the diffusion of health technologies cultural and biological divergence abstract this paper proposes the hypothesis that genetic distance to the health frontier influences population health outcomes evidence from a world sample suggests that genetic distance interpreted as long term cultural and biological divergence is an important factor in understanding health inequalities across countries specifically the paper documents a remarkably robust negative link between genetic distance to the united states and population health as measured by life expectancy at birth and the adult survival rate even after accounting for an extensive set of possible confounders such as gdp per capita and various climatic factors consistent with the interpretation that genetic distance is related to population health indirectly through human barriers to the diffusion of modern health technologies the evidence indicates that the gene gradient emerges at the onset of the international epidemiological transition

tax structure and corruption cross country evidence one common feature of the current literature on corruption especially the empirical contributions to it is the emphasis on the exogenous determinants of corruption which are generally beyond the direct control of governments to date little is known about how the design of government policy potentially affects the level of corruption in a country even though there is growing recognition that the design and administration of tax and spending policies play important roles in promoting or discouraging corrupt practices using a large sample of countries over the 1995 2009 period this paper fills the gap by conducting the first analysis in the literature to examine the significance of the tax structure as measured by both tax mix and tax complexity in determining corruption our results suggest the following 1 countries relying more heavily on direct taxes tend to exhibit less corruption than countries that rely more heavily on indirect taxes and 2 countries with more complex tax systems tend to be more corrupt than countries with less complex tax systems these results are robust across alternative measures of corruption and tax structure and alternative estimations with and without correcting the potential endogeneity issue of the tax structure variables

public health spending old age productivity and economic growth chaotic cycles under perfect foresight abstract this paper analyses the dynamics of a double cobb douglas economy with overlapping generations and public health investments that affect the supply of efficient labour of the old aged it is shown that the positive steady state of the economy is unique moreover we provide necessary and sufficient conditions for the emergence of endogenous deterministic complex cycles when individuals are perfectly foresighted interestingly i the equilibrium dynamics shows rather complicated phenomena such as a multiplicity of bubblings depending on the size of the public health system and ii the higher the degree of thriftiness the likelier an economy is exposed to endogenous fluctuations because the need to save when young to support consumption when old is reduced

corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

endogenous lifetime and economic growth abstract endogenous mortality is introduced in a two period overlapping generations model probability of surviving from the first period to the next depends upon health capital that is augmented through public investment high mortality societies do not grow fast since shorter lifespans discourage savings development traps are possible productivity differences across nations result in persistent differences in capital output ratios and relatively larger gaps in income and mortality high mortality also reduces returns on education where risks are undiversifiable when human capital drives economic growth countries differing in health capital do not converge to similar living standards threshold effects may also result

the cost of pollution on longevity welfare and economic stability this paper presents an overlapping generations model where pollution private and public health expenditures are all determinants of longevity public expenditures financed through labour taxation provide both public health and abatement we study the role of these three components of longevity on welfare and economic stability at the steady state we show that an appropriate fiscal policy may enhance welfare however when pollution is heavily harmful for longevity the economy might experience aggregate instability or endogenous cycles nonetheless a fiscal policy which raises the share of public spending devoted to health may display stabilizing virtues and rule out cycles this allows us to recommend the design of the public policy that may comply with the dynamic and welfare objectives

indeterminacy intergenerational redistribution endogenous longevity and human capital accumulation abstract this paper sets up an olg economy with endogenous life expectancy to study how fiscal policy that redistributes between generations can open the door to sunspot equilibria agents invest independently in their own human capital produce and consume output and receive a pension upon retirement the model produces an expectations coordination problem that can explain significant differences in growth paths followed by otherwise identical countries in particular we show that our economy may be characterized by local indeterminacy of dynamic equilibria and hence feature fluctuations which are driven by extrinsic uncertainty

human capital inequality life expectancy and economic growth this article presents a model in which inequality affects per capita income when individuals decide to invest in education taking into account their life expectancy which depends to a large extent on the human capital of their parents our results show the existence of multiple steady states depending on the initial distribution of education the low steady state is a poverty trap in which children raised in poor families have low life expectancy and work as non educated workers the empirical evidence suggests that the life expectancy mechanism explains a major part of the relationship between inequality and human capital accumulation increases in life expectancy and human capital accumulation have accelerated since the post world war ii period in most parts of the world however in spite of the convergence in life expectancy across countries during this period see for example becker et al 2005 in 2000 there was still an immense gap between the rich and the poor world life expectancy was 78 years in oecd countries but only 47 years in sub saharan africa where the gap with rich countries is increasing nowadays due to aids being widespread likewise the striking disparities in human capital are also evident whereas the secondary school enrolment rate was almost 100 in rich countries more than 70 of children in sub saharan africa were not enrolled in secondary schooling and therefore entered the labour market as unskilled workers from childhood these disparities in schooling are also accompanied by huge differences in the distribution of education thus the human capital gini coefficient in sub saharan africa 0 56 is twice as high as that of oecd countries 0 21 in this article we argue that high human capital inequality low life expectancy and low human capital accumulation rates reinforce each other and may explain the persistence of poverty in a great part of the world

efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

adverse selection commitment and renegotiation extension to and evidence from insurance markets with asymmetric information full commitment to long term contracts may permit markets to approach first best allocations however commitment can be undermined by opportunistic behavior notably renegotiation we reexamine commitment in insurance markets we present an alternative model which extends laffont and tirole s procurement model to address uncertainty and competition which involves semipooling in the first period followed by separation this and competing models e g single period models and no commitment models have different predictions concerning temporal patterns of insurer profitability a test using california data suggests that some automobile insurers use commitment to attract selective portfolios comprising disproportionate numbers of low risks

environmental quality public debt and economic development this article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt a public sector of pollution abatement is financed by a tax or by public debt we show that if the initial capital stock is high enough the economy monotonically converges to a long run steady state on the contrary when the initial capital stock is low the economy is relegated to an environmental poverty trap we also explore the implications of public policies on the trap and on the long run stable steady state in particular we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long run steady state finally a welfare analysis shows that there exists a level of public debt that allows a long run steady state to be optimal

public and private expenditures on health in a growth model abstract this paper introduces endogenous longevity into an otherwise standard overlapping generations model with capital in the model a young agent may increase the length of her old age by incurring investments in health such private health investments are assumed to be more productive if accompanied by complementary tax financed public health programs the presence of the public input in private longevity is shown to expose the economy to aggregate endogenous fluctuations and even chaos and such volatility is impossible in its absence the model is capable of generating dramatic reversals in life expectancy as has been observed in many countries

growth and enduring epidemic diseases abstract this paper analyzes the interplay of human capital formation and economic growth when there is premature adult mortality failing adequate insurance arrangements a long wave of such mortality can so undermine human capital formation as to induce an economic collapse in nuclear family structures random matching of partners is superior to assortative mating only if the shock is not too big and initial levels of human capital are not too low full pooling of mortality risks with equal treatment of all children in extended families may fend off a general collapse depending on the initial conditions and the size and duration of the shock to avoid undesirable effects on expectations awareness campaigns should be complemented by policies that credibly promise to reduce future mortality if mortality depends on the general level of human capital indeterminacy can arise in the form of more than one rational expectations path

children s environmental health education and economic development this article aims at investigating the interplay between environmental quality health and economic development in a unified olg framework human capital accumulation depends on the environment through its impact on children s health and workers productivity in turn environmental quality dynamics rely upon human capital that determines maintenance efforts this two way relationship generates a co evolution of human capital and environmental quality in the long run along the transition path the dynamic interactions between economic and environmental spheres allow for replicating two different trajectories some economies experiment an environmental kuznets curve while some others are caught into the environmental poverty trap

coalition proof equilibrium in an adverse selection insurance economy abstract we extend the notion of coalition proof nash equilibrium to a class of matching games with private information this solution concept is applied to an adverse selection insurance economy and is shown to yield a unique allocation the optimal allocation without cross subsidy this contrasts sharply with the outcome in alternative institutional settings for negotiations among players as modeled for instance by the incentive compatible core journal of economic literature classification numbers c71 c72 d82

tax complexity and fiscal illusion by using the hirschman herfindahl index hhc the traditional approach to the tax complexity hypothesis introduces a restriction into the fiscal illusion model which has no theoretical foundation we analyse the existing framework of the tax complexity hypothesis in detail and propose to capture this complexity through a hannah and kay index we extend the theoretical framework by considering the expected return on investment in information

the precious bane abstract are natural resources harmful to growth we address this question using a two sector endogenous growth model in which human capital is the engine of growth by increasing the rewards to unskilled labor natural resources make schooling more expensive as long as the intertemporal elasticity of consumption substitution is not too high this slows down human capital accumulation and growth the presence of production spillovers from human capital however implies that a planner could react to a resource boom by increasing human capital accumulation even though the decentralized solution yields the exact opposite the paper also shows that as the production complementarity between natural resources and unskilled labor declines the growth effects of natural resources become increasingly sensitive to whether or not there is free trade in goods the empirical evidence lends support to the main channel natural resources to human capital to growth that is suggested in the paper

the family as an incomplete annuities market families can self insure against uncertain dates of death through implicit or explicit agreements with respect to consumption and interfamily transfers interfamily transfers need have nothing to do with altruistic feelings they may simply reflect risk sharing behavior of completely selfish family members although family annuity markets are incomplete even small families can substitute by more than 70 percent for perfect market annuities given adverse selection and transaction costs family risk pooling may be preferred to public market annuities in the absence of public annuities these risk sharing arrangements provide powerful incentives for marriage and family formation

the existence of equilibrium in discontinuous economic games ii applications in part i of this study we established two existence theorems for mixed strategy equilibrium in games with discontinuous payoff functions see theorems 4 4 and 5 5 in dasgupta and maskin 1986 hereafter d m 1986 in this second part we use the second of these two theorems to prove the existence of mixed strategy equilibrium in some wellknown discontinuous economic games that fail to have pure strategy equilibria the models we analyse are the bertrand edgeworth example of price setting duopolists with capacity constraints see section 2 2 price competition among firms producing differentiated products hotelling 1929 and d aspremont gabszewicz and thisse 1979 see section 2 3 spatial competition eaton and lipsey 1975 and shaked 1975 see section 3 and models of market dependent information rothschild and stiglitz 1976 and wilson 1977 section 4 the paper concludes section 5 with a classification of these models

organizations in economic analysis three economic environments are reviewed and in each organizations play an essential role for an adverse selection insurance economy we find that when mutual insurance arrangements are permitted an equilibrium necessarily exists and is optimal this example and the two others illustrate the problems that may result from imposing organizational structure on an environment rather than permitting the structure to be determined endogenously les organisations dans l analyse economique les auteurs examinent trois sortes d environnement economique dans chacun des cas les organisations jouent un role fondamental dans le cas d une economie avec assurance et selection adverse les auteurs suggerent que quand des arrangements d assurance mutuelle sont permis un equilibre existe necessairement et est optimal cet environnement ainsi que les deux autres etudies par les auteurs illustre les problemes qui peuvent resulter quand on impose une structure organisationnelle sur un environnement plutot que de permettre a la structure organisationnelle d emerger de fakon endogene

mortality fertility and persistent income inequality many developing countries are characterized by high and persistent inequality in the distribution of income while a growing body of literature emphasizes differential fertility as a channel through which income inequality persists this paper investigates differential child mortality differences in the incidence of child mortality among different income groups as a critical link in this regard we incorporate both endogenous child mortality and endogenous fertility in an overlapping generations model we demonstrate that differential child mortality and its interaction with differential fertility can generate an income inequality trap where high risk of child death prevents poor households from adequately investing in education empirical evidence based on cross country micro data support differential child mortality as an important channel for the transmission of inequality as predicted by the model from a policy perspective the results suggest that better access to child health care may be a more promising way to reduce income inequality than providing incentives to lower the family size of poor households

the effects of the value added tax on revenue and inequality this paper examines the impact of the introduction of the value added tax on inequality and government revenues using newly released macro data we present both conventional country fixed effect re

education and economic growth a meta regression analysis summary this paper surveys the literature which examines the effect of education on economic growth specifically we apply meta regression analysis to 57 studies with 989 estimates and show that there is substantial publication selection bias toward a positive impact of education on growth once we account for this the genuine growth effect of education is not homogeneous across studies but varies according to several factors specifically it is attributed to differences in education measurement and study characteristics mainly model specification as well as type of data used and the quality of research outlets where studies are published e g academic journals vs working papers

a theory of infrastructure led development abstract this paper proposes a theory of long run development based on public infrastructure as the engine of growth the government in addition to investing in infrastructure spends on health services which in turn raise labor productivity and lower the rate of time preference infrastructure affects the production of both commodities and health services as a result of network effects the degree of efficiency of infrastructure is nonlinearly related to the stock of public capital itself provided that governance is adequate enough to ensure a sufficient degree of efficiency of public investment an increase in the share of spending on infrastructure financed by a cut in unproductive expenditure or foreign grants may facilitate the shift from a low growth equilibrium characterized by low productivity and low savings to a high growth steady state

limited life expectancy human capital and health investments human capital theory predicts that life expectancy will impact human capital attainment we estimate this relationship using variation in life expectancy driven by huntington disease an inherited neurological disorder we compare investments for individuals who have ex ante identical risks of hd but differ in disease realization individuals with the hd mutation complete less education and job training the elasticity of demand for college attendance with respect to life expectancy is around 1 0 we relate this to cross country and over time differences in education we use smoking and cancer screening data to test the corollary that health capital responds to life expectancy

capital and labor saving technical change in an aging economy does population aging and the associated increase in the old age dependency ratio affect economic growth the answer is given in a novel analytical framework that allows for population aging to affect endogenous capital and labor saving technical change the short run analysis reveals that population aging induces more labor and less capital saving technical change as it increases the relative scarcity of labor with respect to capital due to external contemporaneous knowledge spill overs across innovating firms induced technical change has a first order effect on current aggregate income in the long run capitalsaving technical progress vanishes and the economy s growth rate reflects only labor saving technical change however the mere possibility of capital saving technical change is shown to imply that the economy s steady state growth rate becomes independent of its age structure neither a higher life expectancy nor a decline in fertility affects economic growth in the long run

corruption inequality and fairness bigger governments raise the possibilities for corruption more corruption may in turn raise the support for redistributive policies that intend to correct the inequality and injustice generated by corruption we formalize these insights in a simple dynamic model a positive feedback from past to current levels of taxation and corruption arises either when wealth originating in corruption and rent seeking is considered unfair or when the ability to engage in corruption is unevenly distributed in the population this feedback introduces persistence in the size of the government and the levels of corruption and inequality multiple steady states exist in some cases

explaining international fertility differences why do fertility rates vary so much across countries why are european fertility rates so much lower than american fertility rates to answer these questions we extend the barro becker framework to incorporate the decision to accumulate human capital which determines earnings and health capital which determines life span we find that cross country differences in productivity and taxes go a long way toward explaining the observed differences in fertility and mortality

environmental degradation longevity and the dynamics of economic development i construct a two period overlapping generations model in which longevity is positively affected by public spending on health services and negatively affected by pollution it is shown that the parameters which determine the extent of environmental degradation i e emission rate and pollution abatement may also represent additional factors affecting the dynamics of the economy the likelihood of multiple non trivial steady state equilibria and the emergence of poverty traps the distribution of public spending between public health care and pollution abatement that maximizes equilibrium income is also derived this distribution of spending minimizes the threshold which the economy needs to surpass in order to avoid a poverty trap while under certain circumstances it can maximize equilibrium welfare as well

aging growth and the allocation of public expenditures on health and education in this paper i develop an overlapping generations endogenous growth model in which both public education and health are sources of growth by affecting the accumulation rate of the human capital stock and the savings rate over life expectancy i first find that dynamic complementarities of public expenditures lead to minimum threshold levels of public education and health expenditures that ensure sustainable growth i then show how governments can use the allocation of public expenditures as an alternative policy instrument to maximize growth without increasing the tax rate or the retirement age as usually happens in aging economies resume vieillissement croissance et l allocation des depenses publiques en sante et en education dans ce texte l auteur developpe un modele de croissance endogene avec des generations qui se chevauchent dans lequel les services publics en sante et en education sont des sources de croissance en raison du fait qu ils affectent le taux d accumulation du stock de capital humain et le taux d epargne au cours du cycle de vie on decouvre que les complementarites dynamiques des depenses publiques determinent des seuils minimaux de depenses publiques en sante et en education qui assurent une croissance durable on montre comment les gouvernements peuvent utiliser l allocation des depenses publiques comme un instrument de politique publique de rechange pour maximiser la croissance sans accroitre le taux d imposition ou l ge de la retraite comme cela se fait d habitude dans les economies vieillissantes

public private mix of health expenditure a political economy and quantitative analysis this paper constructs a simple model to examine decisions on public and private health spending under majority voting in the model agents with heterogeneous incomes choose how much to consume and spend on health care and vote for public health expenditure the health status of an agent is determined by a ces composite of public and private health expenditure the existence and uniqueness of the voting equilibrium are established a quantitative exercise reveals the importance of the relative effectiveness of public and private health expenditure and their substitutability in determining the public private mix of health expenditure and in accounting for the observed differences across a sample of 22 advanced democratic countries

demographic change human capital accumulation and r d based growth employing an overlapping generations model of r d based growth with endogenous fertility and education decisions we examine how demographic changes induced by an increase in life expectancy influence the long run growth rate of the economy we demonstrate that life expectancy when relatively low high positively negatively affects economic growth this paper also compares the growth implications of child education subsidy policies i e policies for enhancing basic education and child rearing subsidy policies i e pro natal policies and demonstrate that while the child education subsidies consistently foster economic growth child rearing subsidies may negatively affect economic growth

geography health and the pace of demo economic development abstract this paper investigates the impact of subsistence consumption and extrinsic and intrinsic causes of child mortality on fertility and child expenditure it offers a theory for why mankind multiplies at higher rates at geographically unfavorable tropical locations placed into a macroeconomic framework this behavior creates an indirect channel through which geography shapes economic performance it is explained why it are countries of low absolute latitude where we observe exceedingly slow if not stalled economic development and demographic transition

does the internet reduce corruption evidence from u s states and across countries the authors test the hypothesis that the internet is a useful technology for controlling corruption in order to do so the authors develop a novel identification strategy for internet diffusion power disruptions damage digital equipment which increases the user cost of information technology it capital and thus lowers the speed of internet diffusion a natural phenomenon causing power disruptions is lightning activity which makes lightning a viable instrument for internet diffusion using ground based lightning detection censors as well as global satellite data the authors construct lightning density data for the contiguous united states u s states and a large cross section of countries empirically lightning density is a strong instrument for internet diffusion and the authors fourth estimates suggest that the emergence of the internet has served to reduce the extent of corruption across u s states and across the world

demand changes and real exchange rate dynamics in a finite horizon model with sectoral adjustment costs author affiliation hung ju chen department of economics national taiwan university 21 hsu chow road taipei 100 taiwan e mail hjc ntu edu tw corresponding author chen min hsu department of economics national taiwan university 21 hsu chow road taipei 100 taiwan e mail chenmin ntu edu tw acknowledgment we would like to acknowledge the financial support provided by the program for globalization studies at the institute for advanced studies in humanities national taiwan university grant 95r0064 ah03 03 we wish to express our sincere appreciation for helpful comments and suggestions provided by two anonymous referees the editor of the journal joshua aizenman been lon chen ming chia li tsunao okumura and elias sanidas as well as participants at the 2007 annual conference of the asia pacific economic association and the 2007 conference of korea and the world economy we also thank ke shaw lian for his assistance any errors within the work are our responsibility 1 introductionalthough the traditional macroeconomic models tend to explain economic fluctuations by focusing solely on supply shocks given that equilibrium is determined by both demand and supply it would seem obvious that changes in demand may also have important effects in terms of their contribution to economic oscillations changes in demand can easily occur particularly for those small open economies for example small open economies can be easily disturbed by external shocks such as terms of trade shocks through international trade 1 another example is the reduction in the mortality rate as a result of higher health investment both public and private and better healthcare during the economic development 2 for export orientated growth economies in particular such as those of hong kong and taiwan changes in either the terms of trade or the mortality rate can significantly influence economic performance impacting the real exchange rate investment output savings and the current account the phenomenon that life expectancy is steadily lengthening for most developing countries has led to the emergence of a growing number of studies on the impact of population aging 3 since an increase in life expectancy will change the expectation of lifetime utility it will directly affect households inter temporal decisions with regard to consumption and savings however previous studies tend to analyze the impact of mortality decline in a closed economy or in a small open economy with exogenous and constant factor prices 4in order to study the impact of mortality rate changes on the economic performance in an open economy we use the overlapping generations model with uncertain lifetime developed by yaari 1965 and blanchard 1985 to examine household savings behavior within this model agents live with a finite lifetime such that different types of agents simultaneously live in the economy 5 furthermore we extend the blanchard type model to a three good open economy composed of exportable importable and non traded goods to allow us to consider the dynamics of the real exchange rate when demand changes capital production and accumulation are also incorporated into the framework to facilitate an examination of the investment behavior of firms we assume that the economy uses both capital and labor to produce exportable goods and non traded goods while importable goods are imported from abroad capital is produced by the non traded sector and installation costs are incurred when capital is transported to the exportable sector 6 as indicated by morshed and turnovsky 2004 the inclusion of the sectoral adjustment costs of capital can generate persistent deviations from the long run equilibrium by the real exchange rate in response to demand changes 7 because the real exchange rate is playing a dual role of a non traded goods price and a capital price we are able to study the impact of population aging and terms of trade shocks on international capital flows in a small open economy with endogenous factor prices

savings and nutrition at low incomes while many development theorists assume saving propensities vary among different groups there has been limited theoretical justification for this view this paper analyzes two complementary theories stressing the effect on saving of physiological consequences of poor nutrition at low incomes one influence is on the probability of survival another is on workers productivity either effect means that the average propensity to save can rise with income issues considered include annuities exogenous changes in survival and efficiency implications for the efficiency wage theory of unemployment and distinctions between wage and nonwage income implications of nutritional effects for econometric specification of saving functions are stressed

the child is father of the man implications for the demographic transition we propose a new theory of the demographic transition based on the evidence from natural sciences that physical development during childhood affects adult life expectancy positively this theory is embodied in a continuous time olg framework where fertility longevity and education all result from individual decisions we conclude that a sustained improvement in physical development is at the basis of the observed demographic transition in today s developed countries and may be an important factor in explaining the slow transition from the malthusian towards the modern era the dynamics of the proposed model reproduce the key features of the demographic transition including sustained improvements in child physical development permanent increase in life expectancy a hump shaped evolution of both population growth and fertility and late increases in secondary educational attainments

does foreign aid corrupt abstract we estimate the impact of foreign aid on corruption using geographical and cultural distance to the donor countries as instrumental variables to assess causality aid decreases corruption our results are statistically and economically significant and robust to different controls

corruption as an occupational choice endogenous corruption and tax policy corruption is endemic in many countries and empirical studies have demonstrated how it impacts on macroeconomic indicators theoretical studies have generally assumed an exogenously given proportion of the population are corrupt or that the public sector is fixed in size far fewer explore how corruption emerges endogenously we endogenize corruption as an occupational choice workers choose private or public employment public employees can be honest or corrupt corruption is subject to a social sanction that results in a loss of self esteem those who care little about the social sanction choose to be corrupt when a firm meets a corrupt public employee it pays a bribe to secure a reduction in the tax rate the economy has two self sustaining equilibria with different levels of corruption corruption reduces tax revenue and the tax rate that maximizes revenue an increase in the social sanction reduces corruption but also reduces tax revenues if the economy is in a high corruption equilibrium paying a wage premium to public sector workers can result in all public sector workers being corrupt public sector audits to detect corrupt workers always reduce corruption but can only increase welfare when they are cheap to conduct and the economy is in a low corruption equilibrium

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

mortality decline human capital investment and economic growth abstract we examine the role of increased life expectancy in raising human capital investment during the process of economic growth we develop a continuous time overlapping generations model in which individuals make optimal schooling investment choices in the face of a constant probability of death we present analytic results followed by results from a calibrated version of the model using realistic estimates of the return to schooling mortality decline produces economically significant increases in schooling and consumption allowing schooling to vary endogenously produces a much larger response of consumption and capital to mortality decline than is observed when schooling is held fixed

diseases infection dynamics and development abstract the relationship between health and development is a subject of ongoing debate this paper contributes to the debate by proposing a general equilibrium theory of infectious disease transmission prevention investment and rational behavior diseases cause premature death labor productivity loss and lower quality of life higher disease prevalence lowers the average saving investment propensity the model offers two insights first infectious disease can plausibly generate an unconventional growth trap where income alone cannot push an economy out of underdevelopment second even when countries converge to the same balanced growth path the disease ecology significantly impairs the pace of economic development

the impact of corruption on firm tax compliance in transition economies whom do you trust tax compliance is an important issue for gov ernments and the public alike to meet public needs and fund public mandates firms around the world are expected to comply with tax laws factors that are related to orga nizational firm tax compliance have not been sufficiently examined in the literature owing to the increasing global influence of transition economies factors associated with firm tax compliance in transition economies are particu larly of interest based on a sample of over 5 000 firms from 22 former soviet bloc transition economies we find that higher levels of corruption and higher levels of par ticularized trust reliance on friends and family are asso ciated with lower levels of tax compliance interestingly we also find that the negative relationship between cor ruption and tax compliance is weakened in situations of higher generalized trust trust in strangers overall our study s results suggest that institutional factors play an important role and are related to firm tax compliance behavior in transition economies

decentralization and corruption evidence across countries the relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design the theoretical literature makes ambiguous predictions about this relationship and it has remained virtually unexamined by empiricists the authors make a first attempt at examining the issue empirically by looking at the cross country relationship between fiscal decentralization and corruption as measured by a number of different indices their estimates suggest that fiscal decentralization in government spending is significantly associated with lower corruption moreover they find that the origin of a country s legal system for example civil versus common legal code performs extremely well as an instrument for decentralization the estimated relationship between decentralization when so instrumented and corruption is even stronger the evidence suggests a number of interesting areas for future work including investigating whether there are specific services for which decentralized provision has a particularly strong impact on political rent extraction and understanding the channels through which decentralization succeeds in keeping corruption in check

openness country size and government abstract this paper shows that smaller countries have a larger share of public consumption in gdp and are also more open to trade these empirical observations are consistent with recent theoretical models explaining country formation and break up and may account for the observed positive empirical relationship between trade openness and government size

healthcare investment and income inequality abstract this paper examines how the relative shares of public and private health expenditures impact income inequality we study a two period overlapping generation s growth model in which longevity is determined by both private and public health expenditure and human capital is the engine of growth increased investment in health reduces mortality raises return to education and affects income inequality in such a framework we show that the cross section earnings inequality is non decreasing in the private share of health expenditure we test this prediction empirically using a variable that proxies for the relative intensity of investments private versus public using vaccination data from the national sample survey organization for 76 regions in india in the year 1986 87 we link this with region specific expenditure inequality data for the period 1987 2012 our empirical findings though focused on a specific health investment vaccines suggest that an increase in the share of the privately provided health care results in higher inequality

health nutrition and economic development the relationship between health and economic development is explored focusing on nutrition based health indicators the spotlight is placed on the inter related feedbacks between the influence of health on productivity on one hand and the influence of income on health status on the other disentangling causality in these relationships has preoccupied much of the literature we evaluate different empirical strategies that have been adopted and assess the results there is now a body of evidence based on careful empirical studies that demonstrates a causal relationship between health and labor productivity there is also evidence that at least among the very poor additional income is spent on improved nutrition there are two issues that have received little attention although we argue they are likely to be very important first measurement of health is discussed in detail evidence is presented on how taking into account differences in the extent of measurement error is critical for interpreting the impact of health on wages the same theme emerges in studies of the effect of income on health specifically calorie intake the key role of non linearities in these relationships is highlighted and we demonstrate that a good deal of the variation in estimates of income elasticities of demand for calories can be ascribed to the role of measurement and functional form authors

health spending savings and fertility in a lifecycle dynastic model with longevity externalities we investigate health spending savings fertility and policy implications in a lifecycle dynastic model with longevity externalities in annuity returns we show that such externalities engender not only excessive health spending but also under saving and excessive fertility social security and health subsidization increase health spending and savings but reduce fertility from laissez faire levels a publicly funded universal health system under labour income taxation raises fertility taxing health spending or using social security and public health together can obtain socially optimal health spending savings longevity and fertility numerical results based on us observations suggest substantial variations among these cases especially in old age health spending

infectious disease and preventive behavior in an overlapping generations model abstract this paper incorporates prevalence of disease and agent s preventive behavior i e health investment into a small open overlapping generations model and investigates the dynamic behaviors of the competitive equilibrium allocation using the model it is shown that agents prevalence elastic behaviors which are supported from empirical studies can be obtained and that such agents behaviors cause the cyclicity of the spread of disease we also show that although the agents preventive behavior in a competitive equilibrium may be insufficient because of the existence of external effects a one shot medical aid from foreign countries does not necessarily improve the agents welfare in the pareto sense

barriers to prosperity parasitic and infectious diseases iq and economic development iq scores differ substantially across nations this study argues that cross country variations in iq scores to a large extent reflect the burden of parasitic and infectious diseases pids and iron and iodine deficiency iid in infancy and in utero furthermore it is shown that the prevalence of health insults through the channel of cognitive ability is influential for the level as well as the growth in productivity across the world using data for 181 countries and an instrumental variable approach regressions reveal that the prevalence of pid iids is influential for growth and income inequalities globally

health capital and cross country variation in income per capita in the mankiw romer weil model abstract this paper examines the effects of incorporating a proxy for health capital in mankiw romer and weil s empirical growth model results suggest a stronger and more robust relationship between income per capita and health capital than between income per capita and educational human capital

tax structure and the size of government an empirical analysis of the fiscal illusion and fiscal stress arguments this study attempts to fulfill a number of objectives one is the possible reconciliation of two divergent strains of thought concerning the size of government fiscal illusion and fiscal stress in this respect the results show little evidence of fiscal illusion but provide support for some of the notions associated with the fiscal stress hypothesis namely the effects of revenue and income variability on the size of government

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

life expectancy and endogenous growth we consider an overlapping generations model with uncertain lifetime and endogenous growth individuals have to choose the length of time devoted to schooling before starting to work we show that it depends positively on life expectancy but that the positive effect of a longer life on growth could be offset by a decrease in the participation rate dynamics are characterized by a delay differential equation and human capital converges with oscillations to a balanced growth path

environmental policy and human capital inequality a matter of life and death abstract this paper analyzes the economic implications of an environmental policy when we account for the life expectancy of heterogeneous agents in a framework in which everyone suffers from pollution but health status also depends on individual human capital we find that the economy may be stuck in a trap in which inequality rises steadily especially when the initial pollution intensity of production is too high we emphasize that such inequality is in the long run costly for the economy in terms of health and growth therefore we study whether a tax on pollution associated with an investment in pollution abatement can be used to address this situation we show that a stricter environmental policy may allow the economy to escape from the inequality trap while enhancing the long term growth rate when the initial inequality in human capital is not too large

hold your nose and vote corruption and public decisions in a representative democracy this paper analyzes how corruption alters policy decisions in democracy and examines whether this distortion can result in a long term persistence of corruption even when the voters are well informed and rational by applying a citizen candidate model of representative democracy the paper analyzes how corruption distorts the allocation of resources between public and private consumption altering the policy preferences of elected and nonelected citizens in opposite directions the outcome is a reduction in real public expenditure and if the median voter s demand for public goods is sufficiently elastic a reduction in taxes in this case some citizens benefit indirectly from corruption the paper also presents some empirical evidence that in democratic countries corruption results in lower tax revenue and proceeds to show that when this occurs citizens anticipating a shift in preferences in favor of public expenditure may support institutions that favor corruption this result complements the findings of other studies that have attributed the persistence of corruption in democracy to some failure on the part of the voters or the electoral system it also bears implications for developing effective anticorruption strategies and for redefining the role that can be played by the international community

life expectancy and the environment we present an olg model in which life expectancy and environmental quality dynamics are jointly determined agents may invest in environmental care depending on how much they expect to live in turn environmental conditions affect life expectancy as a result our model produces a positive correlation between longevity and environmental quality both in the long run and along the transition path eventually multiple equilibria may also arise some countries might be caught in a low life expectancy low environmental quality trap this outcome is consistent with stylized facts relating life expectancy and environmental performance measures we also discuss the welfare and policy implications of the inter generational externalities generated by individual choices finally we show that our results are robust to the introduction of growth dynamics based on physical or human capital accumulation c 2009 elsevier b v all rights reserved

humanitarian aid fertility and economic growth this paper examines the effect of humanitarian aid on fertility and economic growth in an overlapping generations model where health status in adulthood depends on health in childhood adult agents allocate their time to work leisure and childrearing activities humanitarian aid influences the probability of survival to adulthood health in childhood and the time that adults allocate to childrearing giving rise to an ambiguous effect on both fertility and growth an empirical investigation for the period 1973 2007 suggests that humanitarian aid has on average a zero effect on the rates of fertility and of per capita output growth

paths to success the relationship between human development and economic growth summary this paper explores the two way relationship between economic growth eg and human development hd we develop panel data strategies to estimate the strength of these relationships and find that hd plays an essential role in determining growth trajectories our measure of sustained growth not only is hd a final product in the sense that it measures basic human well being but it is also a critical input into eg our findings illustrate the empirical relevance of endogenous growth and are consistent with threshold effect models our results imply that successful policy requires an early focus on hd not only because of its direct impact but also because of its feedback effect on sustaining eg

a free press is bad news for corruption abstract this paper tests the proposition that a free press may be a powerful control on corruption we find evidence of a significant relationship between more press freedom and less corruption in a large cross section of countries this result is robust to specification and sample and the relationship is not sensitive to the choice of a particular measure of corruption or of press freedom furthermore we present evidence which suggests that the direction of causation runs from higher press freedom to lower corruption

non discriminating renegotiation in a competitive insurance market abstract a variant of the rothschild stiglitz model of a competitive insurance market is considered where each uninformed firm is allowed to renegotiate the contracts that its customers initially sign subject to the restriction that renegotiated contracts be offered to all the firm s customers such non discriminating renegotiation is shown to weaken the profitability of cream skimming to the extent that there exists a unique equilibrium outcome this outcome is that of miyazaki and spence i e the incentive compatible pair of zero profit contracts if efficient and the incentive compatible zero profit pair of contracts maximizing low risk utility otherwise

the empirical analysis of fiscal illusion this paper examines the empirical analysis of the five main hypotheses subsumed under the generic term fiscal illusion after placing these hypotheses within a common theoretical framework the paper attempts to evaluate empirical research into the revenue complexity hypothesis the revenue elasticity hypothesis the flypaper effect renter illusion and debt illusion

patience and prosperity abstract this paper introduces wealth dependent time preference into a simple model of endogenous growth the model generates adjustment dynamics in line with the historical facts on savings and economic growth in europe from the high middle ages to today along a virtuous cycle of development more wealth leads to more patience which leads to more savings and further increasing wealth savings rates and income growth rates are thus jointly increasing during the process of development until they converge towards constants along a balanced growth path during the transition to modern growth an economy in which the association of wealth and patience is stronger overtakes an otherwise identical economy and generates temporarily diverging growth rates