credit constraints and the phenomenon of child labor abstract this paper develops an overlapping generations general equilibrium model where inefficient child labor arises due to credit constraints it derives a positive relationship between inequality in the distribution of income and the incidence of child labor looking at policy implications it shows how trade sanctions against countries using child labor may fail to reduce the incidence of child labor it discusses some alternative policies to reduce the incidence of child labor

the rotten kid theorem meets the samaritan s dilemma a familiar result in the economic theory of the family is becker s rotten kid theorem this theorem states that altruism by a family member will lead other selfish members to act efficiently from the family viewpoint we extend becker s one period model to two periods and show that parental altruism can result in an inefficiency known in other contexts as the samaritan s dilemma implications of this for transfer arrangements within the family and for the ricardian equivalence theorem are drawn

bequests gifts and social security this paper analyses the very long run or stationary state impact of an unfunded social security system we use an overlapping generations model framework a key feature is that while parents care about their children and can leave non negative bequests to them children also care about their parents and can make non negative gifts to them we show that the possibility of negative net bequests may make social security less harmful to private wealth accumulation than would otherwise be the case a subsidiary finding is that risk loving behaviour may emerge for some households due to the nature of intergenerational transfers within family lines

individual transferable quota markets under illegal fishing the use of individual transferable quotas in fisheries has been considered an opportunity to achieve a given total allowable catch with a maximum social benefit one of the assumptions used in obtaining that result is that the system is in perfect compliance the presence of violations and the need for enforcement of tradable property rights systems in fisheries has not received much attention in the literature the incidents of non compliance however may affect the performance of transferable property rights based fisheries in unexplored ways in this paper we adapt previous literature on enforcing emissions trading programs to analyze a positive model of fisherman behavior that operates under a perfectly competitive individual transferable quota system while recognizing the opportunities for violations of quota holdings given incomplete enforcement considering a poorly enforced individual transferable quota system we are able to obtain a number of implications for the current and future equilibrium of the quota market the time paths of the fishery and the proper design of a policy rule on total allowable catch tac

capital taxation and accumulation in a life cycle growth model almost all of the serious economic work on savings decisions within the past decade has relied on some variant of the life cycle hypothesis in which savings arise out of individual choices of an optimum lifetime consumption path this paper reexamines the incidence and welfare consequences of capital income taxes within a realistic life cycle model the results suggest that the elimination of capital income taxation would have very substantial economic effects for example a complete shift to consumption taxation might raise steady state output by as much as 18 percent and consumption by 16 percent the long run welfare gain from such a shift would for plausible parameter values exceed 150 billion annually stated somewhat differently shifting to consumption taxation would raise the lifetime utility of the representative consumer by the equivalent of about six years income in the new steady state these estimates dwarf estimates of the static welfare cost of taxation and significantly exceed even extreme previous estimates of the dynamic loss this study departs from earlier analyses of the effects of taxes on capital income in several respects probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving it is shown below that the common two period formulation of saving decisions yields quite misleading results a more realistic model of life cycle savings demonstrates that for a wide variety of plausible parameter values savings are very interest elastic this implies that shifting away from capital income taxation would significantly increase capital formation making possible long run increases in consumption many studies of the welfare effects of capital income taxation have ignored the general equilibrium effects of increased capital formation in an economy with life cycle savings there is no presumption that the undistorted growth path corresponds to any sort of social optimum as peter diamond has shown life cycle savings can lead to a steady state capital intensity either greater or less than the golden rule level more generally it is clear that there is no reason to believe that a life cycle economy will maximize any particular intertemporal social welfare function a fundamental tenet of welfare evaluation is that preexisting distortions must be considered in evaluating the consequences of tax changes the results presented in this paper take explicit account of the nonoptimal character of the no tax steady state this explains in large part why such a sizeable welfare effect of capital taxes is found in an economy far from the golden rule level of capital intensity there are substantial gains in steady state consumption achievable through increased capital formation section i of the paper examines the aggregate savings function in a continuous time life cycle framework the second section clarifies the differences between wage and consumption taxes an aggregate production function is added to complete the model in the third section the effects of changes in capital taxes on both steady state incidence and welfare are considered within a general equilibrium framework the final section of the paper discusses some implications of the results and suggests areas which appear to warrant further study assistant professor of economics massachusetts institute of technology and research analyst national bureau of economic research i am grateful to alan auerbach martin feldstein laurence kotlikoff to the participants in the nber workshop on business taxation and to the harvard public finance seminar for useful discussions james poterba and james buchal performed the numerical calculations

intergenerational altruism dynastic equilibria and social welfare are three central findings first under relatively weak conditions welfare optima cannot be implemented as dynastic equilibria with positive levels of transfers second intergenerational altruism ordinarily renders the objectives of social planners dynamically inconsistent thereby making implementation of welfare optima problematic third if a planner successfully resolves dynamic inconsistency by committing himself to respect the preferences of deceased generations and if there are a sufficient number of prior generations then in a specific set of cases dynastic equilibria are approximately welfare optimal

uncertainty in the theory of renewable resource markets the natural growth rate of most renewable resource stocks is in part stochastic this paper examines the implications of such ecological uncertainty for competitive equilibrium in a market with property rights we show that stochastic fluctuations add a risk premium to the rate of return required to keep a unit of stock in situ and we examine the effects of fluctuations on resource rent examples are used to show that extraction can increase decrease or be left unchanged as the variance of the fluctuations increases depending on the extent of market self correction regulatory implications are also discussed renewable resource economics has traditionally been concerned with the study of dynamically optimal harvesting policies given a deterministic function for the natural growth of the resource stock issues have included the existence and characteristics of steady state equilibria for the optimally managed resource the need for and design of regulatory policies to prevent over exploitation and conditions under which as a social optimum or otherwise the resource will be exploited to extinction 1 much of this work has been based on the assumption of a fixed and exogenous price for the harvested resource typically resulting in bang bang solutions for the harvesting policy however some recent papers make price endogenous and thereby describe how the extraction rate and the rate of return and asset value of the resource behave in a competitive market with property rights 2

rational ponzi games when can a government run a rational ponzi game i e issue debt and never pay back any interest or principal the transversalit y condition of each individual implies that such schemes require an i nfinity of lenders given this horizons are unimportant ponzi games cannot be ruled out by assuming that agents have infinite horizons the authors point out both the basic similarity of and some key diff erences between rational ponzi games and asset price bubbles or fiat money regarding international debt the analysis implies that what matters for the feasibility of rational ponzi games are conditions in the lenders not the borrowers economy copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

welfare impact of a ban on child labor i introduction the issue of child labor has recently been the subject of a surge in formal economic analysis according to the international labor organization 2006 there has been a significant decrease in child labor and an even steeper decline in hazardous child labor nevertheless in 2004 there were still 218 million child laborers of whom 126 million were in hazardous work the increase in research around this topic is in part the result of the growing awareness of the persistence of child labor around the world and the importance of developing theoretical models that help us understand the incidence of child labor and its implications as only then can we recommend and implement effective policy interventions the economics literature is ambiguous on the desirability of a ban on child labor child labor is typically viewed as the result of some deeper problem in the economy and addressing child labor without solving the problem that leads to its occurrence can make children worse off for example dessy and pallage 2005 present an environment where although child labor has a negative direct impact on children s well being it is the best available choice for children hence a ban on child labor even on its worst forms deprives children of their best possible choice and can make children worse off standard arguments for the imposition of restrictions on child labor are based on the existence of externalities such as positive externalities from a well educated population see udry 2006 a ban on child labor leads children to allocate more resources to education brings the average levels of human capital closer to the optimal and consequently increases welfare constraining the amount of labor supplied by children is also often suggested as an instrument to move the economy toward a desired equilibrium in environments where multiple equilibria can emerge as in dessy and pallage 2001 and basu and van 1998 banning child labor can also be an instrument to achieve increases in efficiency in the presence of capital market imperfections in baland and robinson 2000 capital market imperfections do not allow altruistic parents to internalize the negative impact of child labor on children s human capital accumulation a restriction on the amount of time allocated to work by children is suggested to reduce the resulting inefficiently high levels of child labor finally rogers and swinnerton 2002 advance parents incomplete information on the type of work safe or hazardous their children perform as an argument for a ban on the worst forms of child labor 1 in this article i show that in a standard overlapping generations economy with parental altruism calibrated to the 1880s a ban on child labor increases parental transfers and raises children s as well as the average levels of welfare in the short run and in the long run this result introduces a new rationale for imposing restric ons on child labor adding to a debate still in its early stages of development 2 in an overlapping generations economy with altruism the unconstrained nash cournot equilibrium does not maximize the average welfare of currently living agents as was shown in bernheim 1989 nor the welfare of children and generates suboptimal levels of parental transfers by reducing the income earned by children a ban on child labor reduces children s consumption raising their marginal utility of consumption and parents respond by increasing transfers to children hence the ban places children at a point in their parents reaction function that results in a higher level of parental transfers by inducing an increase in parental transfers the ban on child labor moves the economy closer to the social optimal generating aggregate welfare gains children are made better off because they receive more transfers and do not work parents are made worse off because they need to decrease consumption and leisure to increase parental transfers however the raise in their children s lifetime utility partially offsets this effect

sunk cost and entry exit decisions under individual transferable quotas why industry restructuring is delayed the paper shows that explicit modelling of sunk cost and a firm s entry exit decision in a traditional deterministic investment model may give an explanation of the slow transition to the optimal fleet structure following the introduction of individual transferable quotas itqs the analysis shows that the annual lease unit price of quota may be in a range where the long run fleet structure will not be attainable at once over time firms with zero gross investment as optimal behavior may leave the industry as the capital decays and over the transition period the optimal fleet structure prevails

child labor and the labor supply of other household members evidence from 1920 america this paper analyses the effect of child labor on household labor supply using 1920 us census micro data the aim of the analysis is to understand who in the household benefits from child labor in order to identify a source of exogenous variation in child labor i use state specific child labor laws i find that a rise in the proportion of working children by household is associated with no variation in parents labor supply i also find a strong negative externality among children as the proportion of working children by household rises everything else equal the probability that each child works falls while the probability that he attends school rises this suggests that parents redistribute entirely the returns from child labor to the children in the household consistent with a model of household labor supply with fully altruistic parents

long term industrial equilibrium in an itq managed fishery this paper discusses long term equilibrium in a fishery managed by individual transferable quotas rising prices or falling capital costs become capitalized in a higher value of quotas implying higher capital costs for holding quotas this may in fact reduce the size of each firm and lead to more firms existing in long term equilibrium resource rent taxation by letting firms lose a certain share of their quota holdings each year is discussed and shown to be neutral

disentangling effects of policy reform and environmental changes in the norwegian coastal fishery for cod we construct a detailed bioeconomic model of the norwegian coastal cod fishery this fishery has been open access up to the policy change during the cod crisis of 1989 1990 to answer to what extent the subsequent increase in biomass and profits was due to improved management we isolate the effect of environmental variability projecting stock and harvest forward in the counterfactual scenario of no intervention we show that the policy had a small positive impact on biomass but a pronounced positive effect on profit the main drivers of profit gains are increases in productivity and savings in fuel and labor costs jel d23 q22

quota enforcement in resource industries self reporting and differentiated inspections quotas are frequently used in the management of renewable resources and emissions however in many industries there is concern about their basic effectiveness due to non compliance we develop an enforcement model of a quota regulated resource and focus on a situation with significant non compliance and exogenous constraints on fines and enforcement budget we propose a new enforcement system based on self reporting of excess extraction and explicit differentiation of inspection rates depending on compliance history we use differentiated inspections to induce firms to self report excess extraction this system increases the effectiveness of the quota by allowing the regulator to implement a wider range of aggregate extraction targets than under traditional enforcement while ensuring an efficient allocation of extraction in addition inspection costs can be reduced without reductions in welfare

production and investment decisions under sunk cost and temporal uncertainty building on glenn johnson s asset fixity theory this article introduces sunk cost and temporal uncertainty in jorgenson s neoclassical theory of investment under the assumption of risk neutrality we show sunk cost and temporal risk affect the implicit rental value of capital and investment and entry exit decisions results suggest there are important interactions between sunk cost and the effects of temporal uncertainty on production behavior

the economics of child labor if child labor as a mass phenomenon occurs not because of parental selfishness but because of the parents concern for the household s survival the popular argument for banning child labor loses much of its force however this assumption about parental decision making coupled with the assumption of substitutability in production between child and adult labor could result in multiple equilibria in the labor market with one equilibrium where children work and another where adult wage is high and children do not work the paper establishes this result and discusses its policy implications copyright 1998 by american economic association

minimum information management in fisheries this paper deals with problems of optimal management of common property fisheries it advances the proposition that many fisheries management schemes which are theoretically capable of generating efficiency are actually not practicable owing to their huge informational requirements this applies for instance to management by means of corrective taxes subsidies the paper proceeds to show that there exists under fairly unrestrictive conditions market based management systems that require minimal information for their operation but lead nevertheless to efficiency in common property fisheries one such system is the individual transferable share quota system

fishermen s discount rates in itq systems in this paper the fishermen s planning and investment horizon is investigated using their discount rates it is shown that one might calculate the implicit discount rate in an itq regulated fishery from the available information from the quota market this gives information about how well the system is working in particular discount rates where itq systems are in operation initially were very high before they started to decrease this implies that it take some time to reap the full benefits of an itq system it also gives arguments for not letting itqs be perpetual property rights and hence enables more flexibility in the management system

rent capture in a rights based fishery abstract the paper compares four methods of rent capture in a fishery managed with individual transferable quotas using simulations from a unit profit function some theoretical properties of a quota rental charge profit charge lump sum charge and an ad valorem royalty are examined and then compared in simulations in terms of the distribution of profits distortions to the fishery the relative burden on fishers and flexibility to adjust to changes in the fishery

itqs firm dynamics and wealth distribution does full tradability increase inequality concerns over the re distributive effects of individual transferable quotas itq s have led to restrictions on their tradability we consider a general equilibrium model with firm dynamics to evaluate the redistributive impact of changing the tradability of itqs a change in tradability would happen for example if permits are allowed to be traded as a separate asset from ownership of an active firm if the property right is associated with ownership of an active firm the permit can be leased in each period but it is not possible to exit the industry and keep the right however allowing the permits to be traded as a separate asset has two effects first it leads to a greater concentration of production in the industry second it directly converts a non tradable asset into a tradable one and this is equivalent to giving a lump sum transfer to all firms the first effect implies a concentration in revenues while the second implies a redistribution of wealth we calibrate our model to match the observed increase in revenue inequality in the northeast multispecies groundfish u s fishery we show that although observed revenue inequality measured by the gini coefficient increases by 12 wealth inequality is reduced by 40

on barro s theorem of debt neutrality the irrelevance of net wealth the effects of national debt on real economic activity has been a recurring topic in the literature on macroeconomic policy analysis since the time of adam smith the problem is usually stated as follows for a given level of government spending is the economy sensitive to the financing mix between tax and debt historically attention has focused on the question of whether or not individuals perceive government bonds as net wealth the link between wealth and real activity being taken as given the main point of debate is well established the issue of bonds raises private assets by the full value of the bonds the corresponding tax liabilities for interest payments and retirement of the debt extend indefinitely into the future the perception of bonds as net wealth would then appear to depend on the length of the individual s optimization horizon the most recent contribution to this debate was made by robert barro 1974 in which he argued that despite the limitation of finite lives bonds will not be regarded as net wealth in a system characterized by operative intergenerational transfers the essence of his argument is that inclusion of a bequest motive effectively converts a finite horizon into an infinite one in that paper barro acknowledged a potential limitation on his proof of the neutrality result it was only valid for bonds that are redeemed at a known point in the future this limitation was raised again in a subsequent exchange with martin feldstein in which barro 1976 agreed that for a growing economy an increase in steady state per capita debt will generate net wealth if the rate of growth is greater than the interest rate however he argued that such a steadystate growth situation would not be consistent with rational utility maximizing behavior the main theme of this paper is that the literature has focused attention on the wrong question the real effects of national debt are independent of whether or not individuals perceive the debt as net wealth the correct question is whether or not changes in the level of debt force individuals into patterns of intertemporal consumption that they are unable to neutralize by adjustments in their portfolio behavior viewing neutrality in this light leads to some reinterpretation of the conditions under which neutrality is likely to hold my analysis starts where barro and feldstein leave off within the framework of the overlapping generations model with gift and bequest motives i show that steady state equilibrium growth is consistent with a growth rate in excess of the interest rate indeed without specific knowledge of the parameters of the economy there are no a priori grounds on which to expect any particular relationship between the growth and interest rates more importantly so long as it is valid to view the aggregate economy as behaving like a composite individual changes in the steady state level of government debt are neutral regardless of which relationship prevails provided one or the other of the intergenerational transfer motives is operative i will refer to this as the extended neutrality theorem section i presents an analysis of steadystate growth with gift and bequest behavior the steady state growth path is shown to lie above the golden rule solution if the gift

operative gift and bequest motives the ricardian equivalence theorem which is the proposition that changes in the timing of lump sum taxes have no effect on assumption or capital accumulation depends on the exist of operative altruistic motives for intergenerational transfers these transfers can be bequests from parents to children or gifts from children to parents in order for the ricardian equivalence theorem to hold one of these transfer motives must be operative in the sense that the level of the transfer is not determined by a corner solution resulting from a binding non negativity constraint this paper derives conditions that determine whether the bequest motive will be operative the gift motive will be operative or neither motive will be operative in a model in which consumers are altruistic toward their parents and their children this abstract was borrowed from another version of this item

prices versus quantities in fisheries models this paper discusses the conditions for generalizing the analysis in weitzman 1974 to fisheries it is shown that it is straightforward to generalize the analysis if the cost function is direct additively separable in stock size and catches this leads to the conclusion that the analysis holds for a schooling fishery with and without search costs but it might not hold for a search fishery a further result is that for a schooling fishery without search costs where the marginal cost function is steeper than the marginal benefit function taxes are likely to be preferred over individual transferable quotas

property rights in a fishery regulatory change and firm performance a new method is introduced and applied to the british columbia halibut fishery to analyze changes in productivity of firms harvesting a natural capital stock the index number technique decomposes the contributions of output prices variable input prices fixed inputs and productivity to firm profits adjusted for changes in the natural capital stock an application of the method is given using micro level data from a common pool resource the indexes provide a ready made comparison of all firms to the most profitable firm per unit of resource stock benchmarking with the decompositions also allows firms and regulators to improve overall industry performance by allowing them to analyze what components are contributing most to relative economic profits

private property and economic efficiency a study of a common pool resource abstract the british columbia halibut fishery provides a natural experiment of the effects of privatizing the commons using firm level data from the fishery 2 years before private harvesting rights were introduced the year they were implemented and 3 years afterward a stochastic frontier is estimated to test for changes in technical allocative and economic efficiency the study indicates that 1 the short run efficiency gains from privatization may take several years to materialize and can be compromised by restrictions on transferability duration and divisibility of the property right 2 substantial long run gains in efficiency can be jeopardized by preexisting regulations and the bundling of the property right to the capital stock and 3 the gains from privatization are not just in terms of cost efficiency but include important benefits in revenue and product form

dynamic efficiency in the gifts economy abstract in the standard analysis of overlapping generations economies with gifts from children to parents each generation takes the actions of other generations as given the resulting equilibrium is dynamically inefficient in reality however parents realize that children will respond to higher parental saving by reducing gifts for a broad class of gift economies this implicit tax on saving pushes the equilibrium to dynamic efficiency this result reestablishes the potential relevance of the gift model to the us economy renders moot an important part of the ricardian equivalence debate and provides a motivation for a type of social security system

public versus private education when differential fertility matters we assess the merits of different education systems in a framework that accounts for the joint decision problem of parents regarding fertility and education specifically we compare the implications of a public and a private schooling regime for economic growth and inequality we find that private schooling leads to higher growth when there is little inequality in human capital endowments across families in contrast when inequality is high public education yields higher growth by reducing fertility differentials in addition public schooling leads to income convergence while private schooling can result in ever increasing inequality our analysis highlights theimp ortanceof accounting for endogenous fertility differentials when analyzing educational policies

a note on uncertainty and rent capture in an itq fishery abstract this note addresses the effect of uncertainty on the expected resource rent the short run quota equilibrium and the methods of rent capture in an individual transferable quota fishery with heterogeneous fishers it presents some new results on the effects of output price uncertainty on the quota demands the short run equilibrium and the possible choice of a method of rent capture

child labor cause consequence and cure with remarks on international labor standards although the literature on child labor is enormous it lacks a common theoretical foundation in this paper analytical survey of this field is provided keeping in mind that this is an area where the primary reason for theorizing is ultimately to influence policy overall it is noted that the literature on child labor is an illustration of abundance and anarchy although empirical writings on child labor are numerous they are not usually founded on theory it is argued that there is much that can be done in curbing the issue of child labor several theories were studied in this paper including collaborative intervention such efforts include public action which alters the economic environment such that the parents of their own accord prefer to withdraw the child from labor force another strategy involves the government a legal intervention is enforcing a total ban on the subject although such interventions have good intentions some of them may not be feasible in general it is better to take economy wide measures against child labor and if there is to be a sector specific ban it should be based on the working conditions of that sector rather than the destination of the goods

strategic dynamic interaction abstract the motivation for this paper is fishing legislation that divides a fishery into regions each of which is exploited by a single firm as the regions have common borders an analysis based on models with one firm and one region would lead to erroneous results an alternative motivation is the problem of a fishery with several interacting species each exploited by a single firm in this paper we assume that fish move between regions therefore the stock in one region depends not only on previous stock and catch in the region but also on the stock and catch in neighboring regions in the multiple species interpretation these movements correspond to the interactions between species we use a multisectoral differential duopoly model in order to capture the strategic interactions of the firms over time the model is solved for an example in which varying levels of dependence between regions can be compared

is child labor inefficient we build a model of child labor and study its implications for welfare we assume that there is a trade off between child labor and the accumulation of human capital even if parents are altruistic and child labor is socially inefficient it may arise in equilibrium because parents fail to fully internalize its negative effects this occurs when bequests are zero or when capital markets are imperfect we also study the effects of a simple ban on child labor and derive conditions under which it may be pareto improving in general equilibrium we show that the implications of child labor for fertility are ambiguous

itq s in chile measuring the economic benefits of reform in 2001 an individual operationally transferable quota system was introduced for all the most important industrial fisheries in chile this system was put in place after years of declining stocks and over investment in this paper we describe this reform and estimate related allocative efficiency benefits for the most important industrial fishery in the country the southern pelagic fishery benefits were estimated using a bioeconomic model estimated using data for the 1985 2004 period the estimated model was then used to generate simulated scenarios of the evolution of this fishery in a 20 year horizon with and without the itq system in place the benefits of the reform can then be estimated by comparing the fishery s costs in the scenarios with and without itqs this approach allows benefits to be estimated using more realistic counterfactual scenarios than just comparing the fishery before and after the reform estimated discounted net benefits reach us 166 million in the period 2001 2020 fleet size fell from 149 active boats in 2000 to 57 in 2004 as a direct consequence of the reform among the interesting features of the chilean experience is the way the political economy of the reform was facilitated by the prior introduction of de facto individual quotas within the framework of fishery experimental activities when the authorities closed the southern pelagic fishery because of biological problems between 1997 and 2000 they organized experimental fishing expeditions in which participant boats were given the right to fish a certain amount of resources per expedition this pseudo quota system allowed fishermen to experience directly the benefits of individual quotas and that was instrumental to the political agreement leading to the reform it is important to note that the chilean southern industrial pelagic fishery has average catches of over 1 4 million tons a year making it one of the largest fisheries in the world to be regulated by individual quotas

resource rights and markets in a general equilibrium model of production rights to a free resource lead to distributional deadweight losses in partial equilibrium the present paper examines related distortions in a general equilibrium model of production with output prices constant for the small open economy the free resource can result in lower output than a market with weak substitution in the other sector the free resource also leads to a convex production frontier implying a price increase lowers output in the sector regarding policy an import tariff export subsidy or price support would lower sector output these general equilibrium distortions increase the incentives to favor resource markets over rights

optimal allocation of tac and the implications of implementing an itq management system for the north east arctic cod first we study the allocation rule applied to split the norwegian total allowable catch for cod between coastal and trawler vessels second we explore the bioeconomic implications of an itq management system for this fishery a model combining a cannibalistic biomodel with cooperative game theory is developed key results from the study are 1 the current allocation rule acts in opposite fashion to what may be considered bioeconomically optimal and 2 an itq system for this fishery is likely to result in economic losses as the biological advantages of harvesting with the two vessels types may be lost

the optimal distribution of pollution rights in the presence of political distortions a critical issue in designing a system of tradable emission permits concerns the distribution of the initial pollution rights the purpose of this paper is to investigate how the initial rights should be optimally set when the determination of the number of tradable permits is subject to the influence of interest groups according to the coase theorem in the case where there are low transaction costs the assignment of the initial rights does not affect the efficiency of the final resource allocation in the presence of political pressure we show that the distribution of the initial rights has a significant effect on social welfare in contrast to the conventional results we find that grandfathered permits may be more efficient than auctioned permits even after taking into consideration the revenue recycling effect

das human kapital a theory of the demise of the class structure this paper suggests that the demise of the capitalists workers class structure was a socio economic transformation orchestrated by the capitalists in reaction to the increasing importance of human capital in sustaining their profit rates physical capital accumulation in the process of industrialization enhanced the importance of human capital in production and generated incentives for capitalists to support the provision of public education for the masses triggering the demise of the existing class structure the implications of the theory are consistent with the voting patterns on england s education reform of 1902

child labour a review of recent theory and evidence with policy implications in recent years a growing number of authors have turned their attention to the question of why children work the purpose of this paper is to review some of the more recent theoretical and empirical research into the topic of child labour and to illustrate the fact that no one factor on its own can account for the phenomenon of child labour therefore policies aimed at eradicating child labour will need to address the broad range of underlying factors that contribute to the incidence of child labour such as poverty market imperfections and access to education

the tragedy of the commons in international fisheries an empirical examination abstract historically all capture fisheries have proven hard to manage internationally shared stocks face an additional impediment to effective management previous fisheries studies estimate gains from cooperation for particular species or locations but evidence is lacking on the wider effect that international sharing has in relation to other variables that affect stock status this paper is an attempt to shed a broader light on the effect of sharing by identifying whether shared fish stocks are systematically more exploited i compile exploitation status biological and economic data into a unique two period panel of more than 200 fish stocks from around the globe with which i test the theoretical implications of sharing the empirical results from ordered category estimation suggest that shared stocks are indeed more prone to overexploitation

child labor and coordination failures abstract in this note we show that a technology based coordination failure may explain the emergence of laws restricting child labor child labor may arise because of the lack of a coordination mechanism between parental decisions to invest in the human capital of their children and firms decisions to invest in skill biased technologies legislative intervention in many cases helps coordinate expectations towards a pareto superior outcome with investments both in human capital and in skill biased technologies

firm dynamics with tradable output permits we study firm dynamics firm value equilibrium permit prices and market efficiency in a natural resource industry that is managed with tradable output permits new firms must purchase capital and output permits before they enter active firms must consider the economic cost of capital and the cost of owning the permit when contemplating exit the value of the capital used in the production process has nonseparable effects on permit prices and market efficiency costly investment reversibility in the firm s productive capital and uncertainty reduce permit prices and prolong the abandonment of unproductive capital policies to improve economic performance are identified copyright 2002 oxford university press

the political economy of market based environmental policy the u s acid rain program the u s acid rain program enacted in 1990 gave valuable tradable sulfur dioxide emissions permits called allowances to electric utilities we examine the political economy of this allocation though no senate or house votes were ever taken hypothetical votes suggest that the actual allocation would have beaten plausible alternatives while rent seeking behavior is apparent statistical analysis of differences between actual and benchmark allocations indicates that the legislative process was more complex than simple models suggest the coalition of states that produced and burned high sulfur coal both failed to block acid rain legislation in 1990 and received fewer allowances than in plausible benchmark allocations some of these states may have received additional allowances to cover 1995 99 emissions by giving up allowances in later years and some major coal producing states seem to have focused on benefits for miners and on sustaining demand for high sulfur coal

a guide to public sector debt and deficits government deficits reinterpreted willem h buiter public sector debt and deficits are a matter of concern to governments throughout the world after presenting data on the public debt and deficits in the uk and abroad this paper considers four key issues first does an increase in the budget deficit today make an increase in inflation in the future more likely in economies like the uk the answer is no because the scope for raising revenue by money creation is limited compared to raising taxes second how does one evaluate the consistency of a given spending and tax programme a number of measures are presented which indicate the adjustment that must be made to spending and tax plans if the government is to remain solvent third it is often argued that an increase in budget deficits will merely crowd out private spending the paper shows that the truth of this proposition depends critically on the state of the economy the time horizon and whether the increased deficit is temporary or permanent finally the question of deriving a suitable measure of fiscal stance is considered developing an index of fiscal impact requires a suitable economic model and a number of different measures are considered and criticized conventional deficit measures whether actual cyclically corrected or inflation corrected are a poor indicator of the government s true fiscal stance

individual transferable quota markets and investment decisions in the fixed gear sablefish industry this paper presents an ex ante analysis of an individual transferable quota itq program imposed on one species in a multispecies fishery utilizing mathematical programming pseudo data and tobit regression market demand for quota and prospective gains in economic rent and efficiency gains from quota trade are assessed for the pot and longline sablefish fleet off the pacific coast of the united states incentives for disinvestment and industry exit after quota exchange implications for structure of the industry and itq market and policy implications are examined

efficiency enhancing signalling in the samaritan s dilemma suppose an altruistic person a is willing to transfer resources to a second person b if b comes upon hard times if b anticipates that a will act in this manner b will save too little from both agents point of view this is the samaritan s dilemma this paper shows that the undersaving result is mitigated if we relax the standard assumption of complete information because if a is uncertain about how big b s need for support is b will have an incentive to signal that he is in great need by saving more than he otherwise would have done

disaggregate supply evidence for the uk 1989 disaggregate supply evidence for the uk applied economics vol 21 no 10 pp 1397 1409

a theory of the worst forms of child labour although intuitive and morally compelling a ban on the worst forms of child labour in poor countries is unlikely to be welfare improving we show that harmful forms of child labour have an economic role by maintaining wages for child labour high enough they allow human capital accumulation in poor countries unless appropriate mechanisms are designed to mitigate the decline in child labour wages caused by reduced employment options for children a ban on harmful forms of child labour will likely prove undesirable we perform our analysis within a simple model of parental investment in children s education

economic benefits of management reform in the gulf of mexico grouper fishery a semi parametric analysis this paper uses a semi parametric empirical model to estimate the economic benefits of adopting a property rights based management program in the gulf of mexico grouper fishery the analysis predicts that a rights based fleet will be comprised of fewer more cost efficient boats than under the current controlled access management program results indicate that in the year of our data 1993 the smaller more productive fleet could harvest the allowable reef fish catch at a cost saving of 2 92 7 07 million 12 30 less than under controlled access management recent tightening of controlled access regulations suggest that the benefits from management reform could be even larger in the current day fishery

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

trade of permits for greenhouse gas emissions bilateral trade need not be the answer the kyoto protocol sets national quotas on ghg emissions and allows international trade of these quotas taking terms of trade effects into account we argue that this trade is characterized by asymmetric identity dependent externalities and show that bilateral trade of permits may not be sufficient for an efficient allocation of emissions we derive conditions under which bilateral trade does improve the allocation of permits the conditions are strong in this sense we argue that for emissions permits market design matters

on the relative unimportance of a balanced budget this paper explores the reasoning underlying milton friedman s preference for a small unbalanced budget over a large balanced one because the marginal return from government spending is less than the marginal cost measured in terms of the amount of income private individuals remain free to spend government expenditures have more of an adverse impact on the economy in his view than does the method of financing that spending using a panel data set comprising the 50 states plus the district of columbia we report evidence from the years 1967 through 1992 that growth rates in income per capita tend to be higher in states with smaller public sectors moreover we find that while both deficits and taxes reduce the rate of income growth in a state the negative impact of government spending is considerably larger at the margin

a quarterly model of unanticipated monetary growth output and the price level in the u k 1963 1978 abstract this paper develops and estimates using quarterly data from 1963 to 1978 a three equation model of the u k economy in which output is affected only by unanticipated monetary growth whereas the price level is influenced by both anticipated and unanticipated changes in the money supply expectations of monetary growth are assumed to be muth rational the model was estimated using efficient procedures and tests of the over identifying restrictions were favourable to the model specification in particular anticipated monetary growth was found to have no significant effect on output

on the distributional consequences of child labor legislation this article studies the effects of child labor legislation on human capital accumulation and the distribution of wealth and welfare we calibrate our model to u s data circa 1880 and find that the consequences of restricting child labor or providing tax financed education depend on the main source of individual household income households with significant financial assets unambiguously lose from government intervention whereas high wage workers benefit most from a child labor ban and low wage workers benefit most from free education introducing free education results in substantial welfare gains whereas a child labor ban induces small welfare losses

the macroeconomics of child labor regulation we develop a positive theory of the adoption of child labor laws workers who compete with children in the labor market support a child labor ban unless their own working children provide a large fraction of family income fertility decisions lock agents into specific political preferences and multiple steady states can arise the introduction of child labor laws can be triggered by skill biased technological change which induces parents to choose smaller families the theory can account for the observation that in britain regulations were first introduced after a period of rising wage inequality and coincided with rapid fertility decline

the survival of the welfare state this paper provides an analytical characterization of markov perfect equilibria in a model with repeated voting where agents vote over distortionary income redistribution a key result is that the future constituency for redistributive policies depends positively on current redistribution since this affects both private investments and the future distribution of voters the model features multiple equilibria in some equilibria positive redistribution persists forever in other equilibria even a majority of beneficiaries of redistribution vote strategically so as to induce the end of the welfare state next period skill biased technical change makes the survival of the welfare state less likely

to segregate or to integrate education politics and democracy how is the quality of public education affected by the presence of private schools for the rich theory and evidence suggest that the link depends crucially on the political system we develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures we find that the presence of a large private education sector benefits public schools in a broad based democracy where politicians are responsive to low income families but crowds out public education spending in a society that is politically dominated by the rich the main predictions of the theory are consistent with state level data and micro data from the u s as well as cross country evidence from the programme for international student assessment study

employment flows capital mobility and policy analysis this article extends hopenhayn and rogerson s analysis of firing taxes by introducing a flexible form of capital and considering transitionary dynamics the article finds that capital is not important for understanding the long run and welfare effects of firing taxes however capital is crucial for determining the short run consequences of eliminating this type of policy

defense spending in a neo ricardian world this paper shows that ricardian equivalence no longer holds once we recognize that govern ment acts as an intermediary between generations in the provision of national defence conse quently the level of public debt is positively related to defence spending since this component of government expenditures insures the transferability of bequests as well as protecting savings it is shown that defence spending has an adverse effect on both national saving and the saving rate that has not been considered in the economic growth literature more gener ally the paper emphasizes that in developing a positive theory of taxation the composition of government spending plays an integral role the separation of government expenditures from the methods used to finance them has been an extremely useful assumption employed in economics it has allowed economists to analyse a series of problems which would be much more difficult to study if individual taxpayers were assumed to perceive a link between the tax structure and the expenditure structure of an economy hettich and winer 1988 for example following this tradition develop a positive theory of a tax system this separation has been used most frequently and fruitfully to address the important question do fiscal deficits matter more specifically does the way that government finances its expenditures between taxing and issuing public debt matter in terms of their impact on the real economy barro 1974 employed an overlapping generations model with altruism to show that if individuals are not bequest constrained then government bonds are not perceived as net wealth the recipients of government transfers financed by bonds realize that their descendants will have to finance the debt through higher taxes and so they offset the increase in public debt by increas ing the size of the bequest to their children by the same amount the effect is that interest rates wages and the level of output of the economy are unaltered this result usually referred to as the ricardian equivalence theorem presented a challenge to the profession to find circumstances under which it would not hold and when therefore financing government spending with debt would

public pensions as optimal social contracts abstract a simple overlapping generations model is modified to allow for an externality experienced by the young from consumption by the elderly this sets up a game between generations in which one generation s strategy may be to save too little and rely on gifts from the young e g public assistance for retirement income social security can therefore be viewed as a pareto optimal contract to restore efficient intertemporal allocation a funded public pension plan corresponds to forced saving but is vulnerable in that the next young generation may stop contributing rely on its children for retirement assistance and meanwhile reap the consumption externality from the current elderly s social security benefits this suggests a forced giving or pay as you go type of compulsory pension plan such as exists in most nations which also has the advantage of aiding the initial old generation and therefore generating an immediate consumption externality for the initial young the approach can also be used to explain other aspects of existing social security

fishing revenue productivity and product choice in the alaskan pollock fishery a key element in evaluating fishery management strategies is examining their effects on the economic performance of fishery participants yet nearly all empirical studies of fisheries focus exclusively on the amount of fish harvested the economic benefits derived from fish stocks involve the amount of revenue generated from fish processing which is linked to both the way fish are harvested and the products produced from the fish in this study we econometrically estimate a flexible revenue function for catcher processor vessels operating in the alaskan pollock fishery recognizing potential endogeneity and a variety of fishing inputs and conditions we find significant own price supply responses and product substitutability and enhanced revenues from increased fishing days and tow duration after a regulatory change introduced property rights through a new fishing cooperative we also find significant growth in economic productivity or higher revenues over time after controlling for observed productive factors and price changes which exceeds that attributable to increased harvest these patterns suggest that the move to rights based management has contributed significantly to economic performance in the pollock fishery

evaluating tradable property rights for natural resources the role of strategic entry and exit this paper presents an econometric approach to the evaluation of environmental regulation using tradable property rights existing empirical research on this issue which compares overall industry efficiency before and after the introduction of new regulations conflates two distinct phenomena efficiency changes due to exit of excess capital and changes in the efficiency of individual firms because the regulatory process induces firms of different types to enter and exit the industry at different rates the true efficiency and equity effects of tradable property rights cannot be assessed without correcting for these changes in sample composition this paper examines the impact of regulatory change in the mid atlantic surf clam fishery using an econometric model that separates its effects on industry structure and vessel efficiency the analysis finds that contrary to widely held belief tradable property rights did not disproportionately benefit either large fishing firms or highly integrated firms

employment and distributional effects of restricting working time we study the employment and distributional effects of regulating reducing working time in a general equilibrium model with search matching frictions job creation entails fixed costs but existing jobs are subject to diminishing returns we characterize the equilibrium in the de regulated economy where firms and individual workers freely negotiate wages and hours then we consider the effects of a legislation restricting the maximum working time while we let wages respond endogenously employment effects are sensitive to the representation of preferences in our benchmark small reductions in working time starting from the laissez faire equilibrium solution always result in a small increase in the equilibrium employment while larger reductions reduce employment the regulation benefits workers both unemployed and employed even if wages decrease and even in cases where employment falls but reduces profits and output

using taxes to deter illegal fishing in itq systems we study the effects of different tax schemes used in fisheries management in combination with an individual transferable quota system we focus on the effects of taxes on equilibrium quota prices and on violations under the assumption that enforcement to induce compliance is imperfect and costly the use of taxes is motivated by the regulator s need to recover costs for enforcement activities we propose the use of a tax on the price of the processed products based on its impact on violations and the information that is required to implement it we also show that this tax has a double pay off for enforcement because it reduces the demand for illegal fishing and increases revenue for enforcement activities without producing a deadweight loss in the quota market we present an application of our model to the case of the red shrimp fishery in chile in our simulation example a tax of 7 on the price of fish exports could sufficiently reduce harvest demand and generate enough funding to completely eliminate quota violations which in the absence of taxes can be more than 100 of the total allowable catch at the same time this tax could increase the equilibrium quota price by 19

inequality and growth why differential fertility matters we argue that inequality and growth are linked through differential fertility and the accumulation of human capital we build an overlapping generations model in which dynasties differ in their initial endowment with human capital growth the income distribution and fertility are endogenous due to a quantiy quality tradeoff families with less human capital decide to have more children and invest less in education when initial inequality is high large fertility differentials lower the growth rate of average human capital since poor families who invest little in education make up a large fraction of the population in the next generation a calibrated model shows that this fertility differential effect is quantitatively important we also provide empirical evidence to confirm the links between inequality differential fertility and growth suggested by the model

social security as trade among living generations we model u s social security that is legislated endogeneously by living generations specifically we consider the effects of social security on resource allocation and pareto optimality examining which generations gain from social security and whether some generations lose because saving and transfer decisions are made sequentially in the real world we use an infinite horizon overlapping generations framework in which life cycle saving and transfers to the old are determined by living agents we focus on the case in which agents are altruistic but place sufficiently greater weight on own comsumption than on the consumption of agents in other generations so that starting from a steady state without social security living agents would gain utility if consumption were shifted marginally to them from later generations excerpt

empirical evidence on consumption smoothing and intergenerational transfers in this study i examine empirically intergenerational linkage in terms of resources transfers in the extended family in particular conditional on a household s and its parents or children s liquidity constraints status i look at how far the household can smooth its consumption in face of negative income shocks the permanent income hypothesis postulates that households make their consumption decisions based on their lifetime resources thus their consumption trajectory follows a smooth path in face of shocks to their income however in various tests 8 10 the unconditional form of the hypothesis has been rejected it is conjectured and generally agreed that the rejections of the hypothesis are mainly due to the presence of liquidity constraints i e capital market imperfections see zeldes 22 for a recent empirical investigation and hayashi 12 for an excellent survey moreover the works by cochrane 4 and mace 19 further confer cogency on the liquidity constraints capital market imperfections argument in testing whether households have full consumption insurance or equivalently the existence of complete markets against idiosyncratic shocks they reject their null of the existence of full consumption insurance in some of their tests

government debt in an overlapping generations model with bequests and gifts in 1974 robert barro argued that if individuals in successive generations were linked by bequests changes in the stock of government debt or in social security programs would have no effect on the steady state capital stock barro assumed that individuals held static expectations and that the size of the population was constant martin feldstein 1974 1977 had concluded that social security would reduce the capital labor ratio in models that did not admit a bequest motive and in his 1976 comment on barro argued that the introduction of government debt or social security into a perfect foresight dynamic growth model with bequests would still reduce the capital labor ratio barro replied that feldstein s criticisms were invalid if the steady state capital labor ratio were smaller than the golden rule level but would be correct if the opposite were true barro did suggest however that the latter possibility with overaccumulation of capital might be ruled out in his model as it was in miguel sidrauski 1967 but he was unable to demonstrate that the required behavior would be consistent with utility maximization by finite lived individuals 1976 p 345 although recent work by willem buiter 1979 jeffrey carmichael 1979 1982 truman bewley 1981 a b and others has helped to elucidate the nature of overlapping generations models with bequests and gifts and the issues in the barro feldstein debate they remain far from clear the purpose of this paper is to shed a little more light on the subject in what follows i contend that some of the authors cited above either have specified the individual s optimization problem in an asymmetric way or have failed to impose necessary conditions for a sensible optimization problem or both there is a natural specification of the barro model 1 that emphasizes the similarity between this model and optimal growth models see for example david cass 1965 peter diamond 1973 here in steady state equilibrium the aftertax interest rate r must equal the rate at which individuals discount the utility of their heirs p r p has become known as the modified golden rule and a meaningful individual optimization problem requires that p exceed n the natural growth rate of the economy my results confirm barro s hunch about his model in a barro model r must exceed n much of the barro feldstein 1976 interchange which assumed that r could have any relation to n is wrong headed barro and feldstein reach different conclusions about the effects of government debt and social security because they assume different individual utility functions also my results contrast sharply with those of buiter and carmichael for example carmichael concluded that with intergenerational transfers from parents to children bequests r must exceed n but with transfers in the opposite direction n must exceed r 1982 pp 205 06 indeed i believe that the buiter carmichael representation of the barro model is logically faulty see section ii in section i i outline an overlapping generations model with gifts and bequests and derive its steady state properties in the next section i discuss the shortand long run effects of introducing government debt into the model and contrast my results with those

unanticipated monetary growth output and the price level u k 1946 1977 abstract this paper develops and estimates using annual data from 1946 1977 a three equation model of the u k economy in which output is affected only by unanticipated monetary growth whereas the price level is influenced by both anticipated and unanticipated changes in money supply expectations of monetary growth are assumed to be muth rational the model was estimated using efficient procedures and tests of the over identifying restrictions were generally favourable to model specification some features of the price equation are unsatisfactory and the results in this section must be considered tentative

using history dependence to design a dynamic tradeable quota system under market imperfections a transferable quota system is analysed in a two period model with market power so far the management mechanisms presented in the literature to remedy market power have either not succeeded in securing efficiency in the distribution of quota within and across time periods or have resulted in only one of the two inefficiencies being eliminated in this paper a new mechanism is introduced where allocation of quota is made dependent upon historic quota acquisitions this opens for a trade off between distributional and time efficiency or under specific circumstances securing overall efficiency

love thy children abstract this paper proves that barro s 1974 debt neutrality proposition whose relevance hinges in an economy with bequest motives on bequests being operative in the economy without public debt is not applicable to a wide class of overlapping generation economies those with a weak bequest motive in particular it is shown that the bequest motive is always too weak and public debt therefore non neutral when non physical assets have a well defined function reducing oversavings in the corresponding economy without bequest motive i e when the non altruistic economy is dynamically inefficient

economic inefficiency in a revenue setting the norwegian whitefish fishery the main focus in the inefficiency literature is on suboptimal input use and how this causes increased costs due to technical and allocative inefficiency production or cost functions are then typ

intergenerational transfers and demographic transition abstract this paper presents an analysis of demographic transition based on the endogenous evolution of intergenerational transfers along an economy s endogenous path of development two period lived agents belonging to overlapping generations choose optimally their desired levels of consumption and fertility together with their desired sizes of transfers to both parents and children parents are more efficient than children in producing output but some parental time must be devoted to child rearing at low levels of development fertility is high and the flow of net intergenerational transfers is from the young to the old at high levels of development fertility is low and the flow of net transfers is from the old to the young these results accord strongly with empirical observations and the analysis may be seen as formalising for the first time a long standing and well respected hypothesis in the demographic transition literature

an investigation of the determinants of manufacturing employment in the united kingdom in this paper we present and estimate an adjustment cost model of industry employment which takes explicit account of both expectations and aggregation over different labour types the resulting model is subject to a large number of tests and is a highly robust representation of the data finally forecasts are produced for manufacturing employment up to 1990

fishing technology and optimal distribution of harvest rates this paper examines the problem of the optimal management of a joint ownership fishing exploitation where agents use different fishing gears we consider a model in which the fishing activity may affect resource growth not only through the harvest function but also through the natural growth rate of the resource this allows us to capture the fact that some fishing gears alter the natural growth rate of the resource we find that when the natural growth of the resource is altered by the fishing technology the optimal stock is not independent of how harvest quotas are distribute among the agents as a result a fishing policy that firstly determines the optimum stock and secondly decides how to distribute the harvest among the different agents will not be efficient we also analyze the joint determination of optimal stock and harvest quotas and show that positive harvest quotas will only be optimal when countries are characterized by certain asymmetries