precautionary savings and self selection evidence from the german reunification experiment in the absence of complete insurance expected future income shocks lead prudent individuals to build up precautionary savings in order to avoid wide fluctuations in the consumption path the reaction of savings to expected future shocks is stronger the more risk averse an individual is risk aversion might influence not only the savings behavior of an individual facing a stochastic income path but it can also affect occupational choice in the first place in particular risk averse individuals might choose occupations that are associated with less risky income paths while less risk averse individuals might prefer occupations with higher income risk assessing the importance of self selection of individuals into occupations according to their risk aversion is difficult since risk aversion is usually unobserved yet failing to control for unobserved risk aversion in regressions of wealth on measures of labor income risk will lead to a bias if selfselection takes place since measures of labor income risk will be negatively correlated with the error term that is capturing the unobserved risk aversion this could lead to a rejection of the theory of precautionary savings even if individuals act according to the theory

rice land designation policy in vietnam and the implications of policy reform for food security and economic welfare abstract with the aim of promoting national food security the vietnamese government enforces the designation of around 35 per cent of agricultural land strictly for paddy rice cultivation we investigate the economic effects of adjusting this policy using an economy wide model of vietnam with detailed modelling of region specific land use agricultural activity poverty and food security measures our results show that the removal of the rice land designation policy increases real private consumption by an average of 0 35 per cent per annum over 2011 2030 while also reducing poverty improving food security and contributing to more nutritionally balanced diets among vietnamese households

precautionary wealth accumulation evidence from canadian microdata this paper estimates the effect of labour income uncertainty on wealth accumulation using two data sources wealth information is obtained from the master files of the new canadian survey of financial security 1999 sfs labour income risk proxies are constucted by industry using the canadian survey of labour and income dynamics slid between 1996 and 2001 the empirical results suggest the presence of a strong precautionary saving motive among canadian households for broad definitions of wealth furthermore consistent with the buffer stock saving model the level of precautionary funds significantly increases when households face liquidity constraints ce texte calcule l effet de l incertitude du revenu de travail sur l accumulation de la richesse a l aide de deux sources de donnees les donnees sur la richesse sont tirees des resultats de l enquete sur la securite financiere esf de 1999 les coefficients de risque attaches aux diverses industries sont developpes a partir des resultats de l enquete sur la dynamique du travail et du revenu edtr entre 1996 et 2001 les resultats empiriques suggerent la presence d une forte motivation des menages canadiens aepargner aux fins de precaution si l on accepte des definitions assez comprehensives de la richesse de plus d une maniere qui correspond au modele d epargne pour stockage tampon le niveau des fonds aux fins de precaution s accroit de maniere significative a proportion que les menages font face a des contraintes de liquidite

precautionary savings a panel study theoretical literature shows that income uncertainty boosts saving yet empirical work is incomplete i test for the precautionary motive for saving using panel data knowing this motive s size is important for gauging the responsiveness of saving to government programs that reduce uncertainty and for comparison to other motives such as bequests most empirical studies of precautionary saving use either aggregate time series or cross sectional data which cannot capture the effects of individual income uncertainty i derive measures of total permanent and transitory income uncertainty from panel data the national longitudinal survey and find a strong precautionary motive a doubling of uncertainty increases the ratio of wealth to permanent income by 29

precautionary savings and the self employed this work focuses on the impact of uncertainty on savings under bequest form specifically we estimate whether and to what extent income variability does have an effect on post mortem savings we approximate the post mortem savings with the closest dedicated savings which is savings in term insurance a lump sum inherited at the death of the subscriber furthermore we test whether the intensity of the income variance or the riskiness of the job type such as self employment matters more in the choice our results show that self employment status is one of the most relevant variables affecting term insurance ownership

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

socio economic inequality in ill health amongst the elderly should one use current or permanent income in belgium income related inequality in ill health among the 65 is present but reduces significantly as soon as one restricts the analysis to the 65 the main goal of this paper is to check whether these findings based on current income are robust to the income concept used the analysis is repeated using estimates of permanent income measured inequality among the 65 remains very limited suggesting that the observed findings are not heavily dependent upon the income concept finally i suggest an explanation for the observed difference in inequality between the 65 and the 65 i argue that this difference is likely to be correlated with differences across income groups of 1 sample attrition and 2 mortality

tenure security investment and productivity in gambian agriculture a generalized probit analysis the determinants of investment input use and productivity are investigated under customary tenure in peri urban areas of the gambia a structural model is specified to investigate the role of tenure security on farm investments and input use and thereby on yield testing of the structural form hypotheses requires simultaneous equation estimation containing both continuous and discrete endogenous variables the model is estimated as a feasible generalized least squares amemiya s generalized probit some of the positive relationships hypothesized between tenure security investment and yields are corroborated in particular tenure security is found to enhance long term investments which in turn enhance yields

an alternative test of racial prejudice in motor vehicle searches theory and evidence we propose a simple model of trooper behavior to design empirical tests for whether troopers of different races are monolithic in their search behavior and whether they exhibit relative racial prejudice in motor vehicle searches our test of relative racial prejudice provides a partial solution to the well known infra marginality and omitted variables problems associated with outcome tests when applied to a unique data set from florida our tests soundly reject the hypothesis that troopers of different races are monolithic in their search behavior but fail to reject the hypothesis that troopers of different races do not exhibit relative racial prejudice

religions fertility and growth in south east asia through indirect inference we investigate the extent to which religions supposed pronatalism is detrimental to growth via the fertility education channel using censuses from south east asia we first estimate an empirical model of fertility and show that having a religious affiliation significantly raises fertility this effect is stronger for couples with intermediate to high education levels we next use these estimates to identify the parameters of a structural model of fertility choice on average catholicism is the most pro child religion increasing spending on children followed by buddhism while islam has a strong pro birth component redirecting spending from quality to quantity we show that pro child religions depress growth in the early stages by lowering saving physical capital and labor supply these effects account for 10 to 50 of the actual growth gaps between countries over 1950 1980 at later stages of growth pro birth religions lower human capital accumulation explaining between 10 and 20 of the gap between muslim and buddhist countries over 1980 2010

an institutional analysis of methods for environmental appraisal abstract this paper focuses on a set of issues when choosing between methods for environmental appraisal approaches like cost benefit analysis contingent valuation multicriteria analysis and deliberative methods are based on very different assumptions concerning the characteristics of environmental resources the capacities of the individuals involved and the role the methods play in framing the process the present paper views environmental appraisal methods as institutional structures they are seen as rules concerning a who should participate and in which capacity b what is considered data and which form data should take and c rules about how a conclusion is reached specifically the choice of method defines the logic of the appraisal process and next influences the output while cost benefit analysis is based on the assumption of individual rationality deliberative methods assume that individuals can act according to social rationality the first part of the paper is devoted to clarifying what institutions are and their role in the valuation process second the main features of environmental or ecosystem services and the demands they raise for decision making are described a general framework for evaluating appraisal methods is then developed finally this structure is elaborated in more detail as a basis for deciding over the choices of methods in the case of evaluating ecosystem services a set of unresolved issues are identified especially related to how the choice of appraisal methods themselves should be instituted

cyclical risk aversion precautionary saving and monetary policy this paper analyzes the conduct of monetary policy in an environment in which cyclical swings in risk appetite aect households propensity to save it uses a new keynesian model featuring external habit formation to show that taking note of precautionary saving motives justi es an accommodative policy bias in the face of persistent adverse disturbances equally policy should be more restrictive that is lean against the wind following positive shocks under su ciently persistent habits it is in fact optimal to increase interest rates following a rise

the supply of children s time to disabled elderly parents i introduction in recent years economists have become increasingly interested in intergenerational transfers of both time and money 1 such transfers may be motivated by altruism or exchange models of altruism assume that a person s utility depends on the consumption or utility of other family members and her own consumption for example children may supply unpaid informal care to aging parents because their utility increases when their parents are happier one of the most striking predictions of models of altruism is that public subsidies tend to crowd out transfers by altruistic individuals especially if the subsidy is financed by taxing the altruistic individual becker 1974 in exchange models there is typically altruism but one family member such as a parent can induce a relative such as a child or kid 2 to provide more services or money than the relative would normally provide by threatening to withhold a bequest to the extent that this is so one would plausibly expect more care and attention to be provided to wealthy parents when there is more than one kid more care should be provided because the threat of disinheritance is more credible when there is competition between kids for bequests in a well known article bernheim shleifer and summers 1985 hereafter referred to as bss found empirical support for the strategic bequest motive based on an observed positive relationship between children s visits and telephone calls to elderly parents per child as the measure of attention and bequeathable wealth per child as the measure of the financial motivation for providing such attention one might expect this result to extend to decisions about direct provision of help informal care that kids may provide to parents the marginal benefit of such care is plausibly greater than the benefit derived from a visit or telephone call in a recent article however we found no evidence that the strategic bequest motive is an important determinant of the amount of informal care kids provide or a related decision whether or not to place the parent in a nursing home sloan hoerger and picone 1996 we focused on the distinction between cognitively aware parents who can threaten to disinherit their kids and cognitively unaware parents who cannot disinherit and examined whether this distinction had any effect on the probability that the parent entered a nursing home or on amounts of formal and informal care received if the parent remained in the community any strategic effects were swamped by the greater marginal benefit of care to the parent when the parent was cognitively unaware moreover among the cognitively aware richer parents actually received less informal care contrary to the strategic model s predictions unfortunately in past research on intergenerational transfers of time and money it was not possible to control for the wealth wage and other characteristics of kids to the extent that kid s wealth and wage were positively correlated with parent s wealth which was observed the parameter estimates on parent s wealth may be negatively biased although parent s wealth and kid s wealth and wage rates are plausibly positively correlated they have opposite effects on the supply of kid s time according to the strategic bequest model that is potential bequests from a parent may be less attractive to rich kids and therefore induce less care we test the strategic bequest model using information on elderly parents and their children from two linked surveys the 1989 national long term care survey nltcs for elderly individuals and the survey of informal caregivers sic for a subsample of the elderly s children using these data we can include explicit measures of kid s wealth and wage rates thereby avoiding the possible bias introduced by a correlation between parent s and kid s wealth and wages also the data sets provide information on several pertinent health cognitive and functional status variables which are not typically observed in surveys of financial status

national health insurance and precautionary saving evidence from taiwan abstract by reducing uncertainty about future medical expenses comprehensive health insurance can reduce households precautionary saving we examine this effect using taiwan micro data spanning the 1995 introduction of national health insurance the effects of national health insurance are identified using employment based variation in prior insurance coverage replacement of the households prior insurance coverage with national health insurance is exogenous to the household so our estimates are not subject to selection bias compared with the preceding government insurance programs national health insurance reduced saving by an average of 8 6 13 7 with the largest effects for households with the smallest saving

land titling and rural transition in vietnam abstract we examine the impact of the 1993 land law of vietnam which gave households the power to exchange transfer lease inherit and mortgage their land use rights we use household surveys before and after the law was passed together with the considerable variation across provinces in the speed of implementation of the reform to identify the impact of the law we find that the additional land rights led to statistically significant increases in the share of total area devoted to long term crops and in labor devoted to nonfarm activities however these changes are not large in magnitude and appear to be driven mainly by the increased security of tenure provided by the law rather than by increased access to credit markets or greater land market participation

mortgage lending to minorities where s the bias this paper examines mortgage lending and concludes that studies based on data created by the boston fed should be reevaluated a detailed examination of these data indicates that irregularities in these data when combined with the most commonly used research methodology appear to have biased previous research toward a finding of discrimination against minority applicants when the most severe data irregularities are eliminated evidence to support a hypothesis of discrimination disappears the currently fashionable flexible underwriting standards of mortgage lenders may have the unintended consequences of increasing defaults for the beneficiaries of these policies

consumption puzzles and precautionary savings abstract when marginal utility is convex agents accumulate savings as a precautionary measure against labor income eventualities this paper shows that precautionary savings can go a long way in making the excess growth excess smoothness and excess sensitivity features of consumption consistent with the stochastic processes of labor income observed in the u s at the microeconomic level

precautionary saving in the small and in the large the theory of precautionary saving is shown to be isomorphic to the arrow pratt theory of risk aversion making possible the application of a large body of knowledge about risk aversion to precautionary saving and more generally to the theory of optimal choice under risk in particular a measure of the strength of the precautionary saving motive analogous to the arrow pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the dreze modigliani substitution effect copyright 1990 by the econometric society

an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

peer pressure and partnerships partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie but in organizations of any significant size the free rider effects would seem to choke off

the effects of public pensions on private wealth evidence on the german savings puzzle based on german panel data between 1984 and 1999 we test for the interaction of social security benefits and private wealth formation in a simple life cylce model benefits from public pension systems should displace equal amounts of private retirement accumulation our estimate for the offset effect corrected for several possible measurement biases is much lower however than expected from pure life cycle considerations and less than comparable estimates for the us and the uk this result thus supports other evidence on a particular german savings puzzle which might be due to market imperfections and or bounded rational behaviour

are some groups more vulnerable to macroeconomic shocks than others hypothesis tests based on panel data from peru abstract which socio economic groups are most vulnerable to welfare declines during a macroeconomic shock after clarifying the difference between poverty and vulnerability this paper presents an analytical framework and applies it to panel data from peru major findings are 1 households with better educated heads are less vulnerable 2 female headed households are no more vulnerable than male headed households 3 households with more children are more vulnerable 4 transfer networks that assist the poor in relatively stable periods do not protect them during a major shock unless they originate from outside peru and 5 peru s social security program is targeted neither to vulnerable nor to poor households but other transfer programs are better targeted

behavioral responses to risk in rural china does risk perpetuate poverty in a credit constrained economy jalan and ravallion study portfolio and other behavioral responses to measured risk using household panel data for rural china one quarter of wealth is held in unproductive liquid forms but only a small share of this appears to be a precaution against income risk the authors estimate that eliminating income risk would reduce the share of wealth held in liquid form by less than 1 percentage point moreover that effect is confined largely to middle income groups high income households do not it seems need to hold unproductive cautionary wealth and the poor probably cannot afford to do so the authors find no evidence that income risk discourages schooling but risk does inhibit the out migration of labor generally the results provide only limited support for the idea that uninsured risks promote unproductive portfolio behavior in this setting there is such an effect but it is small in magnitude and cannot be deemed an important cause of poverty

on testing the utility hypothesis in order to be able to conduct a test of the core utility hypothesis that is not confounded with tests of subsidiary hypotheses that economic agents all have the same preferences and that their preferences are weakly separable it is necessary to use data that are disaggregated and complete in order to carry out a utility hypothesis test with complete data revealed preference theory must first be extended the generalised axiom of revealed preference is extended to include labour supply and portfolio choice then a complete disaggregated data set is used to test the utility hypothesis and two preference separability hypotheses

the trend in the male female wage gap in the united states despite the rise in the feminist movement the enactment of equal opportunity legislation and the rapid increase in women s labor force participation a substantial sex differential in wages has persisted in the united states for at least 4 decades measured by hourly earnings of year round workers this wage gap was 31 in 1955 widened to a 35 37 range by the 1960s and early 1970s and then narrowed to 33 by 1982 this paper examines the extent to which changes in the characteristics of men and women in the labor force and other factors can account for the observed pattern the main finding is that increases in women s labor force participation were initially associated with a declining skill level of employed women relative to employed men where skill is measured by years of schooling and job tenure more recently the work experience of employed women has been increasing which helps account for the recent narrowing trend in the wage gap during the 1970s the wage gap probably woul have narrowed m

the role of intergenerational transfers and life cycle saving in the accumulation of wealth he purpose of this paper is to review what economists know at present about the following question how large a portion of the existing wealth is the result of a bequest motive that is of accumulation for the specific purpose of leaving bequests i will also endeavor to clarify why an answer to this question is of interest in the early keynesian period when the study of national saving first attracted wide interest relatively little attention was paid to what led people to save though it was generally understood that the main systematic reason was to leave bequests j m keynes in the famous chapter 9 of the general theory of employment interest and money 1936 had listed seven distinct motives for saving besides the leaving of bequests but five of these which include to increase one s future income or to insure one s independence and power implied that all or nearly all the accumulation would finally wind up as bequeathed wealth this in turn meant that most private wealth originated through bequests that is it either had been received through bequests or was destined to be bequeathed and indeed how else could society accumulate wealth however keynes 1936 p 107 also mentioned two further motives precaution that is to build up a reserve against unforeseen contingencies and foresight that is to provide for an anticipated future relation between the income and the needs of the individual or his family different from that which exists in the present as for example in relation to old age family education or the maintenance of dependents these motives in contrast to most of the previous ones have the

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

property rights productivity and common property resources insights from rural cambodia summary this paper uses data from the 2003 04 cambodia household socioeconomic survey to investigate the effects of property rights to land plots held with a paper documenting ownership in rural cambodia are found to have higher productivity and land values than other plots while property rights have weak effects on access to credit the paper also investigates whether the introduction of private property rights leads to decreased availability of common property resources the data offers only weak support for this hypothesis the general insight is that policies to strengthen land property rights can have important positive effects on the rural economy even in an environment of low state capacity

political connections and land related investment in rural vietnam abstract this paper uses household panel data from rural vietnam to explore the effects of having a relative in a position of political or bureaucratic power our results suggest that households increase their investment in land improvements due to such ties likely explanations are that connections to office holders strengthen de facto land property rights and access to both credit and transfers results also indicate that officials prefer to use informal rather than formal channels of redistribution to relatives

commitment risk and consumption do birds of a feather have bigger nests abstract consumption commitments goods like housing for which adjustment is costly change the relationship between risk and consumption commitment provides a motive to reduce consumption when possible future losses are too small to warrant adjustment but not when losses are large enough that adjustment would be worthwhile this implies conditions under which mean preserving increases in risk can increase housing consumption our empirical evidence exploits the interaction of these conditions with a novel proxy for unemployment risk couples sharing an occupation consistent with our model same occupation couples consume more housing only when adjustment costs are high and potential losses are sufficiently large

the economic importance of financial literacy theory and evidence this paper undertakes an assessment of a rapidly growing body of economic research on financial literacy we start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population next we draw on recent surveys to establish how much or how little people know and identify the least financially savvy population subgroups this is followed by an examination of the impact of financial literacy on economic decision making in the united states and elsewhere while the literature is still young conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps a final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy jel a20 d14 g11 i20 j26

early influences on saving behaviour analysis of british panel data using data from the british household panel survey and understanding society we examine the saving behaviour of individuals over time initially we explore the determinants of the saving behaviour of children aged 11 15 our findings suggest that parental allowances pocket money earnings from part time work lower increase the probability that a child saves there is also evidence that the financial expectations of the head of household have an influence on their offspring s saving behaviour where children of optimistic parents have a lower probability of saving by approximately 2 percentage points however there is no evidence of an intergenerational correlation in savings behaviour the saving behaviour of parents appears to have no bearing on the saving decisions of their offspring we then go on to explore the implications of the saving behaviour of children for their savings decisions in later life specifically when observed in early adulthood we find that having saved as a child has a large positive influence both on the probability of saving on a monthly basis and on the amount saved as an adult this finding is robust to alternative empirical strategies including iv analysis where the most conservative estimates show that having saved as a child increases the probability of saving during adulthood by 12 percentage points

earnings uncertainty and precautionary saving abstract we test for the presence of precautionary saving using a self reported measure of earnings uncertainty drawn from the 1989 italian survey of household income and wealth the effect of uncertainty on wealth accumulation is consistent with the theory of precautionary saving and with decreasing prudence but explains only a small fraction of saving the results cast doubts on the empirical relevance of precautionary saving in response to earnings uncertainty but are not in contrast with the importance of the precautionary motive per se beside earnings uncertainty other risks such as health and mortality may be important determinants of wealth accumulation

land tenure security and investment incentives puzzling evidence from burkina faso abstract the commonsense logic associating higher land security and higher incentives to invest has been recently called into question in the case of african agriculture to be meaningful empirical tests have to be carefully designed so as to take account of the possible endogeneity of the land rights variable this is done in this paper by applying suitable econometric methods to the original data collected in burkina faso the results obtained cast doubt on the existence of a systematic influence of land tenure security on investment by reviewing the justifications for scepticism in the recent literature we are able to conclude that the traditional village order where it exists provides the basic land rights required to stimulate small scale investment

the surprisingly low importance of income uncertainty for precaution abstract while it is common to use income uncertainty to explain household saving decisions there is much disagreement about the importance of precautionary saving this paper suggests that income uncertainty is not an important motive for saving although households do have other precautionary reasons to save using a question from the survey of consumer finances that asks how much households want for precautionary purposes this paper shows that expressed household preferences and liquid savings are much lower than predicted by standard modeling assumptions households rarely list unemployment as a reason to save perceived income uncertainty does not affect liquid savings or precautionary preferences neither does being in an occupation with higher income volatility instead households seem very concerned with expenditure shocks

how prudent are consumers using data from the consumer expenditure survey this paper presents a simple test that provides an explicit estimate of the parameter in the utility function that reflects the strength of the precautionary saving motive the coefficient of relative prudence the test yields a fairly precise estimate of a small precautionary motive in fact the estimate is too small to be consistent with widely accepted beliefs about risk aversion the presence of liquidity constrained households does not appear to explain this finding and there is some evidence that self selection of households into risky environments also cannot explain the results

land ownership as insurance and the market for land a study in rural vietnam we propose simple empirical insights to analyze the relationship between the value of the safety net embedded in land and households decision to sell land land sales may differ from other kinds of land transactions such as rental free loans and gifts in terms of future capacities to safeguard livelihood households well insured through nonland riskcoping mechanisms are expected to make use of sales more frequently than others we test this hypothesis with 2006 survey data from vietnam and find that selling households are less vulnerable better educated and richer than those that use other transfer types

how important is precautionary saving we estimate how much of the wealth of a sample of psid respondents is held because some households face more income uncertainty than others we begin by solving a theoretical model of saving which we use to develop appropriate measures of uncertainty we then regress measures of wealth on our measures of uncertainty and find evidence that households engage in precautionary saving finally we simulate the wealth distribution that our empirical results imply would prevail if all households had the same uncertainty as the lowest uncertainty group we find that between 39 and 46 percent of wealth in our sample is attributable to the extra uncertainty that some consumers face compared to the lowest uncertainty group

the role of human capital in postacquisition ceo departure in this study we examined the postacquisition departure of target firms ceos and found support for the predictions of becker s 1962 human capital theory firms and ceos appear to weigh the cost

precautionary saving and subjective earnings variance abstract in this paper i examine a model of precautionary saving and i show that the fact that people may insure against income risk makes it difficult to evaluate the extent of precautionary accumulation by simply looking at the relationship between wealth and earnings variance i also argue that occupations may represent a bad proxy for income risk

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

the profits of power land rights and agricultural investment in ghana we examine the impact of ambiguous and contested land rights on investment and productivity in agriculture in akwapim ghana we show that individuals who hold powerful positions in a local political hierarchy have more secure tenure rights and that as a consequence they invest more in land fertility and have substantially higher output the intensity of investments on different plots cultivated by a given individual corresponds to that individual s security of tenure over those specific plots and in turn to the individual s position in the political hierarchy relevant to those specific plots

social security the family and economic growth we show that a defined benefits payg social security system distorts key family based choices that affect economic growth we identify human capital as the engine of growth and the motivating forces linking the family s overlapping generations as mutually productive intergenerational transfers and or altruism the payg system is shown to affect adversely at least one of three determinants of the economy s growth path fertility savings and investment in human capital the specific effects may vary over different stages of economic development the growth rate is expected to fall in advanced economies our analysis indicates that the effect may be sizeable jel 915 111 850

on controlling crime with corrupt officials abstract this paper attempts to synthesize the recently developed strategic approach towards modeling corruption and the classical views the following propositions are sought to be proved a if reward schemes are introduced the classical and the strategic approaches yield similar results so far as controlling crime is concerned b with probability of detection being dependent on the effort of a corrupt official crime cannot be controlled and c in the context of an infinitely repeated game of crime the corrupt law enforcing agent might choose less bribes and lower effort level than the myopic optimal and hence would strategically pamper crime

flc usage among california growers under irca an empirical analysis of farm labor market risk management recent immigration reform efforts have been ineffective at controlling the flow of illegal immigration concurrently a structural change occured in the agricultural sector as farm labor contractor flc usage expanded the flc sector is arguably evolving due to the tighter regulatory and risk environment faced by producers using probit analysis of survey data from california growers this study analyzes labor contracting patterns differences are found among regions commodities and several grower characteristics however the significant role of risk perceptions and management attitudes are of greatest interest given the absence of labor issues in agricultural risk management programs

baby boomer retirement security the roles of planning financial literacy and housing wealth abstract we compare wealth holdings across two cohorts of the health and retirement study the early baby boomers in 2004 and individuals in the same age group in 1992 levels and patterns of total net worth have changed relatively little over time though boomers rely more on housing equity than their predecessors most important planners in both cohorts arrive close to retirement with much higher wealth levels and display higher financial literacy than non planners instrumental variables estimates show that planning behavior can explain the differences in savings and why some people arrive close to retirement with very little or no wealth

motives for private transfers over the life cycle an analytical framework and evidence for peru abstract this paper tests for the motives for private income transfers we consider two motives altruism and exchange the question of private transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income using a household survey for peru we find that transfer amounts received increase with recipient pre transfer income which contradicts a key prediction of the strong form of the altruism hypothesis but is consistent with exchange we also find that capital market imperfections are likely to be an important cause of private transfers and that social security benefits crowd out the incidence of private transfers

sovereign liquidity crises analytics and implications for public policy abstract this paper offers an analytical framework with which to assess some recent proposals for strengthening the international financial architecture we develop a model of sovereign liquidity crises that reflects two sources of financial stress weak fundamentals and self fulfilling expectations we examine the nature of the underlying co ordination game and investigate the properties of the unique equilibrium in so doing we are able to characterise the welfare costs of belief driven crises which we find to be potentially significant we also evaluate some recent policy proposals including prudent debt and liquidity management capital controls greater information disclosure and the efficacy of monetary policy tightening in the midst of crisis

minority entrepreneurship in twenty first century america prior to the 1970s minority owned small businesses were small in size and scope and common in only a few industry niches business owners were severely capital constrained lacking in higher education and training in skilled occupations the median owner today in contrast is college educated access to financing has expanded and opportunities to serve corporate and public sector clients are commonplace nearly 40 of all new firms created nationwide in 2015 were minority owned changing attitudes in mainstream society reduced traditional barriers true equality of opportunity among small minority and white owned firms of similar size and scope has nonetheless not been achieved this issue of small business economics examines lingering barriers impeding the development of a more vibrant minority business community focusing on access to financing and government procurement markets articles in this issue offer explicit analyses of enduring barriers along with explanations of adoptive strategic firm behavior appropriate for reducing those barriers

optimal capacity in the banking sector and economic growth the paper investigates from the welfare and growth point of view the determination of the optimal capacity of the banking system for that purpose we consider an overlapping generation model with endogenous growth there is horizontal differentiation and imperfect competition in the banking sector macroeconomic shocks affect the return on capital and together with the expectations of depositors condition the stability of the banking sector we specify to what extent deposit insurance may reduce instability and increase the number of deposits welfare and growth we also characterize the conditions under which excess banking capacities may appear and how their reduction may improve welfare

precautionary saving by young immigrants and young natives 1 introduction and literature review foreign born population accounted for approximately 9 of the total population residing in the united states by the mid 1990s and including their children they were responsible for approximately 51 of the u s population growth martin 1995 these dramatic changes in the u s population have prompted much economic research on the immigrant population but despite the great deal of attention that has been paid to the labor market progress of immigrants little is known about their saving and wealth accumulation patterns 1 many studies requiring information on the saving behavior of immigrants simply assume that immigrant savings parallel that of natives macurdy nechyba and bhattacharya 1998 however it may be the case that immigrants behave differently have different motives different opportunities and different needs with respect to saving and wealth accumulation vis a vis natives most of the limited literature on the saving behavior of immigrants is inspired by european and middle eastern guest worker migration and consequently is geared to the behavior of temporary migrants 2 three papers that focus on the saving behavior of immigrants in general are the papers by galor and stark 1990 carroll rhee and rhee 1994 and dustmann 1997 galor and stark note that immigrants and natives differ from one another in their migration probabilities because immigrants have ties to other countries it is more likely that they emigrate relative to the native born worker 3 using an overlapping generations model galor and stark show that the higher the probability of emigration the higher is the level of savings hence they predict immigrants save more than the native born dustmann models precautionary savings and assumes that immigrants maximize expected lifetime utility from consumption in the host and home country proportionally to the lifetime spent abroad and at home 4 under appropriate restrictions 5 dustmann shows that if labor markets in the home and host countries are uncorrelated immigrants will carry out more precautionary savings relative to a comparable native worker because immigrants will be subject to greater income risk in the host country 6 however it is also possible in dustmann s formulation to have immigrants engaging in less precautionary saving relative to native workers for example if economic conditions across the two countries are correlated immigrants could be subject to less lifelong income risk than natives given their ability to diversify away labor market risk by operating in two markets rather than just one as in the case of natives additionally if the risk preferences of natives and immigrants are different then the precautionary saving motive could be more or less pronounced in one group relative to the other all else equal carroll rhee and rhee 1994 use the canadian survey of family expenditures to compare saving behavior of immigrants to canada from different regions of the world they conclude that immigrant saving does not significantly differ by country of origin however they do find that recent immigrants save less than do canadian born and that immigrants saving behavior approaches the pattern of the canadian born over time overall the theoretical literature tends to favor the hypothesis that immigrants carry out more precautionary savings than natives which could result in immigrants accumulating more wealth than natives immigrants face greater uncertainty regarding their labor market participation labor market progress and health care coverage these factors along with geographic distance may make it more difficult to obtain financial support from family members in times of necessity requiring that immigrants maintain larger stocks of precautionary saving but dustmann s model in consonance with a widely held view also allows for immigrants to be more risk tolerant than natives since they are willing to undergo higher uncertainties and risks when they decide to migrate to a new country barsky et al

financial crises and coordination failure a comment abstract the three papers of this session link financial crises explicitly or implicitly to coordination failure in bryant journal of banking and finance 2002 the possibility of coordination failure is due to complementarity in the productive technology in chui et al journal of banking and finance 2002 foreign lenders to a small country fail to coordinate on the optimal strategy rolling over short term loans finally amable et al journal of banking and finance 2002 implicitly introduce coordination failure through a production function with external increasing returns to scale this sort of thick markets externality can be viewed as a reduced form that stands for coordination problems in a non walrasian economy

the effect of individual uncertainty on the specificity of human capital empirical evidence from career developments in professional soccer this study looks at careers in professional soccer to investigate the determinants of human capital hc specificity inspired by labour market research we formulate three hypotheses on how uncertainty about the usefulness of individuals more productive specific skills affects their investment in more flexible general skills the empirical analysis is based on unique panel data on school grades soccer evaluations and sociodemographic characteristics of 90 elite players from the youth academy of a german bundesliga club we find that senior and long serving players who are comparably certain that their soccer specific capital will be sufficient to pursue a lucrative professional career invest less in general hc at school expected soccer performance in contrast has a counterintuitive positive effect our results expand knowledge on the factors influencing hc specificity from the macro to the subject level and highlight practical implications for institutions that train gifted individuals

interest rates inflation and the aggregate consumption function this paper reports on an empirical study of the effects of interest rates and inflation on aggregate consumption in the united states empirical evidence based on quarterly u s data from the postwar period is first presented in support of the hypothesis that the real rate of interest varies inversely with the rate of inflation at least in the short run regression estimates of an aggregate consumption function for the united states also based on quarterly data from the postwar period are then presented these estimates indicate that the propensity to consume varies inversely with interest rates and directly with the rate of inflation

estimating permanent income and wealth of the us farm households farm households are unique in the way they derive income when compared to nonfarm households farm operators and spouses have dual income sources from farm and off farm activities further farm households on an average possess higher wealth than nonfarm households this article estimates permanent income for the us farm households using data from a large national farm level survey the estimated income is then used to identify the determinants of wealth accumulation by the us farm households results confirm that permanent income is closely related to age of the operator education occupation farm size location and number of earners in the household along with age permanent income is a significant determinant of household wealth it was also found that the wealth income curve is nonlinear upward sloping and convex hausman s specification test indicates that variations in farm household wealth is better explained by estimated permanent income than observed total household income off farm income

altruism and time consistency the economics of fait accompli this paper analyzes the strategic and intertemporal interaction between two economic agents who have overlapping concerns such as altruistic concerns for each other s welfare the agents may be two individuals a social bureau and a client or two units in an organization we show how the presence of such common concerns may lead to socially inefficient outcomes in which one economic agent free rides on the other s concern we also briefly how this inefficiency and free riding in the context of interaction between individuals might be mitigated by compulsory social security systems as another example we interpret the inefficiency in terms of kornai s soft budget constraints within organizations

the forgotten property rights evidence on land use rights in vietnam summary studies of land property rights usually focus on tenure security and transfer rights rights to determine how to use the land are regularly ignored however user rights are often limited relying on a unique vietnamese panel data set at both household and plot levels we show that crop choice restrictions are widespread and prevent crop diversification restrictions do not decrease household income but restricted households work harder and there are indications that they are supplied with higher quality inputs our findings are consistent with the view that it is possible to intervene effectively in agricultural production to promote output and food security nevertheless potential benefits of a more diversified crop pattern must be carefully considered in a period where global food markets are in turmoil

does the welfare state induce risk taking abstract in cross national data on individual and country level characteristics the variance of log annual income is shown to correlate positively with indicators of redistribution the database comes from the panel comparability paco project which provides uniquely comparable cross national panel data including both eastern and western europe and the us a random effects permanent income regression is used to estimate income variance the variance estimates are then regressed on individual and country characteristics the results indicate robustly that various measures of risk are higher in countries with a higher share of social spending in gdp the evidence can be interpreted as support for the argument that the welfare state encourages risk taking and thereby economic growth

household saving micro theories and micro facts in this survey we review the recent theoretical and empirical literature on household saving and consumption the discussion is structured around a list of motives for saving and how well the standard theory captures these motives we show that almost all of the motives for saving that have been suggested in the informal saving literature can be captured in the standard optimizing model particular attention is given to recent work on the precautionary motive and its implications for saving and consumption behavior we also discuss the behavioral or psychological approach that eschews the use of standard optimization techniques and focuses instead on direct consideration on saving we provide a section on facts who save and how much we then discuss informally the recent decline in the u s saving rate and whether the theory is of much use in understanding this and other changes in aggregate saving rates over time we do not find any convincing explanation for the change in saving rates we also discuss some analyses of saving behavior over the life cycle addressing such questions as whether households save enough for retirement and whether the consumption patterns of older households can be rationalized within a simple life cycle model we also review a great number of studies of the consumption euler equations based on our analysis of the studies cited we conclude that there is still mixed evidence that consumption is excessively sensitive to income we also examine in depth the recent empirical literature on the precautionary motive we conclude that although some households do seem to have a significant precautionary motive at some points in their life cycle this motive is not so strong empirically as some investigators suggest

stigler becker versus myers briggs why preference based explanations are scientifically meaningful and empirically important abstract economists typically object to preference based explanations of human behavior differences in preferences explain everything and therefore nothing but this argument is only correct assuming that no empirical evidence exists to discipline preference based explanations in fact over the past decade personality psychologists have produced a robust collection of stylized facts about human preferences while preferences are empirically quite stable they are far from identical and have proven predictive power for economically interesting variables the empirical challenge for future research is to jointly estimate the impact of preferences and constraints to obtain unbiased measures of their relative importance

the intertemporal evolution of agriculture and labor over a rapid structural transformation lessons from vietnam abstract we combine nationally representative household and labor force survey data from 1992 to 2016 to provide a detailed description of rural labor market evolution and how it relates to the structural transformation of rural vietnam especially within the agricultural sector our study adds to the emerging literature on structural transformation in low income countries using micro level data and helps to answer several policy related questions we find limited employment creation potential of agriculture especially for youth rural urban real wage convergence has gone hand in hand with increased diversification of the rural economy into the non farm sector nationwide and rapid advances in educational attainment in all sectors and regions workforce minimum wage laws seem to have played no significant role in increasing agricultural wages this enhanced integration also manifests in steady attenuation of the longstanding inverse farm size yield relationship farming has remained securely household based and the family farmland distribution has remained largely unchanged small farm sizes have not obstructed mechanization nor the uptake of labor saving pesticides consistent with factor substitution induced by rising real wage rates as rural households rely more heavily on the labor market human capital accumulation rather than land endowments have become the key correlate of improvements in rural household well being

production externalities and the efficiency of parental childcare choices the economics of producing and consuming children is an immensely impor tant but largely neglected area we model the allocation of parents time between market production and childcare a choice driven by both consumption and investment motives we identify two externalities in the provision of parental childcare an intergenerational externality stems from the effect of today s parents childcare choices on the productivity of the next generation of workers an intragenerational externality arises when time spent away from productive labour affects the productivity of co workers the interaction of these externalities determines the efficiency properties of the equilibrium

endogenous altruism theory and evidence from chinese twins this paper studies the endogenous formation of intersibling altruism the theory suggests that parental incentive to foster children s fraternal love is positively related to efficiency gains from

land reallocation in an agrarian transition liberalising key factor markets is a crucial step in the transition from a socialist control economy to a market economy however the process can be stalled by imperfect information high transaction costs and covert resistance from entrenched interests the article studies agricultural land reallocation in the wake of vietnam s efforts to establish a free market in land use rights following de collectivisation inefficiencies in the initial administrative allocation are measured against an explicit counterfactual land allocation responded positively but slowly to the initial inefficiencies there is no sign that the transition favoured the land rich or that it was thwarted by local officials vietnam s agrarian transition has closely followed a now classic policy scenario for economies in transition first one privatises the main productive assets in this case agricultural land use rights then one legalises their free exchange in the first step the de collectivisation of vietnam s agriculture meant that the land that had previously been farmed collectively was to be allocated by administrative means across households within each commune without a market mechanism to guide the process it can be expected that inefficiencies in land allocation would remain with some households having too much land relative to a competitive market allocation and some too little ravallion and van de walle 2004 document evidence of such inefficiencies in the initial administrative allocation at the time of de collectivisation

intergenerational transfers and savings in recent years the role of intergenerational transfers in the process of wealth accumulation has been the subject of substantial empirical and theoretical analysis the key question stimulating this research is what is the main explanation for savings is it primarily accumulation for retirement as claimed by albert ando richard brumberg and franco modigliani in their celebrated life cycle model of savings is it primarily intentional accumulation for intergenerational transfers or is it primarily precautionary savings much of which may be bequeathed because of imperfections in annuity markets this paper examines a range of findings on the importance of intergenerational transfers the strong conclusion that emerges from this evidence is that intergenerational transfers play a very important if not a key role in aggregate wealth accumulation while intergenerational transfers figure very large in savings the precise motivation for such transfers is unclear intergenerational altruism might appear the most likely candidate but at least sane stylized facts such as the equal allocation of bequests among children are strongly at adds with the altruism model other explanations involving imperfect insurance arrangements or payments for child services do not appear capable of explaining the substantial amounts of transfers actually observed sorting cut the relative contributions of different models to intergenerational transfers and the precise role of intergenerational transfers in the process of wealth accumulation remains an intriguing and exciting enterprise this abstract was borrowed from another version of this item

precautionary saving a review of the empirical literature standard macroeconomic models show that uncertainty plays a significant role in consumption and saving decisions under rather mild conditions namely the convexity of the marginal utility of consumption increased uncertainty generates a positive extra saving the so called precautionary saving although this hypothesis has been tested by a large number of authors both at macro and micro level the empirical results are not conclusive and the main conclusion than can be drawn is that there is neither consensus on the intensity of that motive for saving nor on the most appropriate measure of uncertainty this paper provides a comprehensive review of the empirical literature discussing the main controversial issues and the different approaches followed by the studies addressing empirically the test of precautionary saving

a fresh look at the rotten kid theorem and other household mysteries gary becker s rotten kid theorem asserts that if all family members receive gifts of money income from a benevolent household member then even if the household head does not precommit to an incentive plan for family members it will be in the interest of selfish family members to maximize total family income i show by examples that the rotten kid theorem is not true without assuming transferable utility i find a simple condition on utility functions that is necessary and sufficient for there to be the kind of transferable utility needed for a rotten kid theorem while restrictive these conditions still allow one to apply the strong conclusions of the rotten kid theorem in an interesting class of examples

private intergenerational contact in france and the demonstration effect this study analyses motives for intergenerational contact from adult children to their middle aged parents if these transfers may be explained either by altruism or by exchange we mainly focus on the demonstration effect where households take care of their own parents in order to elicit a future support from their children we test the model using a cross sectional survey from 1992 about private transfers in france according to the data the presence of children increases the amount of visits that respondents provide to their parents and the econometric results still hold after controlling for unobserved familial heterogeneity using fixed effects although this empirical evidence is consistent with the demonstration effect we suggest an alternative interpretation for the positive correlation based on the care of grandchildren

looking under the hood exploring assumptions and finding behavioral economics abstract cognitive scarcity is a fundamental economic fact but the standard maximization assumption abstracts from this fact much of behavioral economics can be framed as exploring the maximization assumption by applying the tools of behavioral economics to explore this important assumption we can learn why presuming maximization works when it works even when we know the assumption is not accurately descriptive we can also learn why theory fails when the assumption does not proximately hold

wealth accumulation and the propensity to plan why do similar households end up with very different levels of wealth we show that differences in the attitudes and skills with which they approach e nancial planning are a signie cant factor we use new and unique survey data to assess these differences and to measure each household s propensity to plan we show that those with a higher such propensity spend more time developing e nancial plans and that this shift in planning is associated with increased wealth these e ndings are consistent with broad psychological evidence concerning the benee cial impacts of planning on goal pursuit those with a high propensity to plan may be better able to control their spending and thereby achieve their goal of wealth accumulation we e nd direct evidence supporting this effortful self control channel in the very strong relationship we uncover between the propensity to plan and budgeting behavior

trade credit and systemic fragility this paper treats an idealized monetary framework in which merchant banks finance trade trade which is induced by decentralized production indeed merchant bank credit instruments coupled with local bank deposits facilitate decentralization of both production and trade at the same time decentralized production exhibiting technological complementarity induces systemic monetary fragility however with the decentralization of trade the indemnification of either merchant bank credit instruments or of local bank deposits eliminates fragility in particular deposit insurance also stabilizes credit the result is a stable cashless economy a replacement of trade in specie 2002 elsevier science b v all rights reserved

property rights and productivity the case of joint land titling in vietnam this paper explores the effect of land titling on agricultural productivity in vietnam and the productivity effects of single versus joint titling for husband and wife using a plot fixed effects approach our results show that obtaining a land title is associated with higher yields for both individually and jointly held titles we conclude that there is no tradeoff between joint titling and productivity and so joint titles are potentially an effective way to improve women s bargaining power within the household with no associated efficiency losses

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

precautionary savings of agents with heterogeneous risk aversion this article focuses on the estimation of the importance of the precautionary motive in the wealth accumulation decision we use the micro data set of the de nederlandsche bank dnb household survey dhs centerdata tilburg university a dutch household survey containing information on wealth a subjective measure of income uncertainty and subjective qualitative measures of risk aversion we find that only a small share of wealth is accumulated for the precautionary motive by the dutch households this share of wealth is constant across assets with different degrees of liquidity the economic downturn of the period 2008 to 2010 seems to affect risk attitudes and precautionary saving our findings also suggest that the more risk averse individuals are those who hold less savings

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

two conceptions of economics and maximisation fil crespo ricardo fernando consejo nacional de investigaciones cientificas y tecnicas argentina universidad austral instituto de altos estudios argentina

nobel lecture the economic way of looking at behavior an important step in extending the traditional theory of individual rational choice to analyze social issues beyond those usually considered by economists is to incorporate into the theory a much richer class of attitudes preferences and calculations while this approach to behavior builds on an expanded theory of individual choice it is not mainly concerned with individuals it uses theory at the micro level as a powerful tool to derive implications at the group or macro level the lecture describes the approach and illustrates it with examples drawn from my past and current work