the classification and performance of alternative exchange rate systems abstract owing to dissatisfaction with the imf s de jure classification of exchange rate regimes a substantial literature has emerged presenting de facto classifications of exchange rate systems and using the latter classifications to compare performances of alternative regimes in terms of key macroeconomic variables this paper critically reviews the literature on de facto regimes in particular the paper 1 describes the main methodologies that have been used to construct de facto codings 2 surveys the empirical literature generated by de facto regime codings and 3 lays out the problems inherent in constructing de facto classifications the empirical literature is found to yield few robust findings we argue that the as yet unfulfilled objective of this literature and the major research agenda for the future in this area lies in the need of a more thorough investigation of the degree of monetary policy independence without relying exclusively on movements in exchange rates an agenda the attainment of which is made especially challenging because of the lack of comprehensive and reliable data on reserves and interest rates

time aggregation and the distributional shape of unemployment duration this paper reports empirical evidence on the sensitivity of unemployment duration regression estimates to distributional assumptions and to time aggregation the results indicate that parameter estimates are robust to distributional assumptions while estimates of duration dependence are not time aggregation does not seem to have drastic effects on the estimates in a simple parametric model like the weibull but can produce dramatic changes in the more complicated extended generalized gamma model semiparametric models for grouped data produce stable estimates and perform much better than continuous time models in terms of significance at high levels of time aggregation

political cycles in oecd economies this paper studies whether the dynamic behaviour of gnp growth unemployment and inflation is systematically affected by the timing of elections and of changes of governments the sample include the last three decades in 18 oecd economies we explicitly test the implication of several models of political cycles both of the opportunistic and of the partisan type also we confront the implication of recent rational models with more traditional approaches our results can be summarized as follows a the political business cycle hypothesis as formulated in nordhaus 1975 on output and unemployment is generally rejected by the data b inflation tends to increase immediately after elections perhaps as a result of pre electoral expansionary monetary and fiscal policies c we find evidence of temporary partisan differences in output and unemployment and of long run partisan differences in the inflation rate as implied by the rational partisan theory by alesina 1987 d we find virtually no evidence of permanent partisan differences in output growth and unemployment

estimating dynamic games of oligopolistic competition an experimental investigation we evaluate standard assumptions in the estimation of dynamic oligopoly models with laboratory data using an entry exit game we estimate structural parameters under the assumption that the data are generated by a markov perfect equilibrium and subsequently predict counterfactual behavior if behavior was collusive however the assumption would be violated and one would mispredict counterfactuals the laboratory allows us to compare predicted behavior to true counterfactuals implemented as treatments our main finding is that prediction errors due to collusion are modest in size we also document a different deviation from equilibrium behavior inertia that can lead to large prediction errors

entrepreneurship and income inequality in southern ethiopia this article uses inequality decomposition techniques in order to analyze the consequences of entrepreneurial activities to household income inequality in southern ethiopia a uniform increase in entrepreneurial income reduces per capita household income inequality this implies that encouraging rural entrepreneurship may be favorable for both income growth and income distribution such policies could be particularly successful if directed at the low income low wealth and relatively uneducated segments of the society

economic mobility and poverty dynamics in developing countries this study provides an introduction to this special issue of the journal of development studies on economic mobility and poverty dynamics in developing countries in addition to providing a conceptual framework it outlines how the contributions fit into the extant literature a series of regularities emerge across these studies the poor consist of those who are always poor poor at all dates and those who move in and out of poverty with the latter group tending to be strikingly large such movements in and out of poverty are apparent when looking at poverty in either absolute or relative terms changes in returns to endowments can be a potent source of increased incomes finally seemingly transitory shocks can have long term consequences the study concludes by drawing out the policy implications of these regularities

nonstationarity in job search theory generally structural job search models are taken to be stationary in this paper models are examined in which every exogenous variable can cause nonstationarity for instance because its value is dependent on unemployment duration a general differential equation that describes the evolution of the reservation wage over time is derived as an empirical illustration a nonstationary structural model is estimated that focuses on the consequences of a downward shift in the level of benefits it appears that the elasticity of duration with respect to the level of benefits after the shift is much larger than the elasticity with respect to the level before the shift this paper examines the movement of a job seeking individual s reservation wage over time in a general nonstationary job search model also results concerning comparative dynamics of the reservation wage and the distribution of the duration of unemployment are derived as an empirical illustration a nonstationary structural model is estimated the nonstationarity originates from the decrease in the level of benefits when unemployment duration equals two years from the results some detailed policy recommendations can be deduced as one is able to distinguish the effect of a change in the level of benefits in the first two years of unemployment from the effect of a change in the level after that period recently the use of job search models for the analysis of unemployment duration has become widespread the reduced form approach in empirical studies see e g lancaster 1979 in which only the hazard of the duration distribution is estimated is gradually being replaced by a more structural approach the latter way of modelling is characterized by the explicit use in empirical analysis of the reservation wage equation as stated by the theory e g yoon 1981 lancaster and chesher 1983 lynch 1983 narendranathan and nickell 1985 and van den berg 1988 use the complete theoretical framework of job search theory to make inferences about search behaviour however the structural models used in these studies are stationary this implies that variables like unemployment benefits or the rate of arrival of job offers are assumed to be constant over the spell of unemployment which is often at variance with reality what is more various reduced form empirical studies indicate a significant durationdependence of the re employment probability which is generally interpreted as evidence in favour of the presence of nonstationarity see e g blau and robins 1986 kooreman and ridder 1983 lancaster 1979 and narendranathan nickell and stern 1985 consequently there is a need to model reservation wage movements over time based on a nonstationary theoretical framework

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

volatility agricultural risk and household poverty micro evidence from randomized control trials households in developing countries are often highly exposed to risk and despite households risk strategies negative shocks often result in substantial welfare losses given the possibility that weather risks in particular might be further increasing there is renewed policy attention on improving households risk management strategies this article provides an overview of insights learned from recent randomized control trials on predictions coming out of the theoretical literature on households ex ante risk management it reveals new puzzles and questions regarding households inter temporal decision making under risk and draws lessons for effective policy design

non agricultural earnings in peri urban areas of tanzania evidence from household survey data abstract this study draws on purposive survey data of approximately 600 households in peri urban tanzania to describe the degree and nature of non farm diversification in these settings with the exception of relatively dynamic cities such as dar es salaam and arusha overall non farm incomes shares are not unambiguously higher than in rural areas as a whole non farm income shares rise sharply and monotonically with quintiles defined in terms of per capita food consumption in that sense the sector appears to offer an important route out of poverty the evidence suggests that education and access to infrastructure are important determinants of non farm incomes in peri urban areas women appear to be poorly placed vis a vis the non farm sector even after controlling for education age and other characteristics kinship and tribal affinities and time devoted to communal activities appear to deter entrepreneurial activity and non farm employment but trust in officials and public servants and strong heterogeneous village associations are important in stimulating non farm activity

a cross country comparison of rural income generating activities summary this paper uses a newly constructed cross country database composed of comparable income aggregates to examine the full range of income generating activities carried out by rural households the analysis paints a clear picture of multiple activities across rural space in countries on all four continents though less so in the included african countries for most countries the largest share of income stems from off farm activities and the largest share of households has diversified sources of income diversification not specialization is the norm nevertheless agricultural sources of income remain critically important for rural livelihoods in all countries

nonfarm income diversification and household livelihood strategies in rural africa concepts dynamics and policy implications abstract asset activity and income diversification lie at the heart of livelihood strategies in rural africa this paper introduces a special issue on the topic income diversification and livelihoods in rural africa cause and consequence of change we concentrate on core conceptual issues that bedevil the literature on rural income diversification and the policy implications of the empirical evidence presented in this special issue

direct tests of the reservation wage property this paper provides the first direct experimental tests of the reservation wages predicted by finite horizon job search models previous indirect tests were based on search duration and search income the authors show that such indirect tests are weak by demonstrating that a naive rule performs essentially as well as the risk neutral model in predicting search duration in contrast direct tests of predicted reservation wages imply rejections of both the naive rule and the risk neutral model the general concave model survives direct tests with reservation wage data as does a specific logistic concave model copyright 1992 by royal economic society

are unemployment and out of the labor force behaviorally distinct labor force states this paper tests the hypothesis that the classifications unemployed and out of the labor force are behaviorally meaningless distinctions this hypothesis is rejected distinct behavioral equations govern transitions from out of the labor force to employment and from unemployment to employment the evidence reported in this paper is broadly consistent with versions of search theory in which unemployment is a state that facilitates the job search process in an appendix we demonstrate that log concavity of the wage offer distribution implies that the exit rate from unemployment is an increasing function of the rate of arrival of job offers

the economics of poverty traps and persistent poverty an asset based approach abstract longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty while a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty this paper develops an asset based approach to poverty analysis that makes it possible to distinguish deep rooted persistent structural poverty from poverty that passes naturally with time due to systemic growth processes drawing on the economic theory of poverty traps and bifurcated accumulation strategies this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long term persistent structural poverty as well as relevant extensions of the popular foster greer thorbecke class of poverty measures the paper closes with reflections on how asset based poverty can be used to underwrite the design of persistent poverty reduction strategies

job search and asset accumulation under borrowing constraints this article examines the relationship between wealth accumulation and job search dynamics it proposes a model in which risk averse individuals search for jobs save and borrow to smooth their consumption one motivation for accumulating wealth is to finance voluntary quits in order to search for better jobs using data on men from the national longitudinal survey 1979 cohort i estimate the individual s dynamic decision problem the results show that borrowing constraints are tight and reinforce the influence of wealth on job acceptance decisions namely that more initial wealth and access to larger amounts of credit increase wages and unemployment duration

testing models of consumer search using data on web browsing and purchasing behavior using a large data set on web browsing and purchasing behavior we test to what extent consumers are searching in accordance to various classical search models we nd that the benchmark model of sequential search with a known distributions of prices can be rejected based on the recall patterns we observe in the data moreover we show that even if consumers are initially unaware of the price distribution and have to learn the price distribution observed search behavior for given consumers over time is more consistent with non sequential search than sequential search with learning our

credit as insurance in agrarian economies abstract this paper examines consumption credit as an insurance mechanism in agrarian economies it explains the more rapid adoption of new technology in the green revolution by large farmers who had greater access to consumption credit the paper also demonstrates how the emergence and expansion of consumption credit markets by mitigating the need for hoarding in order to meet consumption contingencies enhances growth by encouraging investment

openness and inflation a new assessment romer 1993 uses a barro gordon type model to argue that openness puts a check on the government s incentive to engage in unanticipated inflation because of induced exchange rate depreciation 2 therefore in the absence of precommitment in monetary policy more open economies will tend to have lower inflation rates romer finds that empirically over a large sample of countries and over a broad time frame average inflation rates are lower in smaller more open economies this relationship is significant quantitatively large and robust moreover these findings suggest that models in which the absence of precommitment in monetary policy leads to inefficiently high average levels of inflation are essential to understanding inflation in most of the world this comment suggests that the negative link between inflation and openness romer found may be largely driven by the responses of severely indebted countries sics to the debt crisis of the 1980s figures i and ii show the scatterplots of the logarithms of average inflation and openness for the subperiods 1973 to 1981 predebt crisis and 1982 to 1990 the debt crisis period different groups of countries are separated according to their indebtedness level 3 the solid lines in the figures represent the predicted value of inflation obtained from a regression of openness on inflation for the countries in each group as the scatterplots show there is indeed a strong negative relation between openness and inflation among sics during the debt crisis

unemployment insurance and male unemployment duration in canada a model of unemployment duration is estimated with weekly micro data on canadian men entitlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment the probability of a worker leaving unemployment declines with the duration of unemployment holding unemployment insurance entitlement constant when entitlement is allowed to vary the probability of leaving first falls and then generally rises with unemployment duration these results are robust with respect to allowing for person specific unobserved heterogeneity and alternative specifications of duration dependence

costs and benefits of livestock systems and the role of market and nonmarket relationships in developing countries livestock are kept not only for their physical products but also for insurance financing and to display status though this range of purposes is acknowledged livestock policies nevertheless often emphasize physical production a limited perspective that hampers the formulation and implementation of effective livestock policies this article presents a comprehensive appraisal of costs and benefits of livestock systems that takes into account the institutional environment of livestock keepers indicators are developed that capture quantify and organize not only the benefits resulting from the physical production but also those from the intangible functions the method is illustrated by an analysis of cattle in the western province of zambia the results indicate that the perspective on livestock systems developed more closely reflects the observed decisions of the livestock keepers

using evidence of household income diversification to inform study of the rural nonfarm labor market in africa abstract the labor market literature in developing countries has seldom drawn on the studies of rural household income diversification this paper draws on such studies to inform future study of the rural nonfarm labor market in africa the review of evidence provides some surprising departures from traditional images of nonfarm activities of rural households among the most striking is the dominant importance in the majority of case study areas of nonfarm wage labor as compared to self employment of nonfarm sector earnings as compared to farm sector wage earnings and of local nonfarm earnings as compared to migration earnings the most worrying finding was the poor distribution of nonfarm earnings in rural areas despite the importance of these earnings to food security and farm investments this poor distribution implies significant entry barriers and market segmentation it is probable that this will lead over time to an increasingly skewed distribution of land and other assets in rural africa

determinants of income mobility and household poverty dynamics in south africa this article analyses household income mobility among africans in south africa s most populous province kwazulu natal between 1993 and 1998 compared to industrialised and most developing countries mobility has been quite high as might have been expected after the transition in south africa this finding is robust when measurement error is controlled for when disaggregating the sources of mobility it is found that demographic changes and employment changes account for most of the mobility observed which is related to rapidly shifting household boundaries and a very volatile labour market in an environment of high unemployment using a multivariate analysis it can be seen that transitory incomes play a large role four types of poverty traps are found associated with large initial household size poor initial education poor initial asset endowment and poor initial employment access that dominate the otherwise observed regression towards the mean

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed

sustainable management of renewable resources an experimental investigation in continuous time abstractthis study addresses one of the most basic questions in renewable resource management the ability of economic agents to exploit a renewable resource in an efficient and sustainable manner in a laboratory experiment subjects are presented with renewable resource extraction problems where optimal management will lead to a stable steady state a test of sustainability of the extraction practices shows that extraction behaviour results in steady states only 56 of the time the mode of the steady state distribution coincides with the optimal steady state extraction the trade off between accruing a higher payoff in the present and sustaining the resource for future exploitation leads to suboptimal behaviours such as initial overextraction of the resource compared to the optimal extraction policy costly downward adjustment of the extraction later in time and settling down for lower long run resource and extraction the suboptimal behaviours lead to 17 loss in efficiency on average in terms of th

household strategies and rural livelihood diversification this article reviews the recent literature on diversification as a livelihood strategy of rural households in developing countries with particular reference to sub saharan africa livelihood diversification is defined as the process by which rural families construct a diverse portfolio of activities and social support capabilities in order to survive and to improve their standards of living the determinants and effects of diversification in the areas of poverty income distribution farm output and gender are examined some policy inferences are summarised the conclusion is reached that removal of constraints to and expansion of opportunities for diversification are desirable policy objectives because they give individuals and households more capabilities to improve livelihood security and to raise living standards

risk crop choice and savings evidence from tanzania rural households engaged in agricultural activities face considerable risks in their income process these income risks are especially important if they result in consumption fluctuations this is likely if insurance and credit markets are absent one possible strategy for household is to take up low risk activities even if they imply lower returns such response cannot be viewed independently from the other options available to households to reduce consumption fluctuations this paper focuses on the importance of liquid asset formation for risk taking behaviour by households an intertemporal model of consumption under liquidity constraints is developed in which households can choose between income activities with different returns and riskiness it shows that if liquid asset holdings are large providing a buffer for consumption shortfalls then households will be more willing to take up high risk activities evidence based on survey data from shinyanga district tanzania is presented consistent with this prediction this abstract was borrowed from another version of this item

an econometric analysis of reservation wages this paper describes an analysis of survey data on unemployed people who reported their asking wage and the wage they expected to earn we show that if agents behavior is described by the standard optimal job search model one can use these data to deduce structural parameters rather than estimate them and we report our deductions from two surveys 1 of british unemployed people

rural livelihood diversification in sub saharan africa a literature review abstractthis article provides a comprehensive review of the literature on the nature and evolution of rural livelihood diversification in sub saharan africa and the situation regarding smallholders it reveals mixed findings about the causes and consequences of livelihood diversification on rural smallholders adopting this strategy a lot of evidence from the literature suggests that it is relatively better off smallholders with sufficient assets who achieve successful livelihood diversification mainly by exploiting opportunities and synergies between farm and nonfarm activities because of asset constraints increase in incomes and wealth based on livelihood diversification has not yet benefitted the large majority of smallholders

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

rural nonfarm employment and incomes in the himalayas abstract nonfarm activities generate on average about 60 of rural households incomes in the himalayas this article analyzes the determinants of participation in nonfarm activities and of nonfarm incomes across rural households a unique data set collected in the himalayan region of india allows us to deal with the heterogeneity of rural nonfarm activities by using aggregations into categories that are useful both analytically and for policy purposes we conduct an empirical inquiry that reveals that education plays a major role in accessing more remunerative nonfarm employment other household assets and characteristics such as land social status and geographical location also play a role

have the free trade agreements reduced inflation rates abstract most previous studies have examined extensively the economic effects of free trade agreements ftas such as their effects on economic growth income distribution across industries price competitiveness for international trade trade volume and the price of a commodity but not very much on inflation rates this study empirically estimates how much ftas affect domestic inflation rates from the cross country panel data analysis of 34 oecd countries over the period 1980 2014 the expansion of ftas shows a significant negative effect on the consumer price index inflation which is more apparent than the traditionally used openness measure the inflation reduction effect is more significant in countries with a low level of openness than those with a high level of openness

estimating a structural search model the transition from school to work this paper presents a finite horizon search model that is econometrically implemented using all of the restrictions impli ed by the theory following a sample of male high school graduates fr om the youth cohort of the national longitudinal surveys from graduat ion to employment search parameters are estimated reservation wages and offer probabilities are estimated to be quite low simulations a re performed of the impact of changing the parameters on the expected duration of unemployment copyright 1987 by the econometric society

should we track migrant households when collecting household panel data household relocation economic mobility and attrition biases in the rural philippines based on household panel data that tracked migrant households with an additional survey cost of 17 percent this article describes behavior of household relocation and quantifies the extent of attrition biases in estimating the determinants of percapita household consumption and of its growth rate many households relocate for non economic reasons and to rural destinations while the small number of urban migrants improved their wellbeing faster than did others such heterogeneity among migrants may be a reason behind the negligible attrition biases caused by the omission of migrants in the inference on the average behavioral coefficients among the original population

combining household income and asset data to identify livelihood strategies and their dynamics abstractcurrent approaches to identifying and describing rural livelihood strategies and household movements between strategies over time in developing countries are imprecise here we i present a new statistical quantitative approach combining income and asset data to identify household activity choice variables characterise livelihood strategy clusters and analyse movements between strategies and ii apply the approach using an environmentally augmented three wave household n 427 level panel dataset from nepal combining income and asset data provides a better understanding of livelihood strategies and household movements between strategies over time than using only income or asset data most households changed livelihood strategy at least once over the two three year periods a common pathway out of poverty included an intermediate step during which households accumulate assets through farming petty trading and migratory work

chronic and transitory poverty evidence from egypt 1997 99 abstract this paper uses a panel data of 347 households in egypt to measure changes in household consumption during 1997 99 and to identify causes behind the changes per capita consumption has decreased for the households during this time the decrease has not been dramatic but it has occurred at all points along the distribution over the two year period the number of households who have fallen into poverty is over twice as large as the number of households who have climbed out of poverty about two thirds of overall poverty is chronic average consumption over time is below the poverty line and almost half of all poor are always poor we use quantile regression methods to identify the factors that explain total chronic and transitory poverty while our analysis is able to document the extent of transitory poverty it performs relatively poorly in explaining the determinants of this type of poverty the predominantly chronic nature of poverty in our sample and our ability to identify associated characteristics strengthens the case for targeting antipoverty interventions such as food subsidies

a new assessment of openness and inflation reply terra 1998 argues that my finding romer 1993 of a negative relationship across countries between openness and inflation is actually caused by the severely indebted countries over the debt crisis period she proposes an explanation of the openness inflation relationship based on indebted countries need to raise revenue to repay their debts the smaller a country s trade share the more depreciated the real value of the currency must be in order to generate a given trade surplus as a share of gdp and the more depreciated the currency the greater the pressure on the government s budget and thus the greater pressure to inflate in contrast in my paper i argue that the relationship stems from imperfect commitment in monetary policy the less open the economy the greater the benefits of surprise inflation and thus the higher the level of inflation in the absence of complete commitment terra has uncovered interesting variation in the opennessinflation relationship across countries and over time nonetheless i want to make three brief points that suggest that the channel she proposes accounts for only a modest part of the overall relationship first terra s results do not justify her claim that the relationship is a product only of the severely indebted countries sics during the debt crisis this can be seen from her table i for the sics the openness inflation link in the precrisis period though weaker than during the crisis is large and statistically significant the estimates for the moderately indebted countries although imprecise suggest a relationship that is very similar to that for the sics in both periods and for the less indebted countries the point estimates again suggest a negative relationship indeed for the full sample period the coefficient on openness is significantly different from zero only for the high income countries terra s all other countries is there no evidence of a negative association between openness and inflation

equilibrium search with time varying unemployment benefits we show how time varying unemployment benefits can generate equilibrium wage dispersion when identical firms post wages and homogeneous risk averse workers search for jobs we model a two tier system similar to real world ui programmes the unemployed initially receive benefit b eventually if a worker does not find a job the benefit falls to s the duration of high benefits is treated as an exponential random variable so the model is stationary we characterise the equilibrium and derive the comparative statics effects of changes in the two benefit levels and the expected duration of the high benefit state on equilibrium wages and unemployment in this article we analyse the implications of time varying unemployment insurance in an equilibrium search model we consider a two tier system i e a system with a high and a low benefit level this is the form taken by most real world ui programmes unemployed workers initially receive unemployment compensation but eventually if a worker does not find a job in the meantime this benefit is terminated the worker then has access only to lower social assistance benefits or in some countries to no benefits at all specifically we consider an economy in which newly unemployed workers initially receive unemployment benefits at rate b eventually if a worker does not find and accept a job in the meantime the unemployment benefit falls to a lower level s we assume the event that triggers the fall from b to s occurs at poisson rate k 1 this allows us to do our equilibrium analysis in a stationary framework while focusing on the most important aspect of time varying unemployment compensation namely that after some point the benefit falls this representation of time varying unemployment compensation enables us to derive a two point equilibrium wage distribution in a simple stationary setting we derive this equilibrium distribution using a wage posting model of sequential search we allow for free entry and exit of jobs and for matching frictions in the sense that the rate at which unemployed workers and vacant jobs contact one another depends on overall labour market tightness the use of a matching function to determine the job contact rate for workers and the worker contact rate for jobs is relatively unusual in wage posting models which typically assume a fixed contact rate our model can thus be viewed we thank participants at the tinbergen institute s conference on search and assignment for useful comments in particular we thank gerard van den berg who shared notes with us on an alternative approach to the topic of this paper we also thank lucas navarro for valuable research assistance 1 our model can be interpreted as one in which the search activity of unemployed workers is imperfectly monitored by a government agency suppose unemployed workers are punished by a reduction in their benefits from b to s when found to be putting forth less search effort than required and that detection of insufficient search effort occurs at poisson rate k if all workers choose to put forth less than the required effort and this is a plausible assumption given that workers are homogeneous then this sanctions model is equivalent to our model with time varying benefits that is our model can

interpreting changes from the 1970s to the 1990s in african agriculture through village studies abstract assessments of the performance of agriculture in sub saharan africa are typically based on official production statistics at national level between the early 1970s and the mid 1990s these often show alarmingly poor rates of growth but there are good reasons to doubt the statistics and their interpretation an alternative is to examine the record from the village level upward this paper looks at the evidence from 26 case studies of change between the mid 1970s and the mid 1980s at the district or village level these suggest less cause for alarm than the national statistics they confirm that access to markets is essential for agricultural development the single biggest idea in the policy reforms of the 1980s but they also underline the importance of the detail of policy in remedying failures in product capital and insurance markets and in public investment in technology

the poor stay poor household asset poverty traps in rural semi arid india summary although identifying household level poverty dynamics would have important implications for poverty reduction policies empirical evidence is still scant this paper employs a novel semiparametric panel data estimator that combines the advantages of estimation methods in the existing literature and applies it to a uniquely long panel data set to examine poverty dynamics in three villages in rural semi arid india structural immobility is pervasive the currently poor are likely to remain poor suggesting a structural poverty trap while all households face static asset holdings higher castes larger landholders and more educated households are significantly less likely to be poor

is more competition always better an experimental study of extortionary corruption using a laboratory experiment we assess whether increasing competition among public officials reduces extortionary corruption we find that increasing the number of providers has no effect on bribe demands when citizens search costs are high but it increases corruption when search costs are low the effect is absent in a parallel setting framed as a standard market which we attribute to citizens using a nonsequential search strategy as opposed to sequential search in the corruption setting we conclude that efforts to reduce search costs such as infrastructure investments are preferable to anti corruption policies aimed at increasing the number of providers jel d73 d49 c91

wealth weather risk and the composition and profitability of agricultural investments despite the growing evidence that farmers in low income environments are risk averse there has been little empirical evidence on the importance of risk in shaping the actual allocation of production resources among farmers differentiated by wealth the authors use panel data on investments in rural india to examine how the composition of productive and nonproductive asset holdings varies across farmers with different levels of total wealth and across farmers facing different degrees of weather risk income variability is a prominent feature of the experience of rural agents in low income countries the authors report evidence based on measures of rainfall variability that the agricultural investment portfolio behavior of farmers in such settings reflects risk aversion due evidently to limitations on consumption soothing mechanisms such as crop insurance or credit markets the authors results suggest that uninsured weather risk is a significant cause of lower efficiency and lower average incomes a one standard deviation decrease in weather risk measured by the standard deviation of the timing of the rainy season would raise average profits by up to 35 percent among farmers in the lowest wealth quartile moreover rainfall variability induces a more unequal distribution of average incomes for a given distribution of wealth wealthier farmers are willing to absorb significant risk without giving up profits to reduce production risk smaller farmers have to invest their limited wealth in ways that reduce their exposure to risk at the cost of lower profit rates the authors found that at high levels of rainfall variability differences in rates of profit per unit of agricultural assets were similar across classes of wealth but over the sample range of rainfall variability these rates of profit were always higher for the poorer farmers than for the wealthier ones suggesting that the disadvantages of small farmers in risk diffusion are more than offset by their labor cost advantage

determinants and effects of income diversification amongst farm households in burkina faso using four years of household data from three agroecological zones in burkina faso sahelian sudanian and guinean the article examines the determinants and effects of household income diversification harvest shortfalls and terms of trade are found to drive diversification but land constraints do not income diversification is associated with higher incomes and food consumption and more stable income and consumption over years

declining reservation wages and learning empirical studies of job search strongly suggest that the reservation wages of unemployed job seeking individuals decline with the length of their respective unemployment spells previous explanations of this behaviour based on age effects liquidity constraints and limited unemployment benefits are not adequate we provide a new answer to this question based on the reasonable assumption that workers do not have precise knowledge of the distribution of the prevailing wages an individual model of job search and learning is formulated it is shown that the declining trend of reservation wages naturally arises due to the selection process when search costs are not too small the example of a normal wage offer distribution is analysed and the implications are discussed

the sloping land conversion program in china effect on the livelihood diversification of rural households summary through addressing the motivations behind rural households livelihood diversification this paper examines the effect of the sloping land conversion program slcp on livelihood diversification using a longitudinal household survey data set spanning the overall implementation of the slcp our results show that the slcp works as a valid external policy intervention to increase rural livelihood diversification in addition the findings demonstrate that the implementation of the slcp has had heterogeneous effects on livelihood diversification across different rural income groups the lower income group was more affected by the program in terms of income diversification

measuring and analysing the effects of short term volatility in real exchange rates this paper examines short term volatility in the real effective exchange rates of industrial countries and its impact on their imports it yields three conclusions first volatility has not diminished as markets have gained experience with floating exchange rates the trend appears to be in the opposite direction for some countries second exposure to short term volatility has differed among countries japan and sweden have experienced much more than most other industrial countries third volatility appears to depress the volume of international trade this third finding is consistent with results reported by cushman and by akhtar and hilton and challenges earlier findings by hooper and kohlhagen

determinants of income diversification amongst rural households in southern mali abstract household level panel data from a representative sample of rural households in southern mali describing the different sources of household income are used to examine the determinants of income diversification a conditional fixed effects logit model is employed in the analysis to control for household specific effects we find evidence that poorer households have fewer opportunities in non cropping activities such as livestock rearing and non farm work and hence less diversified incomes this appears to reflect their relative lack of capital which makes it difficult for them to diversify away from subsistence agriculture the results also indicate that households in remote areas are less likely to participate in the non cropping sector than their counterparts closer to local markets while households with educated heads are more likely to participate in the non farm sector than those with illiterate heads the significance of entry constraints in explaining portfolio diversification suggests that the role of government in making assets as well as improved infrastructure available to poorer households is still essential in promoting income diversification

are fiscal deficits inflationary abstract this paper applies the dynamic panel quantile regression dpqr model under the autoregressive distributional lag ardl specification and examines the deficit inflation relationship in 91 countries from 1960 to 2006 the dpqr model estimates the impact of deficits on inflation at various inflation levels and allows for a dynamic adjustment with the ardl specification the empirical results show that the fiscal deficit has a strong impact on inflation in high inflation episodes and has a weak impact in low inflation episodes the results imply that fiscal consolidation would be more effective in price stabilization the higher the inflation rate is and are consistent with the theoretical model of catao and terrones 2005

household income strategies and natural disasters dynamic livelihoods in rural nicaragua this paper assesses the impact of hurricane mitch on livelihood strategies of rural households in nicaragua through destruction or distress sales of productive assets a hurricane or another natural hazard could induce people with relatively remunerative livelihoods to choose more defensive strategies which allow them to survive but at a permanently lower welfare level than before using panel data from before and after hurricane mitch we find that livelihood strategies can be grouped into three welfare categories annual farming and farm employment generate low incomes whereas nonfarm wage employment and livestock farming result in relatively high incomes perennial farming nonfarm self employment and annual cropping with nonfarm employment take an intermediate position high welfare strategies were associated with high levels of capital and the number of people involved was very similar between different years suggesting that households following low welfare strategies were trapped in poverty however many households moved actively between strategies of different welfare levels this indicates that there was no absolute poverty threshold but also that being able to initiate a relatively profitable livelihood strategy was no guarantee that this strategy could be maintained there is no evidence that hurricane mitch affected livelihood strategy transitions livelihood mobility was similar for households inside and outside mitch affected areas

economic search an experimental study this paper presents results of experiments designed to test several of the hypotheses present in the theoretical literature on optimal economic search first we test whether the subjects searchers actually search for wages in ways that are consistent with setting an optimal reservation wage we then proceed to determine experimentally the effects of risk aversion increased search costs changes in risk brought about by a mean preserving transformation of the distribution of wage offers the presence or absence of recall the existence of a finite horizon and the searcher s state of knowledge about the underlying distribution of wages in general we find that the searchers exhibit behavior that is consistent with that predicted by theory differences between risk neutral and risk averse searchers are found and the responses of both groups to changes in search costs in the degree of risk or in the state of knowledge are consistent with theoretical predictions

labor market search an experimental study the theoretical results derived from models of economic search have implications which relate to the structure and performance of labor markets utilizing a series of laboratory experiments we attempt to capture many of the features of workers search and also the conditions under which labor markets operate by varying certain of the experimental conditions we are able to determine the searchers responses to changes in the terms of unemployment insurance to the existence of a minimum wage and to different states of information about the underlying distribution of wages in most cases the behavior of the searchers is consistent with that predicted by theory

quantifying rural livelihood strategies in developing countries using an activity choice approach this article uses a quantitative activity choice approach based on identification of activity variables and application of latent class cluster analysis to identify five major rural livelihood strategies pursued by households n 576 in bolivia nepal and mozambique income sources and welfare outcomes are compared across strategies and household differences in asset holdings are analyzed using multinomial logit regression findings reveal that income diversification is the norm that a higher degree of specialization does not characterize more remunerative livelihood strategies that nonfarm income significantly contributes to higher income earnings that environmental reliance does not vary across strategies and that small scale farmers are the largest and poorest livelihood group some livelihood strategies are superior to all other strategies in terms of income earned access to more remunerative livelihood strategies is determined by land ownership education and ethnic affiliation finally the article also highlights that additional work is required to determine the most suitable methods for livelihood strategy identification

nonfarm employment and rural welfare evidence from the himalayas the potential importance of nonfarm employment for the welfare of rural households has long been recognized but whether the nonfarm sector offers prospects for improving the welfare of the rural poor remains a contentious issue we examine distributional and well being effects of nonfarm employment of rural households in the himalayas we account for heterogeneity of nonfarm employment and estimate a system of structural equations to better understand the causal linkages between nonfarm employment and household well being the results confirm that disaggregating nonfarm employment activities matters for understanding the relationship between nonfarm employment and rural welfare while low return nonfarm employment is associated with lower income inequality high return nonfarm activities have a disequalizing effect on the distribution of household incomes we also find that the ability to engage in high return nonfarm activities is associated with higher economic well being poor households on the other hand tend to rely on low return activities that do not contribute to improved well being

inflation openness and exchange rate regimes the quest for short term commitment abstract this paper further tests romer s romer d 1993 openness and inflation theory and evidence quarterly journal of economics 58 869 903 extension of kydland and prescott s kydland f prescott e 1977 rules rather than discretion the inconsistency of optimal plans journal of political economy 85 473 491 predictions for dynamic inconsistency problems in open economies in a panel data set of developed and developing countries from 1973 to 1998 i find that openness does not play a role in restricting inflation in the short run on the other hand a fixed exchange rate regime plays a significant role the results are robust to controlling for other variables that determine inflation performing sensitivity analysis and using a de facto exchange rate regime classification

income portfolios in rural ethiopia and tanzania choices and constraints the article analyses the different income portfolios of households using survey data from rural ethiopia and rural tanzania it suggests that the different portfolios held by households cannot be e

livelihood strategies and dynamics in rural cambodia summary this paper addresses one of the major challenges in rural livelihood analysis to quantitatively examine the dynamics of household livelihood strategies it investigates the interactions between livelihood assets activities and outcomes and captures the dynamics of long term changes and their underlying factors the study aims to identify the classification of rural livelihood strategies their transitions and factors influencing these processes and changes we employ the dynamic livelihood strategy framework and use panel data for 2008 and 2012 covering 464 households in 15 villages in cambodia for latent class cluster analysis and regression estimation in this paper livelihood strategies are quantified based on allocation of available resources which overcomes the limitations of income based analysis our study identifies five household livelihood strategies pursued in the study areas and the results show that over 70 of households change livelihood strategies over time in response to evolving pressures incentives and opportunities the study identifies covariates that shape the choices of livelihood strategies and affects the households access to more remunerative strategies such as education ownership of physical assets and access to infrastructure these findings suggest policy implications for improving the range of livelihood choices available to lower income groups to move out of poverty trap

one kind of freedom poverty dynamics in post apartheid south africa abstract a 1993 south african living standards survey documented the legacy of apartheid in the form high levels of inequality and human insecurity drawing on a 1998 re survey of households in the 1993 study this paper explores whether this legacy has been superseded or whether apartheid s end has been only one kind of freedom that has left households in a poverty trap from which they cannot escape after proposing a theoretically grounded dynamic poverty typology that distinguishes stochastic from structural poverty transitions the paper goes on to estimate that significant numbers of the south african poor are potentially trapped in a structural poverty trap and lack the means to escape poverty over time

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

modern hyper and high inflations since 1947 hyperinflations by cagan s definition in market economies have been rare much more common have been longer inflationary processes with inflation rates above 100 percent per annum based on a sample of 133 countries and using the 100 percent threshold as the basis for a definition of very high inflation episodes this paper examines the main characteristics of such inflations among other things we find that i close to 20 percent of countries have experienced inflation above 100 percent per annum ii higher inflation tends to be more unstable iii in high inflation countries the relationship between the fiscal balance and seigniorage is strong both in the short and long run iv inflation inertia decreases as average inflation rises v high inflation is associated with poor macroeconomic performance and vi stabilizations from high inflation that rely on the exchange rate as the nominal anchor are expansionary

farm nonfarm linkages in rural sub saharan africa this paper is an accumulation over the past 25 years of a body of detailed work examining the structure of africa s rural nonfarm economy first it systematically reviews empirical evidence on the nature and magnitude of the african rural nonfarm economy it then explores differences across locality and size across countries and over time in an effort to assess likely patterns of growth a subsequent review of key production and consumption parameters allows an estimate of the magnitude of the agricultural growth multipliers in africa the paper concludes with a brief discussion of policies and programs that will be necessary if farm nonfarm growth linkages are to achieve their full potential

an equilibrium model of health insurance provision and wage determination we investigate the effect of employer provided health insurance on job mobility rates and economic welfare using a search matching and bargaining framework in our model health insurance coverage decisions are made in a cooperative manner that recognizes the productivity effects of health insurance as well as its nonpecuniary value to the employee the resulting equilibrium is one in which not all employment matches are covered by health insurance wages at jobs providing health insurance are larger in a stochastic sense than those at jobs without health insurance and workers at jobs with health insurance are less likely to leave those jobs even after conditioning on the wage rate we estimate the model using the 1996 panel of the survey of income and program participation and find that the employer provided health insurance system does not lead to any serious inefficiencies in mobility decisions

effects of manpower policies on duration dependence in re employment rates the example of sweden in contrast to the evidence from other countries swedish studies of the transition from unemployment to employment have consistently reported a non negative duration dependenice in the hazard this study examines the extent to which this results from large scale labour market programmes a limited duration of unemployment benefits or differences among available jobs the labour market programmes are here found to be the primary factor behiind the earlier swedish results the programmes thus pick up those with the worst employment prospects thereby postponing a decrease in the re employment probability among job searchers this in turn generates an on average constant duration dependence

keeping doors open the effect of unavailability on incentives to keep options viable many of the options available to decision makers such as college majors and romantic partners can become unavailable if sufficient effort is not invested in them taking classes sending flowers the question asked in this work is whether a threat of disappearance changes the way people value such options in four experiments using door games we demonstrate that options that threaten to disappear cause decision makers to invest more effort and money in keeping these options open even when the options themselves seem to be of little interest this general tendency is shown to be resilient to information about the outcomes to increased experience and to the saliency of the cost the last experiment provides initial evidence that the mechanism underlying the tendency to keep doors open is a type of aversion to loss rather than a desire for flexibility

real time search in the laboratory and the market the standard model of labor market search posits repeated infinite horizon search from a fixed distribution of wages in a stationary environment under these circumstances the optimal search policy has a reservation wage property i e the decision to accept an offer involves a comparison of the offer with a time invariant constant w which itself is a function of the parameters characterizing the search environment a wage offer greater than or equal to w is accepted while any other is rejected and search is continued some early empirical job search studies however accumulated evidence of a declining trend in reservation wages over the course of an unemployment spell 1 since then several theoretical explanations for the declining reservation wage profiles have emerged all of which relax the stationarity assumption of the standard model for example reuben gronau 1971 assumes searchers have finite lives kenneth burdett 1977 gerard j van den berg 1990 james albrecht and susan vroman 2005 and others model short term unemployment benefits albrecht pieter a gautier and vroman 2006 permit directed search to heterogeneous prospects 2 john p danforth 1979 and silvio rendon 2006 consider general liquidity con strained search and burdett and tara vishwanath 1988 model learning about the job offer distribution behavioral explanations for declining reservation wages have been suggested by braunstein and schotter 1981 schotter and braunstein 1982 and others in this paper we present the results of the first ever to our knowledge real time search laboratory experiment performed in an effort to investigate this falling res ervation wage phenomenon where field studies of unemployed search often rely on strong identifying assumptions to recover searchers unobservable reservation wages in the laboratory we are able to elicit subjects complete reservation wage profiles in an incentive compatible manner 3 further in the laboratory we are able to

inflation in open economies abstract this paper relates the time consistent inflation rate to the degree of trade openness of an economy the mechanism linking the welfare effects of monetary surprises and hence the incentives to inflate to openness does not rely on a large country terms of trade effect but rather is due to imperfect competition and nominal price rigidity in the non traded sector the empirical evidence supports the main predictions of the model 1997 elsevier science b v

smuggling and supply response coffee in ethiopia abstract during the 1980s substantial smuggling of coffee has been taking place in ethiopia the recent devaluation has raised hopes that substantial quantities of coffee will flow back to the official channels in this study data on the incentives to supply to the different channels are collated a model of official supplies is formulated which nests an empirical test between the smuggling models by bhagwati and hansen 1973 and by pitt 1981 the econometric results favor the latter and show a small but significant effect of the premium in the black market and a positive total supply response relative to the main competing crop chat the results imply that the increases in export earnings from the devaluation will be quite limited

the effects of risk and shocks on non farm enterprise development in rural ethiopia summary this paper assesses the impact of risk and shocks on non farm enterprise development in rural ethiopia using a matched household enterprise community dataset augmented with precipitation based measures of risk the likelihood of running a non farm firm and the returns to running such firms co vary with agricultural productivity shocks diversification into non farm activities thus provides limited protection against fluctuations in agricultural performance this may explain why ex ante risk has no impact on the likelihood of running a non farm firm it nonetheless hampers non farm enterprise development by repressing investment and inducing sorting into less capital intensive activities

fixed versus flexible exchange rates which provides more fiscal discipline abstract conventional wisdom holds that fixed rates provide more fiscal discipline than do flexible rates in this paper we show that this wisdom need not hold in a standard model in which fiscal policy is endogenously determined by a maximizing fiscal authority the claim that fixed rates induce more discipline stresses that sustained adoption of lax fiscal policies must eventually lead to an exhaustion of reserves and thus to a politically costly collapse of the peg hence under fixed rates bad behavior today leads to punishment tomorrow under flexible rates bad behavior has costs as well the difference is in the intertemporal distribution of these costs flexible rates allow the effects of unsound fiscal policies to manifest themselves immediately through movements in the exchange rate hence bad behavior today leads to punishment today if fiscal authorities are impatient flexible rates by forcing the costs to be paid up front provide more fiscal discipline and higher welfare for the representative private agent the recent experience of sub saharan countries supplies evidence that matches the predictions of the model

openness and inflation new empirical panel data evidence abstract the purpose of this paper is to test the hypothesis first documented by romer 1993 that inflation is lower in more open economies according to this hypothesis central banks have a smaller incentive to engineer surprise inflations in economies that are more open because the phillips curve is steeper in this paper the panel data technique has been employed to examine the aforementioned hypothesis concerning the developed and developing countries over the last two decades also comparing with other empirical studies this paper has estimated the relationship between economic globalization as one dimension of the new kof globalization index and inflation the paper s results cast substantial doubts on the conventional view that suggests a robust and negative relationship between trade openness and inflation the estimation result regarding the traditional measure of trade openness indicates a positive and significant association between trade openness and inflation which opposes the view of the romer 1993 hypothesis in contrast the estimation results regarding a new economic globalization index the kof index suggest that higher economic globalization will decrease inflation as supported by the romer 1993 hypothesis for both developed and developing countries during 1990 9 and 2000 9 thus it seems that the new economic globalization measure the kof index which is a broader comprehensive index is a better proxy for openness

empirical regularities in the poverty environment relationship of rural households evidence from zimbabwe abstract analysis of rural households and environmental resources is beset by inadequate data especially in africa using purpose collected panel data from zimbabwe we demonstrate seven empirical regularities in the rural poverty environment relationship most important environmental resources make a significant contribution to average rural incomes poorer households also depend heavily on these resources which contribute c 40 to their incomes richer households however use greater quantities of environmental resources in total finally considerable differentiation exists in the economic characteristics of environmental goods these results demonstrate the considerable economic significance of environmental resources to rural households surveys which ignore them miscalculate rural incomes and welfare

investment and abandonment behavior of rural households an empirical investigation this article uses models of irreversible investment under uncertainty to examine the investment and abandonment behavior of poor rural households it considers the decision of ugandan coffee farming households to invest in or abandon coffee trees the observed levels of investment and abandonment are found to be consistent with models of investment that allow for irreversibility uncertainty fixed costs and liquidity constraints the findings highlight the importance of addressing volatility irreversibility fixed costs and liquidity constraints in order to increase households responsiveness to changes in the fundamentals and to enable households to recover from shocks to their capital stock