children as collective goods and divorce settlements the failure of many divorced fathers to comply with court mandated child support awards has been identified as a major reason why a growing number of children live in poverty in female headed households this paper presents a model that seeks to explain why so many divorced fathers allow their children s welfare to suffer as a consequence of divorce the point of departure is the recognition that children are collective consumption goods from the point of view of the father and mother within marriage proximity and altruism serve to overcome the free rider problem associated with the provision of public goods however on divorce the noncustodial parent suffers a loss of control over the allocative decisions of the custodial parent and it is not feasible for the couple to achieve a pareto optimal allocation of their joint resources a model of optimal marriage contracts is constructed in which a couple decides on the allocation of resources within marriage and on the terms of a settlement in the event

entrepreneurial human capital and the long run survival of firms in india abstract this paper analyses the characteristics of entrepreneurs that contribute to firms survival in less developed countries ldcs the study which relies on data collected in a 1971 survey of entrepreneurs in south india and a follow up survey of surviving firms in 1993 finds that entrepreneurial human capital greatly influences firm survival the results indicate that firms founded by older entrepreneurs in higher castes are most likely to survive but that increased education of the founding entrepreneur reduces survival these results provide evidence that opportunities of entrepreneurs outside the firm ignored in most theories are important in firm survival

population dynamics and consumer demand the authors analyze the effects on consumption in the united states of 11 demographic variables including regional location and the urban rural base of the household its age size race sex and marital characteristics and the education and the employment status of the household head and the spouse data are from the 1972 1973 consumer expenditure survey the expenditure functions are first specified followed by descriptions of the data sources and the empirical estimates of expenditure functions for various items of consumption spending excerpt

consumer response to commodity specific and broad based promotion programs for fruits and vegetables generic promotion activities have traditionally been used for individual agricultural commodities yet there is renewed interest in implementing a mandatory broad based promotion program for all fruits and vegetables here we use data from an experiment that introduce subjects to various promotional efforts for fruits and vegetables to estimate the shift and rotational effects of advertising econometric results indicate that commodity specific promotional efforts may not be effective at increasing demand for fruits and vegetables after controlling for various demographic differences among treatments our results show that consumers valuation of fruits and vegetables was highest among subjects exposed to broad based advertisements copyright 2011 oxford university press

conditions for government support of private research and development abstract based on a model by joglekar and hamburg this article examines the problem of identifying conditions for government support of private resource allocation to r d the behavioral assumptions of the original model are modified in two ways first the impact of a matching behavior only with respect to applied research and development on the relation between individually optimal spending and pareto optimal spending is examined the results are largely the opposite of the findings of joglekar and hamburg for investment in basic research second the assumption of a competitive orientation for both kinds of research is integrated into the model the results show the possibility of overinvestment in basic research this leads to the conclusion that the industry s behavior must be considered very carefully when government support instruments are implemented

marriage divorce and asymmetric information we use data on people s valuations of options outside marriage and beliefs about spouses options the data demonstrate that in some couples one spouse would be happier and the other spouse unhappier outside of some marriages suggesting that bargaining takes place and that spouses have private information we estimate a bargaining model with interdependent utility that quantifies the resulting inefficiencies our results show that people forgo some utility in order to make their spouses better off and in doing so offset much of the inefficiency generated by their imperfect knowledge thus we find evidence of asymmetric information and interdependent utility in marriage

on the simple economics of advertising marketing and product design we propose a framework for analyzing transformations of demand such transformations frequently stem from changes in the dispersion of consumers valuations which lead to rotations of the demand curve in many settings profits are a u shaped function of dispersion high dispersion is complemented by niche production and low dispersion is complemented by mass market supply we investigate numerous applications including product design advertising marketing and sales advice and the construction of quality differentiated product lines we also suggest a new taxonomy of advertising distinguishing between hype which shifts demand and real information which rotates demand

the change of tide in political cooperation a limited information model of european integration european integration follows a puzzling stop and go pattern that traditional international reations theories cannot fully explain the predominating paradigms only account for either the achievements or the setbacks of the integration process an information based explanation makes it possible to move beyond structural accounts provided by realist and functionalist scholarship such an approach yields solid micro level foundations of international bargaining and focuses on leaders use of threats in negotiations about regional cooperation situations involving governments agreeing on the necessity of further integration but disagreeing about its level create room for strategic manipulation of information asymmetries this type of uncertainty stems from the manipulator s information and control advantages concerning domestic costs the analysis of different summit meetings demonstrates the empirical relevance of such maneuvers for the dynamics of european integration

advertising and the us market demand for beer the us per capita market demand for beer is empirically estimated to determine the effect of advertising on the demand for beer the empirical results indicate that the most important determinants of demand are the price of beer the price of substitutes demographic factors and a light beer dummy variable the positive effects of income and lagged consumption appear to be small although many have argued that advertising promotes beer consumption the empirical results of this study do not support this hypothesis

religious participation and children s education a social capital approach abstract based on the argument in both economic and sociological literature that religion is conducive to children s human capital formation this paper provides a model of religious participation and explores a mechanism that social capital affects children s education a la coleman coleman j s 1988 social capital in the creation of human capital american journal of sociology 94 s95 s120 the model generates several interesting implications which help explain some important stylized facts about education and religion further in a dynamic setting the model shows that there exists a steady state in which individuals allocate a positive amount of time and resources to religious activities thus it complements the existing literature to explain why seemingly unproductive religions can be everlasting

alternative models of individual behaviour and implications for environmental policy abstract most insights of environmental economics are in line with the standard neoclassical economic model of rational behaviour formulated in terms of maximization of utility in general or of profits in particular the standard theory of environmental policy is a case in point however the maximization hypothesis and its methodological foundation have been criticized on many grounds related to a lack of either logical or empirical content moreover over the years a great many alternative models of behaviour have been proposed both criticism and alternatives are surveyed here attention is devoted to relevant insights from the philosophy of science the notion of methodological individualism and other criticism the alternative behavioural models include bounded rationality and satisficing lexicographic preferences habitual behaviour incommensurability and multicriteria evaluation and various models of behaviour under uncertainty major implications of the criticism and alternative models of individual behaviour for environmental policy theory are outlined

coordination and contagion individual connections and peer mechanisms in a randomized field experiment abstract this paper investigates peer effects at the level of individual connections leveraging the approach to shed light on peer mechanisms in a field experiment using college freshmen we elicited best friends and offered monetary incentives for gym visits to a treated subset we find large spillovers from treated subjects to treated best friends but none from treated subjects to control best friends we also find evidence of a mechanism subjects coordinate by visiting the gym with best friends indicating that the intervention harnesses complementarities in utility or commitment mechanisms results highlight subtle peer effects and mechanisms that often go undetected

stigler becker versus myers briggs why preference based explanations are scientifically meaningful and empirically important abstract economists typically object to preference based explanations of human behavior differences in preferences explain everything and therefore nothing but this argument is only correct assuming that no empirical evidence exists to discipline preference based explanations in fact over the past decade personality psychologists have produced a robust collection of stylized facts about human preferences while preferences are empirically quite stable they are far from identical and have proven predictive power for economically interesting variables the empirical challenge for future research is to jointly estimate the impact of preferences and constraints to obtain unbiased measures of their relative importance

transfers among divorced couples evidence and interpretation we analyze divorce settlements made by a cohort of whites who graduated from high school in 1972 the effects of spouses incomes on the divorce transfer are estimated and used to simulate the welfare effects of divorce on husbands wives and children under alternative assumptions about marriage contracts and the ability of a couple to continue coordinating resources in the aftermath of divorce we find a positive negative relationship between divorce transfers and the growth of husband s wife s earnings during marriage the estimated expenditure on children in the divorce state is only half the accustomed level during marriage

addiction and discounting abstract in 1988 becker and murphy becker g s murphy k m 1988 a theory of rational addiction journal of political economy 96 675 700 launched a theory in which they proposed that the perspective of rational decision making could be applied also to cases of addictive behaviour this paper discusses the theory s assumptions of interpersonal variation and stability in time preferences on the basis of estimates derived from three groups of people with different consumption levels of illegal intoxicants we find that active injectors of heroin and amphetamine have a higher discount rate than a group reporting that they have never used the substances of greater interest though not in accordance with becker and murphy s assumption of stability we also find that the discount rate among active and former users differs significantly these findings raise the question of whether a high time preference rate leads to addiction or whether the onset of an addiction itself alters people s inter temporal equilibrium

rational behavior and economic theory abstract nowadays it seems almost universally presumed that the fundamental characteristic of homo oeconomicus is his rationality we analyze the role played by the concept of rationality in economic theory and demonstrate that it is necessarily constrained to be an essentially contentless notion we show that the main body of economic theory is firmly grounded and that some contrasting approaches to rationality although leading to heated debates and vivid confusion have no fundamental significance for economics with a refereshed view on the essence of economics we argue that the principles of economic theory form an essential methodological guide for the emergent line of research based on the use of so called evolutive models

status seeking and material affluence evaluating the hirsch hypothesis abstract when individuals hold a preference for high relative consumption competition to achieve social status can lead to inefficiently high levels of production and consumption contributing to natural resource depletion and environmental degradation in the 1970s fred hirsch argued that an increasing portion of expenditure is allocated to status seeking as average income rises this paper critiques this hypothesis from two points of view first we note examples from the historical and anthropological literatures suggesting that status seeking is often important in societies with relatively low incomes second we consider a set of analytical models that focus on the economic consequences of status seeking when social status is defined in terms of the algebraic difference between an individual s consumption of a status good and the average consumption level in society hirsch s hypothesis holds true and growth in the level of productivity and output can lead to declines in human welfare if on the other hand status is linked to the ratio of individual and average consumption hirsch s hypothesis is valid only if social status and non status goods are poor substitutes the paper also considers two cases in which social status is defined in terms of the amount of time people devote to status oriented activities under this assumption productivity growth leaves time use unchanged though the value of time devoted to status signaling increases in proportion to total expenditure

social norms of work ethic and incentives in organizations abstract in this paper i model the relation between the dissemination of social norms of work effort work ethic in a given society and the choice of incentives by firms and i motivate it by presenting evidence from three different datasets that suggests that work ethic is correlated with the intensity of firms incentives when the effort choices of different agents in a firm are complementary having hard working coworkers makes an agent more productive therefore in equilibrium she will work harder foreseeing that a work ethic is more useful to hard working agents parents will be more willing to transmit it in societies in which the probability that their offspring will have coworkers with strong work ethic is higher i then expand the model to incorporate the firm technology choice allowing firms to decide between complementary and separable production processes in societies with wide dissemination of work ethic firms will want effort to be complementary as in modern production processes while the opposite is true when the dissemination of work ethic is narrow finally i investigate the comparative dynamics of the model

intra household allocation of resources inferences from non resident fathers child support payments a large proportion of divorced and separated fathers form new partnerships the new partner s preferences are not likely to put much weight on expenditures on the man s children from his previous union thus his own and his partner s income would have different impacts on his child support payments if partners relative incomes affect bargaining power in household decisions this article exploits within father variation in the british household panel survey 1991 2005 to estimate the impacts of the intra household income distribution on child support payments and the father s welfare we find that a higher share of father s income in household income increases the probability of paying child support and its amount relative to household income

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

international passenger transport and climate change a sector analysis in car demand and associated co2 emissions from 2000 to 2050 abstract the paper provides global regionalized projections of passenger car demand use and associated co 2 emissions from 11 world regions the study is based on empirical data that have been originally collated from international sources for the purpose of modeling region specific car stock demand derived demands serve as indicator of car related fuel consumption and associated co 2 emissions which are calculated on the basis of behavioral and technological scenarios the obtained co 2 emission paths are sectoral baseline scenarios that identify region specific potentials of growth in car induced co 2 emissions assuming that current trends continue to prevail the study adopts a multi model approach to car demand by applying two methodologies rooted in the economics of consumption utility maximization and single equation models the utility maximization method for modeling car demand is driven by the preferences of the representative consumers of each world region subject to exogenous price and income trajectories the latter is adopted from an optimal growth model this is a novel approach to projecting global regionalized sectoral car demands the study is complemented by the application of single equation income consumption models based on logistical gompertz functions and non linear regression techniques to compare model results

group utility in the micro motivation of collective action the case of membership in the aarp abstract the fundamental assumption of human rationality in neo classical economic analysis is the maximization of individual utility as economic analyses are being widely used in political science under the broad rubric of public choice one cannot escape the logical inconsistency between theory and reality arising from the free rider problem in the preference for collective goods recent literature argues that a way out of this dilemma is to recognize the existence of motivations other than self interest this paper demonstrates the need to enlarge the assumption of economic rationality by explicitly taking into account the factors of group utility with the help of survey data on the preference for membership in the american association of retired people aarp this study adds to the mounting empirical evidence for the fact that for a proper understanding of collective action the existence of a collective identity should be recognized

are consumers in developing countries willing to pay more for micronutrient dense biofortified foods evidence from a field experiment in uganda vitamin a deficiency is a major health problem in africa and in many other developing countries biofortified staple crops that are high in pro vitamin a have the potential to reduce the prevalence of vitamin a deficiency using a choice experiment with the real product in uganda we quantify the magnitude of the premium or discount in consumers willingness to pay wtp that may be associated with it results suggest that taste plays an important role in consumer acceptance and the provision of nutrition information does translate into substantial premiums for the biofortified variety there is a substantial hypothetical bias in the wtp for the new varieties and while cheap talk mitigates this bias it does not eliminate it

a homogeneous industry model of resource allocation to basic research and its policy implications in a recent paper we showed that unaided industry allocation to basic inappropriable research is suboptimal and that in stimulating this allocation provision of government seed money is generally counterproductive while the provision of matching subsidies is not cost efficient here we consider a special case of the model developed in the earlier paper i e we now consider a homogeneous industry and investigate the effects of several relevant factors upon an industry s allocation of resources to basic research an extensive numerical example is presented that helps to verify and to interpret the model in realistic terms our findings question the validity of a number of popular beliefs about the need for government support of basic research in various types of industries for example contrary to popular belief the greater the risk aversion displayed by member firms in an industry the lesser may be the need for government support of its basic research also the larger the number of firms in an industry the greater may be the need for government support of that industry s basic research

terrorism the relevance of the rational choice model terrorism in general and suicidal terrorism in particular is popularly seen as irrational but many economists and political scientists argue otherwise this paper distinguishes three different senses of irrationality unresponsiveness to incentives deviation from narrow self interest and failure of rational expectations it concludes that an intermediate position on the rationality of terrorism is appropriate the typical terrorist sympathizer deviates only slightly from homo economicus but active terrorists arguably stray from narrow self interest and rational expectations and suicidal terrorists probably violate both deterrence remains a viable anti terrorism strategy but deviations from rational expectations increase the potential of persuasion and appeasement

political deadlocks and distributional information the value of the veil contractarian normative theory relies on the veil of ignorance construct to generate the political consensus required for its theories of justice by eliminating distributional information the veil is presumed to facilite consensus building by reducing conflict over the distributional effects of proposed constitutional rules or institutions this paper explores the extent to which excessive distributional information might also impede the ordinary day to day decision making of democratic institutions our analysis suggests that distributive information makes political deadlocks under majority rule more likely statistical evidence suggests that the efficacy of the u s congress has been reduced by the dramatic increase in distributional information made available to it over the past twenty five years

an evaluation of federal policy instruments to stimulate basic research in industry a model of the resource allocation behavior of a group of firms demonstrates that unaided industry allocation to basic inappropriable research is suboptimal furthermore provision of seed money is generally counterproductive while the provision of a matching subsidy is not very cost efficient in increasing the allocation innovative policy alternatives are proposed

the provision of public goods via advertising existence of equilibria and welfare analysis abstract this paper considers an economy where a public good is provided via advertising the consumers preferences are represented using the characteristics approach and the advertising has a potentially enhancing effect on the characteristics content of a given commodity we define competitive equilibria and show they exist the welfare properties of the resulting allocations are analyzed and conditions for over and under production of the public good are provided

marital investments time consistency and emotions abstract a benchmark model of a married couple s educational investment yields an inefficient outcome due to the possibility of opportunistic divorce motivated by findings in social psychology i use psychological game theory to incorporate belief dependent guilt feelings multiple equilibria become possible some marriages have inefficient under investment some have efficient outcomes and preclude divorce if guilt is sufficiently important a life long efficient marriage is implied because a spouse may signal a trust so strong as to force the partner to hold beliefs that make divorce unattractive

conditions for government support of private research and development abstract in a recent paper brockhoff and warschkow 1993 attempt to extend joglekar and hamburg s work under alternative behavioral assumptions joglekar and hamburg 1986 brockhoff and warschkow mainly obtain results that are opposite to joglekar and hamburg s findings unfortunately as shown below brockhoff and warschkow s model is flawed because 1 it is inconsistent with joglekar and hamburg s assumption that firms are individually rational and 2 it misrepresents the concept of pareto optimality consequently brockhoff and warschkow s conclusions cannot be seen as valid

the effects of banning advertising in junk food markets we develop a structural model to analyze the eects of banning advertising on market equilibria and welfare in junk food markets we consider the impact on demand and prices and show how to quantify welfare eects when advertising might lead consumers to take decisions that are inconsistent with their underlying preferences we use transaction level data on the potato chips market and nd that banning advertising leads to a direct reduction in demand but also toughens price competition leading to lower prices and increased demand welfare increases as consumers benet from no longer making distorted

industry concentration and allocation of resources to basic research while the mainstream of western economic thought believes in competitive markets the schumpeterian school considers concentrated industry to be the ideal vehicle for the advancement of industrial technology empirical evidence on the schumpeterian hypothesis that a concentrated industry allocates relatively more resources to its research and development rd joglekar p m hamburg 1987 industry resource allocation to basic research under normally distributed benefits decision sci winter 1 24 who showed that industries consisting of smaller numbers of firms allocate relatively greater amounts of resources to their basic research than industries consisting of larger numbers of firms extending joglekar and hamburg s models here we find that when two industries consist of the same number of firms in most cases a heterogeneous industry falls as short of its pareto optimal investment in basic research as its comparable homogeneous counterpart numerical examples suggest that in some cases concentrated heterogeneous industries may do worse policy implications of the results as well as directions for further research are discussed

group consumption free riding and informal reciprocity agreements we examine conditions under which group consumption is likely to involve informal reciprocity agreements rather than a price system our model shows that reciprocity agreements are used when transactions costs are high the good is inexpensive demand is inelastic the group continues to interact over time the consumers are patient the time between interactions is short and the group is small and homogeneous further the results suggest that reciprocity agreements are likely to involve goods that are consumed along with other group benefits such as companionship we use the model to analyze overlapping social networks and investments in social capital

retrospectives consumer sovereignty the term consumer sovereignty is usually traced to william harold hutt and his 1936 book economists and the public a study of competition and opinion hutt paid only passing attention to the maximization of consumer welfare or the achievement of market efficiency he was stalking different game for him the basic issues revolved around the exercise of power in a free society and those issues concerned sovereignty why should consumers be given such great power in determining the allocation of resources and the course of production hutt s major argument for consumer sovereignty centered on its role in promoting political and social stability it is unlikely that hutt s defense of consumer sovereignty will be embraced by the economics profession in the near future it received only passing attention when first propounded and has largely disappeared from active discussion yet i would argue that his approach has a most interesting message

lancaster s principle of efficient choice an empirical note abstract lancaster s principle of efficient choice is submitted to an empirical examination using data from consumer reports the results give only moderate support for that principle

genetic variation in financial decision making individuals differ in how they construct their investment portfolios yet empirical models of portfolio risk typically account only for a small portion of the cross sectional variance this paper asks whether genetic variation can explain some of these individual differences following a major pension reform swedish adults had to form a portfolio from a large menu of funds we match data on these investment decisions with the swedish twin registry and find that approximately 25 of individual variation in portfolio risk is due to genetic variation we also find that these results extend to several other aspects of financial decision making

low income and poor health choices the example of smoking people with low incomes tend to make less healthy consumption choices than do high income people in the case of food agricultural economists have investigated whether this is due to the cost of a healthy diet studies of various aspects of the nutrition income nexus have generally been inconclusive we investigate a different possibility motivated by the fact that low income individuals are most likely to be smokers which cannot be due to limited budgets drawing on a body of related literature we develop a model in which income serves not only as a budget constraint but also as a source of future utility we test the model by estimating logistic models of beginning and quitting smoking we find support for the idea that low income consumers make less healthy choices because they face lower costs in terms of foregone future utility

stable partnerships matching and local public goods abstract in the presence of local public goods differences in tastes are an important determinant of the way in which partnerships are formed heterogeneity in tastes for private vs public goods produces a tendency to positive assortment and partnerships of couples with similar tastes heterogeneity in tastes for different public goods brings about partnerships of couples with similar tastes only if there is a significant overlap in the distribution of tastes of the two groups to be matched we show that with two public goods we may get negative assortment pure positive assortment being only one of many possibilities

emergent extremism in a multi agent model of religious clubs i introduction religious extremism is as old as religion itself but the tendency to promote militancy and terrorism from within extremist religions appears to be much more common now than in times past juergensmeyer 2001 stern 2003 wiktorowicz 2005 1 today s terrorists routinely frame their objectives in religious terms and organize their activities within religious movements this shift is not due to increased militancy within religion as a whole not even within the stricter subset of religious groups commonly labeled sectarian or fundamentalist bromley and melton 2002 marty and appleby 1995 rather groups with militant objectives are increasingly leveraging the latent potential for violence within extremist religion krueger and maleckova 2003 and krueger 2007 have shown that contrary to popular hypotheses regarding the salience of poverty and education it is instead institutional conditions such as civil liberties that contribute to the origination of terrorists within a country religious extremism has been shown to be a potentially powerful input into the production of terrorism berman 2004 2 and the origination of terrorists has been empirically connected to civil liberties we seek to complete the triangle and connect religious extremism to social conditions in an extension of existing theory and test the predictions of the model in an empirical context with an eye toward civil liberties this paper extends previous models of religious clubs to better account for observed patterns of extremism across different settings and test policies most likely to reduce the appeal of extremism economists at first blush should have trouble explaining the survival of groups that demand large sacrifices from their members successful religious groups however routinely impose all sorts of apparently unproductive costs on their members iannaccone 1992 introduced a formal model of religious clubs within which apparently irrational sacrifice and stigma enhances the individual and collective utility his model demonstrated the feasibility of extremist groups but does less to explain the relative prevalence of extremism across time and place further the original model allows for only corner solutions and as such the viability of extreme groups is indistinguishable from the viability of the more moderate groups they must compete with for members in the religious marketplace in section ii we revisit analyze and extend the club model of religion we push the analysis of the original model exploring sacrifice substitutability of club and private goods and their relationships to member commitment and the viability of extremist groups in this preliminary analysis we illustrate not only the potential insights of the club theory of religion into the strength and viability of extremist groups but also the limitations inherent to the representative agent model we proceed by extending the model in a multi agent ma computational framework this framework permits us to analyze the distributions of agents and clubs that make up a religious economy the computational nature of the model is critical because it allows for sufficient heterogeneity of agents and clubs and given this heterogeneity agent decision making absent closed form solutions via nash equilibria extremists groups emerge as just one segment the high cost tail of a distribution of religious clubs that range across the full spectrum of potential group imposed sacrifice and stigma extremism is identifiable and comparable in the model because it exists within a full spectrum of clubs by varying the parameters of the model that control the distribution of secular wages across agents and the degree of substitutability between religious and secular commodities we can better explain where and when religious extremism is most popular its strength relative to more moderate groups and which economic policies reduce its prevalence

changing the rules midway the impact of granting alimony rights on existing and newly formed partnerships this article analyses the effect of a reform granting alimony rights to cohabiting couples in canada a collective household model with a matching framework predicts that changes in alimony laws would affect existing couples and couples to be differently for existing couples it benefits the intended beneficiary but for couples not yet formed it generates offsetting intra household transfers and lower intra marital allocations for the beneficiary our empirical analyses confirm these predictions among couples united before the reform obtaining the right to petition for alimony led women to lower their labour force participation but not among newly formed cohabiting couples

property taxes tax cost illusion and desired education expenditures the extensive tax cost illusion found in the marshall survey is interesting both in terms of its magnitude and the direction of its impact counter to the common view that tax illusion will result in higher expenditures there appears to be at least one case where the overestimation of tax cost has the potential of leading to lower expenditure levels

dynamic female labor supply the increase in female employment and participation rates is one of the most dramatic changes to have taken place in the economy during the last century however while the employment rate of married women more than doubled during the last 50 years that of unmarried women remained almost constant to empirically analyze these trends we estimate a female dynamic labor supply model using an extended version of eckstein and wolpin 1989 to compare the various explanations in the literature for the observed trends this dynamic model provides a much better fit to the life cycle employment pattern than a static version of the model and a standard static reduced form model heckman 1979 the main finding using the dynamic model is that the rise in education levels accounts for about 33 percent of the increase in female employment and the rise in wages and narrowing of the gender wage gap account for another 20 percent while about 40 percent remains unexplained by observed household characteristics we show that this unexplained portion can be empirically attributed to cohort specific changes in preferences or the costs of child rearing and household maintenance finally the decline in fertility and the increase in divorce rates account for only a small share of the increase in female employment rates

attitudes and allocations status cognitive dissonance and the manipulation of attitudes abstract economic studies of social status have typically focused on individuals engaging in relative comparisons based on certain characteristics e g consumption wealth without considering why these characteristics are deemed status worthy in this paper individuals choose a status earning characteristic in order to reduce mental discomfort dissonance as a result those individuals with the highest marginal utility from income are often the first to misconstrue or abandon these incentives in favor of alternate forms of seeking status the model provides an explanation for endogenous class formation and highlights the role of redistributive taxation in manipulating individuals attitudes towards status

the robot the party animal and the philosopher an evolutionary perspective on deliberation and preference this paper examines the evolutionary fitness of a variety of ways of reaching decisions in early hunter gatherer societies in order to derive insights about how economists should view modern consumers it challenges conclusions reached by mainstream economists robson rayo and becker about why hunter gatherers needed sensory rewards and about the kinds of preference systems that would have conferred evolutionary fitness it argues that evolution favours those with a variety of ways of reaching decisions programmed deliberative intuitive and go with the flow and that the prospect of sensory rewards serves an evolutionary role by diverting people from thinking too much about what they are doing in situations in which deliberation might interfere with survival or reproduction the evolutionary role of a reluctance or failure to make trade offs is also considered along with the benefits of developing a relatively fixed identity rather than being all things to all men

towards sustainable consumption economic modelling of mobility and heating for austria abstract the paper focuses on economic modelling and empirical analysis of sustainable structures in private consumption and strives to extend conventional economic consumption models the model analysis of sustainable consumption in the areas heating and transport for austria attempts to depart from traditional measurement of consumption in national accounts and economic consumption models the focus of the analysis is laid on consumer services derived from a combination of stocks e g building stock transport systems and flows mainly energy this approach intends to illustrate that a concentration on flows in consumption models lacks important aspects of sustainable consumption the economic analysis of sustainable consumption patterns aims to highlight the effects related to the substitution of flows by stocks in the consumption areas transport and heating e g improvements in thermal quality of buildings more energy efficient transport systems relevant too in this respect is the role that can be played by technological innovation improvements in energy efficiency of stocks the potential for specific incentives to promote new technologies two essential factors are crucial in the context of sustainable consumption the demand shifts concerning the consumer services desired and the composition of the stock flow mix necessary for the service provision

talent and publicity as determinants of superstar incomes empirical evidence from the motion picture industry by drawing on the two prevailing economic stardom theories the paper investigates the sources of superstardom in the us movie industry for the econometric analysis we use income and popularity d

paying attention or paying too much in medicare part d we study whether people became less likely to switch medicare prescription drug plans pdps due to more options and more time in part d panel data for a random 20 percent sample of enrollees from 2006 2010 show that 50 percent were not in their original pdps by 2010 individuals switched pdps in response to higher costs of their status quo plans saving them money contrary to choice overload larger choice sets increased switching unless the additional plans were relatively expensive neither switching overall nor responsiveness to costs declined over time and above minimum spending in 2010 remained below the 2006 and 2007 levels

on the cultural transmission of preferences for social status abstract we study the formation of preferences for social status as the result of intergenerational transmission of cultural traits we characterize the behavior of parents with preferences for status in terms of socialization of their children to this particular cultural trait we show that degenerate distributions of the population whereby agents have either all status preferences or all non status preferences are dynamically unstable moreover under some conditions there exists a unique stationary distribution which is non degenerate in which both status and non status preferences co exist in the population and this distribution is locally stable finally we study the dependence of the stable stationary distribution of status preferences on institutional technological and policy parameters which affect agents economic conditions

the conservation and welfare effects of information in a time of day pricing experiment a recurring concern in tod pricing studies has been that short term experimental tod rates may not stimulate as much conservation as would occur if tod rates were implemented on a permanent basis that is how accurately do experimental tod pricing results extend to nonexperimental settings the present paper provides information relevant to this adjustment question we examine a little analyzed component of the tod pricing experiment conducted by the southern california edison sce company wherein a subset of the tod treatment households had a continuous display electricity use monitoring device installed mid way through the experiment the sce experiment was one of 14 tod pricing studies initiated by the u s department of energy doe most analyses of tod pricing have been based on doe initiated studies but this experiment was the only such study to include the monitoring component this abstract was borrowed from another version of this item

the market for preferences learning processes are widely held to be the mechanism by which boundedly rational agents adapt to environmental changes we argue that this same outcome might also be achieved by a different mechanism namely specialisation and the division of knowledge which we here extend to the consumer side of the economy we distinguish between high level preferences and low level preferences as nested systems of rules used to solve particular choice problems we argue that agents while sovereign in high level preferences may often find it expedient to acquire in a pseudo market the low level preferences in order to make good choices when purchasing complex commodities about which they have little or no experience a market for preferences arises when environmental complexity overwhelms learning possibilities and leads agents to make use of other people s specialised knowledge and decision rules

how similar are alcohol drinkers international evidence stigler and becker 1977 argue that tastes neither change capriciously nor differ importantly between people it is differences in prices and incomes that determine differences in behaviour in this paper we analyse the alcohol consumption patterns of drinkers from 8 industrialized countries we identify a number of empirical regularities and verify stigler and becker s hypothesis that income and price elasticities of demand are international constants by showing that alcohol consumption patterns in the eight countries exhibit intriguing similarities the income and price elasticities of alcohol are found to be about 0 8 and 0 6 respectively in all eight countries

an analysis of the determinants of job satisfaction when individuals baseline satisfaction levels may differ a growing literature seeks to explain differences in individuals self reported satisfaction with their jobs the evidence so far has mainly been based on cross sectional data and when panel data have been used individual unobserved heterogeneity has been modelled as an ordered probit model with random effects this article makes use of longitudinal data for denmark taken from the waves 1995 1999 of the european community household panel and estimates fixed effects ordered logit models using the estimation methods proposed by ferrer i carbonel and frijters 2004 and das and van soest 1999 for comparison and testing purposes a random effects ordered probit is also estimated estimations are carried out separately on the samples of men and women for individuals overall satisfaction with the jobs they hold we find that using the fixed effects approach that clearly rejects the random effects specification considerably reduces the number of key explanatory variables the impact of central economic factors is the same as in previous studies though moreover the determinants of job satisfaction differ considerably between the genders in particular once individual fixed effects are allowed for

divorce and the cognitive achievement of children children of divorced parents exhibit lower test scores and educational attainment have these correlations a causal interpretation parents who divorce may be less likely to invest in their children while together or they may divorce to shield their children from the effects of marital conflict i study the relationship between children s achievement and the marital status of their parents within a dynamic framework in which partners decide on whether to remain married how to interact with or without conflict and child investments i then assess whether a child whose parents divorced would have been better off had divorce not occurred

simultaneous determination of church contributions and church attendance in a standard model of household allocation of time and income church attendance and church contributions are determined simultaneously there are life cycle aspects to both attendance and contributions as azzi and ehrenberg 1975 and ehrenberg 1977 have argued and contributions behavior is affected by tax treatment and by a potential free rider problem as well this paper motivates an econometric specification which recognizes these features and estimates the parameters with a data set of over 2000 protestant church members

purchasing power parity and real factors it is acknowledged that purchasing power parity ppp fails in empirical tests the position adopted is that real factors are an omitted variable from the ppp relationship and are the cause of divergences from ppp the real exchange rate as being determined by supply and demand shift factors as in stockman 1987 and neary 1988 is modelled we then empirically estimate a real exchange rate equation and use the fitted value as a generated regressor in tests of ppp it is demonstrated that when changes in the real exchange rate are incorporated into the ppp relationship ppp improves

the convoluted influence of robbins s thinking on the emergence of economics imperialism this article analyses the influence of robbins s thought on the subsequent development of economics imperialism first the analysis of some passages that have been overlooked up to the present in which the author explicitly expresses his disbelief in the omnipotence of the economic method makes it possible to argue that robbins did not share the confidence exhibited by the advocates of economics imperialism in the capacity of economics to explain non economic phenomena second this article shows that robbins describes the influence of real scarcity on human behaviour in terms of a static constrained maximization problem thereby confusing issues of method and scope in his writings this confusion facilitated the view that economics is a method without a proper subject matter and its later expansion into other fields in conclusion although robbins cannot be counted as an earlier promoter of economics imperialism the misunderstandings implicit in his writings paved the way for the emergence of this intellectual movement

world food demand long term projections of global food demand are heavily dependent on which functional form of the food demand equation is used given that real incomes can change substantially over the long term key elements are the dependence of the income elasticity on income which ensures that the food budget share always lies within the 0 1 range and the role of income inequality this article analyzes these issues proposes a new functional form that deals with them and presents estimates of income and price elasticities for food in 138 countries copyright 2012 oxford university press

an evaluation of federal policies concerning joint ventures for applied research and development current federal policies toward interfirm cooperation in research and development are designed to maximize society s use of available technology models of industry resource allocation behavior demonstrate that these policies are detrimental to the formation of risk sharing consortia for the development of new technology the reason is that current policies often deprive applied research and development activities of their appropriability analytical results suggest that if appropriability is maintained an underinvestment in applied research and development can be corrected in most cases simply by permitting firms to share the benefits and costs of projects in proportion to firms investments a permissive governmental posture may be particularly effective for industries consisting of a large number of firms with some firms relatively larger than others industries consisting of small numbers of relatively equal size firms may require government as a participant in consortia for applied research and development appropriable but risky r d activities

independence of allocative efficiency from distribution in the theory of public goods when is the pareto optimal amount of public goods independent of income distribution subject to some regularity conditions the answer is when preferences of every individual i can be represented by a utility function of the form u x i y a y x i b i y where x i is i s consumption of private goods and y is the amount of public goods

the family as the health producer when spouses act strategically the grossman model has been extended recently in order to take account of the fact that most people lead their lives in a family using frameworks in which family members respectively a have common preferences and b are nash bargainers these models however do not consider individual incentives for behaving strategically in the model presented in this paper spouses interact strategically both in the production of own health and in the production of health of other family members we analyse inter alia the impact on the distribution of health of changes in family policies such as child allowance and custody rules

axiomatic bargaining theory on economic environments abstract axiomatic bargaining theory is reexamined by focusing upon the economic exhange environment instead of the traditional utility possibility set it is argued that the axioms of the traditional theory impose stronger restrictions than can be supported by their motivating economic intuitions weaker alternative axioms making explicit use of economic information are used to characterize the standard bargaining solutions a key idea is to impose consistency of the solution with respect to changes in the dimension of the commodity space even these weaker economic axioms however may be unrealistic restrictions to impose on the bargaining solution in the context of many economic bargaining problems

unlocking amenities estimating public good complementarity abstract public goods may exhibit complementarities that are essential for determining their individual value our results indicate that improving safety near parks can turn them from public bads to goods ignoring complementarities may lead to i undervaluing the potential value of public goods ii overestimating heterogeneity in preferences and iii understating the value of public goods to minority households recent reductions in crime have unlocked almost 7 billion in property value in chicago new york and philadelphia still two fifths of the potential value of park proximity 10 billion remains locked in

church attendance in great britain an ordered logit approach the church attendance decision of individual economic agents is analysed within a becker style allocation of time framework using an ordered logit model with data derived from the british household panel study bhps separate attendance equations are estimated for males and females the empirical results in line with previous north american studies suggest that labour income variables do account for some of the variation in attendance in addition attendance is found to be correlated with factors such as denominational affiliation educational attainment and intensity of belief

price competition and advertising in oligopoly abstract this paper studies price advertising in an oligopoly market where consumers have only local price information sellers may attract consumers from other locations by advertising their price with positive probability they advertise a low price to attract customers from distant locations with the remaining probability they post a high price and serve only local customers the random advertising equilibrium approaches the equilibrium under perfect price information when the cost of advertising becomes small

beliefs and errors in voting choices a restatement of the theory of fiscal illusion this paper reformulates the theory of fiscal illusion to make it more compatible with the median voter model of collective choice it emphasizes the requirement that misperceptions about marginal tax costs and benefits must be permanent to have any significant effect on the level of public expenditures the lancaster becker model of consumer demand is then used to demonstrate the peculiar effects of permanent misperceptions on consumer demand it can be shown for example that other things being the same a republican who underestimates continuously the marginal benefits of public activities may demand more public goods than a democrat who overestimates those same benefits in a permanent fashion

consumers with differing reaction speeds scale advantages and industry structure abstract the development of an industry is seen as the outcome of a differential game in which market shares flow in response to price differences it is hypothesized that while all consumers eventually react to price differences some are slower than others if scale advantages have some influence on marginal costs around average market share then under reasonable conditions only skewed size distributions can be locally stable steady states in addition and contrary to common belief the largest firm need not eventually monopolize the industry

gary becker as teacher this paper looks at the work of gary s becker american economist professor of sociology friend and colleague of kevin m murphy murphy discusses the traditional approach of becker s teaching and ideas as they were expressed through his wealth of content and style in course design his discussions on the role of preferences technology and constraints as they influence household production and his emphasis on the importance of markets and desire for more murphy recognizes becker s teaching style as groundbreaking unapologetic and pure economics

activity choice a new approach to economic behavior abstract an individual s work and consumption behavior is modeled as the outcome of an optimal choice among activities at each moment within a day the model describes the time shapes of his demand for goods and services labor supply and activities within the day and it allows the analysis of choices in which unusually complex motivations are incorporated it is applicable to questions of job satisfaction peak demands shift working and capital utilization estimation of the value of time goal and process utilities intrinsic and extrinsic satisfactions labor versus labor power and to the issues of compulsive consumption and self control

industry investment in basic research assuming interdependence of benefits from appropriable and inappropriable activities using a model of the resource allocation behavior of a group of firms joglekar and hamburg 1983 demonstrate that unaided industry allocation to basic research is suboptimal and that in stimulating this allocation provision of government seed money is generally counterproductive while the provision of matching subsidies is not cost efficient using basically the same model but focusing on the case of a homogeneous industry joglekar and hamburg 1986 further identify several industry characteristics that increase the degree of suboptimality of investment in basic research and consequently the need for government intervention joglekar and hamburg 1983 1986 assume that a firm s benefits from its investment in appropriable activities are independent of its benefits from the industry s total investment in the pertinent basic i e inappropriable research investment theory suggests that a firm s benefits often depend upon its investment portfolio and that an investment in basic research that is not supported by suitable investments in other activities e g plant and equipment personnel training etc may yield far smaller benefits than could be potentially obtained therefore in this paper i present a model that assumes such an interdependence of benefits i find that most of joglekar and hamburg s 1983 1986 conclusions are confirmed by the new model

imperfect knowledge and the new theory of demand in the conventional simple analysis of demand theory a consumer is confronted with the task of maximizing his utility in consuming two or more goods subject to a budget restraint it is usually assumed that the consumer has perfect knowledge concerning the qualities of characteristics of the goods he chooses to purchase when knowledge about one or more goods is lacking the conclusions about consumer welfare must be qualified suppose for example that a consumer maximizes his utility in consuming goods given limited information about the goods if additional information is made available the pattern of his consumption is likely to change and this change in preference can be illustrated by a new indifference map it is not possible however to compare the two sets of indifference maps for the purpose of making a decision about the change in welfare recent developments in the new theory of demand suggest a possible solution to this problem lancaster 1966a 1966b in the new framework emphasis is placed upon the characteristics of the goods which the consumer receives when he purchases goods or services the consumer s utility function is thus based upon these characteristics not the physical goods or services themselves for the purpose of analyzing the effect of changing information on consumer behavior we shall assume that the consumer spends his budget on two goods if and f2 each good possesses two characteristics designated by el and e2 the first characteristic yields positive utility while the second imposes a negative utility 2 the basic model is illustrated in figure 1 the

a stackelberg model of child support and welfare this article models the child support and welfare decisions of never married parents on welfare as a stackelberg game the mother chooses whether to exit welfare report paternity and to obtain a formal child support order if a child support order is obtained the father chooses whether to comply with the order simulation results from the structural parameters indicate that increasing the child support disregard increases paternal compliance slightly and affects maternal paternity reporting more significantly effects are limited however by low paternal incomes results also indicate that high award amounts can decrease expected child support payments to women on welfare