consumer ethics in japan an economic reconstruction of moral agency of japanese firms qualitative insights from grocery retail markets the article reconstructs in economic terms managerial business ethics perceptions in the japanese consumer market for fast moving daily consumption products an economic three level model of moral agency was applied that distinguishes unintentional moral agency passive intentional moral agency and active intentional moral agency the study took a qualitative approach and utilized as empirical research design an interview procedure the study found that moral agency of japanese firms mostly extended up to unintentional and intentional passive moral agency certain myopic managerial views were found to affect active moral agency this leaves room for business ethics program that aim at the development of active moral agency

the measurement and trend of inequality comment in a recent article in this review morton paglin proposes a measure of concentration which he claims will correct the gini ratio for overstatement in populations where each individual may be expected to vary his income or wealth over his life cycle the paglin measure suggests that the gini ratio overstates income concentration in the united states by a third and does not reveal a 23 percent decline in concentration which has occurred between 1947 and 1972 these results are based on an improper decomposition of the gini ratio in this note i decompose the gini ratio to derive the paglin measure it is shown to correct for neither demographic nor life cycle income effects and to understate intracohort income or wealth inequality if properly normalized the paglin measure shows that the gini overstates u s income concentration by 7 percent or less and indicates a decline in u s interfamily income concentration of less than 12 percent four percentage points of this decline are the result of demographic change while less than 7 points comparable to the 5 percent decline of the gini are the result of decreased income concentration within cohorts of family heads decomposition further reveals major changes in the division of income among cohorts and in concentration of income within cohorts these changes compensate each other in the paglin measure the use of which as a measure of income or wealth concentration is not recommended the gini concentration ratio

the incentive effects of medicaid on women s labor supply this paper investigates medicaid s impact on women s labor supply behavior while taking into account medicaid s link to the afdc program the data were extracted from the 1986 current population survey a majorfinding is that medicaid valued as government provided health insurance has a significant negative impact on an average female head s probability of working for instance a i0 percent increase in medicaid would reduce a head s probability of working by 9 to 1 3 percentage points contrary to expectations medicaid is found to have a generally insignificant effect on hours worked

labour supply effects of unemployment insurance benefits data from the 1976 wave of the panel study of income dynamics are employed to study the effect of unemployment insurance ui benefits on weeks worked ols regressions to model labour supply behaviour are estimated for both recipients and nonrecipients of ui benefits we find some inteesting differences between the labour supply behaviour of ui recipients and nonrecipients

social security in panama a multiperiod analysis of income distribution abstract a unique multiperiod data set is used to look at the income distribution effects of the retirement portion of the social security system of panama while it is clear that the system is an important source of income for workers it is argued that its true redistributive importance is greatly exaggerated using a multiperiod view it is found that previously high wage and urban workers are disproportionately represented among current recipients it is also argued that social security has substantially reduced the work effort of these workers hence the appropriateness of the present social security system is questioned on both equity and efficiency grounds

discrimination in the payment of full time wage premiums this study investigates how many hours must be worked per week in order for workers in different race and gender groups to receive a high hours full time wage premium an analysis of 1989 current population survey data shows that across occupations both white and black men received a full time wage premium for working at least 33 hours per week whereas white women had to work at least 37 hours and black women at least 39 hours to receive the premium controlling for occupation changes the threshold for black women to 33 hours but does not change the results for the other groups the authors find that the observed differences account for at most two percentage points of the wage differentials across race and gender

us federal redistributive income policies the purpose of this paper is to present a statiscial model of inequality that allows us to analyse simultaneously the impact of several major redistributive expenditure policies as well as analysing the impact of income taxation on inequality the paper includes multivariate exogeeity tests to determine whether the policies have caused the observed income distribution or if there is feedback i e inequality in the distribution has lead to enhanced or diminished redistributive policies the direction of causality for these policies has not to ourr knowledge been previously examined this paper examines the usual redistributive vehicles of transfer payments social security medicare and medicaid as well as analysing the impact of the personal income tax system on inequality using time series analysis we can allow for lagged effects of these policies as well as current period effects this lagged effects specification may be sugggestive of behavioural responses to policy changes

the leisure bias in cost benefit analyses of employment and training programs although increases in earnings that result from employment and training e t programs typically come at the cost of losses of leisure to participants this is almost never taken into account in cost benefit analyses of e t programs this paper develops a method for adjusting for this bias and illustrates how the method can be used to reassess findings from earlier e t cost benefit analyses results in the paper suggest that the bias from ignoring lost leisure is likely to be sizable unless the e t program that is subject to cost benefit analysis increases earnings mainly by raising wage rates or participant reservation wages are near zero ignoring the bias will favor e t programs that emphasize increases in hours of work by focusing on job search or work requirements at the expense of programs that increase wage rates through investments in human capital

the medicaid notch labor supply and welfare participation evidence from eligibility expansions i assess the impact of losing public health insurance on labor market decisions of women by examining a series of medicaid eligibility expansions targeted toward young children these targeted expansions severed the historical tie between afdc and medicaid eligibility the reforms allowed a mother s earnings to increase without losing public health insurance for her young children increasing the income limit for medicaid resulted in a decrease in afdc participation and an increase in labor force participation among these women the effects were large for ever married women and negligible for never married women

the proportional shapley value and applications abstract we study a non linear weighted shapley value shapley 1953b for cooperative games with transferable utility in which the weights are endogenously given by the players stand alone worths we call it the proportional shapley value since it distributes the harsanyi dividend harsanyi 1959 of all coalitions in proportion to the stand alone worths of its members we show that this value recommends appealing payoff distributions in several applications among which a land production economy introduced in shapley and shubik 1967 although the proportional shapley value does not satisfy the classical axioms of linearity and consistency hart and mas colell 1989 the main results provide comparable axiomatic characterizations of our value and the shapley value by means of weak versions of these two axioms these characterizations rely on another result which states that there exists a unique extension of a value defined on games that are additive except possibly for the grand coalition to the set of all games in the much larger class we consider moreover our value inherits several well known properties of the weighted shapley values

welfare transfers in two parent families labor supply and welfare participation under afdc up this paper examines the effect of cash transfers and food stamp benefits on family labor supply and welfare participation among two parent families the aid to families with dependent children unemployed parent program has provided cash benefits to two parent households since 1961 despite recent expansions little is known about the program s effect on labor supply and welfare participation i develop a model of family labor supply in which hours of work for the husband and wife are chosen to maximize family utility subject to a family budget constraint accounting for afdc up benefits and other tax and transfer programs the husband s and wife s labor supply decisions are restricted to no work part time work and full time work maximum likelihood techniques are used to estimate parameters of the underlying hours of work and welfare participation equations the estimates are used to determine the magnitude of the work disincentive effects of the afdc up program and to simulate the effects of changes in afdc up benefit and eligibility rules on family labor supply and welfare participation the results suggest that labor supply and welfare participation among two parent families are highly responsive to changes in the benefit structure under the afdc up program

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

means testing versus universal provision in poverty alleviation programs this paper contrasts the use of means tested and universal schemes in the alleviation of poverty using a class of poverty measures the authors illustrate the trade off from the fact that means testing is costly to both the government and the claimant while universal provision entails a leakage to the nonpoor the paper provides numerical as well as analytical results copyright 1990 by the london school of economics and political science

welfare recipient work choice and in kind benefits in washington state we analyze the work choice of welfare recipients potential welfare recipients compare their on and off welfare utility from after tax income and in kind benefits via employment or welfare and choose whether to work our null hypothesis which we reject is that benefits affect only the decision to work or not not the hours worked which will depend on wages using temporary assistance for needy families tanf administrative data from washington state we find that employer provided health insurance and child care subsidies significantly raise exit rates of tanf recipients and induce greater work effort other work inducing factors include wages and the earned income tax credit while increased levels of medicaid food stamps and the income guarantee increase welfare dependency

how well do children insure parents against low retirement income an analysis using survey data from urban china abstract as population aging becomes more pronounced in the developing world the uneven implementation of social safety nets raises important questions as to how well traditional family based mechanisms insure elderly incomes when pension systems fail using a unique dataset from a recent household survey conducted in urban china we find evidence that private transfers respond to low household income of retired workers when income falls below the poverty line this finding is consistent with an altruistic motive for transfers at low levels of household income at the same time however the transfer response to elderly pre transfer income is not sufficient to fully cover shortfalls that arise with severe pension arrears and low retirement income

employment and welfare participation among women laurie j bassi the model makes a distinction between voluntary and involuntary welfare receipt the findings suggest that among female heads of households the increase in welfare receipt that occurred between 1967 and 1979 was almost completely attributable to an increase in involuntary unemployment and an increase in the proportion of the population that was eligible for welfare due to changes in program parameters the passage of time used as a proxy for changes in the stigma associated with receiving welfare appears to be of secondary importance the labor supply response to welfare programs is small and possibly diminishing over time i introduction during the last thirty years the aid to families with dependent children afdc and food stamp programs experienced phenomenal increases in outlays between 1965 and 1975 the afdc population grew 162 percent and real government spending on benefits more than tripled by 1980 the probability that a family was receiving afdc was four times the probability in 1950 value the food stamp program after its introduction in the late 1960s experienced equally dramatic increases in recipiency rates and outlays these striking increases in welfare costs and participation brought an emerging consensus that the afdc and food stamp programs had failed as charles murray writes in losing ground 1984 146 the popular wisdom is characterized by hostility toward welfare it makes people lazy historian james patterson 1981 179 provides an alternative though not inconsistent explanation of the skyrocketing caseloads despite the hostility of the middle classes to increases in welfare poor americans refused at last to be cowed from applying for aid compared to the past when poor people harassed and stigmatized by public authorities were slow to claim their rights this was a fundamental change both of these explanations of the increase in welfare participation assert changes in people s response to the programs murray claims that program changes in the 1960s induced negative labor supply responses increasing numbers of individuals voluntarily reduced their earned income in order to become eligible for welfare patterson claims that a reduction in the stigma associated with welfare led a greater percentage of those eligible to apply for welfare a theoretical model for evaluating the validity of these two views as descriptions of reality is presented here the model is tested using data on women who headed households at some time between 1967 to 1979 the analysis attempts to identify changes in behavior among female heads of households but does not model the decision to head a family a decision which embodies both marital status and fertility choices the implications of this limitation are discussed at the end of the paper the focus is on developing a tractable theoretical structure that allows for a distinction between voluntary and involuntary welfare participation the model also provides a simple test for whether reported unemployment is a constraint on choice or rather a result of it i e whether unemployment too is involuntary or voluntary the empirical results enable us to dis aggregate the changes in welfare participation into their component parts the findings suggest that the increase in welfare participation rates among female heads of households during the late 1960s and 1970s is attributable to both an increase in involuntary unemployment and to an increase in those eligible for welfare as a result of changes in program parameters the passage of time used as a proxy for a lessening of stigma appears to be of minor importance the labor supply response to welfare programs appears to be small and possibly diminishing over time in section ii a model for determining the effect of redistribution schemes on labor supply and welfare participation decisions is developed

precautionary savings a panel study theoretical literature shows that income uncertainty boosts saving yet empirical work is incomplete i test for the precautionary motive for saving using panel data knowing this motive s size is important for gauging the responsiveness of saving to government programs that reduce uncertainty and for comparison to other motives such as bequests most empirical studies of precautionary saving use either aggregate time series or cross sectional data which cannot capture the effects of individual income uncertainty i derive measures of total permanent and transitory income uncertainty from panel data the national longitudinal survey and find a strong precautionary motive a doubling of uncertainty increases the ratio of wealth to permanent income by 29

a critique of milton friedman s essay the social responsibility of business is to increase its profits the main arguments of milton friedman s famous and influential essay are unsuccessful he fails to prove that the exercise of social responsibility in business is by nature an unfair and socialist practice

the desirability of in kind transfers in the presence of distortionary taxes a standard argument in welfare economics maintains that private goods should not be publicly provided because cash transfers are always superior to in kind transfers however this conclusion does not hold in second best economies a strong case for the desirability of in kind transfer in the presence of distortionary taxes has been made in various recent contributions here we survey the arguments provided in these papers using a common theoretical framework which enables us to present more clearly the similarities and the differences among the various papers the use of a common formal model helps us to show how the rationale for public provision of private goods is sensitive to the form of the tax system it also helps us to provide an explanation why mandatory and non mandatory in kind transfer schemes have the same effects on social welfare finally we offer some considerations on the relevance of the theory of in kind transfers for policy action jel classification number h42

electoral competition and the growth of public spending in 13 industrial democracies 1950 to 1983 this article examines a theoretically important issue that has received surprisingly little attention whether the process of democratic competition for public office has fueled the growth of domestic spending in the capitalist democracies since world war ii probably because it is difficult to measure electoral competition in multiparty systems existing comparative studies of public spending either ignore this question or use dubious measures of electoral competition this study presents and tests some conceptually more appealing measures of competition the results show a strong robust relationship between improved indicators of electoral competition and the growth of domestic spending from 1950 to 1973 and 1973 to 1983 the study concludes by analyzing the implications of the findings for economic performance in the capitalist democracies and for the democratic management of fiscal policy

the joint choice of retirement age and postretirement hours of work in this paper we develop and estimate the first complete and internally consistent model of the effect of social security on the labor supply of the aged we develop a simple life cycle model that captures the effect of social security on the joint choice of the date of retirement and hours of work immediately after retirement we show that in the presence of social security the budget constraint relating these choices is highly complex and nonlinear and we develop a maximum likelihood procedure for the model that yields consistent parameter estimates our procedure avoids the selectivity biases present in prior studies that have ignored the nonlinearity of the constraint or have examined only self selected subsamples that exclude nonretirees our results show that social security has a significant though relatively small effect on the age of retirement and postretirement hours of work and that the effect of social security grows with advancing age

a measure of horizontal inequity politicians academicians and the general public alike have perceived that the status quo tax and transfer legislation creates inequities among living units tax laws create numerous situations in which living units with seemingly equal abilities to pay are taxed quite different amounts state by state differences in welfare eligibility rules benefit schedules and administrative procedures the general unavailability of cash welfare to childless nonaged healthy couples and single individuals and other features of transfer programs similarly provide vastly different levels of income support to units with equal needs advocates of major tax and welfare reform have marshalled such evidence into a central argument in favor of their proposals while there is wide agreement that the process of redistributing incomes abounds with inequities there have been few attempts to quantify their extent 2 this paper develops a measure of horizontal inequity and illustrates its use section ii discusses the concept of horizontal equity then builds upon familiar lorenz curve gini coefficient analysis to derive the inequity index the third part considers some problems of implementing the measure and illustrates it section iv provides a short conclusion

measuring the influence of unemployment insurance on unemployment experiences this article investigates the comprehensive effects of unemployment insurance ui policies on the amount of time and unemployment that individuals report between jobs the econometric model jointly determines the effects of ui on the lengths of nonemployment spells the classification of these spells as unemployment and the likelihood of collecting program benefits the model carefully attempts to isolate variation in ui benefits attributable to differences in generosity across programs to avoid biases in estimating policy effects induced by other contaminating sources of benefit variation using data on men from the national longitudinal survey of youth the empirical results find a ui recipients typically experience longer spells between jobs at least up to the exhaustion of ui benefits and report substantially larger fractions of these spells as unemployment b weekly benefit amounts exert no significant influence on the likelihood of ui recipiency on the length of spells between jobs or on t

the tradeoff between equality and efficiency short run politics and long run realities in concluding this paper the best way to emphasize what has been argued is to make as clear as possible what has not been argued nothing in the above argumentation or evidence can or is intended to deny that some social welfare programs genuinely serve the long run interests of the poor undoubtedly such programs exist and can be identified as successful other programs exist however that are undeniably making the poor worse off from the perspective of reducing income inequality it is obvious that the successful programs should be maintained and even expanded in ways that further assist the poor while the harmful programs should be terminated unfortunately it is simply not possible politically to select out those programs that do promote broad social goals such as reducing poverty while eliminating those programs that do not this is a point that the present paper is intended to emphasize once you open up the political transfer process to one group no matter how deserving that group may be economic rents are generated that will motivate competition among politically organized interest groups the inevitable result of this competition is a package of programs that serve a variety of interests but which on balance do little if anything to benefit those groups which it was our intention to assist

do means tested transfers reduce labor supply abstract it is frequently argued that recipients of means tested government transfers work less than they would in the absence of the transfer this note shows that this conclusion may not be accurate for many participants in a major housing program

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

cash welfare as a consumption smoothing mechanism for divorced mothers abstract while there has been considerable research on the disincentive effects of cash welfare under the aid to families with dependent children afdc program there is little evidence on the benefits of the program for single mothers and their children one potential benefit of this program is that it provides short run consumption insurance for women at the point that they become single mothers this is only true however to the extent that the program is not crowding out other sources of support such as own savings labor supply or transfers from others i assess the importance of this insurance mechanism by measuring the extent to which afdc smooths the consumption of women who transition to single motherhood through marital dissolution i use longitudinal data on family structure and consumption expenditures on food and housing from the panel study of income dynamics psid matched to information on the welfare benefits available in each state and year over the 1968 1985 period i find that raising potential benefits by one dollar raises the food and housing consumption of women who get divorced and their families by 28 cents this estimate implies that for each dollar of afdc received by this population their consumption of these categories of goods rises by up to 51 cents this is roughly the share of food and housing in the consumption bundle of divorced mothers and their families suggesting little crowdout of other sources of support

the axiomatic approach to three values in games with coalition structure we present a unified framework for a broad class of values in transferable utility games with coalition structure including the owen coalitional value and two weighted versions with weights given by the size of the coalitions we provide three axiomatic characterizations using the properties of efficiency linearity independence of null coalitions and coordination with two versions of balanced contributions inside a coalition and weighted sharing in unanimity games respectively

macroeconomic adjustment and poverty in selected industrial countries the business cycle affects the incidence of poverty as shown by evidence from australia sweden the united kingdom and the united states many of the poor in these countries are outside the labor markets and transfers are a major source of income for many others but the unemployment and wage reductions that occur in recession increase the incidence of poverty major causes of poverty are unemployment in australia and the united kingdom and low wages in the united states similar cyclical effects are observed in sweden but a vast transfer program virtually eliminates poverty there are several policy options for combating poverty caused by recession a combination of unemployment insurance for a limited period followed by a job guarantee is the most effective policy toward unemployment whereas poverty caused by low earnings can be remedied by redistribution through the tax system

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

does unemployment compensation affect unemployment duration abstract we use a flexible hazard rate model with unrestricted spell duration and calendar timeeffects to analyse a dataset including all norwegian unemployment spells during the1990 s the dataset provides a unique access to conditionally independent variation inunemployment compensation we find that a marginal increase in compensation re duces the escape rate from unemployment significantly irrespective of business cycleconditions and spell duration the escape rate rises sharply in the months just prior tobenefit exhaustion while men are more responsive than women with respect to mar ginal changes in compensation women are most responsive with respect to benefitexhaustion keywords unemployment spells business cycles unemployment compensation non parametric duration analysis jel classification c41 j64 the ragnar frisch centre for economic research oslo we wish to thank the re search council of norway for financial support and christian brinck harald goldstein costas meghir espen moen steinar strom rolf aaberge and three anonomyous referees for helpful comments cor respondence to knut roed the ragnar frisch centre for economic research gaustadalleen 21 0349oslo norway e mail knut roed frisch uio no

labor supply response to welfare programs a dynamic analysis previous static analyses of the work disincentive effects of welfare programs are extended to a dynamic context using a sample of continuous longitudinal labor market histories estimates are derived for welfare nonwelfare differences in labor market flows among the states of employment unemployment and nonparticipation the estimates are used to identify the main sources of the lower employment and labor force participation rates and higher unemployment rate of welfare recipients the findings indicate that welfare programs have substantial effects on virtually every labor market transition examined but that the primary source of the static work disincentive effect is slower entry into employment

welfare the earned income tax credit and the labor supply of single mothers during 1984 1996 welfare and tax policy were changed to encourage work by single mothers the earned income tax credit was expanded welfare benets were cut welfare time limits were added and welfare cases were terminated medicaid for the working poor was expanded as were training programs and child care during this same time period there were unprecedented increases in the employment and hours of single mothers we show that a large share of the increase in work by single mothers can be attributed to the eitc and other tax changes with smaller shares for welfare benet cuts welfare waivers training programs and child care programs

poverty comparisons with dependent samples standard inference procedures for poverty comparisons require samples to be independent for many commonly used income samples however this requirement is not ful lled since samples are rotated this note introduces an easy to use method of correction for sample dependency we also apply the method to test changes in u s poverty in the 1990s and evaluate the marginal effects of public assistance on poverty before and after the recent welfare reform

pension wealth and household savings tests of robustness abstract a substantial literature exists on the impact of pension schemes both public and private on the level of household saving yet there is no clear consensus on the impact of pensions on private saving in this paper we show how beliefs about this displacement effect are modified by prior beliefs both about variables which might be relevant in an equation for private savings and about the magnitude of the displacement effect using data for 8279 canadian households and estimates of pension wealth both private and social security which we construct for each household in the sample the estimated displacement effects are found to be relatively robust with respect to both types of prior belief

redistributive effects of transfer programmes in the united kingdom we discuss the redistribution effects of transfer using a conditional choice general equilibrium model we calibrate it to uk data for the early 2000s results indicate that a money metric measure of the welfare value of transfer received by the bottom decile of uk households equals 17 of the cash transfer

the impact of taxes and transfers on job search this article develops a framework for analyzing the impact of taxes and transfers on the length of time a person waits to accept a job while receiving transfer payments it considers the impact of changes in the parameters of a generic tax transfer system characterized by a guarantee and a tax rate on the costs and benefits of search the analytical results indicate that increases in guarantees need not increase duration of unemployment the results for unemployment insurance are a special case of the more general formulation developed in this article in fact increases in guarantees and increases in tax rates may shorten the duration of unemployment while decreasing the labor supply of transfer recipients

female labor supply with a discontinuous nonconvex budget constraint incorporation of a part time full time wage differential this paper incorporates the well documented part time full time wage differential into an empirical labor supply model with both a heterogeneity and a random error term and estimates that model fo

welfare as a cause of poverty a time series analysis since the inception of welfare programs critics have argued that giving aid to the poor dampens their incentive to provide for themselves and their dependents 1 charles murray s losing ground 1984 presents a modern reincarnation of this work disincentive hypothesis he notes that both nominal welfare benefits and caseloads increased during the seventies suggesting that higher benefits cause more people to join the welfare rolls others contend that welfare receipt may be a necessity rather than a matter of personal choice even if the nonworking poor actively sought employment many would not be able to find jobs furthermore many would find only low paying jobs which would not enable them to work their way out of poverty e g abraham 1983 in this view unemployment labor market segmentation and low wages cause poverty which view is correct studies of the effects of welfare typically specify a single model and use regression analysis to test whether the data support its implications in contrast this paper uses the granger 1969 causality test in a system of welfare and employment equations this strategy offers two advantages first regression presumes causality whereas the granger approach tests whether or not causality defined in a technical sense exists second we can use a very general empirical model to test the work disincentive hypothesis as well as the implications of two competing models section 2 presents three models of the welfare caseload and their implied patterns of causality section 3 explains granger s concept of and test for causality in section 4 the test is performed indicating the direction of causality between real afdc benefits the afdc caseload and unemployment we then repeat the exercise using labor force participation rates rather than unemployment rates the paper concludes with a summary of the results and their qualifications

in kind transfers cash grants and the supply of labour abstract this paper corrects the notion that somehow benefits given in kind interfere less with the work leisure choice than cash grants of equivalent monetary value in a simple model the analysis proves that the true effect depends on the extent of the in kind transfer and the substitutability of the good in question with leisure

modelling the take up of means tested benefits the case of housing benefits in the united kingdom official estimates of housing benefit take up rates suggest that up to two million families in the united kingdom ma y not be receiving the help with their housing costs to which they ar e entitled the authors interest in the take up of means tested bene fits is therefore motivated by two concerns the first is the governm ent revenue implications of a change to benefit entitlement levels t he second relates to the welfare of individuals who fail to claim the ir entitlement to benefit in this paper the authors investigate the relationship between the take up of means tested housing benefit in dividual socioeconomic characteristics and the level of entitlement copyright 1987 by royal economic society

sharing costs in highways a game theoretic approach this paper introduces a new class of games highway games which arise from situations where there is a common resource that agents will jointly use that resource is an ordered set of several indivisible sections where each section has an associated fixed cost and each agent requires some consecutive sections we present an easy formula to calculate the shapley value and we present an efficient procedure to calculate the nucleolus for this class of games

the labor force participation of older workers this study examines the decision to participate in the labor force made by persons over 54 years of age through the use of a set of pooled time series cross section observations from the current population survey over the years 1974 80 the analysis emphasizes the effect of two factors on this decision cohort crowding and supplemental security income ssi the empirical results reveal that pressures arising from the relative growth in the youth population led to increased labor market activity by older women that retirement incentives in the form of ssi and social security had a negative effect on female as well as male labor force behavior though the effects were considerably stronger for men and that the differential between men s and women s participation rates was largely a result of the female response to marital status and retirement incentives

tax and education policy in a heterogeneous agent economy what levels of redistribution maximize growth and efficiency this paper studies the effects of progressive income taxes and education finance in a dynamic heterogeneous agent economy such redistributive policies entail distortions to labor supply and savings but also serve as partial substitutes for missing credit and insurance markets the resulting tradeoffs for growth and efficiency are explored both theoretically and quantitatively in a model that yields complete analytical solutions progressive education finance always leads to higher income growth than taxes and transfers but at the cost of lower insurance overall efficiency is assessed using a new measure that properly reflects aggregate resources and idiosyncratic risks but unlike a standard social welfare function does not reward equality per se simulations using empirical parameter estimates show that the efficiency costs and benefits of redistribution are generally of the same order of magnitude resulting in plausible values for the optimal rates aggregate income and aggregate welfare provide only crude lower and upper bounds around the true efficiency tradeoff

public transfers family socioeconomic traits and the job search behavior of the unemployed evidence from puerto rico abstract this paper explores the theoretical and empirical associations between the job search efforts of the unemployed and the socioeconomic characteristics of the family it takes as a point of reference that certain supply side phenomena may contribute to puerto rico s high open unemployment rate the statistical analyses carried out indicate that there does exist what can be labeled luxury unemployment in other words government provided transfer payments generate disincentive effects with respect to the job market behavior of the unemployed moreover the dependency status of the individual within the family group also leads to lower job search effort

income distribution in the united states political action has affected postwar income distribution in the united states mainly through policy induced variations in macroeconomic activity and government transfer benefits in proportion to total income we present a small dynamic model of the connections among the partisan balance of power macroeconomic fluctuations transfer spending trends and income distribution outcomes the model is based on the premise that the parties have different distributional goals and it is designed to identify how shifts in party control of the presidency and the strength of the parties in congress have affected the distribution of after tax after transfer income by influencing cyclical economic performance and the flow of resources to transfer programs we therefore extend the partisan theory of macroeconomic policy to the domain of income distribution outcomes

alternative programs for income redistribution the nit and the nwt economists have devoted considerable attention to the analysis of the advantages and disadvantages of the negative income tax nit as a mechanism for income redistribution surprisingly little attention has been given to any significantly different alternative to the nit most analyses simply compare one variant of the nit to another but recently several writers have suggested that a form of wage subsidy offers significant advantages over the nit 1 this paper is an attempt to provide a more complete comparision of these two forms of transfer programs with an emphasis on the aggregate labor market consequences needless to say no attempt is made to consider all repercussions of these policies instead emphasis is focused on labor supply effects and related conditions for economic efficiency section i is an analysis of the effects of implementing a nit when no other transfer programs are present section ii is a similar analysis for a form of wage subsidy which will be referred to as the negative wage tax or nwt section iii uses the analysis of the preceding sections to provide a comparison of the nit and nwt on two counts their incidence and welfare cost

replacement income duration of unemployment and the migration of unemployed prime age males the relationship between the interstate migration of unemployed males of prime working age i e 25 44 years of age the level of unemployment replacement income and the duration of unemployment spells is addressed through the use of a relatively untapped data source the us census s survey of income and program participation sipp the rich set of details that are provided in this database allows a more precise empirical analysis of the above relationships than has been possible with psid cps and other previously used databases by restricting the sample to a relatively homogeneous segment of the work force its is possible to isolate better the effects of unemployment replacement income and job search duration on the migration decision of unemployed workers without the confounding effects of the variety of demographic factors that previous studies have shown to influence labour force migration the results suggest that for unemployed prime working age males the probability of migration is negativel

a comparison of the effect of welfare programme features on welfare participation one and two parent families the effect of welfare programme characteristics on the decision to enter the welfare system is modelled as a binary discrete choice latent variable model dependent upon an underlying index function the two chief classes of welfare beneficiaries in the us welfare system are analysed two parent families and single female headed families the data set is a large recent non experimental multiyear cross sectional pooled data set derived from the us census bureaus current population survey behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory newly estimated comprehensive descriptive statistics of the entire welfare system for both single female household heads and married couples with children are employed to characterize the welfare system statistically significant estimates of substantial magnitude are obtained for the impacts on welfare participation for the welfare guarantee level the effective tax rate on earned income and the effec

the economic implications of disability insurance in canada the article empirically estimates the effects of disability pensions provided under the canada quebec pension plans on the labor force participation rates of males aged 45 64 years two data sets are used one consists of pooled cross section annual time series data by province for the years 1975 83 the other consists of observations as of 1985 on 651 males in the specified age group naive estimation results from both sets of data suggest a large negative effect of pension income in the case of the micro data this effect becomes small and statistically nonsignificant when more sophisticated estimation methods are used

do welfare benefits cause the welfare caseload analyses of the welfare system generally examine one of five competing models 1 the work disincentive model 2 the human capital model 3 the macroeconomic model 4 the public choice model or 5 the cost of job loss model this paper employs the granger causality concept and the multiple rank f statistic to test the implications of all five of these models simultaneously the results offer modest support to all but the macroeconomic model the relationships among welfare benefits caseloads and labor market conditions appear to be too complex to be fully captured by a single model

an economic approach to business ethics moral agency of the firm and the enabling and constraining effects of economic institutions and interactions in a market economy the paper maps out an alternative to a behavioural economic approach to business ethics special attention is paid to the fundamental philosophical principle that any moral ought implies a practical can which the paper interprets with regard to the economic viability of moral agency of the firm under the conditions of the market economy in particular competition the paper details an economic understanding of business ethics with regard to classical and neo classical views on the one hand and institutional libertarian thought on the other hand implications are derived regarding unintentional and passive intentional moral agency of the firm the paper moves on to suggest that moral agency can be economically viable in competitive market interactions which is conventionally disputed by classical neo classical and institutional libertarian economics the paper here conceptualises active moral agency of the firm as the utilisation of ethical capital in firm stakeholder interactions this yields a reinterpretation of instrumental stakeholder theory

american federalism welfare policy and residential choices the relationship between welfare benefit levels and the residential choices of the poor raises two issues for federalism in the united states do state benefit levels affect the residential choices of the poor do residential choices of the poor affect the level at which a state sets its benefit levels empirical studies have seldom studied the interconnection between these two issues this research estimates simultaneously the mutual effects of welfare benefits and poverty rates while controlling for other economic and political variables when benefit levels become high the size of the poverty population increases conversely when poverty rates become high benefit levels are cut the findings are consistent with the claim that state determined benefit levels distort policy and residential choices

should social security benefits be means tested social security retirement benefits distort the saving decisions of workers who are rational enough to save for their future since the implicit rate of return in an unfunded social security program is less than the marginal product of capital the resulting decline in saving causes a welfare loss the present paper examines the conditions under which the welfare loss could be reduced by replacing the current universal social security program with a means tested program that pays benefits only to those individuals with little or no other retirement income or assets every society must solve the problem of supporting those individuals who become too old to work but have not made adequate provision for their own old age by saving when they were young at the present time the major industrial countries of the world have responded to this problem by creating social security programs that tax the working population and use the proceeds to provide a universal benefit to all retirees regardless of their financial condition this universal provision of social security benefits distorts the saving decisions of those workers who are rational enough to plan for the future since the implicit rate of return that taxpayers get on their this research is part of the nber study of the government budget and the private economy a more complete version of this paper with some numerical calculations is available as nber working paper no 1775 feldstein 1985b i am grateful to gilbert metcalf for assistance with the calculations presented in this paper and for helpful discussions for a discussion of the effect of promised retirement benefits on the savings of employees see feldstein 1974 1982 barro 1974 1978 has discussed an interesting

income distribution within nations problems of cross national comparison in recent years a large number of cross national studies have examined the causes and consequences of income inequality within nations unfortunately few of these studies have attended very carefully to problems of measurement and definitional consistency that can seriously undermine the comparative use of currently available data on income shares this article offers a discussion of the major theoretical and practical problems that can arise in measuring and comparing patterns of income distribution across nations focusing on the completeness of income coverage the unit of analysis the time period over which income is measured the scope of population coverage the underreporting of income and the effect of public sector fiscal policies it then assesses major published sources of cross national data on the size distribution of income in light of these problems finally the article offers several suggestions for minimizing the negative consequences of measurement problems that remain in even the be

labour supply impacts of effective welfare programme parameters a reanalysis we quantify the impact of effective welfare programme parameters on the labour supply of single female household heads the primary group of welfare recipients in the usa our panel of data is derived from the us census bureau s current population survey for the years 1979 to 1990 inclusive behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory we find that effective welfare gurantee levels and the effective tax rate on earned income both significantly decrease labour supply the marginal effects of these welfare programme parameters are economically small a us 1000 increase in the expected welfare guarantee level reduces annual labour supply by about 36 hours a 10 percentage point increase in the effective tax rate on earned income reduces annual labour supply by about 7 5 hours

unemployment insurance in the united states layoff incentives and cross subsidies we survey unemployment insurance ui in the united states and provide new evidence on the ui payroll tax most ui receipt is due to firms that pay part of the ui costs of their layoffs but weak experience rating leads most firms to pay considerably less than the full costs industries consistently receiving subsidies from the ui system are construction manufacturing and mining finally a large fraction of layoffs resulting in payment of ui are made by firms that are not charged for the costs of the claim because they have employed the individual for less than 2 quarters

uncertain lifetime consumption and dissaving in retirement this paper asks whether the continued accumulation or mild dissaving observed among the retired can be explained by uncertain lifetime in the absence of annuities after an initial period influenced by borrowing constraints under constant relative risk aversion uncertain lifetime depresses consumption by a proportion increasing with age if the elasticity of intertemporal substitution in consumption is small illustrative computations based on actual income and survival data show that plausible elasticities are sufficiently small to give this effect the reduction in consumption is large enough to explain much of the lack of decumulation by the elderly

explaining the black white gap in labor force participation among women heading households for the first time in this century black women are participating in the labor force at lower rates than are white women the black white gap in female labor force participation is driven by those in the severest need of income women heading households the author compares three explanations of the black white gap in labor force participation among female household heads lack of human capital lack of opportunities resulting from industrial restructuring and disarticulation from mainstream institutions as described by theories of the underclass using a representative national sample from the panel study of income dynamics he finds that lower rates of labor force participation among black women heading households are determined by black white differences in human capital as well as by characteristics associated with a breakdown in the processes linking black women to the labor market overall the largest impediments to labor force participation among women heading households are dropping out of high school having a child under the age of six in the household and being a long term welfare recipient

welfare employment and income evidence on the effects of benefit reductions from california in recent years there have been unprecedented changes in welfare the 1996 personal responsibility and work opportunity reconciliation act abolished afdc and created temporary assistance for needy families tanf a set of block grants that gave states nearly complete freedom in designing their welfare programs between march 1994 and march 2001 welfare caseloads fell 59 percent to 2 1 million families from 5 1 million these changes in welfare caseloads mirror changes in employment rates of single women which rose to 76 5 percent in 1998 1999 from 67 5 percent in 1989 1990 after a recession early in the decade the economy experienced the longest economic expansion in u s history beginning in march 1991 with gdp growing for 120 consecutive months the unemployment rate fell to 4 0 percent in 2000 its lowest level since 1969 with the strong economy state and federal budgets prospered the good fiscal climate and the funding and flexibility of tanf allowed many states to expand child care benefits health insurance and transportation services for low income families and to change welfare rules so that recipients could keep a greater share of earned income than was previously the case the overwhelming majority of pre tanf welfare waivers and current state tanf plans employ one or more of the following building blocks mandatory employment services earnings supplements and time limits on welfare receipt there is a considerable amount of emerging evidence that these changes along with the strong economy and expansion of the earned income tax credit eitc increased employment of low skilled families see e g dan bloom and charles michalopoulos 2001 jeffrey grogger 2001 hotz et al 2001 bruce meyer and dan t rosenbaum 2001 yet if history is any guide to the future state policymakers facing deteriorating fiscal climates will contemplate cutting welfare benefits this paper summarizes results from a larger paper hotz et al 2002 in which we analyze data from an experimental evaluation of welfare reform in california during the early part of the 1990 s starting in 1991 california experienced a severe economic downturn prompted by the very weak state economy and sharply rising welfare caseloads california implemented changes in its aid to families with dependent children afdc program that included among other changes a 15 percent reduction in the maximum benefits provided to families on aid we exploit these data to assess the impact of these changes on the employment labor market earnings and levels of disposable income for low income households because this experiment was run for almost six years we are also able to assess the long run effects of the benefit changes understanding how welfare reforms especially benefit reductions affect employment and financial resources available to poor households is important given the goal of work based welfare reforms to move these families toward economic self sufficiency

a multiple time series analysis of labor supply and earnings in economic development abstract using multivariate time series techniques the dynamics of male and female labor supply and earnings in puerto rico are examined during a period of rapid economic developemnt 1953 1978 the temporal analysis suggests that aggregate male and female labor force participation rates are exogenous to male and female earnings in addition continous declines in male participation have been partly responsible for increases in both male and female earnings and a narrowing of relative earnings differentials the study also finds that the advent of the food stamp program in 1975 has resulted in a small reduction in male labor force participation moreover the inclusion of food stamps as an intervention component is quite useful in forecasting the male participation rate the forecasting accuracy of univariate and multivariate models is assessed with the result that in every instance the multivariate transfer functions prove superior overall the results support the incorporation of multiple time series in econometric studies of developing countries and provide evidence of its usefullness for development planning and policy

moral agency profits and the firm economic revisions to the friedman theorem the paper reconstructs in economic terms friedman s theorem that the only social responsibility of firms is to increase their profits while staying within legal and ethical rules a model of three levels of moral conduct is attributed to the firm 1 self interested engagement in the market process itself which reflects according to classical and neoclassical economics an ethical ideal 2 the obeying of the rules of the game largely legal ones and 3 the creation of ethical capital which allows moral conduct to enter the market process beyond the rules of the game points 1 and 2 position the friedman theorem in economic terms while point 3 develops an economic revision of the theorem which was not seen by friedman implications are spelled out for an instrumental stakeholder theory of the firm

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

solidarity within a fixed community we study the consequences of a solidarity property that specifies how a value for cooperative games should respond if some player forfeits his productivity i e becomes a null player nullified solidarity states that in this case either all players weakly gain together or all players weakly lose together combined with efficiency the null game property and a weak fairness property we obtain a new characterization of the equal division value

do welfare asset limits affect household saving evidence from welfare reform we use data from the panel study of income dynamics to estimate the effect of new saving incentives implemented as part of the 1996 welfare reform on household saving economic theory predicts that loosening asset limits will increase total savings for households with a large ex ante probability of welfare receipt such as female headed households with children we follow a sample of female heads with children and find that in both absolute terms and relative to comparison groups of male heads and female heads without children there has been no effect of welfare policy changes on the saving of at risk households

when do women use aid to families with dependent children and food stamps the dynamics of eligibility versus participation this paper investigates dynamic patterns in the relationship between eligibility and participation in the aid to families with dependent children afdc and food stamp programs using monthly longitudinal data from the survey of income and program participation the results indicate that there are many relatively short eligibility spells that do not result in program participation and end with increases in income participation is most likely to occur among women with lower current and future earnings opportunities and is affected by locational and policy parameters those who elect to participate in these programs tend to start receiving benefits almost immediately upon becoming eligible a substantial number of women exit these programs before their eligibility ends among at least some of these women it is likely that unreported changes in income are occurring in 1989 if all eligible single parent families had participated in afdc and food stamps benefit payments in these programs would have been 13 5 billion higher

unemployment benefit duration and incentives in britain how robust is the evidence abstract recent years have seen considerable advances in the econometric treatment of micro data in models of unemployment duration this paper examines the evidence from such models concerning the effects of unemployment benefits on incentives to work in britain widely accepted results of a small but significant benefit effect are reproduced using a sample of 1 231 unemployed men however these results are only found when benefit receipt is assumed to follow a hypothetical pattern which is shown to be unrealistic and over generous when more realistic calculations of benefits are used no benefit effect is found the paper also argues that search theory is of little help in determining the choice between competing functional forms and explanatory variables results concerning benefits are shown to be sensitive to the latter