government debt government spending and private sector behavior comment in a recent issue of this review 1983 roger kormendi relied upon the work of martin bailey 1962 1971 and robert barro 1974 to develop an alternative approach to modeling private sector consumptionsaving behavior based on rational evaluation of the consequences of government fiscal policy p 995 briefly this approach involves determining to what extent government spending substitutes for private consumption and to what extent government debt is net wealth and thereby also affects private consumption this consolidated approach to examining private sector consumption is not only novel but appears at a time when there is widespread interest as well as controversy over the effects of government fiscal policy it therefore seems only appropriate to examine further the results obtained by kormendi not to criticize them but rather to explore their robustness this comment specifically explores the sensitivity of kormendi s results to alternative time periods of estimation to the differentiation between federal debt and state and local government debt and to the measurement of government debt particularly par vs market value

government policy with time inconsistent voters behavioral economics presents a paternalistic rationale for benevolent government intervention this paper presents a model of public debt where voters have self control problems and attempt to commit using illiquid assets in equilibrium government accumulates debt to respond to individuals desire to undo their commitments which leads individuals to rebalance their portfolio in turn feeding into a demand for further debt accumulation as a consequence i large and distortionary government debt accumulation occurs and ii banning illiquid assets could improve individuals welfare these results offer a new rationale for balanced budget rules in constitutions to restrain governments responses to voters self control problems

using operating cash flow data to predict financial distress some extensions recently financial statement users and regulators of publicly reported financial accounting data have argued in favor of the disclosure of detailed information on firms current operating cash flows harris et al 1980 fasb 1981 smith 1982 and thomas 1982 the fasb suggests that such disclosures will allow users to assess better the amount timing and uncertainty of future cash flows it states that the greater the amount of future net cash inflows from operations the greater the ability of the enterprise to withstand adverse changes in operating conditions 1981 p 11 the presumption that historical operating cash flows enable better assessments of future cash flows however is based on intuition rather than on empirical evidence griffin 1982 our study was conducted to assess whether operating cash flow data and related measures lead to more accurate predictions of bankrupt and

optimality and monetary equilibria in stationary overlapping generations models with long lived agents growth versus discounting abstract this paper studies the relationship between the existence and optimality of a monetary steady state and the nonoptimality of nonmonetary steady states we construct a sequence of stationary overlapping generations economies with longer and longer lived generations in which all agents maximize a discounted sum of utilities with a common discount rate under some assumptions the following result is established if the discount rate is greater less than the population growth rate then eventually every nonmonetary steady state is optimal nonoptimal and a monetary steady state does not exist exists and is optimal

the market value of outstanding government debt 1919 1975 abstract several new series on the market value of outstanding government debt are reported and their methods of construction described the new series on federal debt are compared with other existing estimates and are shown to be markedly superior to them

federal borrowing and short term interest rates this paper is an empirical study of the effects of federal government borrowing on short term interest rates it is often taken for granted that increases in federal borrowing cause higher short term rates but little empirical support exists for this assumption in fact this paper demonstrates that federal borrowing is a relatively unimportant and insignificant determinant of short term rates an implication of this result is that financial crowding out effects of government deficit spending may not be overly large postulates about interest rate behavior are the driving force behind many hypotheses of the crowding out literature however these interest rate effects have received relatively little direct attention in this literature this is surprising since as a general rule the stronger the interest rate effect is the stronger the crowding out effect will be an empirical determination of the size of the deficit spending interest rate effect gives some empirical content to the crowding out controversy in section ii of this paper the relationship between federal borrowing interest rates and crowding out is discussed and a loanable funds model of short term interest rates is developed in section iii the regression model is generated and tested the essential result is that variation in three month treasury bill rates is caused by expected inflation changes in the monetary base and by changes in the level of economic activity there is no statistically significant relation between short term interest rates and federal borrowing in section iv additional regression tests are performed which confirm the results in section iii and the problem of simultaneous equation bias is discussed the final part of the paper is a discussion of some implications of the results reported in sections iii and iv

does direct democracy reduce public debt evidence from swiss municipalities although some countries have managed toobtain balanced budgets or even budgetsurpluses in recent times public debts ofmany oecd countries remain at high levels since structural reforms of public spendinghave only infrequently taken place in mostcountries fiscal pressure will increaseagain in the future due to society s ageingand the accompanying increases in socialtransfer spending constitutionalrestrictions on debt levels and legal rulesof the budgetary process such as a strongrole of the minister of finance aresupposed to be helping against the debtbias inherent in political decision makingprocedures in addition to such top downbudgetary procedures this paperinvestigates the impact of referendumapproval of budget deficits by the voterson the level of public debt in a crosssection of the 134 largest swissmunicipalities in 1990

a comparative test of alternative theories of the determinants of italian public deficits 1950 1998 the paper assesses the relative explanatorypower of the keynesian the optimalfinance the contingent liability andseveral public choice theories of thedeterminants of public deficits on italian1950 1998 data a vector error correctionmodel suggests that deficits are sensitiveto unemployment levels interest groups preferences especially the elderly government fragmentation changes in thedegree of stringency of budget rules andexternal economic constraints data insteadprovide a weak or no support to thehypotheses that deficits respond to outputgrowth and electoral events theimplications of the optimal finance and ofthe contingent liability theory arerejected as well

government debt government spending and private sector behavior revisited comment perhaps no issue has generated as much controversy among economists in the past decade as the proposition that an increase in the government deficit induces an equal offsetting increase in private saving the truth of this so called ricardian equivalence proposition is central to whether budget deficits reduce capital accumulation to the feasibility of expansionary tax reductions and to the effects of social security on private saving and aggregate capital accumulation although the basic idea that the future tax liabilities associated with government deficits and debt induce individuals to increase their saving has been around since the time of david ricardo and was treated explicitly by don patinkin 1965 martin bailey 1971 and levis kochin 1974 the current debate was launched by robert barro 1974 the voluminous theoretical literature of recent years has shown that complete ricardian equivalence would be expected to prevail only under very special conditions see douglas bernheim 1987 for an especially useful survey and analysis but the theoretical restrictiveness of the assumptions required for complete ricardian equivalence does not constitute a practical refutation defenders of ricardian equivalence can argue that the theory is only an approximation and can claim that although the stringent conditions required for complete ricardian equivalence do not hold the economy s behavior in practice is close to the predictions of ricardian equivalence there are two key empirical questions the first is whether a higher level of taxes with government spending constant induces individuals to reduce their spending on consumption as traditional theory holds or has no effect on consumer spending as the ricardian equivalence proposition predicts the second deals with the effect of government outlays on goods and services although the absence of a negative effect on consumer spending of such government outlays is clearly contrary to the ricardian equivalence proposition the existence of a moderate negative effect of government outlays on consumer spending is not in itself evidence in favor of the ricardian equivalence proposition that individuals increase their saving to finance anticipated debt service as feldstein 1982 explained consumers may correctly believe that a rise in current government spending is a good indicator of a higher level of future government spending once a program is launched or budgets increased the process is unlikely to be reversed an increase in current government spending is therefore a good indication that future taxes will have to be higher to finance a higher level of future government spending individuals may rationally reduce their own spending when government outlays increase without a concurrent increase in taxes because they anticipate higher future taxes to finance higher future government spending even if they give little or no weight to the debt service implications of the current deficit the strongest direct evidence in favor of ricardian equivalence is roger kormendi s 1983 article in the american economic review he presents consumption regression equations that relate an estimate of consumption to net national product wealth martin feldstein is professor of economics at harvard university and president of the national bureau of economic research douglas elmendorf is assistant professor of economics at harvard university we are grateful to greg mankiw and lawrence summers for comments on an earlier draft the research reported here is part of the nber study of the government budget and the private economy ikormendi defines consumption as the sum of current expenditures on services and nondurables plus 10

the economic consequences of federal deficits an examination of the net wealth and instability issues there is currently disagreement over the economic consequences of federal deficits some economists argue that deficits put upward pressure on real interest rates and thereby crowd out interest sensitive private spending others argue that deficits stemming from lump sum tax cuts do not raise interest rates because the response of individuals will be to increase their saving by the full amount of the resulting deficit to enable future generations to service i e make interest and principal payments on the additional debt without curtailing their consumption in other words individuals view debt and taxes as perfect substitutes because debt financed tax cuts imply higher taxes in the future to service that debt this effectively means that there really is no permanent tax cut so there is no increase in private net wealth current consumption or interest rates stated another way the debt that is issued to finance a tax cut does not add to private net wealth because it implies an offsetting future tax liability but if debt is not viewed as implying future tax increases then debt and taxes are not perfect substitutes and increases in debt resulting from tax cuts will indeed add to private net wealth stimulate consumption and raise interest rates 2

the market value of u s government debt monthly 1942 1980 abstract the market value of outstanding united states treasury debt is calculated on a monthly basis using price and par value data from the treasury bulletin separate series for treasury bills bonds certificates of indebtedness notes and total treasury debt are presented along with estimates of privately held treasury debt and gross federal debt the calculated market value series is compared to par value and an existing annual market value series

fiscal policy with agents differing in altruism and ability this paper presents an overlapping generations model of growth with individuals differing in productivity and altruism within such a model wealth is entirely held in the steady state by the families with the highest degree of altruism we then look at the macroeconomic and distributive effects of three fiscal policies public debt pay as you go social security and estate taxation under plausible assumption we show that both public debt and social security are neutral a la ricardo but increase inequality we also show that a estate taxation can be pareto worsening even though it can foster income equality

corporate governance and default prediction a reality test default prediction has commanded the attention of researchers for at least 50 years this paper addresses several testable hypotheses regarding the relations between corporate governance and defaul

a fractionally cointegrated var analysis of economic voting and political support we use a fractionally cointegrated vector autoregressive model to examine the relationship between canadian political support and macroeconomic conditions this model is well suited for the analysis because it allows multiple fractional time series and admits simple asymptotic inference for the model parameters and tests of the hypotheses of interest in the long run equilibrium we find that support for the progressive conservative party was higher during periods of high interest rates and low unemployment while support for the liberal party was higher during periods of low interest rates and high unemployment we also test and reject the notion that party support is driven only by relative to the united states economic performance indeed our findings suggest that us macroeconomic variables do not enter the long run equilibrium of canadian economic voting political opinion poll support at all resume une application du modele vecteur autoregressif fractionnellement cointegre sur le vote economique et le support politique on utilise un modele du type vecteur autoregressif fractionnellement cointegre pour examiner la relation entre le support politique canadien et les conditions macroeconomiques le modele est bien adapte a l analyse parce qu il permet l usage de multiples series chronologiques fragmentees et une inference asymptotique simple des parametres du modele ainsi que des tests d hypothese pertinents en equilibre a long terme on decouvre que le support pour le parti progressiste conservateur a ete plus eleve au cours des periodes de hauts taux d interet et bas taux de chomage alors que le support pour le parti liberal a ete plus eleve au cours des periodes de bas taux d interet et de hauts taux de chomage on met au test l hypothese qu on rejette d ailleurs que la notion que le support politique est enclenche seulement par la performance economique du canada par rapport a celle des etats unis en fait les resultats suggerent que les variables macroeconomiques americaines n ont pas du tout d impact sur l equilibre a long terme du vote economique canadien support dans les sondages d opinion politique

international tax competition and the deficit bias i analyze the dynamic effects of tax competition on public budget deficits i find that stronger tax competition leads to a fiscal deficit bias at the early stages of financial liberalization when countries differ in terms of capital mobility further liberalization leads to external imbalances and diverging fiscal deficits while corporate tax rates converge consistent with theory i find that stronger tax competition increases deficits in a sample of oecd countries controlling for tax revenues and other standard determinants of fiscal deficits jel e62 f62

spending cuts or tax increases the composition of fiscal adjustments as a signal abstract this paper shows that the composition of fiscal adjustments spending cuts versus tax increases serves as a signal of the government s degree of collusion with special interests the politico economic model of fiscal policies combining retrospective voting with common agency type lobbying presents undominated separating equilibria and intuitive pooling ones in both of which fiscal adjustments with sufficiently large spending cuts lead to incumbent reappointment whereas those with only tax increases lead to incumbent defeat these findings are consistent with the recent empirical evidence of voters behaving as fiscal conservatives the efficiency enhancing aspects of the signaling mechanism and the effects of imposing a deficit limit are also analyzed

how important is improving food availability for reducing child malnutrition in developing countries abstract do increases in the food supply per person in a country i e national food availability contribute substantially to reductions in malnutrition among its children this paper sets out to answer this controversial question using panel data from 63 developing countries over 1970 1996 this paper gives evidence in support of a statistically significant and strong positive impact of national food availability on child nutrition finding that increased food supplies have resulted in significant reductions in malnutrition since the 1970s despite population increases over the period however per capita food supplies have a declining marginal impact their effect is quite strong for countries with very low food availability e g most countries in sub saharan africa and south asia but weak or non existent for those with high levels e g most countries in the near east and north africa further non food factors such as women s education and status and the quality of health environments are also important determinants of children s nutritional status depending on the state of food availability in any particular geographic area and relative costs these factors may merit greater priority in policies to reduce malnutrition

the differing effects of pre and post 1981 federal budget deficits on tax adjusted real interest rates this paper employs an estimating equation relating tax adjusted real interest rates to deficits and other economic variables to examine the differing effects of pre and post 1981 federal budget deficits on ex ante and ex post real tax adjusted short term interest rates over the period 1961 1 1992 2 the results for the 1961 1 1992 2 period taking into account a shift in the linkage between the ratio of alternative measures of the deficit to potential gdp occurring in 1981 1 indicate that the ratio of both the nipa deficit and the cyclically adjusted deficit to potential gdp have a significant effect on ex ante and ex post real tax adjusted interest rates for the post 1981 period but no significant effect before 1981

voting on pensions a survey abstract the paper presents a nonexhaustive survey of the literature designed to explain emergence size and political sustainability of pay as you go pension systems it proposes a simple framework of analysis a small open two overlapping generation economy model around which some variants are displayed dictatorship of the median voter is assumed the text is organized to answer the following questions i do political equilibria with payg pension schemes exist ii why do they emerge iii what are the conditions for the participation constraint of the pension game to be verified and finally iv what is the size of the pension system chosen by the median voter and how is this size influenced by an exogenous e g demographic shock

on barro s theorem of debt neutrality the irrelevance of net wealth the effects of national debt on real economic activity has been a recurring topic in the literature on macroeconomic policy analysis since the time of adam smith the problem is usually stated as follows for a given level of government spending is the economy sensitive to the financing mix between tax and debt historically attention has focused on the question of whether or not individuals perceive government bonds as net wealth the link between wealth and real activity being taken as given the main point of debate is well established the issue of bonds raises private assets by the full value of the bonds the corresponding tax liabilities for interest payments and retirement of the debt extend indefinitely into the future the perception of bonds as net wealth would then appear to depend on the length of the individual s optimization horizon the most recent contribution to this debate was made by robert barro 1974 in which he argued that despite the limitation of finite lives bonds will not be regarded as net wealth in a system characterized by operative intergenerational transfers the essence of his argument is that inclusion of a bequest motive effectively converts a finite horizon into an infinite one in that paper barro acknowledged a potential limitation on his proof of the neutrality result it was only valid for bonds that are redeemed at a known point in the future this limitation was raised again in a subsequent exchange with martin feldstein in which barro 1976 agreed that for a growing economy an increase in steady state per capita debt will generate net wealth if the rate of growth is greater than the interest rate however he argued that such a steadystate growth situation would not be consistent with rational utility maximizing behavior the main theme of this paper is that the literature has focused attention on the wrong question the real effects of national debt are independent of whether or not individuals perceive the debt as net wealth the correct question is whether or not changes in the level of debt force individuals into patterns of intertemporal consumption that they are unable to neutralize by adjustments in their portfolio behavior viewing neutrality in this light leads to some reinterpretation of the conditions under which neutrality is likely to hold my analysis starts where barro and feldstein leave off within the framework of the overlapping generations model with gift and bequest motives i show that steady state equilibrium growth is consistent with a growth rate in excess of the interest rate indeed without specific knowledge of the parameters of the economy there are no a priori grounds on which to expect any particular relationship between the growth and interest rates more importantly so long as it is valid to view the aggregate economy as behaving like a composite individual changes in the steady state level of government debt are neutral regardless of which relationship prevails provided one or the other of the intergenerational transfer motives is operative i will refer to this as the extended neutrality theorem section i presents an analysis of steadystate growth with gift and bequest behavior the steady state growth path is shown to lie above the golden rule solution if the gift

politico economic equilibrium and economic growth abstract we propose a notion of dynamic politico economic equilibrium which builds on two key assumptions policies are determined sequentially and agents are fully rational in their roles as both consumers and voters we examine a simple model of endogenous growth and infinitely lived agents where taxes on income are endogenous and where growth critically depends on the initial distribution of asset holdings we relate our equilibrium definition and results to existing literature on time consistency and on political economy and growth we show that our equilibria are time consistent and we argue that the choice of equilibrium concept might have important quantitative implications

does nutrition sensitive aid reduce the prevalence of undernourishment abstract this paper examines the impacts of nutrition sensitive sector aid inflows on the prevalence of undernourishment we find nutrition sensitive aid can reduce undernourishment estimates suggest that a 10 increase in overall nutrition sensitive aid would approximately decrease hunger by 1 1 2 years later on average among nutrition sensitive aid inflows we find that emergency food aid reduces hunger a year later and that food aid is more effective than emergency food aid at reducing medium term hunger a 10 increase in food aid per capita would result in a 1 3 decrease in hunger 3 years later on average against 1 for a similar increase in emergency food aid per capita generally the size of the aid effects on hunger depend on the time horizon considered in the empirical analysis our findings provide supporting evidence for the prioritization of specific nutrition sensitive investments within the sdg agenda while simultaneously challenging the relative reallocation of nutrition sensitive aid that has reduced the role of food and emergency food aid inflows

the politics of intergenerational redistribution this paper studies the political economic equilibrium of a two period model with overlapping generations in each period the policy is chosen under majority rule by the generations currently alive the paper identifies a politically viable set of values for public debt any amount of debt within this set is fully repaid in equilibrium even without commitments by issuing debt within this set the first generation redistributes revenue in its favor and away from the second generation the paper characterizes the determinants of the equilibrium intergenerational redistribution and identifies a difference between debt and social security as instruments of redistribution

real interest rates and macroeconomic activity while standard discussions of the transmission mechanism of monetary policy tend to assume a strong and negative link between real interest rates and real macroeconomic activity and this appears to some extent to be borne out by simulation of large scale macroeconometric models the empirical evidence suggests that the link between real interest rates and macroeconomic aggregates such as consumption and investment is in fact somewhat tenuous the weak link between interest rates and aggregate consumption may be explained at a theoretical level while the apparently weak link between interest rates and investment is more puzzling although it may be related to neglect of issues such as uncertainty and the irreversibility of investment in empirical studies similarly evidence on the link between real interest rates and economic growth is mixed and this may be related to non linearities in the relationship the survey highlights the need for further research in this area

budget deficits and redistributive politics this paper proposes a new view of the forces in the political process that cause governments to accumulate debt the analysis builds on a model of redistributive politics that contrary to median voter models does not restrict the set of policies that politicians can propose i show that deficits occur even in an environment where voters and periods are homogeneous this is an environment where previous political theories of debt would predict budget balance in the model deficits are a way for candidates to better target promises to voters and are therefore used as tools of redistributive politics the main contribution of the analysis is to show that the same forces that push candidates to redistribute resources across voters to pursue political advantage are forces that generate budget deficits most countries have sizeable national debts indeed thinking of governments as debtors seems so customary that it feels awkward to talk about a national credit this suggests that there are systematic forces pushing governments to regularly borrow to cover the excess of spending over receipts at the same time a significant amount of government spending consists of transfers to special interest groups that are hard to justify on efficiency or equity grounds this paper presents a political economic model that suggests that these two phenomena are connected debt is at least in part caused by the fact that in order to get elected candidates need to appeal to groups of voters with promises of transfers debt allows candidates a finer control over the promises they make to these groups

a political theory of government debt and deficits in a neo ricardian framework in the presence of different abilities and therefore different bequests some individuals are bequest constrained even in a neo ricardian world such individuals vote for taxes on future generations through the issuance of bonds thereby increasing their current consumption this produces some crowding out of capital reduces wage rates and increases the interest rate as a consequence even unconstrained individuals are no longer indifferent to the size of government debt the paper derives conditions that are conducive to larger debt and deficits when each of the living generations determines current taxes social security benefits and the national debt by majority rule copyright 1989 by american economic association

deficits and the demand for money in recent years the large budget deficits of the federal government have renewed interest in the effects of government debt on private sector behavior to date empirical research has focused on the relationship between debt and two key variables consumption and interest rates by contrast empirical research on the effects of government debt on other variables of interest to macroeconomists is limited this paper examines the relationship between government debt and one such variable real money balances the neglect of government debt as a determinant of money demand is surprising many traditional macroeconomic models such as blinder and solow s 9 influential work include government debt as an argument to the money demand function moreover macroeconomic theorists have long been aware that a government debt money demand relationship has important implications for the efficacy of fiscal policy 2 this paper examines the relationship between government debt and real money holdings over the 1950 1990 period a positive money debt relationship was previously noted by butkiewicz 12 and deravi hegji and moberly 15 hereafter referred to as dhm our work improves upon this research in two ways first in contrast to butkiewicz 12 and dhm 15 we investigate the time series properties stationarity cointegration of relevant variables second we distinguish between supply side and demand side explanations of the debt money relationship the explanation advanced by butkiewicz 12 and dhm 15 is that an increase government debt is perceived by the private sector as an increase in net wealth and hence should increase money demand 3 this explanation ignores a potentially important connection between government debt and money supply if the federal reserve monetizes debt and if the private sector s adjustment to this monetization is lagged then debt and real money balances will exhibit a positive correla

trouble down on the farm what role for agriculture in meeting food needs in the next twenty years considerable optimism exists in the world today that the eradication of hunger is finally within reach gillespie mason and martorell pinstrup andersen for example on the food supply side the sixth world food survey 6wfs issued in 1996 by the food and agriculture organization fao makes note of a steady increase in per capita daily energy supply in 1979 81 and 1990 92 from 2 330 calories to 2 520 calories fao 1996b these numbers imply that for developing regions as a whole the proportion of individuals with inadequate estimated intakes has declined from 35 in 1969 71 to 20 in 199092 for child

government deficits and aggregate demand abstract the evidence presented in this paper indicates that changes in government spending transfers and taxes can have substantial effects on aggregate demand the estimates also indicate that the promise of future social security benefits significantly reduces private saving each the basic implications of the so called ricardian equivalence theorem is contradicted by the data the results are consistent with the more general view of the effects of fiscal actions and fiscal expectations that is described in the paper

an empirical investigation into the impact of us federal government budget deficits on the real interest rate yield on intermediate term treasury issues 1972 2012 this study provides new empirical evidence on the impact of the federal budget deficit on the real interest rate yields on intermediate term debt issues of the us treasury represented herein by the ex post real interest rate yields on 3 year treasury notes and 7 year treasury notes two interest rate measures that have received essentially no attention in the economics and finance literature in recent years this study is couched within a loanable funds model that includes two ex post real interest rate yields the monetary base as a per cent of gdp the change in per capita real gdp net financial capital inflows as a per cent of gdp and the budget deficit as a per cent of gdp this study uses annual data for the study period 1972 to 2012 a time period that includes quantitative easing monetary policies by the federal reserve two stage least squares estimations reveal that the federal budget deficit expressed as a per cent of gdp exercised a positive and statistically significant impact on the ex

fair trade or trade fair international food trade and cross border macronutrient flows abstract this study examines global food trade from a nutritional perspective paying particular attention to its implications for food security in low income countries by describing food trade in terms of the quantities of three essential macronutrients carbohydrates lipids and proteins embedded in food the analysis goes beyond a simple description of trade values quantities or caloric content as is common in the literature furthermore the study provides estimates of the implicit price of each macronutrient their evolution over time and their implications in terms of north south food trade the data show that over the 1996 2014 period the volume of macronutrients exchanged on international markets has more than doubled with carbohydrates accounting for over 60 of trade flows but proteins and lipids growing at a faster pace proteins were found to be the most expensive macronutrient followed by lipids and carbohydrates in general macronutrients embedded in animal and processed products are more expensive than those in vegetal and unprocessed food the results also suggest that the participation in international food trade has positive effects on low income countries aggregate food availability and food access two pillars of food security indeed low income countries register a net inflow of all macronutrients and take advantage of nutritional arbitrages available on international food markets due to macronutrients price differentials

poverty and famines an essay on entitlement and deprivation this book focuses on the causes of starvation in general and famines in particular the traditional analysis of famines is shown to be fundamentally defective and the author develops an alternative analysis

food policy integrating supply distribution and consumption in many developing countries the persistent problem of hunger calls for policies that encompass not only the production of food but also its distribution and its use by consumers this book brings together the best of current thinking on food policy by specialists in agriculture nutrition management public health education development and other related fields the editors place the individual contributions within the broad framework of food policy topics discussed include world food policy the outcome and effects of programs to increase production trade and food aid domestic marketing price and subsidy policies nutrition growth and disease and food and nutrition policy in the context of existing institutions and competing national priorities experience with food policy in china and in sub saharan africa is reviewed throughout the contribution of women to the household food budget and the impact on women of technological change and agricultural programs receive particular attention this interdisciplinary collection will be of interest both to specialists in the areas covered and to persons interested in development issues and food security

government debt government spending and private sector behavior a current period tax reduction financed by issuing government debt shifts the timing of tax collection from the current period to the future if the future taxes implied by government debt are not fully perceived and discounted by the private sector there will be a net wealth effect that increases private sector consumption thus reducing capital accumulation and growth if on the other hand the implied future taxes are perceived and discounted by the private sector the current period tax reduction will be used to increase private saving to pay for the future taxes and government debt will be absorbed without any real effects on the economy the effects of government spending financed by current period taxation also depend upon private sector perceptions 2 if the benefits of government spending are ignored private sector consumption will decrease in accordance with the reduction in permanent disposable income to the extent that government spending is on consumption type goods that are perceived as substitutes for privately provided consumption goods there will be a relatively greater reduction in private sector consumption to the extent that government spending is on investment type goods yielding future goods and services that are perceived as substitutes for future privately provided consumption goods there will be a relatively smaller reduction in private sector consumption the standard approach to modeling private sector consumption saving behavior involves a rather asymmetric set of assumptions as to how the private sector perceives the various elements of government fiscal policy 3 current period taxes are assumed to be fully perceived but current period government spending is implicitly assumed to be completely ignored by the private sector in considering permanent personal disposable income the private sector is assumed to be forward looking in its assessment of income and taxation the stock of government debt is nevertheless included as part of the stock of private wealth the implicit assumption associate professor of economics graduate school of business university of chicago 1101 east 58th street chicago il 60637 i thank eugene fama levis kochin michael mussa paul evans and an anonymous referee for helpful comments i am particularly grateful to daniel benjamin for contributing many hours of discussion and laura lahaye who was a research assistant and valuable adviser on earlier drafts the theoretical debate on the burden of the debt has been long standing gerald o driscoll 1977 documents ricardo s nineteenth century position robert barro 1974 reopened the debate by introducing the fundamental issue of intergenerational transfers also discussed in merton miller and charles upton 1974 the empirical side of the debate was initiated by levis kochin s 1974 attempt to test for the effects of deficits on consumption and by martin feldstein s 1974 attempt to test for the effects of social security wealth on consumption other empirical contributions include jess yawitz and laurence meyer 1976 myself 1978 and j earnest tanner 1978 1979 with respect to the effects of government deficits and debt and barro 1978 michael darby 1979 and dean leimer and selig lesnoy 1982 with respect to social security wealth see also interesting recent papers by john seater 1982 who generates detailed tests of the effects of deficits and debt on consumption charles plosser 1982 who explores the effects of government spending and debt shocks on interest rates and feldstein 1982 who attempts tests similar to some in this paper see fn 29 2martin bailey s 1962 1971 development of the effects of government spending on private consumption and aggregate economic activity is the seminal contribution paul david and john scadding 1974 extend bailey s ideas and provide some supporting empirical evidence more recently willem buiter 1977 and myself 1978 developed models based on bailey s earlier work barro 1981 has an interesting paper on related issues see also david aschauer 1982 3the standard approach incorporates fiscal policy through the concept of personal disposable income and by including the stock of government debt as part of personal wealth see for example the empirical specification of albert ando and franco modigliani 1963 which has been the basis of most empirical consumption studies since and feldstein 1974 for one of the more influential papers based on the ando modigliani specification

what do regressions of interest rates on deficits imply economists analyses of the impact of federal deficits on interest rates are based primarily upon two alternative theories one of these says deficits force up interest rates while the other says they do not in their lucid exposition james barth george iden and frank russek 1 2 3 call the former the conventional and the latter the ricardian equivalence paradigm there are several studies attempting to assess empirically the impact of federal deficits on economic activity the congressional budget office 23 and b douglas bemheim 5 surveyed most of these studies and found that the evidence produced by these studies on the conventional and ricardian equivalence theories was inconclusive this finding agrees with that of barth iden and russek 1 2 3 the specific purpose is to extend barth iden and russek s computations and compare the out of sample forecasting performances of different estimates of the interest rate deficit connec

forecasting bankruptcy more accurately a simple hazard model i argue that hazard models are more appropriate than single period models for forecasting bankruptcy single period models are inconsistent while hazard models produce consistent estimates i describe a simple technique for estimating a discrete time hazard model i find that about half of the accounting ratios that have been used in previous models are not statistically significant moreover market size past stock returns and idiosyncratic returns variability are all strongly related to bankruptcy i propose a model that uses both accounting ratios and market driven variables to produce out of sample forecasts that are more accurate than those of alternative models copyright 2001 by university of chicago press

an empirical note on the impact of the federal budget deficit on ex ante real long term interest rates 1973 1995 this study investigates the impact of the u s federal budget deficit on ex ante real long term interest rates in the u s using quarterly data for the period from 1973 through 1995 the study adopts a loanable funds model two stage least squares estimates reveal that the federal budget deficit acted to elevate the ex ante real long term interest rate on ten year u s treasury notes moody s aaa rated corporate bonds and moody s baa rated corporate bonds

bankruptcy theory development and classification via genetic programming abstract bankruptcy is a highly significant worldwide problem with high social costs traditional bankruptcy risk models have been criticized for falling short with respect to bankruptcy theory building due to either modeling assumptions or model complexity genetic programming minimizes the amount of a priori structure that is associated with traditional functional forms and statistical selection procedures but still produces easily understandable and implementable models genetic programming was used to analyze 28 potential bankruptcy variables found to be significant in multiple prior research studies including 10 fraud risk factors data was taken from a sample of 422 bankrupt and non bankrupt norwegian companies for the period 1993 1998 six variables were determined to be significant a genetic programming model was developed for the six variables from an expanded sample of 1136 bankrupt and non bankrupt norwegian companies the model was 81 accurate on a validation sample slightly better than prior genetic programming research on us public companies and statistically significantly better than the 77 accuracy of a traditional logit model developed using the same variables and data the most significant variable in the final model was the prior auditor opinion thus validating the information value of the auditor s report the model provides insight into the complex interaction of bankruptcy related factors especially the effect of company size the results suggest that accounting information including the auditor s evaluation of it is more important for larger than smaller firms it also suggests that for small firms the most important information is liquidity and non accounting information the genetic programming model relationships developed in this study also support prior bankruptcy research including the finding that company size decreases bankruptcy risk when profits are positive it also confirms that very high profit levels are associated with increased bankruptcy risk even for large companies an association that may be reflecting the potential for management to be cooking the books

are consumers ricardian when some are liquidity constrained evidence for the united states this paper formulates and estimates a revised specification of evans 1988 test for ricardian equivalence which incorporates the possible presence of liquidity constrained consumers if liquidity constrained consumers are significant in number tests using aggregate consumption data may tend to reject the ricardian equivalence hypothesis when the model allows for liquidity constraints a test which incorporated liquidity constrained consumers could not reject ricardian equivalence over the sample period 1946 91 while the proportion of aggregate consumption which is liquidity constrained is found to be significant it does not appear large enough to affect the test for ricardian equivalence

on the importance of the measurement of consumption in tests of ricardian equivalence abstract the contradictory results in the ricardian equivalence literature may be due largely to the use of alternative consumption measures within kormendi s 1983 empirical framework changing the empirical treatment of the service flow from consumer durables has dramatic effects

a political economy theory of fiscal policy and unemployment this paper presents a political economy theory of fiscal policy and unemployment the underlying economic model is one in which unemployment can arise but can be mitigated by tax cuts and public spending increases such policies are fiscally costly but can be financed by issuing government debt policy decisions are made by a legislature consisting of representatives from different political districts the theory provides a positive account of the simultaneous determination of fiscal policy and unemployment the most important implication of the theory is that debt and unemployment levels should be positively correlated some evidence in support of this prediction is provided using data from a panel of developed countries

sensitivity of consumption to income and to government purchases some specification and estimation issues the paper derives a nonlinear error correction model ecm for consumption and shows that existing models that are based on quadratic utility combine permanent income and current income consumption and nest or could nest the hypothesis of substitutability between private consumption and government purchases are special cases of the ecm the importance of some econometric issues that have not received proper attention in the literature is demonstrated by estimating the models using us aggregate quarterly data 1953 1 1992 4 the evidence suggests that the ecm produces more reliable estimates than do the existing restrictive models

the future of social security we analyze the effect of the projected demographic transition on the political support for social security and equilibrium outcomes embedding a probabilistic voting setup of electoral competition in the standard olg model with capital accumulation we find that intergenerational transfers arise in the absence of altruism commitment or trigger strategies closed form solutions predict population ageing to lead to higher social security tax rates a rising share of pensions in gdp but eventually lower social security benefits per retiree the response of equilibrium tax rates to demographic shocks reduces old age consumption risk calibrated to match features of the u s economy the model suggests that in response to the projected demographic transition social security tax rates will gradually increase to 16 other policies that distort labor supply will become less important labor supply therefore will rise in contrast with frequently voiced fears

on proportional non representation this paper contends the main virtue conventionally attributed to proportional electoral rules i e effective representation of political views it discusses a number of shortcomings that lead too much proportionality to a self defeat it reduces vote mobility through the strong cultivation of voters loyalties it smooths out vote variations when transforming them into seat variations it reinforces intraparty ties to the detriment of vertical attention to constituents and it impinges on the working of checks and balances the paper does not aim at a systematic evaluation of the properties of various voting systems nor is it the proportional principle as such that is under attack however its combination with other institutional features can entrap voters in their own choices thus nurturing political collusion it is because of the ensuing lower influence of the voters on political decision making that too much proportionality can lead to poor representation

heterogeneous dynasties and the political economy of public debt we consider a small open overlapping generations economy with descending altruism heterogeneity is introduced by assuming that each parent procreates a fixed proportion of selfish children altruistic parents can recognize the type of each child there is no ricardian equivalence and an active public intergenerational transfer policy is attractive to altruistic dynasty members although there may be no unanimity among them we display reasonable conditions for indirect preferences to be single peaked and we apply the median voter theorem we then describe political equilibrium paths and discuss their compatibility with the steady path of an underlying closed economy with autonomous labor productivity growth

ricardian equivalence and the public and private saving nexus in india abstractthis study tests the ricardian equivalence theorem ret and examines the responsiveness of private saving to public saving in india most estimators do not provide support for the empirical validity of ret and long run cointegration between public and private saving the increases in household saving hhs seem to have been engendered by the provision of saving incentives institution of saving schemes self driven motivation to save and the precautionary accumulations induced by uncovered uncertainties in incomes rather than by ricardian behaviour of households the self imposed aversion to debt and debt bequest borrowing and liquidity constraints and the intertemporal smoothing of consumption have been the added catalysts that contributed to the increases in hhs the households with binding borrowing constraints inadequate or no insurance and uncovered uncertainties in incomes seem to have been saving more to pay for higher inflation tax the fiscal consolidation and generation of public s

what can new survey data tell us about recent changes in distribution and poverty it has been claimed that in recent times the poor have lost ground both relatively and absolutely even when average levels of living have risen this article tests that claim using household surveys for 67 developing and transitional economies over 1981 94 it finds that changes in inequality and polarization were uncorrelated with changes in average living standards distribution improved as often as it worsened in growing economies and negative growth was often more detrimental to distribution than positive growth overall there was a small decrease in absolute poverty although with diverse experiences across regions and countries almost always poverty fell with growth in average living standards and rose with contraction

patinkin on keynes and meltzer abstract don patinkin s discussion of alternative interpretations of keyne s general theory gave considerable weight to an author s motivation particularly mine patinkin also restates his view that the general theory offers a short run disequilibrium approach i suggest that textual interpretation in economics should not consider motives because better methods are available and are now used i propose three standards applying these standards i find little support for patinkin s interpretation of the general theory although my interpretation better meets the three standards i conclude that the general theory does not have a single correct interpretation

new evidence on deficits and interest rates it is generally assumed on theoretical grounds that increases in government borrowing cause interest rates to rise 1 but empirical support for this proposition has been weak at best several recent papers have uncovered no strong relationship between deficits and short terrn interest rates however the research reported here indicates that although the relationship between deficits and short terrn interest rates may be tenuous there is strong evidence that larger deficits are associated with higher long terrn interest rates much of the debate about whether there is a strong relationship between federal borrowing and interest rates concerns the crowding out question this controversy centers on the direct and indirect eilffects of government fiscal actions on private spending these effects have been well documented in the theoretical literature e g buiter 1977 carlson and spencer 1975 blinder and solow 1973 many of the crowding out effects studied in this literature depend on the connection between government borrowing and high interest rates friedman 1978 meyer 1975 silber 1970 this is called short run indirect crowding out and may occur when increases in government spending and borrowing cause interest rates to rise which then may cause private spending to be reduced buiter 1977 pp 310 13

an intergenerational transfer model of state debt financing as federal budget deficits and the overall national debt have risen in recent years scholarly attention to the causes and consequences of federal indebtedness has also increased much of that research has focused upon the intergenerational distributive effects of relying upon debt as opposed to tax financing considerably less attention has been directed toward debt financing by the american states despite the fact that such borrowing has increased steadily over the last thirty years though not with the dramatic suddenness that characterizes increases in federal borrowing regens and lauth 1988 this paper examines debt financing at the state level as a policy choice with important intergenerational consequences the analysis assumes that debt financing is the result of political decisions based upon a calculation of the economic interests of different demographic groups within each state elected officials are believed to weigh those interests in the light of their states electoral and legal environments borrowing from an argument by alex cukierman and allan meltzer this paper examines the proposition that a state s long term debt financing is likely to be sizeable in absolute per capita terms and relative to tax revenues when two conditions are met 1 the state has a large elderly population and 2 recent economic growth trends indicate that future generations of state taxpayers may have an easier time paying off currently incurred debt than current taxpayers would have paying off government obligations on a pay as you go basis under these conditions a large portion of a state s electorate is likely to be bequest constrained meaning that they are not willing to donate an inheritance of fully financed government facilities and services to successive generations instead they are willing to borrow from their heirs by forcing future taxpayers to pay the costs of current consumption of governmental benefits

women food security and development in less industrialized societies contributions and challenges for the new century summary in this paper i examine the links between women food security and development from a crossnational perspective i find that the proximity to gender equality constructed from the united nations human development and gender related development indices improves development in the form of both child hunger and child mortality extending these results other forms of female empowerment including female contraceptive prevalence significantly improve development outcomes in less industrialized societies findings are net of theoretical controls for economic development population pressure globalization democratization and region further strengthening the importance of gender considerations countries that incorporate gender into policy and program considerations benefit from such inclusion in the form of social and economic development outcomes findings are an important crossnational extension of existing research utilizing new measures that capture the important development dynamic

government debt in an overlapping generations model with bequests and gifts in 1974 robert barro argued that if individuals in successive generations were linked by bequests changes in the stock of government debt or in social security programs would have no effect on the steady state capital stock barro assumed that individuals held static expectations and that the size of the population was constant martin feldstein 1974 1977 had concluded that social security would reduce the capital labor ratio in models that did not admit a bequest motive and in his 1976 comment on barro argued that the introduction of government debt or social security into a perfect foresight dynamic growth model with bequests would still reduce the capital labor ratio barro replied that feldstein s criticisms were invalid if the steady state capital labor ratio were smaller than the golden rule level but would be correct if the opposite were true barro did suggest however that the latter possibility with overaccumulation of capital might be ruled out in his model as it was in miguel sidrauski 1967 but he was unable to demonstrate that the required behavior would be consistent with utility maximization by finite lived individuals 1976 p 345 although recent work by willem buiter 1979 jeffrey carmichael 1979 1982 truman bewley 1981 a b and others has helped to elucidate the nature of overlapping generations models with bequests and gifts and the issues in the barro feldstein debate they remain far from clear the purpose of this paper is to shed a little more light on the subject in what follows i contend that some of the authors cited above either have specified the individual s optimization problem in an asymmetric way or have failed to impose necessary conditions for a sensible optimization problem or both there is a natural specification of the barro model 1 that emphasizes the similarity between this model and optimal growth models see for example david cass 1965 peter diamond 1973 here in steady state equilibrium the aftertax interest rate r must equal the rate at which individuals discount the utility of their heirs p r p has become known as the modified golden rule and a meaningful individual optimization problem requires that p exceed n the natural growth rate of the economy my results confirm barro s hunch about his model in a barro model r must exceed n much of the barro feldstein 1976 interchange which assumed that r could have any relation to n is wrong headed barro and feldstein reach different conclusions about the effects of government debt and social security because they assume different individual utility functions also my results contrast sharply with those of buiter and carmichael for example carmichael concluded that with intergenerational transfers from parents to children bequests r must exceed n but with transfers in the opposite direction n must exceed r 1982 pp 205 06 indeed i believe that the buiter carmichael representation of the barro model is logically faulty see section ii in section i i outline an overlapping generations model with gifts and bequests and derive its steady state properties in the next section i discuss the shortand long run effects of introducing government debt into the model and contrast my results with those

does cash crop adoption detract from child care provision evidence from rural nepal this document addresses the issues of agricultural commercialization using data from fieldwork conducted in nepal it aimed to examine the impact of a project designed to commercialize vegetables and fruit the vegetable and fruit cash crop program vcf on male and female time allocation the goal of vfc program was to increase the commercial production of vegetables and fruits in farm households that were heavily dependent on the production of cereal and livestock for home consumption findings from multivariate analysis suggest that for households with one preschooler vfc participation results in more time to agricultural production of the cash crop for both men and women but also a decrease in care time to preschoolers from both men and women meanwhile for households with more than one preschooler this trade off is not so apparent the analysis also suggests that behavior change initiatives to protect time to child care might be feasible in that vfc participation does not decrease the overall nonwork time of men or women with preschool children in residence

a positive theory of social security in many countries social security accounts for a large fraction of the government budget why is this so given that at any point in time the number of recipients of social security benefits is smaller than the number of contributors in the overlapping generations model studied in this paper all individuals currently alive vote on social security in every period in equilibrium the size of social security is larger the greater is the proportion of elderly people in the population and the greater is the inequality of pre tax income within each generation both predictions of the theory are supported by the empirical evidence in cross country data

altruism deficit policies and the wealth of future generations i introduction there is now a substantial body of evidence suggesting that altruistic financial bequests are zero for the vast majority of households 1 other studies seem to indicate that the financial bequests which are made are not likely to be altruistically motivated 2 while this evidence against the importance of altruistic financial bequests seems reasonably convincing it is by no means clear that the importance of altruism per se has been dismissed 3 for example the results reported in altonji hayashi and kotlikoff 1992 tables 14 17 indicate that extended family resources while not perfectly linked to own resources are important for explaining own consumption the authors do not reject the notion that substantial altruistically motivated transfers occur in the u s rather they suggest the altruistically motivated transfers which are made take the form of less than fully efficient human capital transfers to children if most altruistic transfers do take place via educational expenditures how does this affect the ricardian equivalence theorem robert barro 1974 1989 argues the presence of any altruistic transfer is sufficient to guarantee that intergenerational transfers caused by government policy are neutral other forms of intergenerational transfers such as inter vivos gifts to children support of children s education and so on can work in a similar manner therefore the ricardian results will hold even if many persons leave little in the way of formal bequests 1989 41 4 an alternative view however is expressed by allan drazen 1978 he argues if parents possess an insufficient mix of wealth and altruism intergenerational transfers could be exhausted before the efficient level of human capital investment is achieved if explicit or implicit loans between parents and children are not possible then the government may be able to improve welfare by generating intergenerational transfers from children to parents 5 a cut in the parents tax burden and an equal present value increase in the tax on the next generation is equivalent to a government enforced loan at the going market interest rate since educational expenditures are inefficiently low the return on human capital investment exceeds the loan rate therefore parents could put an amount less than the tax cut into their children s education and still leave the children with enough additional income to pay for the future tax increase thus a deficit policy serves to expand the consumption possibility set of the family viewed in this way drazen 1978 514 footnote 7 imagines an argument for a pareto optimal level of public debt issue 6 a third possibility was identified by nerlove razin and sadka 1988 who conduct the most explicit analysis of government transfers in an economy with altruistic but financial bequest constrained households they also find a transfer or implicit loan to parents from their children will make the parents unambiguously better off however they were the first to point out that a deficit policy may lower the welfare of the children although they fail to explain why thus even in the presence of altruistic transfers from parents to children the effect of deficits on the consumption of future generations is far from clear in this paper we wish to clarify the effect of intergenerational transfers on bequest constrained families the next section intuitively explains why a government loan or deficit policy generates an ambiguous effect on the children s consumption even though altruistic parents are fully capable of making both generations better off after the loan we also identify the key structural determinants of the change in the children s wealth due to the loan in section iii we extend the simple model of section ii to a more quantitatively realistic multi period life cycle simulation model of a bequest constrained household the simulation model is then used in section iv to examine how a government intergenerational transfer affects the consumption of each generation under various settings of the key structural determinants identified in section ii

does trade openness contribute to food security a dynamic panel analysis abstract despite significant progress in the fight against hunger during the last decades food insecurity remains a major problem in many countries especially developing ones in this study we use a large cross country data to investigate the impact of trade openness and other factors on food security measured by dietary energy consumption we employ a system gmm approach to account for unobserved heterogeneity correlated individual effects and potential endogeneity of the explanatory variables the empirical results reveal that trade openness and economic growth exert positive and significant impacts on dietary energy consumption and also contribute to improvements in dietary diversity the results are robust to the inclusion of additional variables capturing specific agro climatic constraints e g weather related and regional country characteristics and to the sample composition most geographical regions are found to have significantly higher food security levels compared to sub saharan africa additional results indicate that besides calorie consumption trade openness also improves dietary diversity and diet quality related aspects of food security

a neoclassical perspective on budget deficits i n the 1988 presidential campaign virtually every serious candidate spoke of the urgent need to trim government budget deficits public opinion polls have identified federal deficits as a key economic issue second only to unemployment while many economists are relieved by what they perceive to be a long overdue political response to a critical economic problem others regard the fuss as much ado about nothing it is indeed remarkable that economists can disagree so severely over an issue which commands such a uniform reaction from laymen of widely different ideologies and political affiliations generally speaking there are three schools of thought concerning the economic effects of budget deficits neoclassical keynesian and ricardian before proceeding further it is useful to review the basic structure and implications of each paradigm the neoclassical paradigm envisions farsighted individuals planning consumption over their own life cycles budget deficits raise total lifetime consumption by shifting taxes to subsequent generations if economic resources are fully employed increased consumption necessarily implies decreased saving interest rates must then rise to bring capital markets into balance thus persistent deficits crowd out private capital accumulation in the current economic environment most economists would agree that these consequences would be highly detrimental