rational household labor supply traditionally household behavior is derived from the maximization of a unique utility function in this paper we propose an alternative approach in which the household is modeled as a two member collectivity taking pareto efficient decisions the consequences of this assumption are analyzed in a three good model in which only total consumption and each member s labor supply are observable if the agents are assumed egoistic i e they are only concerned with their own leisure and consumption it is possible to derive falsifiable conditions upon household labor supplies from both a parametric and nonparametric viewpoint if alternatively agents are altruistic restrictions obtain in the nonparametric context useful interpretation stems from the comparison with the characterization of aggregate demand for a private good economy

does competition for capital discipline governments decentralization globalization and public policy competition among countries or regions within them to attract mobile capital is often thought to discipline their governments motivating them to invest more in infrastructure reduce waste and corruption and spend less on non productive public goods the result should be convergence on business friendly policies we argue that this requires an assumption units start out very similar that is often unrealistic if units are heterogeneous in natural resources geographical location inherited human capital or infrastructure capital mobility often weakens discipline on the poorlyendowed units this may help explain disappointing results of liberalizing capital flows within russia and sub saharan africa jel f36 h73 h87

the hausman macurdy controversy why do the results differ across studies the two perhaps most influential empirical labor supply studies carried out in the united states in recent years hausman 1981 and macurdy green and paarsch 1990 report sharply contradicting labor supply estimates in this paper we show that the seemingly irreconcilable views on the size of work disincentive effects and welfare losses can be attributed to the use of differing nonlabor income and wage measures in the two studies monte carlo experiments suggest that the wage measure adopted by macurdy green and paarsch 1990 might cause a severely downward biased wage effect such that data falsely refute the basic notion of utility maximization

agricultural performance and development strategy retrospect and prospect abstract the slow pace and inequitable pattern of past agricultural growth have been major factors in the continuing problems of poverty hunger and unemployment especially in the poorer regions of the third world past experience shows that agriculture has an important potential in economic development given appropriate structures and policies these historical lessons are of strategic significance for poor countries as they confront severe problems of adjustment this paper examines the main payoffs and obstacles to the pursuit of an agriculture led industrialization strategy together with proposals for appropriate policies that can support such a strategy

one size fits all decentralization corruption and the monitoring of bureaucrats summary the majority of theoretical and empirical studies on the relationship between decentralization and corruption argue that the devolution of power might be a feasible instrument for use in keeping corruption at bay we argue that this result crucially depends on the effectiveness of monitoring bureaucrats behavior the benefits of decentralization only occur if there is a supervisory body such as a free press which is often lacking in a substantial number of countries using cross country data we analyze the relationship between decentralization and corruption taking different degrees of the freedom of the press into account our main finding is that decentralization counteracts corruption in countries with high degrees of freedom of the press whereas countries without effective monitoring suffer from decentralization our policy implication is that a free press is a necessary pre condition for successful decentralization programs

welfare transfers in two parent families labor supply and welfare participation under afdc up this paper examines the effect of cash transfers and food stamp benefits on family labor supply and welfare participation among two parent families the aid to families with dependent children unemployed parent program has provided cash benefits to two parent households since 1961 despite recent expansions little is known about the program s effect on labor supply and welfare participation i develop a model of family labor supply in which hours of work for the husband and wife are chosen to maximize family utility subject to a family budget constraint accounting for afdc up benefits and other tax and transfer programs the husband s and wife s labor supply decisions are restricted to no work part time work and full time work maximum likelihood techniques are used to estimate parameters of the underlying hours of work and welfare participation equations the estimates are used to determine the magnitude of the work disincentive effects of the afdc up program and to simulate the effects of changes in afdc up benefit and eligibility rules on family labor supply and welfare participation the results suggest that labor supply and welfare participation among two parent families are highly responsive to changes in the benefit structure under the afdc up program

panel attrition from the panel study of income dynamics household income marital status and mortality this analysis is concerned with the determinants of panel attrition from the panel study of income dynamics and with its consequences for estimation of dynamic behavioral models which exploit the panel or longitudinal information household income dynamics marriage formation and dissolution and adult mortality risk we develop and estimate joint models of attrition and one or more of these substantive processes and allow for correlation across the equations through random effects although we find evidence of significant selectivity in attrition behavior the biases that are introduced by ignoring selective attrition are very mild

capture and governance at local and national levels 135 despite the importance of this issue not much systematic research appears to have been devoted to assessing the relative susceptibility of national and local governments to interestgroup capture here we describe a model of two party electoral competition with probabilistic voting behavior and lobbying by specialinterest groups based on david baron 1994 and gene grossman and elhanan helpman 1996 that helps identify determinants of relative capture at different levels of government these include relative levels of voter awareness and interest group cohesiveness electoral uncertainty electoral competition heterogeneity of districts with respect to inequality and the electoral system while some of these uphold the traditional madisonian presumption others are likely to create a tendency for lower capture at the local level so the net effect is theoretically ambiguous this suggests that the extent of relative capture may be context specific and needs to be assessed empirically

on the empirics of foreign aid and growth the present paper re examines the effectiveness of foreign aid theoretically and empirically using a standard olg model we show that aid inflows will in general affect long run productivity the size and direction of the impact may depend on policies deep structural characteristics and the size of the inflow the empirical analysis investigates these possibilities overall we find that aid has been effective in spurring growth but the magnitude of the effect depends on climate related circumstances finally we argue that the collier dollar allocation rule should be seriously reconsidered by donor agencies if aid effectiveness is related to climate the usefulness of foreign aid in promoting growth in developing countries has been an area of controversy ever since rosenstein rodan in 1943 advocated for aid to eastern and south eastern europe browsing through successive editions of a leading textbook in development economics provides a telling illustration of how the confidence in aid effectiveness dwindled over the years in the first edition of leading issues in economic development meier 1964 dedicated a full 18 page section to the issue of foreign aid he started out asking how much aid by the time of the sixth edition meier 1995 the treatment of foreign aid had been cut into half and the questions in focus were why official assistance and does aid work in the 2000 edition meier and rauch 2000 foreign aid is not even listed in the index

collective labour supply heterogeneity and non participation we present identification and estimation results for the collective model of labour supply in which there are discrete choices censoring of hours and non participation in employment we derive the collective restrictions on labour supply functions and contrast them with restrictions implied by the usual unitary framework using the large changes in the wage structure between men and women in the u k over the last two decades we estimate a collective labour supply model for married couples without children the estimates of the sharing rule show that male wages and employment have a strong influence on bargaining power within couples

decentralisation and accountability in infrastructure delivery in developing countries many developing countries are experimenting with decentralisation of public service delivery to elected local governments instead of bureaucrats appointed by a central government we study the resulting implications in a theoretical model in which the central government is uninformed about local need and unable to monitor service allocations bureaucrats charge bribes for services as monopoly providers resulting in underprovision of services especially for the poor local governments are directly responsive to their citizens needs but may be subject to capture by elites effects of decentralisation on service volumes efficiency and equity are analysed under different financing arrangements for local governments the theme of the 2004 world development report is summarised by its opening paragraph too often services fail poor people in access in quantity in quality but the fact that there are strong examples where services do work means governments and citizens can do better how by putting poor people at the center of service provision by enabling them to monitor and discipline service providers by amplifying their voice in policymaking and by strengthening the incentives for providers to serve the poor problems of accountability associated with traditional modes of delivery involving centralised bureaucracies include cost padding service diversion limited responsiveness to local needs limited access and high prices charged especially to the poor 1 many developing countries have thus begun to experiment with initiatives to increase accountability of service providers by providing greater control rights to citizen groups these include decentralisation of service delivery to local governments community participation direct transfers to households and contracting out delivery to private providers and ngos the programmes include a wide range of infrastructure services water sanitation electricity telecommunications roads and social services education health and welfare programmes countries where such trends have gathered

the effect of income taxation on labor supply in the united states the effect of income taxation on the labor supply of prime age married men and women in the united states is examined using econometric methods similar to those used in the influential work of jerry hausman male labor supply is found to be relatively invariant to the net wage and virtual income in all specifications estimated the estimated impact of taxation on the labor supply of married women depends critically on the method used to estimate the labor supply function estimated net wage and virtual income elasticities are considerably larger when data on nonparticipants are included than when the estimation is conducted conditional on hours being greater than zero

an empirical model of discrete and continuous choice in family labor supply because of the interdependent nature of family labor supply decisions the nonnegativity constrai nt on women s hours of work will spill over into other consumption an d labor supply decisions of the family here the author develops an e conometric model of family labor supply that captures this spillove r while addressing the usual censoring issues as well the model i s based on a flexible direct utility function and permits unobservabl e differences in tastes the model is estimated by the maximum likeli hood method on a sample of about 1 200 families from the panel study of income dynamics copyright 1987 by mit press

nonparametric estimation of the impact of taxes on female labor supply this paper proposes a simple extension of nonparametric estimation methods for nonlinear budget set models derived in blomquist and newey 2002 to censored dependent variables the nonparametric method is applied to estimate female labor supply elasticities using data on married women from the 1985 and 1989 waves of the panel study of income dynamics exploiting the substantial variation in budget sets caused by the tax reform act of 1986 as a source of identification the estimated wage elasticities from this new method are 0 56 overall and 0 27 on the intensive margin the income elasticity estimates are close to 0 67 overall and 0 13 on the intensive margin compared with the linear labor supply model the estimated elasticities are usually larger for the nonparametric specifications that account for nonlinear budget sets copyright 2010 john wiley sons ltd

new evidence on labor supply employment versus hours elasticities by sex and marital status using the tri annual micro panel data of the survey of income and program participation we estimate fixed effects labor supply models separating the extensive and intensive margins the employment elasticity is 0 6 for single men versus 1 1 for married men the employment elasticity is 2 4 for single women versus 1 8 for married women the compensated hours worked elasticity is 0 4 for employed single and married men and 0 7 for employed single and married women the implied aggregate employment elasticity of 1 5 and hours per employee elasticity of 0 5 indicate employment fluctuations account for three fourths of wage induced variation in labor hours

assessing empirical approaches for analyzing taxes and labor supply recent surveys on the labor supply responses of men document a divergence in the estimates of substitution and income effects obtained using various estimation approaches generally studies accounting for nonlinear tax schedules in a static setting via a piecewise linear approach produce estimates that typically imply higher substitution and lower income responses than are suggested by empirical work applying other approaches this paper demonstrates that maximum likelihood estimation of a consumer choice problem with nonlinear budget sets implicitly relies on the satisfaction of inequality constraints that translate into behaviorally meaningful restrictions these constraints arise not as a consequence of economic theory but instead as a requirement to create a properly defined statistical model in the analysis of piecewise linear budget sets the implicit constraints required by maximum likelihood in estimation amount to imposition of slutsky conditions at all wage income combinations associated with kink points in the analysis of differentiable budget sets the tacit constraints invoked by maximum likelihood also involve inequality restrictions on slutsky terms the empirical work presented in this study supports the contention that these implicit constraints play a major role in explaining the discrepancies in estimates found in the literature on men s labor supply

child care and the labor supply of married women reduced form evidence this paper empirically analyzes family demands for market and nonmarket child care services and the impact of these demands on the work effort of married women the paperfirst develops a general model of child care and labor force participation the model predicts that higher wages increase the likelihood of labor force participation and that higher costs decrease the likelihood of child care utilization the paper then develops a threeequation reduced form econometric specification of the general model the equations in the specification are estimated simultaneously using 1985 data from the survey of income program participation the estimates reveal that the cost of market child care has a strong negative effect on the labor supply of married women

aid policies and growth reply in burnside and dollar 2000 we used standard regression techniques from the growth literature to measure the effect of foreign aid on growth the main finding in our paper was that the effect of foreign aid on growth depended on the macroeconomic policies of recipient countries in this issue william easterly et al 2004 challenge the robustness of our result to new data before commenting on their findings it is useful to review the basis of our original findings our paper focused on three versions of a panel growth regression estimated using data for 51 countries and six four year periods from 1970 to 1993 these regressions may be summarized as

dilemmas of export diversification in a developing economy mexican oil in the 1980s abstract small states usually find it very costly to implement strategies with the objective of reducing their dependence on great economic powers this essay seeks to explain the accomplishments and failures of mexico s efforts to diversify its foreign economic relations beyond the united states though mexican exports to the industrialized world have surged in the 1980s their excessive concentration on oil has skewed mexico s trade profile and stunted the growth of non oil industries moreover while exports of non oil products have expanded fourfold over the last decade they remain concentrated as well within the us market if protectionism in the latter continues to grow the slow but steady new orientation of mexican business toward foreign markets will prove more effective than the government s political security considerations of recent years in leading them to diversify mexico s profile of foreign economic relations beyond the united states

potato led growth the macroeconomic effects of technological innovations in bolivian agriculture through the use of a computable general equilibrium model we measure the economy wide effects of improving the production technology of relatively non traded staples potatoes maize import crops wheat and export crops soybeans in bolivia the results of the analysis suggest that technological innovations in the production technology of potatoes would benefit the bolivian economy most we discuss the reasons for the limited effects of technological innovations in tradeable crops

a life cycle consistent empirical model of family labour supply using cross section data this paper estimates a utility maximising model of the joint determination of male and female labour supplies using a sample of married couples from the u k family expenditure survey the emphasis is on the estimation of within period preferences that are consistent with intertemporal two stage budgeting under uncertainty however the approach we adopt provides an alternative method of estimating certain aspects of life cycle behaviour to the fixed effects constant approach of heckman and macurdy 1980 macurdy 1981 and browning deaton and irish 1985 moreover it relaxes some of the underlying restrictions that are implicit in these constant models under uncertainty

work costs and nonconvex preferences in the estimation of labor supply models abstract works costs have not been adequately handled in labor supply estimation likely due to their complexity we show that if work costs are not accounted for in the budget and time constraints in a structural labor supply model they will be subsumed into the data generating preferences even if underlying preferences over consumption and leisure are convex the presence of unobservable work costs can make these preferences appear nonconvex however we show that under plausible conditions policy relevant calculations such as estimates of the effect of tax changes on labor supply and deadweight loss measures are not affected by the fact that estimated preferences incorporate work costs

an empirical model of collective household labour supply with non participation i present a structural empirical model of collective household labour supply that includes the non participation decision i specify a simultaneous model for hours participation and wages of husband and wife i discuss the problems of identification and statistical coherency that arise in the application of the collective household labour supply model the model includes random effects and it is estimated using a panel data set of dutch couples the estimates allow me to check the underlying regularity conditions on individual preferences and to obtain estimates of the sharing rule that governs the division of household income between husband and wife

changes in the labor supply behavior of married women 1980 2000 using march current population survey data we investigate married women s labor supply from 1980 to 2000 we find a large rightward shift in their labor supply function for annual hours in the 1980s with little shift in the 1990s these shifts account for most of the slowdown in the growth of labor supply during this period a major development was the dramatic decrease in the responsiveness of married women s labor supply to their own and husbands wages their own wage elasticity fell by 50 56 while their cross wage elasticity fell by 38 47 in absolute value

a structural model of multiple welfare program participation and labor supply work on estimating the labor supply effects of high marginal tax rates in welfare programs has been hindered by the difficulty of estimating the effects of participation in multiple welfare programs simultaneously the authors solve this problem by applying methods of simulation estimation to a model of labor supply and multiple program participation the results show asymmetric wage and tax rate effects with fairly large wage elasticities of labor supply but very inelastic responses to moderate changes in cumulative marginal tax rates implying that high welfare tax rates do not necessarily induce major reductions in work effort copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

decentralization of governance and development all around the world in matters of governance decentralization is the rage even apart from the widely debated issues of subsidiarity and devolution in the european union and states rights in the united states decentralization has been at the center stage of policy experiments in the last two decades in a large number of developing and transition economies in latin america africa and asia the world bank for example has embraced it as one of the major governance reforms on its agenda for example world bank 2000 burki perry and dillinger 1999 take also the examples of the two largest countries of the world china and india decentralization has been regarded as the major institutional framework for the phenomenal industrial growth in the last two decades in china taking place largely in the nonstate nonprivate sector india ushered in a landmark constitutional reform in favor of decentralization around the same time it launched a major program of economic reform in the early 1990s on account of its many failures the centralized state everywhere has lost a great deal of legitimacy and decentralization is widely believed to promise a range of benee ts it is often suggested as a way of reducing the role of the state in general by fragmenting central authority and introducing more intergovernmental competition and checks and balances it is viewed as a way to make government more responsive and efe cient technological changes have also made it somewhat easier than before to provide public services like electricity and water supply relatively efe ciently in smaller market areas and the lower levels of government have now a greater ability to handle certain tasks in a world of rampant ethnic cone icts and separatist movements decentralization is also regarded as a way of diffusing social and political tensions and ensuring local cultural and political autonomy these potential benee ts of decentralization have attracted a very diverse range

regime changes economic policies and the effect of aid on growth this study finds that on average aid has little impact on economic growth although a robust finding is that aid promotes growth only in a politically stable environment irrespective of the quality of the country s economic policies aid is ineffective in an unstable environment even in the presence of good policies the results however indicate that policy is more effective in promoting growth when supported by increased aid flows rather than aid being more effective in good policy environment the empirical results also provide some tentative support for the presence of an aid laffer curve in the politically stable countries the allocation of aid is found to be influenced by the country size and its state of development rather than the quality of policy

does federalism lead to excessively high taxes the relative strengths of vertical and horizontal tax externalities turn on the balance between the interest responsiveness of the supply of savings and demand for capital the extent to which immobile factors are taxed by the states and the strength of preferences between federal and state expenditures the vertical externality will dominate if the aggregate tax base of the federation is responsible to the state tax instrument tax interactions in federations are more complex than has often been supposed

decentralization and the shadow economy oates meets allingham sandmo this article studies the impact of decentralization on the shadow economy we argue that decentralization may decrease the size of the shadow economy mainly through two transmission channels 1 decentralization enhancing public sector efficiency efficiency effect and 2 decentralization reducing the distance between bureaucrats and economic agents which increases the probability of detection of shadow economic activities deterrence effect using various measures of fiscal political and government employment decentralization in a cross section of countries we find the deterrence effect to be of more importance the deterrence effect is stronger the lower the degree of institutional quality we find no robust evidence of the efficiency effect

does foreign aid distort incentives and hurt growth theory and evidence from 75 aid recipient countries foreign aid transfers can distort individual incentives and hence hurt growth by encouraging rent seeking as opposed to productive activities we construct a model of a growing small open economy that distinguishes two effects from foreign transfers i a direct positive effect as higher transfers allow the financing of infrastructure ii an indirect negative effect as higher transfers induce rent seeking competition by self interested individuals in this framework the growth impact of aid is examined jointly with the determination of rent seeking behavior we test the main predictions of the model for a cross section of 75 aid recipient countries there is evidence that aid has a direct positive effect on growth which is however significantly mitigated by the adverse indirect effects of associated rent seeking activities this is especially the case in recipient countries with relatively large public sectors

theoretical and practical arguments for modeling labor supply as a choice among latent jobs models of labor supply derived from stochastic utility representations and discretized sets of feasible hours of work have gained popularity because they are more practical than standard approaches based on marginal calculus in this paper we argue that practicality is not the only feature that can be addressed by means of stochastic choice theory this theory also offers a powerful framework for developing a more realistic model for labor supply choices founded on individuals having preferences over jobs and facing restrictions on the choice of jobs and hours of work we discuss and clarify how this modeling framework deviates from both the conventional discrete approach van soest 1995 as well as the standard textbook approach based on marginal calculus hausman 1985 we furthermore discuss how the model based on job choice offers the possibility of conducting a richer set of simulations of alternative policies

aid effectiveness the role of the local elite we study the importance of the local elite as a determinant of the effectiveness of foreign aid in developing countries the local elite serves as an intermediary between aid donors and aid recipients through its control of the government and major firms the likelihood of misusing aid is large if the elite is characterized by extensive economic and political power and little concern for social groups besides itself to determine which countries have this type of elite we use a historically determined variable the percentage of european settlers in total population in colonial times we provide strong empirical evidence that the level of european settlement in colonial times is negatively related to the effectiveness of foreign aid as measured in a growth regression framework our results are robust to the inclusion of a wide set of alternative explanatory factors advanced in the aid effectiveness literature

family labor supply with taxes over the period 1960 1983 the proportion of federal tax revenue raised by taxation of labor supply has risen from 57 77 percent in this paper we specify and estimate a model of family labor supply which treats both federal and state taxation husbands and wives labor supply are treated jointly rather than in aseparate manner as in previous research a method to calculate the virtual wage for nonworking spouses is used within a utility maximizing framework to treat correctly the joint family labor supply decision joint family efforts are found to be important the efficiency cost deadweight loss of labor taxation is estimated to be 29 6 of tax revenue raised the effect of the new 10 deduction to ease the marriage tax for working spouses leads to a prediction of 3 8 increase in wives labor supply and a 9 decrease in husbands labor supply overall taxes paid are predicted to decrease by 3 4 this abstract was borrowed from another version of this item

financial and legal constraints to growth does firm size matter using a unique firm level survey database covering 54 countries we investigate the effect of financial legal and corruption problems on firms growth rates whether these factors constrain growth depends on firm size it is consistently the smallest firms that are most constrained financial and institutional development weakens the constraining effects of financial legal and corruption obstacles and it is again the small firms that benefit the most there is only a weak relation between firms perception of the quality of the courts in their country and firm growth we also provide evidence that the corruption of bank officials constrains firm growth

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

structural estimation of family labor supply with taxes estimating a continuous hours model using a direct utility specification this paper proposes a new method for estimating family labor supply in the presence of taxes this method accounts for continuous hours choices measurement error unobserved heterogeneity in tastes for work the nonlinear form of the tax code and fixed costs of work in one comprehensive specification estimated on data from the 2001 psid the resulting elasticities for married males are consistent with those found elsewhere in the literature but female wage elasticities are substantially smaller than those found in most of the literature simulations of recent tax acts predict small effects on the labor supply of married couples

quantity rationing and concavity in a flexible household labor supply model in the first part of this paper the authors derive explicit expressions for the direct utility functions conditional demand equations and concavity conditions in both price income and quantity space for the demand system introduced by hausman and ruud 1984 these results are then used in an empirical static family labor supply model in which kinked budget constraints and unemployment benefits are taken into account for both spouses imposition of concavity is necessary for consistent estimation and the concavity constraint appears to be binding copyright 1990 by mit press

structural models of family labor supply a discrete choice approach a static neoclassical structural model is presented explaining labor supply of both spouses in two adult households in the netherlands family preferences are described with a direct translog utility function with the husbands leisure the wifes leisure and family income as its arguments we assume that the choice set of each family is finite account is taken of the dutch tax and benefits system we allow for hours restrictions and random preferences and account for unobserved wages of nonworkers the models are estimated using smooth simulated maximum likelihood results based upon dutch cross section data from 1987 are illustrated by confidence intervals for elasticities and by several policy simulations excerpt

taxes and the labor market participation of married couples the earned income tax credit a distinguishing feature of recent changes to the us system of public assistance is its increasing focus on working families and reliance on the tax system to transfer dollars to needy families after a decade in near total obscurity the earned income tax credit eitc was expanded to become the largest cash transfer program for lower income families with children advocates of the eitc argue that unlike traditional welfare the credit helps promote both the values of family and work indeed empirical evidence consistent with economic theory suggests that the eitc promotes employment among eligible unmarried women with children to target benefits to lower income families however the eitc is based on family income leading to traditional welfare type disincentives for most eligible secondary earners in fact the eitc is likely to reduce overall family labor supply among married couples this paper examines the labor force participation response of married couples to eitc expansions between 1984 and 1996 the effect of the credit is estimated using both quasiexperimental and traditional reduced form labor supply models results from both models show the same qualitative conclusion that the eitc expansions reduced total family labor supply of married couples in all cases we find a decline in labor force participation by married women that more than offsets any rise in participation by their spouses while the labor force participation rate of married men increased by about 0 2 percentage points that of married women decreased by just over a full percentage point these aggregate effects mask substantial heterogeneity in the population women facing the strongest disincentives were more than 2 percentage points less likely to work after the expansions these findings imply that the eitc is effectively subsidizing married mothers to stay home and therefore have implications for the design of the program d 2003 elsevier b v all rights reserved

labor supply and taxation in france this paper provides sequential labor supply estimates for french married men and women under specifications analogous to those used by hausman to account for the effects of taxation upon the budget constraint results suggest that even though labor force participation follows the expected pattern work hours are quite rigid most of the variation in the latter being attributed to measurement errors the second part of the paper concentrates on the simultaneous estimation of male and female labor supply conditional maximum likelihood techniques are shown to permit the separate estimation of work hours for both spouses with an appropriate set of instruments aimed at correcting for the biases arising from simultaneity selectivity and the nonlinearity of the budget constraint although consistent the resulting estimates apparently contradict the usual rationality restrictions on family labor supply behavior and seem to confirm the lack of flexibility in work hours

aid growth and devolution considering aid modality and different types of decentralization in this paper we provide further evidence on the relationship between decentralization and foreign aid effectiveness our previous work has shown that decentralization decreases aid effectiveness i e the impact of aid on economic growth is negative in decentralized countries however our previous work has not taken different types of aid and different types of decentralization into account which is at the heart of our current analysis we consider different measures of decentralization in particular measures of fiscal decentralization derived from government finance statistics and measures of political decentralization that are constructed based on countries constitutional rules in addition we take different types of aid into account grants loans technical assistance total net oda and we distinguish between multi lateral and bi lateral aid in order to consider differences in the donor structure our empirical analysis is based on panel data of up to 53 developing countries in our growth regressions we combine all types of decentralization with the different types of aid we find important differences between different types of decentralization i fiscal decentralization negatively affects aid effectiveness in line with our previous work ii employment decentralization may increase aid effectiveness and iii political decentralization does not hamper aid effectiveness or may even have positive effects

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

the aid effectiveness literature the sad results of 40 years of research abstract the aid effectiveness literature ael consists of empirical macroeconomic estimates of the effects of development aid by the end of 2004 it comprised 97 econometric studies of three families of related effects each family has been analyzed in a separate meta analysis the ael is an ideal subject for meta analysis as it uses only a few formally similar models to estimate the same underlying effects it is also an area with strong beliefs often generated by altruism when this whole literature is examined a clear pattern emerges after 40 years of development aid the preponderance of the evidence indicates that aid has not been effective we show that the distribution of results is significantly asymmetric reflecting the reluctance of the research community to publish negative results the dutch disease effect on exchange rates provides a plausible explanation for the observed aid ineffectiveness

does foreign aid corrupt abstract we estimate the impact of foreign aid on corruption using geographical and cultural distance to the donor countries as instrumental variables to assess causality aid decreases corruption our results are statistically and economically significant and robust to different controls

decentralisation as an incentive scheme recent changes have introduced more decentralization in a number of traditionally centralized countries 1 in the case of france it is sometimes claimed that the 1982 1983 reform of subcentral government is of historical importance although the principles of that reform are not contested any more by the new majority elected in 1986 opinions still differ on a number of policy issues some of the issues are presented in this introductory section but the main purpose of this paper is not to expose or discuss in detail the problems of decentralization in france as argued in the second part of the introductory section the theoretical framework in which the policy issues of decentralization are usually discussed by economists is somewhat unsatisfactory in particular when applied to unitary states such as britain or france the bulk of the paper is devoted to the exploration of a different approach to decentralization it is not purported however that this approach could completely replace the more traditional one consequently when in the concluding section we return briefly to the policy issues identified here this is to be read as a preliminary attempt to evaluate the relevance of the reasoning developed in the paper

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

comparing labor supply elasticities in europe and the united states new results we suggest the first large scale international comparison of labor supply elasticities for 17 european countries and the united states using a harmonized empirical approach we find that own wage elasticities are relatively small and more uniform across countries than previously considered nonetheless such differences do exist and are found not to arise from different tax benefit systems wage hour levels or demographic compositions across countries suggesting genuine differences in work preferences across countries furthermore three other findings are consistent across countries the extensive margin dominates the intensive margin for singles this leads to larger responses in low income groups and income elasticities are extremely small

decentralization and economic growth revisited an empirical note abstract although it is theoretically expected that decentralization leads to efficient provision of local public services and stimulates economic development there is a mixed picture of the decentralization effect on economic growth across earlier empirical studies using the instrument variables iv technique with the latest cross country data for the period from 1997 to 2001 this paper found that fiscal decentralization has a significant positive impact on per capita gdp growth therefore when the focus is placed on the latest information on the economic situation in the latter 1990s decentralization particularly on the fiscal expenditure side is instrumental in economic growth

fiscal decentralisation and idc economic growth an empirical investigation the impact of fiscal decentralisation on ldc economic growth and development is widely debated in the development literature notwithstanding this there has been little attempt to test systematically this relationship accordingly in this note we present an empirical examination of the relationship between the level of fiscal decentralisation and economic growth rates across a sample of twenty three ldcsfrom 1974 to 1991 we fail to find however any strong systematic relationship between the two among our sample of ldcs

beyond export led growth abstract in light of the adverse conditions in the current international economic environment this paper reassesses the feasibility of continuing to rely on manufacturing export led growth as the major development dynamic for most ldcs during the next decade this paper argues that after the initial stages of industrial development the emphasis in policy toward agriculture should shift from surplus extraction to surplus creation and to the generation of demand linkages with the rest of the economy the author compares the relative merits of two alternative open development strategies export led industrialization and agricultural demand led industrialization adli by means of several simulation experiments the experiments are performed with a computable general equilibrium model of a small low income semi industrial open economy which is a stylization of south korea of 1963 they are carried out in an international environment assumed to represent the next decade based on a rate of growth of international demand for imports of about half the 1960 1973 rate the results support the adli approach on all counts

an analysis of the impact of sample attrition on the second generation of respondents in the michigan panel study of income dynamics only a few studies have tried to estimate the trend in the elasticity of children s economic status with respect to parents economic status and these studies produce conflicting results in an attempt to reconcile these findings we use the panel study

collective household labor supply nonparticipation and income taxation in this paper we adopt the usual assumptions of the collective approach i e individualism and efficiency to study household labor supply the theoretical innovation is 2 fold first we incorporate the decision to participate in the labor market in the initial setting second we abandon the assumption of linearity of the budget constraint we show that i structural elements such as preferences or the outcome of the decision process can be recovered and ii testable restrictions are generated from the observation of the household labor supplies we also examine for this model how to simulate the incidence of fiscal reforms

fiscal effects of foreign aid in a federal system of governance the case of india abstract this paper models fiscal effects of foreign aid in a federal system of governance our main innovation is to incorporate the inter governmental fiscal link in examining economic fungibility of foreign aid the model is applied to the expenditure decisions of the central government of india the two main findings are i foreign aid merely substitutes for spending that the government would have undertaken anyway funds freed by aid are spent on non development activities and ii in passing earmarked external assistance to states the central government makes a reduction in its transfers to states these findings indicate that the central government s expenditure choices are unaffected by external assistance the implication for donors is that even though their development projects may be associated with very high rates of economic return they could be assisting the central government in financing something very different at the margin for the state governments the finding indicates that they may not be reaping the full benefits of externally procured assistance

tax rights in transition economies a tragedy of the commons abstract this paper develops the concept of tax rights to analyze the impact of fiscal institutions on economic development in transition economies a government s tax rights are poorly defined when it and other governments and agencies can unilaterally levy taxes on the same tax base existing evidence suggests that chinese local governments have gained more clearly defined tax rights than their russian counterparts using the big push model of industrialization murphy k shleifer a vishny r 1989 industrialization and the big push journal of political economy 95 1003 1026 within a common property resource framework we show that this difference in tax rights helps explain why china has been significantly more successful than russia

a test of the unitary and collective models of household labour supply this paper tests the unitary and the collective household labour supply models within a structural framework a nonlinear unrestricted household labour supply system is postulated and the set of parametric restrictions imposed by each model is derived our results generally reject the income pooling restrictions embodied in the unitary model also the symmetry of cross wage effects is rejected however the collective model is not rejected for groups with no pre school children

the panel study of income dynamics after fourteen years an evaluation this article considers the representativeness of the panel study of income dynamics psid over its 14 year history from 1968 to 1981 given the dynamics of entry and exit from the panel by 1981 40 of the original members had left the sample and were replaced by new entrants who joined either existing households or new households being formed by members of the original sample we consider the distribution of demographic characteristics and earnings equations over time and we compare the psid with the current population survey cps by either approach we find little evidence that the psid has become unrepresentative

which countries have state religions among 188 countries 72 had no state religion in 2000 1970 and 1900 58 had a state religion throughout and 58 had 1 or 2 transitions we use a hotelling spatial competition model to analyze the likelihood that the religion market would be monopolized similar forces influence a government s decision to establish a state religion consistent with the model the probability of state religion in 1970 and 2000 is increasing with the adherence rate to the main religion has a nonlinear relation with population and has little relation with per capita gdp the probability of state religion decreases sharply under communism but lagged communism has only a weak effect with costly adjustment for institutions the probability of state religion in 1970 or 2000 depends substantially on the status in 1900 this persistence is much stronger for countries with no major regime change than for countries with such a change

bunching and non bunching at kink points of the swedish tax schedule recent microeconometric studies of taxpayers responsiveness to taxation have shown that intensive margin labor supply and earnings elasticities typically are modest and sometimes equal to zero however a common view is that long run responses might still be large since micro estimates are downward biased owing to optimization frictions in this paper we estimate the taxable income elasticity at a very large kink point of the swedish tax schedule using the bunching method during the period of study the change in the log net of tax rate reached a maximum value of 45 6 interestingly we obtain a precise elasticity estimate of zero for wage earners at this large kink the size of the kink allows us to derive tighter bounds on the long run elasticity than previous studies if wage earners on average tolerate 1 of their disposable income in optimization costs the upper bound on the long run taxable income elasticity is 0 39 we also evaluate the performance of the bunching estimator by performing monte carlo simulations

on the empirical implementation of some game theoretic models of household labor supply this paper discusses some issues in the empirical implementation of game theoretic models of household labor supply in particular we focus on the identification problems inherent in many of these models as an illustration we estimate a game theoretic model which uses data on preferred working hours as additional identifying information

testing the neoclassical model of family labor supply and fertility the mcelroy horney nash bargaining model of family demand behavior relaxes the restriction that nonearned income of husband and wife has the identical effect on family labor supply and commodity demands this restriction of the neoclassical model offamily behavior is tested for the determination of husband and wife labor supply andfertility based on the 1981 socioeconomic survey of thailand the neoclassical restriction is rejected for female labor supply andfertility another unexplored limitation offamily demand studies due to the sample self selection of intact marriages is empirically treated through alternative estimation strategies in this case a more sharply focused theory of marital behavior is needed to identify family demand models

the anarchy of numbers aid development and cross country empirics the recent literature contains many stories of how foreign aid affects economic growth aid raises growth in countries with good policies or with difficult economic environments or outside the tropics or on average but with diminishing returns the diversity of the results suggests that many are fragile seven important aid growth papers are tested for robustness using 14 minimally arbitrary tests deriving mainly from differences among the studies themselves this approach investigates the importance of potentially arbitrary specification choices while minimizing the arbitrariness in testing choices all of the results appear fragile especially to sample expansion

collective decisions household production and labor force participation in this paper we generalize the collective model of household labor supply with domestic production to allow for the possibility of nonparticipation in the labor market we also relax the marketability assumption according to which domestic goods and market goods are perfectly substitutable our results are twofold first we show that the main structural components of the decision process can be retrieved from observed behavior second we estimate a system of market and domestic labor supply using the panel study of income dynamics and apply the theoretical results to recover the intra household sharing of resources

trade and structural change nics and next tier nics as transitional economies abstract the paper finds a strong association between rapid change in the sectoral composition of output and exports structural change and rapid export growth in the newly industrializing countries capital formation appears to be encouraged in dynamic economies by the underpricing of investment goods vis a vis consumption and government goods within these economies also the underpricing of investment goods in dynamic economies is relatively greater than in less dynamic economies whereas other research has found low price distortion to be associated with high growth and an outward rather than an inward looking orientation these associations are seriously challenged and more caution is urged in reaching generalized conclusions

an analysis of sample attrition in panel data the michigan panel study of income dynamics by 1989 the michigan panel study on income dynamics psid had experienced approximately 50 percent sample loss from cumulative attrition from its initial 1968 membership we study the effect of this attrition on the unconditional distributions of several socioeconomic variables and on the estimates of several sets of regression coefficients we provide a statistical framework for conducting tests for attrition bias that draws a sharp distinction between selection on unobservables and on observables and that shows that weighted least squares can generate consistent parameter estimates when selection is based on observables even when they are endogenous our empirical analysis shows that attrition is highly selective and is concentrated among lower socioeconomic status individuals we also show that attrition is concentrated among those with more unstable earnings marriage and migration histories nevertheless we find that these variables explain very little of the attrition in the sample and that the selection that occurs is moderated by regression to the mean effects from selection on transitory components that fade over time consequently despite the large amount of attrition we find no strong evidence that attrition has seriously distorted the representativeness of the psid through 1989 and considerable evidence that its cross sectional representativeness has remained roughly intact

aid policies and growth comment in an extraordinarily influential paper craig burnside and david dollar 2000 p 847 find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies but has little effect in the presence of poor policies this finding has enormous policy implications the burnside and dollar 2000 henceforth bd result provides a role and strategy for foreign aid if aid stimulates growth only in countries with good policies this suggests that 1 aid can promote economic growth and 2 it is crucial that foreign aid be distributed selectively to countries that have adopted sound policies international aid agencies public policy makers and the press quickly recognized the importance of the bd findings this paper reassesses the links between aid policy and growth using more data the bd data end in 1993 we reconstruct the bd database from original sources and thus 1 add additional countries and observations to the bd data set because new information has become available since they conducted their analyses and 2 extend the data through 1997 thus using the bd methodology we reexamine whether aid influences growth in the presence of good policies given our focus on retesting bd we do not summarize the vast pre bd literature on aid and growth we just note that there was a long and inconclusive literature that was hampered by limited data availability debates about the mechanisms through which aid would affect growth and disagreements over econometric specification see gustav f papanek 1972 robert cassen 1986 paul mosley et al 1987 peter boone 1994 1996 and henrik hansen and finn tarp s 2000 review since bd found that aid boosts growth in good policy environments there have been a number of other papers reacting to their results including paul collier and jan dehn 2001 carljohan dalgaard and hansen 2001 patrick guillaumont and lisa chauvet 2001 hansen and tarp 2001 robert lensink and howard white 2001 and collier and dollar 2002 these papers conduct useful variations and extensions some of which had already figured in the pre bd literature such as introducing additional control variables using nonlinear specifications etc some of these papers confirm the message that aid only works in a good policy environment while others drive out the aid policy interaction term with other variables this literature has the usual limitations of choosing a specification without clear guidance from theory which often means there are more plausible specifications than there are data points in the sample we differentiate our paper from these others by not deviating from the bd specification thus we do not test the robustness of the results to an unlimited number of variations but instead maintain the bd methodology this paper conducts a very simple robustness check by adding new data that were unavailable to bd thus we expand the sample used over their time period and extend the data from 1993 to 1997 easterly department of economics new york university 269 mercer street new york ny 10003 center for global development and national bureau of economic research e mail william easterly nyu edu levine department of finance carlson school of management university of minnesota 321 19th avenue south minneapolis mn 55455 and national bureau of economic research e mail rlevine csom umn edu roodman center for global development 1776 massachusetts avenue nw washington dc 20036 e mail droodman cgdev org we are grateful to craig burnside for supplying data and assisting in the reconstruction of previous results without holding him responsible in any way for the work in this paper thanks also to francis ng and prarthna dayal for generous assistance with updating the sachs warner openness variable and to three anonymous referees craig burnside and henrik hansen for helpful comments 1 see for instance the world bank 1994 2001 2002 the u k department for international development 2000 president george w bush s speech march 16 2002 the announcement by the white house on creating the millennium challenge corporation white house 2002 as well as a washington post editorial february 9 2002 a financial times column by alan beattie march 11 2002 and the economist march 16 2002

the effect of income taxation on consumption and labor supply we estimate the incentive effects of income taxation in a life cycle model of consumption and labor supply without intratemporal strong separability we find that consumption and hours worked are direct complements in utility both increase with a compensated increase in the net wage the compensated net wage elasticity is about 0 3 nearly double estimates for u s men from a linear labor supply specification estimated intertemporal elasticities indicate significant intertemporal smoothing of utility the estimated marginal welfare cost of government revenue is 6 20 which is about half the estimated welfare cost when additivity between consumption and leisure is incorrectly imposed

the incredible shrinking elasticities married female labor supply 1978 2002 this paper demonstrates the extent to which married women s labor supply elasticities have changed over the past quarter century estimates from march current population survey data suggest that these elasticities have decreased substantially by 60 percent for the hours wage elasticity from 0 36 to 0 14 70 percent for the hours income elasticity from 0 053 to 0 015 95 percent for the participation wage elasticity from 0 66 to 0 03 and 60 percent for the participation income elasticity from 0 13 to 0 05 changing demographic characteristics explain little of the drop in these elasticities suggesting that preferences toward work have changed across birth cohorts

fiscal decentralization and economic growth a cross country study abstract we use a panel data set of 46 countries over the 1970 1989 period to investigate the relationship between fiscal decentralization and economic growth we find a negative relationship between fiscal decentralization and growth in developing countries but none in developed countries several explanations are offered for our findings

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

bank supervision and corruption in lending abstract which commercial bank supervisory policies ease or intensify the degree to which bank corruption is an obstacle to firms raising external finance based on new data from more than 2500 firms across 37 countries this paper provides the first empirical assessment of the impact of different bank supervisory policies on firms financing obstacles we find that the traditional approach to bank supervision which involves empowering official supervisory agencies to monitor discipline and influence banks directly does not improve the integrity of bank lending rather we find that a supervisory strategy that focuses on empowering private monitoring of banks by forcing banks to disclose accurate information to the private sector tends to lower the degree to which corruption of bank officials is an obstacle to firms raising external finance in extensions we find that regulations that empower private monitoring exert a particularly beneficial effect on the integrity of bank lending in countries with sound legal institutions

aid and growth what does the cross country evidence really show abstract we examine the effects of aid on growth in cross sectional and panel data after correcting for the possible bias that poorer or stronger growth may draw aid contributions to recipient co

child care costs and family labor supply this paper presents a theoretical and empirical analysis of the effects of child care costs on family labor supply and the demand for market child care the model is a framework for cross section estimation of the effects of child care costs on labor supply and child care use it applies to households having young children requiring continuous care and in which both the mother and 1 other potential child care provider are present the 3 potential sources of child care are the mother the potential informal provider and the market using data from the 1980 baseline household survey of the employment opportunity pilot projects this empirical analysis uses a subsample of 6170 households in which there is a married woman under age 45 with her spouse present at the time of the survey at least 1 child under age 14 and nonmissing data on key variables results show that 1 higher market child care costs discourage women from working even when an informal source of care is available indicating that such informal care is an imperfect substitute for market care 2 a higher wage rate for the mother encourages her to work thus a higher wage rate increases the probability of using market child care 3 the number of children requiring care has a negative impact on the probability of the women working with the largest impact caused by younger children 4 nonwage income has a negative impact on the probability of the woman working and 5 black women are more likely to work than whites and are statistically more likely than whites to use market child care if they do work this family labor supply model predicts that the cost of market child care will affect household decisions on labor supply and child care use estimates of a qualitative choice model provide strong confirmation that child care costs affect such decisions the responsiveness of the labor supply of mothers to child care costs demonstrated in this study indicate that such subsidies do have their intended effect of encouraging labor supply the fact that a large proportion of current child care subsidies benefit primarily middle and upper income families via the income tax credit suggests that the labor supply effets of such subsidies may in practice be stronger for less needy families than for low income families employer subsidized child care may become an increasingly popular tool for attracting mothers into the labor force

aid growth and devolution summary this paper examines whether the degree of fiscal decentralization in aid receiving countries matters in explaining aid effectiveness the decentralization theorem predicts that the devolution of powers should increase aid effectiveness since local decision makers are better informed about local needs thereby decentralization may also have reverse effects e g through coordination problems excessive regulation administrative costs and local capture we use panel data for up to 60 countries and find that aid contributes to economic growth in centralized developing economies whereas it is less effective or even harmful in decentralized countries the cases of indonesia the philippines and uganda support our findings our results imply that donor countries should carefully consider how the two development instruments foreign aid and decentralization interact

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

corruption in bank lending to firms cross country micro evidence on the beneficial role of competition and information sharing abstract building on the important study by beck demirguc kunt and levine 2006 bank supervision and corruption in lending journal of monetary economics 53 2131 2163 we examine the effects of both borrower and lender competition as well as information sharing via credit bureaus registries on corruption in bank lending using the unique world bank data set wbes covering more than 4 000 firms across 56 countries with information on credit bureaus registries assembled by djankov mcliesh and shleifer 2007 private credit in 129 countries journal of financial economics 84 299 329 and bank regulation data collected by barth caprio and levine 2006 rethinking bank regulation till angels govern cambridge university press new york to measure bank competition and information sharing we find strong evidence that both banking competition and information sharing reduce lending corruption and that information sharing also helps enhance the positive effect of competition in curtailing lending corruption we also find that the ownership structure of firms and banks legal environment and firm competition all exert significant impacts on lending corruption