tax collection with agency costs private contracting or government bureaucrats historically governments contracted with private agents known as tax farmers to collect taxes this paper develops a theoretical framework for determining when a welfare maximizing government should choose tax farmers over bureaucratic tax collectors while bureaucratic collectors have an incentive to shirk and raise collection costs above least costs profit maximizing private collectors tend to reduce tax evasion below the optimal level generally the choice of collection methods depends on a comparison of the welfare loss associated with monitoring in the bureaucratic setting and the welfare loss associated with overdetection of evasion in the private setting copyright 1992 by the london school of economics and political science

crime and poverty a search theoretic approach numerous studies document that criminal activity is positively related to unemployment and negatively related to educational attainment levels within given communities we study this phenomenon in the context of a search equilibrium model in which agents choose between formal employment and pursuing crimerelated activities theft prior to their occupational choices agents undertake costly schooling raising their productivity crime acts in essence as a tax on human capital by affecting the probability that a worker s earnings possessions are subsequently appropriated there are multiple equilibria high crime low levels of educational attainment long spells of unemployment and poverty are correlated across them

risk private information and the family in the last fifteen years our understanding of the behavior of households in both highand low income countries has increased significantly econometric studies contributing to this body of knowledge concerned with the determinants of such behavior as labor supply fertility health and food consumption however have generally taken the structure of the household as exogenously given while some progress has been made concerning how changes in the legal structure alter patterns of family formation and breakup the wide variety of family organizations observed across countries of the world or the evolution of family structure within countries cannot be readily explained by existing models while some economists have suggested that organizations based on kinship can be understood in terms of transaction economies yoram ben porath 1980 robert pollak 1985 there are now few precise implications of this approach and little or no evidence of its usefulness for predicting or explaining the existence of any particular family structure in specific settings characterized by their natural endowments and or legal structure in this paper i discuss some recent studies of family and household organization in one specific context rural india that have sought to formulate a model of household structure based on the need for individuals in lowincome private information settings to protect themselves against intertemporal fluctuations in resources arising from the natural vagaries of water supply i also present some new evidence on the relationship between family arrangements and measured risk characteristics of the agricultural environment in these settings while many economists have highlighted risk and information consideration in the study of such formal rural institutions as sharecropping permanent servitude and contractual interlinking studies of these individual contractural arrangements have ignored the family itself as a risk mitigating institution moreover much of this literature has been solely concerned with ex ante measures to reduce risk contractual instruments or production factors that reduce the effects of variability in the exogenous production input rainfall on income mechanisms serving to preserve consumption stability ex post in the face of variability in realized income have been neglected

for better or for worse till the human development index do us part abstract this paper describes the results of research intended to explore the volatility inherent in the united nations development programme s undp human development index hdi the hdi is intended to be a simple and transparent device for comparing progress in human development and is an aggregate of life expectancy education and gdp per capita values of the hdi for each country are presented in the human development reports hdrs the first being published in 1990 however while the methodology is consistent for all countries in each year there are notable differences between years that make temporal comparisons of progress difficult the paper presents the results of recalculating the hdi for a simplified sample of 114 countries using various methodologies employed by the undp the results are a set of deviations of recalculated hdi ranks compared to the original ranks given in the hdrs the volatility that can result from such recalculation is shown to be substantial 10 15 ranks yet reports in the popular press are frequently sensitive to movements of only a few ranks such movement can easily be accounted for by changes in the hdi methodology rather than genuine progress in human development while the hdrs often carry warnings about the inadvisability of such year on year comparisons it is argued that the existence of such a high profile index and the overt presentation within league tables do encourage such comparison assuming that the hdi will be retained as a focal point within the hdrs then it is suggested that greater focus be upon more meaningful and robust categories of human development e g low medium and high rather than league tables where shifts of a few places perhaps as a result of nothing more than a methodological or data artefact may be highlighted in the press and by policy makers

irs as loan shark tax compliance with borrowing constraints abstract this paper considers a simple dynamic model of tax compliance in which people may face binding borrowing constraints the model leads to much different conclusions and policy recommendations than static models in particular the government cannot generate full compliance by setting the expected value of cheating to be negative also it is possible for the government to set penalties in a way that will increase tax revenue over that of full compliance the government can increase welfare by playing the role of loan shark to people whose borrowing is constrained on the private market

a framework for the analysis of evolving patron client ties in agrarian economies abstract this paper looks systematically at the various factors that can account for the disappearance or the transformation of the institution of patronage that used to structure labor and other relationships in many agrarian societies of the past it is an attempt to offer a unifying framework capable of guiding one s attention to the relevant variables and to the way they interact in this process the rather simplistic view according to which there is a unique linear path through which patronage evolves is called into question and a number of different scenarios are instead presented these alternatives are illustrated with reference to asia

an empirical investigation of rationing constraints in rural credit markets in india abstract the literature on rural credit markets has generally assumed that households are rationed in their access to subsidized formal credit the validity of this assumption depends on the level of effective demand for formal credit in turn a function of the demand for credit and its availability from informal sources this paper estimates the demand and the sector specific costs of credit and hence the extent of formal sector rationing through an analysis of household participation in both the formal and the informal credit sectors the results show that the extent of rationing is considerably less than what is conventionally assumed

income distribution police expenditures and crime a political economy perspective in this paper i present a structural approach to investigate empirically the relation between income distribution police expenditures and crime the approach is based on the estimation of an equilibrium model where heterogeneous individuals choose whether to engage in criminal activities and expenditures on police to apprehend criminals are determined endogenously through majority voting i discuss the identification and estimation of the parameters of the structural model using data for the united states jel d72 d78 k42

inflation and tax evasion an empirical analysis this paper contains an analysis of the effect of inflation on aggregate tax evasion in the united states over the period 1947 81 it is found that tax evasion in both absolute and relative terms is positively related to the inflation rate further the results indicate that aggregate evasion has risen in both absolute and relative terms with increases in the marginal tax rate but has fallen with increases in the detection probability the penalty rate and the wage share of income finally evasion has risen in absolute terms but has fallen in relative terms when real true income has risen

household energy consumption versus income and relative standard of living a panel approach our fundamental premise is that energy consumption at the household level is a key indicator of standard of living we employ state of the art panel cointegration techniques to evaluate the nature of the relationship between income measures and energy consumption measures for seven east indian ocean countries the general finding is that income and household electricity consumption are not cointegrated given this finding we conclude that standard of living measures that rely on income measures and do not include household level energy consumption information will necessarily miss important indications of both levels and changes of standard of living

social insurance commitment and the origin of law interest bans in early christianity abstract despite the historical importance of ideology based economically inhibitive laws we know little about the economic factors underlying their origin this paper accounts for the historical emergence of one such law the christian ban on taking interest a doctrine that shaped the evolution of numerous financial contracts and related organizational forms a game theoretic analysis and historical evidence suggest that the church s commitment to providing social insurance for its poorest constituents encouraged risky borrowing which the church attempted to limit by banning interest the analysis highlights the applicability of the rational choice framework to seemingly irrational actions and laws the role of nonmonetary sanctions in circumventing commitment problems and the importance of economic forces vis a vis ideology

the human development index yet another redundant composite development indicator abstract in its human development report 1990 the united nations development program undp proposes yet another composite indicator of development levels the human development index hdi the hdi assesses intercountry development levels on the basis of three so called deprivation indicators life expectancy adult literacy and the logarithm of purchasing power adjusted per capita gdp using simple statistical analysis this paper questions both the composition of the hdi and its usefulness as a new index of development it concludes that the hdi is both flawed in its composition and like a number of its predecessors fails to provide insights into intercountry development level comparisons which preexisting indicators including gnp per capita alone cannot

sovereign debt structural adjustment and conditionality abstract the lack of a proper enforcement mechanism for sovereign debt generates a commitment failure as a result a sovereign may seek to improve its position in debt renegotiations and thus evade its debt obligations by reducing exports conditionality seeks to provide a solution to the incentive problem by addressing the commitment failure formalizing this argument we show that conditionality helps the repayment of sovereign debt in certain circumstances it can eliminate debt overhang especially when it is coupled with concessionary lending of sufficient magnitude it is however unable to restore first best when it is anticipated by lenders conditionality may get international financial institutions and sovereign debtors into a trap where the debt overhang persist debt rescheduling takes place periodically and conditionality continues indefinitely

burglary and income inequality abstract in a model where risk neutral agents have differing legal incomes which may be supplemented by burglary we study the effects of income distribution on the level of burglary assuming that a detected burglar is incarcerated for a fixed term and assuming that burglars choose target houses using the signal of house quality we show how increases in income inequality may increase the level of crime in particular increases in relative differential inequality unambiguously increase burglary crime corollaries are that a more regressive income tax increases the level of crime and that richer neighborhoods may have lower crime rates

informal insurance arrangements with limited commitment theory and evidence from village economies recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income thus rejecting the hypothesis of full risk pooling we attempt to explain these observations by adding limited commitment as an impediment to risk pooling we provide a general dynamic model and completely characterise efficient informal insurance arrangements constrained by limited commitment and test the model using data from three indian villages we find that the model can fully explain the dynamic response of consumption to income but that it fails to explain the distribution of consumption across households

credit markets in northern nigeria credit as insurance in a rural economy this article addresses the issues of imcomplete markets and imperfect information in the context of credit markets in rural northern nigeria in much recent theoretical literature the problems of moral hazard and adverse selection are assumed to be decisive for the organization of agrarian institutions in contrast it is found that in the four villages surveyed credit transactions take advantage of the free flow of information within rural communities information asymmetries between borrower and lender are unimportant and their institutional consequences the use of collateral and interlinked contracts are absent credit transactions play a direct role in pooling risk between households through the use of contracts in which the repayment owed by the borrower depends on the realization of random production shocks by both the borrower and the lender

risk and insurance in a rural credit market an empirical investigation in northern nigeria credit contracts play a direct role in pooling risk between households in northern nigeria repayments owed by borrowers depend on realizations of random shocks by both borrowers and lenders the paper develops two models of state contingent loans the first is a competitive equilibrium in perfectly enforceable contracts the second permits imperfect information and equilibrium default estimates of both models indicate that quantitatively important state contingent payments are embedded in these loan transactions but that a fully efficient risk pooling equilibrium is not achieved the research is based on a year long survey in zaria nigeria conducted by the author

making development simple the genetic deterministic hypothesis for economic development abstract this paper discusses the dangers inherent in attempting to simplify something as complex as development it does this by exploring the lynn and vanhanen theory of deterministic development which asserts that varying levels of economic development seen between countries can be explained by differences in national intelligence national iq assuming that intelligence is genetically determined and as different races have been shown to have different iq then they argue that economic development measured as gdp capita is largely a function of race and interventions to address imbalances can only have a limited impact the paper presents the lynne and vanhanen case and critically discusses the data and analyses linear regression upon which it is based it also extends the cause effect basis of lynne and vanhanen s theory for economic development into human development by using the human development index hdi it is argued that while there is nothing mathematically incorrect with their calculations there are concerns over the data they employ even more fundamentally it is argued that statistically significant correlations between the various components of the hdi and national iq can occur via a host of cause effect pathways and hence the genetic determinism theory is far from proven the paper ends by discussing the dangers involved in the use of over simplistic measures of development as a means of exploring cause effect relationships while the creators of development indices such as the hdi have good intentions simplistic indices can encourage simplistic explanations of under development

sustainability indicators policy and governance issues for ecological economics abstract ecological economics is a major forum for discussion of theoretical and analytical aspects of measuring sustainability the role of sustainability indicators as an evaluation method for sustainability within the emerging context of governance merits further analysis focusing on policy processes surrounding the production of sustainability indicators this paper addresses two questions what is the potential utility of indicators for policy and in what ways can indicators influence governance the former is addressed by exploring three disciplines with long histories of indicator application public administration studies urban studies and environmental sciences the latter is addressed by distilling key perspectives from public policy literature on knowledge utilisation and policy learning which become the foundation for clarifying the notion of policy resonant indicators this clarification is achieved by canvassing the spectrum of the influences on indicators and the mechanisms of their resonance in policy processes the final section of the paper brings these arguments together by exploring two major insights in terms of challenges for ecological economics strengthening indicator theory and practice by addressing four key ingredients and mobilisation of indicators through their active use within the context of governance

what accounts for the decline in crime in this article we analyze recent trends in aggregate property crime rates in the united states we propose a dynamic equilibrium model that guides our quantitative investigation of the major determinants of observed patterns of crime our main findings can be summarized as follows first the model is capable of reproducing the drop in crime between 1980 and 1996 second the most important factors that account for the observed decline in property crime are the higher apprehension probability the stronger economy and the aging of the population third the effect of unemployment on crime is negligible fourth the increased inequality prevented an even larger decline in crime overall our analysis can account for the behavior of the time series of property crime rates over the past quarter century

unemployment and crime rates in the post world war ii united states a theoretical and empirical analysis using annual time series data for the united states 1946 1982 two hypotheses are tested 1 the level of the unemployment rate in any given year will have a negative partial contemporaneous effect on detrendedfluctuations increases or decreases in seven index crime rates homicide rape aggravated assault robbery burglary larceny theft and motor vehicle theft in that year 2 unemployment rate fluctuationsfrom one year to the next will have a positive partial effect on detrended crime rate fluctuations in the next year these hypotheses are developed from a theoretical model that identifies the former with a criminal opportunity effect and the latter with a criminal motivation effect of aggregate unemployment on crime for burglary robbery and larceny theft empirical support is found for the expected pattern of partial effects however the relative sizes of the effects are such that the total impacts of unemployment through both partial effects are negative in addition only the negative levels effect is exhibited for homicide and motor vehicle theft while rape and aggravated assault show no consistent association with either levels orfluctuations in the unemployment rate interpretations for these findings are discussed

plea bargaining with the irs abstract the purpose of this paper is to propose a new evasion counteracting policy and to prove its welfare improving property the new fatota policy allows a target group of businesses to choose between the following two options paying a fixed amount of taxes thus exempting themselves from tax audits or paying only the amount they choose to pay and subject to possible tax audits it is shown that fatota is very similar to the plea bargaining system of the u s criminal proceedings and our results can be treated as an extension of the grossman katz analysis to the crime of tax evasion

a modified human development index abstract this paper discusses a modified index for measuring human development the suggested index is based on the components of the human development index hdi developed by the united nations development programme undp since 1990 it discusses two categories of technical issues related to the hdi for 1995 those related to the components and those relevant to the structure of the index the data from the human development report 1995 for 174 countries are used to test the robustness of the suggested index and the results are compared to those of the hdi the new index is then used to delineate with some justification different groups of countries at various levels of human development

the formation of risk sharing networks this paper examines the formation of risk sharing networks in the rural philippines we find that geographic proximity possibly correlated with kinship is a major determinant of mutual insurance links among villagers age and wealth differences also play an important role in contrast income correlation and differences in occupation are not determinants of network links reported network links have a strong effect on subsequent gifts and loans gifts between network partners are found to respond to shocks and to differences in health status from this we conclude that intra village mutual insurance links are largely determined by social and geographical proximity and are only weakly the result of purposeful diversification of income risk the paper also makes a methodological contribution to the estimation of dyadic models

labour supply tax evasion and the marginal cost of public funds an empirical investigation abstract in this paper we extend the concept of marginal cost of public funds itmcf to incorporate tax evasion in the labour market mcf values are also computed from various tax reforms applied to the province of quebec canada 1985 for this purpose a utility based labour supply model that allows for both regular and irregular work activities is used at the benchmark situation the mcf associated with an increase in marginal income tax rates ranges between 1 39 and 1 53 depending upon whether we consider rationing or not moreover the presence of the irregular sector accounts for between 0 02 and 0 05 of this mcf although small in magnitude the impact of the irregular sector increases rapidly with the level of marginal tax rates

on the political economy of income redistribution and crime this article analyzes a general equilibrium model in which agents choose to specialize in either legitimate or criminal activities expenditures on police to apprehend criminals as well as income redistribution are determined endogenously through majority voting we investigate how crime redistribution and police expenditures depend on characteristics of the underlying distribution of income earning abilities and on the apprehension technology our model accounts for the positive correlation between inequality and crime the positive correlation between expenditures on police and redistribution and the lack of correlation between crime and redistribution observed in u s data

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

characteristics of households in the informal sector of an emerging economy using the case study of trinidad and tobago we investigate the socio economic demographic and attitudinal characteristics of households that participate in the informal sector of an emerging economy and their perception of the risk of detection by tax authorities while doing so data are gathered from a cross sectional field survey covering 570 households results using multinomial logit and ordered probit models suggest that households are motivated to participate in the informal sector when members spend little time in formal sector activity believe that taxes are too high and their incomes are too low have dependents to support and believe that the resulting tax evasion will go undetected their perception of the risk of detection by the tax authority is determined largely by the income they earn in the formal sector and the extent of government bureaucracy prevailing there

financial systems in northern thai villages field research attempted to measure the risky environments the information structures the institutions and the risk response mechanisms of ten villages in northern thailand various key features are then modeled in an abstract but realistic way either with a full information risk sharing model or an information constrained version of the same model observations from some of the villages seem consistent with one or the other of these models but in many of the villages one is left with risk response variations across households which suggest that pareto improvements are possible

incentive and incarceration effects in a general equilibrium model of crime an intertemporal general equilibrium model of criminal behavior is used to analyze the effect on crime of changing policy parameters the policy parameters are the length of the prison term the severity of punishment and the amount of police resources the number of crimes in society can be decomposed into an incentive part an incarceration part and a crime competition part the magnitudes of these three components are studied by means of empirical data from england and the us

the human development index a critical review since 1990 the united nations development programme undp has published a series of annual human development reports hdrs in which the human development index hdi is computed for each country this index has become an important alternative to the traditional unidimensional measure of development i e the gross domestic product although the index still fails to include any ecological considerations it has broadened the discussion surrounding the evaluation of development unfortunately over the years the hdrs seem to have become stagnant repeating the same rhetoric without necessarily increasing the hdi s utility this paper evaluates how well these reports have lived up to their own conceptual mandate and assesses the ability of the hdi to further the development debate we find that the reports have lost touch with their original vision and the index fails to capture the essence of the world it seeks to portray in addition the index focuses almost exclusively on national performance and ranking but does not pay much attention to development from a global perspective we propose the incorporation of three simple modifications for the index as a first step to overcome these shortcomings 1998 elsevier science b v all rights reserved

credit for what informal credit as a coping strategy of market women in northern ghana abstract this paper explores the use of informal credit as a strategy for managing risks by market women in northern ghana a broad concept of the costs of risk management strategies is introduced and encompasses both a time and monetary dimension based on qualitative data the analysis reveals that market women invest a considerable amount of time in maintaining complex networks of informal credit providers to ensure their access to credit once a shock occurs informal credit involves high transaction costs and prevents market women from growing out of poverty in the long term

income tax evasion an intersectoral analysis abstract this paper develops an intersectoral model of income tax evasion with general equilibrium effects key elements of the model are imperfectly substitutable outputs from the compliant and evading sectors and workers with heterogeneous evasion costs the model allows for biased public expenditures a wide range of behavioural responses and both legitimate and criminal activities evading tax as well as tax avoidance activities qualitative and quantitative assessments are undertaken for the effects of tax rate changes on evasion activity relative output prices and real tax revenues this approach offers useful findings for taxation policy and is amenable to further analytical extensions

human development means and ends from growth to basic needs sometimes the change in the fashions of thinking about development appears like a comedy of errors a lurching from one fad to another economic growth employment creation jobs and justice redistribution with growth basic needs bottom up development participatory development sustainable development market friendly development liberation liberalisation human development thus goes the carousel of the slogans but this would not be a correct record there has been an evolution in our thinking about development both internal logic and new evidence have led to the revision of our views previous and partly discarded approaches have taught us much that is still valuable and our current approach will surely be subject to criticisms a brief survey of the evolution of our thinking may be helpful the discussion started in the 1950s influenced by arthur lewis 1955 and others who emphasised economic growth as the key to poverty eradication even at this early stage sensible economists and development planners were quite clear in spite of what is now often said in caricature of past thought that economic growth is not an end in itself but a performance test of development arthur lewis defined the purpose of development as widening our range of choice exactly as the human development reports of the united nations development programme do today three justifications were given for the emphasis on growth as the principal performance test one justification assumed that through market forces such as the rising demand for labour rising productivity rising wages lower prices of the goods bought by the people economic growth would spread its benefits widely and speedily and that these benefits are best achieved through growth even in the early days some sceptics said that growth is not necessarily so benign they maintained that in certain conditions such as increasing returns restrictions to entry monopoly power unequal distribution of income and assets growth gives to those who already have it tends to concentrate income and wealth in the hands of the few this is where the second assumption came in it was that governments especially democratic ones are concerned with the fate of the poor therefore progressive taxation social services and other government interventions would

costly state verification with varying risk preferences and liability abstract in the scenario of loan contracts with costly state verification we examine how the properties of the set of states different risk preferences of debtors and varying liability of lenders affect the structure of optimal repayments in particular we show that with risk averse debtors a general set of states a constant observation cost and both unlimited and limited lender liability the debtor is strictly better off revealing the true state of nature when his realized revenue is low which implies that optimal debtor consumption has a downward jump around the single switch from observed to unobserved states if the debtor can destroy revenue or if the debtor is risk neutral this non monotonicity of consumption disappears moreover given the loan size there is more monitoring under debtor risk aversion than risk neutrality we present simulations showing that a contract with unlimited lender liability and debtor risk aversion has a higher expected observation cost but a lower variance of consumption than a contract with limited lender liability finally we discuss the problems of commitment to verification and contract renegotiation in this framework

government policies and graft in an economy with endogenous labor supply abstract this paper is an extension of marcouiller and young s am econ rev 85 1995 630 paper which shows that in a two good economy with constant labor supply the government can always increase graft by squeezing the formal sector out of existence in this paper we find that if individuals choose the amount of labor they supply the government can increase graft by eliminating formal production in relatively rare cases

reasonable doubt and the optimal magnitude of fines should the penalty fit the crime models of the enforcement compliance relationship have assumed that both the probability and magnitude of fines are independent choice variables of policy makers these models indicate that it may be optimal to monitor with lowfrequency but to inflict uniformly maximal penalties for all infractions detected this article shows that if the judicial system is built on the reasonable doubt test then the penalty and the probability of conviction are not independent in particular as the penalty increases the probability of conviction falls as a result uniformly maximal penalties may actually encourage crime rather than deter it this article shows that optimal fines should rise with the severity of the infraction that is the penalty should fit the crime models of the enforcement compliance relationship generally treat both the probability and magnitude of fines as independent choice variables of the government this approach has led becker 1968 and others to conclude that it is optimal to set uniformly maximal penalties for all crimes and to set the probability of conviction at the minimum level necessary to enforce compliance with the law while this normative prescription is natural and intuitive there still remains a larger positive question of why in most nations of the world penalties are not uniformly high but rather rise with the severity of the crime one possible resolution of the positive and normative questions may lie in the fact that penalties and probabilities of conviction are not generally independent convictions are typically determined by judges or jurors who are instructed to convict only if the evidence convinces them beyond a reasonable doubt that the accused is guilty psychologists however have found that a juror s willingness to convict may be influenced by more than just the evidence jurors are very sensitive to the potential penalties that defendants may pay

tax arbitrage and labor supply we examine how tax avoidance in the form of trade in well functioning asset markets affects the basic labor supply model we show that tax arbitrage has dramatic implications for positive normative and econometric analysis of how taxes affect work incentives

good and bad growth the human development reports abstract the 1996 human development report undp 1996 is about economic growth and human development in keeping with past reports in the series it emphasizes the diversity of country performance in improving human development indicators at given rates of growth this article reviews what the human development reports have said on this topic looking at how well the main messages have been supported by data and analysis and how compelling they are as a basis for public action

swedish economic performance and swedish economic debate a view from outside the papers by korpi henrekson and agell raise important questions both about the swedish economy and about the way in which evidence on economic growth should be handled in debate on economic policy i want to comment in particular on the fundamental question of whether the international evidence allows us to judge that swedish growth has been below par the papers raise two further questions on the first whether growth is inhibited by high taxation and a large welfare state the hallmarks of the post war swedish economy agell provides as good an assessment of the cross country macroeconomic evidence as we can probably hope to get at the moment unproven on the final vexed question of whether the structure of the economics profession has been inimical to open debate i have only a few comments to make let me start with the criteria and method by which we should attempt to assess relative economic performance this is a methodological minefield there are numerous paths leading to divergent conclusions the least we can do is to be explicit about our choices and subject our provisional conclusions to some checks for robustness what performance measure is relevant we could look at gdp or consumption scaled per head of population or per member of the workforce or per hour worked what deflators do we use we can reduce measures denominated in local currency to a common unit using exchange rates or using fixed international prices or using utility based indexes which derivative of the performance measure do we use we might want to compare levels or rankings or we might choose to assess relative rates of growth or even relative changes in growth rates which time period is relevant in particular comparisons of growth rates are often very sensitive to choice of start and end years when business cycle fluctuations are asynchronous what is the reference pointfor assessing underor overachievement the definition of par might be either the best performance or average performance for some group of countries for some period of time finally what exogenousfactors are to be taken into account we might wish to control for the influence on our preferred performance measure of a wide range of factors which are extraneous to the policy question under examination i will take a brisk jog through this minefield explaining briefly some of the choices which seem most relevant to the problem in hand but without attempting a full exposition of the problems the most usual starting place is to choose real gdp per capita as a measure of aggregate performance this

the tyranny of international index rankings abstract international index rankings are popular but perhaps too persuasive they emphasize country differences where similarity is the dominant feature rankings based on doing business the human development index and freedom house can be misleading not because of wrong indicators but because the estimation of the scores ignores inherent uncertainty re estimated with a method that captures this uncertainty it becomes clear that ranking every adjacent country is a rather courageous activity

taxation and labour supply with risky activities consider the following three phenomena a in recent years dramatic shifts in the types of contract between london cabbies and the taxi owners have been observed b if one tries to hire a housepainter in the uk one is often quoted two rates one for official work during regular hours and for unofficial weekend and evening work c in two unrelated discussions with economics professors about the textbook model of taxation and labour supply each revealed to me that marginal hours released from his regular employment were spent not in the form of leisure but in participating in stock market speculation

full insurance in the presence of aggregate uncertainty this paper tests implications of full consumption insurance the object is to determine how much mileage can be obtained from a model with complete markets with such features as private information or liquidity constraints omitted the implication exploited is that individual consumption responds to aggregate risk but not to idiosyncratic risk the test involves regressing the change in household consumption onto the change in aggregate consumption and other right hand side variables such as the change in household income and change in employment status all variables other than the change in aggregate consumption are predicted to be insignificant in explaining the change in household consumption with observations on consumption and income for 10 695 households from the consumer expenditure survey the results are mixed the results for one specification exponential utility are mostly consistent with full consumption insurance the results for the other specification power utility are not

myopic deterrence policies and the instability of equilibria we develop a general equilibrium model of crime in which honest workers face an effective tax rate on earnings consisting of an exogenous income tax used to pay for policing and an endogenous crime tax given by the proportion of their disposable income that is stolen when there are two stable equilibria the low crime equilibrium is welfare dominant and furthermore welfare is a decreasing function of the income tax rate however as the income tax rate is reduced the degree of stability of the low crime equilibrium diminishes until for sufficiently low tax rates the low crime equilibrium is unstable with respect to any small positive perturbation in the crime rate thus myopic maximization of social welfare exposes the economy to random shocks in the crime rate that can destroy the preferred low crime equilibrium we argue that this dilemma between economizing on resources used for deterrence and ensuring the stability of the most desirable equilibrium is a fundamental trade off in the design of many institutions intended to control antisocial behavior including rent seeking corruption and theft

crime punishment and background risks abstract we show that if the punishment for a property crime effectively eliminates an individual s initial wealth as with a very long prison sentence then such criminal activities become less desirable for a risk averse and prudent individual if his initial wealth distribution undergoes a second order stochastic dominant improvement similar results obtain under additional restrictions if the punishment reduces an individual s initial wealth by some factor less than 1 in a general equilibrium model where the endogenous victimization risk is part of individuals background risks we also show that the availability of insurance for the victimization risk lowers economy wide crime rates

forging ahead and falling behind the rise and relative decline of the first industrial nation this paper considers britain s failure to maintain its lead in economic growth in the face of overtaking by the united states recent cliometric research is reviewed and it is argued that early nineteenth century britain had a low growth potential by twentieth century standards and that the american growth of the early twentieth century was of a quite different kind neither traditional nor new growth theories can encompass this experience and it is suggested that natural resource endowments location specific learning processes and the international migration of factors of production were central aspects of american overtaking of britain

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

income tax evasion labour supply and the equity efficiency tradeoff abstract this paper is an attempt to incorporate tax evasion into the analysis of optimum income taxation a model of variable labour supply with tax evasion is used to derive supply functions for labour in regular and irregular markets given taxpayer behaviour the government chooses tax rates penalties and the probability of detection to maximize a utilitarian social welfare function the results consist in the derivation of a formula for the optimum marginal tax rate and a characterization of the factors determining the choice between the penalty rate and the probability of detection as instruments for the control of tax evasion

contingent loan repayment in the philippines abstract using data from the philippines this article seeks to understand how households in the study area apparently manage to avoid falling into a debt trap in spite of frequent borrowing findings suggest that this is achieved via three institutional features first most informal debt carries no interest second for all debts repayment is postponed in case of a borrower s difficulty this is the only insurance feature of debt repayment third while debt principal is seldom forgiven or reduced interest bearing debt does not carry additional interest if debt repayment is delayed this prevents interest charges from accumulating and debt from snowballing

poverty human development and growth an emerging consensus this paper considers several issues relevant to the debate on the extent to which poverty or development progress in general should be measured by income or by a broader set of objectives issues covered here are practical implications of the two approaches for poverty reduction efforts the impact of growth on basic social indicators and how national achievement on social indicators is best measured sri lanka and pakistan countries often cited in this debate are used as examples

the market for street crime an economic analysis of victim offender interaction abstract this paper views the economic explanation of crime rates from a new perspective by explicitly deriving an economic model of the behavior of potential victims and considering the interaction of the behavior of potential victims with the behavior of offenders crime is produced through offenders supplying time in search of victims and victims demanding to expose themselves to the environment a model is set up in which the crime rate the probability of being a victim per unit of exposure time and the probability of finding a victim per unit of offenders search time are simultaneously determined the model leads us to distinguish the real crime rate the probability of being a victim per unit of exposure time from the nominal crime rate the number of crimes per capita the nominal crime rate can be inversely related to the real crime rate

the race between deterrence and displacement theory and evidence from bank robberies security measures that deter crime may unwittingly displace it to neighboring areas but evidence of displacement is scarce we exploit precise information on the timing and locations of all italia

crime punishment and the market for offenses crime is a subject of intense emotions conflicting ideologies however economists have generally explained it as a reflection of individual choice and equilibrating market forces two major themes of the literature are outlined the evolution of a market model to explain the diversity of crime across time and space and the debate about the usefulness of positive versus negative incentives systematic analyses generally indicate that crime is affected on the margin by both positive and negative incentives there are serious limitations to the effectiveness of incapacitation and rehabilitation and optimal enforcement strategies involve trade offs between narrow efficiency and equity considerations

sovereign debt as intertemporal barter author s kletzer kenneth m wright brian d abstract borrowing and lending between sovereign parties is modeled as intertemporal barter that smoothes the consumption of a risk averse party subject to endowment shocks the surplus anticipated in the relationship offers sufficient incentive for cooperation by all parties including any other competitive agents who are potential lenders to the sovereign the sole punishments consist of renegotiation proof changes in the path of future payments we show that intertemporal trade can be sustained in the absence of any exogenous enforcement of lending relationships whatsoever that is borrowing and lending are possible under anarchy and are supported by punishments that consist of cheating any cheater long term implicit relationships may be fulfilled as the continual renegotiation of simple incomplete short term loans the analysis suggests that the crucial role of the explicit loan contract is the identification of the relationship and the parties involved

a general equilibrium model of crime commission and prevention abstract the model developed in this paper features a general equilibrium specification of the relationships among criminals victims of crime and a law enforcement agency these relationships are employed to endogenously derive an explicit intuitively appealing technology of crime commission and prevention the solution to the present model is therefore obtained with a set of more elementary assumptions than the previous literature where arbitrary curvature assumptions are invoked

pathology of path dependency the ilo and the challenge of new governance using archival sources the authors study strategic and organizational change in the international labour organization ilo over the last twenty years they focus specifically on the ilo s efforts to incorporate certain elements of the new governance model into its policies and organizational practices which include the shift from standards expressed as detailed legal norms to soft law the active involvement of civil society organizations other than trade unions and employer associations in regulatory activities and the introduction of quantitative indicators of compliance with labor standards they argue that the efforts of the ilo leadership have been waylaid by the organization s corporatist structure which gives employer associations and trade unions veto power over policy developments at a time in which these actors are increasingly unable to agree on concrete policy measures finally the authors ask whether this corporatist structure accurately reflects the ilo s self defined mission prov

the optimal use of fines and imprisonment abstract this paper examines the use of fines and imprisonment to deter individuals from engaging in harmful activities these sanctions are analyzed separately as well as together first for identical risk neutral individuals and then for two groups of risk neutral individuals who differ by wealth when fines are used alone and individuals are identical the optimal fine and probability of apprehension are such that there is some underdeterrence if individuals differ by wealth then the optimal fine for the high wealth group exceeds the fine for the low wealth group when imprisonment is used alone and individuals are identical the optimal imprisonment term and probability may be such that there is either underdeterrence or overdeterrence if individuals differ by wealth the optimal imprisonment term for the high wealth group may be longer or shorter than the term for the low wealth group when fines and imprisonment are used together it is desirable to use the fine to its maximum feasible extent before possibly supplementing it with an imprisonment term the effects of risk aversion of these results are also discussed

dynamic deterrence theory economic theories of deterrence have primarily been built on static models a common and serious shortcoming of the existing dynamic deterrence models is the assumption of a twoperiod structure that ignores recidivism the aims of this paper are to formulate and solve a general dynamic deterrence model that incorporates recidivistic behaviour to explore its implications and to derive some testable predictions the analysis shows how the value and the intensity of engaging in illegal activity change over time highlights the weaknesses of twoperiod deterrence models and compares the deterrent effectiveness of increasing the likelihood of punishment versus the severity of punishment finally the recidivistic model provides a structural foundation for the widely used stochastic process models of crime in operations research and criminology

an inquiry into quasi credit contracts the role of reciprocal credit and interlinked deals in small scale fishing communities in agrarian village societies beset with many hazards and uncertainties people evolve various means of coping with risk what is perhaps less known is that credit transactions can sometimes serve the function of reducing risk in such societies this article is concerned with examining several insurance motivated credit arrangements in small scale fishing communities a hunger insurance mechanism of reciprocal credit and a system of interlinked contracts aimed at insuring against risks in the spheres of labour and marketing relations will be extensively dealt with moreover the concept of triadic relationships will be shown to have special relevance in the case of traditional insurance arrangements aiming at controlling problems of moral hazard

measuring energy poverty focusing on what matters abstract the provision of modern energy services is recognised as a critical foundation for sustainable development and is central to the everyday lives of people effective policies to dramatically expand modern energy access need to be grounded in a robust information base metrics that can be used for comparative purposes and to track progress towards targets therefore represent an essential support tool this paper reviews the relevant literature and discusses the adequacy and applicability of existing instruments to measure energy poverty drawing on those insights it proposes a new composite index to measure energy poverty both the associated methodology and initial results for several african countries are discussed whereas most existing indicators and composite indices focus on assessing the access to energy or the degree of development related to energy our new index the multidimensional energy poverty index mepi focuses on the deprivation of access to modern energy services it captures both the incidence and intensity of energy poverty and provides a new tool to support policy making

imperfect commitment altruism and the family evidence from transfer behavior in low income rural areas in this paper we examine empirically whether risk pooling is more advantageous among altruistic compared to selfish agents in a framework where individuals cannot make binding commitments in particular we incorporate altuism into a model of risk sharing under imperfect commitment and use simulation methods to establish tests of the roles of both altruism and commitment problems in determining the extent of insurance and the intertemporal movements in interhousehold transfers the tests are carried out using three panel data sets from two countries of rural south asia that provide detailed information on transfers and enable the measurement of income shocks the estimates provide strong support for the notion that imperfect commitment substantially constrains informal transfer arrangements whether kin based or not but also provide evidence that altruism plays an important role in ameliorating commitment constraints and thus in increasing the gains from income pooling

tax evasion and the allocation of capital abstract the efficiency cost of capital misallocations between the corporate sector and the noncorporate sector is typically measured using statutory tax differences corporate source income tax compliance is high because of third party reporting however while noncorporate rental income tax compliance is low differential evasion thus exacerbates statutory differences and enlarges the efficiency cost to measure this effect we build a numerical general equilibrium model where households simultaneously choose portfolios of risky assets and fractions of income to report