consumption and children abstract consumption by couples rises sharply in the beginning and falls later in life the causes of the early rise are hotly contested among the suggestions are rule of thumb behavior demographics liquidity constraints the precautionary motive and nonseparabilities between consumption and labor supply we develop two tests of the extreme hypothesis that only changes in family structure matter we estimate effects of the numbers and ages of children on consumption these estimates allow us to rationalize all of the increase in consumption without recourse to any of the causal mechanisms our estimates can be interpreted either as giving upper bounds on the effects of children or as evidence that the other causes are not important

intra household allocation of time and money across siblings abstract how work and consumption are allocated within the family has important consequences for the welfare of individual household members using data on time use and assignable goods for individual siblings across india peru ethiopia and vietnam aged 5 17 i show that there is substantial within sibling variation in leisure as well as consumption allocations i then test whether there is evidence for favoritism in the joint allocation of leisure and consumption toward a particular gender i find that boys with a younger sister have substantially more relative leisure compared to girls with a younger sister in all four countries consumption allocations are relatively higher for older siblings of mixed gender sibling pairs irrespective of the sex of the child i reject that favoritism in consumption equals favoritism in leisure in three of the four countries finally i show suggestive evidence on the role of reward and preferences for allocations of time and money in the household

estimating intertemporal allocation parameters using synthetic residual estimation we present a novel structural estimation procedure for models of intertemporal allocation this is based on modelling expectations errors directly we refer to it as synthetic residual estimation sre the flexibility of sre allows us to account for measurement error in consumption and for heterogeneity in intertemporal allocation parameters an investigation of the small sample properties of the sre estimator indicates that it dominates generalized method of moments gmm estimation of both exact and approximate euler equations in the case when we have short panels and noisy consumption data we apply sre to two panels drawn from the panel study of income dynamics psid and estimate the joint distribution of the discount factor and the elasticity of intertemporal substitution we reject strongly homogeneity of the discount factor and the elasticity of intertemporal substitution we find that on average the more educated are more patient and less willing to substitute intertemporally than the less educated within education strata patience and willingness to substitute are positively correlated 2010 the review of economic studies limited

family planning in a life cycle model with income risk several us states have recently restricted the access to abortions we study fertility intentions and how family planning and abortions are used as mechanisms to control fertility among couples facing income risk we formulate and estimate a life cycle consumption saving model with uninsurable income risk and imperfect contraceptive control that matches fertility behavior in the british household panel survey bhps well we use the estimated model to investigate how family planning and abortions are used to control fertility in our model our simulations suggest that income risk affects family planning and that abortion is used to control fertility due to the presence of income risk this indicates that the availability of abortions might play a role as an insurance mechanism

optimal aging and death understanding the preston curve does prosperity lead to greater longevity if so what is the strength of the income channel to address these questions we develop a life cycle model in which households are subject to physiological aging in modeling aging we draw on recent research in the elds of biology and medicine the speed of the aging process and thus the time of death are endogenously determined by optimal health investments a calibrated version of the model accounts well for the observed non linear cross country link between longevity and income also known as the preston curve

measuring energy efficiency in the context of an emerging economy the case of indian manufacturing in recent years the indian economy has achieved a rapid growth rate however one of the challenges facing the economy is the large energy supply that would be needed to sustain this growth path hence attaining energy efficiency is crucial for the economy this paper examines the indian manufacturing sector and utilizes a variant of the directional distance function to obtain comprehensive measures of performance of the major manufacturing states given the joint goals of achieving energy conservation and output growth the results of the empirical application reveal that given the prevailing technology the average manufacturing firm across the states could reduce energy input and increase output simultaneously by an annual average of 3 84 by improving technical efficiency to accommodate a larger simultaneous increase in output and reduction in energy use india should adopt superior technologies so as to shift the efficient frontier outward

shadow pricing of undesirable outputs in nonparametric analysis abstract for three decades a growing interest in the modeling of desirable and undesirable outputs has led to a theoretical and methodological debate in the nonparametric literature on production technology and efficiency the first main discussion is about the way of modeling bad undesirables as inputs or outputs or by transformation functions the second debate concerns the implications of the weak disposability assumption in the modeling of bad outputs in particular the possibility of assigning unexpected signs to shadow prices of bad outputs in addition we point out a current error in the modeling of weak disposability under a variable returns to scale technology in this paper we introduce a hybrid model to ensure the economically meaningful jointness of good and bad outputs while constraining shadow prices of bad outputs to their expected sign we argue that it is a sound compromise to model undesirable outputs with a meaningful primal dual economic interpretation finally we propose an extension to define shadow prices for undesirable outputs following the law of one price loop rule

negligible senescence an economic life cycle model for the future abstract we propose a model of aging and health deficit accumulation model with an infinite time horizon and a steady state of constant health the time of death is uncertain and endogenous to lifestyle and health behavior this setup can be conceptualized as a strive for immortality that is never reached we discuss adjustment dynamics and show that the new setup is particularly useful to understand aging of the oldest old i e of individuals for which morbidity and mortality have reached a plateau we then show how the existence of a steady state can be used to perform comparative dynamics exercises analytically as an illustration we investigate the effects of more expensive health investment and of advances in medical technology on optimal short run and long run health behavior

the saving behaviour of a two person household the facts that wives are typically younger than their husbands and that women typically live longer than men imply that wives may have more incentive to save for old age than do husbands a theoretical model of the determination of household saving and portfolio choice is introduced which takes into account differences in preferences for saving the most important result is that the level and the composition portfolio of saving and the time path of consumption are dependent on the distribution of income within the household women typically live longer than men and wives are typically younger than their husbands these two facts imply that preferences about saving for old age in married households with forward looking members may differ between husband and wife this paper presents a theoretical analysis of saving and portfolio behaviour if the members of the household have differ ent preferences over future consumption as compared to current consump tion the analysis stands in contrast to unitary models of household intertemporal allocation which assume that the household has a single utility function thus this paper is a contribution in a novel context to the burgeoning literature on intra household decision making the base case analysis is for a simple two person husband and wife1 two period model in which there is only one asset saving it is assumed that because of the two facts given at the start of the introductory paragraph the husband discounts the future more than the wife in section ii the implications of a non cooperative decision making process for the base case are derived see ulph 1988 for a non cooperative model of demand and

the effects of marital status and children on savings and portfolio choice this paper investigates the impact of demographic shocks on optimal decisions about saving life insurance and most centrally asset allocation we analyze these choices within the framework of a life cycle model that features exogenous changes in family composition heterogeneity in lifetime income and uninsurable fluctuations in earnings and medical costs our analysis indicates that marital status transitions and children can have important effects on optimal household decisions widowhood induces sharp reductions in the portfolio shares in stock and the impact is largest for women and individuals with children divorce causes men and women to reallocate their portfolios in different directions men choose much riskier allocations while women opt for safer ones children play a fundamental role in the optimal portfolio decisions men with children for example increase their shares in response to divorce by less than half as much as men without children comparing our simulation results with panel data evidence on stockholding from the psid and the hrs we conclude that changes in marital status and children matter empirically as well but not always in the ways that the model predicts

time series analysis of deregulatory dynamics and technical efficiency the case of the u s airline industry as markets worldwide become less regulated it becomes increasingly possible and timely to establish the presence of an empirical relationship between technical efficiency and market forces compelling agents to economize this article taking an innovative approach to test the hypothesis that competitive pressure enhances efficiency constructs a methodology to examine time series of technical efficiency indices for cointegration and convergence a panel of u s airlines observed quarterly between 1970 and 1990 is used as a case study cointegration results are suggestive of long run relationships between carriers furthermore convergence tests document less dispersion in firm performance over time

the role of environmental factors in growth accounting this paper explores a relatively new methodology the directional distance function method to analyse productivity growth the method allows us to explicitly evaluate the role that undesirable outputs of the economy such as carbon dioxide and other greenhouse gases have on the frontier production process which we specify as a piecewise linear and convex boundary function we decompose productivity growth into efficiency change catching up and technology change innovation we test the statistical significance of the estimates using recently developed bootstrap methods we also explore implications for growth of total factor productivity in the oecd and asian economies copyright 2004 john wiley sons ltd

why european banks are less profitable than u s banks a decomposition approach abstract the low profitability of european banks relative to their u s counterparts has recently raised concerns among policy makers and researchers this paper attempts to shed light on this issue by using the o donnell 2012 decomposition approach this approach enables us to decompose the relative profitability of european banks into an output input price index and a total factor productivity index with the former further decomposed into two price indexes and the latter further into four productivity and efficiency measures our results show that european banks profitability was not only weak but also deteriorated over time our further analysis shows that the decline in the output input price index was due to declines in relative lending rate and relative return on securities and an increase in funding costs while the decline in the productivity index was driven by declines in technical efficiency scale efficiency and residual mix efficiency

revisiting the effect of household size on consumption over the life cycle abstract although the link between household size and consumption has strong empirical support there is no consistent way in which demographics are dealt with in standard life cycle models we study the relationship between the predictions of the single agent model the standard in the literature versus a simple model extension the demographics model where deterministic changes in household size and composition affect optimal consumption decisions we show theoretically that the demographics model is conceptually preferable to the single agent model as it captures economic mechanisms ignored by the latter however our quantitative analysis demonstrates that differences in predictions for consumption are negligible across models when using standard calibration strategies this suggests that it is largely irrelevant which model specification is used

the marginal propensity to earn and consume out of unearned income evidence using an unusually large cash grant reform in this paper we use the rapid introduction of an unconditional cash grant child support in south africa to estimate the marginal propensity to consume and earn out of unearned income we find that the marginal propensity to earn is about 0 3 and that the marginal propensity to consume is about 0 7 nothing of the grant appears to be saved if anything households dissave against future grant payments the marginal propensities estimated here are similar to those reported in comparable papers using us data however they stand in contrast to some results on conditional cash transfers in other developing countries

the gender gap in mortality how much is explained by behavior abstract in developed countries women are expected to live about 4 5 years longer than men in this paper we develop a novel approach to gauge the extent to which gender differences in longevity can be attributed to gender specific preferences and health behavior we set up a physiologically founded model of health deficit accumulation and calibrate it using recent insights from gerontology from fitting life cycle health expenditure and life expectancy we obtain estimates of the gender specific preference parameters we then perform the counterfactual experiment of endowing women with the preferences of men in our benchmark scenario this reduces the gender gap in life expectancy from 4 6 to 1 4 years when we add gender specific preferences for unhealthy consumption the model can motivate up to 89 percent of the gender gap our theory offers also an economic explanation for why the gender gap declines with rising income

after kyoto alternative mechanisms to control global warming after more than a decade of negotiations and planning under the framework convention on climate change fccc the first binding international agreement to control the emissions of greenhouse gases has come into effect in the kyoto protocol the first budget period of 2008 2012 is at hand moreover the scientific evidence on greenhouse warming strengthens steadily as observational evidence of warming accumulates the institutional framework of the protocol has taken hold solidly in the european union s emissions trading scheme ets which covers almost half of europe s carbon dioxide emissions notwithstanding this apparent success the kyoto protocol is widely seen as somewhere between troubled and terminal early troubles came with the failure to include the major developing countries along with lack of an agreedupon mechanism to include new countries and extend the agreement to new periods the major blow came when the united states withdrew from the treaty in 2001 by 2002 the protocol covered only 30 percent of global emissions while the hard enforcement mechanism in the ets accounts for about 8 percent of global emissions even if the current protocol is extended models indicate that it will have little impact on global temperature change unless there is a dramatic breakthrough or a new design the protocol threatens to be seen as a monument to institutional overreach nations are now beginning to consider the structure of climate change policies for the period after 2008 to 2012 some countries states cities companies and even universities are adopting their own climate change policies are there in fact alternatives to the scheme of tradable emissions permits embodied in the protocol the fact is that alternative approaches have not had a serious hearing among natural scientists or among policymakers what are some alternatives for global public goods there are three potential approaches command and control regulation quantity oriented market approaches and taxor price based regimes of these only the tradable quantity and the price like regimes have any hope of being reasonably efficient under a tradable quantity approach an agreement proceeds by setting limits on emissions by different countries the limits are partially or wholly transferable among countries this is the approach taken under the kyoto protocol this approach has very limited international experience under existing protocols such as the cfc chlorofluorocarbon mechanisms and somewhat broader experience under national trading regimes such as the u s sulfur dioxide regime a radically different approach is to use harmonized prices fees or taxes as a method of coordinating policies among countries this approach has no international experience in the environmental area although it has modest experience nationally in such areas as the u s tax on ozone depleting chemicals on the other hand the use of harmonized price type measures has extensive international experience in fiscal and trade policies such as with the harmonization of taxes in the european union and harmonized tariffs in international trade these thoughts on the structure of international agreements to control global warming should not be regarded as negotiating strategies

how does future income affect current consumption this paper tests a straightforward implication of the basic life cycle model of consumption that current consumption depends on expected lifetime income the paper projects future income for a panel of households and finds that consumption is closely related to projected current income but unrelated to predictable changes in income however future income uncertainty has an important effect consumers facing greater income uncertainty consume less the results are consistent with buffer stock models of consumption like those of deaton 1991 or carroll 1992a 1992b where precautionary motives greatly reduce the willingness of prudent consumers to consume out of uncertain future income

total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 1978 this article total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 78 was reprinted with permission from the december 1982 issue of the economic journal this article proposes a methodology that decomposes total factor productivity change into two distinct elements technological progress and changes in technical efficiency technological progress is defined as the change in the best practice production frontier all other productivity change is attributed to technical efficiency change the article provides a theoretical framework for decomposing total factor productivity growth as well as a specification and estimation of the deterministic frontier production function it employs a programming technique to estimate a flexible functional form of the production frontier the paper then applies this technique to empirical data from yugoslavia of the period from 1965 to 1978 it concludes that for yugoslavia improvements to technical efficiency comprise the dominant contribution to total factor productivity change this agrees with accumulating evidence that in many developing economies productivity gain due to technological mastery of imported technology is substantial

income and consumption a micro semistructural analysis with pervasive heterogeneity we develop a model of consumption and income that allows for pervasive heterogeneity in the parameters of both processes introducing codependence between household income parameters and preference

spending on children direct survey evidence we present estimates of spending on children from a danish expenditure survey which asks respondents directly about allocations of expenditures to individual household members our main finding is that the average danish family allocates 44 of total assignable spending on non food non durables and services to children there is considerable variation across households more is spent on older children and expenditure on children is an increasing concave function of the number of equivalent children we find that households in which the mother has had a child by a previous partner spend 24 less on children than otherwise similar households

heterogeneous impacts of regulatory policy stringency on the eu electricity industry a bayesian shrinkage dynamic analysis abstract environmental and technical efficiency in the electricity sector is a major focus of regulatory policies aimed at hastening greenhouse gas reduction and lowering energy prices for final consumers understanding the impact of market and environmental regulations on efficiency is crucial for the design and choice of policy packages at the national level the productivity response to regulations depends on unobserved country specific factors that current empirical analyses have not modelled in this framework we analyse the regulation effects on efficiency in the electricity sector for a panel of european union countries we explicitly consider the effects of the environmental regulation along with the market regulation our estimation strategy uses the bayesian shrinkage estimator which can deal with the bias aggregation problem and cross country heterogeneity it allows us to identify the different transmission channels through which regulatory policy is implemented the results highlight divergent behaviours at the country level the direct impacts of the market and environmental regulatory policies on productivity are negative around 2 7 and 2 3 respectively but the countries vary in the degree to which they are able to compensate these negative effects

the political economy of money evolution and impact of monetarism in the federal reserve system for almost a generation a vigorous debate has been underway over the conduct of monetary policy the central questions in this controversy are widely known what are the appropriate goals of monetary policy what are the linkages between actions to influence the cost and availability of money and credit and the behavior of real output employment and prices what are the best means in terms of targets and central bank operating techniques to accomplish the objectives of monetary policy the divergent answers which economists of different intellectual persuasion give to these questions have generated a sharp schism in the body of monetary theory on the one side are the keynesian and postkeynesian economists who have stressed the efficacy of fiscal policy for the purpose of economic stabilization on the other side are the members of the monetarist school who assign great weight to the role of monetary policy the aim of this paper is to sketch the evolution of monetarist thought inside the federal reserve system in this appraisal i have viewed the evidence from the vantage point of a member of the federal reserve board and of the federal open market committee fomc i concluded that a particularly promising approach was to observe the fomc at work in those rare instances when it set out especially to make substantive revisions in the form of the directive through which it gives instructions to the manager of the system open market account soma in the last decade there have been at least four such effortsin the years 1961 1964 65 1966 and 1970 while the focus was on the proposed changes in the directive language it is clear from the record that the debates were actually over the objectives and conduct of monetary policy thus the directive revision episodes present a unique opportunity to observe the impact on fomc members of competing ideas about monetary management i have relied primarily on the public record available in the minutes of the fomc for the years 1936 1965 and on the fomc record of policy actions through the meeting of september 21 1971 the last one in the public domain at this writ member board of governors of the federal reserve system this paper is a condensation of a more comprehensive version presented at the 84th annual meeting of the american economic association copies of the original paper may be obtained from the board washington d c 20551 i am indebted to a number of persons in the federal reserve system for assistance in the preparation of the original paper foremost among those are several of my fellow board members especially governors j dewey daane sherman j maisel george w mitchell and j l robertson who responded readily to my numerous questions and shared with me some of their recollections regarding internal debates in the federal open market committee fomc and at the board on the appropriate techniques of monetary management of course they bear no responsibility for the use or interpretation i have made of the information provided several members of the board s staff identified in the original version also helped in the preparation of the paper again i must stress that the views expressed here are my own and should not be attributed to my colleagues either on the board or among its staff

increasing agricultural productivity while reducing greenhouse gas emissions in sub saharan africa myth or reality the motivation for this study stems from two major concerns that are interlinked the first is the decades long food insecurity crisis faced by sub saharan african ssa countries which is still prevalent the second is the negative impact greenhouse gas ghg emissions from agriculture may have on future food production and which is likely to worsen the food insecurity problem the conundrum ssa farmers face is how to increase food output through productivity growth while minimizing ghg emissions to measure changes in productivity growth and ghg emissions this study evaluates the agricultural performance of 18 ssa countries by utilizing the malmquist luenberger index to incorporate good and bad outputs for the years 1980 2012 the empirical evidence demonstrates that productivity is overestimated when bad outputs are not considered in the production model the analysis provides a better understanding of the effectiveness of previous mitigation methods and which informs an appropriate course of action needed to achieve the twin objectives of increasing agriculture productivity while reducing ghg emissions

green productivity growth in china s industrial economy abstract this paper uses a directional distance function ddf and the malmquist luenberger productivity index to estimate the changing patterns of green total factor productivity gtfp growth of 38 chinese industrial sectors during the period 1980 2010 unlike the measures of traditional total factor productivity tfp growth the ddf incorporates carbon dioxide emissions as an undesirable output directly into the production technology which credit sectors for simultaneously reducing their emissions and increasing their output our estimates of aggregate and sector level gtfp growth reveal that chinese industry is not yet on the path towards sustainable low carbon growth a dynamic panel data analysis of the determinants of gtfp across sectors is used to identify factors that might rectify this situation including state owned enterprise soe reform the growth of small private enterprises continued openness to foreign investment and higher spending on r d particularly in emission intensive sectors

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

measuring environmentally sensitive productivity growth an application to the urban water sector the energy use and greenhouse gas emissions in the provision of urban water and sewerage services have become an increasingly important issue in recent times however the impact of negative externalities such as greenhouse gas emissions on the productivity of urban water provision has received less attention in the literature this paper applies the global malmquist luenberger gml productivity index which accounts for undesirable outputs in order to evaluate the productivity trends in the australian urban water sector results indicate that the inclusion of greenhouse gas emissions significantly influences the productivity measurement findings also indicate that the conventional index which disregards undesirable outputs over states the productivity growth despite a declining trend in greenhouse emissions over the period the overall productivity trend of the urban water sector experienced a downward trend while accounting for bad output this productivity decline occurs in a period of prolonged drought water security concerns and increased reliance on desalinization and water recycling

non parametric frontier approach to modelling the relationships among population gdp energy consumption and co2 emissions abstract in this paper a non parametric approach based in data envelopment analysis dea is proposed as an alternative to the kaya identity a k a impact this frontier method identifies and extends existing best practices population and gdp are considered as input and output respectively both primary energy consumption and greenhouse gas ghg emissions are considered as undesirable outputs several linear programming models are formulated with different aims namely a determine efficiency levels b estimate maximum gdp compatible with given levels of population energy intensity and carbonization intensity and c estimate the minimum level of ghg emissions compatible with given levels of population gdp energy intensity or carbonization index the united states of america case is used as illustration of the proposed approach

consumption over the life cycle and over the business cycle the main aim of this paper is to assess the validity of the life cycle model of consumption in particular we address an issue that has recently received much attention especially in the macroeconomic literature that of excess sensitivity of consumption growth to income growth we do this using a time series of cross sections and a novel and flexible parameterization of preferences the former allows us to address aggregation issues directly while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth the main findings can be summarized as follows i the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables this is true both at life cycle and business cycle frequencies ii estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables including the level of consumption the eis increases with the level of consumption as expected iii the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle iv we are able to reconcile our results with those reported both in the macro and micro literature v in our specification the elasticity of intertemporal substitution is not very well determined this result however should be taken with care as we have not made an effort to construct a preferred specification which would probably include additional controls for labor supply behavior the evidence presented shows that the life cycle model cannot be easily dismissed indeed we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle