pension profile preferences the influence of trust and expected expenses this paper studies the influence of people s expectations about expenses during retirement and trust in pension funds on preferences for different pension arrangements although most workers prefer

intertemporal labor supply and human capital accumulation we solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption and that allows for both human capital accumulation and savings estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher than the conventional estimates and the downward bias comes from the omission of the human capital accumulation effect the human capital accumulation effect renders the life cycle path of the shadow wage relatively flat even though wages increase with age hence a rather flat life cycle labor supply path can be reconciled with a high intertemporal elasticity of substitution

elasticities of substitution in real business cycle models with home production this paper constructs a simple model of home production that demonstrates the connection between the intertemporal elasticity of substitution in market consumption ies and the static elasticity of substitution between home and market consumption ses understanding this connection is important because there is a large body of empirical evidence suggesting that the ies is small but little evidence on the size of the ses we use our framework to shed light on the properties of a home production model with a low ies we find that such a model must have three fundamental properties in order to match key aspects of aggregate u s data first the steady state growth rate of technology must be the same across sectors second shocks to technology must be sufficiently positively correlated across sectors third capital must be used more intensively in the market sector than in the home sector a home production model with these three properties can be surprisingly successful at reconciling the rbc paradigm with evidence for a low ies

an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

do pharmacists buy bayer informed shoppers and the brand premium we estimate the effect of information and expertise on consumers willingness to pay for national brands in physically homogeneous product categories in a detailed case study of headache remedies we find that more informed or expert consumers are less likely to pay extra to buy national brands with pharmacists choosing them over store brands only 9 percent of the time compared to 26 percent of the time for the average consumer in a similar case study of pantry staples such as salt and sugar we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs we extend our analysis to cover 50 retail health categories and 241 food and drink categories the results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products and a much smaller share for most food and drink products we tie our estimates together using a stylized model of demand and pricing

consumer demand and the life cycle allocation of household expenditures the purpose of this paper is to estimate the parameters of household preferences that determine the allocation of goods within the period and over the life cycle using micro data in doing so the authors are able to identify important effects of demographics labor market status and other household characteristics on the intertemporal allocation of expenditure they test the validity of the life cycle model using excess sensitivity tests and find that controlling for demographics and labor market status variables can largely explain the excess sensitivity of consumption to anticipated changes in income

the elasticity of substitution between time and market goods evidence from the great recession we document a change in household shopping behavior during the great recession households purchased more on sale larger sizes and generic products and increased coupon usage and shopping at discount stores we estimate a decline in returns to shopping during the recession therefore the increase in shopping behavior implies a significant decrease in households opportunity cost of time using the estimated cost of time and time use data we estimate a high elasticity of substitution between market expenditure and time spent on nonmarket work we find that households smooth a sizable fraction of consumption by varying their time allocation during recessions

dynamic financial constraints distinguishing mechanism design from exogenously incomplete regimes we formulate and solve a range of dynamic models of constrained credit insurance that allow for moral hazard and limited commitment we compare them to full insurance and exogenously incomplete financial regimes autarky saving only borrowing and lending in a single asset we develop computational methods based on mechanism design linear programming and maximum likelihood to estimate compare and statistically test these alternative dynamic models with financial information constraints our methods can use both cross sectional and panel data and allow for measurement error and unobserved heterogeneity we estimate the models using data on thai households running small businesses from two separate samples we find that in the rural sample the exogenously incomplete saving only and borrowing regimes provide the best fit using data on consumption business assets investment and income family and other networks help consumption smoothing there as in a moral hazard constrained regime in contrast in urban areas we find mechanism design financial information regimes that are decidedly less constrained with the moral hazard model fitting best combined business and consumption data we perform numerous robustness checks in both the thai data and in monte carlo simulations and compare our maximum likelihood criterion with results from other metrics and data not used in the estimation a prototypical counterfactual policy evaluation exercise using the estimation results is also featured

household saving micro theories and micro facts in this survey we review the recent theoretical and empirical literature on household saving and consumption the discussion is structured around a list of motives for saving and how well the standard theory captures these motives we show that almost all of the motives for saving that have been suggested in the informal saving literature can be captured in the standard optimizing model particular attention is given to recent work on the precautionary motive and its implications for saving and consumption behavior we also discuss the behavioral or psychological approach that eschews the use of standard optimization techniques and focuses instead on direct consideration on saving we provide a section on facts who save and how much we then discuss informally the recent decline in the u s saving rate and whether the theory is of much use in understanding this and other changes in aggregate saving rates over time we do not find any convincing explanation for the change in saving rates we also discuss some analyses of saving behavior over the life cycle addressing such questions as whether households save enough for retirement and whether the consumption patterns of older households can be rationalized within a simple life cycle model we also review a great number of studies of the consumption euler equations based on our analysis of the studies cited we conclude that there is still mixed evidence that consumption is excessively sensitive to income we also examine in depth the recent empirical literature on the precautionary motive we conclude that although some households do seem to have a significant precautionary motive at some points in their life cycle this motive is not so strong empirically as some investigators suggest

structural transformation and the deterioration of european labor market outcomes this paper examines hours worked in continental europe and the united states from 1956 to 2003 the empirical work establishes two results first hours worked in europe decline by almost 45 percent compared to the united states over this period second this decline is almost entirely accounted for by the fact that europe develops a much smaller market service sector than the united states a simple model of time allocation is used to understand these patterns i find that relative increases in taxes and technological catch up can account for most of the differences between the european and american time allocations over this period

time allocation and home production technology abstract this paper studies the effect of the relative productivity between the market sector and the home sector on time allocation a novelty of the paper is to jointly estimate home productivity and the elasticity of substitution between market goods and home hours which is accomplished through structural estimation based on income decile level data with a high elasticity of substitution and a slower growth rate of productivity in the home sector relative to the market sector the model can produce key data patterns of time allocation in both the cross sections and time series quantitatively relative productivity can account for 32 of the variation in market hours and 18 of the variation in home hours

distinguishing limited liability from moral hazard in a model of entrepreneurship we present and estimate a model in which the choice between entrepreneurship and wage work may be influenced by financial market imperfections the model allows for limited liability moral hazard and a combination of both constraints the paper uses structural techniques to estimate the model and identify the source of financial market imperfections using data from rural and semiurban households in thailand structural nonparametric and reduced form estimates provide independent evidence that the dominant source of credit market imperfections is moral hazard we reject the hypothesis that limited liability alone can explain the data

on the allocation of time a quantitative analysis of the roles of taxes and productivities basic theory suggests that increases in labor income taxes induce people to substitute household production for market work time use surveys for 12 oecd countries during 1970 2010 however show that instead people substituted leisure for market work to understand why this happened we carefully measure the labor productivity of household production and find that it grew strongly in many countries of our sample employing a calibrated model of household production we show that strong growth in the labor productivity of household production implies that leisure absorbs the reductions in market work after labor income tax increases

household production and the excess sensitivity of consumption to current income empirical research on the permanent income hypothesis pih has found that consumption growth is excessively sensitive to predictable changes in income this finding is interpreted as strong evidence against the pih we propose an explanation for apparent excess sensitivity that is based on a quantitative equilibrium model of household production in which permanent income consumers respond to shifts in sectoral wages and prices by substituting work effort and consumption across home and market sectors although the pih is true this mechanism generates apparent excess sensitivity because market consumption responds to predictable income growth

the determinants of coupon usage this paper uses a large sample of survey data to investigate the empirical determinants of coupon usage the broad set of control variables allows for comparisons of the relative importance of indi

the baby boom and baby bust what caused the baby boom and can it be explained within the context of the secular decline in fertility that has occurred over the last 200 years the hypothesis is that a the secular decline in fertility is due to the relentless rise in real wages that increased the opportunity cost of having children b the baby boom is explained by an atypical burst of technological progress in the household sector that occurred in the middle of the last century this lowered the cost of having children a model is developed in an attempt to account quantitatively for both the baby boom and bust

life cycle prices and production we use scanner data and time diaries to document how households substitute time for money through shopping and home production we document substantial heterogeneity in prices paid for identical goods for the same area and time with older households shopping the most and paying the lowest prices doubling shopping frequency lowers a good s price by 7 to 10 percent we estimate the shopper s price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1 8 the observed life cycle time allocation implies a consumption series that differs markedly from expenditures

balance sheet in the redd are global estimates measuring the wrong costs abstract this article challenges some of the assumptions underpinning the un programme to reduce emissions from deforestation and forest degradation redd in developing countries firstly it argues that the cost effectiveness of redd may have been exaggerated as current estimates ignore some cost categories as well as the evolution of drivers whilst redd remains a low hanging fruit for climate mitigation if all costs were included estimates would be at the high end of the currently accepted range secondly the article highlights that redd will be affected by a large funding gap at least until the entry into force of a new climate protocol in 2020 this gap is due as much to the poor status of public finances in donor countries as to the languishing state of carbon markets and it calls for a revision of the assumptions regarding the design of the programme finally it is advocated that in order to contribute to the development of the programme economic research on redd should consider different policy options assessing their efficiency and identifying measures that increase their cost effectiveness

optimal multiperiod contracts and the gain from enduring relationships under private information informational asymmetries can play a key role in explaining the existence and nature of multiperiod contracts in an illustrative risk sharing model even relatively short two period contracts can be mutually beneficial if there is private information though one period contracts suffice otherwise further contracts which are pareto optimal relative to the environment and the information structure are defined and partially characterized an example illustrates how otherwise inefficient intertemporal tie ins can be used optimally to mitigate incentive problems the obvious borrowing lending schemes are not private information pareto optimal in these period by period actions are not sufficiently constrained discounting affects the form of the optimal contract but none of these qualitative conclusions

the elasticity of substitution between time and market goods evidence from the great recession the elasticity of substitution between time and market goods we document a change in household shopping behavior during the great recession households purchased more on sale larger sizes and generic products increased coupon usage and shopping at discount stores we estimate that the returns to these shopping activities declined during the recession and therefore this behavior implies a significant decrease in households opportunity cost of time using the estimated cost of time and time use data we estimate a high elasticity of substitution between market expenditure and time spent on non market work we find that households smooth a sizable fraction of consumption by varying their time allocation during recessions institutional subscribers to the nber working paper series and residents of developing countries may download this paper without additional charge at www nber org

is the extended family altruistically linked direct tests using micro data this paper uses panel study of income dynamics data on parents and their adult children to test the standard altruism model this model predicts that within the extended family the distribution of consumption is independent of the distribution of resources the authors findings strongly reject this prediction copyright 1992 by american economic association

relative wage movements and the distribution of consumption we analyze how relative wage movements among birth cohorts and education groups affected the distribution of household consumption and economic welfare our empirical work draws on the best available cross sectional data sets to construct synthetic panel data on u s consumption labor supply and wages during the 1980s we find that low frequency movements in the cohort education structure of pretax hourly wages among men drove large changes in the distribution of household consumption the results constitute a spectacular failure of between group consumption insurance a failure not explained by existing theories of informationally constrained optimal consumption behavior a welfare analysis indicates that the cost of between group consumption variability is larger than the cost of aggregate consumption variability by two orders of magnitude

the aggregate implications of regional business cycles during the last recession and its aftermath aggregate price growth and aggregate nominal wage growth remained robust despite the high rate of unemployment we document that u s states with weaker labor markets experienced lower price growth lower nominal wage growth and lower real wage growth during the great recession given that reliable measures of local prices do not exist we create our own state price indices using scanner data from the nielsen retail scanner database the main innovation of the paper is the development of an econometric procedure that combines cross region data with aggregate time series data to infer the underlying shocks driving both aggregate and regional business cycles applying our procedure to the great recession we find that a combination of both demand and supply shocks are necessary to account for the joint dynamics of aggregate prices wages and employment during the 2007 2012 period in contrast we find that only demand shocks are needed to explain the cross region variation the results suggest that only using cross region variation to explain aggregate fluctuations is insufficient when shocks do not have a substantive regional component

willingness to pay for snowmobile recreation travel cost method models with and without post season resurvey of trip count annual willingness to pay wtp for snowmobile recreation in idaho is estimated using the travel cost method tcm on site snow conditions are important and erratic thus we collect two measures o

retirement home production and labor supply elasticities a standard life cycle model with home production implies a tight relationship between key preference parameters and the changes in time allocated to home production and leisure at retirement we derive this relationship and use data from the atus to explore its quantitative implications the key finding is that the intertemporal elasticity of substitution for leisure and the elasticity of substitution between time and goods in home production are approximately equal in contrast to what is commonly assumed

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

measuring the sensitivity of parameter estimates to estimation moments we propose a local measure of the relationship between parameter estimates and the moments of the data they depend on our measure can be computed at negligible cost even for complex structural models we argue that reporting this measure can increase the transparency of structural estimates making it easier for readers to predict the way violations of identifying assumptions would affect the results when the key assumptions are orthogonality between error terms and excluded instruments we show that our measure provides a natural extension of the omitted variables bias formula for nonlinear models we illustrate with applications to published articles in several fields of economics

property rights and liability for deforestation under redd implications for permanence in policy design reducing emissions from deforestation and forest degradation redd is critical in efforts to mitigate the effects of anthropogenic climate change despite uncertainty about the exact form of a future international redd system redd carbon property rights would need to be created and allocated with liability assigned for the potential loss of climate benefits in the event of carbon reversal from deforestation this commentary explores the links between forest property rights and liability to different redd policy options and their implications for permanence should national governments retain liability for permanence then project level activities that have individually assigned redd carbon rights may have a higher risk of carbon reversal than policies where rights are assigned to the state knowledge of pre existing forest rights is necessary for some policies implemented with government assigned redd rights in order to compensate for potential income losses from policy implementation

financial systems in northern thai villages field research attempted to measure the risky environments the information structures the institutions and the risk response mechanisms of ten villages in northern thailand various key features are then modeled in an abstract but realistic way either with a full information risk sharing model or an information constrained version of the same model observations from some of the villages seem consistent with one or the other of these models but in many of the villages one is left with risk response variations across households which suggest that pareto improvements are possible

immigration and international prices abstract this paper considers the relation between immigration and prices in a number of countries across the world over the period from 1990 to 2006 immigration is shown to have a negative impact on international relative prices a 10 increase in the share of immigrant workers in total employment decreases the prices of final products by as much as 3 our results suggest that the tendency of this factor of production to relocate to relatively expensive high wage countries exerts downward pressure on prices of tradeables and non tradeables there relative to other locations the effect of immigration on prices is more evident for goods consumed by immigrants as compared to goods produced by immigrants

labor income taxation human capital and growth the role of childcare in this paper we examine the effects of labor income taxation on growth in an overlapping generations model in which schooling and childcare play a role in the production of human capital we compare such effects with those obtained in a model in which only schooling matters for skill formation we show that the omission of childcare from the technology of skill formation can bias the results related to the impact of labor income taxation on growth

kinship and financial networks formal financial access and risk reduction kinship networks are beneficial for smoothing consumption and investment but the channels are not well understood we study the financing devices used for consumption and investment by thai households households that are connected to banks achieve significantly better consumption smoothing than unconnected households indirect connections via inter household borrowing are as effective as direct borrowing investment appears to be facilitated by kinship households with kin in the village display reduced sensitivity of investment to income while connections to banks do not significantly reduce sensitivity kin may act as implicit collateral permitting borrowing that would violate repayment constraints in its absence

using repayment data to test across models of joint liability lending theories rationalising joint liability lending are rich in implications for repayment rates we exploit this fact to test four diverse models we show that the models repayment implications do not always coincide for example higher correlation of output and borrowers ability to act cooperatively can raise or lower repayment depending on the model data from thai borrowing groups suggest that repayment is affected negatively by the joint liability rate ceteris paribus and social ties and positively by the strength of local sanctions and correlated returns further the relative fit of the adverse selection versus informal sanctions models varies by region

the integration of natural capital into development policies in response to the united nations sustainable development goals there has been a rising awareness of the need to address simultaneously the preservation of natural capital stocks and poverty alleviation at multiple scales focusing on tropical forest rich developing countries the article overviews the extent to which natural capital considerations are integrated into existing development policies and interventions the review finds that the explicit consideration of natural resources is left out of many commonly applied development interventions leading to suboptimal and unsustainable outcomes the interventions that do tackle both development and conservation goals are often not coordinated and are implemented at a site by site basis without providing the socially efficient levels of natural capital stocks or ensuring the long term sustainability of the development and conservation impacts bringing in perspectives from development economics environmental economics and applied conservation this article makes the case for a better integration of development and conservation goals in interventions in developing countries and outlines the emerging frontiers for research and policy

humps and bumps in lifetime consumption in this article we argue that the life cycle model that allows demographics to affect household preferences and relaxes the assumption of certainty equivalence can generate hump shaped consumption profiles over age that are very similar to those observed in household level data sources and in particular match the differences in shape across different education groups liquidity constraints or myopia are not required to explain the empirical features of observed life cycle patterns

trading down and the business cycle abstract we document two facts first during the great recession consumers traded down in the quality of the goods and services they consumed second the production of low quality goods is less labor intensive than that of high quality goods when households traded down labor demand fell increasing the recession s severity we find that the trading down phenomenon accounts for a substantial fraction of the decline in u s employment in the recent recession we show that embedding quality choice in a business cycle model improves the model s amplification and comovement properties

the formation of consumer inflation expectations new evidence from japan s deflation experience using a new data set we investigate the relationship between the inflation experience and expectations of households in japan focusing on the post 1995 deflationary era our first finding is that inflation expectations increase with age second we find that measured inflation rates also increase with age although age and inflation expectations continue to exhibit a positive correlation even after controlling for the household level inflation rate analysis suggests that the correlation between age and inflation expectations is driven largely by the correlation between cohort and inflation expectations which we interpret to represent the effect of historical inflation experience on inflation expectations

time use during the great recession using data from the american time use survey between 2003 and 2010 we document that home production absorbs roughly 30 percent of foregone market work hours at business cycle frequencies leisure absorbs roughly 50 percent of foregone market work hours with sleeping and television watching accounting for most of this increase we document significant increases in time spent on shopping child care education and health job search absorbs between 2 and 6 percent of foregone market work hours we discuss the implications of our results for business cycle models with home production and non separable preferences jel codes d13 e32 j22

village economic accounts real and financial intertwined using the household panel data from townsend thai data we create economic and balance of payments accounts for a set of villages in rural and semiurban areas of thailand we then study these village economies as small open countries as in international economics exploring in particular the relationship between the real production and trade and financial credit and financial flows variables we examine cross village risk sharing and the feldstein horioka puzzle our results suggest that within village consumption against income risk sharing is better than across village and while there is smoothing in both the mechanisms are different we also find that unlike countries the cross village capital markets for investment are highly integrated in the conclusion we touch on factor price equalization and on trade and financial frictions

village and larger economies the theory and measurement of the townsend thai project i have spent close to 20 years cataloging transactions between households in thai villages along with a research team just this past summer we documented a number of ways in which even relatively poor villages have money markets not dissimilar in some ways from new york financial markets with borrowing and repayment passing along links in credit chains in another project we have been looking at month by month school attendance grade level completion and graduation for children in these villages following them from birth to graduation the townsend thai project is a theory based data collection endeavor measuring and mapping village and larger economies into general equilibrium frameworks this paper reviews a number of findings implications applications and lessons learned and considers next steps

explaining cross country productivity differences in retail trade many macroeconomists argue that productivity is low in developing countries because of frictions that impede the adoption of modern technologies i argue that in the retail trade sector developing countries rationally choose technologies with low measured labor productivity my theory is that the adoption of modern retail technologies is optimal only when household ownership of complementary durable goods such as cars is widespread because income is low in the developing world households own few such durables the theory implies that policies that increase measured retail productivity do not necessarily increase welfare

impact of climate change on rice production in thailand our goal is to evaluate crop yield impacts from likely climate changes for southeast asia to do so we link soil science crop modeling weather simulators and global climate change modeling into an integrated economic model of multi stage rice production the economic model is estimated with detailed monthly data on inputs operations and environmental data over a five year period we then forecast impacts under two different future economic scenarios one assuming high future global anthropogenic pollution emissions and the other assuming low we compare results of the integrated economic model with those of a biophysical model inputting into both the stochastic realizations of a weather generator calibrated against the present no climate benchmark and against the two climate mild and severe climate change scenarios the more realistic forecasts from socio economic model thus include important farmer behavioral mitigation strategies we discuss both aggregate average impacts as well heterogeneity in response

environmental income and rural livelihoods a global comparative analysis this paper presents results from a comparative analysis of environmental income from approximately 8000 households in 24 developing countries collected by research partners in cifor s poverty environment network pen environmental income accounts for 28 of total household income 77 of which comes from natural forests environmental income shares are higher for low income households but differences across income quintiles are less pronounced than previously thought the poor rely more heavily on subsistence products such as wood fuels and wild foods and on products harvested from natural areas other than forests in absolute terms environmental income is approximately five times higher in the highest income quintile compared to the two lowest quintiles

consumption and time use over the life cycle we incorporate home production in a dynamic general equilibrium model of consumption and savings with illiquid housing and a collateralized borrowing constraint the calibrated model explains life cycle patterns of households time use and consumption of different categories documented from the microdata it predicts that the interaction of the labor efficiency profile and the home production technology explains households time use the resulting income profiles the endogenous borrowing constraint and home production account for the initial hump in consumption the complementarity of home hours home input and housing in home production drives the consumption profiles later in the life cycle

the retirement consumption puzzle evidence from a regression discontinuity approach in this paper we investigate the size of the consumption drop at retirement in italy we use micro data on food and total non durable household spending covering the period 1993 2004 and evaluate the change in consumption that accompanies retirement by exploiting the exogenous variability in pension eligibility to correct for the endogenous nature of the retirement decision we take a regression discontinuity design approach and make the identifying assumption that consumption would be the same around the threshold for pension eligibility if individuals would not retire we check in our data that a non negligible fraction of individuals retire as soon as they become eligible and estimate at 9 8 the part of the non durable consumption drop that is associated with retirement induced by eligibility we show that such fall is not driven by liquidity problems for the less well off in the population and can be accounted for by drops in goods that are work related expenses or leisure substitutes however we also show that retirement induces a significant drop in the number of grown children living with their parents and this can account for most of the retirement consumption drop

the retirement consumption puzzle in china abstract using data from china s urban household survey and exploiting china s mandatory retirement policy we use the regression discontinuity approach to estimate the impact of retirement on household expenditures retirement reduces total non durable expenditures by 20 percent among the categories of non durable expenditures retirement reduces work related expenditures and expenditures on food consumed at home but has an insignificant effect on entertainment expenditures after excluding these three components retirement does not have an effect on the remaining non durable expenditures it suggests that the retirement consumption puzzle might not be a puzzle if a life cycle model with home production is considered

taxes and time allocation evidence from single women and men the classic model of becker 1965 suggests that labor supply decisions should be analyzed within the broader context of time allocation and market good consumption choices but most empirical work on policy has focused exclusively on measuring impacts on market work this paper examines how income taxes affect time allocation during the entire day and how these time allocation decisions interact with expenditure patterns using the panel study of income dynamics from 1975 to 2004 we analyze the response of single women s housework labor supply and other time to variation in tax and transfer schedules across income levels number of children states and time we find that when the economic reward to participating in the labor force increases market work increases and housework decreases with the decrease in housework accounting for approximately two thirds of the increase in market work analysis of repeated cross sections of time diary data from 1975 to 2004 shows that home production decreases substantially when market hours of work increase in response to policy changes data on expenditures from the consumer expenditure survey from 1980 to 2003 show some evidence that expenditures on market goods likely to substitute for housework increase in response to a greater incentive to join the labor force the baseline estimates imply that the elasticity of substitution between consumption of home and market goods is 2 61 the results are consistent with the becker model meanwhile single men show little response to changes in tax policy and we are able to rule out an elasticity of substitution between home and market goods for this group of more than 1 52

equilibrium price dispersion in retail markets for prescription drugs this study seeks to establish the empirical importance of price dispersion due to costly consumer search by examining retail prices for prescription drugs posted prices in two geographically distinct markets are shown to vary considerably across pharmacies within the same market even after one controls for variation due to pharmacy differences pharmacy heterogeneity accounts for at most one third of the observed price dispersion the empirical analysis hinges on the observation that consumers incentives to price shop depend on characteristics of the drug therapy cross sectional patterns in price distributions across drugs are consistent with the predictions of a search model prices for repeatedly purchased prescriptions for which the expected benefits of search are highest exhibit significant reductions in both dispersion and price cost margins

do the poor pay more for food evidence from the united kingdom does food cost more for low income households this paper compares two well known approaches to answering this question i find that quantity discounts for a broad range of foods are statistically significant and economically important however quantity discounting does not lead to the poor paying more for food i find that the poor pay less than average for the food they purchase this is explained by the poor spending a greater share of their income on foods where quantity discounting occurs copyright 2010 oxford university press

shopping externalities and self fulfilling unemployment fluctuations we propose a novel theory of self fulfilling fluctuations in the labor market a firm employing an additional worker generates positive externalities on other firms because employed workers have more income to spend and have less time to shop for low prices than unemployed workers we quantify these shopping externalities and show that they are sufficiently strong to create s complementarities in the employment decisions of different firms and to generate multiple rational expectations equilibria equilibria differ with respect to agents rational expectations about future unemployment we show that negative shocks to agents expectations lead to fluctuations in vacancies unemployment labor productivity and the stock market that closely resemble those observed in the us during the great recession

retirement and home production a regression discontinuity approach existing studies show that individuals who retire replace some private consumption with home production but do not consider joint behavior of couples here we analyze the causal effect of retirement of each partner on hours of home production for both partners in a couple our identification strategy exploits the earliest age retirement laws in france enabling a fuzzy regression discontinuity approach we find that own retirement significantly increases own hours of home production and the effect is larger for men than for women moreover retirement of the female partner significantly reduces male hours of home production but not vice versa

full insurance in the presence of aggregate uncertainty this paper tests implications of full consumption insurance the object is to determine how much mileage can be obtained from a model with complete markets with such features as private information or liquidity constraints omitted the implication exploited is that individual consumption responds to aggregate risk but not to idiosyncratic risk the test involves regressing the change in household consumption onto the change in aggregate consumption and other right hand side variables such as the change in household income and change in employment status all variables other than the change in aggregate consumption are predicted to be insignificant in explaining the change in household consumption with observations on consumption and income for 10 695 households from the consumer expenditure survey the results are mixed the results for one specification exponential utility are mostly consistent with full consumption insurance the results for the other specification power utility are not

bounded rationality lifecycle consumption and social security abstract this paper explores an overlapping generations model of bounded rationality in which consumers only foresee the future over a subset of their life span we focus in particular on whether the model can in general equilibrium produce a hump shaped lifecycle consumption profile with a peak that matches data for the average u s consumer for a simple four period model we show that an increasing income profile along with exogenously imposed retirement are sufficient to induce a hump with no other mechanism that can account for a hump besides bounded rationality the model best fits the salient features of consumption data with a planning horizon of 20 years which is well supported by the behavioral evidence found in surveys on retirement planning finally we show that the age of the consumption peak is robust to the introduction of social security mortality risk and another species of bounded rationality quasihyperbolic discounting moreover social security can be welfare improving with a short planning horizon we can calibrate the model to jointly explain the timing of the consumption hump and the optimality of the current social security system with quasihyperbolic discounting instead we can calibrate the model so the current social security system is optimal but we cannot also account for the timing of the consumption hump if we add quasihyperbolic discounting in addition to a short planning horizon the present bias has a negligible effect in equilibrium

household choices in equilibrium this paper is an empirical investigation of equilibrium restrictions on household consumption and male labor supply it exploits a simple factor structure rationalized by two assumptions that household allocations are pareto optimal and that the labor market is competitive the paper estimates household preferences and tests how well this parsimonious factor structure represents panel data on married couples and time series data on asset returns most of the estimates are roughly comparable to those found in previous work no evidence against the simple factor representation is found and the intertemporal capital asset pricing model is not rejected copyright 1990 by the econometric society

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

economies of scale in the household puzzles and patterns from the american past i introduction in one example of economies of scale households with multiple members are able to achieve the same standard of living at lower per capita expenditures on public goods than smaller households for example if two adults unite to form one household the couple will be better off as they can share public goods such as housing lowering per capita expenditure on them the couple can funnel these savings into increased consumption of public goods more spacious housing than either could afford separately making each member better off than they were when they lived by themselves the basic idea has strong intuitive appeal living standards for households of different sizes could be equated with lower per capita expenditures for larger households who are able to economize on public goods household economies of scale are therefore fundamental to the measurement of living standards measuring the distribution of income the costs of children the extent of poverty and poverty thresholds necessitates an accounting for these economies of scale one difficulty with household economies of scale is that it can be difficult to estimate the size of the scale economy and household economies of scale are not as well defined as scale economies in production while economies of scale are a function of the size of the household the demand for goods and services generally derives from both household size and composition when researchers turned their attention to economies of scale in the household they overcame the problem of detection and measurement by concentrating on adult only households as in nelson 1988 measuring economies of scale for households where all members are the same type have identical tastes and are treated equally will not aid in the measurement of poverty the distribution of income and the costs of children where compositional heterogeneity matters a second difficulty lies in the income and substitution effects that scale economies have on private goods while both the income and substitution effects imply increased consumption of public goods the income and substitution effects work in opposite directions for private goods and it is not possible to know which effect will dominate unless we know more about the private good private goods that have low own and cross price elasticities and sizable income elasticities are goods whose consumption is likely to increase with household size the increased consumption of those private goods could be taken as a measure of household economies of scale where larger households are better off in terms of private consumption due to scale economies in public consumption using this insight deaton and paxson 1998 suggested that food would be a good choice for a private good where the income effect will dominate because food has few substitutes and they argue that substitution away from food will be less likely for households close to subsistence this implies that food expenditures should increase with household size the savings realized on public goods would be funneled to food a necessity that has few substitutes rather than increasing with household size deaton and paxson found that food expenditure per capita decreases with household size after considering and dismissing a number of possible explanations they conclude that their empirical results are a puzzle a literature analyzing this food puzzle has developed deaton and paxson 2003 gan and vernon 2003 gardes and starzec 2000 gibson 2002 gibson and kim 2007 horowitz 2002 perali 2001 vernon 2005 but research on household scale economies has yet to look at how or if scale economies change over time just as knowledge about scale economies at a point in time allows us to estimate the extent of poverty and inequality knowledge about changes in scale economies are useful for analyzing changes in living standards over time even more knowledge about changes in scale economies is important since average household size has changed over time

what accounts for the variation in retirement wealth among u s households even among households with similar socioeconomic characteristics saving and wealth vary considerably life cycle models attribute this variation to differences in time preference rates risk tolerance exposure to uncertainty relative tastes for work and leisure at advanced ages and income replacement rates these factors have testable implications concerning the relation between accumulated wealth and the shape of the consumption profile using the panel study of income dynamics and the consumer expenditure survey we find little support for these implications the data are instead consistent with rule of thumb mental accounting or hyperbolic discounting theories of wealth accumulation jel di d91 e21

predictive power in behavioral welfare economics when choices appear inconsistent duet obehavioral biases there is a theoretical debate about whether or not it is necessary to impose the structure of a model in order to provide meaning ful welfare guidance based on such choices to address this question empirically we evaluate the predictive power of the model free and non parametric approach to welfare analysis proposed by bernheim and rangel 2009 in two standard choice settings we show that for most hypothetical demands this approach does not offer clear welfare guidance however we find that for most observed demands this approach can be used to make tight predictions even though these demand functions exhibit inconsistencies for the experimental choices of manzini and mariotti 2010 we show that the welfare guidance provided by these predictions is consistent with delaya version eventhough the guidance provided by revealed preferences is more ambiguous

diagnosing consumer confusion and sub optimal shopping effort theory and mortgage market evidence mortgage loans are leading examples of transactions where experts on one side of the market take advantage of consumers lack of knowledge and experience we study the compensation that borrowers pay to mortgage brokers for assistance from application to closing two findings support the conclusion that confused borrowers overpay for brokers services i a model of effective shopping shows that bor rowers sacrifice at least 1 000 by shopping from too few brokers ii borrowers who compensate their brokers with both cash and a commission from the lender pay twice as much as similar borrowers who pay no cash jel d12 d14 g21 we study a large and financially complex expenditure that the majority of consumers make only a few times in their lives the payment for mortgage origination services in these transactions information is not only imperfect but traditional market practices have likely contributed to consumer confusion these payments range from 0 to 30 000 for mortgages of normal size mortgage brokers receive payments from both borrowers and from wholesale lenders on most loans broker fees paid in cash by the borrower are usually broken down into more than a dozen individual items such as origination fee discount points funding fee and doc prep in addition to these cash payments about half of the value that the bor rower transfers to the broker takes the form of a payment from the wholesale lender to the mortgage broker the borrower bears the burden of this part of the payment in the form of a higher interest rate on the loan these payments compensate mortgage brokers for arranging mortgage loans we stress that this paper is about how and how much borrowers pay their brokers for origination services the broker is an administrator of the process of loan origination the broker bears none of the risk of default on the mortgage so that risk is not a determinant of the broker s compensation under standard theories of pricing because consumers enter the mortgage market infrequently and because features of the market make it difficult to learn the best price mortgage origination pricing

determinants of store level price elasticity using weekly scanner data representing 18 product categories the authors estimated store specific price elasticities for a chain of 83 supermarkets they related these price sensitivities to a com

taking stock a comparative analysis of payments for environmental services programs in developed and developing countries abstract payments for environmental services pes are an innovative approach to conservation that has been applied increasingly often in both developed and developing countries to date however few efforts have been made to systematically compare pes experiences drawing on the wealth of case studies in this special issue we synthesize the information presented according to case characteristics with respect to design costs environmental effectiveness and other outcomes pes programs often differ substantially one from the other some of the differences reflect adaptation of the basic concept to very different ecological socioeconomic or institutional conditions others reflect poor design due either to mistakes or to the need to accommodate political pressures we find significant differences between user financed pes programs in which funding comes from the users of the es being provided and government financed programs in which funding comes from a third party the user financed programs in our sample were better targeted more closely tailored to local conditions and needs had better monitoring and a greater willingness to enforce conditionality and had far fewer confounding side objectives than government financed programs we finish by outlining some perspectives on how both user and government financed pes programs could be made more effective and cost efficient

the role of prices in measuring the poor s living standards in this paper we revisit two pieces of conventional wisdom in the current debate about poverty paying close attention to the price data underlying these findings that the poor pay more than households of higher income for the goods and services they purchase and that poverty rates at least as measured by the u s census have remained essentially flat since the late 1960s raising questions about the success of the policies implemented to reduce poverty by examining scanner data on thousands of household purchases we find that the poor pay less not more for the goods they purchase and by extending the advances on price measurement in the recent decade back to the 1970s we find that current poverty rates are less than half of the official numbers

labor market trends and the changing value of time abstract during the past two decades households experienced increases in their average wages and expenditures alongside with divergent trends in their wages expenditures and time allocation we develop a model with incomplete asset markets and household heterogeneity in market and home technologies and preferences to account for these labor market trends and assess their welfare consequences using micro data on expenditures and time use we identify the sources of heterogeneity across households document how these sources have changed over time and perform counterfactual analyses given the observed increase in leisure expenditures relative to leisure time and the complementarity of these inputs in leisure technology we infer a significant increase in the average productivity of time spent on leisure the increasing productivity of leisure time generates significant welfare gains for the average household and moderates negative welfare effects from the rising dispersion of expenditures and time allocation across households

relative concerns for consumption at the top an intertemporal analysis for the uk abstract this paper investigates whether the consumption of rich households provides a reference point in the intertemporal consumption choices of non rich households using uk household data on food consumption we estimate the euler equation implied by a life cycle model incorporating relative concerns for the consumption of rich households according to both our ols and gmm estimates for the population of non rich households as a whole there is no evidence of such relative concerns we also examine an alternative model of relative concerns in which households overconsume when exposed to higher reference group consumption and find correlational evidence that this may be the case for food consumed away from home finally we investigate the presence of heterogeneous relative concerns across county and household characteristics in both models finding evidence of relative concerns for consumption at the top in counties with relatively low income inequality this mechanism seems to operate for food consumed away from home

estimating smallholder opportunity costs of redd a pantropical analysis from households to carbon and back summary compensating forest users for the opportunity costs of foregoing deforestation and degradation was one of the original distinguishing features of redd reducing emissions from deforestation and degradation in the early days of redd such costs for tropical smallholders were believed to be quite low but this has increasingly been questioned a decade after the concept was proposed direct payments to forest stakeholders remain rare while concerns about safeguarding livelihoods are increasing households facing restrictions on forest based activities will have to be compensated yet evidence on actual costs to households their distribution and implications for efficiency and equity is limited we estimate smallholder opportunity costs of redd in 17 sites in six countries across the tropics we use household data collected from multiple sites in multiple countries using a uniform methodology we find that opportunity costs per tco2 emissions from deforestation are less than the social costs of tco2 emissions 36 in 16 of the 17 sites in only six of the sites however are opportunity costs lower than the 2015 voluntary market price for tco2 3 30 while opportunity costs per tco2 are of interest from an efficiency perspective it is opportunity costs per household that are relevant for safeguarding local peoples income we calculate opportunity costs per household and examine how these costs differ for households of different income groups within each site we find that poorer households face lower opportunity costs from deforestation and forest degradation in all sites in a system of direct conditional payments with no transactions costs to households poorer households would earn the highest rents from a system of flat payments our findings highlight that heterogeneity and asymmetrical distribution of opportunity costs within and between communities bear important consequences on both equity and efficiency of redd initiatives

homework in labor economics household production and intertemporal substitution abstract we argue that estimates of intertemporal substitution elasticities obtained from standard life cycle models are subject to a downward bias because they neglect changes in work done at home over the life cycle we extend the standard life cycle model to include home production and estimate it using data from three time use surveys we find that the downward bias is large

consumption versus expenditure previous authors have documented a dramatic decline in food expenditures at the time of retirement we show that this is matched by an equally dramatic rise in time spent shopping for and preparing meals using a novel data set that collects detailed food diaries for a large cross section of u s households we show that neither the quality nor the quantity of food intake deteriorates with retirement status we also show that unemployed households experience a decline in food expenditure and food consumption commensurate with the impact of job displacement on permanent income these results highlight how direct measures of consumption distinguish between anticipated and unanticipated shocks to income whereas measures of expenditures obscure the distinction

the importance of product reformulation versus consumer choice in improving diet quality improving diet quality has been a target of public health policy governments have encouraged consumers to make healthier food choices and firms to reformulate food products evaluation of such policies has focused on the impact on consumer behaviour firm behaviour has been less well studied we show that the recent decline in dietary salt intake in the uk was entirely attributable to product reformulation consumer switching between products worked in the opposite direction and led to a slight increase in grocery salt intensity these findings point to the important role that firms can play in achieving public policy goals