the effect of life expectancy on fertility saving schooling and economic growth theory and evidence we construct a simple growth model where agents with uncertain survival choose schooling time life cycle consumption and the number of children we show that rising longevity reduces fertility but raises saving schooling time and the growth rate at a diminishing rate cross section analyses using data from 76 countries support these propositions life expectancy has a significant positive effect on the saving rate secondary school enrollment and growth but a significant negative effect on fertility through sensitivity analyses the effect on the saving rate is inconclusive while the effects on the other variables are robust and consistent these estimated effects are decreasing in life expectancy

are judges leading economic theory sunk costs the threat of entry and the competitive process in this paper we attempt to bring theoretical form to a particular entry argument that has found favor in the courts we suggest that sunk costs may not be a major impediment to entry when a group of customers can commit to an entry enhancing strategy buyers have strong incentives to adopt such strategies because they benefit directly from the resulting lower prices the simplest example involves a large buyer that is able to guarantee an entrant a market for its product long term contracts or even informal purchase commitments backed by customer reputation may also allow the entrant to obtain a guarantee of sufficient business to make the entry profitable once entry is thought likely to occur the existing competitors may be unwilling to attempt a price increase of any magnitude thus the threat of entry can maintain competitive prices even in the presence of sunk costs in section ii we motivate the analysis by discussing the current controversy over the role entry conditions play in an antitrust merger review then we discuss the necessary assumptions for a model of how the threat of entry can deter any price increase in the presence of sunk costs we note that these conditions are different from those commonly used in the economic literature

health education and life cycle savings in the development process this paper studies investment in health and human capital in a life cycle model health investment enhances survival to old age by improving health from its endowed level the model predicts two distinctive phases of development when income is low enough the economy has no health investment and little savings leading to slow growth when income grows health investment will become positive and the saving rate will rise leading to higher life expectancy and faster growth a health subsidy can move the economy from the first phase to the next subsidies on health and human capital investments can improve welfare

consumption vs income taxes when private human capital investments are imperfectly observable abstract this paper considers optimal taxation in an endogenous growth model where private education investments are imperfectly observable consumption taxation is better than labor income taxation for public provision of goods unless educational investment is completely unobservable if subsidies are feasible for observed education investment the consumption tax rate is independent of the degree of observability but the subsidy rate is higher the lower is the observability if subsidies are not feasible the consumption tax rate is lower the more limited is the observability optimal tax rates for goods that provide consumption and education investment simultaneously are below normal rates for observed pure consumption growth and welfare are positively related to independent of the degree of observability without with subsidies

the effect of increased longevity on capital accumulation one of the more startling demographic trends of the 1970 s has been the sharp rise in lifespan in the united states between 1970 and 1980 the life expectancy of 25year old men and women increased by at least two years while longevity has been steadily rising for many decades the recent spurt has hastened the trend the increase for both men and women in the 1970 s more than doubled the improvement of the 1960 s 1 the 1970 s were also characterized by a decline in labor force participation of older workers although rising income and increased disability payments may have explained some of the decline donald parsons 1980 it seems clear that expanding longevity has not been strongly associated with deferred retirement daniel hamermesh 1984 2 thus the retirement years have assumed greater importance in financial planning for the consumer as he or she retires earlier and lives longer the traditional life cycle model would predict greater savings rates as consumers increase accumulation of assets for their retirement consumption while young would drop and there might be an increase in labor supply as individuals substitute leisure while young for greater levels of life cycle consumption even under a social security system as long as the current generation s tax liabilities reflect their longer lifespan total savings private plus public should also rise 3 the predicted increase in savings is substantial a simple example using the modigliani ando brumberg life cycle model can illustrate the extent of the savings shift assume that earnings and consumption are constant over working years and lifespan respectively and that the interest rate is zero consumption is then a constant proportion k of earnings where k is the ratio of working years to one s lifespan if consumers made plans based on average lifespan the representative 25 year old would have saved 18 percent of earnings in 1970 1 40 49 when he plans to retire at age 65 and expects to live until age 74 in 1980 after a rise in life expectancy of two years the representative 25 year old would have increased savings to 21 percent of earnings or a net rise in the savings rate per worker of 17 percent that is this simple life cycle model implies that savings in the last decade should have risen other things held constant by approximately 17 percent or about 80 billion dollars per year the evidence from aggregate time series data appears to contradict the life cycle model s prediction of rising savings rates the net private savings rate in the united states declined from 7 8 percent of nnp in 1970 to 6 2 percent in 1980 while alan auerbach 1982 has suggested that some of the reported decline in savings may be caused by mismeasurement it seems clear that there has been no substantial rise in the savings rate there are numerous explanations for department of economics university of virginia charlottesville va 22901 i am grateful to maxim engers daniel hamermesh william r johnson laurence j kotlikoff john strauss and especially james davies and john r wolfe for helpful suggestions and comments life table data can be found in daniel hamermesh 1985 the life insurance fact book various years or in unpublished form from the national center for health statistics 2john wolfe 1983 provides an ingenious argument for why the social security benefit schedule has induced those with shorter life expectancies to retire early we might therefore expect some rise in the average retirement age as those expecting to live longer defer retirement until age 65 3if the social security taxes do not rise as expected lifespan increases perhaps because current tax proceeds are paid out as current benefits rather than retained in a trust fund young workers will save more to offset the lower expected benefits in the future 4in a two period model the percentage change in savings by the young is equal to the percentage change in aggregate savings

a long run perspective on saving historical estimates of long run gross savings rates are provided for 11 countries which represent about 48 per cent of world product in real terms and close to half of world savings even though savings rates declined over the past decade in nine of the 11 countries present rates are usually well above their prewar levels factors which influence savings rates are also examined

some empirical evidence on the effectiveness of antimerger relief in the united states the paper seeks to flll the void in the empirical economics literature of u s antimerger policy a new empirical measure of relief secured in a section 7 case is proposed the extent of obtained relief is modeled as a fraction of the competitive overlap subject to structural divestiture the model of determination of the relative size and scope of divestiture is applied to a sample of recent section 7 cases the estimated model is reasonably successful at predicting the outcomes of several out of sample cases

support for rational expectations models with u s data abstract this paper compares simplified versions of three macroeconomic models the income expenditure model the st louis model and the rational expectations model nominal income and inflation rate reduced form equations that nest all three theories are fitted to u s quarterly data for period 1951 4 to 1980 2 tests of exclusion restrictions indicate that 1 potential output affects the inflation rate but not nominal income 2 non stationary parameters characterize the inflation equation but not the nominal income equation 3 money affects the inflation rate quicker during periods characterized by volatile money growth rates and by low values of lucas parameter these findings suggest that the rational expectations model best describes the data

mortality decline and long run economic growth this paper examines the impacts of mortality decline on long run growth in a dynastic family two sector growth model with social security a rise in longevity has direct effects on fertility human capital investment and growth as well as indirect effects through increasing unfunded social security contributions both the direct and indirect effects depend on the relative strength of the tastes for the number and welfare of children and may have different signs the net effects of rising longevity on fertility tend to be negative but positive on human capital investment and growth c 2001 elsevier science s a all rights reserved

aids crisis and growth abstract we investigate an olg economy where an aids epidemic influences human capital accumulation and growth through the creation of large numbers of orphans we study how intra family allocations regarding school and work time of children are adjusted in the face of aids within a family and how in turn these adjustments influence accumulation of physical and human capital we compute the aggregate effects of an aids epidemic on human and physical capital accumulation and growth we find that growth effects of an aids epidemic are large some policies such as subsidization of aids medication have relatively small effects

early mortality declines at the dawn of modern growth we explore the hypothesis that demographic changes which began in the seventeenth and eighteenth centuries are at the root of the acceleration in growth rates at the dawn of the modern age during this period life tables for geneva and venice show a decline in adult mortality french marriage registers reveal an important increase in literacy historians measure an acceleration of economic growth we develop an endogenous growth model with a realistic survival law in which rising longevity increases individual incentives to invest in education and fosters growth we quantitatively estimate that the observed improvements in adult mortality account for 70 of the growth acceleration in the pre industrial age

fight fold or settle modelling the reaction to ftc merger challenges i introduction scholars studying law and economics have identified four stages through which every legal dispute moves the first stage involves an alleged injury which leads to the legal dispute second the injured party decides whether to advance a claim once a claim is advanced the plaintiff and defendant may negotiate to settle the claim if the negotiation fails the dispute moves to litigation by subdividing the legal process into these four stages it is possible to study the interaction at any one stage in greater detail this paper models the third stage of this process in an antitrust setting the interaction between the federal trade commission ftc and private parties interested in consummating horizontal mergers that may adversely affect competition the ftc must decide whether to advance a claim against the merger and seek to block the transaction if such a claim is made the merging parties may fight forcing a resolution of the dispute through litigation by moving forward with the transaction they may also fold abandoning the transaction or settle entering into an agreement with the government to resolve the issues underlying the merger challenge this decision to fight fold or settle is somewhat more complicated than the standard settle or litigate question because the prospective nature of the alleged competitive injury gives the defendant an opportunity to abandon the transaction before the injury occurs our basic hypotheses with respect to this process are that firms decisions depend not only on the competitive merits of the ftc s case but perhaps more importantly on the political conglomerate and financial nature of the relevant transaction and how the nature of the case fits into the merger review process section ii presents the background for the analysis by discussing the institutional structure of the ftc explaining the merger review process and then presenting an overview of a firm s options when faced with a decision by the ftc to block a merger section iii models the decision faced by firms defines the equations to be estimated and surveys the data set of ftc merger challenges a multinomial logit model of a firm s fight fold or settle decision is estimated in section iv followed by an interpretation of the results and an application of the model using both historical data and information from mergers proposed during fiscal 1992 and 1993 we find that the level of the competitive overlap associated with the relevant transaction is an important determinant of firms fight fold or settle decisions in particular if the competitive overlap involves a small percentage of the transaction firms generally prefer to reach a negotiated settlement with the commission in such cases the settlement decision appears unaffected by the underlying merits of the ftc s legal position in other cases the merits of the case may play a role in the firm s litigation decision we also find that the potential efficiencies offered by the merger affect the firms decision making process with firms more likely to fight and less likely to settle if the merger is expected to generate efficiencies ii issues in merger enforcement background on the federal trade commission the ftc is a government agency charged along with the antitrust division of the department of justice with enforcing the antitrust laws much of the antitrust casework involves the evaluation of the competitive effects of proposed horizontal mergers 1 to interdict a proposed merger the ftc must obtain a preliminary injunction from a federal district court with possible review from the relevant court of appeals if the court declines to issue the injunction the firms are free to merge though the ftc can initiate a lengthy court process to attempt to obtain a permanent injunction against the merger commission decisions are made by a majority vote of the five commissioners each of whom are appointed by the president and confirmed by the senate for terms of up to seven years

an economic analysis of life expectancy by gender with application to the united states this paper presents an economic model to explain the behavior of life expectancy of both sexes it explicitly examines the relationship between the gender gap in life expectancy and the gender gap in pay it shows that as the latter narrows over the course of economic development the former may initially expand but will eventually shrink simulation results from our model accord with the behavior of life expectancy for both sexes since the 1940s in the united states

early settlement in european merger control we analyse the determinants of early settlement between merging parties and the european commission over remedies that remove concerns of anticompetitive effects this extends the previously narrow range of econometric literature on early settlement consistent with the theory of early settlement our results confirm the importance of delay costs and of uncertainty measured by the complexity of the economic analysis required for each merger we also find a non monotonic effect of agency resourcing which raises questions about the commission s efficiency in times of high case load econometrically we select a sample of merger decisions in which the european commission intervened due to concerns of anticompetitive effects and our selection model provides estimates of the factors determining intervention by the commission conclusions are drawn for public policy

court politics the political economy of tort awards abstract we investigate the forces that explain why trial awards differ across the united states in 23 states judges are elected and in 10 they are elected via partisan elections elections have two important effects first defendants are often out of state nonvoters while plaintiffs are typically in state voters we predict therefore that elected judges will redistribute wealth from out of state businesses to in state plaintiffs second the realities of campaign financing require judges to seek and accept campaign funding from trial lawyers who uniformly are interested in larger awards we hypothesize that these two forces cause awards to be larger in states where the judiciary is elected rather than appointed we also hypothesize that the demand for redistribution will increase as poverty increases and thus that awards will be larger in states with greater poverty using a sample of over 7 000 cases across 48 of the 50 states we find significant evidence in support of these hypotheses

government health spending and growth in a model of endogenous longevity abstract we present a model of endogenous longevity that results in a non monotonic effect of government spending on economic growth the key element is the effectiveness of publicly provided health care in enhancing life expectancy

old age longevity and mortality contingent claims this paper analyzes the savings and longevity impacts of mortality contingent claims defined here as income measures such as annuities and life insurance under which earned income is contingent on the length of one s life the postwar increase in mandatory annuity and life insurance programs as well as the rapid increase in the life expectancy of older ages motivates a better understanding of the incentive effects that mortality contingent claims have on longevity related behavior we claim that these incentives in often alter the standard conclusions obtained about old age support when mortality is treated exogenously in particular we argue that annuities involve moral hazard effects that increase longevity and among other things introduce a positive interaction between public programs for health care and income support for the elderly programs that have grown enormously in developed countries

life expectancy and endogenous growth we consider an overlapping generations model with uncertain lifetime and endogenous growth individuals have to choose the length of time devoted to schooling before starting to work we show that it depends positively on life expectancy but that the positive effect of a longer life on growth could be offset by a decrease in the participation rate dynamics are characterized by a delay differential equation and human capital converges with oscillations to a balanced growth path

art of the deal the merger settlement process at the federal trade commission 1 introductiontwo firms competing with each other in at least one line of business face a complicated regulatory regime if they attempt to merge under the hart scott rodino hsr act of 1975 almost all large transactions in the united states are subject to review by either the department of justice or the federal trade commission ftc in the event an enforcement agency objects to the transaction several outcomes are possible i the parties could give up and abandon their transaction ii take the case to a federal court and litigate the dispute to a conclusion or iii the firms could settle their differences with the enforcement agency all settlements however are not the same in particular agencies have shown some willingness to accept compromise settlements defined here as consents that do not fully resolve the relevant competitive concerns the purpose of this study is to model the interaction between an antitrust agency and firms seeking to consummate mergers in doing so we will attempt to answer an important question in antitrust regulation what attributes drive the final outcome of a merger challenge this paper will model interactions between the ftc and private parties interested in consummating horizontal mergers that may adversely affect competition in at least one relevant market this decision to fight fold or settle is somewhat more complicated than an action for damages because the prospective nature of the alleged competitive injury gives the defendant an opportunity to abandon the transaction before the injury occurs moreover the conglomerate nature of most mergers creates a possibility for a strong settlement to resolve competitive concerns while allowing the firm to quickly consummate the innocuous portions of the transaction compromise settlements also are possible under which the consent offers partial relief the maximum likelihood estimation procedure used in the paper is derived directly from a game theoretic analysis that models the outcome of the interaction between merging firms and the ftc this allows for formal estimation of utility functions for both merging parties and the ftc estimating the structural equations of the model offers more detailed insight into the regulatory system we have two basic hypotheses with respect to this process first the underlying opportunity costs the legal merits of particular cases and possibly the political ramifications of enforcement decisions drive ftc decisions second firms decisions depend not only on the competitive merits of the ftc s case but perhaps more importantly on both the financial issues relevant to the specific transaction and how the nature of the case fits into the merger review process section 2 presents the background for the analysis by discussing the institutional structure of the ftc explaining the merger review process describing the hostage effects that may affect a firm s response to an ftc enforcement decision and introducing the idea of a compromise settlement section 3 models the game theoretic interaction between firms and the ftc and then explores an econometrically tractable method of estimating the underlying utility functions for the players in the game section 4 describes the data and specifications to be used results of the maximum likelihood estimation are presented in section 5 concluding comments are in section 6 we hope to shed light on an important aspect of the u s merger review process we also suggest that our results may have broader consequences since the mid 1980s a large number of countries have established formal antitrust procedures the results here may be of assistance to those policy regimes as well 2 issues in merger enforcementbackground on the ftcthe ftc is a government agency charged along with the department of justice doj with enforcing u s antitrust laws the bulk of the casework involves the evaluation of proposed horizontal mergers

vintage human capital demographic trends and endogenous growth we study how economic growth is affected by demographics in an overlapping generations model with a realistic survival law individuals optimally chose the dates at which they leave school to enter the labor market and at which they retire endogenous growth arises thanks to the accumulation of generation specific human capital favorable shifts in the survival probabilities always induce longer schooling and later retirement but have an ambiguous effect on growth the relationship between the growth of population and per capita growth is hump shaped increases in longevity can be responsible for a switch from a no growth regime to a sustained growth regime and for a positive relationship between fertility and growth to vanish