reevaluation of the employment impact of the 1996 summer olympic games using empirical methods published more recently than our earlier analysis found in this journal we continue to find a statistically significant and substantial employment impact of the 1996 summer olympic games in atlanta post olympics versus pre olympics employment gains in counties affected by the olympics exceeded employment gains in the rest of the counties in georgia by 11 by the end of 2000 in addition olympics affected counties in the metro atlanta area experienced employment gains relative to other major southern metropolitan statistical areas of roughly 5 these results stand up to robustness and falsification tests

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

political instability and savings in less developed countries evidence from sub saharan africa a four equation model is used to investigate the effects of political instability pi on the savings rate in sub saharan africa utilising a comprehensive measure of pi we find that political instability has a deleterious effect on the savings rate both directly and indirectly through a reduction in investment and economic growth the negative effects of pi on savings rate occurs contemporaneously as well as with a lag we also find that economic growth has a stabilising effect on the political system and that not accounting for these effects through a simultaneous equations model results in biased coefficient estimates these relationships are robust with respect to model specification the implication of our results is that economic factors alone cannot explain the development process in less developed countries

a neo schumpeterian model of health services innovation the paper presents and empirically applies a neo schumpeterian model of innovation capable of studying interactions between service providers patients and policy makers and how these complex interactions determine the timing direction and success of innovations in the public sector the model is tested using a case study that traces the introduction and development of ambulatory surgery in a spanish hospital the multi agent model applies the ideas of schumpeter to services encompassing schumpeter s five types of innovation and re introducing the policy maker as a key agent in the innovation process the model has a number of advantages over previous reduced form models first it can analyse the interactions between the economic social and political spheres that make up the complex selection environment of innovations second it captures the recursive impact of radical innovations on agents competences and preferences and their relative power this brings politics power and rhetorical persuasion to the fore third it provides an improved set of definitions for radical and incremental innovation these are not only important for understanding the sources and drivers of innovation but also for the accurate measurement of innovation

the effects of hospitals governance on optimal contracts bargaining vs contracting we propose a two stage model to study the impact of different hospitals governance frameworks on the optimal contracts designed by third party payers when patients disease severity is the private information of the hospital in the second stage doctors and managers interact within either a bargaining or a contracting scenario in the contracting scenario managers offer a contract that determines the payment to doctors and doctors decide how many patients to treat in the bargaining scenario doctors and managers strategically negotiate on both the payment to doctors and the number of patients to treat we derive the equilibrium doctors payments and number of treated patients under both scenarios we then derive the optimal contract offered by the government to the hospital in the first stage results show that when the cost of capital is sufficiently low the informational rent is lower and the social welfare is higher in the contracting scenario

financial intermediation and endogenous growth an endogenous growth model with multiple assets is developed agents who face random future liquidity needs accumulate capital and a liquid but unproductive asset the effects of introducing financial intermediation into this environment are considered conditions are provided under which the introduction of intermediaries shifts the composition of savings toward capital causing intermediation to be growth promoting in addition intermediaries generally reduce socially unnecessary capital liquidation again tending to promote growth

trust and the welfare state the twin peaks curve we show the existence of a twin peaks relation between trust and the size of the welfare state that stems from two opposing forces uncivic people support large welfare states because they expect to benefit from them without bearing their costs but civic individuals support generous benefits and high taxes only when they are surrounded by trustworthy individuals we provide empirical evidence for these behaviors and this twin peaks relation in the oecd countries

life is unfair in latin america but does it matter for growth summary i analyze the effect of inequality on economic growth in latin america where inequality is measured as the area of family farms as a percentage of the total area of agricultural holdings using data from 18 latin american countries during 1960 2004 i find that inequality has a nonlinear effect on economic growth overall for the countries included in this analysis the share of family farms has a positive significant effect on economic growth these findings are robust to controlling for several factors using a different indicator of inequality land gini and addressing for endogeneity

okun s law fit at 50 this paper asks how well okun s law fits short run unemployment movements in the united states since 1948 and in 20 advanced economies since 1980 we find that okun s law is a strong relationship in most countries and one that is fairly stable over time accounts of breakdowns in the law such as the emergence of jobless recoveries are flawed or exaggerated we also find that the coefficient in the relationship the effect of a 1 change in output on the unemployment rate varies substantially across countries this variation is partly explained by idiosyncratic features of national labor markets but it is not related to differences in employment protection legislation

liquidity risk and banks asset composition implications for monetary policy monetary growth models in which the government is a net debtor demonstrate that inflation adversely affects capital formation through the crowding out effect interestingly the results are at odds with empirical evidence in particular recent studies point to an asymmetric relationship between inflation and the real economy across countries specifically inflation and output are negatively correlated in poor countries in contrast inflation is associated with higher levels of economic activity in advanced economies i present a monetary growth model with public debt where the exposure to risk is inversely related to the level of income in this setting i demonstrate that the effects of monetary policy depend on the level of capital of the economy in poor countries banks portfolios consist primarily of government liabilities therefore a higher rate of money creation inhibits capital formation in these economies in contrast banks devote more resources toward productive uses in advanced countries consequently monetary policy generates a tobin effect

a revised tobin effect from inflation relative input price and capital ratio realignments usa and uk 1959 1999 the paper studies the realignments induced by inflation within an endogenous growth monetary economy accelerating inflation raises the ratio of the real wage to the real interest rate and so raises the use of physical capital relative to human capital across all sectors we find cointegration evidence for the us and uk economies consistent with a general equilibrium tobin type effect of inflation on input prices and capital intensity even while the growth rate of output is reduced by inflation

the long run relationship between inflation and output in postwar economies abstract we investigate the relationship between inflation and real output in a large sample of postwar economies our methodology is to use a structural vector autoregression to estimate the response of the level of real output to permanent inflation shocks separately for each country we find that a permanent shock to inflation is not associated with a permanent movement in the level of real output for most countries in our sample the main exceptions are certain low inflation countries in which permanent inflation shocks permanently increase the level of output we also find that permanent inflation shocks do not permanently influence real output growth rates in our sample

trust and development in this paper we examine linkages between social trust and economic development using for the first time a panel of data we confirm earlier cross sectional studies finding that trust is a significant factor in development and also show for the first time that trust significantly interacts with both investment in physical and human capital we provide a robustness analysis of our results via a set of jackknife experiments on our main equations and the trust coefficients and interactions are very tightly distributed indicating that the results are not highly sample dependent we also consider whether trust directly influences investment and find that in a panel framework it does not unless we allow for a trust education interaction in the investment equation

banking crises and liquidity in a monetary economy abstract this study investigates banks liquidity provision using the lagos and wright model of monetary exchange with aggregate uncertainty we show that banks sometimes exhaust their cash reserves and fail to satisfy their depositors needs for consumption smoothing we also show that banking crises can be eliminated by a rate of return equalizing policy under perfect risk sharing but the first best outcome can be only achieved with the friedman rule these results cannot be obtained with other monetary models e g overlapping generations models we also derive a rich array of non trivial effects of inflation on equilibrium deposits the probability of banking crises and banks portfolios

long run neutrality high inflation and bank insolvencies in argentina and brazil abstract using long low frequency data on money and output over 1884 1996 for argentina and over 1912 1995 for brazil it is found that money is long run neutral but not long run superneutral with regard to real output a rise in money growth is associated with a decline in output the opposite of the tobin effect the introduction of dummy variables for 1930s or to capture recent periods of financial disruption associated with bank insolvencies does not restore long run superneutrality for either country however results indicate that bank insolvency episodes have a distinct and negative influence on output

rethinking social insurance economics 1 social insurance programs have become the most important the most expensive and often the most controversial aspect of government domestic policy not only in the united states but also in many other countries including developing and industrialized nations in the united states these programs include social security retirement disability and survivor insurance unemployment insurance and medicare insurance for those age 65 and older together these programs accounted for 37 percent of federal government spending and more than 7 percent of gdp in 2003 these ratios have increased rapidly in the past and are projected to increase even faster in the future because of the more rapid aging of the population i will discuss how the major forms of social

fiscal policy in good and bad times in this paper we analyze whether the effect of fiscal policy differs across the business cycle to tackle this question we use a regime switching error correction framework where nonlinearities are only modeled in the short run and have no impact on the long run equilibrium regime specific shocks to government revenue and government purchases are identified using sign restrictions linear combinations of the impulse responses of these basic shocks are used to construct a deficit spending shock and a deficit financed tax cut shock we find that active spending policies have a stronger impact in recession with multipliers exceeding unity and should be preferred to deficit financed tax cuts

explaining the decline of the u s saving rate the role of health expenditure between 1980 and 2007 the u s personal saving rate declined from 11 percent to 3 percent in this paper we provide evidence that most of the decline can be explained by rising health expenditures we rst employ reduced form methods and exogenous variation in medical expenses generated by fda drug approvals to document that a 1 percentage point increase in health expenditure generated a decline in the saving rate that is between 0 73 and 0 89 percentage points using this result we calculate that the rise in health expenditure explains about 90 percent of the drop in the saving rate we then develop and estimate a model of consumption saving and health decisions to evaluate which mechanisms are behind the decline using the estimated model we document that the rise in medical expenses and drop in the saving rate are driven mainly by progress in health technology during the years 1995 2010 by the reduction in co payment rates in the period 1986 1994 and by improvements in income processes for the years 1980 1985

accumulation of human capital in ldcs in the presence of unemployment this paper takes up an aggregative growth framework to study how human and physical capital evolve over time as households allocate their investment between the two assets in the context of unemployment of educated labor it develops a general equilibrium model of an economy with two sectors a composite good sector and a schooling sector where output is subject to increasing returns to scale a temporary equilibrium for this economy depends on the endowments of physical and human capital as well as on the output elasticity of returns to scale and the price elasticity of education the dynamic evolution of this economy is explored in terms of the accumulation of the two types of capital a rise in education subsidy increases the demand for education at the cost of investment in physical capital and could lead to inefficient substitution between skilled and unskilled workers in the long run copyright 1994 by the london school of economics and political science

a change point analysis of the impact of environmental federalism on aggregate air quality in the united states 1940 98 i introduction a major purpose of this article is to examine three important national air pollution series nitrogen oxides nox sulfur dioxides so2 and volatile organic compounds vocs for change points in their trends and in so doing determine to what extent president ronald reagan s environmental federalism economic report of the president 1982 p 44 had any effect on the trends of these series did his devolution of environmental policy from federal control to state and local control positively or negatively affect the trends in these series did the reagan devolution provide the impetus for the beneficial trends in these series that we currently observe might the aggregate series we examine tell us anything about the current controversy concerning whether increased state and local competition in environmental decision making might give rise to a race to the bottom or race to the top with respect to the stringency of environmental standards see for example cumberland 1981 glazer 1999 list and gerking 2000 first to give proper context to these questions we must take a brief look at the history of environmental policy making in the united states before 1955 there was very little environmental policy making two major exceptions were the federal refuse act of 1899 and the federal food drug and cosmetic act of 1938 the first act prevented navigational obstruction of waterways and the second act set limits on the amount of pesticide residuals allowed in farm products however beginning in 1955 federal activism concerning the environment increased resulting in the enactment of several federal environmental laws the air pollution act of 1955 facilitated cross state air quality management the clean air act of 1963 provided permanent federal support for research on air pollution the motor vehicle air pollution control act of 1965 was aimed at decreasing the level of air pollution from vehicles and the air quality act of 1967 provided national auto emissions standards moreover the clean air act of 1970 established the environmental protection agency epa for the purpose of setting and enforcing national environmental quality standards in the following year the epa established the uniform national ambient air quality standards naaqs the clean air act was amended in 1977 primarily to set new goals for achieving the naaqs in contrast to the previous 1955 80 era of federal control of air quality standards much of the environmental decision making power was devolved from the federal level to the state and local levels under the presidential administrations of ronald reagan 1981 89 and george herbert walker bush 1989 93 this policy regime shift has been referred to as the shift to environmental federalism economic report of the president 1982 p 44 with respect to environmental federalism figures 1 and 2 display governmental expenditures for air pollution abatement and control obtained from vogan 1996 unfortunately the bureau of economic analysis of the commerce department discontinued their pollution abatement and control survey with the vogan article and more recent abatement and control data are unavailable to extend the series in figures 1 and 2 beyond 1994 figures 1 2 omitted in figure 1 we have plotted total governmental expenditures for air pollution abatement and control in 1992 chain weighted dollars obviously from 1972 90 total real governmental expenditures oscillated at or below 1 trillion 1992 dollars and there was no discernible trend in total governmental commitment to environmental policy however beginning in 1991 real expenditures on abatement and control doubled to approximately 2 trillion 1992 dollars with respect to the federal to state and local devolution figure 2 displays the proportion of state and local expenditures to total governmental expenditures both in current and real 1992 dollars

political equilibrium income distribution and growth this paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy the model has three main features first very different patterns of income distribution are conducive to high growth at different levels of per capita income second growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups thus potentially enabling them to invest in human capital third the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted in which case growth is enhanced or prevented in which case growth is stopped using a non overlapping generations model with voting i derive several empirical implications in particular the model implies an inverted u relation between levels of inequality and levels of income in cross sections but not necessarily in time series a result that seems consistent with a number of empirical studies

the credit channel transmission mechanism and the nonlinear growth and welfare effects of inflation and taxes with the credit channel effect driven by the central bank s open market operations this paper s model easily gives rise to the nonlinear inflation growth nexus which is evidenced by a number of cross country empirical studies the threshold level of the inflation rate is found to be lower when tax rates are higher the presence of the credit channel effect also provides the rationale for setting positive and smaller than 1 tax rates on consumption labor income and capital income the optimal tax rates rise as the inflation target declines under a fiscal policy rule where labor and capital income taxes move proportionally to each other the optimal capital income tax rate could be higher than the optimal labor income tax rate under a sufficiently large central bank balance sheet the credit channel effect will be so weak that inflation and all kinds of taxes are growth and welfare repressing this provides a rationale for central banks that have implemented quantitative easing policies to shrink their balance sheets jel e58 e62 o42

do execution moratoriums increase homicide re examining evidence from illinois this article revisits the event study by cloninger and marchesini 2006 who find that the declaration of the illinois death penalty moratorium on 31 january 2000 had a homicide promoting effect and resulted in 150 additional homicides over the period 2000 2003 we reassess the author s identification strategy which they refer to as portfolio approach and which draws upon event studies in finance research we argue that their methodology is not applicable in crime studies instead we apply univariate time series methods to test for a structural break at a known and unknown break date we allow for unknown break points as the structural break might have occurred slightly earlier criminals might have anticipated the moratorium or later due to persistence in criminal behaviour in addition we implement the synthetic control estimator which approximates the counterfactual homicide series by a weighted average of homicide outcomes in other us states based on various testing methods and two distinct

public health insurance expansions and hospital technology adoption abstract this paper explores the effects of public health insurance expansions on hospitals decisions to adopt medical technology specifically we test whether the expansion of medicaid eligibility for pregnant women during the 1980s and 1990s affects hospitals decisions to adopt neonatal intensive care units nicus while medicaid expansion provided new insurance to a substantial number of pregnant women prior literature also finds that some newly insured women would otherwise have been covered by more generously reimbursed private sources such crowd out combined with medicaid s low reimbursement rats leads to a theoretically ambiguous net effect of medicaid expansion on a hospital s incentive to invest in technology using american hospital association data we find that on average medicaid expansion has no statistically significant effect on nicu adoption however we also find that in geographic areas where more of the newly medicaid insured may have come from the privately insured population medicaid expansion slows nicu adoption this holds true particularly when medicaid payment rates are very low relative to private payment rates our findings are consistent with prior evidence on reduced nicu adoption from increased managed care penetration we conclude by discussing the policy implications of our work for insurance expansions associated with the affordable care act

income and health spending evidence from oil price shocks health expenditures as a share of gdp in the united states have more than tripled over the past half century a common conjecture is that this is a consequence of rising income we investigate this hypothesis by instrumenting for local area income with time series variation in oil prices interacted with local oil reserves this strategy enables us to capture both partial equilibrium and local general equilibrium effects of income on health expenditures our central income elasticity estimate is 0 7 with 1 1 as the upper end of the 95 confidence interval which suggests that rising income is unlikely to be a major driver of the rising health expenditure share of gdp 2013 the president and fellows of harvard college and the massachusetts institute of technology

liquidity risk and financial competition implications for asset prices and monetary policy abstract this paper studies the implications of banking competition for capital markets and monetary policy in particular i develop a two sector monetary growth model in which a group of agents is exposed to liquidity shocks and money is essential banks insure depositors against such risk and invest in the economy s assets in this setting i compare an economy with a perfectly competitive banking sector to an economy with a fully concentrated financial sector unlike previous work banks can have market power in both deposits and capital markets compared to a perfectly competitive financial sector i demonstrate that a monopolistic banking system can have substantial adverse consequences on capital formation assets prices and the degree of risk sharing furthermore multiple steady states can emerge and the economy becomes subject to poverty traps more importantly market power in financial markets may overturn the tobin effect present under a perfectly competitive financial sector this necessarily happens in economies with high degrees of liquidity risk and low levels of capital formation

health care costs on the rise again since 1999 health care costs have been growing faster than national income this rapid growth has occurred as the ability of private and public purchasers to reduce service utilization and bargain for lower prices has fallen insurers have recouped lost profits through higher premiums and new technologies have driven up costs throughout the sector private insurance market responses to these rising costs may lead to reductions in the number of people with insurance and to increased fragmentation of the insurance market over time technological change in medicine both increases costs and improves the quality of care the challenge for public policy is to maintain insurance and some degree of equity in the face of these rising costs

monetary policy arithmetic reconciling theory with evidence empirical evidence indicates that in countries with low inflation rates a permanent decrease in inflation rate either has no impact on capital stock and output superneutrality or causes them to fall moderately existing budget arithmetic models of monetary policy cannot deliver superneutrality in this paper we conduct a budget arithmetic analysis of monetary policy using a money demand specification money in the utility function that is new to this literature we find that one simple assumption about utility from money delivers superneutrality while a more general assumption delivers departures from superneutrality in the direction consistent with the evidence jel classification e60 e13

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

economic organization with limited communication this paper presents formal stylized representations of communication accounting systems oral assignment portable object written message and telecommunication systems are considered the environments that allow this formalization are characterized by spatial separation private information and a need to keep track of past actions transfers and shocks in environments that have spatial separation and private information beneficial multilateral arrangements can depend critically on agents ability to communicate to one another values of contemporary shocks and to keep track of histories of past transfers or past announced shocks this paper formalizes this idea and focuses on com

money banking and capital formation we consider a monetary growth model in which banks arise to provide liquidity in addition there is a government that issues not only money but interest bearing bonds these bonds compete with capital in private portfolios when the government fixes a constant growth rate for the money stock we show that there can exist multiple nontrivial monetary steady states one of these steady states is a saddle while the other can be a sink moreover paths approaching a steady state can display damped endogenous fluctuations and development trap phenomena are common across different steady states low capital stocks are associated with high nominal interest rates the latter signal the comparative inefficiency of the financial system also increases in the steady state inflation rate can easily reduce the steady state capital stock journal of economic literatureclassification numbers e13 e44 e50 g20 o16

positive versus normative economics what s the connection evidence from the survey of americans and economists on the economy and the general social survey previous research suggests that positive and normative beliefs about economics are largely unrelated using questions from two national surveys this study finds that a the underlying determinants of positive and normative beliefs are strikingly similar b education is by far the strongest overall determinant of both positive and normative beliefs and c the variables known to push positive beliefs in the same direction as formal economic training education male gender income growth and job security also push normative beliefs in the same direction these results strongly suggest that the positive normative connection has been underestimated

projecting long term medical spending growth we present a dynamic general equilibrium model of the u s economy and the medical sector in which the adoption of new medical treatments is endogenous and the demand for medical services is conditional on the state of technology we use this model to prepare 75 year medical spending forecasts and a projection of the medicare actuarial balance and we compare our results to those obtained from a method that has been used by government actuaries our baseline forecast predicts slower health spending growth in the long run and a lower medicare actuarial deficit relative to the previous projection methodology

systematically biased beliefs about economics robust evidence of judgemental anomalies from the survey of americans and economists on the economy differences between the general public s positive economic views and economists resemble other judgemental anomalies laypeople and experts systematically disagree i analyse this puzzle using data from the survey of americans and economists on the economy the paper first tests and decisively rejects the hypothesis that the differences solely reflect economists self serving bias then it examines whether economists political ideology and party loyalties explain the disagreement if anything this slightly increases their magnitude the effect of economic training clearly falls but remains large after adding education to the set of control variables apparent biases robustness suggests that the anomaly is real

what makes people think like economists evidence on economic cognition from the survey of americans and economists on the economy abstract the positive economic beliefs of economists and the general public systematically differ what factors make noneconomists think more like economists using the survey of americans and economists on the economy this paper shows people think more like economists 1 if they are well educated 2 if they are male 3 if their real income rose over the last 5 years 4 if they expect their real income to rise over the next 5 years or 5 if they have a high degree of job security however neither high income nor ideological conservatism have this effect my findings for education gender and income have close parallels in political science on tests of objective political knowledge the better educated and males score higher controlling for numerous other variables and the independent effect of income is minor

on the flow of funds accounts and inter sectoral mobility of capital in india this study uses the flow of funds accounts framework and undertakes an in depth analysis of the inter sectoral mobility of capital in india unlike previous studies the fh model is estimated at th

trade costs and the home market effect most of the theoretical and empirical studies on the home market effect hme assume the existence of an outside good that absorbs all trade imbalances and equalizes wages we study the consequences on the hme of removing this assumption the hme is attenuated and more interestingly it becomes non linear the non linearity implies that the hme is more important for very large and very small countries than for medium size countries the empirical investigation conducted on a database comprising 25 indus tries 25 countries and 7 years con rms the presence of the hme and of its non linear shape

economists views about parameters values and policies survey results in labor and public economics specialists in labor economics and public economics at 40 leading research universities provided opinions of policy proposals quantitative best estimates and 95 percent confidence intervals for economic parameters and answers to values questions regarding income redistribution efficiency versus equity and individual versus social responsibility their positions on policy are more closely related to their values than to their estimates of relevant economic parameters average best estimates of the economic parameters agree well with the relevant literature but individual best estimates are usually widely dispersed the individual 95 percent confidence intervals are much narrower than the substantial cross respondent variation in estimates would warrant

contrasting models of the effect of inflation on growth the paper formulates a nesting model for studying the theoretical literature on inflation and endogenous growth it analyses different classes of endogenous growth models with different usage of physical and human capital with different exchange technologies first the paper shows that a broad array of models can all generate significant negative effects of inflation on growth second it shows that these models can be differentiated primarily by the fact whether there is a tobin type effect of inflation and also whether the inflation growth effect becomes weaker as the inflation rate rises a non linearity or stays essentially constant over the range of inflation rates the paper compares these features of the models to empirical evidence as a way to summarize the efficacy of the models

international evidence on the long run impact of inflation in this paper i use a structural vector autoregression framework to analyze the effects of a permanent change in inflation on the long run real interest rate and real output level in 14 industrialized countries long run monetary superneutrality is rejected for all 14 countries using annual data the results indicate that a permanent increase in inflation lowers the long run real interest rate in each country a permanent increase in inflation also increases the long run real output level in a number of countries long run monetary superneutrality is also rejected for four out of the five countries examined using quarterly data under long run monetary superneutrality lrsn a per

the aggregate effects of health insurance evidence from the introduction of medicare this paper investigates the effects of market wide changes in health insurance by examining the single largest change in health insurance coverage in american history the introduction of medicare in 1965 i estimate that the impact of medicare on hospital spending is over six times larger than what the evidence from individual level changes in health insurance would have predicted this disproportionately larger effect may arise if market wide changes in demand alter the incentives of hospitals to incur the fixed costs of entering the market or of adopting new practice styles i present some evidence of these types of effects a back of the envelope calculation based on the estimated impact of medicare suggests that the overall spread of health insurance between 1950 and 1990 may be able to explain about half of the increase in real per capita health spending over this time period

anticipated inflation and the capital stock in a cash in advance economy abstract an economy is constructed in which the steady state capital stock is inversely related to the rate of inflation as a result that is directly opposite the usual conclusion

perspectives from the president s commission on social security reform recently we were asked to serve on the president s commission to strengthen social security csss along with 14 other members drawn equally from both major political parties the commission s charge was to provide recommendations to modernize the social security system restore its fiscal soundness and develop a workable system of personal retirement accounts this paper explains how the commission arrived at some of its recommendations and the role that economics played in contributing to these recommendations we describe the key institutional constraints confronting efforts to reform social security and how these constraints influenced commission decisions we also illustrate how economics research influenced the commission s analysis of how to structure personal accounts ways to enhance traditional social security program finances and means of measuring the extent of financial progress achieved through reform

income inequality human capital accumulation and economic performance we show that greater income equality implies higher human capital accumulation and economic performance in an overlapping generations model with heterogeneity in income and talent given liquidity constraints and declining marginal utility individuals with a given level of talent receive education if their initial income is higher than a threshold level and the threshold is lower for more talented individuals assuming the more talented create more human capital when educated greater initial income equality for one generation then imply not only higher aggregate human capital accumulated by that generation but an improvement in all subsequent generations initial income distributions

inflation and the capital stock there is a long literature examining the theoretical relationship between the rate of inflation and the size of the capital stock in an economy this literature has produced varied predictions about the effects of inflation on the capital stock in this paper we present some time series evidence on this issue we estimate a structural var model for thirty four countries and discover that for the majority of these countries there is no statistically significant long run effect of inflation on the capital stock moreover for countries where a significant effect is found the long run coefficient estimate is typically positive overall our empirical results support the view that the long run level of the capital stock is invariant to permanent changes in the inflation rate

on endogenous growth with physical and human capital this paper presents a class of models in which agents may devote part of their nonleisure activities to going to school so as to increase the efficiency units of labor they supply to the firms and the wages they receive the interaction among the technology of human capital accumulation and agents preferences will determine endogenously the economy s rate of growth given a constant returns to scale technology for physical capital accumulation we characterize the set of steady states as a ray from the origin and show the global convergence of every off balanced path to some point on this ray further properties concerning the dynamic evolution of the state and control variables around the ray of steady states are also established our analysis is useful to understand the role played by the technologies of physical and human capital in the process of accumulation and to evaluate the impact of policies geared toward attaining higher levels of capital our results highlight the importance of human capital

the asian financial crisis and international reserve accumulation a robust control approach abstract standard macroeconomic models have difficulties accounting for the surge in international reserves of asian countries in the aftermath of the asian financial crisis of 1997 we propose precautionary demand for saving generated by model uncertainty as an important driver of this phenomenon using korean data we estimate a simple permanent income model augmented with model uncertainty find a structural break at the point of the asian financial crisis and identify a rise in concern for model misspecification which is distinct from an increase in income volatility the post crisis concern for model misspecification implies a reasonable detection error probability we also show that learning serves as an additional powerful amplification mechanism in our framework

physician reimbursement and technology adoption this study analyses the incentives of health care providers to adopt new technologies in a world with ex post moral hazard it is shown that in a second best efficient world with respect to insurance coverage a linear remuneration scheme implements the adoption of second best efficient technologies only in special cases under a third best standard coinsurance contract the adequate reimbursement rule is characterised depending on the characteristics of the technology and on patients demand elasticities with respect to monetary and non monetary costs a shift from fee for service to capitation is likely to display undesirable incentives for very severe illnesses by inducing a reduction in the technically feasible level of healing or an increase in non monetary costs of treatment

does support from government help firms survive evidence on financial and political assistance in china 1998 2007 using the national bureau of statistics data set over the period 1998 2007 this article examines the dual roles of financial assistance and strong political links on firm survival in china by applying a semi parametric duration model we find that generally either financial assistance or strong political links had a positive effect on the likelihood of firm survival furthermore if firms received both types of support from government their survival rate was around two times as high compared to only receiving a single support the likelihood of survival depended on the amount of assistance a firm received we also find firm ownership impacts on its survival pattern lastly china joining the world trade organisation wto coincided with cet par higher firm failure especially with regard to state owned firms however this period also saw the authorities targeting political and financial help on the better firms especially soes with characteristics likely to increase their chance of survival

on the number and size of nations this paper studies the equilibrium determination of the number of countries in different political regimes and in different economic environments with more or less economic integration we focus on the trade off between the benefits of large jurisdictions and the costs of heterogeneity of large and diverse populations our model implies that i democratization leads to secessions ii in equilibrium one generally observes an inefficiently large number of countries iii the equilibrium number of countries is increasing in the amount of economic integration

liquidity risk economic development and the effects of monetary policy abstract empirical evidence indicates that monetary policy is not super neutral in many countries in particular in high inflation economies inflation is negatively related to economic activity by comparison inflation may be positively correlated with output in low inflation countries we present a neoclassical growth model with money in which the incidence of liquidity risk is inversely related to aggregate capital formation interestingly there may be multiple monetary steady states where the effects of monetary policy vary in poor economies the financial system is highly distorted and higher rates of money growth are associated with less capital formation in contrast in advanced economies a tobin effect is observed since inflation exacerbates distortions from a coordination failure in the low capital steady state individuals become much more exposed to liquidity risk consequently optimal monetary policy depends on the level of development

dollarization and the inflation threshold this paper analyzes the relationship among inflation dollarization financial intermediation and real activity empirical evidence suggests non linearity in the eects of inflation on financial intermediation and real activity i e the existence of an inflation threshold evidence also suggests that one way in which inflation aects financial intermediation in high inflation economies is through the substitution of dollars under the mattress for savings in domestic banks our model captures these empirical regularities inflation and real activity are positively related at low levels of inflation when the inflation rate exceeds certain threshold however agents substitute in their portfolios dollars a non productive asset of constant value that also provides liquidity services for deposits issued by domestic banks this substitution reduces the scale of financial intermediation and the capital investment in the economy as a consequence at high levels of inflation the levels of capital stock and output become negatively related to the inflation rate

why are latin america s savings rates so low an international comparative analysis abstract this paper presents a theoretical and empirical assessment of the determinants of savings rates with special emphasis on latin american savings rates the study is based on international comparisons using data from 36 countries for 1970 1992 a distinction is made between private and public savings the later are endogenously determined by economic and political variables per capita income growth is the most important determinant of private and public savings public savings are lower in countries with higher political instability public savings crowd out private savings but less than proportionately low latin american savings are due to the magnitudes of their determinants rather than structural differences

the importance of ethics in environmental economics with a focus on existence values the importance of ethics and fundamental value judgments in environmental economics is high lighted by discussing the controversial concept of existence values the social value depends crucially on the social objective which is not necessarily self evident e g since some individuals tend to value nature intrinsically it is shown that the motives behind willingness to pay figures matter for the social value and the conventional view that people respond to cv questions solely in order to maximize their own utility or well being is questioned the importance of being explicit about value judgments is emphasized and it is argued that environmental economics should consider non conventional assumptions which take the social context into account to a larger degree

financial markets in development and the development of financial markets what is the relationship between markets and development it is argued that markets promote growth and that growth in turn encourages the formation of markets two models with endogenous market formation are presented to analyze this issue the first examines the role that financial markets banks and stock markets play in allocating funds to the highest valued use in the economic system it is shown that intermediation will arise under weak conditions the second focuses on the role that markets play in supporting specialization in economic activity the consequences of perfect competition in market formation are highlighted

limits to substitution and irreversibility in production and consumption a neoclassical interpretation of ecological economics abstract there are many methodological approaches within ecological economics one of the principal modes of analysis is a modified version of the standard neoclassical model this paper examines the parallels which emerge between the ideas of some ecological economists concerning production and the ideas of others concerning consumption when these ideas are interpreted in the neoclassical paradigm it is well known that ecological economics is characterized by arguments concerning limits to substitution between inputs energy natural capital etc vs manufactured capital labor etc in production and the implications these have for sustainability however various authors have also expressed concerns regarding limits to substitution in consumption either between environmental assets and other goods or between basic needs commodities and other goods though the specific reasons for non substitution are different in the production and consumption cases the underlying theme is that individual commodities and other inputs have unique physical or other properties which make them poor substitutes ideas about irreversibility in production and economic development are also prominent in ecological economics likewise many authors have argued for similar irreversibilities in consumption behavior in analogy to the term technological change i coin the term preferential change to describe these phenomena the linking themes in this case are that the economy environment system is evolutionary in character and that external effects intended and unintended consequences of actions or processes imposed on other parties or resources are all pervasive

financing human development some lessons from advanced asian countries abstract this paper brings together the main conclusions of a study which has analyzed public expenditure policies pursued by today s advanced asian economies aae and their policies for financing the provision of education and health services during the high growth phase the aaes combined prudent low deficit fiscal policies with large allocations for social services this was combined with efficient public resource allocation within the social sectors for basic education and health services and reliance on the private sector for higher levels of education and expensive curative health care aae experiences with health insurance also hold useful lessons for today s developing countries

medicare reform the larger picture the medicare problem is examined as part of the larger problem of providing for the overall financial needs of the elderly several myths about medicare are discussed and sources and uses of the elderly s full income are estimated the paper explores policy options to deal with technology induced increases in health care expenditures and excessive dependence of the elderly on transfers from the young the paper concludes that if americans wish to continue to enjoy the benefits of medical advances they will have to work before and after age 65 and will have to increase their rate of saving substantially