politics and environmental management abstract we study determinants and effects of two types of private political actions ppas against s p 500 companies environmental boycotts and shareholder proxy proposals we consider effects on the firms adoption of environmental management systems ems and the environmental protocol iso 14001 we find that ppas have a significant impact on firms environmental management decisions and consistent with baron 2009 that a company s likelihood of experiencing a ppa is higher if it is a receptive target that has a reputation for social responsibility

do hmo plans reduce health care expenditure in the private sector i introduction since the hmo act was passed in 1973 health maintenance organizations hmos have become one of the most popular types of managed care plans in the u s health delivery system faced with a dramatic increase in health care costs hmos are designed to implement a tight utilization review and authorization process along with restricted choice of providers as a means of managing utilization and quality by comparing health care expenditure patterns of hmo members with those of non hmo members among the privately insured nonelderly population this study seeks to understand the impact that hmos have on health care expenditure in the private insurance sector our data come from the 2000 medical expenditure panel survey meps a nationally representative survey of the u s civilian noninstitutionalized population despite the dramatic growth in the number and proportion of individuals enrolled in private hmo plans much of existing research on this issue has focused on the relationship between hmo enrollment and use of health care services miller and luft 1994 2002 whereas only a limited number of studies have been conducted on the role of prevalent hmo enrollment in saving health care expenditure kralewski et al 2000 analyses on expenditure performance are mostly carried out on the performance of the medicaid or medicare managed care plans buchanan et al 1996 mello et al 2002 this study extends previous research in several ways first rather than using localized or insurance group wise data johnson and aquilina 1986 kralewski et al 2000 mclaughlin et al 1983 mclaughlin 1987 robinson 1996 or employer data baker and corts 1996 feldman et al 1993 we use data provided directly by hmo members through nationally representative surveys second by using decomposed expenditure data we are able to ascertain whether the provision of financial incentives to both consumers and providers in hmo plans makes any differences in medical care expenditure by each party compared with traditional plans furthermore by testing the hypothesis of selectivity in health insurance choice we try to avoid the biased findings that often find in favor of hmo plans trends and relevance during the past two decades the number of hmo enrollees has proliferated from 9 1 million 4 of the total population in 1980 to 76 1 million 26 4 in 2001 health united states 2003 between 1977 and 2001 the percentage of the u s population under age 65 that joined private insurance hmos increased dramatically from 3 7 to 27 9 table 1 over the same time period per capita national health expenditure increased from 1 980 to 4 773 in 1995 constant dollars and total national health expenditure as a percentage of gross domestic product rose from 8 8 to 14 1 out of total national health expenditure the share of private expenditure decreased from 57 3 to 54 1 motivated by the prevalence of hmos in the private insurance market and the insufficiency in understanding its cost containment performance we investigate the patterns of health care expenditure among hmo members to understand whether hmos contribute to limiting medical expenditure relative to non hmo arrangement there are two main complications to our empirical analysis the first is selection bias due to endogenous health plan choice decisions previous studies buchanan and cretin 1986 jackson beeck and kleinman 1983 suggest that the utilization reduction effect of hmos may be a consequence of the selective enrollment of a healthier population in hmo plans rather than the more efficient medical care delivery management of hmos thus we first estimate the probit model of health insurance plan choice decisions and test this hypothesis in line with the analysis of taylor et al 1995 the second complication is that the dependent variables are nonnegative with a high frequency of zero observations

men women and competition an experimental test of behavior this study reports a series of experiments that examine outcomes when agents are able to choose between a payment scheme that rewards based on absolute performance i e piece rate and a scheme that rewards based on relative performance i e a tournament we test for the presence and persistence of gender differences in performance and the rate of entry into the tournament option and whether these differences are sensitive to the structure of the tournament rewards in the winner take all wta condition only the best performer in the tournament for each round received a payment 4 50 in the graduated tournament condition the same payment 4 50 was divided among the first second and third finishers in the tournament in the wta condition men showed significantly lower forecast errors than women in addition a clear sorting effect occurs in the wta condition in early rounds of the wta condition male entrants into the tournament show significantly lower forecast errors than female tournament entrants however the difference disappears over time after controlling for forecasting skill gender did not predict entry into the tournament for the wta condition however lower forecasting skill reduced the probability of entry in the graduated tournament the situation was reversed men entered the tournament at significantly higher rates even after controlling for skill forecasting skill had no impact on the decision to enter the tournament while the average male entrant to the tournament had lower forecast errors than the average female entrant the men entered at much higher rates as a consequence men were much more likely than women to enter the tournament too frequently

what drives the choice of the type of partner in r d cooperation evidence for spanish manufactures and services abstractwe analyse the heterogeneity in firms decisions to engage in r d cooperation taking into account the type of partner competitors suppliers or customers and research institutions and the sector to which the firm belongs manufactures or services we use information from the technological innovation panel pitec for spanish firms and estimate multivariate probit models corrected for endogeneity which explicitly consider the interrelations between the different r d cooperation strategies we find that placing a higher importance to publicly available information incoming spillovers receiving public funding and firm size increase the probability of cooperation with all kind of partners but the role is much stronger in the case of cooperative agreements with research institutions and universities our results also suggest that r d intensity and the importance attributed to the lack of qualified personnel as a factor hampering innovation are key factors influencing positively r d cooperation

does distance matter for institutional delivery in rural india this article estimates the causal effect of distance to health facility on in facility birth in rural india taking into account the endogenous placement of the health facility we find that women living farther away from the health facilities are less likely to give birth at a health facility each additional kilometre from the nearest health facility is associated with a 4 4 decline in the probability of in facility birth policy simulation results indicate that providing access to a health facility within 5 km would increase institutional delivery by 10 overall our findings confirm that distance is an important barrier to in facility births in rural india

the determinants of price in 3g spectrum auctions this article examined the empirical relationship between prices paid for national 3g wireless licenses when spectrums were sold by auction the reduced form modelling approach was based on the prem

increasing returns and the foundations of unemployment theory current approaches to macroeconomic theory divide roughly into two basic schools of thought one approach typically associated with rational expectations views the economy as basically at or near walrasian market clearing equilibrium in which case it becomes very difficult to explain away convincingly the undeniable persistence at times of involuntary unemployment another approach views the underemployed economy as being in a state of temporary fixed price disequilibrium in which case aside from having to repress suspicions that the essence of effective demand failure might not have to do with prices fixed at wrong values there is a lot of rationalising to be done about why profitable adjustments are so slow this paper argues that something like an internally consistent theory of steady state involuntary unemployment is possible and even plausible the cornerstone of this third approach is increasing returns to scale which blocks unemployed agents from breaking out of a low level equilibrium trap unless there is overall coordination or stimulation a simple model is presented which contains the basic ideas

the public finance of healthy behavior lifestyle can often affect the likelihood an individual will have a future illness subsidies often mitigate the consequences of poor lifestyle choices in this paper we explore tax subsidy policies that lower the consequences of incurring ill health we find that a funding mechanism consistent with current us policy lowers the investment in healthy lifestyles by both the wealthy who pay taxes and the poor who receive subsidies we also explore alternative policy interventions such as investing in research to lessen the impact or probability of the disease

strategic complementarity slows macroeconomic adjustment to temporary shocks i introduction starting with the work of diamond 1982 hart 1982 and bryant 1983 a number of authors have employed models which use potential coordination failure to show that many features of the keynesian framework can be captured in models consistent with the microfoundations approach 1 for example in the context of a search model diamond demonstrates the existence of equilibria with too low a level of aggregative activity hart captures this feature and the simultaneous existence of multipliers in a model of monopolistic competition while technological interactions are the crucial element of bryant s analysis one reason to refer to these seemingly diverse set of papers as a single literature is that all the models are in fact driven by the presence of the same factor strategic complementarity a macroeconomic model which exhibits strategic complementarity is simply one where the larger is aggregate production the larger is the incentive for any particular agent to produce cooper and john 1988 first demonstrated that the presence of strategic complementarity is a characteristic of all of the models mentioned above and persuasively argue that this is the critical feature which lies behind the finding of keynesian type results in this paper we argue that strategic complementarity is also important in understanding the dynamic response of economies to temporary shocks in particular we find that strategic complementarity is potentially an important factor in understanding why an economy may return only slowly to steady state behavior after a temporary shock that is given the presence of any of a variety of factors which would cause the economy not to instantaneously return to full employment after a temporary shock e g adjustment costs associated with changing the capital stock the speed with which the economy returns to steady state behavior is negatively related to the degree of strategic complementarity in the environment related analyses are those of haltiwanger and waldman 1989 bomfim and diebold 1992 and baxter and king 1990 the first two papers consider models wherein some agents are characterized by adaptive or regressive expectations while others am characterized by rational expectations among other findings these analyses demonstrate that the speed with which the economy returns to steady state behavior after a temporary shock is negatively related to the degree of strategic complementarity in the economy 2 we argue that the relationship between strategic complementarity and the dynamic response to temporary shocks is more general than is suggested by these papers in their analyses temporary shocks have long term effects because some of the agents make systematic mistakes when forming expectations here it is argued that given any of a variety of factors which would cause temporary shocks to have long term effects there is a negative relationship between adjustment speed and the degree of strategic complementarity baxter and king consider a world where because of productive externalities the economy exhibits increasing returns at the economy wide level using simulation techniques they show first that the presence of increasing returns serves to increase the output volatility exhibited by the economy in response to shocks and second that after a one time shock the return to steady state behavior is slower in a world characterized by increasing returns baxter and king do not discuss their results in terms of strategic complementarity however it is easy to show that one way of introducing strategic complementarity is to assume that the economy exhibits increasing returns at the economy wide level our paper suggests that what is central in baxter and king s study is not the introduction of increasing returns per se but rather that the introduction of increasing returns is one way of introducing strategic complementarity that is baxter and king s findings can be thought of as a manifestation of the central point of the current paper

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

parties politics and regulation evidence from clean air act enforcement does local federal regulation respond to the preferences of local congressional representatives for example do republican congressmen reduce local enforcement of clean air laws in their districts we use facility level panel data on clean air act inspections over 1989 2005 to study the causal effect of a congressman s party affiliation on local enforcement random assignment of electoral outcomes is obtained with a regression discontinuity design we find that new republican vs democratic representatives significantly depress inspection rates for local polluting facilities in the first year after their election jel d73 q52 q53

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item

inequality among world citizens 1820 1992 this paper investigates the distribution of well being among world citizens during the last two centuries the estimates show that inequality of world distribution of income worsened from the beginning of the 19th century to world war ii and after that seems to have stabilized or to have grown more slowly in the early 19th century most inequality was due to differences within countries later it was due to differences between countries inequality in longevity also increased during the 19th century but then was reversed in the second half of the 20th century perhaps mitigating the failure of income inequality to improve in the last decades jel d31 f0 n0 o0