inequality control rights and rent seeking sugar cooperatives in maharashtra this paper presents a theory of rent seeking within farmer cooperatives in which inequality of asset ownership affects relative control rights of different groups of members the two key assumptions are constraints on lump sum transfers from poorer members and disproportionate control rights wielded by wealthier members transfers of rents to the latter are achieved by depressing prices paid for inputs supplied by members and diverting resulting retained earnings the theory predicts that increased heterogeneity of landholdings in the local area causes increased inefficiency by inducing a lower input price and a lower level of installed crushing capacity predictions concerning the effect of the distribution of local landownership on sugarcane price capacity levels and participation rates of different classes of farmers are confirmed by data from nearly 100 sugar cooperatives in the indian state of maharashtra over the period 1971 93

the rate elasticity of florida tourist development aka bed taxes one aspect of taxation in florida is unique in that state policymakers have created several different tourist development taxes generally allowing local governments to adopt up to four of these ad valorem levies which can total 5 on transient rentals the rentals include but are not limited to hotel stays in this article we estimate the elasticity of this local tax base with respect to the rate for florida counties with rate changes between 1998 and 2012 results indicate several significant and large short term declines from periodic county level increases in the tax rate but no significant long term effects

markov perfect equilibria in altruistic growth economies with production uncertainty this paper concerns the existence of markov perfect equilibria in altruistic growth economies previous work on deterministic models has established existence only under extremely restrictive conditions we show that the introduction of production uncertainly yields an existence theorem for aggregative infinite horizon models with very general forms of altruism journal of economic literature classification numbers

approaching the innovation frontier in korea the transition phase to leadership as leading east asian latecomer firms begin to compete on the basis of new product development and in house research and development r d they appear to confront a difficult strategic dilemma should they compete as r d and brand leaders on the international stage or should they continue with their tried and tested formula of low cost catch up competitiveness most studies of east asian firms focus on catch up innovation processes by contrast this paper focuses on the challenges facing latecomer firms in the transition phase from catch up to leadership status in order to assess the strategic dilemma argument and examine the nature of transition innovation based on in depth interviews with leading korean firms the paper contends that the strategic dilemma argument is a misleading oversimplification of the main innovation challenges facing most korean firms as they become more technologically advanced most of the major exporters or chaebol offer a portfolio of products some of which are technologically advanced and others less advanced corporate innovation strategies tend to be executed in relation to the needs of specific products or closely related product families rather than the firm in its entirety in addition many firms in many product areas have yet to reach the innovation frontier stage and even the leading chaebol continue to produce large volumes of products under sub contracting and licensing agreements firm strategies tend to embody a mix of leadership followership and latecomer positions according to the product portfolio of the company in question the study identifies various strategic options and difficulties facing korean firms during the transition process and points to promising future research on latecomer transition

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

equilibrium income inequality among identical agents the paper offers a theory of income differences in which income inequality exists and persists despite identical tastes and talents teams of unskilled labor supervised by schooled managers produce goods with increasing returns to scale agents are assumed unable to borrow to fund the human capital investment needed to become managers despite ex ante identical agents the model displays the following equilibrium phenomena i risk averse agents accept fair gambles implying an unequal ex post distribution of unearned income ii agents agree to publicly subsidize education although those receiving the subsidy have the highest material wealth and iii income and educational differences are perpetuated from generation to generation

contractual structure and wealth accumulation can historical wealth distributions affect long run output and inequality despite rational saving convex technology and no externalities we consider a model of equilibrium short period financial contracts where poor agents face credit constraints owing to moral hazard and limited liability if agents have no bargaining power poor agents have no incentive to save poverty traps emerge and agents are polarized into two classes with no interclass mobility if instead agents have all the bargaining power strong saving incentives are generated the wealth of poor and rich agents alike drift upward indefinitely and history does not matter eventually d31 d91 i32 o17 q15

job information networks neighborhood effects and inequality this paper explores the theoretical and empirical literature to examine the use by different social groups of informal sources of information provided by friends relatives and acquaintances during job search and its consequences for the job market it also addresses the role of network structure and size the resource endowments of contacts and nature of the links between contacts to explain differences in the effects of job information networks in doing so the paper also turns to the sociology literature on job information networks and provides an economic perspective on such sociological concepts as strong versus weak ties inbreeding distance from structural holes etc the paper distinguishes between models of exogenous job information networks that is where individuals obtain job related information through a given social structure and endogenous job information networks which are social networks that result from individuals uncoordinated actions the paper pays special attention to such issues as physical and social proximity and sharing of information and discusses them in the context of the recent social interactions and neighborhood effects literature finally the paper outlines a model that integrates job information networks where interactions occur in business cycle frequencies with the dynamics of human capital formation which include the joint effects of parental community and neighborhood human capital and are set in life cycle frequencies for the purpose of organizing suggestions for future research and examining earned income inequality

the effects of compulsory schooling on growth income distribution and welfare abstract in this paper we consider an olg model with productive capital and human capital affecting the quality of labor in each generation parents invest in their children s education but disregard its external effect on the aggregate production function government intervention in providing compulsory schooling increases economic growth along the equilibrium path while the intragenerational income distribution becomes more equal also in the long run the majority of individuals in each generation are better off due to compulsory schooling

the desegregating effect of school tracking this paper makes the following point detracking schools that is preventing them from allocating students to classes according to their ability may lead to an increase in income residential segregation it does so in a simple model where households care about the school peer group of their children if ability and income are positively correlated tracking implies that some high income households face the choice of either living in the areas where most of the other high income households live and having their child assigned to the low track or instead living in lower income neighbourhoods where their child would be in the high track under mild conditions tracking leads to an equilibrium with partial income desegregation where perfect income segregation would be the only stable outcome without tracking

intergenerational talent transmission inequality and social mobility abstract the paper investigates the effects of intra family talent transmission when human capital exhibits indivisibilities and parental financing of education involves borrowing constraints positive talent correlation reduces social mobility but steady state inequality and macroeconomic history dependence are not affected

intergenerational persistence of earnings the role of early and college education recent empirical evidence from the united states indicates a high degree of persistence in earnings across generations designing effective public policies to increase social mobility requires identifying and measuring the major sources of persistence and inequality in earnings we provide a quantitative model of intergenerational human capital transmission that focuses on three sources innate ability early education and college education we find that approximately one half of the intergenerational correlation in earnings is accounted for by parental investment in education in particular early education we show that these results have important implications for education policy

coordination failures and government policy a model with applications to east asia and eastern europe abstract poor countries must specialize in standardized labor intensive commodities middle income countries may have a richer menu of options if their labor force is reasonably well educated and skilled the multiplicity of equilibria is due to a coordination problem inherent in activities that require specialized inputs if no intermediate inputs are presently produced there may be little incentive for any single firm to do so on its own the economy may get stuck in a low wage low tech equilibrium an investment subsidy or a minimum wage policy can enhance welfare by moving the economy to a superior equilibrium

risky higher education and subsidies abstract tertiary education in the u s requires large investments that are risky lumpy and well timed tertiary education is also heavily subsidized our model suggests that despite adverse selection arising from encouraging poorly prepared students to enroll observed collegiate subsidies improve outcomes substantially relative to the fully decentralized case this result occurs because increases in subsidy rates for college education generate reductions in college failure risk without altering mean returns we find that this mechanism is robust and that tertiary subsidy rates well in excess of those observed in the u s can be justified by failure risk alone

firm size age and efficiency evidence from kenyan manufacturing firms translog stochastic frontier production functions are estimated using an unbalanced panel of 235 kenyan manufacturing firms in the food wood textile and metal sectors the sectors are estimated individually in order to investigate whether technical efficiency is systematically related to the size and age of firms the evidence suggests that firm size has a positive and significant effect in the wood and textile sectors the age effect is less systematic but is insignificant in all sectors except textiles

intergenerational transfers production and income distribution abstract we consider an overlapping generations economy where the aggregative production process uses physical capital and human capital intergenerational transfers from parents to their children are motivated by altruism we distinguish between two types of transfers investment of parents in the education of their offspring and capital transfer the gift bequest motive we show that the intensity of each type of altruism and hence the composition of the two types of transfers affect significantly the equilibrium output and the intragenerational income distributions comparing competitive equilibria from the same initial distributions of capital transfers and human capital we derive a the economy with the higher education inclined altruism attains lower output and more equal intragenerational income distributions if either the production function s elasticity of substitution is not large or the altruism is weak b for more bequest inclined altruism the effects are usually reversed c under public provision of education higher bequest inclined altruism results in lower output and less equal distribution of income in all dates

introduction to development theory abstractthisarticle introduces the symposium on economic development theory 2007 elsevier inc all rights reserved jel classi cation o11 o12keywords development economics development economics a subject that studies institutions growth inequality and povertyin the developing world is a large lively and exciting area of research the objective of thissymposium is to put together some contributions in economic theory with a distinct focus ondevelopment questions much of early development economics as typi ed in the work of paul rosenstein rodan arthurlewis ragnarnurkse tiborscitovsky allynyoung gunnarmyrdal harveyleibenstein alberthirschman amartyasenandothers wastheoretical thoughnotnecessarilyinthesenseofformalmodel building theseauthorsallfelttheneedtobringnewconceptsintoeconomictheory ideas that would capture the essential features of underdevelopment and provide explanationsof the development process existing economic theory with its focus on competitive markets depersonalized exchange steady technical progress and balanced growth simply did not seemrightwhenmatchedwiththegroundrealitiesofunderdevelopment fragmented imperfect orjustplain missing markets highly personalized transactions in credit insurance or agrarian tenancy ambiguousornonexistentpropertyrights andwidespreadevidenceofpovertytrapsandhistoricallock ins a fair bit of modern economic theory was born in some of these early development writings young s article 40 on increasing returns was perhaps the rst systematic study of noncon vexities in economic growth rosenstein rodan s celebrated paper 32 on post war interven tion in europe provided a conceptual foundation for modern thinking on coordination failures

why do diplomas pay an expanded mincerian framework applied to mexico we compare four explanations for the value of diplomas each of which has implications for unemployment and wage variation amongst graduates most of which have not previously been tested for when seeking to explain the effects of diplomas we test for these implications using a refined econometric framework exploiting idiosyncrasies in mexican labour market and educational institutions premiums in mexico appear to result from diplomas tied to jobs with downwards rigid wages an uncommon but simple explanation the standard explanations including screening are not suggested by mexican data our results illuminate how labour markets segmented by diplomas clear this depends upon the nature of the labour market rigidities exactly as predicted by neoclassical theory

productivity growth and factor prices in east asia the industrial revolution in several east asian countries over the last three decades is one of the most important economic events in the postwar era several recent growthaccounting exercises have found that their extraordinary rate of output growth was due primarily to an equally impressive rate of factor accumulation with little due to technological progress see alwyn young 1992 1995 jong il kim and lawrence lau 1994 susan collins and barry bosworth 1996 since these studies suggest that factor accumulation has been the lead actor in east asia s growth many economists have reached the conclusion that the industrial revolution in east asia can largely be explained in terms of transition dynamics in a neoclassical growth framework see e g paul krugman 1994 n gregory mankiw 1995 if this view is correct the lesson from east asia s experience is that there are no easy solutions for a poor country that seeks to join the league of wealthy nations low levels of investment and education may be the result of bad policies but once proper policies are enacted a poor country faces the grim prospect of a further decline in its already low standards of living as it devotes more resources to investment and education the central point of this paper is that if east asia s growth was largely driven by capital accumulation with little technological progress the return to capital should have fallen dramatically as capital accumulation encounters diminishing returns for example the capital output ratio for korea computed from the national accounts has increased at an average rate of 3 4 percent per year from 1966 to 1990 while that of singapore has increased at an average rate of 3 7 percent per year from 1968 to 1990 by dividing the share of payments to capital in total income by the capital output

firm size and technical efficiency applications of production frontiers to indian survey data abstract this paper is an empirical investigation of the relationship between relative technical efficiency and firm size in four indian manufacturing industries a frontier translog production function is used to derive measures of technical inefficiency at the enterprise level given the properties of the estimated production frontier these indices of technical efficiency are also indices of total factor productivity tfp which is the single most widely accepted measure of productive efficiency variations in technical efficiency are correlated with several explanatory variables including size of firm firm size is found to be positively associated with relative productive efficiency in only one of the four industries

level playing fields and laissez faire postliberal development strategy in inegalitarian agrarian economies focusing on the rural sector in latin america this paper explores the microeconomic linkages between distribution and growth which drive the possible reproduction of rural poverty over time the result of this exploration is a neostructuralist perspective which argues that actually existing laissez faire agrarian economies do not present a level playing field and that low wealth farms face disadvantages which tend to reproduce or even deepen sectoral inequality the paper then tries to identify the sorts of public policy and collective action which might modify the nature of growth and distribution in post liberalization agrarian market economy

stochastic wealth dynamics and risk management among a poor population we use herd history data collected among pastoralists in southern ethiopia to study stochastic wealth dynamics among a poor population although covariate rainfall shocks plainly matter household specific factors including own herd size account for most observed variability in wealth dynamics we find no support for the tragedy of the commons hypothesis past studies may have conflated costly self insurance with stocking rate externalities biophysical shocks move households between multiple dynamic wealth equilibria the lowest suggesting a poverty trap according to nonconvex path dynamics these findings have broad implications for development and relief strategies among a poor population vulnerable to climatic shocks a vast economic literature on risk management rests explicitly or implicitly on the classic friedmanite permanent income hypothesis studies of portfolio management consumption smoothing social insurance and the like all depend on the canonical assumption that stochastic income realisations are drawn from a stationary income distribution leading to consumption smoothing off a stable asset base the possibility of asset accumulation connects this literature to the immense literature on the theory and empirics of economic growth

why does child labor persist with declining poverty we develop a dynamic overlapping generations model to highlight the role of income inequality in explaining the persistence of child labor under declining poverty differential investment in two forms of human capital schooling and health in the presence of inequality gives rise to a nonconvergent income distribution in the steady state characterized by multiple steady states of relative income with varying levels of education health and child labor the child labor trap thus generated is shown to preserve itself despite rising per capita income policy recommendations include public provision of education targeted toward reducing schooling costs for the poor or raising the efficacy of public health infrastructure jel i1 j2 o1 o2

high profit strategies in mature capital goods industries a contingency approach high profit and low profit strategic gestalts in two different types of mature capital goods industries are examined multiple avenues to high profits are found within both types but they differ

technology international trade and pollution from us manufacturing pollution emitted by us manufacturers declined markedly over the past several decades even as real manufacturing output increased i first show that most of the decline in us manufacturing pollution has resulted from changing production processes technology rather than changes in the mix of goods produced i then show that increased net imports of polluting goods international trade accounts for only a small portion of the pollution reductions from the changing mix of goods together these two findings demonstrate that shifting polluting industries overseas explains only a minor part less than 10 percent of the cleanup of us manufacturing jel f18 l23 l60 o30 q52 q53

productivity growth of newly industrializing economies in heterogeneous capital goods markets the case of the korean machinery and equipment industry although many previous studies have investigated the economic growth of east asian countries from the perspective of productivity growth they have adopted a limited focus only on the national level or on the aggregated level and have overlooked the heterogeneity at the disaggregated level furthermore only a few studies have examined the sources of the remarkable growth and trade performance of the korean machinery and equipment industry despite its importance for sustainable growth of national economy therefore we investigated the total factor productivity growth tfpg of the korean machinery and equipment industry and its 12 sub sectors from 1970 to 2012 using the stochastic frontier production approach as a result we found that the industry has achieved labour input driven tfpg largely due to technical progress this is contrary to the previous result that east asia has expanded the production frontier by capital accumulation in contrast in some sub sectors scale effect and allocation effici

intergenerational income group mobility and differential fertility one question development economists are especially interested in but so far left unanswered is how would the societal income distribution be affected by introducing a family planning program to reduce the reproduction rate of the poor which is usually high in developing countries the purpose of this paper is to search for analytical answers to this question we are able to make definite comparisons about some class of inequality measures of the steady state societal income distributions and these comparisons provide strong theoretical support in favor of the above mentioned family planning program excerpt

self enforcing exchange among generations implications for consumption and mobility abstract a three generation olg model with one directional altruism and two directional intra family transfers is presented adults invest in their children s education and make transfers to their elderly parents however due to lack of altruism adults with high earnings do not share consumption equally with their elderly parents but spend a larger share of their earnings on own consumption and on their children s education this allows the model to be consistent with three empirical observations that are difficult to reconcile with traditional altruistic frameworks of intergenerational social interactions and mobility i consumption is not perfectly shared between members of an extended family ii consumption is not equally persistent over the lifecycle as across generations and iii the intergenerational persistence of earnings is particularly high at the top end of the earnings distribution

intergenerational mobility and macroeconomic history dependence a large literature on endogenous inequality has argued that persistent differences in macroeconomic performance across countries can be explained by historical inequality owing to indivisibilities in occupational choice and borrowing constraints these models are characterized by homogenous agents a continuum of steady states sss and lack of mobility in every ss we show that introducing even a little heterogeneity in order to generate ss mobility shrinks the ss set dramatically mobile sss are generically locally unique and finite in number sufficient conditions for global uniqueness and convergence of competitive equilibrium dynamics are provided

like grand parent like child multigenerational mobility across the eu abstract this study shows that the multigenerational transmission of inequality in most of the 28 eu countries is higher than what a parent to child paradigm would suggest while a strand of the literature claims that this is due to a direct grandparental effect economic historian gregory clark argues that multigenerational mobility follows a markovian process in his view not only are previous estimates severely attenuated by an errors in variables problem but persistence is also constant across time and space using a unique retrospective survey containing information on three generations of european citizens we provide suggestive evidence against such a universal law of mobility while estimates based on measurement error models show that persistence is indeed as strong as clark suggests there are cross country differences furthermore for a few eu countries we cannot reject the hypothesis of a direct grandparental effect overall there is no single data generating process to describe multigenerational persistence that fits all eu countries 2

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

returns to education a further international update and implications this paper updates evidence on the returns to investment in education by adding estimates for new countries and refining existing estimates to bring the total number of country cases to over 60 the new cross country evidence confirms and reinforces earlier patterns namely that returns are highest for primary education the general curricula the education of women and countries with the lowest per capita income the findings have important implications for directing future investment in education which for efficiency and equity purposes should concentrate on these priority areas

endogenous capital market imperfections human capital and intergenerational mobility in this paper capital market imperfections are endogenized considering an adverse selection problem between banks and borrowers we develop a growth model with linear olg wealth dynamics where agents are heterogeneous in terms of observable wealth and ability which is private information we show that banks react to this informational asymmetry by granting higher loans to talented borrowers this in turn helps poor and talented agents to become educated and catch up with the rich agents furthermore the credit market friction leads to greater human capital accumulation

on endogenous competitive business cycles the belief that the long run equilibrium of a competitive monetary economy that does not experience any exogeneous shocks whether originating from the external environment or from policy should be modelled as a state that is stationary or perhaps growing at a constant rate seems to be deeply rooted in the mind of some economists

inequality lobbying and resource allocation this paper describes how wealth inequality may distort public resource allocation a government seeks to allocate limited resources to productive sectors but sectoral productivity is privately known by agents with vested interests in those sectors they lobby the government for preferential treatment the government even if it honestly seeks to maximize economic efficiency may be confounded by the possibility that both high wealth and true economic desirability create loud lobbies broadly speaking both poorer economies and unequal economies display greater public misallocation the paper warns against the conventional wisdom that this is so because such governments are more corrupt jel d72 d78 d82 016 in this paper we propose a particular channel through which wealth inequality distorts the resource allocation process our analysis rests on four premises

convergence and catching up in asean a comparative analysis the increasing diversity of average growth rates and income levels across countries has generated a large literature on testing the income convergence hypothesis most countries in south east asia particularly the five founding asean member countries asean 5 have experienced substantial economic growth with the pace of growth having varied substantially across countries recent empirical studies have found evidence of several convergence clubs in which per capita incomes have converged for selected groupings of countries and regions this paper applies different time series tests of convergence to determine if there is a convergence club for asean 5 as well as asean 5 and the usa the catching up hypothesis states that the lagging country with low initial income and productivity levels will tend to grow more rapidly by copying the technology of the leader country without having to bear the associated costs of research and development given the important effects of technological change on growth

is equality stable economic inequality is of interest not only at some intrinsic level but also for its close connections to diverse variables ranging from economic indicators such as growth rates to sociopolitical outcomes such as collective action and conflict it is only natural then to study the evolution of inequality in an economic system it is fair to say that the dominant view on this topic is that inequality is the outcome of a constant battle between convergence and luck gary becker and nigel tomes 1979 current asset inequalities may echo into the future but their natural tendency is to die out owing to a convex investment technology disparities are only sustained through ongoing stochastic shocks see also david champernowne 1953 glenn loury 1981 a second approach emphasizes that initial conditions determine final outcomes owing principally to a nonconvex investment technology see e g mukul majumdar and tapan mitra 1982 abhijit banerjee and andrew newman 1993 oded galor and joseph zeira 1993 ray and peter streufert 1993 historical disparities may persist and magnify if such differences straddle some bifurcation threshold inequality is not inevitable in this view stable steady states with inequality coexist with others that involve perfect equality in this paper we examine a third view which emphasizes an intrinsic tendency of the market mechanism to create inequality in this approach economic inequality appears as an inevitable outcome even if all agents are identical to begin with and even if there is no uncertainty or technological nonconvexity this view has received attention in ray 1990 debasis bandyopadhyay 1993 lars ljungqvist 1993 scott freeman 1996 kiminori matsuyama 2001 and mookherjee and ray 2001 the basic argument is as follows suppose that an economy is populated by several dynasties each of which allocates resources to current consumption and bequests to descendants assume for the moment that the latter consists entirely of educational expenditures preparing children for their chosen professions of course the returns to such professions are endogenous they depend on the distribution of individuals across different professions now if several professional categories are necessary wages must adjust so as to force separation in choices even if all individuals are ex ante identical to be sure this broken symmetry matsuyama 2002 has no payoff implications for the generation alive today identical individuals must receive identical payoffs starting with the next generation however there must be inequality not just in wages but in payoffs there must be individuals in lowpaying professions that involve low training costs whose parents invested little and there must be others in high paying high trainingcost professions whose parents invested a lot once such inequality sets in it may well magnify richer offspring will find it easier to invest in better paying professions for their children two ingredients are used in this argument first credit markets must be missing or imperfect otherwise the necessary finances may be borrowed and wages net of costs must be equalized over all professions however the assumption that parents cannot borrow against their children s future earnings seems innocuous enough second parents cannot make financial bequests to supplement or substitute for educational expenditures such bequests could conceivably neutralize earnings inequality this motivates the question when might financial bequests compensate for earnings inequality in steady state moreover starting from perfect equality will equality be preserved thereafter or will inequality emerge and persist we discuss an extended example from an ongoing research project mookherjee department of economics boston university 270 bay state road boston ma 02215 ray department of economics new york university 269 mercer street new york ny 10003 and instituto de analisis economico csic barcelona spain we thank kiminori matsuyama who encouraged us to write this paper

more equal but less mobile education financing and intergenerational mobility in italy and in the us a centralised and egalitarian school system reduces the cost of education for poor families and so it should reduce income inequality and make intergenerational mobility easier in this paper we provide evidence that italy compared to the usa displays less income inequality as expected given the type of school system but also less intergenera tional upward mobility between occupations and between education levels we explore some of the reasons which can explain this puzzling result and conclude that in a world in which family background is important for labor market success a centralised and egalitarian tertiary education does not necessarily help poor children and may take away from them a fundamental tool to prove their talent and to compete with rich children 1999 elsevier science s a all rights reserved

the schubert effect when flourishing businesses crowd out human capital we show that in family or household firms credit constraints can make business investment a direct competitor to educational investment we test this theory on data collected in cameroon households that are not restricted by credit constraints invest more in education when demand for the product they produce and sell increases however credit constrained households react in the opposite way when demand increases they invest less in education as predicted by our theory we obtain these results controlling for endogeneity of family size of demand conditions and credit constraints

financial market globalization symmetry breaking and endogenous inequality of nations this paper investigates the effects of financial market globalization on the inequality of nations the world economy consists of inherently identical countries which differ only in their levels of capital stock each country is represented by the standard overlapping generations model modified only to incorporate credit market imperfection an integration of financial markets affects the set of stable steady states as it changes the balance between the equalizing force of the diminishing returns technology and the unequalizing force of the wealth dependent borrowing constraint the model is tractable enough to allow for a complete characterization of the stable steady states in the absence of the international financial market the world economy has a unique steady state which is symmetric and stable in the presence of the international financial market symmetry breaking occurs under some conditions that is the symmetric steady state loses its stability and stable asymmetric steady states come to exist in the stable asymmetric steady states the world economy is endogenously divided into the rich and poor countries the borrowing constraints are binding in the poor but not in the rich the world output is smaller the rich are richer and the poor are poorer in any of the stable asymmetric steady states than in the unstable symmetric steady state

early and late human capital investments borrowing constraints and the family we develop a dynastic human capital investment framework to study the importance of family borrowing constraints and uninsured labor market risk as well as the process of intergenerational ability

the measurement and sources of technical inefficiency in the indonesian weaving industry production function models are estimated with a time series of cross section data on indonesian weaving establishments the sources of technical inefficiency are investigated three firm attributes are identified as being potentially related to firm efhciency tbey are firm ownership age and size the importance of these attributes as sources of inefficiency in the indonesian weaving industry is investigated and the implications of the find ings discussed

the inheritance of inequality how level is the intergenerational playing field what are the causal mechanisms that underlie the intergenerational transmission of economic status are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair these are the questions we will try to answer

the effect of financial development on convergence theory and evidence we introduce imperfect creditor protection in a multicountry schumpeterian growth model the theory predicts that any country with more than some critical level of financial development will converge to the growth rate of the world technology frontier and that all other countries will have a strictly lower long run growth rate we present evidence supporting these and other implications in the form of a cross country growth regression with a significant and sizable negative coefficient on initial per capita gdp relative to the united states interacted with financial intermediation in addition we find that other variables representing schooling geography health policy politics and institutions do not affect the significance of the interaction between financial intermediation and initial per capita gdp and do not show any independent effect on convergence in the regressions our findings are robust to removal of outliers and to alternative conditioning sets estimation procedures and measures of financial development

wage structure as implicit insurance on human capital in developed versus underdeveloped countries abstract this paper explores the role of wage structure as implicit insurance on human capital it illustrates how smaller wage differentials in the developed world can be welfare enhancing by acting as implicit insurance while larger wage differentials in underdeveloped countries make investments in human capital riskier in other words with smaller wage differentials the students in a developed country are insured against poor educational outcomes through the existence of well paid alternative employments which are not present in the economy of a less developed country this result arises as multiple equilibria in a general equilibrium model when there are no insurance markets for human capital

the effect of microenterprise lending on child schooling in guatemala many recent theoretical models which portray human capital investment as a primary engine of economic growth underemphasize the structure of the microeconomic decision making process which gives rise to human capital investment in both developed and developing countries human capital investment tends to be a household level decision made in the form of child schooling for families in developing countries which operate household enterprises the decision involves an economic trade off between future returns to schooling and the current return to childrens labor in the enterprise the author explores how access to credit in developing countries can affect the child schooling decision a 2 period household model is presented which endogenously generates an optimal level of child schooling by households accounting for the possibility of asymmetric information in credit and labor markets comparative statics are then conducted to show the conditions under which child schooling will increase or decrease when credit constraints are relaxed a brief background of the schooling system in guatemala and a brief description of the survey data collected in guatemala are provided followed by the presentation of empirical tests and a summary of empirical findings with suggestions made for further research

intervention analysis with cointegrated time series the case of the hawaii hotel room tax tourism taxes have become an important source of revenue for many tourist destinations in the usa among the most widely used is the hotel room tax levied by 47 states and many localities room taxes are touted by proponents as a way to shift the local tax burden to non residents while the travel industry claims the levies signi cantly harm their competitiveness previous studies of room tax impacts have relied on ex ante estimates of demand and supply elasticities in this study we analyse the ea ect onhotel revenuesof the hawaiiroom tax using timeseries interventionanalysis we specify a time series model of revenue behaviour that captures the long run cointegrating relationships among revenues and important income and relative price

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

educational inequality and intergenerational mobility in latin america a new database abstract the causes and consequences of the intergenerational persistence of inequality are a topic of great interest among various fields in economics however until now issues of data availability have restricted a broader and cross national perspective on the topic based on rich sets of harmonized household survey data we contribute to filling this gap by computing time series for several indexes of relative and absolute intergenerational education mobility for 18 latin american countries over 50 years and making them publicly available we find that intergenerational mobility is on average rising in latin america this pattern seems to be driven by the high upward mobility of children from low educated families at the same time there is substantial immobility at the top of the distribution significant cross country differences are observed and are associated with income inequality poverty economic growth public educational expenditures and assortative mating

students today teachers tomorrow identifying constraints on the provision of education with an estimated 115 million children not attending primary school in the developing world increasing access to education is critical resource constraints limit the effectiveness of demand based subsidies this paper focuses on the importance of a supply side factor the availability of low cost teachers and the resulting ability of the market to offer affordable education the authors first show that private schools are three times more likely to emerge in villages with government girls secondary schools gss identification is obtained by using official school construction guidelines as an instrument for the presence of gss in contrast there is little or no relationship between the presence of a private school and girls primary or boys primary and secondary government schools in support of a supply channel the authors then show that for villages that received a gss there are over twice as many educated women and that private school teachers wages are 27 percent lower in these villages in an environment with poor female education and low mobility gss substantially increase the local supply of skilled women lowering wages locally and allowing the market to offer affordable education these findings highlight the prominent role of women as teachers in facilitating educational access and resonate with similar historical evidence from developed economies the students of today are the teachers of tomorrow

pride and prejudice using ethnic sounding names and inter ethnic marriages to identify labour market discrimination labour markets discriminate against workers with particular ethnic sounding names we use non random sorting into interethnic marriage and salient differences between sephardic and ashkenazi surnames to evaluate the causal impact of sephardic affiliation on wages using the 1995 israeli census we estimate the effect of a sephardic sounding surname on wages we first compare the wages of israeli jewish males born to sephardic fathers and ashkenazi mothers sa who are more likely to carry a sephardic surname with the wages of israeli jewish males born to ashkenazi fathers and sephardic mothers as we find that israeli labor markets discriminate based on perceived ethnicity sa workers earn significantly less than their as counterparts we then exploit the custom of women to adopt their husbands surnames to disentangle actual ethnicity from the ethnicity perceived by the market consistent with ethnic discrimination based on surnames we find that it is father in law s ethnicity rather than father s ethnicity that shapes female wage rates finally we find that labor markets discriminate based on surname only when those names provide additional information about ethnicity when ethnicity can be discerned from skin tone surnames do not provide additional explanatory power with respect to wages

exploring the capital goods economy complex product systems in the uk over the past decade qualitative empirical research at the firm project and industry levels has improved our understanding of the characteristics and dynamics of innovation in the high technology high value capital goods or complex product systems cops which underpin modern industrial activity this paper describes the development of a new industrial classification system for cops which is able to estimate quantitative shares of production and value added accounted for by cops at the economy level it is also able to provide insights into the capital information technology and skill intensity of cops as well as employment contributions as an example the method is applied to one major industrial economy namely the uk through a comparison of cops with non cops industries the paper identifies some of the key factors which explain the different patterns of innovation between the two types of industrial activity although preliminary the analysis shows that cops based industries together represent a distinctive class of industrial activity based on the classification system provided further research is underway to examine cross country comparisons in both production and trade performance through time

urbanization informal sector and development abstract urbanization is a universal phenomenon in the postwar world but its qualitative nature is varied across countries some nations have experienced urbanization that accompanied skill upgrading industrialization and the expansion of the urban formal modern sector but others urbanized without such modernization and underwent the expansion of the urban informal traditional sector simultaneously the question that naturally arises is what are the underlying causes for the differences the purpose of the paper is to tackle this question analytically based on a dynamic model of urbanization and development

a theory of intergenerational mobility we study the link between market forces cross sectional inequality and intergenerational mobility emphasizing complementarities in the production of human capital we show that wealthy parents i

fostering the capital goods sector in ldcs abstract the conventional arguments in favour of the production of capital goods by ldcs are based on comparative advantage the possibility of designs appropriate to indigenous factor proportions and the externalities conferred on other sectors these and other arguments are inducing the governments of many middle income countries to more intensively foster the development of the machinery sector this paper examines the analytic and empirical bases of the conventional arguments and finds a considerably more complex picture than that contained in earlier studies

the efficiency wage given long run employment and concave labor constraint abstract the purpose of this paper is to analyze determination of wage rate in a setting where health capital of labor accumulates over time our conclusions are 1 efficiency wage in a dynamic framework exceeds the static wage rate and 2 there is a possibility of multiple steady state equilibria and a low level equilibrium we have also made some comparative static exercises with respect to some key parameters

the short term price effect of a tourist tax through a dynamic demand model the case of the balearic islands abstract tourist taxes have become an important source of revenue for many tourist destinations taxes on accommodation are upheld by their proponents as a way of shifting the local tax burden on to non residents while the travel industry claims that these levies do significant damage to their level of competitiveness the objective of this paper is to identify the market s sensitivity to price changes in travel related services or groups of services assuming that one of the main factors that influences travel decisions is the information on the destination that consumers receive in order to include this effect the study applies a combination of a diffusion model and a traditional economic utility theory model to tourists visiting the balearic islands spain from the united kingdom germany france and the netherlands

inequality mobility and redistributive politics abstract this paper develops a model where income inequality and intergenerational mobility are jointly determined via redistributive politics the model includes two key factors accessibility of tertiary education for poor born agents and multiple self fulfilling expectations of agents given these factors the model provides predictions of cross country differences in inequality and mobility consistent with empirical observations

a theory of trickle down growth and development this paper develops a model of growth and income inequalities in the presence of imperfect capital markets and it analyses the trickle down effect of capital accumulation moral hazard with limited wealth constraints on the part of the borrowers is the source of both capital market imperfections and the emergence of persistent income inequalities three main conclusions are obtained from this model first when the rate of capital accumulation is sufficiently high the economy converges to a unique invariant wealth distribution second even though the trickle down mechanism can lead to a unique steady state distribution under laissez faire there is room for government intervention in particular redistribution of wealth from rich lenders to poor and middle class borrowers improves the production efficiency of the economy both because it brings about greater equality of opportunity and also because it accelerates the trickle down process third the process of capital accumulation initially has the effect of widening inequalities but in later stages it reduces them in other words this model can generate a kuznets curve

intergenerational mobility and the process of development this paper offers an explanation for some evidence that intergenerational earnings mobility is higher in more developed economies and that mobility is positively correlated with wage equality in the model mobility promotes economic growth via its effect on the accumulation and allocation of human capital growth influences mobility via its effect on incentives to acquire education and its effect on liquidity constraints upon such acquisition in the process of development mobility increases and the distribution of education becomes better correlated with ability redistributive policy has a negative effect on growth in developed economies and a positive effect in developing economies

sorting and long run inequality many social commentators have raised concerns over the possibility that increased sorting in society may lead to greater inequality to investigate this we construct a dynamic model of intergenerational education acquisition fertility and marital sorting and parameterize the steady state to match several basic empirical endings we end that increased sorting will signiecantly increase income inequality four factors are important to our endings a negative correlation between fertility and education a decreasing marginal effect of parental education on children s years of education wages that are sensitive to the relative supply of skilled workers and borrowing constraints that affect educational attainment for some low income households

uneven growth a framework for research in development economics the textbook paradigm of economy wide development rests on the premise of balanced growth that is on the presumption that all sectors will grow in unison over time as a country gets richer this view has served us reasonably well in some circumstances but is not particularly useful for accounts of modern under development in many developing countries economic growth has been fundamentally uneven software development the outsourcing of services sectoral technological change quick compositional shifts between agriculture and other sectors the rise of particular exports special economic zones and so on this paper will discuss both the sources of uneven growth and its implications with greater emphasis on the latter the paper will argue that much of the distributional issues or the reactions to globalization that we see in modern developing societies can be viewed as reactions to a growth process that is fundamentally uneven and is indeed perceived as such

decomposing intergenerational income elasticity the gender differentiated contribution of capital transmission in rural philippines summary using longitudinal data from rural philippines we decompose intergenerational income elasticity ige into five distinct pathways intergenerational transmissions of health education land and spouse education capital plus residual correlation in productivity intergenerational human capital transmissions from mothers are stronger than those from fathers maternal education is the parental capital most strongly associated with ige while naive ige estimates are indistinguishable for sons and daughters the pathways that generate these results differ strikingly for sons ige is entirely explained by parent to child capital transmission by contrast strong income correlation exists between daughters and parents even after controlling for parent and child capital endowments

aspirations segregation and occupational choice this paper examines the steady states of an overlapping generations economy with a given distribution of household locations over a one dimensional interval parents decide whether or not to educate their children educational decisions are affected by location there are local complementarities in investment incentives stemming from aspirations formation learning spillovers or local public goods at the same time economy wide wages endogenously adjust to bring factor supplies into line with demand the model therefore combines local social interaction with global market interaction the paper studies steady state configurations of skill acquisition both with and without segregation the model is used to compare macroeconomic and welfare properties of segregated and unsegregated steady states jel d31 o15 d85

a population macroeconomic growth model for currently developing countries abstract this paper constructs a theoretical model that predicts as observed in some currently developing countries that the average school enrollment ratio may fall even when the average fertility rate declines unlike existing models the current analysis indicates that economic growth may slow down when a fertility transition starts asymmetric behavior with respect to fertility and education between households stemming from income inequality plays an important role in generating this result we examine the implications of an education subsidy policy contrary to intuition in some circumstances this policy may decrease the average school enrollment ratio and future economic growth

distributional effects of public education in an economy with public pensions we study how the allocation of government expenditures between two major outlays education and pay as you go social security affects human capital distribution in an economy with heterogeneous agents we consider an overlapping generations economy where the government maintains both programs and allocates tax revenues to finance them in our model human capital is one of the factors of production it is itself produced as a combined result of public inputs and private inputs parents decisions to invest time and material resources in education of their children are motivated by altruism heterogeneous in its strength across the population which leads to heterogeneity of incomes we investigate the effect of an increase in public funding for education on the human capital distribution we show that in this framework contrary to some earlier results increased spending on public education may lead to higher inequality our results depend crucially on the interaction of education funding with the social security budget and on the elasticity of substitution in the learning technology

technological regimes catching up and leapfrogging findings from the korean industries abstract this paper examines the experiences of selected industries in korea to identify the stylized facts in the process of technological capability building and thereby to sort out the conditions for the catching up to occur to explain the process we have built a model of technological and market catching up a special attention has been given to the question of whether there has been a case of leapfrogging in any industry in korea and if so what are the conditions for its incidence in our framework we first measure the degree of catching up in terms of market shares in the world then we focus on catching up in technological capabilities in explaining the different record and prospects of korean industries in market catching up in the model technological capability is determined as a function of both technological effort and the existing knowledge base as determinants of technological effort we look at the technological regimes of the industries such as cumulativeness of technical advances fluidity predictability of technological trajectory and the properties of knowledge base using this model we explain the different technological evolution of the selected industries in korea including the d ram automobile mobile phone consumer electronics personal computer and machine tool industries we find three different patterns of catching ups path creating catching up cdma mobile phone path skipping catching up d ram and automobile and path following catching up consumer electronics personal computers and machine tools we interpret the first two case of catching up as leapfrogging unlike the argument by perez and soete perez c soete l 1988 catching up in technology entry barriers and windows of opportunity in dosi et al eds technical change and economic theory pinter publishers london we find that important r d projects except automobiles where only private r d was involved involved both private and public capacities and that entry was not driven by endogenous generation of knowledge and skills but by collaboration with foreign companies

when equal opportunity is not enough training costs and intergenerational inequality this paper develops an individual optimization model with persistent intergenerational immobility its key feature is that training costs are negatively correlated with family background leading to differences in privately optimal training levels across population groups heterogeneity of innate abilities is shown to reduce but not eliminate the importance of family backgrounds conversely wage thresholds which result from indivisibilities in the production or training functions or noncompetitive elements in the economy such as segmented labor markets increase the scope for inequality in the steady state

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

looking at the population problem through the prism of heterogeneity welfare and policy analyses upon introducing heterogeneity and dynamics into a model of the demand for children a problem of optimal population is defined and analyzed it is shown that from the perspective of social welfare better educated individuals produce too few children while less educated individuals produce too many children and all individuals invest too little in the education of their children the impact of several policy tools geared at addressing the population problem is investigated in particular how child allowances and other tax subsidy policies can be harnessed to enhance welfare and how and why early childhood education programs can mitigate the population problem

distribution and growth in models of imperfect capital markets abstract a full analysis of the distribution of income should include both the inequality in income between different generations of the same family what is usually called intergenerational ocial mobility and the inequality in income between different families in the same generation becker tomes 1979 p 1154

information technology efficiency and productivity evidence from korean local governments this study evaluates the performance of korean local government by measuring their technical efficiency te and total factor productivity tfp growth and more importantly examining the impact of information technology it on this performance the study is different from received analysis in that a unique measure of the state of it the informatization index is used to investigate the impact of it on both te and tfp growth empirical analyses are conducted on data from 222 korean local governments for the period 1999 to 2001 in particular data envelopment analysis techniques are applied to calculate te scores and tfp growth rates for sampled local governments the empirical findings confirm the positive impact it has in improving technical efficiency and accelerating productivity growth the estimated coefficients are correctly signed with other regional characteristics controlled for when te scores and tfp growth rates are regressed on the index in addition the findings indicate that economies o

education technologies wages and technological progress abstract we analyze the worker s incentives to acquire skills under technological progress when the costs of education are endogenous and depend on the wage distribution we show that the agent s intergenerational elasticity of substitution plays then a relevant role in determining how incentives and the long run wage distribution react to technological progress moreover whenever poverty traps of unskilled workers exist higher rates of technological progress can even decrease the incentives of low skill workers to acquire skills we also analyze the effects of educational subsidies in contrast with previous analytical findings we obtain that subsidies always decrease the long run skill premium finally we study the efficiency of the resulting competitive equilibria

the productivity debate of east asia revisited a stochastic frontier approach this paper applies a stochastic frontier production model to the data from penn world table s 49 countries over the period 1965 to 1990 to decompose total factor productivity growth into technical change and technical efficiency change empirical results show east asian countries led the world in productivity growth mainly because their technical efficiency gain was so much faster than that of other countries east asian countries also registered rapid technical change which was comparable to that of the g6 countries after the late 1980s the results provide evidence that negate the hypothesis that east asian growth was mostly input driven and unsustainable

long run growth and human capital this paper analyzes long term growth in a closed economy with human as well as physical capital the human capital corresponds to general education private utility maximization determines each child s schooling costs of educating a given individual are convex although self sustaining growth is not possible steady states with per capita output growing faster than the underlying rate of technological progress do emerge and the magnitude of some comparative static results is increased section 3 attempts to pin down the degree of growth rate amplification implied in practice concluding with estimates of 30 50 percent

economic underdevelopment the case of a missing market for human capital abstract this paper demonstrates that the coexistence of developed and underdeveloped countries can be a stationary equilibrium in a world economy with free trade in consumption goods and physical capital an underdeveloped country is characterized by a high ratio of unskilled workers in the labor force a small stock of physical capital a low gross national product a high rate of return on human capital and a corresponding large wage differential between skilled and unskilled workers the critical assumptions are that future labor earnings cannot serve as collateral on a loan and indivisibilities in education

the dynamics of the wealth distribution and the interest rate with credit rationing are uniquely determined and wealth dispersion among individuals or firms is irrelevant introducing credit rationing into the solow model modifies these conclusions multiple stationary interest rates and wealth distributions can exist because higher initial rates can be self reinforcing through higher credit rationing and lower capital accumulation the wealth accumulation process is ergodic in every steady state but wealth mobility is lower with higher steady state interest rates aggregate output is higher in steady states with lower interest rates because credit is better allocated short run interest rate or distribution shocks can be self sustaining and can have long run effects on output through the induced dynamics of the wealth distribution and credit rationing

wealth constraints lobbying and the efficiency of public allocation abstract in esteban and ray 1999 inequality public allocation and development mimeo we formalize a model in which individuals lobby before the government in order to benefit from some productivity enhancing government action infrastructures direct subsidies permissions in short the government honestly tries to allocate these permissions to the agents that will make the best use of them as revealed by the intensity of their lobbying if the marginal cost of resources varies with wealth the amount of information transmitted through lobbying will depend on the degree of inequality in this paper we summarize the main approach and examine the special case of equal wealth we show that the nature of signaling equilibria is critically affected by per capita wealth