rational household labor supply traditionally household behavior is derived from the maximization of a unique utility function in this paper we propose an alternative approach in which the household is modeled as a two member collectivity taking pareto efficient decisions the consequences of this assumption are analyzed in a three good model in which only total consumption and each member s labor supply are observable if the agents are assumed egoistic i e they are only concerned with their own leisure and consumption it is possible to derive falsifiable conditions upon household labor supplies from both a parametric and nonparametric viewpoint if alternatively agents are altruistic restrictions obtain in the nonparametric context useful interpretation stems from the comparison with the characterization of aggregate demand for a private good economy

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

the demand for assets through a low interest rate environment asset demand is important in many areas of economics to investigate this we estimate a globally flexible dynamic fourier asset demand specification and calculate morishima elasticities of substit

the ant or the grasshopper the long term consequences of unilateral divorce laws on savings of european households abstract unilateral divorce laws udls allow people to obtain divorce without the consent of their spouse using the staggered introduction of udls across european countries we show that households exposed to udls for a longer period of time accumulate more savings this effect holds for both financial and total wealth and is stronger at higher quantiles of the wealth distribution consistent with a precautionary motive for savings we also find that exposure to udls increases female labour supply numeracy trust in others and dispositional optimism

specific experience household structure and intergenerational transfers farm family land and labor arrangements in developing countries data from indian rural household survey was used to test th hypothesis that the coexistence in traditional rural societies of extended intergenerational families infrequent land sales and high reliance on family members as farm laborers is the result of the economic advantages which accrue from the knowledge gained by farming a particular ploy of land over a long period of time the land specific experience of elderly members of a intergenerational household who farmed the land as a child and then as an adult are expecially critical in adverse weather years most previous investigators attributed the existence of multigenerational households the use of family members rather than hired laboreds and the infrequency of land sales to deficiencies in the market i e labor market imperfections and an absence of capital insurance and asset markets in the present investigations these same characteristics are viewed as having an economic advantages a model for estimating the contribution of the experience of the elderly household members to agricultural profits was developed and applied to data from a 3 year panel study of 2900 indian rural farm households the data was collected between 1968 71 by the national council of applied economic research the survey collected information on farm profits farm inputs demographic characteristics and the effects of weather conditions on profits a major limitation of the study was a lack of information on the duration of land ownership age of household members was substituted as a proxy for duration of ownership findings were consistent withe the hypothesis in poor agricultural years gross returns for households which contained an elderly household member were greater than the gross returns for comparable households which did not contain an elderly member the economic advantages of specific knowledge embodied in the experienced elderly farmer were comparable to the economic advantages which accrued to households whose members were more educated the hypothesis cannot fully explain the existence of intergenerational families since there is a relatively large proportion of such families among nonfarm families in many countries including india findings suggest that intergenerational families may provide for more occupational diversity and thereby reduce income risks the specific experience hypothesis has policy implications if technological changes are introduced the value of specific experience may be lost and the frequency of intergenerational households may decline the hypothesis may also explain why farmers are reluctant to agree to land redistribution and consolidation schemes this reluctance may disappear after sufficient technological change has occurred

bureaucratic behavior in the local public sector a revealed preference approach public sector bureaucratic utility is typically assumed to be a function ofbudget size or government employment although intuitively appealing thereare no definitive direct tests of the assumption to fill this gap thispaper exploits data that isolate resource allocation decisions made by localpublic sector bureaucrats we use revealed preference theory to find thatthe bureaucracy behaves as if bureaucratic utility is an increasingfunction of employment across government functions and public spending providing direct evidence justifying the popular assumption in theoreticalmodels of government behavior

oligarchy democracy inequality and growth abstract this paper analyses the dynamics of inequality democratization and economic development in a political economy model of growth where education is both the engine of growth and a determinant of political participation in a context with imperfect capital markets we investigate the incentives for an educated oligarchy to subsidize the poor s education and to initiate a democratic transition we characterize the equilibrium patterns of political institutions income distribution and growth as a function of the initial income and inequalities in particular we identify circumstances under which the elite promotes the endogenous emergence of a middle class for purely political economy reasons a simple linear infinite horizon framework is then presented in this setting we discuss the importance of historical dependence for long run social stratification and redistribution

intra household allocation of parental leave we introduce childcare sharing in a collective model of household behavior to investigate which factors make spouses increase or decrease their share of parental leave the concern about future consumption motivates parents to invest in their human capital and to limit their leave duration using relative income and the age difference between spouses as distribution factors we cannot reject pareto efficiency in childcare sharing higher relative incomes and larger age differences shift the conditional leave allocation towards the relatively poorer and younger partner respectively households with higher total income purchase more professional childcare

decentralisation and accountability in infrastructure delivery in developing countries many developing countries are experimenting with decentralisation of public service delivery to elected local governments instead of bureaucrats appointed by a central government we study the resulting implications in a theoretical model in which the central government is uninformed about local need and unable to monitor service allocations bureaucrats charge bribes for services as monopoly providers resulting in underprovision of services especially for the poor local governments are directly responsive to their citizens needs but may be subject to capture by elites effects of decentralisation on service volumes efficiency and equity are analysed under different financing arrangements for local governments the theme of the 2004 world development report is summarised by its opening paragraph too often services fail poor people in access in quantity in quality but the fact that there are strong examples where services do work means governments and citizens can do better how by putting poor people at the center of service provision by enabling them to monitor and discipline service providers by amplifying their voice in policymaking and by strengthening the incentives for providers to serve the poor problems of accountability associated with traditional modes of delivery involving centralised bureaucracies include cost padding service diversion limited responsiveness to local needs limited access and high prices charged especially to the poor 1 many developing countries have thus begun to experiment with initiatives to increase accountability of service providers by providing greater control rights to citizen groups these include decentralisation of service delivery to local governments community participation direct transfers to households and contracting out delivery to private providers and ngos the programmes include a wide range of infrastructure services water sanitation electricity telecommunications roads and social services education health and welfare programmes countries where such trends have gathered

capture and governance at local and national levels 135 despite the importance of this issue not much systematic research appears to have been devoted to assessing the relative susceptibility of national and local governments to interestgroup capture here we describe a model of two party electoral competition with probabilistic voting behavior and lobbying by specialinterest groups based on david baron 1994 and gene grossman and elhanan helpman 1996 that helps identify determinants of relative capture at different levels of government these include relative levels of voter awareness and interest group cohesiveness electoral uncertainty electoral competition heterogeneity of districts with respect to inequality and the electoral system while some of these uphold the traditional madisonian presumption others are likely to create a tendency for lower capture at the local level so the net effect is theoretically ambiguous this suggests that the extent of relative capture may be context specific and needs to be assessed empirically

which road leads to stable money demand this paper denies that the demand for money function is any more unstable than other demand functions and maintains that the controversies regarding unstable money demand are produce by poor methodology that is not shared by other areas of the field of economics when investigating demand function properties this abstract was borrowed from another version of this item

informal insurance arrangements with limited commitment theory and evidence from village economies recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income thus rejecting the hypothesis of full risk pooling we attempt to explain these observations by adding limited commitment as an impediment to risk pooling we provide a general dynamic model and completely characterise efficient informal insurance arrangements constrained by limited commitment and test the model using data from three indian villages we find that the model can fully explain the dynamic response of consumption to income but that it fails to explain the distribution of consumption across households

the retirement consumption puzzle a marital bargaining approach abstract evidence from several countries reveals a substantial drop in household consumption around the age of retirement that is difficult to explain with life cycle models using food consumption data from more than 550 households from the panel study of income dynamics for the years 1979 1986 and 1989 1992 we find that married couple households decrease their expenditures on both food consumed at home and away from home by about 9 following the retirement of the male household head no significant decrease in consumption is found for single households either in a sample of males or a pooled sample of single males and females these results are consistent with a model of marital bargaining in which wives prefer to save more than their husbands do to support an expected longer retirement period and relative control over household decisions is affected by control over market income the pattern of the consumption decline which is increasing in the age gap between husband and wife lends further support to this interpretation

does the balance of power within a family matter the case of the retirement equity act abstract this paper studies within family decision making regarding investment in income protection for surviving spouses using a simple and tractable nash bargaining model a change in us pension law the retirement equity act of 1984 is used as an instrument to derive predictions from the bargaining model about the household demand for survivor annuities and life insurance and to contrast these with the predictions of the classical single utility function model of the household in the empirical part of the paper the predictions of the classical model are rejected in favor of the predictions of the nash bargaining model

standard errors for elasticities a comparison of bootstrap and asymptotic standard errors this article compares two methods of deriving standard errors for elasticities in a linear expenditure demand system with first order autoregressive errors the first is the ordinary taylor series method and the second is efron s bootstrap in an example problem these two methods yielded similar values for the standard errors with the exception of the income elasticity standard errors for which the asymptotic standard errors were apparently too large by a factor of two

a semi nonparametric approach to the demand for uk monetary assets we estimate an asymptotically ideal model of the demand for uk personal sector monetary assets we use data that are consistent with utility maximizing behaviour and find that uk monetary assets are generally substitutes in use the estimated elasticities of substitution during the 1980s and the early 1990s indicate that a relatively broad monetary aggregate should be used in economic studies the results also suggest that any policy based on interest or user cost elasticities of substitution between financial assets should be based on the morishima elasticities as the allen uzawa calculation can give misleading results

tests of microeconomic foundations of a north american common currency area the movement of some members of the european union towards a common currency area is likely to spark interest in other possible common currency areas one such area of interest is a north american common currency area in this paper some results from tests of microeconomic foundations of a north american common currency area are presented these results can be viewed as favourable for the formation of a north american common currency area jel classification f33 f36 tests des fondements micro economiques d une union monetaire en amerique du nord le deplacement de certains membres de l union europeenne vers une monnaie commune va vraisemblablement susciter de l interet pour ce genre d arrangement dans d autres parties du monde un de ces autres lieux ou il y a un interet pour une union monetaire est l amerique du nord dans ce texte on presente certains resultats de tests des fondements micro economiques d une zone monetaire commune en amerique du nord ces resultats peuvent etre consideres comme favorables a la formation d une union monetaire nord americaine

schooling wages and profits negative pecuniary externalities from schooling and their consequences for schooling investments abstract this paper tests the hypothesis that the schooling of the poor reduces profits for landowners and that such negative pecuniary externalities in turn adversely affect schooling investments made by local governments a theoretical model of occupational choice in the presence of credit and labor market constraints combined with existing political economy models of the delivery of local public goods delivers such a result this hypothesis is tested using household data from india the empirical analysis shows that profits are reduced by the schooling of the poor and that this is primarily because of the effect of schooling on wages it also shows that the negative effect of wages on profits reduces government provided schooling inputs

an empirical comparison of flexible demand system functional forms this paper compares the performance of eight frequently used flexible forms that are either 1 locally flexible 2 effectively globally regular or 3 asymptotically globally flexible results show that the functions with global properties generally perform better particularly those models having asymptotic properties results using us consumption data indicate substitutability among the components of consumption at most data points there is also some interesting substitution volatility around the time of recessions in the usa copyright 2001 john wiley sons ltd

the substitutability of equities and consumer durable goods a portfolio choice approach the stock market crash of october 1987 led many economists to lower their forecast of gnp growth for 1988 the rationale was that the loss of wealth that resulted from the crash would force asset holders to reduce their consumption expenditures yet a major slowdown in economic growth was not realized in the months following the crash gamer 11 explains this fact in terms of the life cycle hypothesis of consumption he argues that the potential adverse effect of stock market losses on planned consumption would be spread out over the entire lifetime of asset holders so that the immediate effect of the crash on the level

semi non parametric estimates of substitution for canadian monetary assets we estimate the dynamic fourier expenditure system to obtain consistent estimates of short run and long run morishima elasticities of substitution for canadian liquid assets we argue that the variability of the estimated elasticities and evidence of less than perfect substitution between monetary assets interferes with the successful use of simple sum aggre gates and traditional log linear money demand functions

static and intertemporal household decisions we discuss the most popular static and dynamic models of household behavior our main objective is to explain which aspects of household decisions different models can account for using this insight we describe testable implications identification results and estimation findings obtained in the literature particular attention is given to the ability of different models to answer various types of policy questions

testing data for consistency with revealed preference the author develops a method of hypothesis testing for revealed preference tests this method is particularly well suited to tests of commonality of tastes or tests of preference stability he devises a metric based on an estimate of the fraction of expenditure wasted in maximizing utility if all consumers in the sample share the same utility function this metric increases in size with increases in the proportion of observations having different tastes and with increasing differences in tastes the author proposes bootstrap methods for estimating the distribution of the test statistic copyright 1995 by mit press

measuring substitution in monetary asset demand systems the allen elasticity of substitution aes is widely used to study monetary asset substitution and structural demand stability blackorby and russell showed that the aes is uninformative and that the morishima elasticity of substitution mes is the appropriate measure a point overlooked in the monetary literature use of improper measures can lead to incorrect inferences this article considers five alternative measures of substitution the aes the mes the hicksian and marshallian elasticities of demand and mundlak s unencountered but appealing constant cost elasticity of substitution selection of the substitution measure appropriate to respective research questions is addressed

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

urban influences on rural schooling in india abstract many believe that low levels of schooling in rural areas of developing economies are a consequence of the low rate of return to schooling in agriculture this belies the possibility that rural schooling decisions are undertaken in response to the possibility of employment in urban areas this paper tests this hypothesis using three cross sections of household data for rural india it finds that urban rates of return do influence rural schooling particularly amongst households who are most likely to seek urban employment such as the landless the results suggest that low levels of rural schooling may reflect not just conditions in the local village economy but also the functioning and size of the relevant labor market

intertemporal preferences and labor supply in this paper the authors examine whether nonseparable preference structures ar e important in characterizing life cycle labor supply using longitud inal data on prime age males from the panel study of income dynamics they estimate a model of life cycle leisure and consumption under un certainty in which intertemporal preferences are allowed to be nonsep arable in leisure the model tests several alternative specifications considered in the literature they investigate the robustness of the ir findings to certain forms of population heterogeneity and types of model misspecification across alternative specifications the autho rs find that the standard assumption of intertemporally separable pre ferences for leisure is not consistent with the data copyright 1988 by the econometric society

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

translog flexible functional forms and substitutability of monetary assets this article attempts to establish the nature of the relationship between monetary assets by estimating a sequence of four nested demand systems the generalized translog the basic translog the linear translog and the homothetic translog the principal attraction of the empirical work is that i am able to test separately for both homothetic and quasi homothetic preferences over monetary assets the tests reject both homotheticity and quasi homotheticity and thus consistency of the strotz gorman two stage optimization i also perform tests on economic theory to establish whether the parameter estimates are consistent with the utility maximizing hypothesis underlying the models these tests indicate that the generalized translog is the preferred model

curvature restrictions on flexible functional forms an application of the minflex laurent almost ideal demand system to the pattern of spanish demand 1954 1987 this article introduces a new demand model labeled minflex laurent almost ideal demand system which has been achieved by combining the flexible functional minflex laurent form with the price independent generalized logarithm expenditures structure introduced by muellbauer the model has been applied to analyze the aggregate demand behavior of final consumer goods in the spanish economy from 1954 to 1987 when the flexible functional form has been empirically tested the curvature requirements imposed by economic theory have been studied

communication commitment and growth abstract we study the effect on the growth of an economy of alternative financing opportunities in a stochastic growth model with incentive constraints efficient accumulation mechanisms are designed and computed for economies that differ in their incentive structure we show that when borrowing is subject to information constraints there is a computable efficient transfer mechanism that does not affect capital accumulation and investment patterns even though consumption patterns and the distribution of wealth are affected in contrast enforcement constraints can severely reduce the outside financing opportunities and affect investment patters and economic growth we adapt numerical algorithms for obtaining numerical solutions of these models

a revealed preference analysis of friedman and schwartz money in their seminal series of books friedman and schwartz concluded that the appropriate assets to aggregate into money are currency demand deposits and time deposits issued by commercial banks for this paper i used revealed preference analysis to test the validity of this conclusion i find that these financial assets pass tests for the existence of a monetary aggregate consistent with the economic theory of aggregation over goods for a short period after world war ii the data are consistent with a more broadly defined monetary aggregate a reputable index number like the divisia index must be employed to form these assets into an aggregate consistent with the economic theory of aggregation copyright 1995 by ohio state university press

spousal control and intra household decision making an experimental study in the philippines i elicit causal effects of spousal observability and communication on financial choices of married individuals in the philippines when choices are private men put money into their personal accounts when choices are observable men commit money to consumption for their own benefit when required to communicate men put money into their wives account these strong treatment effects on men but not women appear related more to control than to gender men whose wives control household savings respond more strongly to the treat ment and women whose husbands control savings exhibit the same response changes in information and communication interact with underlying control to produce mutable gender specific outcomes

a box cox consumer demand system nesting the almost ideal model this article proposes a consumer demand system that has a generalized functional form characterized by the box cox transformation the new model offers a wider range of responses to both price and expenditure changes than the existing price independent generalized linear models including the almost ideal demand system even with these features its functional form is relatively simple and easy to interpret and implement an empirical illustration is given for japanese demand for nondurable goods and services the results show that the new model is preferable to the nested models in terms of relative explanatory power and producing reasonable elasticities

the dynamic laurent flexible form and the demand for money i derive the dynamic full laurent model to estimate economic models that assume a dynamic process the application in this paper is to use the dynamic full laurent to estimate a system of dynamic asset demand equations the main results are that the dynamic full laurent rejects its static version and the estimated elasticities are variable over time results from a monte carlo analysis using a dynamic data generating process show that the prediction errors from the dynamic full laurent are much smaller than those from the static version thus when the data are generated by a dynamic process inferences from the static full laurent model can be severely biased 1997 john wiley sons ltd

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

labor supply and household dynamics abstract using the panel study of income dynamics we provide evidence that to understand household decisions and evaluate policies designed to affect individual welfare it is important to add an intertemporal dimension to the by now standard static collective models of the household specifically we document that the observed differences in labor supply by gender and marital status do not arise suddenly at the time of marriage but rather emerge gradually over time we then propose an intertemporal collective model that has the potential of explaining the observed patterns

divisia aggregation and substitutability among monetary assets in this paper the authors estimate the degree of substitutability among the services of money checkable deposits savings deposits and time deposits in a quasi homothetic translog utility framework for canada the four composites mentioned are formed by aggregating more basic assets such as checkable deposits at banks checkable deposits at trust companies etc traditionally the simple sum aggregation has been used in this context the authors investigate both this alternative and divisia aggregation of the assets they find a low degree of substitution among the services of monetary assets and provide some evidence favoring divisia aggregation over simple sum aggregation copyright 1986 by ohio state university press

nonparametric tests of utility maximization and weak separability for consumption leisure and money some of the most fundamental assumptions of economics are utility maximization and weak separability of the arguments in the represen tative consumer s utility function this paper contains results from nonparametric tests of these assumptions about consumer behavior the authors find that quarterly per capita data on consumption goods le isure and monetary assets are consistent with utility maximization further consumption goods and leisure meet necessary and sufficient conditions for weak separability additionally one grouping of relat ively liquid monetary assets meets the necessary conditions for weak separability they also test and find no evidence of homothetic prefe rences copyright 1987 by mit press

are factor substitutions in hmo industry operations cost saving past research on the potentials for cost saving scale and scope economies in multiproduct hmo operations in the united states are incomplete in their economics of the underlying technology structure this article exploits the translog cost model estimates of all past studies of hmo production to infer the extent to which pairwise factor substitutions e g administrative services vs medical care resources e g hospital days physician services suggest potential for cost savings in groups and independent practice associations given the industry s nonhomothetic production over a 20 year period the conceptually valid morishima elasticity measure at constant output reveals limited cost saving potentials from factor interchange and input demands these opportunities differ for groups and ipas across medicare and non medicare products my findings add a timely and significant dimension to understanding potential cost savings in hmo operations policy suggestions and cost implications are rationalized in light of the declining medicare hmo enrollment and recent changes in factor input prices

new indices of money supply and the flexible laurent demand system the article begins by surveying the existing results on the new divisia monetary aggregates charts display the differences in behavior between the divisia aggregates and the federal reserve s official simple sum monetary aggregates the article then compares system wide fit for the simple sum and divisia monetary aggregates when used as data in the joint estimation of a system of demand equations the demand system is derived from a new laurent expansion approximation to the reciprocal indirect utility function the laurent expansion provides a better behaved remainder term than that of the more commonly used taylor series the results favor the divisia aggregates

a trigonometric flexible consumer demand system this paper proposes the first ever empirical specification of a trigonometric demand system the new model is potentially useful because of some attractive features it is flexible amenable to exact aggregation over consumers possessed of trigonometric engel curves which can oscillate and able to have an unusually large regular region with comparisons between the new model and two other popular models an illustration is given for japanese demand for non durables and services the new model shows relatively gentle engel curves with an inflection point on each of them which seem reasonable given that aggregate expenditure is used in parameter estimation jel classification c51 d12 un systeme trigonometrique flexible de demande des consommateurs ce memoire propose une premiere specification empirique d un systeme de demande trigonometrique le nouveau modele est potentiellement utile a cause de certaines caracteristiques interessantes il est flexible se prete a l agregation exacte des consommateurs donne lieu a des courbes d engels trigonometriques qui peuvent osciller et couvrir une region reguliere singulierement vaste a partir de comparaisons entre le nouveau modele et deux autres modeles populaires on illustre ces avantages dans le cas de la demande japonaise pour les biens non durables et les services le nouveau modele revele des courbes d engels relativement douces avec un point d inflexion en chacune d elle ce qui semble raisonnable compte tenu du fait que la depense agregee est utilisee dans la calibration des parametres

the translog utility function and the demand for money in the united states in recent years considerable effort has been directed towards establishing the nature of the relationship between money and nearmonies but with mixed success the approaches vary from multi interest rate single equation studies to the careful simultaneous equations studies summarized and amended by feige and pearce 1977 and extended recently by donovan 1978 offenbacher 1979 and barnett 1980 the empirical results also vary with numerous studies favoring only one interest rate see the surveys in fisher 1978 1983 some claiming that a variety of entities are close substitutes for money e g chetty 1969 and others showing that weak substitution or even complementarity may be the result of the measurement of elasticities of substitution between money and a number of other assets e g feige and pearce 1977 offenbacher 1979 and barnett 1980 the debate seems to have overshadowed a second and equally intriguing issue which centers on the establishment of an acceptable definition of money the basic idea of this study is to take an approach that takes account of the different degrees of moneyness possessed by the various monetary assets this paper produces quantitative estimates of the degree of substitutability of other monetary assets for money in the context of a flexible functional form model with a

labor supply and marital separation panel data are used to estimate the effect of marital separation on labor supply female labor supply increases substantially and male labor supply declines marginally lending support to the theory of specialization within the household the most interesting finding is that women began to increase their labor supply well before the actualsplit occurs suggesting either that shocks to labor supply change divorce probabilities or that women with a higher likelihood of divorcework more this argument is pursued by constructing and estimating a simultaneous model of labor supply and divorce risk copyright 1986 by american economic association

factor proportions and relative wages the supply side determinants of wage inequality supply side factors may contribute to rising wage inequality first certain changes in the supply of skills allegedly exacerbate wage inequality women s increased labor force participation and increased immigration are the leading candidates both allegedly reduce the wages of less skilled men however immigration s impact on wage inequality has been minor and the effects of women s participation is inconclusive second in evaluating the likelihood that human capital investment will mitigate future inequality evidence suggests that rising returns to education have increased the proportion of young people attending college limiting the growth of inequality among high wage workers

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

are risky assets substitutes for monetary assets i introduction financial innovation over the past couple of decades has enhanced the liquidity of many financial assets particularly noncapital certain risky assets further financial assets previously not regarded as monetary assets such as mutual funds and particularly money market mutual funds now provide monetary services such as liquidity and transactions services l given the increased liquidity of such funds the question arises as to whether risky assets are substitutes for capital certain monetary assets if noncapital certain assets are indeed substitutes for capital certain assets and are also being used for transactions purposes then agents may be treating risky assets as money although this issue has been addressed in the united states in the context of the addition of bond funds to m2 by for example duca 1995 no such research has yet been conducted in the united kingdom including risky assets in the analysis contradicts the work of ando and shell 1975 spencer 1986 appendix i pp 184 93 and spencer 1994 broadly they argue that since some nonrisky assets provide monetary services and probability also liquidity individuals would not hold risky assets for these purposes 2 in contrast hicks 1935 states that falling transaction costs and rising wealth encourages individuals to increase the proportion of risky assets in portfolio holdings most studies generally assume that risky assets fail to provide significant monetary services and for example have been excluded from the asset demand analysis of barr and cuthbertson 1991a drake fleissig and swofford 1997 and money demand studies such as taylor 1987 belongia and chrystal 1991 drake and chrystal 1994 and drake 1996 alternatively barr and cuthbertson 1991b use only risky assets in their asset demand system analysis the degree of substitution between risky assets and capital certain assets is an empirical issue while noncapital certain risky assets mutual funds and other financial assets may well be becoming closer substitutes for what people are using as money they are in no way perfect substitutes for the highly liquid cash assets to evaluate the role of noncapital certain assets we construct a noncapital certain risky divisia aggregate consisting of equities government bonds and unit trusts the divisia index allows for less than perfect substitution between assets and weights component assets according to their differing degrees of moneyness which may vary over time due to many factors for example financial innovation see barnett 1980 this methodology has been widely applied to monetary aggregation and money demand studies in a number of countries as in belongia 1996 drake 1996 drake and chrystal 1997 and anderson jones and nesmith 1997 to determine whether risky assets are substitutes for capital certain assets we use two other divisia aggregates constructed from traditional measures of money the first of these is an aggregate of highly liquid zero yield cash assets given that the component assets all have zero own rates of return however divisia aggregation is equivalent in this case to simple summation the second aggregate is a divisia aggregate of interest bearing capital certain assets including risky assets complicates the analysis because the degree of risk aversion will affect the estimates of substitution between capital certain and noncapital certain assets thus we also analyze how different degrees of risk aversion affect the results the substitution relationship between assets is estimated from an asymptotically ideal model aim the choice of an aim is in line with the recommendation of barnett fisher and serletis 1992 that flexible systems of demand equations should be used that allow for nonlinear optimizing behavior by economic agents furthermore this paper can be seen as an extension of the recent application of this model to u