individual risk in an investment based social security system this paper examines the risk aspects of an investment based defined contribution social security plan we focus on the risk after the plan is fully phased in individuals deposit a fraction of wages to a personal retirement account pra invest these funds in a 60 40 equity debt mix and in a similarly invested annuity at age 67 the value of the assets follows a random walk with mean and variance of a 60 40 equity debt portfolio over the period 1946 95 a mean log return of 5 5 percent net of administrative costs of 0 4 percent and a standard deviation of 12 5 percent we study he stochastic distributions of this process by doing 10 000 simulations of the 80 year experience of the cohort that reached age 21 in 1998 the resulting annuities are compared to the future defined benefits specified in current law the benchmark benefits with no uncertainty a 5 5 percent log return would permit the benchmark benefits to be purchased with pra deposits of 3 1 percent of payroll only one sixth of the pay as you go tax needed for the benchmark benefits saving a higher share of wages provides a cushion that protects the individual from the risk of an unacceptably low level of benefits for example pra deposits of 6 percent of wages reduces the probability that the benefits are less than the benchmark to 0 17 and the probability that they are less than 61 percent of the benchmark to 0 05 pra deposits of 9 percent of wages half of the tax rate required in a pay as you go system would substantially reduce these risks this pure investment based plan is an extreme case the investment risk can be reduced further by using a mixed system that combines pay as you go and investment based components or that makes intergenerational transfers conditional on the performance of stock and bond prices this abstract was borrowed from another version of this item

health investment saving and public policy this paper develops an overlapping generations model in which agents invest in health to prolong life in both working and retirement periods it explores how unfunded social security with or without health subsidies affects life expectancy economic growth and welfare in particular by extending life at a possible cost of capital accumulation health subsidies and a pay as you go pension can improve welfare especially in the short run

poverty comparisons over time and across countries in africa abstract we use demographic and health surveys dhs to compare poverty at two or more points in time within and between african countries our welfare measure is an index resulting from a factor analysis of various household characteristics durables and household heads education an advantage of this measure is that for intertemporal and intraregional comparisons we need not rely on suspect price deflators and currency conversion factors the wide availability and similarity of questionnaires of the dhs facilitate comparisons over both time and countries our results generally show declines in poverty during the previous decade largely due to improvements in rural areas

income distribution political instability and investment abstract this paper successfully tests on a sample of 71 countries for the period 1960 85 the following hypotheses income inequality by fuelling social discontent increases sociopolitical instability the latter by creating uncertainty in the politico economic environment reduces investment as a consequence income inequality and investment are inversely related since investment is a primary engine of growth this paper identifies a channel for an inverse relationship between income inequality and growth we measure socio political instability with indices which capture the occurrence of more or less violent phenomena of political unrest and we test our hypotheses by estimating a two equation model in which the endogenous variables are investment and an index of socio political instability our results are robust to sensitivity analysis on the specification of the model and the measure of political instability and are unchanged when the model is estimated using robust regression techniques

estimation of poverty transition matrices with noisy data summary this paper investigates measurement error biases in estimated poverty transition matrices we compare transition matrices based on survey expenditure data to transition matrices based on measurement error free simulated expenditure the simulation model uses estimates that correct for measurement error in expenditure we find that time varying measurement error in expenditure data magnifies economic mobility roughly 45 of households initially in poverty at time t 1 are found to be out of poverty at time t using data from the korean labor and income panel study when measurement error is removed this drops to between 26 and 31 of households initially in poverty copyright 2016 john wiley sons ltd

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

properties of actuarially fair and pay as you go health insurance schemes for the elderly an olg model approach the aged dependency ratio or adr is growing at a fast pace in many countries this fact causes stress to the economy and might create conflicts of interest between young and old in this paper the properties of different health insurance systems for the elderly are analysed within an overlapping generations olg model the properties of actuarial health insurance and different variations of pay as you go payg health insurance are compared it turns out that the welfare properties of these contracts are heavily dependent on the economy s dynamic properties of particular importance is the magnitude of the rate of population growth relative to the interest rate in addition it is shown that public health insurance is associated with an inherent externality resulting in a second best solution

investment and disinvestment principles with nonconstant prices and varying firm size applied to beef breeding herds variable beef breeding herd sizes are found to be optimal given cyclical beef prices traditional replacement theory does not allow variable firm size because unequal investment replacement and disinvestment culling rates are not possible if firm size changes cost of production per unit endogenously changes given a u shaped cost curve optimal investment and disinvestment rules for variable firm size are developed based upon the firm s cost curve and discounted net revenue flows for a finite rolling planning horizon current and future investment and disinvestment decisions are linked by their mutual effect on firm size and hence production cost per unit

growth and chronic poverty evidence from rural communities in ethiopia abstract what keeps some people persistently poor even in the context of relative high growth in this article we explore this question using a 15 year longitudinal data set from ethiopia we compare the findings of an empirical growth model with those derived from a model of the determinants of chronic poverty we ask whether the chronically poor are simply not benefiting in the same way from the same factors that allowed others to escape poverty or whether there are latent factors that leave them behind we find that this chronic poverty is associated with several initial characteristics lack of physical assets education and remoteness in terms of distance to towns or poor roads the chronically poor appear to benefit from some of the drivers of growth such as better roads or extension services in much the same way that the non chronically poor benefit however they appear to have lower growth in this period related to time invariant characteristics and this suggests that they face a conside

how much of observed economic mobility is measurement error iv methods to reduce measurement error bias with an application to vietnam research on economic growth and inequality inevitably raise issues concerning economic mobility because the relationship between long run inequality and short run inequality is mediated by income mobility for a given level of short run inequality greater mobility implies lower long run inequality yet empirical measures of both inequality and mobility are biased upward due to measurement error in income and expenditure data collected from household surveys this paper presents a straightforward method to remove this bias using instrumental variable estimates the method is applied to panel data from vietnam the results imply that at least 15 and perhaps as much as 42 of measured mobility is upward bias due to measurement error the results also suggest that measurement error accounts for at least 12 of measured inequality

mortality decline and long run economic growth this paper examines the impacts of mortality decline on long run growth in a dynastic family two sector growth model with social security a rise in longevity has direct effects on fertility human capital investment and growth as well as indirect effects through increasing unfunded social security contributions both the direct and indirect effects depend on the relative strength of the tastes for the number and welfare of children and may have different signs the net effects of rising longevity on fertility tend to be negative but positive on human capital investment and growth c 2001 elsevier science s a all rights reserved

data gaps data incomparability and data imputation a review of poverty measurement methods for data scarce environments this paper reviews methods that have been employed to estimate poverty in contexts where household consumption data are unavailable or missing these contexts range from completely missing and partially missing consumption data in cross sectional household surveys to missing panel household data the paper focuses on methods that aim to compare trends and dynamic patterns of poverty outcomes over time it presents the various methods under a common framework with pedagogical discussion on the intuition empirical illustrations are provided using several rounds of household survey data from vietnam furthermore the paper provides a practical guide with detailed instructions on computer programs that can be used to implement the reviewed techniques

using repeated cross sections to explore movements into and out of poverty movements in and out of poverty are of core interest to both policymakers and economists yet the panel data needed to analyze such movements are rare in this paper the authors build on the methodology used to construct poverty maps to show how repeated cross sections of household survey data can allow inferences to be made about movements in and out of poverty they illustrate that the method permits the estimation of bounds on mobility and provide non parametric and parametric approaches to obtaining these bounds they test how well the method works on data sets for vietnam and indonesia where we are able to compare our method to true panel estimates the results are sufficiently encouraging to offer the prospect of some limited basic insights into mobility and poverty duration in settings where historically it was judged that the data necessary for such analysis were unavailable

recessions and the vulnerable abstract this study evaluates the impact of recessions on households vulnerable to poverty the results indicate that recessions impact vulnerable households asymmetrically in comparison to the impact of growth on poor households we also demonstrate that this outcome is significantly influenced by a country s extent of development we argue that a direct consequence of the foregoing is that the efficacy of growth in poverty reduction tends to be under stated by conventional measures of poor households responses to economic growth and that safety nets need to be constructed to incorporate vulnerability to recessions

an economic analysis of life expectancy by gender with application to the united states this paper presents an economic model to explain the behavior of life expectancy of both sexes it explicitly examines the relationship between the gender gap in life expectancy and the gender gap in pay it shows that as the latter narrows over the course of economic development the former may initially expand but will eventually shrink simulation results from our model accord with the behavior of life expectancy for both sexes since the 1940s in the united states

education social security and growth abstract we study the role of government s allocation of tax revenues between two outlays public investment in education a transfer to the young generation and social security benefits to the older generation in an overlapping generations economy with pay as you go social security and altruistically motivated transfers from parents to children we analyze how the allocation of the tax revenues between the two outlays affects growth and welfare in competitive equilibria a we obtain comparative dynamics results for nonstationary equilibria subject to a change in the allocation profile b for stationary equilibria we show that for a given allocation profile of the tax revenues educational subsidies can either increase the growth rate or decrease it depending on the parameters of the model preferences production function and the tax rate c if government seeks to allocate funds in a way that maximizes the growth rate we demonstrate that under some plausible conditions it is not optimal to maintain pay as you go social security however if parents preferences combine strong concern for their retirement with significant degree of altruism towards their children then pay as you go social security system does enhance growth and welfare

poverty dynamics in india between 2004 and 2012 insights from longitudinal analysis using synthetic panel data recent national sample surveys point to significant poverty reduction in india since 2004 05 with a marked acceleration between 2009 10 and 2011 12 this paper enquires into important aspects of income mobility between 2004 05 and 2011 12 based on new statistical methods to convert the three pertinent national sample survey rounds into synthetic panels the analysis draws on the synthetic panels to derive a vulnerability line for india that can be used to separate out a population subgroup comprising non poor households facing a heightened risk of falling into poverty the paper documents a strong pattern of upward mobility out of poverty and vulnerability into the middle class with a noticeable acceleration between 2009 10 and 2011 12 the paper further undertakes a careful investigation into the comparability of the survey rounds prompted by the observation that fairly significant modifications had been made to survey questionnaires the findings suggest that changes in questionnaire design have not compromised the comparability of the data

social security longevity and moral hazard abstract recently several authors have argued that social security can have positive effects on savings and welfare when individuals possess hidden information about their longevity that is when there is adverse selection in annuity markets this paper considers the related problem of the effects of social security when individuals can take hidden actions to affect their longevity that is when there is moral hazard in annuity markets in contrast to the adverse selection models we show that social security never raises welfare in a pure moral hazard economy as well social security may either increase or reduce longevity depending on the characteristics of the health related goods consumed it is suggested that a complete analysis of social security needs to consider both adverse selection and moral hazard

is poverty in africa mostly chronic or transient evidence from synthetic panel data absent actual panel household survey data this paper constructs for the first time synthetic panel data for more than 20 countries accounting for two thirds of the population in sub saharan africa in this process the analysis employs repeated cross sections that span on average a six year period for each country the analysis suggests that all these countries as a whole have had pro poor growth one third of the poor population escaped poverty during the studied period which is larger than the proportion of the population that fell into poverty in the same period the region also saw a 9 percent reduction in poverty and a 28 percent increase in the size of the middle class however chronic poverty remains high and a considerable proportion of the population is vulnerable to falling into poverty there is some limited evidence that most resource rich and middle income countries have more upward mobility than downward mobility post secondary education is especially strongly associated with higher upward mobility and less downward mobility which holds to some extent for female headed and urban households

old age longevity and mortality contingent claims this paper analyzes the savings and longevity impacts of mortality contingent claims defined here as income measures such as annuities and life insurance under which earned income is contingent on the length of one s life the postwar increase in mandatory annuity and life insurance programs as well as the rapid increase in the life expectancy of older ages motivates a better understanding of the incentive effects that mortality contingent claims have on longevity related behavior we claim that these incentives in often alter the standard conclusions obtained about old age support when mortality is treated exogenously in particular we argue that annuities involve moral hazard effects that increase longevity and among other things introduce a positive interaction between public programs for health care and income support for the elderly programs that have grown enormously in developed countries

what is middle class about the middle classes around the world we expect a lot from the middle classes jim frederick writing in time magazine in 2002 stated china s burgeoning middle class holds the key to the future of the country in a more academic vein easterly 2001 concludes based on a comparison of a large number of countries that countries that have a larger middle class tend to grow faster at least if they are not too ethnically diverse in another article birdsall graham and pettinato 2000 rue the shrinking of the middle class the backbone of both the market economy and of democracy in most advanced societies in the face of burgeoning globalization the economic historian david landes writing about the wealth and poverty of nations 1998 explains england s early ascendancy in terms of the great english middle class of the eighteenth and nineteenth centuries of course there is nothing new about this faith in the middle class it follows a long line of theorizing going back at least to max weber 1905 at least three distinct arguments are traditionally made in one new entrepreneurs armed with a capacity and a tolerance for delayed gratification emerge from the middle class and create employment and productivity growth for the rest of society for a formalization of this argument see acemoglu and zilibotti 1997 in a second perhaps more conventional view the middle class is primarily a source of vital inputs for the entrepreneurial class it is their middle class values their emphasis on the accumulation of human capital and savings that makes them central to the process of capitalist accumulation for example doepke and zilibotti 2005 2007 the third view a staple of the business press emphasizes the middle class consumer the consumer who is willing to pay a little extra for quality in this view the middle class demand for quality consumer goods feeds investment in production and marketing which in turn raises income levels for everyone murphy shleifer and vishny 1989 1 this essay asks what we should make of these arguments in the context of today s developing countries starting from data on patterns of consumption and investment by the middle class we look for what is distinct about the global middle class especially when compared to the global poor defined as those whose per capita daily consumption valued at purchasing power parity exchange rates is below 2 a day who were the subject of a previous essay in this journal banerjee and duflo 2007b in particular is there anything special about the way the middle class spend their money earn their incomes or bring up their children

social security and endogenous growth abstract this paper examines the effects of social security on the steady state growth of per capita income in an endogenous growth model in which agents care about their own consumption the number of children and the welfare of each child it shows that an unfunded program may simulate growth by reducing fertility and increasing the ratio of human capital investment per child to per family income when bequests are positive also it may cause faster growth than funded programs especially when receipts from funded programs are independent of contributions when voluntary saving is positive funded social security is neutral if receipts are linked to contributions and most likely depresses growth if receipts are independent of contributions

vulnerability seasonality and poverty in ethiopia most studies examining the dynamics of welfare have found large fluctuations in consumption over relatively short periods suggesting substantial short run movements in and out of poverty the consequence is that cross section poverty research may not be able to identify the poor in this study we explore this short run variability further we use a data set on a panel of 1450 households in different communities in rural ethiopia surveyed thrice over 18 months on average year to year poverty is very similar however we find high variability in consumption and poverty over the seasons and year by year econometric analysis suggests that consumption is affected by idiosyncratic and common shocks including rainfall and household specific crop failure while households respond to seasonal incentives related to changing labour demand and prices the results imply that a larger number of households are vulnerable to shocks than implied by the standard poverty statistics while some of the non poor in the

a stochastic asset replacement model for rejuvenated assets stochastic returns generated by a productive asset are investigated for the replacement problem with rejuvenation optimal replacement and rejuvenation conditions given collinearities among multiple outputs are considered for alternative levels of producer risk preference this methodology is applied to a laying hen replacement problem results indicate that risk averse producers should consider less rejuvenation and shorter rejuvenation production periods also replacement decisions should occur later in the year for peak production to coincide with high output prices