a model of trade credit in a capital constrained distribution channel abstract in a product market with uncertain demand we examine a distribution channel consisting of one manufacturer and one capital constrained retailer the retailer may fund its business by borrowing credit either from a competitive bank market or from the manufacturer provided it is also to the latter s benefit to extend trade credit under bank credit financing we show that the channel behaves as if the retailer is not constrained by capital in a wholesale price contract we find that trade credit makes both channel members better off and is the unique financing equilibrium trade credit better integrates the channel than bank credit by centralizing the financing of distribution at the manufacturer we further compare bank versus trade credit under a classical channel contract revenue sharing contract in addition we present a set of numerical experiments to show how product cost internal capital and demand variability impact on the market equilibrium under both bank and trade credits

price indexes inequality and the measurement of world poverty i discuss the measurement of world poverty and inequality with particular attention to the role of purchasing power parity ppp price indexes from the international comparison project global inequality increased with the latest revision of the icp and this reduced the global poverty line relative to the us dollar the recent large increase of nearly half a billion poor people came from an inappropriate updating of the global poverty line not from the icp revisions even so ppp comparisons between widely different countries rest on weak theoretical and empirical foundations i argue for wider use of self reports from international monitoring surveys and for a global poverty line that is truly denominated in us dollars

if we knew ability how would we tax individuals abstract the suggestion to tax people on earnings capacity instead of earnings has been around for a long time and is attractive in terms of economic efficiency in this paper we reflect on the feasibility of such a system and give an exploratory empirical implementation we apply the leyden welfare function of income a survey based measure of an individual s welfare associated with income to derive implications for ability taxation under the assumption that iq and schooling reflect earnings capacity we derive the tax functions using different criteria to distribute the utility loss due to taxation

rich and powerful subjective power and welfare in russia abstract does empowerment come hand in hand with higher economic welfare in theory higher income is likely to raise both power and welfare but heterogeneity in other characteristics can either strengthen or weaken the relationship survey data on russian adults indicate that higher individual and household incomes raise both self rated power and economic welfare the individual income effect is primarily direct rather than through higher household income there are diminishing returns to income though income inequality emerges as only a minor factor reducing either aggregate power or welfare at given income the identified covariates have strikingly similar effects on power and economic welfare

aggregation and pairwise aggregation of demand when the distribution of income is fixed abstract this paper derives necessary and sufficient conditions for pairwise aggregation of the demand functions of a group of consumers conditions under which the mean demand for each pair of consumers satisfies the slutsky restrictions when the distribution of income is fixed the sufficient conditions imply existence of a representative competitive consumer whose demand is the mean demand of the group the necessary conditions imply that such a representative consumer exists for every fixed income distribution only if the consumers have homothetic preferences or alternatively if for each price vector all the consumers income expansion paths lie in the same plane

household cost functions and equivalence scales we describe a simple method to estimate household cost functions and family equivalence scales it is an alternative to standard methods as it does not assume strong postulates about utility maximization nor any functionally specified model equations the data requirements are extremely modest we assume interpersonal ordinal comparability in the sense of sen 1976 and use empirical evidence for eight european countries and the u s to show the feasibility of the method and the stability of its results we also show that subjective data like those provided by income evaluation questions may be used without adopting a cardinal utility framework

tricks with hicks the easi demand system we invent implicit marshallian demands which combine desirable features of hicksian and marshallian demands we propose and estimate the exact affine stone index easi implicit marshallian demand system like the almost ideal demand aid system easi budget shares are linear in parameters given real expenditures however unlike the aid easi demands can have any rank and its engel curves can have any shape over real expenditures easi error terms equal random utility parameters to account for unobserved preference heterogeneity easi demand functions can be estimated using gmm or three stage least squares and like aid an approximate easi model can be estimated by linear regression

estimating consumption deprivation in india using survey data a state level rural urban analysis before and during reform period this paper assesses deprivation in india employing a measure proposed by sitaramam and using consumption data at the household level as cereals constitute a staple food and form a major portion of expenditure on food the deprivation measure considered here is deprivation in cereal consumption the total expenditure at which the engel curve for cereals turns from concave to convex is taken as the cut off to determine the deprived households it is shown that cereal deprivation at the all india level exhibits a declining trend over the period 1987 88 and 1999 2000 in the rural sector while there is little change in the urban sector further this decline in cereal deprivation seems to have been slowing down during the reform period the estimates of deprivation are poorly correlated with the hci and pgi at state level both in rural and urban sectors they however have better temporal correlations with those poverty measures we offer some explanation for these observed differences in alternate deprivation indices the trends in cereal deprivation are accompanied in some cases by a decline in real terms in maximum cereal consumption of each group of consumers whether this is an improvement or otherwise of the living standards of the poor must await further analysis of per capita food consumption in general with an analysis of prices and quantities of various food items it is hoped that this kind of study on deprivation of essential commodities may increase our understanding of poverty and even suggest direct intervention strategies

changes in the perception of the poverty line during the depression in russia 1993 96 economic transition in russia was accompanied by a precipitous decline in real income for most of the population this article analyzes how the decline affected people s perception of the minimum level of income needed to make ends meet individual level data collected from repeated surveys between march 1993 and september 1996 reveal that the elasticity of subjective minimum income with respect to actual median income was 1 5 or that people s subjective estimate of the minimum income for an adult russian fell about 1 7 percent each month this sharp reduction in the face of a decrease in real income meant that the percentage of the population who felt that they were poor declined even though poverty remained at a very high level more than 60 percent of the population throughout the period this self perception is in marked contrast to an objective measure of poverty the percentage of the population whose income was less than a given real poverty line rose

measuring the costs of children an alternative approach abstract the cost of a child or the general equivalence scale as it is more commonly known is a concept of considerable importance in matters relating to public policy and welfare it has played a crucial part in numerous theoretical and empirical studies relating to poverty income distribution dietary needs income maintenance programs supplementary and child benefits and other forms of social security payments in a welfare state and in assessing the horizontal equity of income taxation in spite of a long tradition of estimating the scale from observed household budget data there remain severe problems in estimation and interpretation of the scales this paper proposes a new methodology for calculating the scale using a framework which is consistent with utility theory and which overcomes the identification problem without having to enforce the arbitrary prior assumptions of recent studies the proposed method allows easy calculation of not only the basic scale parameter but also how it varies with price and reference utility we illustrate the usefulness of the procedure by estimating on u k budget data at two different levels of aggregation and employing two sets of quite different functional forms the results are plausible compare favourably with one another and hence confirm the robustness and usefulness of the proposed procedure

robustness of subjective welfare analysis in a poor developing country madagascar 2001 the authors analyze the subjective perceptions of poverty in madagascar in 2001 and their relationship to objective poverty indicators they base their analysis on survey responses to a series of subjective perception questions the authors extend the existing empirical methodology for estimating subjective poverty lines on the basis of categorical consumption adequacy questions based on this methodology they calculate the household specific subjective poverty lines and compare the poverty profiles derived from different subjective welfare questions the results show that the aggregate poverty measures derived from consumption adequacy questions accord quite well with the poverty measures based on objective poverty lines the subjective welfare analysis can be used in poor developing countries for evaluating socioeconomic and distributional impacts of various policy interventions

a review of trade credit literature opportunities for research in operations abstract trade credit arises when a buyer delays payment for purchased goods or services its nature has predominantly been an area of inquiry for researchers from the disciplines of finance marketing and economics but it has received relatively little attention in other domains in our article we provide an integrative review of the existing literature and discuss conflicting study outcomes we organize the relevant literature into seven areas of inquiry and analyze four in detail trade credit motives order quantity decisions credit term decisions and settlement period decisions additionally we derive a detailed agenda for future research in these areas

measuring poverty using qualitative perceptions of consumption adequacy we show that subjective poverty lines can be derived using simple qualitative assessments of perceived consumption adequacy based on a household survey we implement the method using survey data for jamaica and nepal respondents were asked whether their consumptions of food housing and clothing were adequate for their family s needs the implied poverty lines are robust to alternative methods of dealing with other components of expenditure the aggregate poverty rates accord quite closely with those based on independent objective poverty lines however there are notable differences in the geographic and demographic poverty profiles

how sensible is the leyden individual welfare function of income abstract the leyden economists contend that the individual welfare function utility function of income is best represented by a lognormal distribution function they have presented ample data to document the good empirical fit of the lognormal hypothesis this paper presents reexamines and criticises the theoretical foundations of the lognormal hypothesis and finds that this edifice is not built on solid ground neither from the point of view of economic theory nor of experimental psychology moreover it investigates the paradox of the good empirical fit of the lognormal hypothesis in spite of its theoretical deficiencies it is shown that the lognormal hypothesis is observationally equivalent to the logarithmic power welfare function when respondents evaluate welfare according to a normal lognormal distribution function

unconventional monetary policy fiscal side effects and euro area im balances we study the macroeconomic effects of unconventional monetary policy in the euro area using structural vector autoregressions identified with external instruments the instruments are based on the common unexpected variation in euro area sovereign yields for different maturities on policy announcement days we first show that expansionary monetary surprises are effective at lowering public and private interest rates and increasing economic activity consumer prices and inflation expectations we then document that the shocks lead to a rise in primary public expenditures and a widening of internal trade balances

relativity rank and the utility of income relative utility has become an important concept in several disjoint areas of economics i present a cardinal model of income utility based on the supposition that agents care about their rank in the income distribution and that utility is subject to adaptation over time utility levels correspond to the leyden individual welfare function while utility differences yield a version of the prospect theory value function thereby providing a new and shared derivation of each i offer an explanation of some long standing paradoxes in the wellbeing literature and an insight into the links between relative comparisons and loss aversion

poverty time and vagueness integrating the core poverty and chronic poverty frameworks in recent decades there have been considerable steps forward in terms of understanding poverty this paper identifies three meta dimensions of poverty which relate to i depth and severity ii breadth and multidimensionality and iii time and duration the advances that have been made in terms of conceptualising measuring and analysing poverty in each of these areas are briefly considered it is shown that the third and final meta dimension time and duration has been neglected until relatively recently it is argued that time and in particular duration is an important analytical component for understanding the experience of poverty and the processes that create and reduce poverty the final part of the paper suggests a way of integrating time into a unified framework for understanding poverty which can deal with the depth breadth and duration of poverty this involves extending mozaffar qizilbash s poverty and vagueness methodology to include duration

weakly relative poverty prevailing measures of relative poverty are unchanged when all incomes grow or contract by the same proportion this property stems from seemingly implausible assumptions about the disutility of relative deprivation and the cost of social inclusion the authors propose weakly relative lines that relax these assumptions on calibrating our measures to national poverty lines and survey data we find that half the population of the developing world in 2005 lived in poverty only half of whom were absolutely poor the total number of poor rose over 1981 to 2005 despite falling numbers of absolutely poor with sustained economic growth the incidence of relative poverty became less responsive to further growth the number of relatively poor rose just as the numbers of absolutely poor fell

the price and utility dependence of equivalence scales evidence from indonesia the purpose of this research is to estimate equivalence scales and evaluate their price and utility dependencies to do this we unify two strands of the empirical literature on this topic one that relies on demand data and one that relies on subjective evaluations of wellbeing this way we are able to employ the strengths of both kinds of information equivalence scales are not identified from demand data alone this is because changes in demographics could affect wellbeing directly i e in ways that are not revealed by changes in behavior the demand based literature rules out such effects a priori and restricts parameters that measure them in this paper we do not rely on such restrictions and instead use subjective evaluations of wellbeing as an additional source of information because demand data are highly informative about some of the other parameters of the model its use increases efficiency this becomes critical once we specify complex preference structures that allow for the equivalence scale s dependence on price and utility our model nests the typical models used in the subjective and the demand literature and we are able to test down both kinds we find evidence for direct utility effects this rejects the validity of some of the restrictions applied by the demand literature within the indonesian context we estimate equivalence scales that are of reasonable magnitude and decrease in utility we also find that the scales increase in the food to nonfood price ratio for poor households whereas we do not find price dependence for more affluent households

equivalent expenditure functions and expenditure dependent equivalence scales abstract this paper presents and investigates a new class of equivalent expenditure functions that is a generalization of the one that corresponds to exact independent of base equivalence scales it provides less restrictive household demands especially for children s goods and has associated equivalence scales that may depend on expenditure we show that under certain conditions equivalent expenditure functions and the associated expenditure dependent equivalence scales can be uniquely estimated from demand data we estimate them using canadian data and find that the resulting scales are both plausible and expenditure dependent the estimated equivalence scales for households with children decline significantly as expenditure increases

poverty and household size the widely held view that larger families tend to be poorer in developing countries has influenced research and policy the scope for size economies in consumption cautions against this view we find that the correlation between poverty and size vanishes in pakistan when the size elasticity of the cost of living is about 0 6 this turns out to be the elasticity implied by a modified version of the food share method of setting scales by contrast some measures of child nutritional status indicate an elasticity of unity consideration of the weight attached to child versus adult welfare may help resolve the non robustness of demographic profiles of poverty excerpt

characterizing some gorman engel curves this paper characterizes all utility derived demand systmes having engel curves that are linear in both income and an arbitrary function of income this class encompasses virtually all utility derived demand systems that have been estimated in the past using ag gregate data with explicit treatment of the problem of aggregation ac ross individuals it includes extensions of the piglog and pigl class es that have similar properties to these classes but allow for more general engel curve shapes this paper extends w m gorman s study o f these forms primarily by characterizing systems of rank two the ap plication of the characterized systems to problems of nesting separa bility flexibility engel curve analysis estimation and aggregatio n are briefly discussed copyright 1987 by the econometric society

nesting the aids and translog demand systems this paper shows that there exists a relatively simple demand model that is consistent with utility maximization and has nested within it both the almost ideal demand system and translog models this model is exactly aggregated then estimated using aggregate u s demand data the results are used to test the relative adequacy of the almost ideal demand system and translog models copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

estimating consumption economies of scale adult equivalence scales and household bargaining power how much income would a woman living alone require to attain the same standard of living that she would have if she were married what percentage of a married couple s expenditures are controlled by the husband how much money does a couple save on consumption goods by living together versus living apart we propose and estimate a collective model of household behaviour that permits identification and estimation of concepts such as these we model households in terms of the utility functions of its members a bargaining or social welfare function and a consumption technology function we demonstrate generic non parametric identification of the model and hence of a version of adult equivalence scales that we call indifference scales as well as consumption economies of scale the household s resource sharing rule or members bargaining power and other related concepts copyright 2013 oxford university press

does 25 cents more per day make a difference the impact of livestock transfer and development in rural zambia abstract analyses of the impacts of asset transfer programs often find statistically significant effects on consumption expenditures that are large in percentage terms but small in absolute value this study explores the practical significance of such impacts using the case of a livestock transfer program among impoverished households in zambia as in other studies results show that the asset transfers increased household consumption expenditure and dietary diversity extending previous work this paper examines whether the increase in expenditures has been large enough to trigger changes in consumption patterns or in subjective assessment of poverty status changes in composition of expenditures composition of diet and subjective self assessment of poverty all suggest a growing sense of security and a practically significant change in welfare for treated households as transfers included three different types of animals dairy cows meat goats and draft cattle we are able to discern that the specific nature of the asset transferred influences food security impacts examination of change in the composition of consumption shows substantial effects on poverty and food security starting within six months of livestock transfers persistence of the impact through the next 18 months of our study period indicates that livestock transfers can have a sustained effect on poverty and food security

a partial credit guarantee contract in a capital constrained supply chain financing equilibrium and coordinating strategy abstract in this study we first design a supply chain finance scf system comprising a capital constrained retailer a manufacturer and a commercial bank and formulate a bilevel stackelberg game model in which the bank acts as a leader second we design a partial credit guarantee pcg contract for scf incorporating the bank credit financing bcf and manufacturer s trade credit guarantee to analyze its equilibrium financing strategies third we explore the interdependencies between the operational and financial decisions and analyze the coordination conditions for the pcg contract fourth we perform a comparative analysis of the optimal strategies among the various financing scenarios including a traditional supply chain without capital constraint and scf without credit guarantee as well as one with full credit guarantee to examine the impact of the credit guarantee coefficient finally we perform a numerical sensitivity analysis in terms of the manufacturer s guarantee coefficient and the retailer s initial capital and verify the manufacturer s willingness to provide pcg for scf the findings of this study reveal that based on a suitable guarantee coefficient the pcg contract may realize profit maximization and channel coordination in the scf system as well as achieve the super coordination effect

on the income dependence of equivalence scales household consumption exhibits economies of scale as the number of household members increases we collect survey data from two countries germany and france in order to obtain direct subjective estimates of household consumption economies of scale and in particular to examine an additional dimension whether household consumption economies of scale change as living standards go up our data from both countries indicate strongly that household economies of scale increase as the living standard goes up we discuss the robustness of our survey method and compare our results to these of alternative estimation methods in the literature

revealed community equivalence scales abstract this paper estimates the equivalence scale revealed by discretionary community allocations of welfare benefits to poor households i apply the proposed approach to a subsidized rice program in indonesia in which villages designated program beneficiaries and estimate the equivalence scale implicit in the beneficiaries they selected i find that the revealed community equivalence scale for this program lies much closer to per capita expenditure than traditional demand based equivalence scales particularly in the poorest communities this suggests that per capita expenditure may be closer to how poor communities actually compare households when allocating aid than previously thought

self rated economic welfare in russia abstract most of those russian adults who feel that they are poor are not classified as such in the poverty statistics and most of those who are classified as poor don t feel that way we study the determinants of peoples perceptions of their economic welfare in an unusually rich socioeconomic survey while income is a highly significant predictor subjective economic welfare is influenced by many other factors including health education employment assets relative income in the area of residence and expectations about future welfare insights are obtained into how objective data should be weighted in assessing economic welfare

microfinance and household poverty reduction new evidence from india the objective of the present study is to examine whether household access to microfinance reduces poverty using national household data from india treatment effects model is employed to estimate the poverty reducing effects of micro finance institutions mfis loans for productive purposes such as investment in agriculture or non farm businesses on household poverty levels these models take into account the endogenous binary treatment effects and sample selection bias associated with access to mfis despite some limitations such as those arising from potential unobservable important determinants of access to mfis significant positive effect of mfi productive loans on multidimensional welfare indicator has been confirmed the significance of treatment effects coefficients has been verified by both tobit and propensity score matching psm models in addition we found that loans for productive purposes were more important for poverty reduction in rural than in urban areas however in urban areas simple access to mfis has larger average poverty reducing effects than the access to loans from mfis for productive purposes this leads to exploring service delivery opportunities that provide an additional avenue to monitor the usage of loans to enhance the outreach

taking prices seriously in the measurement of inequality abstract in the measurement of inequality adjustments for differences across households in their demographic composition and in the price regimes they face are usually very simple often nominal expenditure or income is adjusted with an expenditure independent price deflator and a price independent equivalence scale i show that using more flexible expenditure dependent price deflators and price dependent equivalence scales affects the level of and trend in measured family expenditure inequality in canada over 1969 1997 for example standard methods show a significant decrease in inequality between 1969 and 1978 but more flexible methods show a significant increase in inequality over this period

frustrated freedom the effects of agency and wealth on wellbeing in rural mozambique in sen s capability view of poverty wellbeing is threatened by both deficits of wealth and deficits of individual agency sen further predicts that unfreedom or low levels of agency will suppress the wellbeing effects of higher levels of wealth the current paper extends sen s view to include a condition labeled frustrated freedom in which relatively higher levels of agency can heighten the poverty effects of relatively low levels of material wealth applying data from a large scale population study of female heads of household in rural mozambique the paper empirically tests sen s view and the proposed extension as predicted agency is found to moderate the relationship between agency wealth and wellbeing uncovering evidence of both unfreedom and frustrated freedom in the population further research into the complex dynamics of wellbeing and poverty are called for by the authors

supply chain contract design under financial constraints and bankruptcy costs we study contract design and coordination of a supply chain with one supplier and one retailer both of which are capital constrained and in need of short term financing for their operations competitively priced bank loans are available and the failure of loan repayment leads to bankruptcy where default costs may include variable proportional to the firm s sales and fixed costs without default costs it is known that simple contracts e g revenue sharing buyback and quantity discount can coordinate and allocate profits arbitrarily in the chain with only variable default costs buyback contracts remain coordinating and equivalent to revenue sharing contracts but are pareto dominated by revenue sharing contracts when fixed default costs are present thus for general bankruptcy costs contracts without buyback terms are of most interest quantity discount contracts fail to coordinate the supply chain since a necessary condition for coordination is to proportionally reallocate debt obligations w

financing equilibrium in a three echelon supply chain the impact of a limited bank loan this paper studies a three echelon supply chain consisting of a commercial bank a supplier and a capital constrained retailer the newsvendor like retailer may not borrow up to what she needs from

household equivalence scales and welfare comparisons abstract the ratio of cost functions of different households facing the same prices and attaining the same utility level is a true cost of demographic characteristics index this index is independent of a base level of income or utility ib if and only if it equals a ratio of household equivalence scales that are themselves ib applied cost index and equivalence scales specifications are usually ib this paper describes the general restrictions on cost functions and social welfare functions required for ib scales and for their use in welfare analysis

how robust is a poverty profile comparison of poverty such as when poverty is greatest typically matter far more for policy choices than do aggregate measures of poverty such as how many people are deemed poor the authors examine alternative methods for constructing poverty profiles focusing on their internal consistency and appropriateness for guiding policy none is perfect but some methods appear to be preferable to others when the aim is to inform policies for fighting absolute consumption poverty a case study on indonesia reveals that the country s regional and sectoral poverty profile is highly sensitive to some aspects of measurement but quite robust to others

composition of trade flows and the effectiveness of fiscal devaluation we empirically explore whether the magnitude of the effects of fiscal devaluation which consists of reducing the employers social security contribution rate and increasing the value added tax rate depends on the composition of trade flows our sample comprises data on bilateral balances of trade between 28 european union eu member states and their main eu trade partners over the 2000 14 period we use robust ordinary least squares regressions controlling for the country pair and time fixed effects to test whether there are differences in the sizes of relationships between these taxation forms and bilateral trade balances for different types of goods by distinguishing between i consumer intermediate and capital goods and ii labour and capital intensive goods our results show that the overall effectiveness of fiscal devaluation depends on the composition of trade flows value added tax is more strongly positively associated with bilateral balances of trade in consumer goods compared to balances of trade in capital and intermediate goods the employers contribution rate in contrast is more tightly negatively related to balances of trade in capital goods the latter finding also holds true for trade balances of labour intensive goods compared to balances of capital intensive goods

entrepreneurial finance with equity for guarantee swap and idiosyncratic risk we consider a risk averse entrepreneur who invests in a project with idiosyncratic risk in contrast to the literature we assume the entrepreneur is unable to get a loan from a bank directly because of the low creditability of the entrepreneur and so an innovative financial contract named equity for guarantee swap is signed among a bank an insurer and the entrepreneur it is shown that the new swap leads to higher leverage which brings more diversification and tax benefits the new swap not only solves the problems of financing constraints but also significantly improves the welfare level of the entrepreneur the growth of welfare level increases dramatically with risk aversion index and the volatility of idiosyncratic risk

health and consumption preferences estimating the health state dependence of utility using equivalence scales abstract this paper estimates health state dependence of utility in europe for identification we introduce a new method using insights from the research domain of living standards we estimate how much extra or less income is needed to maintain the same level of material wellbeing after a health shock and we derive a simple relation between this estimate and the health state dependence parameter the results show positive health state dependence this is not driven by medical expenditures and is robust across alternative specifications and health measures interestingly for cognitive limitations we find negative health state dependence presumably resulting from a decreased ability to plan

aids translog and the gorman polar form abstract all budget share models that are linear in the log of income can be derived from gorman polar form subutility functions implications of this result for two stage budgeting lifetime utility maximization and social welfare calculations are discussed

trade credit for supply chain coordination abstract trade credit is a seller s short term loan to the buyer allowing the buyer to delay payment of an invoice it has been the largest source of working capital for a majority of business to business firms in the united states numerous theories have been proposed to explain trade credit mainly from finance perspectives it has also been an important issue in supply chain management surprisingly most literature in supply chain management has examined the retailer s stocking policies given a supplier s trade credit this paper attempts to shed light on trade credit from a supplier s perspective and presents it as a tool for supply chain coordination specifically we explicitly assume firms financial needs for inventory following a newsvendor framework we assume that the supplier grants trade credit and markdown allowance given the supplier s offer the retailer determines order quantity and the financing option for the inventory either trade credit or direct financing from a financial institution our result shows that the supplier s markdown allowance alone cannot fully coordinate the supply chain if the retailer employs direct financing positive financing costs call for trade credit in order to subsidize the retailer s costs of inventory financing using trade credit in addition to markdown allowance the supplier fully coordinates the retailer s decisions for the largest joint profit and extracts a greater portion of the maximized joint profit

external adjustment and the global crisis abstract the period preceding the global financial crisis was characterized by a substantial widening of current account imbalances across the world since the onset of the crisis these imbalances have contracted to a significant extent in this paper we analyze the ongoing process of external adjustment in advanced economies and emerging markets we find that countries whose pre crisis current account balances were in excess of what could be explained by standard economic fundamentals have experienced the largest contractions in their external balance we subsequently examine the contributions of real exchange rates domestic demand and domestic output to the adjustment process allowing for differences across exchange rate regimes and find that external adjustment in deficit countries was achieved primarily through demand compression rather than expenditure switching finally we show that changes in other investment flows were the main channel of financial account adjustment with official external assistance and ecb liquidity cushioning the exit of private capital flows for some countries

a rational rank four demand system past parametric tests of demand system rank employed polynomial engel curve systems however by gorman s 1981 theorem the maximum possible rank of a utility derived polynomial demand system is three the present paper proposes a class of demand systems that are utility derived are close to polynomial and have rank four these systems nest rational polynomial demands and so can be used to test ranks up to four these systems are suitable for applications where high rank is likely such as demand systems involving a large number of goods a test of rank using this new class of systems is applied to uk consumer demand data

dollar a day revisited the article presents the first major update of the international 1 a day poverty line proposed in world development report 1990 poverty for measuring absolute poverty by the standards of the world s poorest countries in a new and more representative data set of national poverty lines a marked economic gradient emerges only when consumption per person is above about 2 00 a day at 2005 purchasing power parity below this the average poverty line is 1 25 which is proposed as the new international poverty line the article tests the robustness of this line to alternative estimation methods and explains how it differs from the old 1 a day line

poverty and the measurement of individual welfare a review article this review of hagenaars the perception of poverty gives a lengthy presentation and evaluation of the leyden approach of measuring the individual welfare function of income the key feature of the approach is the claim that welfare can be measured on a 0 1 scale the review discusses the book s wealth of material on poverty in europe within this theoretical framework

a unified approach to incorporating demographic or other effects into demand systems a general method of introducing demographic effects into any demand system using modifying functions is described which permits complicated interactions of demographic variables with prices and expeditures theorems give properties the modifying functions must have to ensure integrability of the resulting system demand equations of the new system are given explicitly as functions of the original demand equations and the modifying functions the procedure is interpreted as altering a households technology and is shown to encompass adult equivalent scales and related methods examples of modifying functions are derived and applications of the technique to uses other than demographic variation are considered excerpt

the rise and fall of european current account deficits this paper traces the rise and fall of current account deficits in certain euro area countries and in the baltics these countries all entered the global financial crisis with sizable current account deficits and the unwinding of these deficits has been a complex and painful process for most while much of the general policy discussion of the large pre crisis deficits has focused on losing export competitiveness this paper highlights other results in the literature regarding import booms as well as a dimension that is rarely discussed the drop in the non trade portion of the current account transfers and net income balance in many countries the paper also examines progress made in unwinding these deficits most countries have made tangible progress but with different degrees improvement of price competitiveness and a shift of production from non tradable to tradable sectors has helped increase exports and along with compressed imports close the current account deficits the adjustment though has taken place against recessions and low growth in the euro area and the paper also considers what has made the process more painful in some countries rather than others we find that large current account balances prior to the crisis is the best predictor of a sharp drop in output during the crisis supportive macro policies to cushion the adjustment process and keep overall euro inflation at or above target level are necessary in the longer term improving institutions to deal with imbalances and preventing them at future entry are important

stackelberg solution in a vendor buyer supply chain model with permissible delay in payments abstract in practice vendors or sellers often offer their buyers a fixed credit period to settle the account the benefits of trade credit are not only to attract new buyers but also to avoid lasting price competition on the other hand the policy of granting a permissible delay adds not only an additional cost but also an additional dimension of default risk to vendors in this paper we will incorporate the fact that granting a permissible delay has a positive impact on demand but negative impacts on both costs and default risks to establish vendor buyer supply chain models then we will derive the necessary and sufficient conditions to obtain the optimal solution for both the vendor and the buyer under non cooperative stackelberg equilibrium finally we will use two numerical examples to show that 1 granting a permissible delay may significantly improve profits for both the vendor and the buyer 2 the sensitivity analysis on the optimal solution with respect to each parameter and 3 the comparisons between nash and stackelberg solutions

trade credit and supplier competition abstract this paper examines how competition among suppliers affects their willingness to provide trade credit financing trade credit extended by a supplier to a cash constrained retailer allows the latter to increase cash purchases from its other suppliers leading to a free rider problem a supplier that represents a smaller share of the retailer s purchases internalizes a smaller part of the benefit from increased spending by the retailer and as a result extends less trade credit relative to its sales in consequence retailers with dispersed suppliers obtain less trade credit than those whose suppliers are more concentrated the free rider problem is especially detrimental to a trade creditor when the free riding suppliers are its product market competitors leading to a negative relation between product substitutability among suppliers to a given retailer and trade credit that the former provide to the latter we test the model using both simulated and real data the estimated relations are consistent with the model s predictions and are statistically and economically significant

the use of equity financing in debt renegotiation debt renegotiation is often modeled as pure debt for equity or debt for debt swaps in the theoretical literature however the empirical evidence in the debt repurchase literature shows that a combination of debt and equity along with asset sales is used in renegotiation in this paper we analyze the use of equity financing in addition to debt financing and asset sales in debt repurchases firms with larger volatility lower cash flow growth rates or higher recovery rates are more likely to use equity financing in debt renegotiation flotation and renegotiation costs the bargaining power of the creditors and macroeconomic variables also influence this choice when equity issuance is a possible source of financing in renegotiation firms optimally choose smoother coupons and welfare increases as compared to pure debt for debt swaps we provide closed form solutions for the optimal use of funding and we derive novel testable empirical implications regarding the use of equity financing in debt repurchases

ten years of q squared implications for understanding and explaining poverty summary over the past decade there have been a number of initiatives to promote a more systematic integration of quantitative and qualitative or q squared approaches to poverty analysis in the global south and a large body of literature had emerged the objective of the article is to present a selective review of this empirical work with a view to demonstrate the value it has added for understanding and explaining poverty the evidence strongly suggests that q squared approaches have aided our understanding of the characteristics of the poor and the causes of poverty

the identification of fixed costs from consumer behavior some household expenditures such as those for subsistence or basic needs are fixed using the methodology of equivalence scales we develop a model in which differences in fixed costs of characteristics across households can be identified from household behavior equivalent expenditure for a household is the expenditure needed to bring a reference household such as a single childless adult to the level of well being of household members the equivalence scale for the household is the ratio of expenditure to equivalent expenditure only two types of equivalent expenditure functions are used in practice those in which the ratio of household expenditure and equivalent expenditure is independent of expenditure and those in which their difference is independent of expenditure we propose a class of equivalent expenditure functions that allows for differences in fixed costs and generalizes both relationships using canadian consumer demand microdata we estimate equivalent expenditure functions and equiva

stock flow consistent macroeconomic models a survey the stock flow consistent sfc modelling approach grounded in the pioneering work of wynne godley and james tobin in the 1970s has been adopted by a growing number of researchers in macroeconomics especially after the publication of monetary economics by godley and lavoie which provided a general framework for the analysis of whole economic systems and the recognition that macroeconomic models integrating real markets with flow of funds analysis had been particularly successful in predicting the great recession of 2007 2009 we introduce the general features of the sfc approach for a closed economy showing how the core model has been extended to address issues such as financialization and income distribution we next discuss the implications of the approach for models of open economies and compare the methodologies adopted in developing sfc empirical models for whole countries we review the contributions where the sfc approach is being adopted as the macroeconomic closure of microeconomic agent based models and how the sfc approach is at the core of new research in ecological macroeconomics finally we discuss the appropriateness of the name sfc for the class of models we survey

new global estimates of child poverty and their sensitivity to alternative equivalence scales this paper uses micro data from household surveys from 89 countries to estimate the rate of extreme poverty among children in the developing world 19 5 of children are estimated to live on less than 1 90 per day as opposed to 9 2 of adults poverty rates for children remain above 17 and are greater than adult poverty rates for all reasonable two parameter equivalence scales

quadratic engel curves and consumer demand this paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to provide a detailed welfare analysis of shifts in relative prices a nonparametric analysis of consumer expenditure patterns suggests that engel curves require quadratic terms in the logarithm of expenditure while popular models of demand such as the translog or the almost ideal demand systems do allow flexible price responses within a theoretically coherent structure they have expenditure share engel curves that are linear in the logarithm of total expenditure we derive the complete class of integrable quadratic logarithmic expenditure share systems a specification from this class is estimated on a large pooled data set of u k households models that fail to account for engel curvature are found ro generate important distortions in the patterns of welfare losses associated with a tax increase