the retirement behaviour of the self employed in britain we analyze the retirement behaviour of older self employed workers using a life cycle framework and a multinomial logit model of dynamic employment and retirement choices using data from the two wave retirement survey we find that greater actual or potential earnings decrease the probability of retirement among the self employed in contrast to employees none of gender health or family circumstances appear to affect self employed retirement decisions the dynamic analysis reveals that relatively few employees and virtually no retirees switch into self employment in later life the switches that do occur are motivated less by attempts to use self employment as a bridge job or stepping stone to full retirement than by self employment being a last resort for less affluent workers with job histories of weak attachment to the labour market we compare self employed and employee retirement behaviour and discuss the policy implications of our results

the economics of two sided markets at a local best buy a child places a new sony playstation 3 on the cashier s counter while the parents dig out their visa card the gaming system and the payment card may appear to have little connection other than this purchase however these two items share an important characteristic that is generating a series of economic insights and has important implications for strategic decision making and economic policymaking both video game systems and payment cards are examples of two sided markets broadly speaking a two sided market is one in which 1 two sets of agents interact through an intermediary or platform and 2 the decisions of each set of agents affects the outcomes of the other set of agents typically through an externality in the case of a video game system the intermediary is the console producer sony in the scenario above while the two sets of agents are consumers and video game developers neither consumers nor game developers will be interested in the playstation if the other party is not similarly a successful payment card requires both consumer usage and merchant acceptance where both consumers and merchants value each others participation many more products fit into this paradigm such as search engines newspapers and almost any advertisersupported media examples in which consumers often negatively value rather than positively value the participation of the other side as well as most software or title based operating systems and consumer electronics malls which seek retailers and consumers convention organizers which seek buyers and sellers dating services which seek men and women and the journal of economic perspectives which seeks content and readership all experience the economics of two sided markets the multi sided nature of many internet and high technology markets as well as

on the simple economics of advertising marketing and product design we propose a framework for analyzing transformations of demand such transformations frequently stem from changes in the dispersion of consumers valuations which lead to rotations of the demand curve in many settings profits are a u shaped function of dispersion high dispersion is complemented by niche production and low dispersion is complemented by mass market supply we investigate numerous applications including product design advertising marketing and sales advice and the construction of quality differentiated product lines we also suggest a new taxonomy of advertising distinguishing between hype which shifts demand and real information which rotates demand

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

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

tying and freebies in two sided markets abstract in two sided markets where platforms are constrained to set non negative prices tying can be deployed by platforms as a tool to introduce implicit subsidies for a monopoly this raises participation and benefits consumers on both sides in a duopoly tying on one side makes a platform more or less competitive on the other side depending on externalities tying may not be ex ante optimal while the competing platform may benefit from it the impact on consumers surplus depends on whether competition is softened or intensified on the profitable side moreover tying increases total welfare if network effects are strong

chicken and egg competition among intermediation service providers we analyze a model of imperfect price competition between intermediation service providers we insist on features that are relevant for informational intermediation via the internet the presence of indirect network externalities the possibility of using the nonexclusive services of several intermediaries and the widespread practice of price discrimination based on users identity and on usage efficient market structures emerge in equilibrium as well as some specific form of inefficient structures intermediaries have incentives to propose non exclusive services as this moderates competition and allows them to exert market power we analyze in detail the pricing and business strategies followed by intermediation services providers copyright 2003 by the rand corporation

a structural model of multiple welfare program participation and labor supply work on estimating the labor supply effects of high marginal tax rates in welfare programs has been hindered by the difficulty of estimating the effects of participation in multiple welfare programs simultaneously the authors solve this problem by applying methods of simulation estimation to a model of labor supply and multiple program participation the results show asymmetric wage and tax rate effects with fairly large wage elasticities of labor supply but very inelastic responses to moderate changes in cumulative marginal tax rates implying that high welfare tax rates do not necessarily induce major reductions in work effort copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the role of labor and marriage markets preference heterogeneity and the welfare system in the life cycle decisions of black hispanic and white women using data from the nlsy79 we structurally estimate a dynamic model of the life cycle decisions of young women the women make sequential joint decisions about school attendance work marriage fertility and welfare participation we use the model to perform counterfactual simulations designed to shed light on three questions 1 how much of observed minority majority differences in behavior can be attributed to differences in labor market opportunities marriage market opportunities and preference heterogeneity 2 how does the welfare system interact with these factors to augment those differences 3 how can new cohorts that grow up under the new welfare system temporary aid for needy families be expected to behave compared to older cohorts

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

information management and pricing in platform markets we study platform markets in which the information about users preferences is dispersed first we show how the dispersion of information introduces idiosyncratic uncertainty about participation decisions and how the latter shapes the elasticity of the demands and the equilibrium prices we then study the effects on profits consumer surplus and welfare of platform design blogs forums conferences advertising campaigns post launch disclosures and other information management policies affecting the agents ability to predict participation decisions on the other side of the market

child care choices and children s cognitive achievement the case of single mothers we evaluate the effect of child care versus maternal time inputs on child cognitive development using single mothers from the nlsy79 to deal with nonrandom selection of children into child care we exploit the exogenous variation in welfare policy rules facing single mothers in particular the 1996 welfare reform and earlier state level policy changes generated substantial increases in their work child care use we construct a comprehensive set of welfare policy variables and use them as instruments to estimate child cognitive ability production functions in our baseline specification we estimate that a year of child care reduces child test scores by 2 1

multidimensional platform design successful platforms attract not just many users but also those of the right kind the right kind of user is one who can either be directly monetized or who differentially attracts other valuable users bonacich centrality on the network of user sorting with direct value of monetization captures this feedback loop and thus characterizes the value of user characteristics we use this value to determine optimal steady state platform design and reliable means for platforms to reach such a steady state we apply these results respectively to explain the dynamic growth strategy of social networks and urban development policies of cities

differentiated networks equilibrium and efficiency we consider a model of price competition in a duopoly with product differentiation and network effects the value of a good for a consumer is the sum of a common and an idiosyncratic component the first captures the vertical dimension of quality the second captures horizontal differentiation each consumer privately observes his own value for each good but cannot separate the common and the idiosyncratic component therefore he has incomplete information about the value of the goods for the other consumers after firms announce prices consumers choose simultaneously which network to join facing a coordination problem in the efficient allocation both networks are active and the firm with the highest expected quality has the largest market share to characterize the equilibrium allocation we derive necessary and sufficient conditions for uniqueness of the equilibrium of the coordination game played by consumers for given prices the equilibrium allocation differs from the efficient one for two reasons first the equilibrium allocation of consumers to the networks is too balanced since consumers fail to internalize network externalities second if access to the networks is priced by strategic firms then the product with the highest expected quality is also the most expensive this further reduces the asymmetry between market shares and therefore social welfare

are there increasing returns to the intergenerational production of human capital information on ability and achievement test scores of sibling children many of whom had mothers who continued their schooling between births is used to test the hypothesis that maternal schooling augments the production of children s human capital that there are increasing returns to human capital estimates from models that take into account heterogeneity in maternal endowments could not reject this hypothesis and suggest benefits to postponed childbearing in particular they suggest that postponement of the initiation of childbearing by two years among women who are tenth graders would result in a 5 percent increase in their children s achievement test scores

transfer payment diversion for small business development british and french experience government programs in britain and france allow the unemployed to receive transfer payments while they attempt to create their own employment through new small businesses this study finds that businesses formed under those programs even more than most small enterprises generate only limited incomes and unstable employment for their proprietors also program participants most in need of help in finding stable employment those with the sparsest qualifications and resources are precisely those whose businesses are most likely to fail the authors therefore conclude that policy makers should not expect this approach now under consideration by congress to provide major assistance to the disadvantaged or long term unemployed m ost government efforts to reduce structural unemployment seek to promote the absorption of the unemployed into established enterprises many employers however prove reluctant to hire disadvantaged job seekers even when encouraged with subsidies also economically lagging localities are short of firms hiring anyone and many of the newly employed in all localities enter low wage positions with little employment stability and few opportunities for advancement in the 1980s renewed emphasis on self help among the unemployed and disadvantaged murray 1984 and praise for the role of private entrepreneurs in economic growth wanniski 1978 have

do peer groups matter peer group versus schooling effects on academic attainment this paper estimates an educational production function educational attainment is a function of peer group parental input and schooling conventional measures of school quality are not good predictors for academic attainment once we control for peer group effects parental qualities also have strong effects on academic attainment this academic attainment is a then a key determinant of subsequent labour market success as measured by earnings the main methodological innovation in this paper is the nomination of a set of instruments very broad regions of birth which as a whole pass close scrutiny for validity and permit unbiased estimation of the production function

supplying information to facilitate price discrimination the authors examine the incentive of a seller to allow potential buyers to acquire private information about their tastes for the seller s product improved private information for buyers enables the seller to segment the market and charge higher prices to high value buyers however improved information can also provide rents to buyers in a variety of settings this tradeoff is optimally resolved at one of two extremes either buyers are supplied with the best available knowledge of their tastes or no information is supplied by the seller copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

life cycle schooling and dynamic selection bias models and evidence for five cohorts of american males this paper examines an empirical regularity found in many societies that family influences on the probability of transiting from one grade level to the next diminish at higher levels of education we examine the statistical model used to establish the empirical regularity and the intuitive behavioral interpretation often used to rationalize it we show that the implicit economic model assumes myopia the intuitive interpretive model is identified only by imposing arbitrary distributional assumptions onto the data we produce an alternative choice theoretic model with fewer parameters that rationalizes the same data and is not based on arbitrary distributional assumptions

evaluation of credit guarantee policy using propensity score matching in this article we evaluate the effect of the credit guarantee policy by comparing a large sample of guaranteed firms and matched non guaranteed firms from 2000 to 2003 the sample firms are compared with respect to growth rates of different performance indicators including productivity sales employment investment r d wage level and the survival of firms in the post crisis period in order to avoid the selectivity problem propensity score matching methodologies are adopted results suggest that credit guarantees influenced significantly firms ability to maintain their size and increase their survival rate but not to increase their r d and investment and hence their growth in productivity moreover due to the adverse selection problem firms with lower productivity were receiving guarantees

dynamic price competition with network effects i consider a dynamic model of competition between two proprietary networks consumers die and are replaced with a constant hazard rate and firms compete for new consumers to join their network by offering network entry prices i derive a series of results pertaining to a existence and uniqueness of symmetric equilibria b monotonicity of the pricing function e g larger networks set higher prices c network size dynamics increasing dominance vs reversion to the mean and d firm value how it varies with network effects finally i apply my general framework to the study of termination charges in wireless telecommunications i consider various forms of regulation and examine their impact on firm profits and market share dynamics

two sided markets a progress report the paper provides a road map to the burgeoning literature on two sided markets and presents new results it identifies two sided markets with markets in which the structure and not only the level of prices charged by platforms matters the failure of the coase theorem is necessary but not sufficient for two sidedness the paper builds a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality and obtains new results on the mix of membership and usage charges when price setting or bargaining determine payments between end users

estimating a household production function heterogeneity the demand for health inputs and their effects on birth weight the household production literature emphasizes that technical or biological processes condition input selection by households in their production activities along with prices and income exogenous variations in health to the extent that they are perceived by individuals heterogeneity lead to correlations between inputs and health outcomes that cannot be used to derive causal conclusions therefore estimates of health technology must be obtained from a behavioral model in which health inputs are themselves choices consistent estimates are reported of the effect of endogenous inputs such as medical care smoking and fertility on birth weight and fetal growth in the presence of health heterogeneity

comparative advertising disclosing horizontal match information improved consumer information about horizontal aspects of products of similar quality leads to better consumer matching but also to higher prices so consumer surplus can go up or down while profits rise with enough quality asymmetry though the higher quality and hence larger firm s price falls with more information so both effects benefit consumers this occurs when comparative advertising is used against a large firm by a small one comparative advertising as it imparts more information therefore helps consumers although it also improves the profitability of the small firm overall welfare goes down because of the large loss to the attacked firm

microenterprise development programs in the united states and in the developing world abstract sparked by examples from bangladesh bolivia indonesia and other developing countries hundreds of microenterprise programs have been started in the united states will these us efforts be successful this paper reviews the evidence and concludes that microenterprise development is much more difficult in the united states than in the developing world the paper suggests some ways to address the challenges of us microenterprise development

natural natural experiments in economics the recent literature exploiting natural events as natural experiment instruments is reviewed to assess to what extent it has advanced empirical knowledge a weakness of the studies that adopt this approach is that the necessary set of behavioral market and technological assumptions made by the authors in justifying their interpretations of the estimates is often absent the methodology and findings from twenty studies are summarized and simple economic models are used to elucidate the implicit assumptions made by the authors and to demonstrate the sensitivity of the interpretations of the findings to the relaxation of some of these assumptions