the high scope perry preschool program cost benefit analysis using data from the age 40 followup this paper presents an updated cost benefit analysis of the high scope perry preschool program using data on individuals aged 40 children were randomly assigned to a treatment or control group program costs are compared against treatment impacts on educational resources earnings criminal activity and welfare receipt net present values are calculated for participants the general public and society the treatment group obtains significantly higher earnings for the general public higher tax revenues lower criminal justice system expenditures and lower welfare payments easily outweigh program costs they repay 12 90 for every 1 invested however program gains come mainly from reduced crime by males

redistributing income and relative efficiency i introduction the welfare costs associated with a demo grant reform and with spending on a publicly provided good have been extensively investigated as in browning and johnson 1984 stuart 1984 and ballard 1988 the welfare cost of marginal spending on earnings or wage subsidies has received less attention even though as scholz 1996 reports the income subsidy rate of the earned income tax credit eitc has increased from 10 to 40 in the past 20 years 1 triest 1994 and browning 1995 are two articles that analyze the welfare gains and losses associated with reforms to the eitc triest concludes that the eitc is a relatively efficient way to redistribute income whereas browning suggests considering alternative methods of assisting the working poor this article calculates the welfare gains and losses for marginal reforms to three different policies designed to redistribute income increased spending on an earnings subsidy program as defined by the eitc is compared with the effects of higher spending on means tested cash transfers to low income households a negative income tax nit an nit is used to represent welfare policies because hoffman and siedman 1990 suggest that programs such as aid to families with dependent children afdc have properties similar to an nit reforms to the nit and eitc are compared to the effects of increasing the subsidy rate of a wage subsidy or a negative wage tax as defined by browning 1973 understanding the normative effects of an earnings subsidy are important because the eitc has grown and it is now larger than the food stamp program although the eitc is best known as an earnings subsidy it actually has three phases for a household with one child in 1997 labor income up to 6 500 is subsidized at a rate of 34 households receive the subsidy in the form of a refundable tax credit and the household receives a check from the government if their credit exceeds their tax liability for income between 6 500 and 11 930 households receive the maximum tax credit but for earnings above 11 930 the tax credit diminishes 15 98 cents for every dollar earned according to rosen 1999 over 70 of those receiving a tax credit are in the last two phases of the program for these households the credit takes the form of a cash transfer and for most it is a means tested transfer unlike traditional assistance to the poor the eitc only provides assistance to those employed a priori one might expect a subsidy on labor earnings to be more efficient than an nit at redistributing income to the working poor this view is consistent with the survey results of fuchs et al 1998 who find that economists do not generally support increased funding of programs such as afdc however if the eitc is just an nit for most households it services it is not obvious that the eitc is more efficient at marginally redistributing income to the poor steuerle 1990 envisioned that effort would be made to convert the tax credit system to an hourly wage subsidy more recently browning 1995 suggested that a negative wage tax nwt be considered instead of the eitc an nwt like that proposed by browning 1973 1995 involves subsidizing the difference between a target wage rate and a household s actual wage rate and it does not have a cash transfer or the high positive implicit marginal tax rates mtrs associated with most redistributive programs browning 1973 demonstrates that a wage subsidy is more efficient that an nit but less is known about the relative efficiency of an nwt and the eitc traditional welfare programs such as afdc and food stamps provide most of their benefits to those who receive no labor income whereas wage and income subsidies only aid those employed how does one compare redistributive programs that serve different populations to address this question two different sets of reforms are considered

a glimpse through the veil of ignorance equality of opportunity and support for redistribution abstract this study is an experimental investigation into preference for redistribution of income it had been hypothesized that belief in equality of opportunity in a society diminishes support for the welfare state this could potentially explain the low taxes and social benefits in the united states vis a vis europe to verify this hypothesis participants in an experiment were assigned different probabilities of winning and matched in groups of four next before finding out who would actually win they selected preferred transfers to be paid by the winners to the group as a whole it was found that the average transfers were about 20 lower in the sessions in which winning was determined by performance in a task rather than by sheer luck this difference cannot be explained by overconfidence in predicting own score it corroborates the conjecture that perceived determinants of success i e whether poverty results from laziness or bad luck affect the support for redistribution on the other hand greater inequality of opportunity measured simply by dispersion of probabilities of winning within a group did not lead to higher transfers

the marginal welfare cost of public funds theory and estimates abstract we derive a general analytic formula for the marginal welfare cost mwc of public funds without imposing restrictive assumptions on preferences or technologies the framework encompasses the various special cases previously considered and reconciles the disparities among the reported estimates of mwc unresolved differences in existing estimates are fully explained by appropriate interpretations of intended thought experiments and alternative assumptions about the elasticity of labor supply with respect to public spending further progress in measuring mwc requires empirical estimation of labor supply functions that include government spending as an explanatory variable

special remedies for special causes involuntary unemployment in keynes political writings this paper analyses the proposals keynes made in his political writings regarding unemployment extending arguments made in the general theory the first issue is the relevance of voluntary unemployment to an understanding of keynes views on structural unemployment the second issue is the connection between on the one hand keynes argument in favour of public works state planning and more generally the socialisation of investment and on the other the analysis of involuntary unemployment made in the general theory emphasis is placed on long term pessimistic expectations and on the market valuation of capital assets copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

the 6lucas critique a generalisation the extraordinarily influential lucas critique of various familiar econometric practices is generalized the intention though is not to argue against the possibility of economics as science but to hasten its widespread realization to this end it is argued that a quite significant change of direction in economic practice is warranted and an outline of a sustainable potentially fruitful alternative approach is indicated c 1995 academic press ltd copyright 1995 by oxford university press

tax effects versus budget effects on labor supply this paper analyzes the effects on labor supply of parallel changes in taxes and public spending of various types a number of important recent developments in the labor supply behavior of households are highlighted by such a study of various types of budget effects rather than isolated tax effects this comes out in particular when considering cross substitution effects on labor supply of changes in public spending on goods and services or of the subsidization of goods and services provided by private markets moreover the income effects of tax changes are often mitigated or possibly even removed by the income effects of the accompanying expenditure changes

evaluation of four tax reforms in the united states labor supply and welfare effects for single mothers an emerging consensus is that labor force participation is more responsive to taxes and transfers than hours worked to understand the implications of participation responses for the welfare analysis of tax reform this paper embeds this margin of labor supply in an explicit welfare theoretic framework we apply the framework to examine the welfare effects on single mothers in the united states following four tax acts passed in 1986 1990 1993 and 2001 we propose a simulation method combining features of fully structural microsimulation studies and simple deadweight loss calculations our approach accounts for the observed heterogeneity in the microdata but is simple to implement because we do not need to specify utility functions and estimate utility parameters we find that each of the four tax acts created substantial welfare gains and that the gains were concentrated almost exclusively on the participation margin our results imply that standard approaches not modeling the participation decision can make large errors

marginal welfare costs of taxation with human and physical capital i introduction marginal welfare cost of taxation is the amount by which the social cost of an additional tax dollar differs from 1 because of distortionary taxation browning and johnson 1984 stuart 1984 browning 1987 ballard 1988 and allgood and snow 1998 use static models of the u s economy in which labor supplies adjust but the stocks of human and physical capital are fixed to calculate estimates of this welfare cost relevant to cost benefit analysis the studies by lucas 1990 and perroni 1995 incorporate human and physical capital into calculations of excess burden for the purpose of comparing alternative tax systems but do not address the welfare costs of marginal tax and spending reforms ballard et al 1985 and judd 1987 provide estimates of welfare cost using models that allow the stock of physical capital to change in response to marginal reforms but the stock of human capital is exogenous in these studies however judd 2001 argues that there is ample evidence indicating that human capital investment decisions have a significant effect on the cost of altering the tax system which suggests that these decisions could also have an important influence on marginal welfare cost in this article we present estimates of welfare costs for marginal reforms to government tax and spending policies when labor supply saving and education decisions are all endogenous we focus our analysis on marginal reforms because as skinner and slemrod 1985 observe most policy reforms enacted do not involve replacing one tax or spending system with another but instead typically entail marginal adjustments in tax laws and government appropriations using a perfect foresight overlapping generations model with a three period life cycle we derive analytical expressions for the changes in labor supply saving and education and use them to calculate marginal welfare cost as shown by auerbach et al 1983 in overlapping generations models steady state welfare comparisons of alternative tax policies are biased unless households are compensated for intergenerational redistribution along the transition path to arrive at our steady state estimates of welfare costs we adapt the compensation method introduced by gravelle 1991 for analyzing fundamental tax reforms to the context of incremental tax and spending reforms in a static one consumer model triest 1990 has shown that marginal welfare cost mwc is positive solely because of tax leakage the decline in tax revenue caused by reductions in the tax base we extend this insight to an intertemporal context that incorporates tax leakage arising from changes in both human and physical capital investment we evaluate three sets of reforms first a revenue neutral reduction in the tax on capital income funded by a higher tax on labor income second spending on a public good financed by either a higher tax on labor or interest income third a per capita lump sum transfer or demogrant also funded by either a higher tax on labor or interest income we find that marginal welfare costs are uniformly lower in the dynamic model where investment decisions are endogenous than in the static model where investment decisions are fixed and that the majority of the difference between the dynamic and static estimates is attributable to human capital decisions the principal reason is that a reallocation of time between labor hours and human capital investment has opposing and potentially offsetting effects on effective labor supply as a result labor supply responds less elastically in the dynamic model and changes in labor supply are the main source of tax leakage because wage taxation is the main source of tax revenue we also find that shifting marginal financing from capital to labor results in a lower welfare cost the reason being that such a change encourages saving which increases wage rates and stimulates labor supply leading to a reduction in marginal welfare costs

abstraction tendencies and stylised facts a realist approach to economic analysis in his numerous methodological asides and assertions that feature in his more empirically oriented postwar contributions nicholas kaldor makes frequent reference to notions of abstraction tendencies and stylized facts however the employment of such terms seems rarely to be explicitly questioned justified or explicated this paper argues that such notions can be readily explicated and their employment justified through adopting an explicitly realist approach to economic analysis it is also argued that realism represents a serious alternative to current orthodox approaches to economics without suffering from some of the latter s more obvious limitations copyright 1989 by oxford university press

a nominal theory of the nominal rate of interest and the price level this paper develops a simple theory of nominal income and interest determination under the assumption that the only relevant distinction between money and bonds lies in their holding periods individuals take full account of the government budget constraint and do not concern themselves with discounting future tax liabilities associated with the issue of government bonds according to this theory the price of bonds is analogous to the price level and the nominal rate of interest is determined by the bond money ratio and bears no close relationship to the rate of expansion of the price level

financialised internationalisation and structural hierarchies a mixed method study of exchange rate determination in emerging economies this paper conducts an extensive mixed method study of exchange rate determination in the brazilian foreign exchange market it combines semi structured interviews with foreign exchange market participants in brazil and london and advanced time series econometrics in line with post keynesian theory and critical realist ontology the interviews uncover the context specific expectations and underlying processes and structures that condition exchange rate dynamics in brazil and emerging economies more generally the results point to important structural changes in brazil s financial integration in the form of currency internationalisation and financialisation moreover they show that this internationalisation has been mediated through a structured and hierarchic international monetary system which fundamentally distinguishes exchange rate drivers in emerging economies from those in developed ones

does ecological economics have a future contradiction and reinvention in the age of climate change abstract this paper addresses the role of neoclassical methodologies in ecological economics and the contradictions these methodologies pose to the field s critical founding principles we first consider robert costanza s treatment of nicholas stern s global deal and then survey climate change related articles published in this journal over the past five years this survey reveals how mainstream neoclassical methodologies dominate discourse and do so by marginalizing more critical political economy analyses this situation imperils the field s founding vision of a no growth steady state it also fails to address the related growth dynamics of capitalism without such a critical treatment the field s formal embrace of methodological pluralism actually entails an ideological empiricism that renders ecological economics theoretically incoherent this situation undermines the field s historical promise as an alternative economic paradigm ecological economics now faces a problematic future its survival in a form faithful to its founding vision will require an explicit choice to address its internal contradictions and reinvent itself in ways relevant to our contemporary context without such a choice ecological economics will likely succumb to an implicit acceptance of the hegemony of mainstream economic methodologies and their pro growth imperatives

from unemployed to entrepreneur the role of the absolute bequest motive abstract using the british household panel survey this paper finds that inheritance has a concave effect on the hours worked by male entrepreneurs receiving an inheritance increases the labor supply of unemployed male entrepreneurs however this effect becomes smaller for higher inheritances

carbon taxes and joint implementation an applied general equilibrium analysis for germany and india germany has committed itself to reducing its carbon emissions by 25 percent in 2005 as compared to 1990 emission levels to achieve this goal the government has recently launched an environmental tax reform which entails a continuous increase in energy taxes in conjunction with a revenue neutral cut in non wage labor costs this policy is supposed to yield a double dividend reducing both the problem of global warming and high unemployment rates in addition to domestic actions international treaties on climate protection allow for the supplementary use of flexible instruments to exploit cheaper emission reduction possibilities elsewhere one concrete option for germany would be to enter joint implementation with developing countries such as india where germany pays emission reduction abroad rather than meeting its reduction target solely by domestic action in this paper we investigate whether an environmental tax reform cum joint implementation ji provides employment and overall efficiency gains as compared to an environmental tax reform stand alone etr we address this question in the framework of a large scale general equilibrium model for germany and india where germany may undertake joint implementation with the indian electricity sector our main finding is that joint implementation offsets adverse effects of carbon emission constraints on the german economy ji significantly lowers the level of carbon taxes and thus reduces the total costs of abatement as well as negative effects on labor demand in addition ji triggers direct investment demand for energy efficient power plants produced in germany this provides positive employment effects and additional income for germany for india joint implementation equips its electricity industry with scarce capital goods leading to a more efficient power production with lower electricity prices for the economy and substantial welfare gains

the marginal cost of raising tax revenue and redistributing income we present analytic formulas for calculating marginal welfare costs when taxes are levied against the wages of a heterogeneous population of households and marginal tax revenue finances either the supply of a public good or lump sum transfers the formulas are applied to explain the wide discrepancy between estimates of marginal welfare costs for redistribution previously obtained through computer simulation procedures our calculations reveal that these procedures introduced lump sum transfers that were not specified as part of the reforms to be simulated but explain most of the differences between their estimates we also show that welfare cost estimates are quite sensitive to the elasticity of labor supply with respect to exhaustive public spending

aggregate structural macroeconomic analysis a reconsideration and defence aggregate structural macroeconomic analysis asma is frequently criticised for being ad hoc and justified if at all only as a pragmatic expedient this paper argues instead that asma is consistent with the principles of well established bodies of social theory appeal to these principles reveals that asma is adequate and likely even necessary for the successful prosecution of macroeconomic inquiry

the relationship between the marginal cost of public funds and marginal excess burden a large literature has recently developed which attempts to measure the marginal cost shadow price of public funds the motivation for much of this literature is the recognition that many of the tax instruments used by governments generate substantial amounts of excess burden deadweight loss jerry a hausman 1981 for example estimates that for an average prime aged american male with a wage of ten dollars in 1975 the excess burden generated by the federal income tax was over fifty percent of the revenue raised from taxing that individual one might suspect that such large excess burden estimates would require a change in the way government project costs are calculated in benefit cost analysis if the revenue required to finance a project is raised through distortionary taxation then intuition would suggest that the excess burden generated by the increase in tax rates needed to finance the project should be incorporated into the cost of the project however this analysis is not entirely consistent with the theoretical literature on the optimal provision of public goods which are financed by distortionary taxation when distortionary taxes are used to finance public goods and the level of public good provision does not affect consumption of the taxed goods the standard samuelsonian rule which equates the sum over consumers of the marginal rates of substitution between a private good and a public good with the marginal rate of transformation between the two goods must be modified to account for the marginal effect of increases in tax rates on the revenue raised from the existing taxes 2 the intuition behind this result is that we need to correct for indirect leakages from existing government revenue sources when considering an incremental expenditure if the increase in tax rates needed to finance the project causes a reduction in the revenue raised by the current tax structure then we need to account for this loss in calculating the cost of the project it is important to note that this result concerns the values of uncompensated demand elasticities an example first provided by atkinson and stern 1974 illustrates this point consider a world where the only tax is on labor earnings and incremental expenditure on the public good does not affect the demand for leisure in this case the marginal rate of transformation will overstate the cost of the public good as long as the uncompensated wage elasticity of labor supply is negative this is because an increase in the tax rate causes an increase in labor supply leading to an indirect increase in government revenue from the excess burden perspective described earlier this example is very puzzling it is well known that even if the uncompensated own price elasticity of a good is zero a tax on that good can still result in a large deadweight loss we instead need the compensated elasticity to be zero to ensure that there will be no excess burden however the department of economics university of california davis ca 95616 this paper is based on chapter two of my dissertation at the university of wisconsin madison i wish to thank the members of my dissertation committee martin david robert haveman chair and arthur goldberger for very helpful advice and comments i have also benefited from comments by don fullerton and bruce hamilton an anonymous referee provided unusually helpful comments and corrected an error in the figure 1don fullerton 1989 provides a recent survey and analysis of this literature 2this is shown by anthony atkinson and nicholas h stern 1974 and david e wildasin 1979 the effect of provision of the public good on consumption of the taxed goods must also generally be taken into account

optimal control of externalities in the presence of income taxation a substantial literature examines second best environmental policy focusing particularly on how the pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription it is demonstrated however that simple first best rules unmodified for labor supply distortion or distribution are correct in a natural basic formulation of the problem specifically setting all commodity taxes equal to marginal harms and subsidies equal to marginal benefits can generate a pareto improvement likewise a marginal reform in the direction of the first best can yield a pareto improvement qualifications and explanations for differences from previous work are also presented

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

on the social desirability of urban rail transit systems despite a decline in its mode share investment to build new urban rail transit systems and extend old ones continues we estimate the contribution of each u s urban rail operation to social welfare based on the demand for and cost of its service we find that with the exception of bart in the san francisco bay area every system actually reduces welfare and is unable to become socially desirable even with optimal pricing or physical restructuring of its network we conclude rail s social cost is unlikely to abate because it enjoys powerful political support from planners civic boosters and policymakers

agricultural growth poverty and nutrition in tanzania abstract rapid economic growth does not appear to have significantly improved poverty and nutrition outcomes in tanzania we link recent production trends to household incomes using a regionalized recursive dynamic computable general equilibrium and microsimulation model results indicate some inconsistency between recent growth and poverty measurements in tanzania we also find that the structure of economic growth may have constrained the rate of poverty reduction agricultural growth has been driven by larger scale farmers who are less likely to be poor and has been concentrated among crops grown in specific regions of the country slow expansion of food crops and livestock also explain the weak relationship between agricultural growth and nutrition outcomes we find that accelerating agricultural growth particularly in maize strengthens the growth poverty relationship and enhances households caloric availability while also contributing significantly to growth itself

comment lucas on involuntary unemployment keynes distinguishes three concepts voluntary frictional and keynesian involuntary unemployment frictional unemployment is a classical form of involuntary unemployment not voluntary as lucas suggests and reflects the marshallian rather than walrasian treatment of time and equilibrium lucas contradicts both keynes and pigou in asserting that there are always immediate vacancies for unskilled labour and abstracts from the very problem that keynes seeks to address if voluntary unemployment is re defined appropriately as de vroey helpfully suggests elsewhere the prefix involuntary is dispensable not because all unemployment is voluntary as lucas would have it but because it is all involuntary copyright 2006 oxford university press

tax rates and labor supply in fiscal equilibrium tax rates and labor supply in fiscal equilibrium i introduction if the government changes the tax on wage income what happens to aggregate labor supply this question is at the core of debates between proponents of supply side and keynesian approaches to government fiscal policy it is unfortunate therefore that previous attempts to resolve the issue have obscured decisive assumptions regarding the preference relation between leisure and public spending one argument exposited recently by gwartney and stroup 1983 1986 and ehrenberg and smith 1988 179 80 descends from an older literature represented by the works of friedman 1949 1954 goode 1949 scitovsky 1951 and bailey 1954 and emphasizes the importance of a balanced budget framework for addressing the question this approach reveals the presence of an income effect caused by the change in government spending that must accompany the tax change at optimum according to this view this income effect exactly offsets the income effect of the tax change so that only the substitution effect of the tax remains as a consequence a balanced budget increase in the wage tax unambiguously decreases economy wide labor supply provided the increase in public spending is valued the same as the forgone private spending a different approach was initiated by winston 1965 and subsequently elaborated upon by lindbeck 1982 fullerton 1982 hanson and stuart 1983 bohanon and van cott 1986 and gahvari 1986 this approach stresses the importance of the preference relation between public spending and private spending rather than the role of the public spending income effect in determining the change in aggregate labor supply as a special example gahvari 1986 assumes a preference structure which implies that public spending does not have any influence on labor supply so there is only the partial equilibrium effect of the tax however the general conclusion of this line of reasoning is that the theoretical ambiguity of the labor supply response arises from both tax and spending effects in this paper a simple formal model is used to develop a careful accounting of the various income and substitution effects the model is sufficiently general to permit a rigorous comparison of earlier studies and to expose implicit assumptions responsible for their conclusions we show that the two approaches outlined above are associated respectively with the focal cases of compensated independence and ordinary independence between leisure and public spending the pan of the paper is as follows section ii contains a model of labor supply in the presence of wage taxation and public spending in section iii the effect on aggregate labor supply of a balanced budget change in wage taxation is analyzed section iv provides an interpretation of several previous analyses of these issues section v contains a summary of our results ii the model consider an economy with n identical consumers who derive utility from leisure l a pure private good x which serves as numeraire and a publicly provided good z the utility function u l x z is assumed to be twice continuously differentiable and strictly quasi concave everyone is endowed with t units of time which are allocated either to labor market work or leisure nonmarket activities the marginal product of labor in producing the private good is the constant real gross of tax wage rate w because agents are identical we can confine attention to allocations of equal consumption as a consequence the production possibilities frontier assumed to be linear can be expressed in per capita terms as wl x p n z wt 1 where p is the constant marginal cost of z with identical agents and only two goods not publicly provided it may be assumed without loss of generality that public spending is financed by a wage tax with constant marginal and average ad valorem rate t

lucas on involuntary unemployment the aim of this paper is to examine critically lucas arguments against keynes s general theory and in particular against keynes s concept of involuntary unemployment it comprises two main parts in the first i question lucas s claim that keynes betrayed the equilibrium discipline by freeing himself from the postulates of optimising behaviour and market clearing in the second i discuss lucas three arguments against the involuntary unemployment concept first that there is no rationale for drawing a distinction between two sorts of unemployment second that every economic outcome features voluntarity and involuntarity jointly and third that alternatives to unemployment are always present

how well do tree plantations comply with the twin targets of the clean development mechanism the case of tree plantations in tanzania the clean development mechanism cdm of the kyoto protocol is supposed to provide both carbon mitigation and poverty reduction this article reports from a model based study of market related carbon leakage and poverty reduction in the wake of a cdm tree planting project in tanzania a tree plantation was incorporated in a computable general equilibrium cge model with income differentiated household segments the study focused on sensitivity of carbon leakage and income distribution to different project ownerships and carbon premium allocations it turned out that the project value in terms of carbon premium has clear shortcomings as indicator of induced gdp growth and poverty alleviation the non poor rural and urban households benefit considerably more than the poor households however rising household income in all domestic project ownership arrangements increases demand for food raises use of fertilizer and crop yields a carbon cycle module for agricultural land use was incorporated in the cge model showing an increased carbon sequestration in agricultural soil representing a negative leakage through markets in the range of 60 120 of the certified emissions reductions as registered in the cdm tree plantation project

endogenous private safety investment and the willingness to pay for mortality risk reductions when individuals cannot undertake safety improving expenditures the effect of an increase in the initial risk on the willingness to pay wtp for mortality risk reduction is positive because of the dead anyway effect when they can undertake safety improving expenditures the effect of an increase in the initial risk is governed by two effects the dead anyway effect which is positive and the high payment effect which is negative we treat the two types of risk reducing expenditures endogenous and exogenous as inputs in a safety improving technology function and find conditions that guarantee that the high payment effect dominates

finite lifetimes and growth abstract in this paper we study the long run growth property of overlapping generations models it is shown that in one sector models with convex technologies the asymptotic growth rate must be zero this results because the young do not have sufficient income to purchase a large capital stock thus a policy of income redistribution to the young can generate growth even if financed by income taxation additionaly it is shown that two sector models and one sector models with nonconvex technologies are consistent with growth

evaluating transfer programmes within a general equilibrium framework we develop a general equilibrium model for evaluating domestically financed transfer programmes and derive analytical expressions which provide a framework for combining results from a computable general equilibrium model with disaggregated household data we separate the welfare impact into three components i e redistribution reallocative and distortionary effects we show how these are subsumed within one parameter the cost of public funds using a mexican programme for illustration we show that substantial welfare gains result from a switch from universal food subsidies to targeted transfers reflecting both the improved targeting efficiency of the latter and the relaxation the trade off between equity and efficiency when designing tax systems in an attempt to maximise the welfare impact of government transfers on lowincome households many governments in both developed and developing countries have moved towards better targeted transfer programmes in developed countries these transfers mostly take the form of cash transfers or tax credits whereas in developing countries they take the form of either cash transfers e g in latin america or infra marginal subsidised food rations e g in south asia l when evaluating the economic impact of such transfers it is useful to separate these into direct and indirect income or welfare effects the direct income effects reflect the design of the programme i e the rules for targeting transfers these are often referred to as first round effects and are captured by partial equilibrium approaches to policy evaluation the indirect effects capture the second round income changes brought about by the impact of cash transfers and their financing on the level and composition of demand and supply most evaluations of social safety net programmes focus on the partial equilibrium evaluation of programme targeting outcomes even those that focus on the indirect impacts tend to concentrate on their efficiency implications with only a very limited analysis of income distribution outcomes and with little attempt to combine both the equity and efficiency dimensions this is all the more limiting given that the central objective of these programmes is to improve income distribution in this paper we focus primarily on the indirect income effects in particular we show how the results from a computable general equilibrium model can be combined with the information available in standard household surveys to

structural adjustment and soil degradation in tanzania a cge model approach with endogenous soil productivity abstract in this paper a model of the nitrogen cycle in the soil is incorporated in a computable general equilibrium cge model of the tanzanian economy thus establishing a two way link between the environment and the economy for a given level of natural soil productivity profit maximising farmers choose input levels and hence production volumes which in turn influence soil productivity in the following years through the recycling of nitrogen from the residues of roots and stover and the degree of erosion the model is used to simulate the effects of typical structural adjustment policies like a reduction in agro chemicals subsidies reduced implicit export tax rate etc after 10 years the result of a joint implementation is a 9 higher gross domestic product gdp level compared to the baseline scenario the effect of soil degradation is found to represent a reduction in the gdp level of more than 5 for the same time period

optimal control of externalities in the presence of income taxation optimal control of externalities a substantial literature examines second best environmental policy focusing particularly on how the pigouvian directive that marginal taxes should equal marginal external harms needs to be modified in light of the preexisting distortion due to labor income taxation additional literature is motivated by the possibility that distributive concerns should amend the internalization prescription it is demonstrated however that simple first best rules unmodified for labor supply distortion or distribution are correct in a natural basic formulation of the problem specifically setting all commodity taxes equal to marginal harms and subsidies equal to marginal benefits can generate a pareto improvement likewise a marginal reform in the direction of the first best can yield a pareto improvement for other reforms a simple efficiency test characterizing when a pareto improvement is possible is offered qualifications and explanations for the substantial departure from results in previous work are also elaborated

payments or persuasion common pool resource management with price and non price measures we use lab experiments to study policies that address common pool resource overuse we look at a price mechanism specifically a pigouvian subsidy and four non price interventions the non price policies are information alone information with a normative message communication alone and normative messages with communication allowed in all experiment sessions no intervention occurs in the first seven and last seven rounds allowing us to examine the effects of introducing and taking away a policy the subsidy leads to near efficient extraction but surprisingly leads groups that were not over extracting to also reduce extraction this over compliance decreases efficiency although on net the subsidy is the most efficiency enhancing intervention information provision communication normative appeals and normative appeals combined with communication all reduce over extraction though by less than the subsidy without exacerbating over compliance however the effects of information alone and communication alone are small and not robust the non price policies cause a decline in over extraction of from 0 549 information to 11 441 normative appeals with communication these effects are of the same order of magnitude as the effects seen in major field studies of conservation messaging the subsidy has the worst persistence properties after the intervention ceases while normative messages with communication have the best

a generalized approach to multigeneration project evaluation 1 introductionit is well known that the choice of discount rate plays a significant role in the ranking of projects with varying time paths of costs and benefits for public projects the choice of the appropriate social discount rate sdr is not clear cut even in the context of short lived projects in which costs and benefits occur within a single generation in particular when capital taxes produce a wedge between gross and net rates of return should one discount at the economy s rate of return the before tax rate or the individual s rate of return the after tax rate in the single generation context the literature falls in two camps 1 one camp argues that the appropriate sdr is a weighted average of the gross and net rates of return with weights typically determined by the fractions of resources drawn from consumption and private investment respectively 2 a second camp argues that future benefits should be discounted at the net rate of return but that the initial investment should be multiplied by a scale factor so that the direct costs of the project can be expressed in terms of consumption units 3both approaches suffer from severe implementation problems for the first approach there is no general formula for the weights needed to calculate the sdr as a weighted average of two market rates of return dreze 1974 indeed the appropriate sdr to use is project specific stiglitz 1982 without a systematic methodology to derive project specific sdrs the weighted average approach is hard to implement for the second approach which equalizes the sdr to the net rate of return the scale factor the opportunity cost of public investment must be quantified the opportunity cost of public investment depends on whether resources come from private investment or consumption and on the calculation of the present value of the future consumption yielded by a unit of capital discounted at the net rate of return that is the shadow price of capital as lind 1997 points out however there is no general agreement on a specific procedure for calculating the shadow price of capital indeed the concept of the opportunity cost of public investment suffers the same project dependence problem as the first view of the sdr diamond 1968 multigeneration projects such as nuclear waste disposal natural resource conservation or even social security reform further complicate discount rate choice specifically intergenerational equity in addition to intertemporal efficiency plays a role in determining the appropriate social discount rate for multigeneration public project evaluation 4 as in the single generation context there are two competing views on the appropriate discount rate when evaluating multigeneration projects the descriptive and the prescriptive approaches 5the descriptive approach to discounting is a market based approach it does not rely on an explicit social welfare function swf or the pure time preference rate embedded in the swf however the descriptive approach works under the assumption that intergenerational compensation through changes in the tax debt policy is available 6 it is argued that under appropriate intergenerational compensation the market rates of return are still relevant for calculating the sdr for multigeneration project evaluation and in general the sdr should be a weighted average of the gross and net rates of return this descriptive view of setting the sdr equal to the market return appears to underlie the office of management and budget s omb adoption of 7 as the appropriate discount rate for federal programs 7the intent of the prescriptive approach is to use the social discount rate as an expression of ethical judgment on how consumption of future generations should be compared to consumption of current generations

a pigovian rule for the optimum provision of public goods abstract the integrated treatment of optimal taxation and public expenditure presented here is based on the dual relationship between the prices of private goods and the quantities of public goods the conditions for optimum public good provision can be expressed as a modification of the samuelson conditions with extra terms representing a the distortionary effect of taxes on the willingness to pay for the public good and b distributional effects the former captures pigou s notion of the indirect damage caused by the need to finance public expenditure out of distortionary taxes and we call this the pigou term in certain cases a very simple benefit cost ratio for public projects emerges that is equivalent to measuring benefits as if they were taxed

on the ir relevance of distribution and labor supply distortion to government policy should the assessment of government policies such as the provision of public goods and the control of externalities deviate from first best principles to account for distributive effects and the distortionary cost of labor income taxation for example is the optimal extent of public goods provision smaller than indicated by the samuelson rule because finance is distortionary or should environmental regulations fail to internalize externalities fully if the incidence of the regulations is regressive it is suggested that these questions are best addressed by considering distribution neutral implementation in which budget balance is achieved by choosing an adjustment to the income tax that offsets the distributive impact of the policy in question in basic cases both distribution and labor supply distortion are moot because the target policy and the tax adjustment produce offsetting effects on each thus traditional first best principles provide good benchmarks for policy analysis after all moreover even when actual implementation will not be distribution neutral in aggregate distribution neutral policy analysis has many conceptual and practical virtues that render it quite useful to investigators

economic growth with finite lifetimes abstract finite lifetimes do not preclude sustained growth with a convex technology when agents are finitely lived and formulate their bequeathing decisions in terms of an absolute bequest motive in this model the presence of government debt adversely affects the equilibrium rate of growth of the capital stock

growth with unintended bequests abstract in an overlapping generations model with finite lifetimes sustained growth is possible if there is a positive risk of death a redistribution occurs when non altruistic parents leave unintended bequests to their children

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

keynes lucas and involuntary unemployment a reply to hayes in this response to mark hayes s criticism of his article lucas on involuntary unemployment the author insists on the need to draw a distinction between labour rationing a market outcome and unemployment the activity of job seeking economic theory is mainly concerned with the former yet the issue of the voluntarity versus the involuntarity of unemployment pertains to unemployment as an activity failing to make this distinction cannot but lead to semantic confusion

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

the new classical macroeconomics comprises articles published between 1972 and 1992 on new classical macroeconomics it starts by examining the rational expectations hypothesis and the application of general equilibrium to labour markets and continues with various arguments for the ineffectiveness of government policy

rural market imperfections and the farm size productivity relationship evidence from pakistan the subject of this article is the relationships between farm size and productivity and between farm size and profitability in the developing countries the recent controversies over the inverse size output relationship are reviewed and a framework is provided that explains the inverse relationship based on plausible assumptions about imperfections in the markets for labor land credit and risk from this framework a set of testable hypotheses are derived the hypotheses are tested on recent farm level panel data from pakistan a strong inverse relationship between farm size and yield is present in the sample even when household fixed effects are used to account for unobserved heterogeneity moreover the suggested market imperfections framework is consistent with the data

stochastic economic assessment of afforestation on marginal land in irrigated farming system we analysed the economic viability of afforestation on marginal irrigated croplands in irrigated drylands of uzbekistan the revenues derived from a combination of diversified agricultural production carbon sequestration nitrogen fixation and avoided irrigation water use were analysed considering uncertainty associated with on farm activities such as crop production and short rotation forestry at the per hectare scale variability in land use revenues would necessitate substantial increases in carbon prices for afforestation to be as profitable as crop cultivation on marginal lands assuming an abundant irrigation water supply in contrast at the farm scale the analysis results revealed that afforestation can be attractive financially even without carbon payments due to farm production constraints variable land use returns and the benefits of land use diversification increased carbon prices would promote carbon sequestration by motivating farmers to plant high biomass producing tree species but would have an ecosystem service trade off by reducing the appeal of nitrogen fixing species that are essential for nitrogen self sufficiency of afforestation efforts given the modest irrigation needs of afforestation efforts compared to the cultivation of annual crops tree plantations could become a primary income source for farms during periods of drought irrigation water saved from replacing crops with trees on marginal farmland would enhance the cultivation of commercial crops on productive lands thus increasing farm income