policy relevant treatment effects accounting for individual level heterogeneity in the response to treatment is a major development in the econometric literature on program evaluation a substantial body of empirical evidence demonstrates that econometric models fit on individual level data manifest heterogeneity in treatment effects that is present even after conditioning on observables an important distinction is the one between evaluation models where participation in the program being evaluated is based at least in part on unobserved idiosyncratic responses to treatment and models where participation is not based on unobserved idiosyncratic responses this is the distinction between selection on unobservables and selection on observables the validity of entire classes of evaluation estimators hinges on whether or not they allow agents to act on unobserved idiosyncratic responses in a wide variety of applications the available evidence suggests that not only are ex post postenrollment responses heterogeneous but that ex ante decisions to participate in programs are based in part on these heterogeneous responses heckman and vytlacil 2000b 2001

generating conditional expectations from models with selectivity bias abstract this paper discusses how conditional expectations should be generated from models with sample selectivity we argue that the conventional method ignores relevant and available information and produces unreliable results an alternative approach is suggested and the empirical example of black white wage differentials is presented

technology adoption impact and extension in developing countries agriculture a review of the recent literature given the stagnant agricultural productivity and persistent food insecurity in low income countries notably in sub saharan africa ssa there has been continued interest in the adoption of new technology and its impact on productivity in these regions interestingly there are signs of green revolution in maize and rice in ssa reflected in sharply increasing yield trends in advanced regions to increase crop yields and sustain yield gains recent case studies of technology adoption unanimously recommend the adoption of integrated farm management systems particularly in ssa on the other hand since the 2010s there have been increasing numbers of studies on social network or farmer to farmer technology extension these studies explore more efficient extension systems than traditional public sector extension approaches this article reviews both recent case studies of technology adoption and its productivity impacts as well as studies on agricultural extension to identify common findings shortcomings and major remaining issues

a note on price perception in water demand models 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

micro data heterogeneity and the evaluation of public policy nobel lecture this paper summarizes the contributions of microeconometrics to economic knowledge four main themes are developed 1 microeconometricians developed new tools to respond to econometric problems raised by the analysis of the new sources of micro data produced after the second world war 2 microeconometrics improved on aggregate time series methods by building models that linked economic models for individuals to data on individual behavior 3 an important empirical regularity detected by the field is the diversity and heterogeneity of behavior this heterogeneity has profound consequences for economic theory and for econometric practice 4 microeconometrics has contributed substantially to the scientific evaluation of public policy

structural change in an open economy we study the importance of international trade in structural change our framework has both productivity and trade cost shocks and allows for non unitary income and substitution elasticities we calibrate our model to investigate south korea s structural change between 1971 and 2005 we nd that the shock processes propagated through the model s two main transmission mechanisms non homothetic preferences and the open economy explain virtually all of the evolution of agriculture and services labor shares and the rising part of the hump shape in manufacturing counterfactual exercises show that the role of the open economy is quantitatively important for explaining south korea s structural change

satisfaction guaranteed or money partially refunded efficient refunds under asymmetric information refunds are modelled as a competitive market response to asymmetric information firms have private information on their choice of product quality and compete by offering price and refund contracts consumers who care about quality draw inferences about the quality offered by the various firms from observed contracts conditions under which a revealing market equilibrium emerges are specified and the equilibrium quality and contract s characterized the model predicts that when product risk is not insurable consumers with higher incomes will pay higher prices for higher quality goods with higher refunds if the product fails

privately operated water utilities municipal price negotiation and estimation of residential water demand the case of france this paper addresses the issue of price negotiation between a municipality and a private water utility operator and its implications for residential water demand estimation we use appropriate econometric procedures to estimate a water demand equation on a panel of french municipalities we find evidence that negotiated water price depends on municipality s characteristics causing endogeneity of price in the demand equation the impact of average household income housing and system features such as metering is investigated both on municipal consumption and price estimated price and income elasticities are significant and close to previous household level studies

social networks and technology adoption in northern mozambique despite their potentially strong impact on poverty agricultural innovations are often adopted slowly using a unique household dataset on sunflower adoption in mozambique we analyse whether and how individual adoption decisions depend upon the choices of others in the same social networks since farmers anticipate that they will share information with others we expect farmers to be more likely to adopt when they know many other adopters dynamic considerations however suggest that farmers who know many adopters might strategically delay adoption to free ride on the information gathered by others we present empirical evidence that shows that the relationship between the probability of adoption and the number of known adopters is shaped as an inverse u in line with information sharing the network effect is stronger for farmers who report discussing agriculture with others the data contains information which is needed to ameliorate the identification issues that commonly arise in this context in particular social networks are precisely identified and in addition we can control for village heterogeneity and endogenous group formation

demand side management policies for residential water use who bears the conservation burden to assess the potential for urban demand side management dsm policies as a water resource management tool we analyze the extent to which price and alternative policy instruments such as use and quantity restrictions and subsidies for water efficient technologies reduce residential demand and their distributional implications by type of household using detailed household level panel data for two california communities the results suggest that the ultimate effects of dsm policies in terms of the reduction in aggregate demand and distribution of water savings among household classes depend both on the policy instrument selected and the composition of aggregate demand

creating incentives for the adoption of sustainable agricultural practices in developing countries the role of soil carbon sequestration sustainable agricultural development is widely acknowledged as a critical component in a strategy to combat both poverty and environmental degradation yet sustainable agricultural development remains an elusive goal particularly in many of the poorest regions of the world soil degradation continues to be a key factor in unsustainable production systems despite decades of research on soil conservation and other sustainable practices hudson scherr barrett place and aboud sanchez various studies stress the role played by resource poor farmers in human induced natural resource degradation bruntland commission reardon and vosti barbier the prevailing economic explanation for the continuing trend toward resource degradation in many parts of the world is that economic incentives often encourage degradation and discourage conservation these incentive problems have been attributed to poor farmers high discount rates lack of capital markets high transport costs and other market imperfections adverse government policies insecure property rights and limited availability of fodder for grazing or fuel for cooking and heating e g lutz pagiola and reiche heath and binswanger from this perspective the challenge facing researchers and policy analysts is to understand the factors and processes causing the use

an intertemporal model of warranties using a simple two period model this paper attempts to explain certaini interesting intertemporal properties of product warranties specifically why does coverage generally fall over time and why is the typical warranty s life so much shorter than the expected life of the product it covers we view warranties as a partial solution to the double moral hazard problem that arises when buyers cannot readily observe the quality built into a product and sellers cannot observe the care with which buyers use it the optimal warranty strikes the right balance between providing incentives for seller quality and for buyer care under certain conditions a two period warranty will render even the first best i e full information solution achievable un modlde intertemporel dce garanties ce memoire tente d expliquer certaines proprietes intertemporelles interessantes des garanties sur les produits a l aide d un modele simple sur deux periodes specifiquement on se pose les questions suivantes pourquoi est ce que generalement la couverture diminue avec le passage du temps et pourquoi la vie de la garantie est elle tellement plus courte que celle du produit auquel elle est attachee les garanties sont perques comme une solution partielle a un double probleme de risque

the demand for residential industrial and total electricity 1973 1998 this paper estimates residential industrial and total electricity demand by a partial adjustment approach and by a simultaneous equation approach simultaneous equation models are more appropriate since they provide negative price elasticity estimates for the residential industrial and total electricity samples flow adjustment models yield positive price elasticity estimates in some cases suggesting they fail to identify proper supply considerations that may be influencing prices the simultaneous equation approach suggests that residential customers are more price sensitive than industrial customers weather seems to have the greatest impact on the residential sector and cold weather appears to affect demand more than hot weather

diversification strategies and adaptation deficit evidence from rural communities in niger summary the paper provides fresh empirical evidence on the adaptation process in niger rural communities using original longitudinal socio economic panel data merged with granular geo referenced climatic information we identify the main drivers and impacts of crop and labor diversification which constitute two livelihood strategies on moderating the adaptation deficit in doing so we account for the interdependence between the two diversification practices and potential reverse causality between welfare outcomes and diversification behavior moreover we condition the impacts of diversification on different sections of the welfare distribution to capture potential non linear effects our results reveal that the diversification has positive and significant welfare impacts when most vulnerable households rely on it as an adaptation strategy to mid run climate variability and as a coping strategy to short run market shocks at the same time our results find lower but still positive impacts for well endowed households that are likely to diversify their activity portfolio given the very limited presence of policy support we conclude that the rural nigerien communities are characterized by a large and autonomous adaptation response which constitutes a key leverage mechanism for policy makers we thus suggest government interventions aimed at supporting the most important diversification drivers but also aimed at straightening some channels such as network infrastructures or the promotion of local crop varieties which may have a greater potential in triggering diversification

conservation agriculture organic marketing and collective action in the honduran hillsides conservation agriculture ca is often perceived to provide win win outcomes for farmers leading to reduced erosion and off site sedimentation as well as improved soil fertility and productivity however adoption rates for ca in many regions of the world remain below expected levels this article looks at the effects of participation in organic markets and farmers organizations on the adoption of soil conservation practices based on original survey data from 241 small scale farm households in honduras we find that both participation in organic markets and farmer based groups have positive effects on the number of soil conservation practices adopted the results indicate that besides supply oriented policy measures such as the provision of technical assistance and extension demand related factors are likely to play an important role in sustainable soil management demand oriented policy measures include support for labeling initiatives and consumer education to facilitate value added product differentiation and market segmentation jel classifications q01 q12 q13 q16

wealth inequality and intergenerational links previous work has had difficulty generating household saving behaviour that makes the distribution of wealth much more concentrated than that of labour earnings and that makes the richest households hold onto large amounts of wealth even during very old age i construct a quantitative general equilibrium overlapping generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability i show that voluntary bequests can explain the emergence of large estates while accidental bequests alone cannot and that adding earnings persistence within families increases wealth concentration even more i also show that the introduction of a bequest motive generates lifetime savings profiles more consistent with the data

a discrete continuous choice approach to residential water demand under block rate pricing reply waldman is quite correct in noting that the microeconomic theory of block rate pricing in hewitt and hanemann hh 1995 is given for the general case of a k block rate structure whereas the econometric theory is largely confined to the case of exactly two blocks the extension in waldman to the more general case of k blocks is correct although the extension itself could be even more general if it addressed the nonnegativity of demand as is demonstrated below that no apparent attention was paid to the nonnegativity of demand in hh may be attributed to the fact that the need to do so was negated by a fortuitous assumption in the earlier work although that assumption that the errors are multiplicative and lognormally distributed was only maintained and not tested in hh i now estimate two models with the more common assumptions of linear demand and additive and normally distributed errors both with and without a modification for

sequential adoption of site specific technologies and its implications for nitrogen productivity a double selectivity model this paper analyzes the sequential decision to adopt two site specific technologies soil testing and variable rate technology and the impact of adoption on nitrogen productivity the results indicate that while farm location was a key variable influencing adoption of soil testing farm size human capital and innovativeness of farmers had a significant impact on adoption of variable rate technology in four midwestern states a double selectivity model applied to correct for sample selection bias shows that adoption leads to significant gains in nitrogen productivity for farms with below average soil quality but statistically insignificant gains for farms with above average soil quality copyright 2001 oxford university press

on the distributional effects of reducing capital taxes this article asks whether household heterogeneity and market incompleteness have quantitatively important implications for the welfare effects of tax changes we compare a representative agent economy to an economy in which households face idiosyncratic uninsurable income risk the income process is consistent with empirical estimates and implies a realistic wealth distribution we find that capital tax cuts imply large welfare gains in the representative agent economy however when households are heterogeneous substantial redistribution during transition means that only a minority will support capital tax cuts whereas most households can expect large welfare losses

markets for experience goods with performance uncertainty this article analyzes the market for experience goods when the product s quality is uncertain unlike the case of certain product quality in this setting a customer who receives a bad product cannot automatically infer that the producer has cheated in this two period model producers select either high or low quality technologies and consumers individually decide whether or not to rebuy the product in the second period the sequential equilibria involve mixed strategies in producer honesty and buyer trust and the form of these strategies under conditions of monopoly and competition is investigated unreasonable equilibria are eliminated by applying a form of kohlberg and mertens invariance criterion several extensions are analyzed including the use of first period discounts and an infinite horizon model obtained by independent repetition of the two period case if product quality is costly and cannot be determined prior to consumption why should consumers believe a seller s quality claims using telser s 1980 idea of self enforcing agreements klein and leffler 1981 developed the now standard solution to this problem the price remains above the cost providing high quality sellers with rents and consumers boycott any seller discovered cheating on quality however production technologies may have performance uncertainty that is the producer might not have perfect control over the quality of each unit consequently the receipt of an inferior product might not always be a clear signal that a supplier is cheating given the existence of performance uncertainty buyers receiving low quality products do not know whether to blame their problems on malfeasance or on bad luck this ambiguity can itself increase the seller s propensity to cheat in this article we construct and analyze a model of an experience good market with performance uncertainty the model features fully rational and homogeneous buyers and sellers there are no arbitrary beliefs or types of player the setup constrains a buyer s information to his personal experience rules out any threats to boycott that are not credible

are there systematic gender differences in the adoption of sustainable agricultural intensification practices evidence from kenya this paper uses sex disaggregated survey data at the plot level to test whether there are systematic gender differences in the adoption of multiple sustainable intensification practices sips in kenya we analyze plot level adoption decisions of sips by male female or joint plot managers within the household controlling for household characteristics asset wealth and land quality factors that condition investments in intensification options using a multivariate probit model we find gender differences in the adoption pattern for some sips compared to male plot mangers female managers are less likely to adopt minimum tillage and animal manure in crop production indicating the existence of certain socioeconomic inequalities and barriers for female farmers however we find no gender differences in the adoption of soil and water conservation measures improved seed varieties chemical fertilizers maize legume intercropping and maize legume rotations

climate change adaptation a study of fuel choice and consumption in the us energy sector abstract using cross sectional data this paper estimates a national energy model of fuel choice by both households and firms consumers in warmer locations rely relatively more heavily on electricity rather than natural gas oil and other fuels they also use more energy climate change will likely increase electricity consumption on cooling but reduce the use of other fuels for heating on net american energy expenditures will likely increase resulting in welfare damages that increase as temperatures rise for example if the us warms by 5 c by 2100 we predict annual welfare losses of 57 billion

crop diversity household welfare and consumption smoothing under risk evidence from rural uganda abstract in the wake of climate change there is now a resurgence of interest in the promotion of crop diversification as a climate smart agricultural practice in sub saharan africa the development economics literature suggests that increasing crop diversity is an effective risk management and consumption smoothing strategy in a context characterized by repeated exposure to shocks but weak institutional innovations using panel survey data from rural uganda merged with historical weather data this paper sheds light on the household welfare and consumption smoothing effects of crop diversity we employ instrumental variables methods to control for unobserved heterogeneity and potential reverse causality our study finds that crop diversification is a welfare enhancing strategy that increases consumption and aggregate household diets instrumental variables quantile regression results show that crop diversification generates higher consumption benefits for poorest households in the lower quantile of the consumption distribution than for relatively richer households crop diversification also improves consumption smoothing through reducing households reliance on less effective strategies such as informal insurance and involuntary diet changes as risk coping mechanisms overall the findings suggest that transforming agriculture towards a more diversified cropping system is a viable pathway for improving diets welfare risk management and the resilience of rural households

organic agriculture and fair trade a happy marriage a case study of certified smallholder black pepper farmers in india summary this study examines whether the joint adoption of organic and fair trade systems adds additional benefits to smallholders in developing countries we use panel data collected from 300 smallholder rural black pepper growers in kerala india to assess household welfare impacts we apply a multinomial endogenous switching regression model along with a counterfactual analysis to estimate certification effects results show that both certification systems have a significant impact on income compared to conventional black pepper farming however membership in fair trade marketing systems does not increase income of organic farmers but has positive effects on asset accumulation of smallholder farmers

accounting for the u s earnings and wealth inequality we show that a theory of earnings and wealth inequality based on the optimal choices of ex ante identical households that face uninsured idiosyncratic shocks to their endowments of efficiency labor units accounts for the u s earnings and wealth inequality almost exactly

how does gender affect sustainable intensification of cereal production in the west african sahel evidence from burkina faso better understanding of gender differences in the adoption of agricultural intensification strategies is crucial for designing effective policies to close the gender gap while sustainably enhancing farm productivity we examine gender differences in adoption rates likelihood and determinants of adopting strategy sets that enhance yields protect crops and restore soils in the west african sahel based on analysis of cereal production in burkina faso applying a multivariate probit model to a nationally representative household panel we exploit the individual plot as unit of analysis and control for plot manager characteristics along with other covariates reflecting the socio cultural context of farming combined with the economic attributes of inputs we find that female managers of individual cereal fields are less likely than their male counterparts to adopt yield enhancing and soil restoring strategies although no differential is apparent for yield protecting strategies more broadly gender disaggregated regressions demonstrate that adoption determinants differ by gender plot manager characteristics including age marital status and access to credit or extension services do influence adoption decisions furthermore household resources influence the probability of adopting intensification strategy sets differently by gender of the plot manager variables expressing the availability of household labor strongly influence the adoption of soil restoring strategies by female plot managers by contrast household resources such as extent of livestock owned value of non farm income and area planted to cotton affect the adoption choices of male plot managers rectifying the male bias in extension services along with improving access to credit income and equipment to female plot managers could contribute to sustainable agricultural intensification

the heterogeneous effect of shocks on agricultural innovations adoption microeconometric evidence from rural ethiopia abstract theoretically the relationship between shocks and agricultural innovation adoption could be ambiguous while shocks could lower the competence and capacity of households to adopt new agricultural innovations households can also take up agricultural innovations as a coping mechanism against the different shocks they face using a nationally representative household data from ethiopia of the living standards measurement study integrated surveys on agriculture lsms isa of the world bank this paper analyzes the effect of idiosyncratic and covariate shocks on adoption of different agricultural innovations assuming interdependence among the innovations we find shocks to have heterogeneous effects on the adoption of agricultural innovations specifically production and health shocks have negative effects on the adoption of high cost innovations such as improved seeds chemical fertilizer and irrigation however production shocks are positively associated with low cost innovations such as organic fertilizer to enhance farmers adoption of agricultural innovations especially high cost innovations there is a greater need towards the design of policies and interventions that would reduce household s exposure to production and health shocks

a matter of taste estimating import price inflation across u s income groups abstract we estimate import price inflation for different income deciles of u s consumers over the years 1998 through 2014 after structurally estimating the parameters of a model capturing non homotheticity across sectors we use price data from the universe of foreign establishments exporting goods to the u s as well as consumer expenditure information to construct import price indexes we find that lower income households experienced the most import price inflation while higher income households experienced the least over our time period

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

deconstructing life cycle expenditure we revisit two well known facts regarding life cycle expenditures the hump shaped profile of nondurable expenditures and the increase in cross household consumption inequality we document that the behavior of total nondurables masks surprising heterogeneity in the life cycle profile of individual consumption subcomponents we provide evidence that the categories driving life cycle consumption either are inputs into market work or are amenable to home production using a quantitative model we document that the disaggregated life cycle consumption profiles imply a level of uninsurable permanent income risk that is substantially lower than that implied by a model using a composite consumption good

solving the incomplete markets model with aggregate uncertainty using the krusell smith algorithm and non stochastic simulations abstract this article describes the approach to computing the version of the stochastic growth model with idiosyncratic and aggregate risk that relies on collapsing the aggregate state space down to a small number of moments used to forecast future prices one innovation relative to most of the literature is the use of a non stochastic simulation routine

on the heterogeneous welfare gains and losses from trade how are the gains and losses from trade distributed across individuals within a country first we document that tradable goods constitute a larger fraction of expenditures for poor households second we build a trade model with nonhomothetic preferences to generate the documented relationship between tradable expenditure shares income and wealth and uninsurable earnings risk to generate heterogeneity in income and wealth third we use the calibrated model to quantify the differential welfare gains and losses from trade along the income and wealth distribution in a numerical exercise we permanently reduce trade costs so as to generate a rise in import share of gdp commensurate with that seen in the data from 2001 to 2014 we find that households in the lowest wealth decile experience welfare gains over the transition measured by permanent consumption equivalents that are 67 percent larger than those in the highest wealth decile

trade liberalization and regional dynamics abstract we study the evolution of trade liberalization s effects on brazilian local labor markets regions facing larger tariff cuts experienced prolonged declines in formal sector employment and

agricultural technology crop income and poverty alleviation in uganda summary this paper evaluates the ex post impact of adopting improved groundnut varieties on crop income and poverty in rural uganda the study utilizes cross sectional data of 927 households collected in 2006 from seven districts in uganda using propensity score matching methods we find that adopting improved groundnut varieties technology significantly increases crop income and reduces poverty the positive and significant impact on crop income is consistent with the perceived role of new agricultural technologies in reducing rural poverty through increased farm household income this study supports broader investment in agriculture research to address vital development challenges reaching the poor with better technologies however requires policy support for improving extension efforts access to seeds and market outlets that simulate adoption

urban residential demand for water in the united states further discussion using a new model formulation and data from a sample of colorado utilities we investigated the price specification controversy marginal price versus average revenue when estimating residential water demand the improved statistical fit using average

structural change and the kaldor facts in a growth model with relative price effects and non gorman preferences u s data reveal three facts 1 the share of goods in total expenditure declines at a constant rate over time 2 the price of goods relative to services declines at a constant rate over time and 3 poor households spend a larger fraction of their budget on goods than do rich households i provide a macroeconomic model with non gorman preferences that rationalizes these facts along with the aggregate kaldor facts the model is parsimonious and admits an analytical solution its functional form allows a decomposition of u s structural change into an income and substitution effect estimates from micro data show each of these effects to be of roughly equal importance

cost pass through in the u s automobile market we study cost pass through in the u s automobile market using a framework that incorporates the effects of cost changes on input decisions we find that accounting for firms factor market decisions significantly increases measured cost pass through although we reject the hypothesis of full cost pass through and constant markups in addition our evidence suggests that cost shocks common to all manufacturers have a greater effect on prices than do model specific cost shocks finally we examine how pass through varies with manufacturer nationality finding that u s firm cost pass through exceeds that of european and asian firms

cropping system diversification conservation tillage and modern seed adoption in ethiopia impacts on household income agrochemical use and demand for labor the type and combination of sustainable agricultural practices saps adopted have a significant effect on agricultural productivity and food security this study develops a multinomial endogenous switching regression model of farmers choice of combination of saps and impacts on maize income and agrochemicals and family labor use in rural ethiopia four primary results were found first adoption of saps increases maize income and the highest payoff is achieved when saps are adopted in combination rather than in isolation second nitrogen fertilizer use is lower in the package that contains system diversification and conservation tillage third conservation tillage increased pesticide application and labor demand perhaps to compensate for reduced tillage however when it is used jointly with system diversification it does not have a significant impact on pesticide and labor use fourth in most cases adoption of a package of saps increases women workload suggesting that agricultural intensification technology interventions may not be gender neutral this implies that policy makers and other stakeholders promoting a combination of technologies can enhance household food security through increasing income and reducing production costs but need to be aware of the potential gender related outcomes

a theory of voluntary recalls and product liability there is now a substantial body of literature analyzing pricing policies in unregulated markets when firms and consumers have asymmetric information about the quality of a product at the time the product is marketed the existence of equilibria in which a variety of signaling mechanisms can be used to transfer a firm s information regarding its product to otherwise uninformed consumers is demonstrated in 1 11 14 more recently bagwell and riordan analyzed the learning procedure of consumers when a product of unknown quality is introduced to the market and some fraction of consumers becomes informed over time 9 in these models the firm has prior knowledge of the exact quality and consumers either correctly infer quality prior to purchase because of the incentive structure of the equilibrium signaling scheme or learn quality immediately upon purchase the extensive literature on statistical testing and quality control as well as the frequent news items on product recalls suggests that prior to observation of market performance a firm s knowledge of the properties of its product may not be exact 2 there is another body of literature which examines the effectiveness of various forms of liability schemes on the level of care and the severity of the warnings firms choose when producing and marketing their products models by marino shavell and cooter have the assumption that the market will not provide the firm with sufficient incentives to provide the socially efficient levels of care and warnings and these market incentives must be supplemented by liability rules of various kinds 10 13 4 the particular liability rule which is chosen varies with the assumptions of the model marino showed that the existence of scale effects in consumption could alter the common conclusions regarding the relative effectiveness of strict liability and regulation this paper examines the incentives a firm faces to recall a product which is discovered to be

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

estimating demand under block rates electricity and water many empirical studies of the demand for electricity under declining block tariffs have been conducted but few have produced results consistent with traditional demand theory nordin bell j economics 7 719 21 1976 explains this in part by pointing out that most of those studies failed to take into account the income effects caused by intramarginal price differences the authors show here that nordin s suggestion involves the inappropriate use of ordinal level statistics ols they propose a method by which consistent estimates of the demand parameters can be obtained when a household s rule for selecting a block can be estimated 19 references 1 figure

adoption of modern varieties farmers welfare and crop biodiversity evidence from uganda abstract this paper assesses the impact of modern varieties adoption on farmers welfare and crop biodiversity conserved in situ using nationally representative data collected in 2009 2010 in uganda an endogenous switching regression model estimates the net economic and environmental effects of switching from local landraces to modern species results show that after controlling for market and agro ecological factors the local varieties perform better than modern ones in marginalized and climatic vulnerable areas crop biodiversity shows to play a fundamental role in farmers risk minimizing strategies when the available modern varieties are not adaptable to the local context and not supported by the required level of agro intensification rural development policies should consider the heterogeneity in the adoption returns and support diversity conservation as a national strategic asset for a suitable bioprospecting and a best fitting agricultural system implementation

the distribution of wealth and fiscal policy in economies with finitely lived agents we study the dynamics of the distribution of wealth in an overlapping generation economy with finitely lived agents and intergenerational transmission of wealth financial markets are incomplete exposing agents to both labor and capital income risk we show that the stationary wealth distribution is a pareto distribution in the right tail and that it is capital income risk rather than labor income that drives the properties of the right tail of the wealth distribution we also study analytically the dependence of the distribution of wealth of wealth inequality in particular on various fiscal policy instruments like capital income taxes and estate taxes and on different degrees of social mobility we show that capital income and estate taxes can significantly reduce wealth inequality as do institutions favoring social mobility finally we calibrate the economy to match the lorenz curve of the wealth distribution of the u s economy

investment in soil conservation in northern ethiopia the role of land tenure security and public programs abstract a double hurdle statistical analysis of 250 farms in the tigray region of ethiopia reveals different causal factors for soil conservation adoption versus intensity of use farmers reasons for adopting soil conservation measures vary sharply between stone terraces and soil bunds long term investments in stone terraces were associated with secure land tenure labour availability proximity to the farmstead and learning opportunities via the existence of local food for work ffw projects by contrast short term investments in soil bunds were strongly linked to insecure land tenure and the absence of local food for work projects public conservation campaigns on private plots reduced adoption of both stone terraces and soil bunds whereas capacity factors largely influenced the adoption decision expected returns carried more influence for the intensity of stone terrace adoption measured as metres of terrace per hectare more stone terracing was built where fertile but erodible silty soils in higher rainfall areas offered valuable yield benefits intensity of terracing was also greater in remote villages where limited off farm employment opportunities reduced construction costs these results highlight the importance of the right kind of public interventions direct public involvement in constructing soil conservation structures on private lands appears to undermine incentives for private conservation investments when done on public lands however public conservation activities may encourage private soil conservation by example secure land tenure rights clearly reinforce private incentives to make long term investments in soil conservation

the economics of consumer knowledge while approaches to measuring the state of a consumer s knowledge are well developed much less is known about the relationship between knowledge and consumer choice and information search the purpose of this article is to explore these relationships by treating consumer knowledge as human capital which affects the full price of consumption and search activities using this framework models are presented to explain life cycle consumption patterns lifestyles brand loyalty choice of features and search behavior this economic perspective is compared and contrasted to other consumer research on these topics including recent qualitative research that examines consumption behavior

synergies between different types of agricultural technologies in the kenyan small farm sector abstractsustainable intensification of agriculture will have to build on various innovations but synergies between different types of technologies are not yet sufficiently understood we use repre

the econometrics of nonlinear budget sets traditional empirical analysis of consumer demand has usually made the assumption of linear budget sets that is the consumer is assumed to purchase any desired quantity at a constant price subject to a budget constraint the major exception to this framework is the analysis of demand when some goods are rationed 2 in the rationed case the price is constant up to a quantity limit in contrast to the rationed case here i consider the situation where the price varies with the amount of the good purchased empirical situations with nonconstant prices come readily to mind and of course they have received much recent attention from theorists since mirrlees 44 paper on optimal nonlinear taxation the following examples are meant to give a partial listing of cases when nonlinear budget sets occur i electricity prices many electric utilities engage in declining block pricing that is the marginal price of successive kwh s of electricity decrease at a given number of points determined by total demand thus the budget set is piecewise linear houthakker 36 was the first to propose an approach to this problem taylor 51 analyzes the problem at length and hausman kinnucin and mcfadden 31 use an instrumental variables estimator to provide consistent estimates of the demand function

the effects of changing input costs on food prices the relationships between changes in food sector input costs and retail food prices are examined results indicate that increases in factor prices pass quickly to consumers within two quarters for most foods in addition rising farm level prices and substantial increases in nonfarm resource prices appear to explain why food prices rose more rapidly than nonfood prices in the 1970s the analysis is based on a twenty equation econometric model of the food price determination process specified following popkin s stage of processing approach causality and validation test statistics for the model are presented

perception of price when price information is costly evidence from residential electricity demand a bstract residential electricity consumption is an example of a good for which it is costly to determine marginal price since price changes with the quantity purchased according to multistep block rate schedules this paper investigates the effect of the price information problem on consumers price perceptions an alternative hypothesis of average price perception is tested against the marginal price postulate which assumes wellinformed consumers the model which includes a price perception variable allows the estimation of the price to which consumers actually respond the empirical results support the hypothesis that consumers respond to average price perceived from the electricity bill

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

can traditional theories of structural change fit the data two traditional explanations for structural changes are sector biased technological progress and non homothetic preferences this paper integrates both into an otherwise standard growth model and quantitatively evaluates them vis a vis time series the exercise identifies a set of puzzles for standard theories i the model cannot account for the steep decline in manufacturing and rise in services in the later data ii the standard model requires implausibly low elasticity of substitution across goods to match the consumption and output data and iii the behavior of consumption and output shares differs significantly from that of employment shares we argue that models that incorporate home production sector specific factor distortions and differences across sectors in the accumulation of human capital are promising avenues to amend the standard models jel o11 o14 o41

residential demand for electricity under inverted block rates evidence from a controlled experiment block rate structures are used extensively in public utility pricing including residential electricity estimating price elasticities in this context is complicated by the resulting nonlinearity of the consumer s budget constraint this article estimates the demand for electricity under inverted block rates using data from a residential rate experiment the study provides an opportunity to obtain short run price elasticities in an experimental setting and to compare alternative estimators developed for nonlinear budget constraints elasticities of demand with respect to individual components of the block rate are developed using a modification of the structural maximum likelihood estimator

ex ante investment ex post remedy and product liability low quality products may cause consumer harm a firm can reduce the probability of low quality through ex ante investment before sales and can take remedy actions such as product recalls if it learns after sales that product quality is low an increase in the firm s product liability increases its incentive for ex post remedy more ex post remedy however may reduce the firm s ex ante quality investment on the other hand higher product liability increases consumer demand for the product resulting in high output and hence greater return to ex ante investment the trade off between these two effects the substitution effect and the output effect can lead to an inverted u shaped relationship between ex ante investment and product liability we find that the firm always prefers full liability whereas consumers might be better off with less than full liability full product liability tends to be socially optimal when the potential consumer loss from low quality is sufficiently high otherwise partial liability can be socially optimal

household responses to increased water rates during the california drought this paper explores the use of fixed effects and maximum likelihood techniques to es timate household responses to water price in creases during the california drought estimates are based on bimonthly meter readings from 599 single family households in the alameda county water district over the period 1982 1992 before and after the introduction of a steeply increasing block rate price structure i find that household and monthly fixed effects models are not success ful in modeling water demand with these data however maximum likelihood models that ex plicitly consider the household s response to the rate structure result in plausible estimates of wa ter demand jel q25

evidence on the specification of price in the study of domestic water demand the development of lakefront property in northern wisconsin has prompted in several towns minimum frontage zoning stricter than the state standard such zoning generates an economic loss by constraining development development effect and an economic

cost of business cycles with indivisibilities and liquidity constraints it is almost universally agreed that individuals face incomplete insurance markets and cannot perfectly insure against the idiosyncratic risk in this paper simple general equilibrium models with incomplete insurance markets are examined in order to assess the impact of imperfect insurance on the magnitude of the welfare costs of business cycles two versions of incomplete insurance markets are considered and certain statistical properties of the equilibrium stochastic processes in these environments are compared with those of a perfect insurance economy

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

managing environmental risk in presence of climate change the role of adaptation in the nile basin of ethiopia this study investigates the impact of climate change adaptation on farm households downside risk exposure in the nile basin of ethiopia the analysis relies on a moment based specification of the stochastic production function we use an empirical strategy that accounts for the heterogeneity in the decision on whether to adapt or not and for unobservable characteristics of farmers and their farm we find that past adaptation to climate change i reduces current downside risk exposure and so the risk of crop failure ii would have been more beneficial to the non adapters if they adapted in terms of reduction in downside risk exposure and iii is a successful risk management strategy that makes the adapters more resilient to climatic conditions

adoption and welfare impacts of multiple agricultural technologies evidence from eastern zambia using plot level panel data and multinomial endogenous switching regression this article analyzes the adoption and welfare impacts of multiple agricultural technologies in eastern zambia we adapt a multinomial endogenous switching treatment effect regression framework to correct for selection bias and endogeneity originating from both observed and unobserved heterogeneity results indicate that joint adoption of multiple agricultural technologies had greater impacts on crop yields household incomes and poverty than the adoption of individual components of the technology package our findings suggest that efforts aimed at raising household incomes and reducing poverty should focus on promoting the adoption of multiple agricultural technologies through provision of improved support services such as extension and input supply

analysis of adoption and impacts of improved maize varieties in eastern zambia summary this paper analyzes the adoption and welfare impacts of improved maize varieties in eastern zambia using data obtained from a sample of over 800 farm households using both propensity score matching and endogenous switching regression models the paper shows that adoption of improved maize leads to significant gains in crop incomes consumption expenditure and food security results further show that improved maize varieties have significant poverty reducing impacts in eastern zambia the paper concludes with implications for policies to promote adoption and impacts of modern varieties in zambia

a memory based model of bounded rationality in order to investigate the impact of limited memory on human behavior i develop a model of memory grounded in psychological and biological research i assume that people take their memories as accurate and use them to make inferences the resulting model predicts both over and underreaction but provides enough structure to predict when each effect dominates i then use this framework to study the consumption decision the results match empirical work on consumption predictability as well as differences in the marginal propensity to consume from different income streams most importantly because it ties the extent of bias to a measurable aspect of the stochastic process being forecasted the model makes testable empirical predictions

a ricardian model with a continuum of goods under nonhomothetic preferences demand complementarities income distribution and north south trade this paper develops a ricardian model of trade in which goods are indexed according to priority and higher indexed goods are consumed only by richer households south north has a comparative advantage in lower higher indexed goods and hence specializes in goods with lower higher income elasticities of demand product cycles and a southern terms of trade deterioration result from faster population growth and uniform productivity growth in south and a global productivity improvement south s domestic income redistribution policy can improve its terms of trade so much that every household in south may be better off at the expense of north

the computation of opportunity costs in polychotomous choice models with selectivity this article provides general formulas for the computation of opportunity costs or foregone earnings of chosen alternatives in sample selection models with polychotomous choices with observed choice probabilities and outcomes of alternatives chosen by some individuals the opportunity costs for individuals who do not choose those alternatives can be evaluated for the probability indexed sample selection models with logit choice probabilities which include the polychotomous choice model of lung fei lee 1983 the formulas are simple and reveal restrictions implicitly imposed on those models these formulas can be useful for empirical studies copyright 1995 by mit press

residential water demand in the northwest of spain a panel of monthly aggregate data from the northwest of spain is used to estimate domestic water demand functions under linear and non linear tariffs price billing climatic and sociodemographic variables are used as explanatory variables the use of intraannual data constitutes a relevant contribution in the european context overall marginal price elasticity estimates lie between 0 12 and 0 17 summer only elasticities and elasticities associated with uses beyond the effectively free allowances seem significantly higher climatic variables significantly affect monthly use although probably less than in other wealthier and drier areas domestic water use appears to be a normal good

modeling multiple adoption decisions in a joint framework a multinomial probit mnp model is applied to the modeling of adoption decisions by farmers facing multiple technologies which can be adopted in various combinations this model allows for full investigation of the interactions between decisions to adopt or not adopt several technologies estimation is carried out in a bayesian framework employing gibbs sampling to circumvent past difficulties encountered in maximum likelihood estimation of the mnp model the model is estimated for a sample of u s apple growers with four possible sustainable production technology bundles the results show that adoption decisions are most significantly influenced by off farm labor supply