optimal nonparametric estimation of first price auctions this paper proposes a general approach and a computationally convenient estimation procedure for the structural analysis of auctioni data considering first price sealed bid auction models within the independent private value paradigm we show that the underlying distribution of bidders private values is identified from observed bids and the number of actual bidders without any parametric assumptions using the theoiy of minimax we establish the best rate of uniform convergence at which the latent density of private values can be estimated nonparametrically from available data we then propose a two step kernel based estimator that converges at the optimal rate

specific experience household structure and intergenerational transfers farm family land and labor arrangements in developing countries data from indian rural household survey was used to test th hypothesis that the coexistence in traditional rural societies of extended intergenerational families infrequent land sales and high reliance on family members as farm laborers is the result of the economic advantages which accrue from the knowledge gained by farming a particular ploy of land over a long period of time the land specific experience of elderly members of a intergenerational household who farmed the land as a child and then as an adult are expecially critical in adverse weather years most previous investigators attributed the existence of multigenerational households the use of family members rather than hired laboreds and the infrequency of land sales to deficiencies in the market i e labor market imperfections and an absence of capital insurance and asset markets in the present investigations these same characteristics are viewed as having an economic advantages a model for estimating the contribution of the experience of the elderly household members to agricultural profits was developed and applied to data from a 3 year panel study of 2900 indian rural farm households the data was collected between 1968 71 by the national council of applied economic research the survey collected information on farm profits farm inputs demographic characteristics and the effects of weather conditions on profits a major limitation of the study was a lack of information on the duration of land ownership age of household members was substituted as a proxy for duration of ownership findings were consistent withe the hypothesis in poor agricultural years gross returns for households which contained an elderly household member were greater than the gross returns for comparable households which did not contain an elderly member the economic advantages of specific knowledge embodied in the experienced elderly farmer were comparable to the economic advantages which accrued to households whose members were more educated the hypothesis cannot fully explain the existence of intergenerational families since there is a relatively large proportion of such families among nonfarm families in many countries including india findings suggest that intergenerational families may provide for more occupational diversity and thereby reduce income risks the specific experience hypothesis has policy implications if technological changes are introduced the value of specific experience may be lost and the frequency of intergenerational households may decline the hypothesis may also explain why farmers are reluctant to agree to land redistribution and consolidation schemes this reluctance may disappear after sufficient technological change has occurred

rotating savings and credit associations the choice between random and bidding allocation of funds abstract the performance and efficiency of random and bidding rotating savings and credit associations roscas are compared within a game theoretic model information about individuals return from investing the rosca pool is assumed to be asymmetric and imperfect and rosca members are allowed to use funds raised outside the rosca to supplement the funds raised in the rosca the conclusion is that although both types of roscas can improve individual welfare the bidding rosca is preferred to the random rosca except when credit from other sources is costly and types of rosca members are not widely dispersed

the economics of roscas and intrahousehold resource allocation this paper investigates individual motives to participate in rotating savings and credit associations roscas detailed evidence from roscas in a kenyan slum nairobi suggests that most roscas are predominantly composed of women particularly those living in a couple and earning an independent income to explain this phenomenon we propose an argument based on conflictual interactions within the household participation in a rosca is a strategy a wife employs to protect her savings against claims by her husband for immediate consumption the empirical implications of the model are then tested using the data collected in kenya

credit markets in northern nigeria credit as insurance in a rural economy this article addresses the issues of imcomplete markets and imperfect information in the context of credit markets in rural northern nigeria in much recent theoretical literature the problems of moral hazard and adverse selection are assumed to be decisive for the organization of agrarian institutions in contrast it is found that in the four villages surveyed credit transactions take advantage of the free flow of information within rural communities information asymmetries between borrower and lender are unimportant and their institutional consequences the use of collateral and interlinked contracts are absent credit transactions play a direct role in pooling risk between households through the use of contracts in which the repayment owed by the borrower depends on the realization of random production shocks by both the borrower and the lender

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

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

trend inflation and monetary policy regimes in japan abstract this paper examines the dynamics of trend inflation in japan over the last three decades based on the smooth transition phillips curve model we find that there is a strong connection between the trend inflation and monetary policy regimes the results also suggest that the introduction of the inflation targeting policy and quantitative and qualitative easing in the beginning of 2013 successfully escaped from the deflationary regime but were not enough to achieve the 2 inflation target finally our results indicate the significance of exchange rates in explaining the recent fluctuations of inflation and the importance of oil and stock prices in maintaining the positive trend inflation regime

approximating a cost of living index from demand functions a retrospect abstract this paper discusses several methods for approximating a cost of living index that are based on knowledge of the demand functions centered around a recently discovered article by malmquist it discusses the mean of over and undercompensation frisch s double expenditure method and some proposals of vartia

inflation dynamics when inflation is near zero this paper discusses the likely evolution of u s inflation in the near and medium term on the basis of 1 past u s experience with very low levels of inflation 2 the most recent japanese experience with deflation and 3 recent u s micro evidence on downward nominal wage rigidity our findings question the view that stable long run inflation expectations and downward nominal wage rigidity will provide sufficient support to prices such that deflation can be avoided we show that an inflation model fitted on japanese data over the past 20 years which accounts for both short and long run inflation expectations matches the recent u s inflation experience quite well while the model indicates that u s inflation might be subject to a lower bound it does not rule out a prolonged period of mild deflation going forward in addition our micro evidence on wages suggests no obvious downward rigidity in the firm s wage costs downward rigidity in individual wages notwithstanding as a consequence downward nominal wage rigidity may provide little offset to deflationary pressures in the current u s situation despite some circumstantial evidence that this channel might have been at work in the past

rosca composition and repayment evidence from taiwanese bidding roscas abstractrotating savings and credit associations roscas are widespread and remain a key financial management tool for poor individuals we analyse data from taiwanese bidding roscas and focus on how social relationships within the group influence contribution behaviour and rosca failure we find that less socially connected participants were more likely to receive the pot early in the cycle which increases their incentive to default yet contrary to accepted wisdom groups including more outsiders were not more likely to experience repayment problems our results highlights how bidding roscas can be a versatile device that provide profitable savings while allowing for emergency credit

is inflation sticky abstract new keynesian sticky price models predict that monetary policy can affect real variables however they also predict that inflation can be reduced without depressing output or employment in fact bringing down inflation is costly presenting a challenge to the new keynesian model two departures from the new keynesian model predict costly disinflation one assumes sticky inflation rather than sticky prices while the other assumes less than perfectly rational expectations taking into account information from surveys of inflation expectations i find the evidence suggests that inflation is not sticky and that inflation expectations are less than perfectly rational

are oil shocks inflationary asymmetric and nonlinear specifications versus changes in regime this paper identifies a structural break in core u s inflation phillips curves such that oil prices contributed substantially before 1981 but since that time pass through has been negligible this characterization is robust to a variety of re specifications and fits the data better than asymmetric and nonlinear oil price alternatives evidence does not support the hypotheses that declining energy intensity or deregulation of energy producing and consuming industries played an important role monetary policy did not itself become less accommodative of oil shocks but may have helped create a regime where inflation is less sensitive to price shocks more generally

wealth weather risk and the composition and profitability of agricultural investments despite the growing evidence that farmers in low income environments are risk averse there has been little empirical evidence on the importance of risk in shaping the actual allocation of production resources among farmers differentiated by wealth the authors use panel data on investments in rural india to examine how the composition of productive and nonproductive asset holdings varies across farmers with different levels of total wealth and across farmers facing different degrees of weather risk income variability is a prominent feature of the experience of rural agents in low income countries the authors report evidence based on measures of rainfall variability that the agricultural investment portfolio behavior of farmers in such settings reflects risk aversion due evidently to limitations on consumption soothing mechanisms such as crop insurance or credit markets the authors results suggest that uninsured weather risk is a significant cause of lower efficiency and lower average incomes a one standard deviation decrease in weather risk measured by the standard deviation of the timing of the rainy season would raise average profits by up to 35 percent among farmers in the lowest wealth quartile moreover rainfall variability induces a more unequal distribution of average incomes for a given distribution of wealth wealthier farmers are willing to absorb significant risk without giving up profits to reduce production risk smaller farmers have to invest their limited wealth in ways that reduce their exposure to risk at the cost of lower profit rates the authors found that at high levels of rainfall variability differences in rates of profit per unit of agricultural assets were similar across classes of wealth but over the sample range of rainfall variability these rates of profit were always higher for the poorer farmers than for the wealthier ones suggesting that the disadvantages of small farmers in risk diffusion are more than offset by their labor cost advantage

the role of roscas lumpy durables or event insurance abstract the stylised representation of roscas in recent theoretical work as a device driven by impatience for lumpy consumer durables misses the important insurance role of this pervasive informal financial institution in the developing world that insurance role explains why roscas with concurrent bidding are the dominant means of determining the sequence and pricing of allocations in roscas so structured the recipient and the implied interest rate for each period s allotment are determined by competitive bids at the time of distribution we use an example of an actual bidding rosca to demonstrate the extent of unpredictable needs for funds as reflected in the volatility of interest rates implicit in winning bids

auctions with price proportional benefits to bidders after some auctions including amish estate sales and buyer rings knockout auctions each bidder receives a share of the revenue generated by the auction we show that in the symmetric case equilibrium bids in both first price sealed bid auctions and oral auctions increase as each bidder s share increases in the case of independent signals oral auctions result in higher expected equilibrium prices than do first price sealed bid auctions journal of economic literature classification number d44

tracking u s inflation expectations with domestic and global indicators abstract are foreign variables important for tracking u s inflation expectations this paper estimates a reduced form model that takes both domestic and global indicators of economic slack and inflationary pressures into account our main findings point towards the instability of the estimated parameters over the last four decades in particular global indicators appear to have played a statistically significant role in shaping forecasters expectations until the mid 1980s by contrast the u s monetary policy stance turns out to be relevant in the 1980s and 1990s we relate this finding to the more aggressive monetary policy conduct implemented by the fed since the end of the volcker experiment

private information and altruism in bidding roscas this article studies how altruism improves allocations in a private information environment where strategic behaviour reduces economic welfare a theoretical analysis establishes that in an environment characterised by uncertainty and private information outcomes of auctions in rotating savings and credit associations roscas are more efficient when bidders preferences are altruistic rather than selfish a semi parametric structural estimation technique for rosca auctions is presented a parametric structural estimation identifies interactions between group characteristics and bidder altruism it is found that effective leadership and intra group diversity are associated with a greater extent of bidder altruism and thus more efficient intra rosca allocations

effects of technology on incentive design of share contracts do observed contracts have the properties predicted by the principal agent model with moral hazard in contract theory this paper tests the predictions of such an agency model in the context of sharecropping in north india the most well known explanation for sharecropping is based on the principal agent model with a trade off between risk and incentives even though sharecropping contracts are quite prevalent in rural areas of developing countries there is very little evidence on factors determining the instruments used to provide incentives in such contracts using information in the data giving rise to exogenous variation in technology across regions this paper tests for the effect of cultivation technology on the incentive structure of share contracts as predicted by the agency model existing empirical evidence on sharecropping seems to indicate that yield on sharecropped plots is lower than on owner operated plots i e there is an incentive problem or moral hazard radwan a shaban 1987 jean jacques laffont and mohamed s matoussi 1995 there is some informal evidence that landowners use various mechanisms to improve efficiency in sharecropping by participating in cost sharing and by repeating contracts robert m townsend and rolf a mueller 1994 examine the nature of these mechanisms in detail but their data do not permit econometric tests more generally though the principal agent model has been widely studied there is little existing empirical evidence for it michael c jensen and kevin j murphy 1990 find that executive compensation is only weakly sensitive to firm performance in recent work rajesh k aggarwal and andrew a samwick 1999 find that executive s pay performance sensitivity is decreasing in the volatility of firm s performance however their results are sensitive to the inclusion of other characteristics of the firms in the regressions as pierre a chiappori and bernard salanie 2003 note in a recent survey empirical work on contract theory using nonexperimental data needs to be careful in adequately correcting for underlying heterogeneity across agents otherwise the parameters of interest would be hard to interpret if such heterogeneity affects contract choice for example douglas w allen and dean lueck 1995 find no role for risk in the choice between share contract and fixed rent contracts but they do not take the heterogeneity across agents into account in a recent paper addressing the issue of heterogeneity across agents ackerberg and botticini 2002 find a significant role for risk in the choice between share contract and fixed rent contract after correcting for endogenous matching between landowners and tenants they find that wealthier tenants are more likely to be in fixed rent contracts in this paper we are able to address such estimation issues and check for the robustness of our results regarding the relationship between technology and the design of share contracts department of economics pennsylvania state university university park pa 16801 e mail pxp22 psu edu this paper derives from related work done earlier in my dissertation i am grateful to two anonymous referees for very helpful suggestions i thank james heckman lars stole robert townsend kala krishna and seminar participants for useful comments financial support from the andrew mellon foundation for both rounds of fieldwork is gratefully acknowledged any errors remain my own 1 see nirvikar singh 1991 for a survey of various theories of sharecropping including steven n cheung 1969 c h hanumantha rao 1971 joseph e stiglitz 1974 david newbery and stiglitz 1979 avishay braverman and stiglitz 1982 mukesh eswaran and ashok kotwal 1985 and sudhir shetty 1988 a common feature of the different theories is an emphasis on uncertainty and asymmetric information 2 an exception is daniel a ackerberg and maristella botticini 2002 ackerberg and botticini differ from our paper in that they examine the role of tenant s risk aversion in the choice between fixed rental contract and share contract they do not examine share contracts per se 3 see john e core and wayne guay 2000

smoothing consumption by smoothing income hours of work responses to idiosyncratic agricultural shocks in rural india while research has demonstrated that farm households in developing economies are able to protect consumption from idiosyncratic crop shocks little evidence shows how this is achieved this paper examines the extent to which labor markets allow households to shift labor from farm to off farm employment and the extent to which such a shift explains the observed lack of correlation between consumption and idiosyncratic crop shocks the empirical analysis uses a novel measure of the idiosyncratic crop income shock which utilizes information on start of season cropping choices to more accurately estimate household expectations of weather

the economics of rotating savings and credit associations evidence from the jamaican partner abstract using a unique sample of rotating savings and credit association rosca members from jamaica we provide the first econometric tests of the recent theoretical advances in the literature on roscas and find considerable support for an economic theory of roscas we find for example that payments to the rosca leader significantly enhance the sustainability of the rosca and that the contractual relationship between the leader and other rosca members is transaction cost minimizing when the degree of asset specificity is higher the contract is more flexible other theoretical predictions we validate are the inverse relationship between size of rosca and size of contribution and the use of rosca funds for durable goods purchase

experimental evidence on inflation expectation formation using laboratory experiments within a new keynesian sticky price framework we study the process of inflation expectation formation we focus on adaptive learning and rational expectations contrary to the previous literature that mostly studied simple heuristics using a test for rational expectations that allows heterogeneity of expectations we find that we cannot reject rationality for about 40 of subjects more than 20 of subjects are also best described by adaptive learning models where they behave like econometricians and update their model estimates every period however rather than using a single forecasting model switching between models describes their behavior better switching is more likely to occur when experimental economy is in a recession

rotating savings and credit associations when participants are risk averse we model rotating savings and credit associations roscas among risk averse participants who experience privately observed income shocks a random rosca is not advantageous whereas a bidding rosca is if temporal risk aversion is less pronounced than static risk aversion the payoff scheme of a bidding rosca facilitates risk sharing in the presence of information asymmetries the risk sharing performance of a simple arrangement where a group of homogenous individuals runs several bidding roscas simultaneously is as good as that of a linear risk sharing contract and is more enforceable because it carries a fixed rather than a variable contribution

mosak s equality and the theory of duality slutsky in the interpretation of the substitution matrix in the fundamental equation of value theory 2 slutsky s interpretation involves a compensation of the change in real income caused by a price change that makes possible the purchase of the same quantities of all the goods that had formerly been bought 13 while hicks compensation keeps the consumer on the same utility level as before the price change 4 it is known that when the price change is infinitesimal the hicks substitution matrix is equal to the slutsky matrix we will call this mosak s equality mosak s equality has played an important role in index number theory the price index that truly reflects the welfare change should be based on the hicksian compensation such an index is difficult to compute however because utility levels are not observable instead the laspeyres index is widely adopted in practice this index is based on the slutsky compensation since it indicates the change in income that would be needed in the current year in order to buy the commodity bundle bought in the base year mosak s equality reveals that for small price changes the laspeyres index is a good approximation to the ideal index 5 despite its practical importance mosak s equality has been given only a rather cumbersome proof 6 the aim of the present paper is to give a new proof of mosak s equality based on the principles of duality theory like the duality proofs of many other theorems this proof is simpler and more transparent than the traditional one

risk sharing and information in village economies arrangements for achieving efficient risk sharing vary depending on the information available to agents in the economy the usual euler equation restricts efficient allocations in an economy which obeys the permanent income hypothesis while efficient allocations in an economy with private information and long term contracts satisfy a symmetric restriction but not the euler equation full insurance arrangements are unique in that they satisfy both restrictions we look at an environment in which it seems likely that long term contracts play a role in mitigating the effects of private information three village economies in south india the evidence that consumption allocations satisfy the private information restriction is quite strong for households in two of the three villages the evidence for the third village suggests that while consumption for some households satisfies the private information restrictions other households consumption obey the permanent income hypothesis

consumption smoothing migration and marriage evidence from rural india a significant proportion of migration in low income countries particularly in rural areas is composed of moves by women for the purpose of marriage we seek to explain these mobility patterns by examining marital arrangements among indian households in particular we hypothesize that the marriage of daughters to locationally distant dispersed yet kinship related households is a manifestation of implicit interhousehold contractual arrangements aimed at mitigating income risks and facilitating consumption smoothing in an environment characterized by information costs and spatially covariant risks analysis of longitudinal south indian village data lends support to the hypothesis marriage cum migration contributes significantly to a reduction in the variability of household food consumption farm households afflicted with more variable profits tend to engage in longer distance marriage cum migration the hypothesized and observed marriage cum migration patterns are in dissonance with standard models of marriage or migration that are concerned primarily with search costs and static income gains

impact of village savings and loan associations evidence from a cluster randomized trial the vast majority of the world s poor live in rural areas of developing countries with little access to financial services setting up village savings and loan associations vslas has become an increasingly widespread intervention aimed at improving local financial intermediation using a cluster randomized trial we investigate the impact of vslas in northern malawi over a two year period we find evidence of positive and significant intention to treat effects on several outcomes including the number of meals consumed per day household expenditure as measured by the usaid poverty assessment tool and the number of rooms in the dwelling this effect is linked to an increase in savings and credit obtained through the vslas which has increased agricultural investments and income from small businesses