financial illiteracy and pension contributions a field experiment on compound interest in china i conduct a field experiment to study the relationship between peoples misunderstanding of compound interest and their pension contributions in rural china i find that explaining the concept of compound interest to subjects increased pension contributions by roughly 40 the treatment effect is larger for those who underestimate compound interest than for those who overestimate compound interest moreover financial education enables households to partially correct their misunderstanding of compound interest i structurally estimate the level of misunderstanding of compound interest and conduct a counterfactual welfare analysis lifetime utility increases by about 10 if subjects misunderstanding of compound interest is eliminated authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

dynamic coalition formation and the core this paper presents a dynamic model of endogenous coalition formation in cooperative games with transferable utility tu the players are boundedly rational at each time step a player decides which of the existing coalitions to join and demands a payoff these decisions are determined by a best reply rule given the coalition structure and allocation in the previous period further the players experiment with myopically suboptimal strategies whenever there are potential gains from trade we establish an isomorphism between the set of absorbing states of the process and the set of core allocations and show that the process converges to one of these states with probability one whenever the core is non empty these results do not require superadditivity of the characteristic function and they carry over to the case of coalitional values depending on the coalition structure and to non transferable utility ntu games

two stage residual inclusion estimation addressing endogeneity in health econometric modeling the paper focuses on two estimation methods that have been widely used to address endogeneity in empirical research in health economics and health services research two stage predictor substitution 2sps and two stage residual inclusion 2sri 2sps is the rote extension to nonlinear models of the popular linear two stage least squares estimator the 2sri estimator is similar except that in the second stage regression the endogenous variables are not replaced by first stage predictors instead first stage residuals are included as additional regressors in a generic parametric framework we show that 2sri is consistent and 2sps is not results from a simulation study and an illustrative example also recommend against 2sps and favor 2sri our findings are important given that there are many prominent examples of the application of inconsistent 2sps in the recent literature this study can be used as a guide by future researchers in health economics who are confronted with endogeneity in their empirical work

an empirical analysis of competitive nonlinear pricing abstract we estimate a model of competitive nonlinear pricing with multidimensional preference heterogeneity using individual level data on advertisements bought by local businesses e g doctors electricians from two yellow page directories in one u s city market variation in individual choices and payments allows us to identify the joint density of preferences marginal costs of publishing and common utility parameters our estimates suggest substantial welfare loss due to asymmetric information comparing duopoly outcomes with counterfactual monopoly outcomes we find that with less competition i producer surplus increases substantially ii more low type consumers are excluded iii product variety increases but benefits accrue only to the high type consumers iv total consumer surplus decreases v but its distribution across consumers does not change

pricing and welfare in health plan choice premiums in health insurance markets frequently do not reflect individual differences in costs either because consumers have private information or because prices are not risk rated this creates inefficiencies when consumers self select into plans we develop a simple econometric model to study this problem and estimate it using data on small employers we find a welfare loss of 2 11 percent of coverage costs compared to what is feasible with risk rating only about one quarter of this is due to inefficiently chosen uniform contribution levels we also investigate the reclassification risk created by risk rating individual incremental premiums finding only a modest welfare cost

toward the fair sharing of profit in a supply network formation abstract the design of a supply chain network can be interpreted as a coalition formation problem in a cooperative game theory and formulated as a linear production game lpg the companies that are members of the optimal coalition share their manufacturing assets and resources to produce a set of end products and globally maximize their profits by selling them in a market this paper investigates the possibility of combining the requirement of coalition stability with a fair allocation of profits to the participants it is shown that in general the purely competitive allocation mechanism does not exhibit the property of fairness a technique is proposed to construct a stable and fair allocation system when the core of the game does not exclusively contain a set of competitive allocations

health and mortality delta assessing the welfare cost of household insurance choice we develop a pair of risk measures health and mortality delta for the universe of life and health insurance products a life cycle model of insurance choice simplifies to replicating the optimal health and mortality delta through a portfolio of insurance products we estimate the model to explain the observed variation in health and mortality delta implied by the ownership of life insurance annuities including private pensions and long term care insurance in the health and retirement study for the median household aged 51 to 57 the lifetime welfare cost of market incompleteness and suboptimal choice is 3 2 of total wealth

observing unobservables identifying information asymmetries with a consumer credit field experiment information asymmetries are important in theory but difficult to identify in practice we estimate the presence and importance of hidden information and hidden action problems in a consumer credit market using a new field experiment methodology we randomized 58 000 direct mail offers to former clients of a major south african lender along three dimensions i an initial offer interest rate featured on a direct mail solicitation ii a contract interest rate that was revealed only after a borrower agreed to the initial offer rate and ii a dynamic repayment incentive that was also a surprise and extended preferential pricing on future loans to borrowers who remained in good standing these three randomizations combined with complete knowledge of the lender s information set permit identification of specific types of private information problems our setup distinguishes hidden information effects from selection on the offer rate via unobservable risk and anticipated effort from hidden action effects via moral hazard in effort induced by actual contract terms we find strong evidence of moral hazard and weaker evidence of hidden information problems a rough estimate suggests that perhaps 13 to 21 of default is due to moral hazard asymmetric information thus may help explain the prevalence of credit constraints even in a market that specializes in financing high risk borrowers

time related characteristics of tenancy contracts and investment in soil conservation practices we present a dynamic model that shows how different types of land tenancy contracts and their time related characteristics influence farmers decisions to invest in soil improvement and productive inputs using recent household and plot level data from the brong ahafo region in ghana we analyze the impact of land tenancy arrangements contract duration as well as the number of times the contract has been renewed in the past on the intensity of investment in soil conservation measures such as ditches and farmyard manure and productive inputs like chemical fertilizer the empirical findings generally confirm the predictions of the theoretical model and reveal that the intensity of investments on different plots cultivated by a given farmer varies significantly with the type of tenancy arrangement on the plot as well as the time related characteristics of the contract

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

liquidity constraints and imperfect information in subprime lending ditions for precisely the population that is most likely to have a difficult time obtaining credit those with low incomes and poor credit histories these consumers who typically cannot qualify for regular bank loans comprise the so called subprime market because the company we study originates subprime loans its loan applications and transaction records provide an unusual win dow into the consumption and borrowing behavior of households that are rationed in primary credit markets moreover we track loan repayments allowing us to analyze the difficulties in lending to the subprime population we begin by documenting the importance of short term liquidity constraints for individuals in our sample we present two pieces of evidence both are based on purchasing behavior and indicate a high sensitivity to cash on hand first we document a dramatic degree of demand seasonality associated with tax rebates overall demand is almost 50 percent higher during tax rebate season than during other parts of the year this seasonal effect varies with household

perfect competition in markets with adverse selection this paper proposes a perfectly competitive model of a market with adverse selection prices are determined by zero profit conditions and the set of traded contracts is determined by free entry crucially for applications contract characteristics are endogenously determined consumers may have multiple dimensions of private information and an equilibrium always exists equilibrium corresponds to the limit of a differentiated products bertrand game we apply the model to establish theoretical results on the equilibrium effects of mandates mandates can increase efficiency but have unintended consequences with adverse selection an insurance mandate reduces the price of low coverage policies which necessarily has indirect effects such as increasing adverse selection on the intensive margin and causing some consumers to purchase less coverage

paying for health insurance the trade off between competition and adverse selection we use data on health plan choices by employees of harvard university to compare the benefits of insurance competition with the costs of adverse selection moving to a voucher type system induced significant adverse selection with a welfare loss of 2 to 4 percent of baseline spending but increased competition reduced harvard s premiums by 5 to 8 percent the premium reductions came from insurer profits so while harvard was better off the net effect for society was only the adverse selection loss adverse selection can be minimized by adjusting voucher amounts for individual risk we discuss how such a system would work governments are increasingly turning to market forces as a way to limit the cost of social insurance traditionally social insurance programs were operated as nonmarket goods governments mandated participation in a central program collected revenues to finance the program and ran the insurance system there was no role for competition among suppliers in providing the basic benefit as the costs of social insurance have increased however the centralized model of social insurance is coming under increasing strain in the united states for example recent proposals have called for replacing the medicare program with a health care voucher for the elderly aaron and reischauer 1995 cutler 1996 the voucher would guarantee people a basic insurance plan but the plans would be privately run competition among plans would generate plan premiums and enrollments similarly longstanding proposals for social security reform have called for replacing the current system with a system of individual accounts where people would make saving investment and annuitization decisions on their own advisory council on social security 1996 feldstein 1996 the trend is not just domestic in the united kingdom the national health service has moved to encourage more competition in recent years with the establishment of hospital trusts that bid for patients and partially fixed payments to physicians

land tenure differences and investment in land improvement measures theoretical and empirical analyses this article develops a theoretical framework to examine the relationship between land tenure arrangements and households investment in soil improving and conservation measures it then analyzes this relationship with a multivariate probit model based on detailed plot level data from villages in the brong ahafo region of ghana a major hypothesis tested is that investment in productivity enhancing and conservation techniques are influenced by land tenure arrangements the theoretical analysis and empirical results generally reveal that land tenure differences significantly influence farmers decisions to invest in land improving and conservation measures the findings also show that tenure security does affect farm productivity

estimation in a class of simultaneous equation limited dependent variable models estimation in a class of simultaneous equation limited dependent variable models is considered the minimum chi squared method is used to compare the asymptotic relative efficiency of marginal and new conditional maximum likelihood estimators for this class of models efficient minimum chi squared estimation procedures are described a two step algorithm based on a conditional maximum likelihood estimator provides a natural framework for both computing a linearized and locating the joint maximum likelihood estimator the unimodality of the simultaneous equation tobit likelihood function is proved and this model is used to illustrate the empirical application of some of the estimators considered in the paper the relative efficiency of these estimators in the simultaneous equation tobit model is examined in a set of monte carlo experiments many applications of microeconomic theory to individual data face the joint problems of censoring and simultaneity in particular the dependent variable under investigation may not be continuously observed and some of the conditioning variables representing the outcome of other decisions by the individual may be simultaneously determined smith and blundell 1986 developed an asymptotically efficient test for exogeneity or simultaneity in the simultaneous equation tobit model as a byproduct a conditional maximum likelihood estimator was obtained which is consistent under the alternative hypothesis of simultaneity nelson and olsen 1978 amemiya 1978 1979 and heckman 1978 consider a number of consistent marginal maximum likelihood estimators based on marginal maximum likelihood estimators of the reduced form parameters for the probit and tobit models in contrast the estimator derived from smith and blundell 1986 is based on the corresponding conditional maximum likelihood estimators this paper is concerned with estimation in a class of simultaneous limited dependent variable regression models which includes the simultaneous probit and tobit models as special cases analogous marginal and conditional maximum likelihood estimators to those of nelson and olsen 1978 amemiya 1978 1979 heckman 1978 and smith and blundell 1986 are derived and other new estimators are suggested the minimum chi squared approach discussed by ferguson 1958 malinvaud 1970 and rothenberg 1973 is used to compare the asymptotic relative efficiency of various estimators considered a simple two step algorithm based on the conditional maximum likelihood

improving the efficiency of probit estimators the efficiency with which coefficients in probit mod els are estimated is improved by exploiting data on continuous ancillary variates in this paper the resulting gains in efficiency are examined and illustrative calculations are provided extra precision is achieved at the cost of making an extra assumption but this assumption can be tested it is shown that fully efficient maximum likelihood estimation of the probit model with a continuous ancillary variate can be achieved by a simple two step procedure involving an ordinary least squares and a probit estimation

selection in health insurance markets and its policy remedies selection adverse or advantageous is the central problem that inhibits the smooth efficient functioning of competitive health insurance markets even and perhaps especially when consumers are well informed decision makers and insurance markets are highly competitive and offer choice such markets may function inefficiently due to risk selection selection can cause markets to unravel with skyrocketing premiums and can cause consumers to be under or overinsured in its simplest form adverse selection arises due to the tendency of those who expect to incur high health care costs in the future to be the most motivated purchasers the costlier enrollees are more likely to become insured rather than to remain uninsured and conditional on having health insurance the costlier enrollees sort themselves to the more generous plans in the choice set these dual problems represent the primary concerns for policymakers designing regulations for health insurance markets in this essay we review the theory and evidence concerning selection in competitive health insurance markets and discuss the common policy tools used to address the problems it creates we emphasize the two markets that seem especially likely to be targets of reform in the short and medium term medicare advantage the private plan option available under medicare and the state level individual insurance markets

temporary migration human capital and language fluency of migrants this paper investigates human capital investment of immigrants whose duration in the host country is limited either by contract or by their own choice the first part of the paper develops a model which distinguishes between temporary migrations where the return time is exogenous or optimally chosen the analysis has a number of interesting implications for empirical work some of which are explored in the second part of the paper the analysis focuses on language capital and tests the hypothesis that country specific human capital investments are sensitive to the duration in the host country s labour market the results show that the acquisition of language capital is sensitive to the intended duration in the host country

claim timing and ex post adverse selection many health care treatments are not urgent and may be delayed if patients so choose because insurance coverage is typically determined by the treatment date individuals may have incentives to strategically delay treatments to minimize out of pocket costs the strategic delay of treatment a particular form of moral hazard can be an important source of subsequent adverse selection in which ex ante identical individuals select insurance coverage based on their differing accumulation of previously delayed treatments this article investigates these forces empirically in the context of the missing market for dental insurance using rich claim level data my analysis reveals that approximately 40 of individuals strategically delay dental treatments when incentivized to do so and this flexibility in delaying treatment can explain why the market for dental insurance has largely unraveled more generally the counterfactual analysis suggests features such as open enrolment periods and contracting on pre existing conditions may be helpful tools in overcoming adverse selection in insurance contexts where the timing of uncertainty is not contractible

the connection between public transfers and private interfamily transfers abstract this paper investigates the anti poverty effectiveness of public transfers taking private transfer responses into account widespread altruistically motivated private transfers would neutralize the distributional impact of public transfers but exchange motivated transfers can reinforce the effects of public transfers on the distribution of economic well being the common technique for gauging anti poverty effectiveness subtracting public transfers from other income and measuring the poverty rate counterfactual yields results that are close to a more complex procedure that takes private transfer responses into account and some of the empirical findings suggest an exchange rather than altruistic motive for private transfers indicating that the effects of public transfers can be magnified by private behavior this is an exact reversal of the prediction that public transfers merely supplant private ones

ethnic enclaves and immigrant labor market outcomes quasi experimental evidence i examine the effects of the ethnic enclave size on labor market outcomes of immigrants i account for ability sorting into enclaves by exploiting a danish spatial dispersal policy under which refugees were randomly dispersed across locations first i find strong evidence that refugees with unfavorable unobserved characteristics self select into ethnic enclaves second a relative standard deviation increase in the ethnic enclave size increases annual earnings by 18 on average irrespective of skill level third further findings are consistent with the explanation that ethnic networks disseminate job information which increases the job worker match quality and thereby the hourly wage rate

comparing features of convenient estimators for binary choice models with endogenous regressors abstract we discuss the relative advantages and disadvantages of four types of convenient estimators of binary choice models when regressors may be endogenous or mismeasured or when errors are likely to be heteroscedastic for example such models arise when treatment is not randomly assigned and outcomes are binary the estimators we compare are the two stage least squares linear probability model maximum likelihood estimation control function estimators and special regressor methods we specifically focus on models and associated estimators that are easy to implement also for calculating choice probabilities and regressor marginal effects we propose the average index function aif which unlike the average structural function asf is always easy to estimate

advantageous selection in insurance markets this article reverses the standard conclusion that asymmetric information plus competition results in insufficient insurance provision risk tolerant individuals take few precautions and are disinclined to insure but they are drawn into a pooling equilibrium by the low premiums created by the presence of safer more risk averse types taxing insurance drives out the reckless clients allowing a strict pareto gain this result depends on administrative costs in processing claims and issuing policies as does the novel finding of a pure strategy partial pooling subgame perfect nash equilibrium in the insurance market copyright 2001 by the rand corporation

the industrial organization of health care markets the u s health care sector is large and growing health care spending in 2011 amounted to 2 7 trillion and 18 percent of gdp approximately half of health care output is allocated via markets in this paper we analyze the industrial organization literature on health care markets focusing on the impact of competition on price quality and treatment decisions for health care providers and health insurers we conclude with a discussion of research opportunities for industrial organization economists including opportunities created by the u s patient protection and affordable care act

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

take up and targeting experimental evidence from snap this paper develops a framework for evaluating the welfare impact of various interventions designed to increase take up of social safety net programs in the presence of potential behavioral biases we calibrate the key parameters using a randomized field experiment in which 30 000 elderly individuals not enrolled in but likely eligible for the supplemental nutrition assistance program snap are either provided with information that they are likely eligible provided with this information and also offered assistance in applying or are in a status quo control group only 6 percent of the control group enrolls in snap over the next 9 months compared to 11 percent of the information only group and 18 percent of the information plus assistance group the individuals who apply or enroll in response to either intervention receive lower benefits and are less sick than the average enrollee in the control group the results are consistent with the existence of optimization frictions that are greater for needier individuals suggesting that the poor targeting properties of the interventions reduce their welfare gains

health insurance for humans information frictions plan choice and consumer welfare traditional models of insurance choice are predicated on fully informed and rational consumers protecting themselves from exposure to financial risk in practice choosing an insurance plan is a complicated decision often made without full information in this paper we combine new administrative data on health plan choices and claims with unique survey data on consumer information to identify risk preferences information frictions and hassle costs our additional friction measures are important predictors of choices and meaningfully impact risk preference estimates we study the implications of counterfactual insurance allocations to illustrate the importance of distinguishing between these micro foundations for welfare analysis

adverse selection in insurance markets policyholder evidence from the u k annuity market in this paper we investigate the importance of adverse selection in insurance markets we use a unique data set consisting of all annuity policies sold by a large u k insurance company since the early 1980s to analyze mortality differences among individuals who purchased different types of policies we find systematic relationships between ex post mortality and annuity policy characteristics such as whether the annuity will make payments to the estate in the event of an untimely death and whether the payments from the annuity rise over time these mortality patterns are consistent with the presence of asymmetric information in the annuity market we find no evidence of substantive mortality differences however across annuities of different size even though models of insurance market equilibrium with asymmetric information would predict such differences we also find that the pricing of various features of annuity contracts is consistent with the self selection patterns we find in mortality rates our results therefore suggest that selection may occur across many specific features of insurance contracts and that the absence of selection on one contract dimension does not preclude its presence on others this highlights the importance of considering the detailed features of insurance contracts when testing theoretical models of asymmetric information

social insurance private health insurance and individual welfare abstract this paper studies the impact of social insurance on individual choices and welfare in a dynamic general equilibrium model with uncertain medical expenses and individual health insurance choices i find that social insurance modeled as the combination of a minimum consumption floor and the medicaid program does not only distort saving and labor supply decisions but also has a large crowding out effect on the demand for private health insurance however despite the distorting effects the net welfare consequence of eliminating social insurance is still negative in most cases in addition the large crowding out effect on private health insurance suggests that the existence of social insurance programs may be one reason why some americans do not buy any health insurance

an empirical examination of information barriers to trade in insurance this paper uses direct evidence to evaluate whether asymmetric information is a barrier to trade in the largest market for private insurance in the world life insurance we report several findings that seem difficult to reconcile with the conventional theory of insurance under asymmetric information we conjecture that sellers may know their costs of production better than consumers in this market as in those for most other products

optimal mandates and the welfare cost of asymmetric information evidence from the u k annuity market much of the extensive empirical literature on insurance markets has focused on whether adverse selection can be detected once detected however there has been little attempt to quantify its welfare cost or to assess whether and what potential government interventions may reduce these costs to do so we develop a model of annuity contract choice and estimate it using data from the u k annuity market the model allows for private information about mortality risk as well as heterogeneity in preferences over different contract options we focus on the choice of length of guarantee among individuals who are required to buy annuities the results suggest that asymmetric information along the guarantee margin reduces welfare relative to a first best symmetric information benchmark by about 127 million per year or about 2 percent of annuitized wealth we also find that by requiring that individuals choose the longest guarantee period allowed mandates could achieve the first best allocation however we estimate that other mandated guarantee lengths would have detrimental effects on welfare since determining the optimal mandate is empirically difficult our findings suggest that achieving welfare gains through mandatory social insurance may be harder in practice than simple theory may suggest

endogeneity in semiparametric binary response models this paper develops and implements semiparametric methods for estimating binary response binary choice models with continuous endogenous regressors it extends existing results on semiparametric estimation in single index binary response models to the case of endogenous regressors it develops a control function approach to account for endogeneity in triangular and fully simulataneous binary response models the proposed estimation method is applied to estimate the income effect in a labor market participation problem using a large micro data set from the british fes the semiparametric estimator is found to perform well detecting a significant attenuation bias the proposed estimator is contrasted to the corresponding probit and linear probability specifications jel c14 c25 c35 j22

computing core allocations in cooperative games with an application to cooperative procurement abstract cooperative game theory defines several concepts for distributing outcome shares in a cooperative game with transferable utilities one of the most famous solution concepts is the core which defines a set of outcome allocations that are stable such that no coalition has an incentive to leave the grand coalition in this paper we propose a general procedure to compute a core element or to detect that no core allocation exists which is based on mathematical programming techniques the procedure proposed in this paper can be applied to a wide class of cooperative games where the characteristic function is given by the optimum objective function value of a complex optimization problem for cooperative procurement which is an example from the field of supply chain management where some literature on the core concept already exists we prove the applicability and provide computational results to demonstrate that games with 150 players can be handled

the location of markets perceived entrepreneurial risk and start up capital of micro rural firms it is argued that when founders of smes perceive the probability of a successful and lucrative venture to be greater they are more likely to provide a greater proportion of the start up capital this paper provides an empirical examination of two concurrent hypotheses firstly that the size of the debt or equity is affected by factors influencing perceived entrepreneurial risk secondly that the location of the market for the firm s output is a major factor reducing perceived entrepreneurial risk and increasing equity of the start up capital a statistical analysis based on the simultaneous tobit model is used results show that significant factors influencing risk perception include the size of the new business and the sector of economic activity as well as entrepreneurial experience and the location of the markets for the firm s output the results highlight implications for the design and implementation of rural development policies and especially for the instruments supporting rural business creation

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item

testing for asymmetric information in insurance markets the first goal of this paper is to provide a simple and general test of the presence of asymmetric information in contractual relationships within a competitive context we also argue that insurance data are particularly well suited to such empirical investigations to illustrate this claim we use data on contracts and accidents to investigate the extent of asymmetric information in the french market for automobile insurance using various parametric and nonparametric methods we find no evidence for the presence of asymmetric information in this market

choose to lose health plan choices from a menu with dominated option we examine the health plan choices that 23 894 employees at a u s firm made from a large menu of options that differed only in financial cost sharing and premium these decisions provide a clear test of the predictions of the standard economic model of insurance choice in the absence of choice frictions because plans were priced so that nearly every plan with a lower deductible was financially dominated by an otherwise identical plan with a high deductible we document that the majority of employees chose dominated plans which resulted in excess spending equivalent to 24 of chosen plan premiums low income employees were significantly more likely to choose dominated plans and most employees did not switch into more financially efficient plans in the subsequent year we show that the choice of dominated plans cannot be rationalized by standard risk preference or any expectations about health risk testing alternative explanations with a series of hypothetical choice experiments we find that the popularity of dominated plans was not primarily driven by the size and complexity of the plan menu nor informed preferences for avoiding high deductibles but by employees lack of understanding of health insurance our findings challenge the standard practice of inferring risk preferences from insurance choices and raise doubts about the welfare benefits of health reforms that expand consumer choice

inter vivos transfers and exchange most parents divide their bequests equally among their children whereas inter vivos transfers are usually unequal we propose that exchange is better for inducing inter vivos transfers than bequests inter vivos transfers can be adjusted quickly to the amount of care are less costly than writing a will and can be kept secret from other family members and the public the results from national longitudinal data show that as expected if a parent gives any inter vivos transfers she is more likely to give to children who provide informal care informal care has no effect on the equality of intended bequests

an empirical examination of the relation between debt contracts and management incentives abstract prior research on the factors influencing the use of debt covenants restricting dividends and additional borrowing is extended by considering management incentives when alternative incentive variables are considered separately we find covenants have a significant negative relation to ceo cash compensation an insignificant relation to the value of ceo equity held and significant positive relations to both the ratio of the value of ceo equity holdings to cash compensation and the fraction of equity held by the ceo in two stage simultaneous equations models only the latter is significant when jointly considered with each of the other incentive variables

new evidence on altruism a study of tiaa cref retirees this paper investigates the role in household wealth accumulation of saving for bequests it employs data from a 1988 survey of tiaa cref annuitants designed to measure pension and other net worth as well as lifetime earnings about half of the households in the data plan to leave estates and the authors find that their behavior conforms with theoretical altruistic models for the same families the amount of wealth that the authors attribute to estate building is large nevertheless altruism towards one s children does not seem to be the major explanation of saving in the overall sample copyright 1996 by american economic association

impact of conservation agriculture technology on household welfare in zambia this article examines the determinants and impact of conservation agriculture ca technology adoption on farm household welfare in zambia to account for selection bias from both observable and unobservable factors an endogenous switching regression model is employed to estimate the impact of the technology on continuous outcomes like farm output throughput accounting ratio tar poverty gap and severity of poverty a recursive bivariate probit model is however used for the estimation of impact of adoption on a binary outcome like poverty headcount the empirical findings demonstrate that the adoption of ca technology increases maize output and farm tar and reduces household poverty moreover the results reveal that farmers years of schooling social networks access to credit extension services and machinery as well as soil quality positively influence adoption of ca technology

illegal drug use and employment this article investigates the relationship between employment and the use of marijuana and cocaine for males in national longitudinal survey of youth data from 1984 and 1988 previous studies yielding mixed evidence may have inadequately accounted for the simultaneity between drug consumption and employment i implement an instrumental variable procedure that identifies drug use with variables that are empirically unrelated to employment including the regional cocaine price and a state marijuana decriminalization indicator results indicate that the use of each drug substantially reduces the likelihood of employment exogeneity tests reveal that standard probit estimates are severely biased toward zero

firms adoption of international standards evidence from the ethiopian floriculture sector global trade in agriculture and food products is increasingly governed by an array of standards a survey conducted in 2010 covering all operational firms in the nascent floriculture industry in ethiopia revealed that only 36 per cent have managed to acquire certification for international private standards this study uses a census based panel dataset from ethiopian floriculture to empirically examine the determinants of firms adoption of international private standards it also analyses overall industry level efforts and public private partnership to launch and implement a national scheme for good agricultural practice and build firms capacity to comply with the standards key words standards certification floriculture exports estate farms ethiopia africa

aging in place housing maintenance and reverse mortgages we study the role of housing wealth in financing retirement consumption in our model retirees 1 derive utility benefits from remaining in their home aging in place and 2 choose in each period whether to maintain their house the evidence that we present shows that these features are important in explaining the saving decisions of the elderly the costs and the maintenance requirement of reverse mortgages rms reduce or eliminate the benefits of the loans for retirees who wish to do less maintenance we evaluate the impact of different loan features on retirees utility cash flows to lenders and to the government agency that provides mortgage insurance we show that combining rms with insurance against a forced home sale e g due to a move to a nursing home is pareto improving and can lead to increased demand for the loans due to product complementarities

simulation of a health insurance market with adverse selection a health insurance market is examined in which individuals with a history of high utilization of health care services tend to select fee for service ffs insurance when offered a choice between ffs and health maintenance organizations hmos in addition hmos are assumed to practice community rating of employee groups based on these observations and health plan enrollment and premium data from minneapolis st paul a deterministic simulation model is constructed to predict equilibrium market shares and premiums for hmo and ffs insurers within a firm despite the fact that favorable selection enhances their ability to compete with ffs insurers the model predicts that hmos maximize profits at less than 100 market share and at a lower share than they could conceivably capture that is hmos would not find it to their advantage to drive ffs insurers from the market even if they could in all cases however the profit maximizing hmo premium is greater than the experience rated premium and thus the ave

time consistent health insurance currently available health insurance contracts often fail to insure long term illnesses sick people can suffer large increases in premiums or denial of coverage i describe insurance contracts that solve this problem their key feature is a severance payment a person who is diagnosed with a long term illness and whose premiums are increased receives a lump sum equal to the increased present value of premiums this lump sum allows him or her to pay the higher premiums required by any insurer people are not tied to a particular insurer or a group and the improvement is free insurance companies can operate at zero economic profits and consumers can pay exactly the same premium they do with standard contracts

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

semi parametric estimation of simultaneous equations with limited dependent variables a case study of female labour supply we propose a general strategy to estimate semi parametrically simultaneous equations with limited dependent variables first each reduced form rf is estimated with various semi parametric methods second the specification of each rf is tested to select an appropriate method third the structural form sf equations are estimated using minimum distance methods and the restrictions among the sf and rf parameters a case study of female labour supply is presented

selection criteria for a microeconometric model of labour supply the wide variety of observed behaviour that is displayed in survey data suggests that microeconometric models should allow a reasonable degree of flexibility in specification however since these models are generally used for policy analysis they are required to satisfy some degree of theoretical consistency this requirement has generally led to the adoption of rather simple inflexible models based on additive preferences or linear labour supply responses we estimate and test a sequence of models for the labour supply of married working women emphasizing the importance of testing both the thecretical and statistical assumptions underlying the models

estimation of limited dependent variable models with dummy endogenous regressors applied economists have long struggled with the question of how to accommodate binary endogenous regressors in models with binary and nonnegative outcomes i argue here that much of the difculty with limited dependent variables comes from a focus on structural parameters such as index coefcients instead of causal effects once the object of estimation is taken to be the causal effect of treatment several simple strategies are available these include conventional two stage least squares multiplicative models for conditional means linear approximation of nonlinear causal models models for distribution effects and quantile regression with an endogenous binary regressor the estimation strategies discussed in the article are illustrated by using multiple births to estimate the effect of childbearing on employment status and hours of work

is there a dead spot new evidence on fomc decisions before elections using new data that chronicle the fed s internal forecast of the output gap from 1973 to 1998 this paper tests for an electoral cycle in the decisions of the federal open market committee fomc the paper provides evidence of a dead spot in the committee s decisions before presidential elections for given values of these internal forecasts the fomc is less likely to decide to tighten monetary policy in the year preceding a presidential election than at other times

the effects of rate regulation on demand for supplemental health insurance many developed countries have a market for private health insurance that supplements publicly funded universal coverage government regulation of the supplemental market including the extent to which insurers are permitted to adjust premiums based on individual characteristics such as age sex and health status varies across countries oecd 2004 proponents of rate regulation argue that the resulting crosssubsidization from low to high risks is necessary to maintain the affordability of coverage for high risks economic theory however raises the concern that the inability to adjust premiums to reflect individual risk could create adverse selection by driving low risks from the market michael rothschild and joseph stiglitz 1976 little empirical evidence exists to determine the optimal role of rate regulation in private supplemental insurance markets existing studies of the consequences of rating restrictions focus on markets for primary health insurance and find that these laws have had surprisingly little effect on overall rates of coverage simon 2004 in this paper we study the effects of rate regulation in supplemental health insurance markets by examining the market for individually purchased coverage that supplements medicare among the elderly in the united states while the publicly financed medicare program provides nearly universal coverage of a standard set of benefits for those 65 and over beneficiaries are exposed to significant financial risk due to the cost sharing associated with covered services and a lack of coverage for some important services the vast majority of medicare beneficiaries obtain supplemental coverage through a complex system of publicly and privately funded sources state medicaid programs provide publicly financed supplemental coverage for low income and disabled beneficiaries and employers provide highly subsidized retiree supplemental health insurance for other beneficiaries but the remainder rely on highly regulated private insurance markets medicare s part c managed care plans are a voluntary private replacement for traditional medicare while medigap coverage is a private policy bought by about 30 percent of medicare beneficiaries that provides only supplemental benefits franklin j eppig and george s chulis 1997 our study examines the effects of regulations limiting the information on individual characteristics insurers can use in setting premiums for medigap coverage

are risk preferences stable across contexts evidence from insurance data using a unique dataset we test whether households deductible choices in auto and home insurance reflect stable risk preferences our test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household coverage specific poisson processes we find that the hypothesis of stable risk preferences is rejected by the data our analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices our results are robust to several alternative modeling assumptions jel d11 d83

portfolio choice in retirement health risk and the demand for annuities housing and risky assets in a life cycle model a retiree faces stochastic health depreciation and chooses consumption health expenditure and the allocation of wealth between bonds stocks and housing the model explains key facts about asset allocation and health expenditure across health status and age the portfolio share in stocks is low overall and is positively related to health especially for younger retirees the portfolio share in housing is negatively related to health for younger retirees and falls significantly in age finally out of pocket health expenditure as a share of income is negatively related to health and rises in age

the interaction of public and private insurance medicaid and the long term care insurance market a long tradition in public finance examines how public programs can crowd out private activ ity in areas as diverse as education savings and insurance among others these studies typi cally focus on aggregate economic implications particularly for government expenditures and national savings in this paper we demonstrate that crowd out can also have an important effect on individual welfare specifically we show that the provision of even very incomplete public insurance can crowd out more comprehensive private policies by imposing a large implicit tax on private insurance benefits thus potentially increasing overall risk exposure for individuals we examine the interaction of public and private insurance for one of the largest uninsured financial risks facing the elderly in the united states long term care expenditures at 135 bil lion in 2004 long term care expenditures represented over 8 5 percent of total health expendi tures or all ages or roughly 1 2 percent of gdp moreover real long term care expenditures are projected to triple over the next 35 years due to rising medical costs and the aging of the baby boomers only 10 percent of the elderly however have any private long term care insurance and one third of expenditures are paid for out of pocket congressional budget office cbo 1999 cbo 2004 brown and finkelstein 2007 one potential explanation for the small size of the private market is that the public insurance provided by medicaid may crowd out demand for private insurance medicaid was designed to provide long term care insurance for the poor elderly mark v pauly 1989 1990 has established the qualitative result that as an incomplete but publicly funded source of long term care insur ance medicaid has the potential to reduce substantially demand for private long term care insur ance even among the nonpoor our work builds on this insight by quantifying the magnitude of medicaid s crowd out effect and the incomplete nature of medicaid coverage we also illustrate the mechanism behind medicaid s crowd out effect and are therefore able to assess the likely impact of alternative policies on private insurance demand we develop a utility based model of a 65 year old risk averse individual who chooses an opti mal intertemporal consumption path in the presence of uncertainty about long term care expen ditures we calibrate the model using data on the distribution of long term care expenditure risk common state medicaid rules and the prices and coverage of typical private long term care insurance policies

adverse selection and inertia in health insurance markets when nudging hurts this paper investigates consumer inertia in health insurance markets where adverse selection is a potential concern we leverage a major change to insurance provision that occurred at a large firm to identify substantial inertia and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk we use these estimates to study the impact of policies that nudge consumers toward better decisions by reducing inertia when aggregated these improved individual level choices substantially exacerbate adverse selection in our setting leading to an overall reduction in welfare that doubles the existing welfare loss from adverse selection jel d82 g22 i13 a number of potential impediments stand in the way of efficient health insur ance markets the most noted of these is adverse selection first studied by akerlof 1970 and rothschild and stiglitz 1976 in insurance markets prices reflect the expected risk costs of the insured pool whether the reason is price regulation or private information when insurers cannot price all risk characteristics riskier consumers choose more comprehensive health plans this causes the equilibrium prices of these plans to rise and healthier enrollees to select less comprehensive coverage than they would otherwise prefer

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

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

allocation of cost savings in a three level supply chain with demand information sharing a cooperative game approach we analyze the problem of allocating cost savings from sharing demand information in a three level supply chain with a manufacturer a distributor and a retailer to find a unique allocation scheme we use concepts from cooperative game theory first we analytically compute the expected cost incurred by the manufacturer and then use simulation to obtain expected costs for the distributor and the retailer we construct a three person cooperative game in characteristic function form and derive necessary conditions for the stability of each of five possible coalitions to divide the cost savings between two members or among three supply chain members we use various allocation schemes we present numerical analyses to investigate the impacts of the demand autocorrelation coefficient and the unit holding and shortage costs on the allocation scheme

the effect of uncertainty on the demand for medical care health capital and wealth we analyze the effect of the uncertainty of the incidence of illness on the demand for medical care and on the accumulation of health capital and wealth over the retirement years we use a simplified version of a dynamic grossman household production model to characterize patterns of an individual s precautionary behavior elderly individuals respond to uncertainty by smoothing their expected utility over time by making specific patterns of purchases of medical care and consumption we examine these patterns for individuals with different degrees of risk aversion

coalitional game theory approach to modeling suppliers collaboration in supply networks abstract suppliers collaboration is a new paradigm to improve the utilization of collective intelligence in supply networks although existing literature advocates the notion of cooperation in supply networks there is a dearth of studies quantitatively analyzing cost and benefit of cooperation in this study we first develop a model for suppliers dynamic coalition formation using coalitional game theory the proposed cost structure influences the utility of each possible coalition and restricts the coalition size and search space for finding possible coalitions to distribute the profit earned by cooperation in a fair manner a criterion named shared capacity index is developed according to suppliers capacity share in the corresponding coalition a suppliers cooperation algorithm is then proposed to resolve possible conflicts among network members whereby each supplier is able to explore coalitional structures autonomously the efficiency of the proposed approach is evaluated through simulation studies and compared to other solution methods including shapley value and proportional fairness results demonstrate that long term cooperation among suppliers leads to enhanced average individual profit in the network

how deep is the annuity market participation puzzle using microeconomic data for the united kingdom we analyze the empirical determinants of voluntary annuity market demand we find that annuity market participation increases with financial wealth life expectancy and education and decreases with other pension income and a possible bequest motive for surviving spouses we then show that these empirically motivated determinants of annuity market participation have the same quantitatively important effects in a life cycle model of annuity and life insurance demand saving and portfolio choice moreover reasonable preference parameters predict annuity demand levels comparable to the data for stockholders a strong bequest motive can simultaneously generate balanced portfolios and low annuity demand

home equity commitment and long term care insurance demand abstract this paper shows how home equity may substitute for long term care insurance ltci the elderly commonly hold substantial wealth in the form of home equity that is rarely spent before death except for after moves to long term care facilities absent strong bequest motives implies that marginal utility fluctuates less across health states than one would predict based on a standard model without wealth tied up in housing numerical examples show that this asset commitment may substantially weaken ltci demand

preference heterogeneity and insurance markets explaining a puzzle of insurance the textbook approach to insurance markets emphasizes the role of private information about risk in determining who purchases insurance in the classic adverse selection model of michael rothschild and joseph stiglitz 1976 individu als with higher expected claims buy more insur ance than those with lower expected claims who may be out of the market entirely this basic prediction of asymmetric information models of a positive correlation between insurance cov erage and accident occurrence has been shown to be robust to a variety of extensions to the stan

did community rating induce an adverse selection death spiral evidence from new york pennsylvania and connecticut using data from the 1987 to 1996 march current population surveys we find no evidence for the dire predictions of some that the imposition of pure community rating leads to a market wide reduction in insurance coverage by setting off an adverse selection death spiral specifically the percentage of individuals in small groups covered by health insurance did not fall in new york which enacted community rating legislation in 1993 relative to either pennsylvania which enacted no insurance reform or connecticut which enacted moderate insurance reforms without imposing community rating consistent with the predictions of the simple rothschild and stiglitz 1976 framework however we find that the new yorkreforms appear to have had a significant impact on the structure of the new yorkinsurance mark et specifically new yorkexperienced a dramatic shift away from indemnity insurance toward hmos while this shift tookplace during a period of nationwide increases in the percentage with managed care the increase in hmo penetration in new york s small group and individual markets was significantly greater than in pennsylvania or connecticut

multiple dimensions of private information evidence from the long term care insurance market we demonstrate the existence of multiple dimensions of private information in the long term care insurance market two types of people purchase insurance individuals with private information that they are high risk and individuals with private information that they have strong taste for insurance ex post the former are higher risk than insurance companies expect while the latter are lower risk in aggregate those with more insurance are not higher risk our results demonstrate that insurance markets may suffer from asymmetric information even absent a positive correlation between insurance coverage and risk occurrence the results also suggest a general test for asymmetric information

how strong are bequest motives evidence based on estimates of the demand for life insurance and annuities this paper presents new empirical evidence in support of the view that a significant fraction of total saving is motivated by the desire to leave bequests specifically i find that social security annuity benefits significantly raise life insurance holdings and depress private annuity holdings among elderly individuals these patterns indicate that the typical household would choose to maintain a positive fraction of its resources in bequeathable forms even if insurance markets were perfect evidence on the relationship between insurance purchases and total resources reinforces this conclusion

mispriced equity regulated rates for auto insurance in massachusetts from the santa monica freeway to the new jersey turnpike drivers are unhappy about the cost of automobile insurance and are asking government to do something about it california voters approved proposition 103 in 1988 it requires that all rates be approved by the state insurance commissioner attempts to reduce rates by 20 percent and dramatically limits the criteria that can be used to rate drivers for premium purposes new jersey enacted an insurance reform law that seeks to charge insurers for a deficit burdened state underwriting pool and prohibits the use of age sex and marital status in rating drivers for premiums other states enacting or considering significant rate rollbacks or reform since 1988 include arizona florida michigan nevada and pennsylvania this article describes the current consequences of similar policies adopted in massachusetts more than a decade ago the experience suggests that recent moves by other states in the same direction will ultimately prove quite expensive as the proportion of high cost drivers increases and as insurers lose the incentive to write policies and control costs the trend away from insurance premiums based on expected cost also reduces incentive effects for drivers since insurance premiums provide a link between tort judgments and consumer decisions

moral hazard vs liquidity and optimal unemployment insurance this paper presents new evidence on why unemployment insurance ui benefits affect search behavior and develops a simple method of calculating the welfare gains from ui using this evidence i show that 60 percent of the increase in unemployment durations caused by ui benefits is due to a liquidity effect rather than distortions on marginal incentives to search moral hazard by combining two empirical strategies first i find that increases in benefits have much larger effects on durations for liquidity constrained households second lump sum severance payments increase durations substantially among constrained households i derive a formula for the optimal benefit level that depends only on the reduced form liquidity and moral hazard elasticities the formula implies that the optimal ui benefit level exceeds 50 percent of the wage the exact identification approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives

dynamic coalition reformation for adaptive demand and capacity sharing abstract to deal with volatile product demand and rapidly changing manufacturing technologies for sustainable returns selective collaboration among companies in supply networks sns is required recently demand and capacity sharing among independent and non competitive manufacturers at the same horizontal layer in sns has been studied through an appropriate coalition for collaborative demand and capacity sharing manufacturers can minimize their lost sales as well as maximize production capacity utilization against lumpy real demand in a previous study we have developed the collaborative demand and capacity sharing cdcs protocol which addresses a long term profitable and well balanced collaboration for each manufacturer through distributed decision making however the uncertainty of circumstances calls for an effective and timely reformation of coalitions in reality there is a trade off between frequent accommodation to changeable environments and high additional costs incurred by reformation hence in this paper we design the adaptive cdcs protocol based on dynamic contract mechanism in each period our protocol suggests whether to reform existing coalitions or not based on theoretical analyses of long term expected net profit to evaluate its performance a numerical experiment is conducted by comparing three models no collaboration static collaboration and dynamic collaboration by adaptive cdcs protocol dynamic collaboration results in more profits and its balanced redistribution by accommodating with changeable conditions

estimating welfare in insurance markets using variation in prices we provide a graphical illustration of how standard consumer and producer theory can be used to quantify the welfare loss associated with inefficient pricing in insurance markets with selection we then show how this welfare loss can be estimated empirically using identifying variation in the price of insurance such variation together with quantity data allows us to estimate the demand for insurance the same variation together with cost data allows us to estimate how insurers costs vary as market participants endogenously respond to price the slope of this estimated cost curve provides a direct test for both the existence and the nature of selection and the combination of demand and cost curves can be used to estimate welfare we illustrate our approach by applying it to data on employerprovided health insurance from one specific company we detect adverse selection but estimate that the quantitative welfare implications associated with inefficient pricing in our particular application are small in both absolute and relative terms

the use of regression statistics to analyze imperfect pricing policies corrective taxes can solve many market failures but actual policies frequently deviate from the theoretical ideal because of administrative or political constraints we present a method to quantif

pairwise difference estimation with nonparametric control variables this paper extends the pairwise difference estimators for various semilinear limited dependent variable models proposed by honore and powell 2005 to permit the regressor appearing in the nonparametric component to itself depend upon a conditional expectation that is nonparametrically estimated this permits the estimation approach to be applied to nonlinear models with sample selectivity and or endogeneity in which a control variable for selectivity or endogeneity is nonparametrically estimated we develop the relevant asymptotic theory for the proposed estimators and we illustrate the theory to derive the asymptotic distribution of the estimator for the partially linear logit model

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

cooperative game theory approach to allocating benefits of horizontal cooperation abstract logistics costs in general and transportation costs in particular represent a large fraction of the operating costs of many companies one way to try to reduce these costs is through horizontal cooperation among shippers thus when the transportation needs of two or more companies are merged their collective transportation requirements can be met at lower cost the attainable cost savings are due to economies of scale which translate into cheaper rates due to increased negotiation power use of larger vehicles and bundling of shipments in this paper a linear model is presented and used to study the cost savings that different companies may achieve when they merge their transportation requirements on the one hand solving this optimization model for different collaboration scenarios allows testing and quantifying the synergies among different potential partners thus identifying the most profitable collaboration opportunities on the other the problem of allocating the joint cost savings of the cooperation is tackled using cooperative game theory the proposed approach is illustrated with an example in which different cooperative game solution concepts are compared extensive numerical experiments have also been carried out to gain insight into the properties of the corresponding cost savings game and the behavior of the different solution concepts

the determinants of price in 3g spectrum auctions this article examined the empirical relationship between prices paid for national 3g wireless licenses when spectrums were sold by auction the reduced form modelling approach was based on the prem

the effect of development aid unpredictability and migrants remittances on fiscal consolidation in developing countries summary we use panel data on 74 developing countries for the period 1980 2007 to examine the effects of aid unpredictability and migrants remittances on fiscal consolidation in these countries using two definitions of fiscal adjustment and a conditional logit model to perform our analysis evidence is shown that except for the case of low income countries especially gradual fiscal retrenchment remittances increase the likelihood of fiscal consolidation be the latter gradual or rapid surprisingly we observe that aid unpredictability does not affect the adoption of fiscal consolidation measures in all the groups considered

the cost of financial frictions for life insurers during the financial crisis life insurers sold long term policies at deep discounts relative to actuarial value the average markup was as low as 19 percent for annuities and 57 percent for life insurance this extraordinary pricing behavior was due to financial and product market frictions interacting with statutory reserve regulation that allowed life insurers to record far less than a dollar of reserve per dollar of future insurance liability we identify the shadow cost of capital through exogenous variation in required reserves across different types of policies the shadow cost was 0 96 per dollar of statutory capital for the average company in november 2008 jel g01 g22 g28 g32