habits costly investment and current account dynamics abstract we analyze the current account dynamics for a small country model with habit forming consumers and costly investment the model has several empirical and policy implications i it is consistent with stylized facts regarding the effects of productivity shocks and increases in fiscal spending and regarding the savings investment co movement ii the long run effect of a temporary shock on net foreign assets is often opposite to that of a permanent shock iii under strong habit persistence the welfare dynamics are sluggish so that a beneficial tax financed fiscal policy may have a harmful hangover effect on welfare

how groups reach agreement in risky choices an experiment this paper studies how groups resolve disagreement when they must reach unanimity after submitting individual proposals and exchanging text form messages via a chat window in lottery choice experiments we find that the majority proposal does not always prevail the minority proposal prevails sometimes especially when it is closer to risk neutrality about one third of the groups disagrees after communication and would have got zero payoffs if disagreement remains after two more attempts without communication in these groups extrovert subjects are more likely to lead the group outcome than confused or conscientious subjects overall group choices are more coherent and closer to risk neutrality than individuals checking the recorded messages we find that the chat activity is intense growing with the level of disagreement and aims at finding consensus the amount and timing of chat messages help us to predict which choice prevails in the group

the strategic interaction between firms and formulary committees effects on the prices of new drugs we study the strategic interaction between the pricing decisions of a pharmaceutical firm and the reimbursement decisions of a government agency which grants reimbursement rights to patients for whom new drugs are most cost effective if the reimbursement decision precedes pricing the agency only reimburses some patients if the drug s private and public health benefits diverge this is there are consumption externalities and the variable cost of the drug exceeds the alternative s contrarily if the firm can commit to a price before reimbursement a strategic effect implies that by setting a sufficiently high price the firm can make the agency more willing to reimburse than without commitment

the hidden persuaders institutions and individuals in economic theory in his classic book the hidden persuaders vance packard claimed that large corporations manipulated consumers using advertising techniques john kenneth galbraith and others have repeated a similar view against this gary becker and george stigler have claimed that advertising is essentially informative rather than manipulative in contrast it is argued here that both of these opposed accounts of human agency neglect the more subtle and undesigned processes by which institutions bear upon and mould individuals this paper proposes a concept of reconstitutive downward causation in which institutions act upon individual habits and dispositions the mechanisms involved do not fall foul of past critiques of holism or methodological collectivism this argument involves a rehabilitation of the concept of habit in social science with far reaching implications

strong sustainability critical natural capital and the capability approach this article is an attempt to conceptually improve the notion of strong sustainability by creating a rapprochement between its core concept critical natural capital and the capability approach we first demonstrate that the capability approach constitutes a relevant framework for analysing the multiple links between human well being and critical natural capital second we demonstrate that the rapprochement between critical natural capital and the capability approach can form both the normative basis and the informational basis for a deliberative approach to human development which embraces a strong sustainability perspective this conceptual rapprochement as illustrated in our case study opens up avenues of research towards the practical implementation of human development projects from a strong sustainability perspective

monopoly pricing with negative network effects the case of vaccines abstract we study the market for vaccinations considering income heterogeneity on the demand side and monopoly power on the supply side a monopolist has an incentive to exploit the external effect of vaccinations and leave the poor susceptible in order to increase the willingness to pay the rich even the possibility of price discrimination does not remove this incentive we demonstrate that the weaknesses of standard policy measures are mitigated when income heterogeneity is taken into account this offers an efficiency based rationale for distribution oriented national or international public health interventions

agency relationships in family firms theory and evidence does owner management necessarily eliminate the agency costs of ownership drawing on agency literature and on the economic theory of the household we argue that private ownership and owner management expose privately held owner managed firms to agency threats ignored by jensen s and meckling s 1976 agency model private ownership and owner management not only reduce the effectiveness of external control mechanisms they also expose firms to a self control problem created by incentives that cause owners to take actions which harm themselves as well as those around them jensen 1994 p 43 thus shareholders have incentive to invest resources in curbing both managerialand owner opportunism we extend this thesis to the domain of the family firm after developing hypotheses which describe how family dynamics and specifically altruism exacerbate agency problems experienced by these privately held owner managed firms we use data obtained from a large scale survey of family businesses to field test our hypotheses and find evidence which suggests support for our proposed theory finally we discuss the implications of our theory for research on family and other types of privately held owner managed firms

more than total economic value how to combine economic valuation of biodiversity with ecological resilience abstract the assessment of total economic value has become a pragmatic and popular approach in nature valuation yet criticisms have been raised one major point of critique is that total economic value bases the monetary value of ecosystems purely on the flow of human benefits of services of ecosystems and consequently ignores questions of sustainable use of natural capital per se this paper explains why total economic value by itself is in principle an inadequate concept to guide sustainable use of ecosystems and gives an overview of essential ecological theory that needs to be taken into account in addition to total economic value to fully include ecosystem sustainability the paper concludes with a framework for combining ecological theory with economic valuation the key elements here are theoretical ecological insights about ecosystem resilience and portfolio theory which offers an economic perspective on investment in biodiversity portfolio theory puts total economic value in a framework where investment in biodiversity is expanded to cover functional diversity and mobile link species in order to maintain ecosystem resilience and so fosters sustainable use of ecosystems

interaction protection and epidemics abstract individuals respond to the risk of contagious infections by restricting interaction and by investing in protection we develop a model that examines the trade off between these two actions and the consequences for infection rates there exists a unique equilibrium individuals who invest in protection choose to interact more relative to those who do not invest in protection changes in the contagiousness of the disease have non monotonic effects as a result interaction initially falls and then rises while infection rates too may initial increase and then decline we then consider a society with two communities that differ in their returns from interaction high and low individuals in isolated communities exhibit different behavior the high community has a higher rate of protection and interaction and a lower rate of infection integration amplifies these differences

teams take the better risk abstract one reason why decision makers are often teams and not individuals may be that team decisions comply more closely with economic rationality we compare individual and team decisions when systematic deviations from the expected utility theory eut and the portfolio selection theory pst are to be expected we find almost no evidence for the greater compliance of team decisions with the principles of eut however there is substantial evidence for the consistency of team decisions with the pst compared to individuals teams accumulate significantly more expected value at a significantly lower total risk measured in standard deviation s d

the control of invasive species on private property with neighbor to neighbor spillovers invasive pests cross property boundaries property managers may have private incentives to control invasive species despite not having sufficient incentive to fully internalize the external costs of their role in spreading the invasion each property manager has a right to future use of his own property but his property may abut others properties enabling spread of an invasive species the incentives for a foresighted property manager to control invasive species have received little attention we consider the efforts of a foresighted property manager who has rights to future use of a property and has the ability to engage in repeated discrete control activities we find that higher rates of dispersal associated with proximity to neighboring properties reduce the private incentives for control controlling species at one location provides incentives to control at a neighboring location control at neighboring locations are strategic complements and coupled with spatial heterogeneity lead to a weaker link public good problem in which each property owner is unable to fully appropriate the benefits of his own control activity future use rights and private costs suggest that there is scope for a series of coase like exchanges to internalize much of the costs associated with species invasion pigouvian taxes on invasive species potentially have qualitatively perverse behavioral effects a tax with a strong income effect e g failure of effective revenue recycling can reduce the value of property assets and diminish the incentive to manage insects on one s own property

group decision making in the shadow of disagreement abstract a model of group decision making is studied in which one of two alternatives must be chosen while agents differ in their preferences over alternatives everybody prefers agreement to disagreement our model is distinguished by three features private information regarding valuations differing intensities in preferences and the option to declare neutrality to avoid disagreement there is always an equilibrium in which the majority is more aggressive in pushing its alternative thus enforcing their will via both numbers and voice however under general conditions an aggressive minority equilibrium inevitably makes an appearance provided that the group is large enough such equilibria invariably display a tyranny of the minority the increased aggression of the minority always outweighs their smaller number leading to the minority outcome being implemented with larger probability than the majority alternative we fully characterize the asymptotic behavior of this model as group size becomes large and show that all equilibria must converge to one of three possible limit outcomes

building the consensus the moral space of earth measurement abstract we chart the moral space of earth measurement with the aim to develop practical tools to evaluate and improve earth measurement frameworks including environmental economic accounting and ecosystem services based on a survey of environmental ethics we develop four concepts that are fundamentally important to fostering agreement in debates over earth measurement frameworks among stakeholders with diverging belief systems the four concepts can thus be used as criteria to evaluate the completeness and defensibility of existing measurement frameworks the first two concepts the consideration of broad human values and long time frames follow the landmark work by bryan norton we further propose the adoption of the capital approach and precaution as the third and fourth concept respectively we conclude with suggestions for how current frameworks could be rendered more complete defensible and internationally acceptable

existence value and intrinsic value abstract in this paper the concept of existence value is related to the notion of intrinsic value current in environmental ethics the methods employed to measure existence value are discussed and thus the question is investigated as to whether these methods are a satisfactory means of taking non use value into account in practical decision making in particular i argue against jonathan aldred that not all bearers of intrinsic value satisfy his definition of existence value plausible counter examples include undiscovered and future bearers of such value section 2 i also raise difficulties for the two proposed measures of existence value willingness to pay and willingness to accept section 3 finally i conclude in section 4 that to base decision making on the valuations of valuers in a free market fails to give value its due a method is instead needed which unlike those associated with existence value more directly takes into account and weighs up the good or the interests of future human beings and of nonhuman entities

non adherence to a low fat diet an economic perspective abstract despite bearing increased risk of suffering a heart attack failure to adhere to a low fat dietary regimen is wide spread the paper applies an expected utility maximization model to inquire into the individual s decision to deviate from a prescribed low fat diet offering an economic explanation for excess high fat consumption the implications of self protection against the risk of dying from an attack are further examined the analysis reveals that self protection and dietary adherence can be complements suggesting that public health policy may help reduce both the risk of an attack and the risk of dying from an attack through providing incentives for self protection

taxation or regulation looking for a good anti smoking policy abstract this paper investigates the relative ability of two anti smoking policies taxes and regulation in inducing reductions in cigarette consumption and in providing incentives to stop smoking or not to start to our results based on canadian data show that cigarette demand responds to taxes elasticity of 0 28 but not to regulation while the converse is true for the proportion of smokers in the population

optimal tax subsidy combinations for the flu season this paper uses a dynamic susceptible infected recovered sir epidemic model to identify optimal vaccination policy mixes for the flu season it begins with the solution to the relevant optimal control problem and then gives the derivation of a perfect foresight equilibrium outcome for vaccination behavior in an unregulated market both the optimal and market outcomes are characterized by switching curves in s i state space exact expressions for these are derived the final section discusses taxes and subsidies that can be used to attain the optimal outcome

consumer habituation this paper examines how consumers willingness to pay for goods is determined by past patterns of consumption the central result is atheorem of interior maximum which states that willingness to pay for a good is maximized at a moderate level of habitual consumption the theorem is derived from a simple model of adaptive behavior that involves a shifting s shaped value function the detailed analysis of the impact of consumption frequency and intensity on willingness to pay reveals an unsuspected implication of diminishing sensitivity even as it leads to a formalization of consumer habituation patterns including sensitization habituation and response recovery upon withdrawal that matches and integrates the most robust empirical regularities attendant on nonassociative learning in neurobiology and behavioral psychology an examination of the implications for demand dynamics and pricing highlights deterministic recurrent and transient patterns of consumption at higher price points

group and individual risk preferences a lottery choice experiment with self employed and salaried workers abstract this paper focuses on decision making under risk comparing group and individual risk preferences in a lottery choice experiment in the individual treatment subjects make choices individually in the group treatment each subject placed in a group made lottery choice via voting in the choice treatment subjects choose whether to be on their own or in a group the originality of this research lies in the fact that we introduced variability in socio demographic characteristics by recruiting salaried and self employed workers our main findings indicate that groups are more likely than individuals to choose safe lotteries our results also show that individuals risk attitude is correlated with both the type and the sector of employment

payments for ecosystem services as commodity fetishism abstract payments for ecosystem services pes economically reward resource managers for the provision of ecosystem services and are thus characterised by i an ecological function subject to trade ii the establishment of a standard unit of exchange iii and supply demand and intermediation flows between those who sell and buy ecosystem services this paper departs from the term commodity fetishism broadly understood as the masking of the social relationships underlying the process of production to illuminate three invisibilities in the commodification of ecosystem services firstly we argue that narrowing down the complexity of ecosystems to a single service has serious technical difficulties and ethical implications on the way we relate to and perceive nature secondly the commodification of ecosystem services denies the multiplicity of values which can be attributed to these services since it requires that a single exchange value is adopted for trading finally we suggest that the process of production exchange and consumption of ecosystem services is characterised by power asymmetries which may contribute to reproducing rather than addressing existing inequalities in the access to natural resources and services

market structure and communicable diseases communicable diseases pose a formidable challenge for public policy using numerical simulations we show under which scenarios a monopolist s price and prevalence paths converge to a non zero steady state in contrast a planner typically eradicates the disease if eradication is impossible the planner subsidizes treatments as long as the prevalence can be controlled drug resistance exacerbates the welfare difference between monopoly and first best outcomes nevertheless because the negative externalities from resistance compete with the positive externalities of treatment a mixed competition monopoly regime may perform better than competition alone this result has important implications for the design of many drug patents les maladies contagieuses posent un defi important a la politique publique a l aide de simulations numeriques on montre dans quels scenarios les prix de monopole et le sentier de prevalence tendent a engendrer un regime permanent ou la maladie ne disparait pas un planificateur typiquement elimine la maladie si l eradication est impossible le planificateur subventionne les traitements aussi longtemps que la prevalence peut etre controlee la resistance au remede agrandit l ecart de bien etre entre le cas du monopole et l optimum cependant comme les effets externes negatifs de la resistance au traitement sont en conflit avec les effets externes positifs des traitements un regime mixte concurrence monopole peut donner de meilleurs resultats que la seule concurrence ce resultat a des implications importantes pour l elaboration de nombreux brevets pharmaceutiques

critical natural capital revisited ecological resilience and sustainable development abstract the maintenance of critical natural capital is an important objective of sustainable development critical natural capital represents a multidimensional concept as it mirrors the different frameworks of various scientific disciplines and social groups in valuing nature this article revisits the concept of critical natural capital and examines its relation to the concept of ecological resilience i propose that ecological resilience can help a great deal in specifying the ecological criticality of specific renewable parts of the natural capital more specifically i suggest that the degree of ecological resilience is inversely related to the degree of threat ecosystems are prone to the concept of ecological resilience may complement other measures such as integrity or vulnerability in estimating the degree of threat specific ecosystems are exposed to the empirical estimates of ecological resilience add a further criterion in order to build a comprehensive and clear conception of critical natural capital

public control of rational and unpredictable epidemics abstract efforts to improve disease forecasting are often justified on the grounds that accurate and reliable forecasts offer opportunities to improve response to epidemics yet little is known about how disease forecasts influence the responsiveness to public health interventions this paper couples an optimal stopping model and rational disease prevention with a stochastic compartmental epidemiological model of disease spread to develop a framework for evaluating the timing of public health interventions in response to rational but unpredictable epidemics optimal behavior by a public health agency is characterized by a pair of critical prevalence thresholds that trigger implementation and suspension of a public prevention program unlike existing economic thresholds for disease prevention our decision thresholds account for time varying probabilities of different levels of infection prevention by private individuals and the likelihood of crossing epidemiological thresholds that determine disease persistence

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

price knowledge in household demand for utility services a household s decision to acquire price knowledge is endogenous in the demand for utility services and may affect elasticities and consumption levels a simultaneous equation model with endogenous switching is developed to evaluate the effects of price knowledge and other sources of heterogeneity results indicate informed households were more responsive to average and marginal price signals informed households also use less water but this is due to heterogeneity rather than price knowledge controlling for heterogeneity price knowledge actually increases monthly water usage the implications of accounting for differences in price knowledge in utility demand modeling and demand management policy are discussed

global disease eradication an infectious disease can only be eradicated globally if it is eliminated in every country but does this require only international coordination or does it require cooperation using a model that blends epidemiology economics and game theory this paper shows that coordination will not always suffice even when the global benefits of eradication exceed the costs in general eradication will require strong international institutions jel h41 i18 k33 o19

the economic functioning of online drugs markets abstract the economic functioning of online drug markets using data scraped from online platforms is studied analysis of over 1 5 million online drugs sales shows online drugs markets tend to function without the significant moral hazard problems that a priori one might think would plague them only a small proportion of online drugs deals receive bad ratings from buyers and online markets suffer less from problems of adulteration and low quality that are a common feature of street sales of illegal drugs furthermore as with legal online markets the market penalizes bad ratings which subsequently lead to significant sales reductions and to market exit the impact of the well known seizure by law enforcement of the original silk road and the shutdown of silk road 2 0 are also studied together with the exit scam of the market leader at the time evolution there is no evidence that these exits deterred buyers or sellers from online drugs trading as new platforms rapidly replaced those taken down with the online market for drugs continuing to grow

are wages habit forming evidence from micro data although utility functions play a central role in economics the axiom that utility depends only on the absolute levels of its arguments is rarely tested this paper uses panel data on 2000 british employees who remain with the same employer and who are not promoted from one wave to the next it is shown that one important measure of well being overall job satisfaction is strongly positively correlated with the change in the worker s pay between waves but is unrelated to the current level of pay empirical tests suggest that a reference dependent satisfaction function where individual well being depends on current pay relative to past pay is more consistent with these regression results than are productivity or agency explanations of increasing wage profiles some evidence is presented of greater job satisfaction effects of pay rises for lower paid less well educated and younger workers these results provide some micro evidence consistent with the theory widespread in social science of habituation individuals may become used to any given level of consumption or income as such they tie in with the finding that a country s well being as measured by the average happiness of its citizens is only weakly correlated with its per capita gnp

rational exuberance at the mall addiction to carrying a credit card balance the becker murphy model of rational addiction is tested with new zealand credit card debt data the results clearly favour the rational addiction model over the myopic backward looking model the estimated short run and long run price elasticities are 0 58 and 2 32 respectively and the estimated rate of time preference is 6 7 per quarter

tax subsidy policies toward vector borne infectious diseases abstract vector borne diseases especially rife in poor countries pose sectoral tax subsidy issues preventions and therapies mitigate these diseases in a numerical optimization model combining dynamic epidemiology and economics the medical distinction between prevention and therapy does not distinguish economic properties of preventions and therapies some interventions increase and others decrease moving to the steady state depending on the utility function the targeting of interventions and the disease process interventions display negative own price but indeterminate cross price effects juxtaposing the social planner s with decentralized choices quantifies externalities and shows how subsidies implement the first best one prevention and the therapy are equally subsidized

on the relation between ecosystem services intrinsic value existence value and economic valuation various attempts have been made to amalgamate the concepts of intrinsic value and ecosystem services often with a stop over at the economic concept of existence value these attempts are based on a confusion of concepts however in this article two types of non use values are distinguished warm glow value related to the satisfaction people may derive from altruism towards nature and existence value related to the satisfaction people may derive from the mere knowledge that nature exists and originating in the human need for self transcendence as benefits to humans warm glow and existence values can be considered ecosystem services neither warm glow value nor existence value represents benefits to nature itself however intrinsic value lies outside the scope of the wide palette of ecosystem services although the concept of ecosystem services does not cover benefits to nature and the intrinsic value of such benefits intrinsic value is not necessarily incompatible with economic valuation although a deontological ethics does not allow economic valuation of nature as an end in itself consequentialism does in consequentialism however intrinsic value is not attributed to nature itself but to benefits to nature these benefits can be economically valued on the basis of benefit transfer

motives for private transfers over the life cycle an analytical framework and evidence for peru abstract this paper tests for the motives for private income transfers we consider two motives altruism and exchange the question of private transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income using a household survey for peru we find that transfer amounts received increase with recipient pre transfer income which contradicts a key prediction of the strong form of the altruism hypothesis but is consistent with exchange we also find that capital market imperfections are likely to be an important cause of private transfers and that social security benefits crowd out the incidence of private transfers

how individual preferences are aggregated in groups an experimental study abstract this paper experimentally investigates how individual preferences through unrestricted deliberation are aggregated into a group decision in two contexts reciprocating gifts and choosing between lotteries in both contexts we find that median group members have a significant impact on the group decision but the median is not the only influential group member non median members closer to the median tend to have more influence than other members by investigating the same individual s influence in different groups we find evidence for relative position in the group having a direct effect on influence these results are consistent with predictions from spatial models of dynamic bargaining for members with intermediate levels of patience we also find that group deliberation involves bargaining and compromise as well as persuasion preferences tend to shift towards the choice of the individual s previous group especially for those with extreme individual preferences

equilibrium vaccination patterns in incomplete and heterogeneous networks abstract under vaccination is a usual concern of disease control studies but this paper employs a simultaneous move game in a three agent contagion network to show that it is only one of the three inefficient patterns when the network structure is incomplete or individual characteristics are heterogeneous there exist new types of nash equilibrium outcomes with either the right number but wrong set of people getting vaccinated or too many vaccinations and these equilibria are robust to standard refinements while untargeted policies can correct the standard under vaccination problem targeted policies are more palatable for correcting the new inefficiencies universal mandates can never improve on any nash equilibria

network software security and user incentives we study the effect of user incentives on software security in a network of individual users under costly patching and negative network security externalities for proprietary software or freeware we compare four alternative policies to manage network security i consumer self patching where no external incentives are provided for patching or purchasing ii mandatory patching iii patching rebate and iv usage tax we show that for proprietary software when the software security risk and the patching costs are high for both a welfare maximizing social planner and a profit maximizing vendor a patching rebate dominates the other policies however when the patching cost or the security risk is low self patching is best we also show that when a rebate is effective the profit maximizing rebate is decreasing in the security risk and increasing in patching costs the welfare maximizing rebates are also increasing in patching costs but can be increasing in the effective security risk when patching costs are high for freeware a usage tax is the most effective policy except when both patching costs and security risk are low in which case a patching rebate prevails optimal patching rebates and taxes tend to increase with increased security risk and patching costs but can decrease in the security risk for high risk levels our results suggest that both the value generated from software and vendor profits can be significantly improved by mechanisms that target user incentives to maintain software security

illicit drug use and labour market achievement evidence from the uk this study using data from the british crime survey bcs examines the effect of drug use on occupational achievement it starts by attempting to overcome the identification problem that results from the limited set of drug use questions presented in the bcs taking this into account and allowing for the endogeneity of drug use in equations for unemployment and labour market outcomes that a mild positive association with soft drugs and occupational achievement is observed that diminishes with age this relationship holds for males but not for females in contrast it is also found that past use of hard drugs significantly increases the likelihood of current unemployment although it appears to be unrelated to occupational success conditional on achieving employment

what makes you grab low carb beers what makes people choose low carbohydrate high protein food low carb food which is good for health but usually tastes bad using panel data on us beer consumption in which each consumption occasion is uniquely associated with various companion based consumption contexts and exposure levels to diet information we analyse the variations in consumers preferences for low carb food the results show that there exist considerable gender differences in the preference variation under peer pressure first single females behave in a way they dislike drinking low carb beer in front of friends spouses and significant others second male both married and single and married females pretend to choose low carb beer when accompanied by spouses or significant others finally the elasticity of demand for healthy food with respect to news articles about low carb diets is positive yet with substantial differences in the degree of elasticity across demographic groups

risk preference differentials of small groups and individuals the risk prefer ences of thr ee person group s a nd individuals are compar ed using a non sequential repeated measures lottery exp eriment w ith 20 per player win pe rcentages varying from 10 to 90 analysis based on independent samples of certainty equivalent ratios certainty equivalent expected value elicited using a maximum willingness to pay mechanism for fifty two individuals and sixteen groups reveals that 1 certainty equi valent ratios cers va ry significantly a cross lottery win percentages 2 cer dispersion tends to decline as the lottery win percentage increases and is significantly smaller for groups than individuals in seven of the nine lotteries 3 for the highest risk lotteries the average cers submitted by groups are significantly smaller more risk averse than the average cers submitted by individuals 4 for the lowest risk lotteries the average cers submitted by groups are approximately risk neutral cer 1 and somewhat larger than the average cers submitted by individuals

externalities and compulsary vaccinations abstract this paper challenges the conventional wisdom that because of the free rider problem a case can be made for compulsary vaccination against infectious disease for a very general class of models requiring that all individuals be vaccinated is strictly dominated by free choice the market allocation is not optimum and in the full information optimum some individuals would be compelled to be vaccinated this allocation can be achieved by taxes and subsidies however the government can exploit the revelation properties of vaccination and achieve an even better allocation than the full information optimum

dynamic corrective taxes with time varying salience abstract economies across the globe are becoming increasingly cashless and many payment systems have become automated driving a temporal wedge between consumption and payment and generally making the costs of consumption intermittently salient since this inconsistent price salience alters demand elasticities it is a particular concern for goods that generate externalities and the price based policies deployed to address them this paper derives optimal dynamic corrective taxes for suboptimal and persistent consumption decisions these taxes depend on the agent s ability to commit to a future consumption path we also characterize a second best constant tax and the excess burden from time invariant tax rates when calibrated to u s residential electricity consumption the model shows that the second best constant tax is more than twice the marginal external cost of carbon emissions

the simple analytics of tobacco taxation with illegal supply this paper examines the impact of tobacco excise taxes where legal and illegal supplies coexist the government s objective is to minimize cigarettes smoked in the economy or to maximize revenue or to minimize illegal activity it reacts to a competitive illegal supply in an adjoining jurisdiction a model of consumer choice is used to demonstrate how demand response to tax changes can yield counterintuitive results while the model mimics the canadian market similar situations characterize the us and european markets a novel element of the paper is the treatment of externalities on the supply side rather than the demand side resume analytique simple des taxes sur le tabac quand il y a offre illegale ce memoire examine l impact des taxes sur la vente de tabac quand des offres legale et illegale coexistent l objectif du gouvernement est de minimiser les cigarettes fumees dans l economie ou de maximiser le revenu fiscal ou de minimiser l activite illegale il doit prendre en compte l offre concurrentielle illegale dans une juridiction contigue on utilise un modele de choix du consommateur pour montrer comment la reaction de la demande aux changements dans les taxes peut engendrer des resultats contre intuitifs bien que le modele soit concu pour le marche canadien on trouve des situations avec des caracteristiques similaires dans les marches americain et europeens un element novateur du memoire est sa prise en compte des externalites du cote de l offre plutot que du cote de la demande

dynamic epidemiology and the market for vaccinations abstract the intent of this paper is to raise the question of how and when externalities can arise in the market for vaccinations static and dynamic models of such markets are developed and compared a special case in a continuous time dynamic framework is examined and is found to be efficient i e there is no externality this is in contrast to the results from the static formulation raising doubts about the suitability of a static approach these results indicate that the question of whether there are externalities in individual immunization decisions is more involved than is generally supposed

preventives versus treatments preventives are sold ex ante before disease status is realized while treatments are sold ex post even if the mean of the ex ante distribution of consumer values is the same as that ex post the shape of the distributions may differ generating a difference between the surplus each product can extract if for example consumers differ only in ex ante disease risk then a monopolist would have more difficulty extracting surplus with a preventive than with a treatment because treatment consumers having contracted the disease no longer differ in disease risk we show that the ratio of preventive to treatment producer surplus can be arbitrarily small in particular when the distribution of consumer values has a zipf shape and the disease is rare the firm s bias toward treatments can be reversed for example if the source of private information is disease severity learned ex post the difference between the producer surplus earned from the products can result in distorted rd the deadweight loss from this distortion can be as large as the entire producer surplus difference calibrations for hiv and heart attacks based on risk factors in the u s population suggest that the distribution of disease risk is sufficiently zipf similar to generate substantial differences between producer surplus from preventives and treatments empirically we find that proxies for the zipf similarity of the disease risk distribution are associated a significantly lower likelihood of vaccine development but not drug development jel codes o31 l11 i18 d42

preference heterogeneity in the structural estimation of efficient pigovian incentives for insecticide spraying to reduce malaria this paper bridges the theoretical and empirical literatures on the role of preference heterogeneity in characterizing externalities related to disease transmission we use a theoretical structure similar to locational sorting models which characterize equilibria in terms of marginal individuals who are indifferent between locations in our case the locations are binary consisting of whether or not to take a discrete preventative action individual heterogeneity arises in this structure due to variation in the costs and disutility associated with prevention we demonstrate application of this approach in the context of participation in insecticide based indoor residual spraying programs for malaria control in northern uganda we identify the parameters of our theoretical model using a stated preference choice experiment combined with estimates from published epidemiological studies the model implies that pigovian subsidies for participation in this context should decrease household malaria risk by 19 25 our approach can be applied to other bioeconomic externalities with spillovers from discrete preventative actions including agricultural pest management and the control of pest infestations and invasive species

rational habit formation abstract this paper discusses consumer demand under rational habit formation if consumer tastes change endogenously through habit stocks depending on past consumption the rational consumer will make allowance of the future habit forming effects of current consumption a model with rational habit formation is made formally equivalent to an intertemporal consumer model without habit formation by redefining the cost of consumption and wealth the cost of consumption is obtained by adding the cost of future induced consumption to the rental price of the commodity the extended wealth concept is obtained by subtracting the cost of the initial stocks of habits and the cost of future physically necessary consumption from wealth the paper also investigates the implication of rational habit formation for constructing one period cost of living indices

the duration of the smoking habit i introduction most smokers smoke out of habit once the habit is ended many of smoking s most harmful effects decline rather quickly preventing and ending cigarette addiction is therefore the straightest path toward preventing the health damage done by cigarette smoking consequently the related questions of why people start smoking and why they quit are central to formulating and evaluating effective antismoking policies duration or hazard models are designed to measure the probability of transition between states and are thus ideal for investigating the structural determinants of the transition between addiction and non addiction nevertheless most previous work in the economics literature uses the aggregate smoking participation rate defined as the percentage of people who currently smoke or an individual s probability of participation rather than a hazard rate to measure the attractiveness of habitual smoking this paper models the hazard rates of both starting and quitting the cigarette smoking habit the starting hazard rate is the probability that an individual will start smoking in a given time period conditional on being a nonsmoker until then the quitting hazard rate is the probability of quitting smoking in a given time period conditional on being a smoker since the starting date both of these rates should rise and fall in response to changes in the attractiveness of smoking the two rates will respond differently to different stimuli since the starting hazard reflects the point of view of nonsmokers and the quitting hazard reflects the point of view of smokers hazard or duration models possess several advantages over smoking participation models most obviously smoking participation rates cannot directly distinguish between increased starting rates and decreased quitting rates but the hazard models can also in a participation rate model it is difficult to control for the effect of the duration of the habit whereas duration models are designed specifically to allow for and measure the dependence of the hazard rate on duration another advantage is that the participation rate at any one time will oversample the number of long term smokers relative to those who had a short term habit whereas a duration model is designed to avoid this source of bias one drawback however is that because of their inherent panel nature the data requirements of duration models are somewhat more difficult to satisfy as shall be seen the only previous work in the economics literature that estimates the hazard rate of starting smoking is douglas and hariharan 1994 my paper improves upon douglas and hariharan in at least three important ways first it estimates the hazard rate of quitting smoking as well as that of starting second it takes into account variation in state level regulation third its time varying covariate model allows hazard rates to respond dynamically to changes in cigarette price regulation and information variables the use of time varying covariates is important because it brings the empirical model into much closer accord with theory the decision whether or not to start or quit smoking is an ongoing decision made one day at a time on the basis of current information the hazard of starting is greatest when the cost of the habit appears lowest and its benefit appears highest this comparison of cost and benefit changes through time as price information income and life cycle variables change while douglas and hariharan 1994 used price information from the potential smoker s most vulnerable age on the theory that its marginal effect is greatest at that time the model used in this paper allows each individual s hazard rate to respond to changes in price and public information as they occur the leading theoretical model of the decision to smoke is the rational addiction model of becker and murphy 1988 which assumes that consumers of addictive goods begin smoking only after fully weighing the costs and benefits of the habit

alcoholism work and income this article reports on an empirical analysis of the relationships between alcoholism and income and working we show that the relationships between alcoholism and labor market success have important age or life cycle dimensions we present evidence that alcoholism may affect income more by restricting labor market participation than by affecting the wages of workers finally we demonstrate that the effects of alcoholism on earnings depend on the extent to which one controls for other covariates associated with alcoholism as such we suggest that there may be important indirect as well as direct effects of alcoholism on labor market success

tax incidence with strategic firms in the soft drink market abstract because soft drink sd consumption is considered to be a contributor to the epidemic of obesity there is a growing interest in evaluating the impact on sd consumption of alternative tax policies in this paper we propose a methodology to evaluate the impact of taxation of a food market taking into account the strategic price response of both manufacturers and retailers we apply this methodology to the french sd market and simulate the impacts of ad valorem and excise taxes we find that firms behave differently when facing an ad valorem tax or an excise tax an excise tax is overshifted to consumer prices while an ad valorem tax is undershifted to consumer prices we find that an excise tax based on the sugar content of sd is the most effective at reducing sd consumption our results also indicate that ignoring strategic pricing by firms leads to misestimations of the impact of taxation by between 15 and 40 depending on the products and the tax implemented in the short term that is ignoring positive long term health effects a 9 cents l excise tax has a small negative welfare effect about 1 person year

employment wages and alcohol consumption in russia 1 introductionconcerns regarding the relationship between alcohol consumption and labor market productivity are well grounded if problem drinking or alcoholism is considered a disease then it may have depressant effects on labor market productivity causing reductions in employment earnings and other labor market outcomes mullahy and sindelar 1993 1996 kenkel and ribar 1994 however there is a medical literature that documents a u shaped relationship between alcohol consumption and the risk of cardiovascular disease according to this literature moderate drinkers have a lower risk of cardiovascular disease than do either abstainers or heavy drinkers beaglehole and jackson 1992 doll et al 1994 consistent with this evidence several economists have found a positive association between moderate drinking and earnings berger and leigh 1988 french and zarkin 1995 heien 1996 hamilton and hamilton 1997 zarkin et al 1998 macdonald and shields 2001 this article investigates the impact of alcohol consumption on employment and wages in russia the primary contributions of the article are twofold first it enhances the economic literature on the relationship between alcohol consumption and labor market behavior by using data from a longitudinal survey the use of a longitudinal data set enables the estimation of a fixed effects model which helps avoid the potential bias caused by unobserved individual factors not captured in cross sectional models the use of a fixed effects model is an important extension to the literature because the data sets used in previous studies are cross sectional and usually lack adequate variables that could serve as identifying instruments to control for the endogeneity of alcohol consumption 1 furthermore the richness of the data set used in this article allows for the application of three alternative measures of alcohol consumption in the empirical analysis this is important because the relationship between alcohol consumption and labor market outcomes may be sensitive to the alcohol measure that is used the second notable contribution of this article is that it provides the first empirical evidence on the association between alcohol consumption and labor market outcomes in russia excessive alcohol consumption is a widespread problem in russia where per capita alcohol consumption is around 14 liters per year the world health organization who considers 8 liters to be a sign that a country has a critical consumption level for health problems quinn judge 1997 furthermore the dramatic fluctuations in mortality rates experienced in russia over the past 15 years have generated considerable attention to the potential effect of alcohol consumption on the overall health of the russian population it is important to investigate how labor market outcomes would be affected by alcohol consumption in a country which demonstrates such dramatic fluctuations in alcohol consumption and mortality consistent with the previous studies cross sectional results generally support the hypothesis of an inverse u shaped relationship between alcohol consumption and wages and employment results from the fixed effect models are found to be quite different from those of cross sectional models the positive effect of alcohol consumption on employment disappears for both males and females once the individual fixed effects are controlled for the results of the wage model lend support to a small and linear return to alcohol consumption but the effects are significant only at the 10 level the fixed effects estimates are smaller in magnitude and estimated with less precision compared with cross sectional estimates section 2 reviews the previous literature section 3 discusses the conceptual issues and empirical strategy section 4 introduces the data set section 5 provides a discussion of the results and sensitivity analyses section 6 concludes the article

on the existence of balanced growth equilibrium the authors characterize the class of dynamic models that allow for the most commonly used types of sustained economic growth balanced and asymptotically balanced they show that under a constant returns to scale technology asymptotically constant discount rate and asymptotically constant elasticity of marginal felicity are not only necessary but also sufficient conditions for the existence of a n asymptotically balanced growth equilibrium path the authors provide examples of recursive utility models that accept a n asymptotically balanced growth equilibrium and discuss their implications on cross country differences in growth rates as well as on savings behavior and wealth distribution copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

importance and threat as determining factors for criticality of natural capital abstract an important issue in the debate about the use and conservation of natural ecosystems is the degree to which these ecosystems and their functions should be considered critical this paper presents some guidelines to determine the criticality of natural capital based on two main criteria the first criterion is the importance of natural ecosystems ecological socio cultural and economic and the second is the degree of threat based on the quantity and quality of the remaining natural areas in a given region it is argued that the two criteria are complementary and need to be taken into account simultaneously when determining the criticality of natural capital finally the paper presents and discusses some possibilities for the development of a critical natural capital index for europe

junk food home cooking physical activity and obesity the effect of the fat tax and the thin subsidy abstract in an effort to reduce the growing prevalence of obesity a tax on junk foods known as fat tax has been proposed the revenue from which could be used to finance a thin subsidy for healthy foods or exercising equipment the present paper addresses the fat tax and thin subsidy within a food intake rational choice model assuming that healthy meals are cooked at home with purchased ingredients and time input the paper examines the effects on obesity of a tax on junk food meals and a subsidy to cooking ingredients distinguishing between a weight conscious and a non weight conscious individual and between a weight conscious individual who is physically active and physically inactive the results show that for a non weight conscious individual a fat tax will unambiguously reduce obesity whereas a thin subsidy may increase obesity however for a weight conscious individual particularly one who is physically active even a fat tax may increase obesity as it may reduce not just the consumption of junk food but also the time devoted to physical activity the paper explores conditions under which obesity will rise fall or remain intact following the introduction of a fat tax or a thin subsidy