optimal leniency and the organization design of group crime abstract we study a simple law enforcement model where the organizational structure of a criminal group is endogenous and determined jointly with the amnesty granted to whistleblowers we allow criminals to choose between a horizontal partnership and a vertical hierarchical organization structure and we study how this choice affects the optimal leniency granted by a benevolent legislator whose aim is to minimize crime we show that the optimal amnesty with an endogenous organizational choice is less lenient than that granted when the policy targets vertical organizations only in the equilibrium partnerships coexist with vertical organizations

addiction compulsion and the technology of consumption the consumption technology model of lancaster and becker is extended to include addictive activities assuming a utility function in which the individual places a premium on maintenance of self esteem the model generates empirically verified patterns of habituation withdrawal and the compulsive restarting of an abandoned habit it is then applied to the analysis of public policies toward drug abuse their frequent ineffectiveness is shown to result from an unwarranted emphasis on deterring the addictive activity rather than on encouraging atceptable behavior

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

what s legal and what s not the regulation of opiates in 1912 this paper develops a model to explain state level opiate regulation in 1912 the personal choice of whether to engage in mainstream or deviant activity is determined by consumption technology and market prices and voting determines the legality of deviant behavior voting outcomes depend on population characteristics including diversity tolerance visiblilty of deviance and the distribution of consumption efficiencies a logit equation whose dependent variable is the presence of a state opiate prescription law is estimated results broadly support the collective choice model and disconfirm the role of interest groups particularly physicians in determining prescription regulation i introduction alcohol and nicotine may be the most dangerous drugs sold today considering their effects on health and accidents legal restrictions on the sale and private use of tobacco and alcohol are minor some currently illegal substances including marijuana and opiates might in fact be less harmful than alcohol and tobacco ff used in moderation why are some commodities legal and others not economists should be interested in the question for two reasons the first is that the work of non economists often uses economic metaphors a number of historians have described the prohibition of alcohol and opiates in america in terms of interest group politics 1 economists however have yet to explain these episodes using their own models of regulation and collective choice the second reason is that the historical facts are dramatic enough to tax the explanatory power of economics between 1890 and 1920 private transactions in alcohol and opiates went from being virtually unregulated by the federal government to complete illegality 2 this change in legal status was not a response to new scientific knowledge about the substances becker s model of household production 1981 chs 1 and 2 formalizes the questions at issue lannaccone 1988 has recently used becker s model to analyze the sociological distinction between mainstream churches and religious sects assuming individuals have differing consumption technologies he derives propositions about the characteristics of religious sects and their members iannaccone 1988 242 45 notes that churches are characterized by inclusivity and sects by exclusivity church members have more heterogeneous beliefs socialize mainly with people from outside their church and place few demands on their church for non religious support services churches are more tolerant of diverse behavior and place fewer restrictions on the conduct of members church members span a wider range of demographics than do sect members they are on average economically better off than sect members but sect members contribute more funds to their institutions the distinction between churches and sects is analogous to that between licit and illicit drug use drug users are demographically more homogeneous than nonusers more poorly socialized and more likely to spend a major portion of their time in drug related activity 3 they have lower productivity than alcohol or tobacco users both at work and in household consumption 4 and are more likely to restrict themselves to companions with similar consumption patterns kandel and maloff 1983 suggest that learning to use drugs in the subculture resembles an initiation into the rites and beliefs of a deviant sect according to winick 1974 the exit from drug taking like that from a sect is often a total burnout to zero use which occurs at a predictable time the church sect model yields such predictions about drug use and generalizes individualistic models of that activity 5 in the next section i model an individual who receives utility from consumption itself and from the attitude or state of mind in which consumption takes place consumption and attitude are the outputs of household production functions after deriving the optimum in a two activity model i analyze the choice between mainstream and deviant attitudinal activities

credible threats in extortion there is a fundamental credibility problem in the extortion business will the gang retaliate if i refuse to pay unlike reputation models we emphasize the up front investment choice by the gang of which potential victims are uncertain for small numbers of victims only a no extortion equilibrium exists however as the number of potential victims becomes large this equilibrium disappears the only subgame perfect equilibria have extortion and expected loss from violence we justify and examine the properties of one particular set of equilibria the model can also shed light on credibility problems in settings other than extortion

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

do drinkers know when to say when an empirical analysis of drunk driving this paper presents empirical evidence that an individual s decision to drive while drunk is negatively affected by the expected full price of driving drunk the analysis usa a unique data set containing information on self reported drunk driving matched to state level drunk driving policies as well as to state excise taxes on beer these are hypothesized and found to affect drunk driving further we find interesting racial differences but surprisingly small differences by gender in the effect of socioeconomic and policy variables on drunk driving propensities

on the diversification observability and measurement of estimation risk this paper reexamines how risk return relationships are affected by investor uncertainty about the exact parameters of the joint rate of return distribution we attempt to clarify results relating to three central issues first we address the issue of diversification focusing on an apt factor model framework second we discuss the observability of estimation risk and describe research experimental designs that should encompass the existence of estimation risk and reveal it in the data finally we suggest exploiting contemporaneous return observations on high and low information securities to aid in the measurement of return parameters for low information securities

enforcement costs and the optimal magnitude and probability of fines whenever the government uses fines to control harmful activities it incurs certain costs in connection with the enforcement process this article will show how these costs affect the optimal magnitude of fines and the optimal degree of enforcement effort that is the optimal probability of detection of those who commit harmful acts we will distinguish between two types of enforcement costs fixed enforcement costs are costs that do not depend on the number of individuals who commit harmful acts these costs would include for example the expenses borne by a pollution control agency in testing water quality in a lake variable enforcement costs are costs that do depend on the number of individuals who commit harmful acts such as the costs of prosecuting and penalizing polluters in our basic model we assume that the fixed enforcement costs are the costs of maintaining the probability of detection at a certain level and that the variable enforcement costs are the costs of fining individuals the main conclusions of this article may be summarized as follows the optimalfine equals the harm properly inflatedfor the chance of not being detected plus the variable enforcement cost of imposing the fine if the fine is of this magnitude the expected fine will equal the harm caused by the harmful act plus the expected increase in enforcement costs occasioned by it for instance suppose that the probability of detecting a

rational choice and rebellious collective action a basic problem for a rational choice theory of rebellious collective action is to explain why average citizens would participate in such behavior since they have nothing to gain they will receive benefits of successful rebellion in terms of public goods regardless of whether they take part or not but much to lose rebellious behavior may be quite costly according to the conventional private interest or by product theory the incentive to participate must come from the expectation of receiving selective benefits but since average citizens in a general case cannot expect substantial private material rewards the relevant selective benefits must be psychological in nature in contrast to the model of private interest theory a public goods model is proposed stipulating that the value of rebellion in terms of public goods can be a relevant incentive for participation using data from surveys conducted in new york city and hamburg west germany we investigate the relationship between participation in rebellious political behavior and measures of the incentives of public goods and private interest the results do not support predictions of the private interest model in regard to nonmaterial selective incentives hypotheses of the public goods model are supported

pirates and traders some economics of pirate infested seas abstract even where all agents are risk neutral merchants can insure themselves against piracy such self insurance is surprisingly invulnerable to moral hazard further there exist a patrolling intensity and or penalties for captured pirates which along with mercantile self insurance could eliminate piracy

organized crime corruption and punishment we analyze an oligopoly model in which differentiated criminal organizations globally compete on criminal activities and engage in local corruption to avoid punishment when bribing costs are low that is badly paid and dishonest law enforcers work in a weak governance environment and the rents from criminal activity are sufficiently high we find that increasing policing and sanctions can generate higher crime rates indeed beyond a threshold further increases in intended expected punishment create incentives for organized crime to extend corruption rings and ensuing impunity results in a fall of actual expected punishment that yields more rather than less crime

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

an arrgh chy the law and economics of pirate organization this article investigates the internal governance institutions of violent criminal enterprise by examining the law economics and organization of pirates to effectively organize their banditry pirates required mechanisms to prevent internal predation minimize crew conflict and maximize piratical profit pirates devised two institutions for this purpose first i analyze the system of piratical checks and balances crews used to constrain captain predation second i examine how pirates used democratic constitutions to minimize conflict and create piratical law and order pirate governance created sufficient order and cooperation to make pirates one of the most sophisticated and successful criminal organizations in history

the association between disclosure distress and failure the quality of corporate disclosures has drawn increasing levels of criticism from congress and the sec a subject of particularly intense scrutiny and action is the management s discussion and analysis md a this narrative intended to provide an inside perspective on the reported results of the firm is particularly important when attempting to evaluate the investment prospects of the marginal or poorly performing firm however managers may restrict the information content of the disclosure raising potential concerns about ethical behavior in this study we employ a proprietary instrument to measure the quality of md a disclosures for a sample of firms entering financial distress we evaluate the disclosure behavior of these firms in an effort to determine whether changes in the disclosure appear to be motivated primarily by economic or ethical concerns we find on average that firms increase disclosure quality in the year of initial distress however sustained increases in disclosure quality are limited to firms that subsequently recover from the distress the results suggest that observed changes in disclosure are driven primarily by economic considerations rather than ethical ones especially in good economic times

individual protection against property crime decomposing the effects of protection observability we re examine the efficiency of observable and unobservable crime protection decisions with new results and insights observable protection is unambiguously associated with a negative externality at the individual level it reduces the crime effort but its unit payoff remains unchanged conversely unobservable protection reduces the unit payoff and has no effect on the crime effort exerted though it deters crime globally a decrease in the global crime payoff is detrimental to a victim if protection is observable while it is beneficial when unobservable while observable protection has a positive diversion effect it has the opposite effect when unobservable on reexamine l efficacite des decisions observables et non observables de protection par rapport au crime et on en tire de nouveaux resultats et de nouvelles perspectives la protection observable est associee a une externalite negative sans aucune ambiguite au niveau individuel elle reduit l effort de crime mais laisse les resultats financiers inchanges d autre part la protection non observable reduit les resultats financiers de l unite mais n a aucun effet sur l effort de crime dans ce cas particulier meme si cela se traduit par un effet dissuasif sur le crime globalement un declin dans le rendement global de l activite criminelle nuit a une victime si la protection est observable alors qu il est benefique quand la protection n est pas observable alors que la protection observable a un effet positif de diversion elle a l effet oppose quand elle n est pas observable

organized crime or individual crime endogenous size of a criminal organization and the optimal law enforcement i introduction organized criminal activities have been regarded as major economic and social issues since the early 1900s although there has been as pointed out by fiorentini and peltzman 1995 enormous research interest in the economics of criminal activities economists have done relatively little work on issues specifically related to the economics of organized crime we only see that much of the work has been done by following becker s 1968 framework where the target is the individual agent s allocative choice between legal and illegal activities in the face of different deterrence arrangements among the few exceptions a criminal organization is often thought of as a monopolistic firm and the theory of monopoly is predominantly used to analyze organized crimes schelling 1967 buchanan 1973 backhaus 1979 gambetta and reuter 1995 and more recently garoupa 2000 investigate the optimal public policy toward organized crimes through a welfare comparison between a monopoly organized criminals and competitive supplies individual criminals given that criminal activities are seen as social bads the monopolistic market is considered to be better than a perfectly competitive one because its output of crime is smaller 1 the monopolistic model implies that potential offenders have no other criminal choices but are forced to join the criminal organization if they decide to commit a crime clearly it is less than exhaustive in terms of describing agents choices in relation to criminal behavior in fact the criminal organization may not be monopolistic after all as argued by dick 1995 and others 2 criminologists johnson 1962 rubin 1973 and reiss 1986 observe that most criminal organizations are endemic in some particular areas and or restrictive in some particular illegal businesses these criminal activities such as bootlegging drug dealing pimping and prostitution are often less organized and would be difficult to successfully monopolize dick 1995 also points out that prostitution smuggling fencing and narcotics importation often involve substantial competition among downstream suppliers and can hardly be regarded as monopolistic businesses in other similar studies klein and crawford 1967 morash 1983 and sarnecki 1986 conclude that most youths who engage in delinquency are at most street gangsters and cannot be seen as members of a highly structured organization in reality the determination of the market structure for crime should be endogenous which has notable implications for the optimal crime enforcement policies and crime itself to recover the conventionally neglected facts and provide a more complete picture regarding organized crime this article develops a simple but more general model in this framework individual and organized crimes are coexisting alternatives to a potential offender and joining a criminal organization is seen as only one of the agent s rational choices in deciding whether to join a criminal organization the methods used to allocate the criminal organization s payoffs and the extra benefits provided by the criminal organization are given serious consideration they both play crucial roles in determining the sizes of the criminal organizations as well as in influencing the interactive relationship between the market structure for crime and the government s optimal law enforcement this study contributes to the existing literature and provides new insights in three respects first of all by allowing the agent to choose rationally between engaging in individual or organized crime we not only endogenize the size of the criminal organization but also explore the factors that determine the type high or low criminal ability of offenders that enter the criminal organization a new theoretical attempt is made in terms of providing an explanation to the observation of anderson 1995 there are considerable variations in personal qualities and values across different criminal organizations

the theory of optimal law enforcement the economic literature on optimal law enforcement is very recent becker s seminal paper on crime and law enforcement dates from 1968 and most papers which are the focus of this survey have been published in the last ten years the core result presented by becker is the following the probability and the severity of punishment deter crime therefore the fine should be maximal since it is a costless transfer whereas the probability of detection and conviction is costly much of the recent work has attempted to show why becker s result may not hold

the economics of organized crime and optimal law enforcement this article extends the optimal law enforcement literature to organized crime i model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion as long as extortion is a costless transfer from individuals to the criminal organization not only the existence of extortion is social welfare improving because it makes engaging in a criminal offense less attractive but it also allows the government to reduce expenditures on law enforcement when extortion is costly because the criminal organization resorts to threats and violence the existence of extortion is social welfare diminishing and may lead to higher expenditures on law enforcement

pirational choice the economics of infamous pirate practices abstract this paper investigates the economics of infamous pirate practices two closely related economic theories the theory of signaling and the theory of reputation building explain these practices first i examine the pirate flag jolly roger which pirates used to signal their identity as unconstrained outlaws enabling them to take prizes without costly conflict second i consider how pirates combined heinous torture public displays of madness and published advertisement of their fiendishness to establish a reputation that prevented costly captive behaviors pirates infamous practices reduced their criminal enterprise s costs and increased its revenues enhancing the profitability of life on the account

search for a theory of organized crimes abstract casual empirical observations reveal no systematic relationship between the overall crime rate and organized criminal activity we develop a search theoretic framework to study the interactions not only between formal labor and crime sectors but also between individual and organized crimes in equilibrium individual and organized criminals face different arrest risks success rates reward structures and outside options we characterize agents occupational choices the gang s hierarchical structure and the responses of unemployment crime rates and crime composition to changes in labor market conditions and crime deterrence policies we further assess the effectiveness of arrest versus punishment policies in deterring individual and organized crimes

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

a model of optimal incapacitation one of the functions of the criminal sanctions of imprisonment and the death sentence is to prevent individuals from doing harm by removing them from the population this incapacitative function of sanctions is considered below in a model in which the amount of harm individuals cause each period that they are free is not influenced by the threat of sanctions so as to abstract from the role of sanctions as a deterrent 2 the model is initially examined assuming that an individual s dangerousness i e the harm he will do if free remains the same each period of his life and that the sanction is imprisonment in this case it is optimal to imprison an individual if his dangerousness exceeds a threshold equal to the per period social cost of imprisonment moreover if it is optimal to imprison an individual at all it will be best to do so for life the optimal probability of apprehension is also determined the model is then extended in several ways it is first supposed that the dangerousness of individuals declines with age in this case it is again optimal to imprison individuals if their dangerousness exceeds the per period cost of imprisonment but it is optimal to release them if their dangerousness later falls below the threshold it is next supposed that the dangerousness of individuals declines with time spent in prison due to a rehabilitative effect in this case it is optimal to imprison individuals beginning at a lower threshold of dangerousness than the per period cost of imprisonment imprisonment is now socially more valuable and to release them if their dangerousness becomes sufficiently low finally it is supposed that a choice can be made between imprisonment and the death penalty and the optimal choice is discussed

differential information and security market equilibrium we propose a simple model of equilibrium asset pricing in which there are differences in the amounts of information available for developing inferences about the returns parame ters of alternative securities in contrast with earlier work we show that parameter uncer tainty or estimation risk can have an effect upon market equilibrium under reasonable conditions securities for which there is relatively little information are shown to have relatively higher systematic risk when that risk is properly measured ceteris paribus the initially very limited model is shown to be robust with respect to relaxation of a number of its principal assumptions we provide theoretical support for the empirical examination of at least three proxies for relative information period of listing number of security returns observations available and divergence of analyst opinion

pirates and fishermen is less patrolling always bad abstract motivated by the somali fishermen pirates i explore the time allocation decision of potential pirates between piracy and an alternative non violent occupation fishing when the returns of both piracy and fishing are sensitive to patrolling intensity for a range of parameters the static model yields multiple equilibria an efficient one with no patrolling and low piracy a less efficient equilibrium with intermediate levels of both piracy and patrolling and a highly inefficient high patrolling high piracy equilibrium analyzing the dynamic analogue i obtain the surprising result that sufficiently low patrolling can be a good strategy

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

addiction as extreme seeking this paper examines addictive and compulsive behavior within a new framework in an effort to establish a stronger link to the psychological and sociological literature on the subject individuals who suffer an addiction are not the classic homo economicus of textbooks but are instead extreme seekers concavities in indifference curves provide a simple characterization of extreme seeking the consequences of consumption which is physiologically or psychologically addicting and which threatens the individual s health are modeled in terms of capital and threshold effects the model is then used tentatively to assess policies aimed at controlling substance abuse

accomplice witnesses and organized crime theory and evidence from italy we develop an agency model of organized crime accounting for the main trade offs involved in the introduction of an accomplice witness program we characterize the optimal policy and identify its main determinants in a framework where public officials can be dishonest our predictions are tested by using data for italy before and after the introduction of the 1991 accomplice witness program as predicted by the model and the earlier antitrust literature the program appears to have strengthened deterrence and enhanced prosecution moreover consistent with a novel prediction of our theory the evidence suggests that the program efficacy is affected by the judicial system efficiency

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

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

crime punishment and the market for offenses crime is a subject of intense emotions conflicting ideologies however economists have generally explained it as a reflection of individual choice and equilibrating market forces two major themes of the literature are outlined the evolution of a market model to explain the diversity of crime across time and space and the debate about the usefulness of positive versus negative incentives systematic analyses generally indicate that crime is affected on the margin by both positive and negative incentives there are serious limitations to the effectiveness of incapacitation and rehabilitation and optimal enforcement strategies involve trade offs between narrow efficiency and equity considerations

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

a bandwagon effect in personalized license plates a bandwagon effect in personalized license plates the bandwagon effect is a consumption externality that exists when an individual s demand for a good is increased by his observation of other consumers using that good this paper models a product demand curve with a bandwagon effect and using data on sales of personalized license plates estimates such a demand curve certain more conventional models of product demand including information diffusion and habit formation models are observationally similar to the bandwagon model despite being conceptually different from it i attempt to use the license plate data to discriminate between the bandwagon model and these other models in 1950 harvey leibenstein described the impact on product demand curves of what he called a bandwagon effect the bandwagon effect was said to exist if peoples valuations of a good and thus demand for that good increased when they observed others consuming the good no one to my knowledge has attempted to empirically verify the existence of or estimate the magnitude of a bandwagon effect in any product market in this paper i attempt to do both by looking at the demand for personalized license plates a good that could plausibly be subject to a bandwagon effect in the first section of the paper i develop a simple model of product demand in the presence of a bandwagon effect the model is based on leibenstein s treatment but is modified to fit the case of personalized license plates in the second section data on the sales of personalized plates are described and used to estimate a demand function the results of this estimation are consistent with the theoretical model of the bandwagon effect the search for the bandwagon effect cannot end there however the bandwagon model in which consumers are moved by considerations of fashion and status emulation is observationally similar to other well known but conceptually quite different models of product demand in which consumers are more sober and level headed in particular models of information diffusion or habit formation imply patterns in the data very much like those that follow from the bandwagon model section iii discusses this matter in more detail and presents statistical tests designed to differentiate between the bandwagon model and alternative models of product demand in the final section i draw some conclusions from the empirical evidence i the bandwagon effect consider a product that lasts for a single period of well defined length each period a consumer may purchase at most one of the product the personalized license plate is a product of this sort as are subscriptions to a particular magazine hairstyles club memberships vacations to chic resorts etc assume first that there is no bandwagon effect and let 1 v sub it x sub it z sub t represent the value of the product to individual i in period t where x sub it is a vector of individual characteristics such as age or income and z sub t is a vector of product characteristics in period t the function v sub it is a random variable defined over the population of potential buyers let f sub t v prob v sub it adding a bandwagon effect to this model involves allowing individuals preferences to depend on aggregate behavior liebenstein assumed that in the presence of a bandwagon effect the quantity of a product demanded by each consumer at a given price depended on market level demand at that price this creates a problem when moving from individual to market level demand functions for the market level demand curve is no longer a lateral summation of individual demand curves

does drug use lower wages this study using microdata from the 1980 and 1984 waves of the national longitudinal survey of youth examines the effects of drug use on wages and employment contrary to most previous researcher