wealth volume and stock market volatility case of hong kong 1993 2001 this article attempts to answer the question of whether the gain and loss in property market speculations and rate of information flow play a significant role in stock market volatility in hong kong to test for our wealth volume volatility hypothesis two different measures of volatility absolute absolute value of sd from mean with monthly dimension and conditional egarch are used and results are compared in both measures we find evidence of a statistical presence of a wealth effect on stock market volatility particularly in the investment of luxury class of property in hong kong to account for this result we apply the prospect theory house money effect and the newly developed conditional confidence theory although we fail to establish a volume volatility relationship in our estimation we offer additional dimensions to the explanation of our observation

idiosyncratic and common shocks to investment decisions this paper shows how microeconomic data on investment plans can be used to study the structure of risk faced by firms revisions of investment plans form a martingale and thus reveal the underlying shocks driving investment we decompose revisions in investment plans into micro sector and aggregate shocks and exploit stock market data to distinguish between structural valuerelated shocks and measurement error in investment revisions using panel data for us firms we find that microshocks are not the dominant source of risk in investment decisions and that much of the observed microvariation is actually due to heterogeneity in firm level responses to aggregate shocks firms are able to diversify most idiosyncratic investment risk and they do not appear to be liquidity constrained

mitigating the consequences of a health condition the role of intra and interhousehold assistance the behavior of noncoresident family members motivates much of the literature on consumption smoothing risk sharing and informal networks yet little is known empirically on the topic due to a lack of data simultaneously observing multiple households in an extended family this study utilizes genealogically linked longitudinal data to examine how extended family networks insure against financial risks from severely limiting health conditions we find that nonhealth consumption of unmarried households declines in response to worsening health whereas married households smooth expenditures in a way that is consistent with full insurance families mitigate losses by reallocating home production drawing down home equity holding formal health insurance collecting social security and receiving transfers from noncoresident relatives we illustrate that the costs of health shocks are transmitted throughout family networks and that noncoresident children draw down their assets and consumption when responding to a parent s health decline

risk sharing by households within and across regions and industries abstract cochrane 1991 journal of political economy 99 957 976 and mace 1991 journal of political economy 99 928 956 test if risk sharing across households is complete in the sense that household consumption moves one for one with aggregate consumption in their studies the source of income risk is idiosyncratic and agents can share risk across the entire economy using a sample of households from the panel study on income dynamics psid we explore whether households share the risk associated with their industries and regions across households in other regions and industries we find that a large fraction of risk faced by households is not shared across regions and industries

skill diversity of cities and entrepreneurship this paper analyses the effect of city skill diversity on local entrepreneurship it proposes a mechanism based framework to study the precise channels through which skill diversity contributes to

on the measurement of risk aversion from experimental data attitudes towards risk are measured for households in northern zambia using an experimental gambling approach with real payoffs that at maximum were equal to 30 of average total annual income per capita the results of the experiment show decreasing absolute risk aversion and increasing partial risk aversion determinants of risk aversion are investigated using random effects interval regression model exploiting the panel data structure of the repeated experiments wealth indicator variables are found to be significant and partial relative risk aversion decreases as wealth increases females are found to be more risk averse than males

income dynamics and life cycle inequality mechanisms and controversies this study focuses on the transmission of inequality over the working life a model of constrained intertemporal choice is used to provide structure to the distributional dynamics of wages earnings income and consumption the mechanisms used to insure labour market shocks are examined in a partial insurance setting where the manner and scope for insurance depends on the access to credit the information available to consumers and the durability of income shocks drawing on recent research family labour supply the credit market and the tax system are all shown to play a key role these mechanisms vary in importance across different points of the life cycle and the business cycle 2014 the author s the economic journal published by john wiley sons ltd on behalf of royal economic society

risk taking preferences of farmers in northern thailand measurements and implications abstract risk taking preferences were elicited from small semi commercial farmers in northern thailand using an experimental procedure that included real monetary payoffs of meaningful magnitudes a total of five sets of lotteries with increasing payoffs were offered the farmers were found to be risk averters and their preferences conformed to the hypothesis of increasing nondecreasing partial relative risk aversion using regression analysis farmers expected variation of rice yields and farm size were found to be directly related to a decrease in risk aversion while the extent of multiple cropping availability of non land household assets and tested mathematical ability were found to be indirectly related to a decrease in risk aversion the variables expected variation of rice prices farmer s age and tested abstract ability scores were not related to risk taking preferences

the effect of work experience on female wages and labour supply this paper develops and implements a semiparametric estimator for investigating with panel data the importance of human capital and time nonseparable preferences to females when aggregate shocks are present it provides a set of conditions for making statistical inferences about agents expectations of their correlated future choices from a short panel under the assumption that observed allocations are pareto optimal a dynamic model of female labour supply and participation is estimated in which experience on the job raises future wages and time spent off the job in the past directly affects current utility or indirectly through productivity in the nonmarket sector

for love or money fairtrade business models in the uk supermarket sector sales in supermarkets have contributed greatly to growth in fairtrade but the literature suggests there may be tensions between fairtrade principles and the commercial practices which characterise uk supermarket value chains this article explores these tensions through an analysis of supermarket value chains for fairtrade coffee cocoa bananas and fresh fruit it finds considerable variation in uk supermarket approaches in terms of scale and scope of commitment to fairtrade and in the nature of relationships with fairtrade suppliers in some cases supermarket involvement has the potential both to expand and deepen the impact of fairtrade whereas in others it threatens to undermine the ability of fairtrade to support long term processes of development the findings indicate that a more nuanced approach to supermarket fairtrade is required with recommendations for actions that could be taken to maximise the opportunities and minimise the risks

marriage and consumption insurance what s love got to do with it when markets are incomplete individuals may choose to marry to diversify their labor income risk love however can complicate the picture if love is fleeting or the resolution of agents income uncertainty occurs predominantly later in life then marriages with good economic matches last longer in contrast if love is persistent and the resolution of uncertainty to agents income occurs early then marriages with good economic matches are more likely to be caught short with too little love to save a marriage consequently once married the partners will be more likely to divorce evidence is provided to distinguish between these alternative scenarios

towards a framework for understanding fairtrade purchase intention in the mainstream environment of supermarkets despite growing interest in ethical consumer behaviour research ambiguity remains regarding what motivates consumers to purchase ethical products while researchers largely attribute the growth of ethical consumerism to an increase in ethical consumer concerns and motivations widened distribution mainstreaming of ethical products such as fairtrade questions these assumptions a model that integrates both individual and societal values into the theory of planned behaviour is presented and empirically tested to challenge the assumption that ethical consumption is driven by ethical considerations alone using data sourced from fairtrade shoppers across the uk structural equation modelling suggests that fairtrade purchase intention is driven by both societal and self interest values this dual value pathway helps address conceptual limitations inherent in the underlying assumptions of existing ethical purchasing behaviour models and helps advance understanding of consumers motivation to purchase ethical products

risk aversion and credit constraints in farmers decision making a reinterpretation in 1976 the agricultural development council sponsored a conference on risk uncertainty and agricultural development which has been summarised in a volume edited by james roumasset jean marc boussard and inderjit singh 1979 the volume provides an excellent review of the state of the art at that time however as discussed in the summary chapters of that volume there were few theoretical empirical or policy issues on which clear conclusions could be reached on the basis of knowledge then available in the intervening years progress has been made on a number of issues as a result of both empirical investigations and theoretical advances this paper concentrates on advances which have relevance to the controversy about the relative roles of risk aversion and credit constraints in limiting farmers investment levels especially for purchased inputs such as seeds or fertilizers in particular we review recent experimental studies on the extent of risk aversion among farmer populations in developing

focus on fairtrade propositions for integrating fairtrade and supply chain management research driven by increased consumer interest and stakeholder pressure the number of fairtrade ft products has been steadily increasing the mainstreaming of ft means that the products are now facing stiff competition within the generic product categories in which they operate while consumers may pressure organizations for ethical conduct they are less willing to pay premium prices for fairly traded products for ft to continue to grow more efficient operating models are required to offset the premium prices paid to producers to ensure competitiveness in the market one such improvement approach may be the management of ft supply chains to investigate the feasibility of this approach this article systematically combines literature on ft with key supply chain management scm constructs and theories we discuss existing scm paradigms in the context of ft and demonstrate aspects where the efficiency of ft chains needs to be improved to ensure their viability we present propositions that demonstrate the key limitations of the ft model from the point of view of scm theory and practice and suggest the potential changes needed in the management of ft supply chains the article provides a timely first attempt to systematically combine ft with scm constructs thus establishing a basis for the further development of ft chains and for the improvement of the operating efficiency within them

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

an evolutionary analysis of industrial districts the changing multiplicity of production know how nuclei this paper deals with the evolution of place based division of labour considering in particular the dynamics of differentiated pools of knowledge that can be embedded in local production systems such as industrial districts drawing on conceptual framework of marshallian industrial districts the paper develops a model that links knowledge dynamics to possible tendencies towards either industrial progress lock in transition or decline of such systems the model is complemented by a related new statistical method that allows us to analyse the evolution of the multiplicity of production know how nuclei inside industrial districts the methodology is applied to two cases the ceramics district of stoke on trent uk and the textile district of prato ita over the period 2005 2013

estimating dynamic localization economies the inadvertent success of the specialization index and the location quotient estimating dynamic localization economies the inadvertent success of the specialization index and the location quotient regional studies after addressing definitional issues on the concepts of c

urban wages and labor market agglomeration abstract using the 5 public use micro sample of the 1990 u s census we find that observationally equivalent workers in the manufacturing sector earn higher wages when they are in urban labor markets that have a larger share of national or metropolitan employment in their same occupation and industry groups quantitatively the effect is large with an elasticity measured at the means of between 1 2 and 3 6 for these effects we interpret the willingness of firms to pay more for equivalent workers in dense markets as evidence of an agglomeration economy in urban labor

extended families and child well being studies of household behavior have established the distribution of resources among household members predicts spending and savings patterns however there is a paucity of evidence on the relationship between the well being of individual family members and the distribution of resources within an extended family including non co resident family members given the central role the family plays in many models of economic behavior this is an important gap in the literature using rich longitudinal survey data from the indonesia family life survey ifls evidence is presented on the relationship between three measures of health and education related human capital of children and the distribution of resources among extended family members ifls is ideally suited for this research since the survey collects detailed information about income and wealth from both coresident and non co resident family members the empirical model is founded on a natural extension of the collective model of household decision making chiappori 1988 1992 to the extended family the model is particularly appealing in this context because it places few restrictions on preferences of individual family members and does not specify a specific bargaining mechanism that underlies negotiations the collective model yields empirical tests of whether the behavior of family members is pareto efficient a special case of the model allows all family members to be completely altruistic which is observationally equivalent to a unitary model of family behavior that special case is rejected by the data however the restrictions of the efficient model are not rejected indicating that non co resident family members are able to co ordinate allocation decisions with respect to child human capital investments in such a way as to make no family member better off without another member being worse off

testing efficient risk sharing with heterogeneous risk preferences previous papers have tested e cient risk sharing under the assumption of identical risk preferences in this paper we show that if in the data households have heterogeneous risk preferences the tests proposed in the past reject e ciency even if households share risk e ciently to address this issue we propose a method that enables one to test e ciency even when households have difierent preferences for risk the method is composed of three tests the flrst one can be used to determine whether in the data under investigation households have homogeneous risk preferences the second and third test can be used to evaluate e cient risk sharing when the hypothesis of homogeneous risk preferences is rejected we use this method to test e cient risk sharing in rural india using the flrst test we strongly reject the hypothesis of identical risk preferences we then test e ciency with and without the assumption of preference homogeneity in the flrst case we reject e cient risk sharing at the village and caste level in the second case we still reject e ciency at the village level but we cannot reject this hypothesis at the caste level this flnding suggests that the relevant risk sharing unit in rural india is the caste and not the village

precautionary savers with ricardian propensities in his seminal 1974 paper barro noted that ricardian equivalence may fail if agents face undiversifiable idiosyncratic risk and governments finance tax rebates with higher future tax rates 5 higher tax rates reduce the dispersion of future after tax income decrease the precautionary demand for savings and hence tend to stimulate present consumption barro concluded however that the stimulus to consumption would be minor and would likely be offset by induced reductions in future labor income the recent revival of interest in the precautionary savings motive has refocused attention on this tax insurance effect tie 2 8 24 27 in particular two highly influential papers one by barsky mankiw and zeldes 6 and the other by kimball and mankiw 19 argue that the tax insurance effect generates consumption responses roughly equivalent to those obtained from keynesian models where agents ignore future tax liabilities entirely although the existence of a precautionary demand for savings and by implication a taxinsurance effect has received strong empirical support 9 15 21 the magnitude of the effect remains largely unknown the two most difficult empirical issues involve quantifying the degree of uninsured idiosyncratic risk faced by typical agents and determining the appropriate form and shape of agents utility functions on these issues the profession is far from a consensus studies from the labor economics literature 1 17 suggest idiosyncratic risk may be large and persistent whereas a recent paper by heaton and lucas 16 finds idiosyncratic risk to be small and largely transitory similarly the vast literature surrounding the equity premium puzzle highlights the profession s lack of consensus over the degree of risk aversion exhibited by typical agents in this paper i circumvent some of these controversial issues by extending barsky mankiw and zeldes model to include an explicit labor supply decision the introduction of a labor supply decision allows me to bring evidence from the literature on optimal income taxation 22 25 and the literature on the welfare cost of taxation 3 4 7 to bear on these issues the idea is simple under the conditions that make the tax insurance effect large i e very risky income distributions and a high degree of risk aversion agents will place great value on tax induced

using field experiments to elicit risk and ambiguity preferences behavioural factors and the adoption of new agricultural technologies in rural india abstractwe conduct a series of experiments in rural india in order to measure preferences related to risk loss and ambiguity by combining these results with a discrete choice experiment over new and familiar rice seeds we demonstrate how these behavioural parameters affect decisions to adopt new agricultural technologies especially when the new technologies are risk reducing we find that risk averse and loss averse individuals are more likely to switch to new seeds demonstrating risk reducing characteristics while contrary to expectations ambiguity averse individuals are no more willing to retain their status quo than switch to cultivating the new variety

desperation or desire the role of risk aversion in marriage i introduction attitudes toward risk are an important determinant of a vast array of decisions such decisions include ones with a big impact on life the choice of education the choice of career investment decisions and even when and if to get married or divorced most empirical studies of behavior implicitly assume risk preferences are identical across households such a research strategy undoubtedly results in appreciably different predictions of behavior than would occur if risk preferences are permitted to vary while an increasing number of surveys are asking respondents questions that allow for construction of a measure of interpersonal variation in risk that is based on economic theory there is still a paucity of empirical studies that explicitly investigate the impact of risk preferences on behavior 1 i use information on risk preferences from the national longitudinal survey of youth 1979 nlsy79 to predict how interpersonal variation in these preferences affects the time to marriage decision because of the uncertainty inherent in searching for a partner and the uncertainty of the future quality and state of the marriage itself risk attitudes likely directly impact the timing of marriage risk preference variables are constructed from a series of hypothetical gambles over lifetime income that were offered to respondents in the nlsy79 i examine how the risk preference variables affect the hazard rate into marriage and find that the more risk averse marry sooner l also exploit sibling data from the nlsy79 to examine the robustness of the empirical results by controlling for unobserved family effects that might be correlated with risk attitudes and find qualitatively similar results in addition i find that risk preferences affect the timing of marriage differentially for the sexes with a larger and more statistically significant effect of risk preferences on the hazard rate into marriage for men one possible explanation for this finding is that women value risk aversion as a desirable characteristic in a spouse to explore this possibility i analyze spouse characteristics by the risk aversion of the respondent i find that spouse quality in terms of education and other measurable traits is generally lower for more risk averse men than for more risk loving men this finding is in accordance with a prediction of a search model the reservation price is decreasing in risk aversion spouse quality of more risk averse women is usually but not always lower than for more risk loving women suggesting that the effect of a woman s own risk aversion on time to marriage may be more complex than suggested by a search model overall the results suggest that risk preferences have some causal influence on the timing of marriage whether it be from a supply side standpoint such as in the case of a basic search model or from a demand side standpoint where risk aversion is a desirable trait this article contributes to a sparse literature that employs empirical measures of risk aversion many of these studies ask how demographic characteristics affect risk attitudes 2 a few ask how these measures of risk aversion affect behaviors like the propensity to smoke or invest in risky assets 3 these studies are however cross sectional and do not employ survival analysis as does this article to my knowledge only two existing studies light and ahn 2008 schmidt 2008 employ an empirical measure of risk aversion to investigate the relationship between risk preferences and the marriage market schmidt focuses on fertility but also considers marital timing of employed women and light and abn focus on divorce timing the findings of both studies are consistent with mine 4 my study adds to schmidt s by considering all women and men and exploring the differences between the genders including a discussion of how spousal characteristics might differ by the risk aversion of respondents

partial insurance and investments in children this article studies the impact of permanent and transitory shocks to income on parental investments in children we use panel data on family income and an index of investments in children from the children of the national longitudinal survey of youth we find that there is partial insurance of parental investments against permanent income shocks but the magnitude of the estimated responses is small we cannot reject the hypothesis of full insurance against temporary shocks another interpretation of our findings is that insurance possibilities are limited but the fact that skill is a non separable function of parental investments over time results in small reactions of these investments to income shocks especially at later ages

inferring labor income risk and partial insurance from economic choices this paper uses the information contained in the joint dynamics of individuals labor earnings and consumption choice decisions to quantify both the amount of income risk that individuals face and the extent to which they have access to informal insurance against this risk we accomplish this task by using indirect inference to estimate a structural consumption savings model in which individuals both learn about the nature of their income process and partly insure shocks via informal mechanisms in this framework we estimate i the degree of partial insurance ii the extent of systematic differences in income growth rates iii the precision with which individuals know their own income growth rates when they begin their working lives iv the persistence of typical labor income shocks v the tightness of borrowing constraints and vi the amount of measurement error in the data in implementing indirect inference we find that an auxiliary model that approximates the true structural equations of the model which are not estimable works very well with negligible small sample bias the main substantive findings are that income shocks are moderately persistent systematic differences in income growth rates are large individuals have substantial amounts of information about their income growth rates and about one half of income shocks are smoothed via partial insurance putting these findings together the amount of uninsurable lifetime income risk that individuals perceive is substantially smaller than what is typically assumed in calibrated macroeconomic models with incomplete markets

growth and risk sharing with private information abstract we examine the impact of incomplete risk sharing on growth and welfare the source of market incompleteness in our economy is private information a household s idiosyncratic productivity shock is not observable by others risk sharing between households occurs through long term contracts with intermediaries we find that incomplete risk sharing tends to reduce the rate of growth relative to the complete risk sharing benchmark numerical examples indicate that the welfare cost and the growth effect of private information are small

incomplete intertemporal consumption smoothing and incomplete risk sharing this paper develops a method to estimate jointly the degree of intertemporal consumption smoothing and the degree of inter regional risk sharing the empirical results for the u s states and oecd and eu countries suggest that i regardless of the assumption on the degree of intertemporal consumption smoothing the degree of risk sharing within a country is larger than across countries ii the degree of intertemporal consumption smoothing within a country is also larger than across countries and iii the difference between the degree of intertemporal consumption smoothing within u s states and across oecd and eu countries is as large as the difference between the degree of risk sharing contrary to the findings of some past studies

risk sharing between and within families this paper uses the panel study of income dynamics to test whether risk sharing is complete between or within american families the tests accommodate a wide variety in the configuration and availability of family data the test results reject inter as well as intra family full risk sharing even assuming that leisure is endogenous or that leisure and consumption are nonseparable

the roles of destination gender and household composition in explaining remittances an analysis for the dominican sierra two non exclusive hypotheses about what motivates remittances sent by dominican migrants to their rural parents in the sierra are tested a an insurance contract taken by parents with their migrant children and b an investment by migrants in potential bequests results show that the relative importance of these two motives to remit is affected by destination us vs cities in the dominican republic gender and household composition the insurance function is mainly fulfilled by female migrants to the us only when a male is the sole migrant in his household does he play the role of insurer investment by contrast is pursued by both males and females but only among those migrating to the us d 2002 elsevier science b v all rights reserved

shocks individual risk attitude and vulnerability to poverty among rural households in thailand and vietnam summary we examine whether the experience of shocks influences individual risk attitude we measure the risk attitude of more than 4 000 households in thailand and vietnam via a simple survey item the experience of adverse shocks which is typical for poor and vulnerable households is related to a higher degree of risk aversion even when controlled for a large set of socio demographic variables therefore shocks perpetuate vulnerability to poverty via their effect on risk attitude we extend this general finding to various categories of shocks and find differences between thailand and vietnam this suggests that risk coping strategies profit from case specific design

persistence of power elites and institutions we construct a model to study the implications of changes in political insti tutions for economic institutions a change in political institutions alters the distribution of de jure political power but creates incentives for investments in de facto political power to partially or even fully offset change in de jure power the model can imply a pattern of captured democracy whereby a democratic regime may survive but choose economic institutions favoring an elite the model provides conditions under which economic or policy outcomes will be invariant to changes in political institutions and economic institutions them selves will persist over time jel d02 d72 the domination of an organized minority over the unor ganized majority is inevitable the power of any minority is irresistible as against each single individual in the majority who stands alone before the totality of the organized minor ity at the same time the minority is organized for the very reason that it is a minority

on testing for full insurance using consumer expenditure survey data in a recent issue of this journal mace 1991 presented empirical evidence in support of the hypothesis that u s households engage in full risk sharing the data used were taken from the u s consumer expenditure survey cex for the years 1980 84 full insurance implies that household level consumption should be perfectly correlated with aggregate consumption but uncorrelated with householdlevel changes in income mace s surprising result was that at least for one functional specification household level income changes whether measured directly by changes in reported income or proxied by employment change dummies seemed to have no statistically significant effect on consumption this comment demonstrates that this result was due to measurement error in key variables

estimating a dynamic adverse selection model labour force experience and the changing gender earnings gap 1968 1997 this paper addresses two questions what accounts for the gender gap in labour market outcomes what are the driving forces behind the changes in the gender labour market outcomes over the period 1968 1997 it formulates a dynamic general equilibrium model of labour supply occupational sorting and human capital accumulation in which gender discrimination and an earnings gap arise endogenously it uses this model to quantify the driving forces behind the decline in the gender earnings gap and the increase in female labour force participation the proportion of women working in professional occupations and hours worked it finds that labour market experience is the most important factor explaining the gender earnings gap in addition statistical discrimination accounts for a large fraction of the observed gender earnings gap and its decline it also finds that a large increase in aggregate productivity in professional occupations plays a major role in the increase in female labourforce participation number of hours worked and the proportion of females working in professional occupations although of less importance demographic changes account for a substantial part of the increase in female labour force participation and hours worked whereas home production technology shocks do not

production risk risk aversion and the determination of risk attitudes among spanish rice producers agricultural production is subject to risk and the attitudes of producers toward risk will influence input choices insofar as these affect production risk risk attitudes in turn may be affected by certain socioeconomic characteristics of producers using 2004 survey data from a cross section of 130 spanish rice farms we estimate risk aversion coefficients of farmers and investigate the influence of a series of socioeconomic variables on their risk attitudes our results show that farmers exhibit risk averse behavior and that risk attitudes are related to a series of socioeconomic characteristics in particular the belief that the farm will continue after the producer retires is found to increase the degree of risk aversion while age is found to have nonlinear effects on risk aversion off farm income especially from nonagricultural activities is found to reduce risk aversion neither the educational level of the producer nor the presence of dependents on the household is found to have an effect on risk preferences regarding the production technology we find that land labor and fitosanitary products are risk reducing inputs whereas capital seeds and fertilizer all increase risk

rate of time preference intertemporal elasticity of substitution and level of wealth the rate of time preference rtp and the intertemporal elasticity of substitution ies are two important factors shaping intertemporal consumption decisions models in which the rtp and or the ies differ systematically between rich and poor households have different empirical and policy implications for economic development growth and the distribution of income and consumption from those of standard models in which these parameters are constant across households in this chapter we estimate a model in which both rtp and ies are allowed to differ across rich and poor households using household level panel data from india our empirical results are consistent with the view that the rtp is constant across poor and rich households but the ies is larger for the rich than it is for the poor

risk sharing within families evidence from the health and retirement study abstract we report strong empirical support for the presence of self interest based risk sharing within extended families in the u s a standard model of self interest based risk sharing predicts that the share of current family income consumed by a child positively depends on that child s permanent income it follows that parental transfers to children that are expected to earn more over the period of risk sharing arrangements should exhibit less sensitivity to the recipient s income fluctuations we test this distinguishing prediction of self interest based risk sharing by exploiting the variation of transfer receipts among siblings observed over 17 years of longitudinal data spanned by the health and retirement study

risk and insurance in village india comment the protection of poor households in high risk agrarian economies from shocks to their incomes has often been seen as a compelling motive for various forms of policy intervention including transfers of cash or food credit subsidies and public employment schemes for a survey see lipton and ravallion 1995 the desirability of such safety net policies clearly depends on how well pre existing risk sharing arrangements work while it is commonly thought that without effective policy intervention rural households are vulnerable to village wide shocks such as adverse prices or poor rains it is less clear to what extent risk sharing institutions within the village mitigate the effects of idiosyncratic income risk stemming for instance from ill health or localized crop damage 2 several recent papers have used household level data to implement tests of risk sharing that might inform such concerns 3 these tests are based on the proposition that with perfect risk sharing consumption at the household level should be insured against idiosyncratic risks and thus depend solely on the realization of the aggregate risk wilson 1968 diamond 1967 townsend 1994 tests this implication of perfect intra village risk sharing using longitudinal household data on consumptions and incomes for three villages in india he reports that the full insurance hypothesis provides a surprisingly good benchmark in that household consumptions co move and do not appear to be much influenced by contemporaneous own income our aim here is to examine the robustness of this potentially important finding we have two main concerns the first is that the specification townsend adopts potentially biases his test towards the null hypothesis of full insurance because it yields inconsistent estimates of the key test parameter under a plausible alternative we therefore estimate a different specification that generates consistent estimates under both the null and the alternative our second concern is that a particular form of measurement error in the consumption data townsend uses may have further biased his results toward the null hypothesis of full insurance to address this concern we use an instrumental variables procedure when we implement the test of consumption insurance with townsend s consumption data we also re estimate the test equations with a measure of consumption derived from the same underlying primary data by an alternate method finally townsend reports 1discussions with robert townsend stimulated our interest in this investigation the staff of the

decreasing relative risk aversion risk sharing and the permanent income hypothesis this article develops a method for testing the risk sharing hypothesis rsh against various versions of the permanent income hypothesis pih while allowing for heterogeneity in risk preferences across households using 1 year and longer differences in household total nondurable consumption data from indian villages we find evidence that favors the rsh over the pih at the village level

do agglomeration externalities affect firm survival abstractdo agglomeration externalities affect firm survival regional studies this paper analyses the impact of spatial agglomeration externalities on italian start up firms survival italy represents a relevant case study given the well known role of firm clusters in the country s economic development results obtained support the hypothesis that industry variety reduces the likelihood of firm exit specifically related variety which contributes to the generation and diffusion of new knowledge has a positive effect on firm survival in manufacturing sectors while unrelated variety which may work as a portfolio strategy plays a positive role in services sectors localization economies positively influence firm survival only in services sectors finally urban density is not robust to the control for firm characteristics

a microeconometric comparison of household behavior between countries this article reviews the methodological issues associated with estimating and testing competitive markets with panel data and applies it to an important new arena international economics we investigate differences in housing consumption and male labor supply across households in germany and the united states with data from the german socio economic panel and the panel study of income dynamics observations are treated as equilibrium outcomes generated by a set of competitive markets that accommodate varying degrees of integration after controlling for differences in the sample populations and aggregate shocks we find that the estimated structural parameters are surprisingly similar across these two countries

consumption risk sharing in italy this paper analyses the issue of consumption risk sharing in the 20 italian regions during the period 1983 94 the tests proposed allow for regional specific departures from the hypothesis of complete risk sharing and for the existence of non separabilities among groups of commodities empirical evidence suggests the rejection of the hypothesis of complete consumption risk sharing

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

consumption and labor supply with partial insurance an analytical framework we develop a model with partial insurance against idiosyncratic wage shocks to quantify risk sharing closed form solutions are obtained for equilibrium allocations and for moments of the joint distribution of consumption hours and wages we prove identification and demonstrate how labor supply data are informative about risk sharing the model estimated with us data over the period 1967 2006 implies that i 39 percent of permanent wage shocks pass through to consumption ii the share of wage risk insured increased until the early 1980s and iii preference heterogeneity is important in accounting for observed dispersion in consumption and hours jel e21 e23 e31 e52

production risk pesticide use and gm crop technology in south africa technology involving genetic modification of crops has the potential to make a contribution to rural poverty reduction in many developing countries thus far pesticide producing bacillus thuringensis bt varieties of cotton have been the main gm crops under cultivation in developing nations several studies have evaluated the farm level performance of bt varieties in comparison to conventional ones by estimating production technology and have mostly found bt technology to be very successful in raising output and or reducing pesticide input however the production risk properties of this technology have not been studied although they are likely to be important to risk averse smallholders this study investigates the output risk aspects of bt technology by estimating two flexible risk production function models allowing technology to independently affect the mean and higher moments of output the first is the popular just pope model and the second is a more general damage control flexible risk mode

precautionary saving credit constraints and irreversible investment theory and evidence from serniarid india this article investigates the extent to which poor households are discouraged from making a non divisible but profitable investment using data on irrigation wells in india we estimate the parameters of a structural model of irreversible investment results show that poor farmers fail to undertake a profitable investment that they could in principle self finance because the nondivisibility of the investment puts it out of their reach irreversibility constitutes an additional disincentive to invest simulations show that the availability of credit can dramatically increase investment in irrigation and that interest rate subsidization has little impact

the wider impacts of high technology employment evidence from u s cities abstract innovative high technology industries are commonly described as drivers of regional development tech workers earn high wages but they are also said to generate knock on effects throughout the local economies that host them spurring growth in jobs and wages in nontradable activities at the same time in iconic high tech agglomerations like the san francisco bay area the home of silicon valley the success of the tech industry creates tensions in part as living costs rise beyond the reach of many non tech workers across a large sample of u s cities this paper explores these issues systematically combining annual data on wages employment and prices from the quarterly census of employment and wages the department of housing and urban development and the consumer price index it estimates how growth in tradable tech employment affects the real living cost deflated wages of local workers in nontradable sectors results indicate that high technology employment has significant positive but modest effects on the real wages of workers in nontradable sectors these effects appear to be spread consistently across different kinds of nontradable activities in terms of substantive wider impacts tech appears benign though fairly ineffectual

why do cities pay more an empirical examination of some competing theories of the urban wage premium abstract ols regression identifies a 19 percent wage advantage for workers in large urban areas fixed effects estimation suggests that two thirds of this premium can be explained by cities attracting workers of higher unmeasured skills and ability the remaining wage premium is shown to consist of both level and growth elements the wage level effect is consistent with a productivity advantage for firms located in cities the wage growth effect is shown to relate in part to a cumulative advantage in the returns to job mobility for urban workers this last finding highlights the importance of coordination in urban labor markets

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

income risk macroeconomic and demographic change and economic inequality in japan abstract using an olg model with heterogeneous households we investigate the relationship among income risk macroeconomic and demographic changes and economic inequality between 1980 and 2000 in japan by decomposing the primary factors in earnings and consumption inequality into macroeconomic variables and the demographic variable we find that our model replicates the evolution of economic inequality in japan by performing counterfactual simulations we demonstrate that two factors changes in time varying macroeconomic factors and the unexpected decline in the total factor productivity growth rate played important roles in the increase in earnings and consumption inequality in the 1990s

housing urban growth and inequalities the limits to deregulation and upzoning in reducing economic and spatial inequality urban economics and branches of mainstream economics what we call the housing as opportunity school of thought have been arguing that shortages of affordable housing in dense agglomerations r

is specialization good for regional economic development kemeny t and storper m is specialization good for regional economic development regional studies debates about urban growth and change often centre on specialization however arguments linking specialization to metropolitan economic development contain diverse and sometimes conflicting claims is it better to be highly specialized or diversified does specialization refer to the absolute or relative scale of an activity in a region does specialization have static or evolutionary effects this paper investigates these questions in theoretical and empirical terms by analysing local agglomerations over time it is found that growing absolute specialization is positively linked to wages while changes in relative concentration are not significantly associated with wage dynamics

sustaining inter organizational relationships across institutional logics and power asymmetries the case of fair trade this paper explores an empirical puzzle namely how inter organizational relationships can be sustained between organizations that draw upon distinctive and potentially conflicting institutional logics under conditions of power asymmetry this research analyses cases of these relationships and suggests some key conditions underlying them examining relationships between fair trade organizations and corporate retailers a series of contingent factors behind the dynamic persistence of such relationships are proposed namely the presence of pre existing hybrid logics the use of boundary spanning discourses joint tolerance of conflict and co creation of common rules these four elements are supported by a fifth mediating factor i e the presence and use of a fair trade certification system in the collaboration the latter appears as a central vehicle facilitating cross logic relationships it can be seen as a boundary object embodying a series of narratives and discourses that are open to multiple interpretations corresponding to the dominant institutional logics of each partner organization

measuring risk attitudes among mozambican farmers abstract although farmers in developing countries are generally thought to be risk averse little is known about the actual form of their risk preferences in this paper we use a relatively large lab in the field experiment to explore risk preferences related to sweet potato production among a sample of farmers in northern mozambique a unique feature of this experiment is that it includes a large subsample of husband and wife pairs after exploring correlations between husband and wife preferences we explicitly test whether preferences follow the constant relative risk aversion crra utility function and whether farmers follow expected utility theory or rank dependent utility theory in generating their preferences we reject the null hypothesis that farmers preferences follow the crra utility function in favor of the more flexible power risk aversion preferences if we make the common crra assumption in our sample we poorly predict risk preferences among those who are less risk averse

decreasing relative risk aversion and tests of risk sharing the relative risk aversion rra coefficient of a household whose consumption is close to the subsistence level may be very high for example if consumption is exactly at the subsistence level the household may not be willing to bear any risk if this is the case then the rra coefficient must be a decreasing function of wealth for poor households therefore we should allow the possibility of decreasing rra drra in testing the full risk sharing hypothesis however existing tests in the empirical literature are derived using preferences that exhibit either increasing or constant rra even when they are applied to data containing low income households we therefore use a hyperbolic absolute risk aversion hara utility which implies increasing constant and decreasing rra as special cases to test full risk sharing hypothesis using the international food policy research institute ifpri and the international crops research institute of the semi arid tropics icrisat household level data sets we find evidence in support of the drra hypothesis along with evidence favoring full risk sharing hypothesis at the village level and evidence against the hypothesis at the inter village level when rra is restricted to be constant we replicate the previous results in the literature reject the full risk sharing hypothesis at both levels our tests however reject this restriction and favor drra in almost all cases these results suggest that it is important to allow for drra in testing the full risk sharing hypothesis when data containing low income households are investigated this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this this abstract was borrowed from another version of this item

estimating a dynamic model of household choices in the presence of income taxation the purpose of the article is to study the incentive and distributional consequences of income taxation the article analyzes tax changes in a dynamic setting the framework is estimated under a set of different identifying assumptions using parametric nonparametric and semiparametric techniques the empirical results focus on tax reforms in germany in the 1980s the article shows that these reforms did not significantly lower effective tax rates the findings also suggest that estimated elasticities for male labor supply are small ranging between 0 02 and 0 2

do stockholders share risk more effectively than nonstockholders abstract this paper analyzes the extent of risk sharing among stockholders and nonstockholders to evaluate the empirical importance of market incompleteness it is essential to determine whether idiosyncratic shocks are important for the wealthy who have access to better insurance opportunities but also face different risks than the average household we study a model where each period households decide whether to participate in the stock market by paying a fixed cost due to this endogenous entry decision the testable implications of perfect risk sharing take the form of a sample selection model which we estimate using a semiparametric gmm estimator proposed by kyriazidou 2001 using data from psid we strongly reject perfect risk sharing among stockholders but perhaps surprisingly do not find evidence against it among nonstockholders this result appears to be robust to several extensions this finding suggests further focus on risk factors that primarily affect the wealthy such as entrepreneu

household s risk attitudes in indonesian villages this paper estimates attitudes towards risk using data obtained through interviews of 400 households in villages in indonesia participants were invited to play investment games in order to identify household risk attitudes the game result supports the hypothesis of non decreasing partial relative risk aversion using an ordered probit model the determinants of risk attitude were investigated the results show that the variable of co residence is important an individual living with his or her parents is less risk averse than an individual in a nuclear household co residence can be viewed as a type of security blanket partial relative risk aversion decreases with the level of education and wealth

urban diversity and economic growth at the risk of some simplification it is possible to identify four periods of intense study of cities by economists each of these has led to an increased understanding of the economics of urban areas and the unique role played by cities in the modem economy the first of these periods occurred in the decade after world war i only about ten years after the truck revolutionized the transport of goods within urban areas this period included the first systematic empirical analysis of the forces affecting the location of firms and households within cities robert murray haig 1926 and a number of other microeconomists at columbia analyzed the spatial pattems of manufacturing activity in lower manhattan and in the rest of new york city haig jmd his colleagues devoted considerable attention to where things belong in an urban area p 402 providing the first systematic economic analysis of urban spatial structure for example they analyzed the garment industry concluding that it was destined by nature to disperse north of 14th street and predicting that it would follow the estabhshed spatial pattem of the cooperage barrelmaking industry standardization in size and quality of barrels had meant that identical barrels could be made throughout the new york metropolitan area even in new jersey and the introduction of the truck meant that they could be transported cheaply throughout the region and exported the second of these periods though not in chronological order began in the mid 1960s it formalized many of the insights about location incentives within urban areas which had been uncovered a half century before mixed them with the logic of heinrich von thunen s 1826 ancient theories about agricultural crops and land values and applied them to the hotisehold sector the works of william alonso 1964

the role of food stamps in consumption stabilization although the food stamp program is the largest universal entitlement program in the social safety net little is known about its stabilizing role in household income and consumption using data from the panel study of income dynamics spanning 1980 99 we estimate the volatility of income with and without food stamps coupled with a variance decomposition of consumption among families at high ex ante risk of food stamp participation food stamps reduced income volatility by about 12 percent and food consumption volatility by about 14 percent there was however a marked decline in consumption smoothing benefits of the program in the early 1990s relative to the 1980s

testing whether unemployment represents intertemporal labour supply behaviour in the lucas rapping 1969 model of the labour market fluctuations in unemployment represent individuals optimally adjusting their labour supply behaviour in response to fluctuations in wage rates over the business cycle in this paper i propose and implement a misspecification test of the lucas rapping treatment of unemployment as labour supply behaviour using panel data this test extends previous such work with micro data by simultaneously allowing for intertemporal substitution uncertainty and endogenous unemployment using the standard specification of intertemporal labour supply behaviour i find strong evidence against this interpretation of unemployment there are two possible interpretations of the test results the first is that it is necessary to turn to alternative models of the labour market in which unemployed workers are off a supply function the second is that the test results indicate the necessity of moving to more complex models of intertemporal substitution however given current econometric techniques and data sets these alternative models of intertemporal substitution will be extremely difficult to test

private pensions mortality risk and the decision to annuitize abstract this paper examines household decisions about whether or not to annuitize retirement resources a life cycle model of consumption implemented with the use of dynamic programming techniques is used to construct a utility based measure of annuity value for individuals and couples in the health and retirement survey variation in the calculated annuity equivalent wealth arises from differences in mortality risk marital status risk aversion and the presence of pre existing annuities such as social security i find that a one percentage point increase in the annuity equivalent wealth leads to nearly a one percentage point increase in the ex ante probability of annuitizing balances in defined contribution pension plans however because much of the variation in the expected annuity decision is left unexplained by the life cycle model other factors are also analyzed health status and an individual s time horizon for financial decision making are significant determinants of the decision there is no evidence that bequest motives are an important factor in making marginal annuity decisions

are rainfed agricultural households insured evidence from five villages in vidarbha india there are several studies on risk and insurance in village economies in the developing world however there is a lack of evidence for recent decades in spite of profound changes including structural transformation and widespread market liberalization in most regions in this paper i use primary panel data from five rainfed villages in a high risk region of india and find evidence of considerable exposure as well as vulnerability to idiosyncratic and covariate risks further there is significant wealth differentiated heterogeneity in vulnerability the findings help identify the scope of public policy in improving risk management in rainfed agriculture

the story of the moment risk averse cypriot farmers respond to drought management this article illustrates the importance of estimating risk preferences when evaluating water policy using agricultural production data from the kiti region of cyprus we estimate farmers risk preferences a la antle journal of business and economic statistics 1 192 201 1983 american journal of agricultural economics 69 509 22 1987 and show sensitivity to higher order moments of profit such as skewness we show that farmers in the kiti region are risk averse with risk premiums in the region of 20 of expected profit we use these estimates to analyse the impact of a water quota from the perspective of three policy makers who differ only in their understanding of farmers risk preferences we show in the case of kiti that policy makers who model risk preferences incorrectly that is either a assume risk neutrality or b ignore down side risk wrongly predict the magnitude and direction of input responses and therefore the magnitude of welfare changes this highlights the importance of accomm

risk sharing and industrial specialization regional and international evidence the authors provide empirical evidence that risk sharing enhances specialization in production to the best of their knowledge this well established and important theoretical proposition has not been tested before the empirical procedure is summarized as follows first the authors construct a measure of specialization in production and calculate an index of specialization for each of the european community ec and non ec oecd countries u s states canadian provinces japanese prefectures latin american countries and regions of italy spain and the united kingdom then they estimate the degree of capital market integration a measure of risk sharing within each of these groups of regions the ec countries the non ec oecd countries the united states canada japan italy spain and the united kingdom and rely on another author s estimate for latin america finally they perform a regression of the specialization index on the degree of risk sharing controlling for relevant economic variables they find a positive and significant relation between the degree of specialization of individual members of a group of countries provinces states or prefectures and the amount of risk that is shared within the group the authors perform regressions using variables such as shareholder rights and the size of the financial sector relative to gdp as instruments for the amount of inter regional risk sharing these regressions confirm that risk sharing facilitated by a favorable legal environment and a developed financial system is a direct causal determinant of industrial specialization this abstract was borrowed from another version of this item

the social security early entitlement age in a structural model of retirement and wealth abstract a structural life cycle model of retirement and wealth attributes retirement peaks at both ages 62 and 65 to social security rules and wide heterogeneity in time preferences those with high discount rates often retire at 62 they have few assets and heavily value lost benefits from working after 62 largely ignoring potential increases in later benefits declining actuarial adjustments beginning at 65 induce those with low discount rates to retire at 65 raising the social security early entitlement age to 64 induces 5 of the population to delay retiring shifting the retirement spike from 62 to 64

is the extended family altruistically linked direct tests using micro data this paper uses panel study of income dynamics data on parents and their adult children to test the standard altruism model this model predicts that within the extended family the distribution of consumption is independent of the distribution of resources the authors findings strongly reject this prediction copyright 1992 by american economic association

market incompleteness and the equity premium puzzle evidence from state level data abstract this paper investigates the importance of market incompleteness by comparing the rates of risk aversion estimated from complete and incomplete markets environments for the incomplete markets case we use consumption data for the 50 us states we find that the rate of risk aversion under the incomplete markets setup is much lower furthermore including the second and third moments of the cross sectional distribution of consumption growth in the pricing kernel lowers the estimate of risk aversion these findings suggest that market incompleteness ought to be seen as an important component of solutions to the equity premium puzzle