a theory of socio economic disparities in health over the life cycle motivated by the observation that medical care explains only a relatively small part of the ses health gradient we present a life cycle model that incorporates several additional behaviours that potentially explain jointly a large part of observed disparities as a result the model provides not only a conceptual framework for the ses health gradient but more generally an improved framework for the production of health we derive novel predictions from the theory by performing comparative dynamic analyses more generally our comparative dynamic method can be applied to models of similar form e g human capital health deficits firm investment to name a few

buying less but shopping more the use of nonmarket labor during a crisis households allocating time between market and non market uses should respond to income variations by adjusting the time devoted to shopping search and other home production activities in this paper we exploit high frequency household expenditure data to examine the use of changes in shopping intensity as a method of mitigating the effects of the 2002 argentine economic crisis although the total quantity and real value of goods purchased fell during the crisis consumers are found to be doing more shopping search this increase in shopping is shown to enable households to seek out lower prices and locate substitutes allowing a given level of expenditure to buy more goods the magnitude and prevalence of these effects suggest that this non market use of labor can be an important coping strategy for households during a recession

law and employment lessons from latin america and the caribbean analyzing the effects of regulation and deregulation on latin american labor markets law and employment joins the ongoing debate about the virtues and costs of legislating mandatory benefits for workers of the numerous labor regulations that were altered or created in latin america during the last thirty years many have had unintended and far reaching results nobel prize winning economist james j heckman and carmen pages document the behavior of firms attempting to stay in business and be competitive while facing the high costs of complying with these labor laws they challenge the prevailing view that labor market regulations affect only the distribution of labor incomes and have little or no impact on efficiency or the performance of labor markets this volume shows that mandated benefits reduce employment have a disruptive impact on turnover rates and labor market flexibility promote inequality and discriminate against marginal workers along with in depth studies of colombia peru brazil argentina chile and uruguay law and employment provides comparative analysis from a range of european countries and the united states while also covering important changes in reg

changes in income inequality and the black market premium is a high black market premium for us dollars associated with rising or falling income inequality within a nation this paper empirically examines this issue within a cross section of countries and finds that the black market premium is strongly associated with rising income inequality as measured by changes in the gini coefficient others have used the black market premium as a proxy to measure protectionist policies so a possible implication is that protectionist policies further skew the distribution of income within a country however other measures of protectionist policies are not associated with changes in income inequality instead other factors which might drive the black market premium such as interest rate differentials appear to be more relevant in explaining why the black market premium is positively related with increases in income inequality

recognizing progeny in the value of life abstract this note generalizes the value of life to incorporate the preferences for descendants of a dynastically altruistic decision maker it derives the value of progeny and shows how it depends on the benthamite vs millian nature of dynastic altruism

life cycle responses to health insurance status this paper studies the lifetime effects of exogenous changes in health insurance coverage e g medicare ppaca termination of employer provided plans on the dynamic optimal allocation consumption leisure health expenditures status health and wealth and welfare we solve simulate and structurally estimate a parsimonious life cycle model with endogenous exposure to morbidity and mortality risks and exogenous health insurance by varying coverage we identify the marginal effects of insurance when young and or when old on allocations statuses and welfare our results highlight positive effects of insurance on health wealth and welfare as well as mid life substitution away from healthy leisure in favor of more health expenses caused by peaking wages and accelerating health issues

a model of the demand for longevity and the value of life extension we specify a demand function for longevity or quantity of life along with corresponding demand functions for indicators of quality of life and a value of health and life extension function we show that the demand for health must be derived in conjunction with that for longevity and the related consumption plan and that all choices depend on initial individual endowments and terminal conditions our comparative dynamics predictions indicate that optimal health and longevity are increasing functions of endowed wealth rather than necessarily current income that improvements in opportunities to produce health can accentuate the differences between endowed health and attained longevity levels and that the value individuals ascribe to their health may be increasing over a good portion of their life cycle we use this model to analyze observed empirical variations in levels and trends of life expectancy and in exposure to health risks across different population groups

life cycle prices and production we use scanner data and time diaries to document how households substitute time for money through shopping and home production we document substantial heterogeneity in prices paid for identical goods for the same area and time with older households shopping the most and paying the lowest prices doubling shopping frequency lowers a good s price by 7 to 10 percent we estimate the shopper s price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1 8 the observed life cycle time allocation implies a consumption series that differs markedly from expenditures

smuggling and the black market for foreign exchange this paper develops a model of the black market for foreign exchange in which black market currency is demanded and supplied by firms engaged in smuggling it is demonstrated that quotas or foreign exchange rationing are not necessary to induce the coexistence of legal and black foreign exchange markets variants of the model analyze the implications of capital flight unbalanced trade quotas foreign exchange licensing and economies with more than two goods

spatial competition with heterogeneous firms i model endogenous horizontal and vertical product differentiation with arbitrarily many heterogeneous firms firms are asymmetric in that they differ in their marginal costs i prove that under an equilibrium refinement all economically relevant firm outcomes are uniquely determined across all strict subgame perfect nash equilibria there are two central results first a firm s price market share and profit are independent of its neighbors marginal costs conditional on the average marginal cost in the market second more productive firms are more isolated all else equal in particular the distance between two firms is strictly decreasing in their average marginal cost

optimal choice of health and retirement in a life cycle model abstract we examine within a life cycle model the simultaneous choice of health care and retirement together with consumption health tends to have an impact on retirement through morbidity determining earnings and the disutility of work and through longevity determining the need to accumulate retirement wealth conversely the age of retirement drives the demand for health care through the value of survival and the value of morbidity reductions we characterise the optimal relationship between health expenditure and retirement and apply our model to analyse the effects of moral hazard in the annuity market while moral hazard always induces excessive health investments and an excessive duration of working life it also triggers an excessive level of consumption if the impact of health on the disutility of work is sufficiently large we examine a transfer scheme and mandatory retirement as policies towards curtailing moral hazard numerical analysis illustrates the role of moral hazard in shaping the life cycle allocation

foreign trade and its impact on employment the mexican case abstract this paper discusses the relationship between foreign trade and employment in a small open economy and carries out some empirical work using mexican data it is argued that employment multipliers are not stable if intermediate inputs are imported actual employment multipliers will be given by the relationship between effective demand and installed capacity in each sector and will depend strongly on whether quotas or tariffs are in operation it is also found that mexican exports are capital intensive relative to its imports

engines of liberation electricity was born at the dawn of the last century households were inundated with a flood of new consumer durables what was the impact of this consumer durable goods revolution it is argued here that the consumer goods revolution was conducive to liberating women from the home to analyse this hypothesis a beckerian model of household production is developed households must decide whether or not to adopt the new technologies and whether a married woman should work can such a model help to explain the rise in married female labour force participation that occurred in the last century yes the housewife of the future will be neither a slave to servants nor herself a drudge she will give less attention to the home because the home will need less she will be rather a domestic engineer than a domestic labourer with the greatest of all handmaidens electricity at her service this and other mechanical forces will so revolutionize the woman s world that a large portion of the aggregate of woman s energy will be conserved for use in broader more constructive fields thomas alva edison as interviewed in good housekeeping magazine lv no 4 october 1912 p 436

uncertain lifetime life protection and the value of life saving abstract the analytic innovation is treating life s end as uncertain and life expectancy as partly the product of individuals efforts to self protect against mortality and morbidity risks the demand for self protection is modeled in a stochastic life cycle framework under alternative insurance options the model helps explain the trend and systematic diversity in life expectancies across different population groups as well as the wide variability in reported value of life saving estimates the analysis yields a closed form solution for individuals value of life saving that is estimable empirically it reflects the impacts of specific personal characteristics and alternative insurance options on both life expectancy and its valuation

homework in development economics household production and the wealth of nations we introduce home production into the neoclassical growth model and examine its consequences for development economics in particular we study the extent to which one can account for international income differences with differences in policies that distort capital accumulation in models with home production such policies not only reduce capital accumulation but also change the mix of market and nonmarket activity hence these models can generate larger differences in output than standard models for a given policy differential we also show how the welfare implications change when we incorporate home production

the economics of risks to life this study asks two questions 1 what is the net value to the representative individual over his life time of activities that alter age specific mortality risks 2 what is the cost to the representative individual of activities that take a life at random at a given age results derived from an economic demographic model with full age specific accounting have a strong actuarial flavor alterations in the mortality schedule caused say by a medical breakthrough should be assessed on the utility of expected additional life years production and reproduction less expected social costs of support loss of life at a specific age due to an accident say should be assessed on the opportunity costs of expected lost years of living lost production and reproduction less expected social support costs the results show that current methods in general leave out an important social transfer term that value of a life lost is highly age dependent and that the degree of diminishing returns to consumption is crucial in calculations of the economic cost of risks

market price and income elasticities of new vehicles demand recent evidence from aggregate models of automobile demand indicates that when not corrected for quality differences market price elasticity of demand is substantially biased downwards this note presents new information on market price and income elasticities derived from a disaggregate demand model that controls for cost household income vehicle attributes and perceived quality consumer search and manufacturer based on an extensive household survey of new vehicle purchasers in 1989 market price and income elasticities are estimated to be 0 87 and 1 70 respectively moreover excluding vehicle quality from a well specified model is found to have little effect upon the estimated market elasticities copyright 1996 by mit press

market place trading and the transformation of retail space in the expanding latin american city the global spread of the supermarket and the planned shopping centre is transforming retail space in the latin american city nevertheless market place trading has continued to flourish in most cities and is itself a key element of retail change a case study of quito shows how new periodic markets have been established and that as demand density grows these are consolidated into daily markets much of the dynamism in market place trading is associated with government intervention with principal policies being the creation of markets in poorly served urban areas and a reduction in the concentration of market place trading in the historic centre speculations about competition and complementarity between supermarket and market underline the need for further research and an understanding of the consumption patterns which support the continued heterogeneity of retail forms in the latin american city

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

contractual dualism market power and informality we develop a search theoretic model of contractual dualism in formal and informal labour markets the model i provides the micro underpinnings for endogenous determination of employer market power in the formal and informal sectors ii offers a unified and coherent set up whereby a host of salient features of developing country labour markets can be explained together and iii places for the first time the stiglerian prescription of the optimal unemployment minimising minimum wage in the broader context of labour markets where formal job creation is costly where employer market power is endogenous and where formal employment informal employment and unemployment coexist

the effects of the minimum wage in brazil on the distribution of family incomes 1996 2001 abstract the brazilian economy has long relied on the minimum wage having first implemented a minimum in 1940 shortly after taking office in 2003 brazil s president raised the minimum wage by 20 and promised to double the value of the minimum wage before his term ends in 2006 the usual rationale for minimum wage increases is to bring about beneficial changes in the income distribution by raising incomes of poor and low income families the goal of this paper is to evaluate the efficacy of the minimum wage in brazil in bringing about these changes in the income distribution we examine data drawn from brazil s major metropolitan areas studying the years after brazil s hyper inflation ended the estimates provide no evidence that minimum wages in brazil lift family incomes at the lower points of the income distribution if anything some of the evidence points to adverse effects on lower income families

explaining cross country productivity differences in retail trade many macroeconomists argue that productivity is low in developing countries because of frictions that impede the adoption of modern technologies i argue that in the retail trade sector developing countries rationally choose technologies with low measured labor productivity my theory is that the adoption of modern retail technologies is optimal only when household ownership of complementary durable goods such as cars is widespread because income is low in the developing world households own few such durables the theory implies that policies that increase measured retail productivity do not necessarily increase welfare

trade regimes and wages abstract we examine the impact of restrictive trade regimes on wages in the manufacturing sector a simple three sector economic model predicts that wages will fall in response to trade regime restrictiveness empirical tests are based on data for 37 countries over time our measure of trade regime restrictiveness is the black market premium on u s dollars the results strongly suggest that restrictive trade regimes reduce wages consistent with our theoretical analysis

assessing the effect of payroll taxes on formal employment the case of the 2012 tax reform in colombia in 2013 colombia implemented a tax reform that reduced payroll taxes by a total of 13 5 percentage points of wages this paper evaluates the effects of this component of the 2012 colombian tax reform on firms formal employment and average wages we construct a panel of firms based on their employees administrative records to account for the endogeneity of the treatment we use an instrumental variables technique that exploits the exogenous variation from the decisions of firms that are similar to each other in several dimensions but belong to different economic sectors based on our preferred specification we estimate a positive and significant increase in formal employment as a result of the implementation of the reform of approximately 213 000 jobs in existing pre reform firms in the long run these effects will increase to more than 600 000 jobs the effect of the reform on the average wages paid by firms was also found to be positive for some sizes of firms but the overall effect in the short run is rather small

modeling informality formally households and firms i introduction recent estimates indicate that around 10 of gross domestic product gdp in the united states is produced by individuals or firms that evade taxes schneider and enste 2000 in latin america approximately 50 of all salaried employees work informally an important question is therefore what are the determinants of informality unfortunately three decades of research have not yet yielded a consensus opinion on this point the traditional explanation initiated with the work of lewis 1954 assumes the existence of segmented labor markets in which some workers do not have access to jobs in the regulated formal sector these workers are forced to accept lower paying informal sector jobs that usually involve inferior working conditions while this view has become prevalent in the development literature direct empirical tests of the premise that informal workers would expect higher wages in the formal sector yield mixed results for instance magnac 1991 maloney 2004 and pratap and quintin 2004 do not find compelling evidence of segmentation between the formal and the informal sectors using data from colombia mexico and argentina respectively it is nonetheless certainly plausible that the presence of unions might segment the labor market layard et al 1991 however even if we believe that unionization has been an important factor in determining labor market segmentation in the past the pronounced decline of unionization throughout latin america over the last two decades seems to be a less satisfactory explanation of the phenomenon at the present time especially since informality increased in most countries in latin america during the same period gasparini and tornarolli 2006 another approach emphasizes the role of labor market regulation and taxation as the main cause of informality a pioneering study by de soto 1989 describes how informal workers develop their own laws and institutions to make up for the shortcomings of the official legal system it is certainly true that the size of the shadow economy is affected by the burden of taxes and social security contributions as well as by the many other regulations governing the official economy the problem with adopting this explanation of informality unreservedly however is that it overlooks the fact that workers have nonpecuniary preferences for the sector they work for and these preferences play a role in determining the equilibrium level of formality of an economy in particular workers in the informal sector are not eligible for socially mandated benefits three stylized facts characterize informality 1 small firms tend to operate informally while large firms tend to operate formally 2 unskilled workers tend to be informal while skilled ones have formal jobs 3 ceteris paribus secondary workers a worker other than the household head are less likely to operate formally than primary workers in this paper we present a model of an economy in which the sizes and wages of the formal and informal sectors are endogenously determined that accounts for these three facts our model entails a continuum of types on both sides of the labor market i e firms and workers firms choose whether to operate formally or informally and workers choose in what sector they work in equilibrium managerial talent determines size dualism at the firm level and human capital is the factor that determines whether workers are employed in the formal or informal sector in our model both heterogeneous firms and workers have preferences over the sectors they operate and choose optimally whether to function formally or informally by contrast a prominent feature of the preexisting literature is the idea that workers decisions play no role in determining the equilibrium of the economy thus our model is the first one in which policies that affect workers preferences as well of course as firm preferences over the formal or the informal sector such as pension plans public health issues and unemployment and any social benefits will affect the sizes and wages of the formal and the informal sectors

latin america in the rearview mirror abstract latin american countries are the only western countries that are poor and that are not gaining ground on the u s this paper evaluates why latin america has not replicated western economic success we find that this failure is primarily due to tfp differences latin america s tfp gap is not plausibly accounted for by human capital differences but rather reflects inefficient production we argue that competitive barriers are a promising channel for understanding low latin tfp we document that latin america has many more international and domestic competitive barriers than do western and successful east asian countries we also document a number of microeconomic cases in latin america in which large reductions in competitive barriers increase latin american productivity to western levels

what determines productivity lessons from the dramatic recovery of the u s and canadian iron ore industries following their early 1980s crisis great lakes iron ore producers had faced no competition from foreign iron ore in the great lakes steel market for nearly a century as the 1970s closed in the early 1980s as a result of unprecedented developments in the world steel market brazilian producers were offering to deliver iron ore to chicago the heart of the great lakes market at prices substantially below prices of local iron ore the u s and canadian iron ore industries faced a major crisis that cast doubt on their future in response to the crisis these industries dramatically increased productivity labor productivity doubled in a few years whereas it had changed little in the preceding decade materials productivity increased by more than half capital productivity increased as well i show that most of the productivity gains were due to changes in work practices work practice changes reduced overstaffing and hence increased labor productivity by increasing the fraction of time equipment was in operating mode changes in work pra

intergenerational trade longevity and economic growth we develop an overlapping generations model of endogenous growth in which human capital is the engine of growth and the generations are linked through material and emotional interdependencies within the family parents invest in their children to achieve both old age support care and emotional gratification and material support from children is determined through self enforcing implicit contracts we show that optimal intergenerational trade can then lead to maximization of growth opportunities our model produces a theory of the demographic transition linking longevity fertility and economic growth we also show that while population aging may raise the growth rate an increase in young age longevity is likely to produce a greater increase in the growth rate and a reduction in the fertility rate in a growth equilibrium these predictions and the model s implications concerning the behavior of private savings during the takeoff period appear consistent with empirical evidence

non monotonic health behaviours implications for individual health related behaviour in a demand for health framework a number of behaviours influence health in a non monotonic way physical activity and alcohol consumption for instance may be beneficial to one s health in moderate but detrimental in large quantities we develop a demand for health framework that incorporates the feature of a physiologically optimal level an individual may still choose a physiologically non optimal level because of the trade off in his or her preferences for health versus other utility affecting commodities however any deviation above or below the physiologically optimal level will be punished with respect to health distinguishing between two individual types we study a the qualitative properties of optimal time paths of health capital and health related behaviour b the perturbations of the optimal time paths that result from changes in exogenous parameters and c steady state properties predictions of the model and the implications for empirical analysis are discussed at length some comments on potential future extensions conclude the paper

growth and welfare under endogenous lifetime we study the role of endogenous healthcare choices by households to extend their expected lifetimes on economic growth and welfare in a decentralized overlapping generations economy with the realistic feature that households savings are held in annuities we characterize healthcare spending in the decentralized market equilibrium and its effects on economic growth we then identify the moral hazard effect in healthcare investments when annuity rates are conditioned on average mortality and explain the conditions under which it will lead to over investment in healthcare moreover we specify the general equilibrium effects and macroeconomic repercussions associated with this moral hazard effect calibrating our model to oecd data we find that the moral hazard effect may be substantial and implies sizeable welfare losses of approximately 1 5 at a more general level our study suggests that welfare improvements from longevity increases may be quite lower than sometimes assumed when considered in planner economies

health and other asset holdings despite clear evidence of correlations between financial and medical statuses and decisions most models treat financial and health related choices separately this article bridges this gap by proposing a tractable dynamic framework for the joint determination of optimal consumption portfolio holdings health investment and health insurance we solve for the optimal rules in closed form and capitalize on this tractability to gain a better understanding of the conditions under which separation between financial and health related decisions is sensible and of the pathways through which wealth and health determine allocations welfare and other variables of interest such as expected longevity or the value of health furthermore we show that the model is consistent with the observed patterns of individual allocations and provide realistic estimates of the parameters that confirm the relevance of all the main characteristics of the model

barriers to entry and development we ask whether barriers to entry are a quantitatively important reason for the income gap between developing countries and the united states we develop a tractable general equilibrium model that captures the effects of barriers to entry and the other main distortions typically considered in the development literature we carry our model to the data and ask it to match the main development facts from the penn world table we find that this requires large barriers to entry in developing countries which account for about half of the income gap with the united states

the political economy of used automobile protection in latin america i n the wake of the debt crises of the early 1980s latin america embarked upon a process of trade liberalisation the levels of both average tariffs and tariff dispersions fell throughout the region as did the coverage of non tariff barriers in the case of used automobiles however this liberalisation has not in general taken place many latin american countries retain significant restrictions on the imports of used automobiles even as liberalisation has occurred in the new automobile sector from a factor proportions standpoint these restrictions are difficult to justify for a number of reasons elucidated by sen 1962 used machinery should be imported relatively intensively into labourabundant countries such as those of latin america further this insight was specifically applied to the case of used automobiles by grubel 1980 the key factor identified by grubel is the lower repair costs of used automobiles in developing countries importantly grubel s analysis suggests that the bulk of the gains from trade in used automobiles would accrue to the developing countries explaining latin american protection against imports of used automobiles requires an exploration of the political economy of the protective measures in this paper we make a preliminary attempt at this exploration we begin in the following section by presenting the degree of used passenger automobile protection in 24 latin american and caribbean countries this is followed by a

health status and health dynamics in an empirical model of expected longevity expected longevity is an important factor influencing older individuals decisions such as consumption savings purchase of life insurance and annuities claiming of social security benefits and labor supply it has also been shown to be a good predictor of actual longevity which in turn is highly correlated with health status a relatively new literature on health investments under uncertainty which builds upon the seminal work by grossman grossman m 1972 on the concept of health capital and demand for health journal of political economy 80 223 255 has directly linked longevity with characteristics behaviors and decisions by utility maximizing agents our empirical model can be understood within that theoretical framework as estimating a production function of longevity using longitudinal data from the health and retirement study we directly incorporate health dynamics in explaining the variation in expected longevities and compare two alternative measures of health dynamics the self reported health change and the computed health change based on self reports of health status in 38 of the reports in our sample computed health changes are inconsistent with the direct report on health changes over time and another 15 of the sample can suffer from information losses if computed changes are used to assess changes in actual health these potentially serious problems raise doubts regarding the use and interpretation of the computed health changes and even the lagged measures of self reported health as controls for health dynamics in a variety of empirical settings our empirical results controlling for both subjective and objective measures of health status and unobserved heterogeneity in reporting suggest that self reported health changes are a preferred measure of health dynamics

survival versus consumption we develop an indirect method to estimate utility and willingness to pay wtp for reductions in the risk of death at various ages using a life cycle model of consumption we assume that an individual sets his consumption level each year so as to maximize his expected lifetime utility alternative assumptions about opportunities for borrowing and annuities characterize two polar types of societies in our robinson crusoe case an individual must be entirely self sufficient and annuities are not available in our perfect markets case an individual can borrow against future earnings and purchase actuarially fair annuities we show that under these assumptions wtp is the sum of livelihood discounted expected future earnings and consumer surplus to illustrate our methods we derive wtp for an average financially independent american man under plausible assumptions the model is calibrated to 1978 earnings e g 18 000 per year for men aged 45 54 with at least some income in the robinson crusoe case wtp increases from 500 000 at age 20 to a peak of 1 250 000 at age 40 and declines to 630 000 at age 60 in the perfect markets case age variations are less pronounced wtp is 1 050 000 at age 20 peaks at 1 070 000 at age 25 and declines to 600 000 at age 60 these results suggest that individuals value risks to their lives at several times the pro rata share of their future earnings

do payroll tax breaks stimulate formality evidence from colombia s reform alternative work arrangements have grown rapidly around the world in latin america these alternative work arrangements have long been part of the labor market and have continued to grow the informal sector grew rapidly in latin america over the past few decades comprising up to half of the working population in many countries some attribute the growth in alternative work arrangements and informality to regulations and taxes while others argue that it is precisely the lack of enforcement of regulations that allows unprotected employment arrangements to flourish we examine whether reducing taxes associated with employment stimulates formal sector employment we exploit the fact that the tax reform introduced in colombia in 2012 affected only certain types of workers and not others in particular workers earning less than ten times the minimum wage and self employed workers with more than two employees experienced a reduction of payroll taxes of 13 5 percent between 2013 and 2014 we use the colombian household surveys social security records and the monthly manufacturing sample to conduct difference in differences analyses of the reform we find evidence of increased formal employment for the affected groups after the reform using all three data sets we find that the probability of formal employment and the likelihood of transitioning into registered employment increased for the affected groups after the reform we also find that the level and share of permanent employment relative to temporary employment grew after the reform for those earnings less than ten times the minimum wage the results are greatest for those in smaller firms and for those earnings close to the minimum wage

labor market effects of payroll taxes in developing countries evidence from colombia abstract we use a panel of manufacturing plants from colombia to analyze how the rise in payroll tax rates over the 1980s and 1990s affected the labor market our estimates indicate that formal wages fall by between 1 4 and 2 3 as a result of a 10 rise in payroll taxes this less than full shifting is likely to be the result of weak linkages between benefits and taxes and the presence of downward wage rigidities in colombia because the costs of taxation are only partly shifted from employers to employees employment also falls our results indicate that a 10 increase in payroll taxes lowered formal employment by between 4 and 5 in addition we find some evidence of less shifting and larger disemployment effects for production than for nonproduction workers these results suggest that policies aimed at boosting the relative demand of less skilled workers by reducing social security taxes may be effective in latin american countries where minimum wages bind and benefits are often not directly lin

on adaptation and the demand for health the purpose of this paper is to analyse the impacts of adaptation to failing health this is done by integrating adaptation processes in a grossman type of pure consumption model model simulations show that adaptation affects the health variables by lowering the incentives to invest in health as well as smoothing the optimal health stock path over the life cycle whether or not the risk of mortality is an object of choice has important effects when studying adaptation as well as for the joint development of the health variables

what is the price of tea in china goods prices and availability in chinese cities author s feenstra robert c xu mingzhi antoniades alexis abstract abstract we examine the price and variety of a sample of consumer goods at the barcode level in cities within china unlike the position in the united states in china the prices of goods tend to be lower in larger cities we explain that difference between the countries by the more uneven spatial distribution of manufacturers sales and retailers in china and we confirm the pro competitive effect of city size on reducing markups there in both countries there is a greater variety of goods in larger cities but that effect is more pronounced in china combining the lower prices and greater variety the price indexes in china for the goods we study fall with city size by around seven times more than in the united states

annuitization and asset allocation this paper examines the optimal annuitization investment and consumption strategies of a utility maximizing retiree facing a stochastic time of death under a variety of institutional restrictions we focus on the impact of aging on the optimal purchase of life annuities which form the basis of most defined benefit pension plans due to adverse selection acquiring a lifetime payout annuity is an irreversible transaction that creates an incentive to delay under the institutional all or nothing arrangement where annuitization must take place at one distinct point in time i e retirement we derive the optimal age at which to annuitize and develop a metric to capture the loss from annuitizing prematurely in contrast under an open market structure where individuals can annuitize any fraction of their wealth at anytime we locate a general optimal annuity purchasing policy in this case we find that an individual will initially annuitize a lump sum and then buy annuities to keep wealth to one side of a separating ray in wealth annuity space we believe our paper is the first to integrate life annuity products into the portfolio choice literature while taking into account realistic institutional restrictions which are unique to the market for mortality contingent claims

minimum wage effects under endogenous compliance evidence from peru latin american labor markets feature large informal sectors in practice however the simple duality formal informal has many different shades firms tend to comply more with certain legislation than with other recent evidence has suggested that minimum wages have significant effects on the informal sector bell 1997 for mexico gindling and terrell 2004 for costa rica lemos 2004 and fajnzylver 2001 for brazil and maloney and nunez 2004 for colombia further some of this evidence suggests effects throughout a large part of the wage distribution this has been interpreted as evidence of lighthouse or numeraire effects we test this hypothesis using panel data from peru to identify effects throughout the wage distribution although there are some effects on informal sector workers overall results provide little support for numeraire or lighthouse effects labor monthly earnings are affected only at the bottom of the distribution 0 25 0 60 of the minimum wage made up mostly of informal workers and for formal workers earning between the old the new minima negative effects on the probability of retaining employed status after a minimum wage shock are either weak or non significant for wage earners below the minimum wage but significant for formal workers trapped between minima and for both formal and informal earning between 1 2 and 2 times the minimum wage independent workers earning below minimum suffer negative effects on both earnings and employment

evidence on the impact of minimum wage laws in an informal sector domestic workers in south africa what happens when a previously uncovered labor market is regulated we exploit the introduction of a minimum wage in south africa and variation in the intensity of this law to identify increases in wages for domestic workers and no statistically significant effects on employment on the intensive or extensive margins these large partial responses to the law are somewhat surprising given the lack of monitoring and enforcement in this informal sector we interpret these changes as evidence that strong external sanctions are not necessary for new labor legislation to have a significant impact on informal sectors of developing countries at least in the short run

consumption and investment demand when health evolves stochastically abstract the health capital model of grossman 1972 is extended to account for uncertainty in the rate at which a stock of health depreciates two general versions of the model are contemplated one with a fully functioning financial market and the other in its absence the comparative dynamics of the feedback form of the consumption and health investment demand functions are studied in these general settings where it is shown that the key to deriving refutable results is to determine how a parameter or state variable affects the expected lifetime marginal utilities of health and wealth to add further reach to the results a simplified stochastic control problem is explicitly solved yielding estimable structural feedback demand functions