a simple estimator for simultaneous models with censored endogenous reggressors this paper presents a simple two step estimator for models with censored endogenous regressors and sample selection bias the approach unifies the literature on censored endogenous regressors and sample selection bias and provides extensions the procedure employs generalized residuals to adjust for the inconsistency caused by the endogeneity of the censored regressors the paper also provides two new tests of weak exogeneity an empirical example examining the trade off between fringe benefits and wages indicates that the estimation procedure works well a monte carlo experiment suggests that the proposed tests have good power properties copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

diversification and heterogeneity of investor beliefs abstract in the paper we find that diversification reduces the heterogeneity of investor beliefs on firm value we obtain this finding by comparing not only between diversified and focused firms but also between diversifying and non diversifying mergers we also find that the reduced heterogeneity of investor beliefs on a diversified firm relative to its focused peers is negatively associated with its contemporaneous excess value and positively associated with its future excess value overall our results contribute to the understanding about how corporate organization structure affects the heterogeneity of investor beliefs and further firm value

speculative investor behavior and learning as traders learn about the true distribution of some asset s dividends a speculative premium occurs as each trader anticipates the possibility of reselling the asset to another trader before complete learning has occurred small differences in prior beliefs lead to large speculative premiums during the learning process this phenomenon helps explain a paradox concerning the pricing of initial public offerings the result casts light on the significance of the common prior assumption in economic models

does smoking affect schooling evidence from teenagers in rural china youth smoking can biologically reduce learning productivity it can also reduce youths expected returns to education and lower their motivation to go to school where smoking is forbidden using rich household survey data from rural china this study investigates the effect of youth smoking on educational outcomes youth smoking is clearly an endogenous variable to obtain consistent estimates of its impact we use counts of registered alcohol vendors and a food price index as instrumental variables since the variable that measures smoking behavior is censored for non smoking adolescents we implement a two step estimation strategy to account for the censored nature of this endogenous regressor the estimates indicate that smoking one cigarette per day during adolescence can lower students scores on mathematics tests by about 0 08 standard deviations however we find no significant effect of youth smoking on either chinese test scores or total years of schooling

targeting target shareholders we integrate heterogeneity and uncertainty in investor valuations into a model of takeovers investors have dispersed valuations holding shares in firms they value more highly and a successful offer must win approval from the median target shareholder we derive the consequences for an acquiring firm s takeover offer its size and cash equity structure and implications for takeover premia firm returns share price dynamics the probability that a takeover succeeds and shareholder welfare we characterize when the acquirer prefers cash offers and when equity offers are best our model collectively reconciles various empirical regularities that have proven elusive to explain in one unified framework and we derive new testable predictions this paper was accepted by neng wang finance

distinguishing between whole farm vs partial farm participation in the conservation reserve program by distinguishing between the decision to participate in the conservation reserve program crp and the decision for whole farm vs part farm participation we model participation as separate binary decisions our results suggest the farm characteristics and other factors affect the decision to participate in crp differently than the decision regarding whole farm vs part farm participation this model formulation also helps to clarify the conditions under which the effect of crp payments on the acreage enrolled in the program is positive or negative

an approach to asset pricing under incomplete and diverse perceptions we model a dynamic competitive market where in every period risk neutral traders trade a one period bond against an infinitely lived asset with limited short selling of the long term asset traders lack structural knowledge and use different incomplete theories all of which give statistically correct beliefs about next period s market price of the long term asset the more theories there are in the market the higher is the equilibrium price of the long term asset investors with more complete theories do not necessarily earn higher returns than those with less complete ones who can earn above the risk free rate we provide two necessary conditions for a trader to earn above the risk free rate

supply side and demand side cost sharing in deregulated social health insurance which is more effective abstract microeconomic theory predicts that if patients are fully insured and providers are paid fee for service utilization of medical services exceeds the efficient level moral hazard effect in switzerland both demand side and supply side cost sharing have been introduced to mitigate this problem analyzing a panel dataset of about 160 000 adults we find both types of cost sharing to be effective in curtailing the use of medical services however when moral hazard mitigation is traded off against risk selection the minimum deductible supply side cost sharing option ranks first followed by the medium deductible demand side alternative making the supply side option somewhat more effective

unemployment assistance and transition to employment in argentina abstractin 2001 2 argentina experienced a wrenching economic crisis plan jefes implemented in may 2002 was argentina s institutional response to the increase in unemployment and poverty triggered by the crisis the program provided a safety net and appears to have protected some families against indigence despite this success the continued existence of the program which provides benefits to eligible unemployed individuals for an unlimited duration may have unappealing consequences reliance on the plan may reduce the incentive to search for work and in the long run may damage individual employability and perpetuate poverty motivated by these concerns this article examines the effect of participating in plan jefes on the probability of exiting unemployment regardless of the data set the specification and the empirical approach the article shows that plan enrollees are at least 14 percentage points less likely to transit to employment as compared to individuals who applied but did not join the

hmo plans self selection and utilization of health care services this study examines the effect of health maintenance organizations hmos on the use of health care services among the privately insured nonelderly population to consider jointly the possible self selection bias and high frequency of zero observations in the applied utilization measures we accommodate the endogeneity of health plan choice decisions in the censored regression model using data from the 2000 medical expenditure panel survey we find strong evidence for favourable self selection into hmo plans health maintenance organization enrollment is found to encourage greater use of office based and hospital outpatient services overall satisfaction with the quality of care among hmo members is relatively low compared to that among nonhmo members these findings suggest that more effort is needed to develop management strategies in hmos in order to contain the moral hazard in utilization and assure the quality of service provided within the network of hmo providers

the forward premium in a model with heterogeneous prior beliefs abstract this paper explores a model of bond prices where agents have diverse prior beliefs about domestic and foreign inflation in the long run the foreign exchange forward premium reflects expected differences in inflation but in the short run it depends upon the diversity of prior beliefs if some people have diffuse priors about a country s inflation process then its currency commands a forward premium that is eventually dissipated using data on the dollar mark premium from the 1980s it shows that this kind of diversity really matters thus models with a single representative agent give an inadequate description of the data

a theory of disclosure in speculative markets this paper presents a theory of disclosure in a market where investors have heterogeneous beliefs and face short sale constraints assets trade above fundamentals reflecting the value of the option to sell to more optimistic investors in the future the initial seller has an incentive to commit to an imprecise disclosure policy despite the negative effect this has on the fundamental value of the asset in order to increase the potential for disagreement and hence the magnitude of the speculative premium i show that there is a strategic complementarity between sellers in their disclosure decisions this explains why financial misreporting and episodes of speculation occur together in waves and demonstrates that the endogenous choice of imprecise disclosure amplifies the extent to which assets are overpriced this paper was accepted by amit seru finance

impact of off farm labor supply on food expenditures of the farm household abstract farm households diversify their income sources by working off the farm this is a risk management strategy that is used by farm households in both developed and developing countries income diversification via off farm work is associated with higher incomes and food consumption however little is known about the association between off farm work and farm household food expenditures in an effort to bridge this gap this study attempts to assess the impact of off farm work decisions by the operator and or the spouse on the food expenditures of the farm household using a nationwide farm household survey in the united states and new econometric method we find that the decisions of the operator and or the spouse to work off the farm are significantly interrelated 29 however these two decisions affect food expenditures in different ways the operator s off farm work decision is positively related to food expenditures while the spouse s decision is negatively associated with expenditures on food by the farm household

why are power couples increasingly concentrated in large metropolitan areas using the panel study of income dynamics psid we test costa and kahn s colocation hypothesis which predicts that power couples couples in which both spouses have college degrees are more likely to migrate to the largest cities than part power couples or power singles we find no support for this hypothesis instead regression analyses suggest that only the education of the husband and not the joint education profile of the couple affects the propensity to migrate to large metropolitan areas the observed location trends are better explained by higher rates of power couple formation in larger metropolitan areas

explaining smallholder maize marketing in southern and eastern africa the roles of market access technology and household resource endowments research on household food grain sales behavior in developing countries has tended to focus on the roles of market access and prices to explain why many rural households do not sell staple crops though recent literature suggests that low household asset endowments may also be key constraints we use econometric analysis of panel data from smallholders in kenya mozambique and zambia to inform the design of public investments that will enable smallholders to increase their maize sales results show that investments that raise farm level productivity and land access are an essential complement to investments that improve market access

national and international privatisation of pensions abstract the paper analyses the switch from pay as you go to funded pensions pensions privatisation in a world with many small open economies it contrasts go it alone privatisation in one country with world wide privatisation in the go it alone case at least one generation necessarily loses in the world wide case the long run gains are substantially larger and depending on the nature of production technology an intergenerational pareto improvement is possible this generates a potential isolation paradox each country may individually reject privatisation because some people will lose but this need not happen if all privatised simultaneously this problem occurs because the adoption of payg pensions in any one country imposes international externalities on other countries via the impact on world interest rates

the impact of microcredit borrowing on household consumption in bangladesh the rapid expansion of microcredit in recent years renders knowledge of its impact on poverty critical unfortunately empirical investigations have been limited by endogeneity issues and randomiz

a welfare criterion for models with distorted beliefs this paper proposes a welfare criterion for economies in which agents have heterogeneously distorted beliefs instead of taking a stand on whose belief is correct our criterion asserts an allocation to be belief neutral ine cient if it is ine cient under any convex combination of agents beliefs while this criterion gives an incomplete ranking of social allocations it can identify negative sum speculation in a broad range of prominent models with distorted beliefs

shrewd crude or simply deluded comovement and the internet stock phenomenon we show that i return comovement among internet stocks during the late 1990s and early 2000 was not exceedingly high ii there was substantial consistency in the manner by which investors distinguished among internet stocks and iii high comovement is most common during periods of price erosion these results cast doubt on the view that the extraordinary appreciation of internet stocks was due to the crude classification of all such stocks as members of a hot category

hybrid seed and the economic well being of smallholder maize farmers in zambia abstractthe development and diffusion of hybrid maize in zambia since the 1970s is a major achievement in african agriculture but other than profitability studies analyses of how this process has affected the economic well being of smallholder farmers have been few we test the relationship of hybrid seed use with six indicators of economic well being after using the control function instrumental variables approach to test for the endogeneity of hybrid seed use we estimate correlated random effects cre fractional response cre tobit and fixed effects models with a panel of nationally representative data collected in 2002 3 and 2006 7 findings suggest that use of maize hybrids is associated with higher values of household income assets farm and processing equipment and livestock and less deprivation compared to other farmers in nearby villages

the chinese warrants bubble in 2005 2008 over a dozen put warrants traded in china went so deep out of the money that they were almost certain to expire worthless nonetheless each warrant was traded more than three times each day at substantially inflated prices this bubble is unique in that the underlying stock prices make warrant fundamentals publicly observable and that warrants have predetermined finite maturities this sample allows us to examine a set of bubble theories in particular our analysis highlights the joint effects of short sales constraints and heterogeneous beliefs in driving bubbles and confirms several key findings of the experimental bubble literature jel g12 g13 o16 p34

arrested development theory and evidence of supply side speculation in the housing market this paper incorporates speculation into the standard supply and demand framework used to analyze housing booms and busts speculation reverses the common intuition that elastic housing supply attenuates housing booms housing market frictions make land a more attractive speculative investment than housing as a result undeveloped land both facilitates construction and intensies

heterogeneous expectations and bond markets this paper presents a dynamic equilibrium model of bond markets in which two groups of agents hold heterogeneous expectations about future economic conditions the heterogeneous expectations cause agents to take on speculative positions against each other and therefore generate endogenous relative wealth fluctuation the relative wealth fluctuation amplifies asset price volatility and contributes to the time variation in bond premia our model shows that a modest amount of heterogeneous expectations can help explain several puzzling phenomena including the excessive volatility of bond yields the failure of the expectations hypothesis and the ability of a tent shaped linear combination of forward rates to predict bond returns the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

does climate change affect real estate prices only if you believe in it this paper studies whether house prices reflect belief differences about climate change we show that in an equilibrium model of housing choice in which agents derive utility from ownership in a neighborhood of similar agents prices exhibit different elasticities to climate risk we use comprehensive transaction data to relate prices to inundation projections of individual homes and measures of beliefs about climate change we find that houses projected to be underwater in believer neighborhoods sell at a discount compared to houses in denier neighborhoods our results suggest that house prices reflect heterogeneity in beliefs about long run climate change risks

the dynamics of efficient asset trading with heterogeneous beliefs this paper analyzes the dynamic properties of portfolios that sustain dynamically complete markets equilibrium when agents have heterogeneous priors we argue that the conventional wisdom that belief heterogeneity generates continuous trade and significant fluctuations in individual portfolios may be correct but it needs some qualifications we consider an infinite horizon stochastic endowment economy populated by many bayesian agents with heterogeneous priors over the stochastic process of the states of nature our approach hinges on studying the portfolios that decentralize pareto optimal allocations since these allocations are typically history dependent we propose a methodology to provide a complete recursive characterization when agents believe that the process of states of nature is i i d but disagree about the probability of the states we show that even though heterogeneous priors within that class can indeed generate genuine changes in the portfolios of any dynamically complete markets equilibrium these changes vanish with probability one if the true process consists of i i d draws from a common distribution and the support of some agent s prior belief contains the true distribution finally we provide examples in which asset trading does not vanish because either i no agent learns the true conditional probability of the states or ii some agent does not know the true process generating the data is i i d

recent two stage sample selection procedures with an application to the gender wage gap recently developed two stage estimation methods of sample selection models are used in the context of data from the 1989 labor market activity survey to examine labor supply decisions and wage outcomes for employed men and women recent hypothesis test procedures are used to test for no sample selection and to test for a parametric against a semiparametric selection correction procedure we conclude that selection is indeed an issue for the sample at hand and that the semiparametric specification is appropriate we also present the standard decomposition of the gender wage gap into its explained and unexplained portions

returns to endogenous education the case of honduras the rapid expansion of the education sector in developing countries and the scarcity of public funds have increased the need for an accurate evaluation of educational policies estimates of rates of return to education have often been used as an integral part of cost benefit studies and programme evaluation efforts this study uses household survey data from honduras for 1990 to estimate returns to education that allow for worker heterogeneity and individual self selection in the education process a sequential estimation procedure is used that enables study of the interaction between educational attainment and earnings determination it is found that accounting for endogenous educational attainment leads to substantially higher estimated returns to education compared to traditional least squares estimates the possible magnitude of the bias underscores the importance of recognizing the role of self selection and comparative advantage in the education process

the inflow effect trader inflow and price efficiency abstract we investigate the impact of cash and trader inflow on price efficiency in multi period experimental asset markets implementing eight treatments with 672 subjects we find that i the joint inflow of cash and traders triggers strong overvaluation and massive price run ups inflow effect remarkably the effect occurs in almost all of the 30 markets with joint cash and trader inflow and is very robust the effect even prevails in markets with complete and symmetric fundamental information we further show that ii in treatments with the joint inflow of cash and traders prices crash to fundamentals towards maturity of the asset the analysis of traders beliefs reveals that iii despite fundamental values staying constant beliefs about fundamentals co move with upwardly trending prices finally we report a speculative motive only among the optimists in treatments where we observe the inflow effect

estimating the effects of earnings uncertainty on families saving and insurance decisions this paper investigates whether families save partially to self insure against uncertain future earnings and estimates the extent to which pooled insurance substitutes for saving as a precaution against earnings risk an econometric model is estimated using unique household survey data from the nineteenth century to examine families joint saving and insurance decisions the historical microdata are of interest because they predate widespread social insurance programs which may stunt self insurance through private saving among contemporary families the econometric results imply that two independent measures of idiosyncratic earnings risk matter for families saving decisions additionally families whose primary wage earners belong to labor unions significantly save less frequently than others all else being equal but this tendency is not apparent among members of private benevolent societies

transnational trafficking law enforcement and victim protection a middleman trafficker s perspective abstractwe explore two hitherto poorly understood characteristics of the human trafficking market the cross border ease of mobility of traffickers and the elasticity of buyers demand in a model of two way bargaining the exact configuration of these characteristics is shown to determine whether domestic and foreign crackdowns on illicit employment mutually reinforce or counteract one another in efforts to stem the tide of trafficking estimation results from a gravity model of trafficking present evidence consistent with the mutual reinforcement view indicating considerable ease of mobility and inelastic demand

child labor and schooling responses to access to microcredit in rural bangladesh microcredit has been shown to be effective in reducing poverty in many developing countries however less is known about its effect on human capital formation in this paper we develop a model examining the relation between microcredit and child labour we then empirically examine the impact of access to microcredit on children s education and child labour using a new and large data set from rural bangladesh we address the selection bias using the instrumental variable method where the instrument relies on an exogenous variation in treatment intensity among households in different villages the results show that household participation in a microcredit program may increase child labour and reduce school enrolment the adverse effects are more pronounced for girls than boys younger children are more adversely affected than their older siblings and the children of poorer and less educated households are affected most adversely our findings remain robust to different specifications and methods and when corrected for various sources of selection bias

bubbles and financial professionals the efficiency of financial markets and their potential to produce bubbles are central topics in academic and professional debates yet little is known about the contribution of financial professionals to price efficiency we run 116 experimental markets with 412 professionals and 502 students we find that professional markets with bubble drivers capital inflows or high initial capital supply are susceptible to bubbles although they are more efficient than student markets in mixed markets with students bubbles also occur but professionals act as price stabilizers we show that heterogeneous price beliefs drive overpricing especially in bubble prone market environments

impacts of subsidized hybrid seed on indicators of economic well being among smallholder maize growers in zambia we test the hypotheses that subsidies on hybrid seed change maize production total household income the severity of poverty and relative deprivation among smallholder maize growers in zambia the analysis contributes to the literature by measuring the quantitative effects of seed as compared to fertilizer subsidies on indicators of household well being rather than input demand we apply a combination of econometric approaches to a nationally representative balanced panel of smallholder maize growing households and invoke the chain rule to generate quantitative estimates of impacts per kilogram of subsidized seed our findings demonstrate that in the initial years of the program subsidized seed enhanced the well being of smallholder maize growers according to each indicator but by small magnitudes simple calculations suggest high private and social benefit cost ratios when benefits are measured in terms of household income although magnitudes are sensitive to seed price and administrative costs

subsidies and crowding out a double hurdle model of fertilizer demand in malawi this article uses a double hurdle model with panel data from malawi to investigate how fertilizer subsidies affect farmer demand for commercial fertilizer the article controls for potential endogeneity caused by the nonrandom targeting of fertilizer subsidy recipients results show that on average 1 additional kilogram of subsidized fertilizer crowds out 0 22 kg of commercial fertilizer but crowding out ranges from 0 18 among the poorest farmers to 0 30 among relatively nonpoor farmers this indicates that targeting fertilizer subsidies to the rural poor is likely to maximize the contribution of the subsidy program to total fertilizer use

farm income variability and the supply of off farm labor if farmers are risk averse greater farm income variability should increase off farm labor supply this effect is confirmed for a sample of kansas farmers off farm employment of farmers and their spouses is also found to be significantly influenced by farm experience off farm work experience farm size leverage efficiency and farm specific education in addition farm operators and spouses who receive significant income support through government farm programs are less likely to work off the farm this may suggest that policy changes reducing farm income support payments may increase off farm employment of farmers and their spouses

short sales constraints and price discovery evidence from the hong kong market short sales practices in the hong kong stock market are unique in that only stocks on a list of designated securities can be sold short by analyzing the price effects following the addition of individual stocks to the list we find that short sales constraints tend to cause stock overvaluation and that the overvaluation effect is more dramatic for individual stocks for which wider dispersion of investor opinions exists these findings are consistent with miller s 1977 intuition and other optimism models we also document higher volatility and less positive skewness of individual stock returns when short sales are allowed the question of how short sales impact capital markets is highly controversial with short sale regulations varying widely across countries and capital markets 1 although short selling has been carried out for years in major financial markets around the world its effects on market efficiency especially on pricing efficiency remain of interest to financial researchers miller 1977 theorizes that in the presence of short sales constraints security prices tend to reflect a more optimistic valuation than the average opinion of potential investors and thus tend to be upward biased this overvaluation argument is based on two conditions 1 a security s short sales are either prohibited or costly and 2 investors have heterogeneous beliefs or information about the security s value the underlying intuition is quite straightforward pessimistic investors are forced to sit out of the market when short sales are not available and thus some negative information is not reflected in prices enabling enthusiastic buyers to bid prices above the level that average investors perceive as fair this argument has significant implications for market efficiency theories since one of the major functions of capital markets is price discovery indeed an efficient market should be a market in which prices always

the effect of short selling on bubbles and crashes in experimental spot asset markets a series of experiments illustrate that relaxing short selling constraints lowers prices in experimental asset markets but does not induce prices to track fundamentals we argue that prices in experimental asset markets are influenced by restrictions on short selling capacity and limits on the cash available for purchases restrictions on short sales in the form of cash reserve requirements and quantity limits on short positions behave in a similar manner a simulation model based on delong et al 1990 generates average price patterns that are similar to the observed data asset market bubbles are persistent deviations of prices from fundamentals to the extent that bubbles exist they can influence investment levels and the allocation of capital and thereby have considerable economic effects in recognition of their potential importance the question of the existence and pervasiveness of bubbles has been a focus of extensive empirical investigation see e g shiller 1981 blanchard and watson 1982 diba and grossman 1988 and west 1988 these studies yield mixed results regarding the empirical relevance of bubble phenomena one source of the differences in conclusions may be that because the fundamental value of the assets cannot be observed tests of the presence of bubbles are joint tests with the particular specification of the process guiding the evolution of fundamentals also being tested the availability of short selling is widely believed to make bubble formation less likely one rationale for such a belief is the notion that the cause of asset market bubbles is a constraint on the ability of traders to speculate on future downward price movements see e g miller 1977 jarrow 1980 diamond and verrecchia 1987 or figlewski and webb 1993 in the absence of short sales traders may sell only the shares in their portfolios the availability of short sales relaxes this constraint in this paper we study empirically the effect of allowing short sales on both the incidence and magnitude of market bubbles we choose a setting in which the fundamental value of the asset is clearly and unambiguously defined and known at all times and bubbles typically occur namely we use the experimental environment that smith suchanek and williams 1988 introduce while

waiting to persuade i analyze a sequential bargaining model in which players are optimistic about their bargaining power measured as the probability of making offers but learn as they play the game i show that there exists a uniquely predetermined settlement date such that in equilibrium the players always reach an agreement at that date but never reach one before it given any discount rate if the learning is sufficiently slow the players agree immediately i show that for any speed of learning the agreement is delayed arbitrarily long provided that the players are sufficiently patient therefore although excessive optimism alone cannot cause delay it can cause long delays if the players are expected to learn

effect of off farm income on smallholder commercialization panel evidence from rural households in ethiopia this article investigates how off farm income affects crop output market participation decisions and marketed surplus of smallholder farmers in ethiopia a double hurdle model is estimated using three waves of panel data from the ethiopian rural household survey unobserved heterogeneity is controlled for using a correlated random effect procedure and potential endogeneity of explanatory variables using a control function approach the results show that off farm income has no significant influence on household crop output market participation however conditional on market participation additional off farm earnings negatively affect the marketed surplus this indicates that farmers use off farm earnings for consumption rather than for investment in agricultural production policy measures that promote rural investment may help increase returns to labor for land poor households participating in off farm work in the process of agricultural commercialization

takeovers and divergence of investor opinion we test several hypotheses on how takeover premium is related to investors divergence of opinion on a target s equity value we show that the total takeover premium the pre announcement target stock price run up and the post announcement stock price markup are all higher when investors have higher divergence of opinion we obtain identical results with higher market level investor sentiment when divergence of opinion is higher a firm is less likely to be a takeover target although takeover synergy in successful takeovers is higher our results suggest that takeovers may play a role in explaining high contemporaneous stock prices in the presence of high divergence of investor opinion the author 2011 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

disrupting demand for commercial seed input subsidies in malawi and zambia summary this study uses nationally representative household level panel data from malawi and zambia to identify the determinants of subsidized maize seed and fertilizer receipt and to estimate how input subsidies affect households commercial purchases of improved maize seed varieties in both countries we find that households in areas where the ruling party won the last presidential election acquire significantly more subsidized inputs than other households results also indicate that each additional kilogram of subsidized maize seed acquired by a household reduces its commercial improved maize seed purchases by 0 58 kg in malawi and by 0 49 kg in zambia on average

how do fertilizer subsidy programs affect total fertilizer use in sub saharan africa crowding out diversion and benefit cost assessments a major determinant of input subsidy programs effects on the achievement of national policy goals is the extent to which they raise total fertilizer use this study synthesizes recent literature on how the new generation of targeted input subsidy programs has affected national fertilizer use after accounting for crowding effects and derives benefit cost bc estimates of the fertilizer subsidy programs for kenya malawi and zambia after accounting for crowding out and diversion we highlight two major findings first accounting for the illicit diversion of program fertilizer can profoundly influence estimates of how fertilizer subsidy programs affect total fertilizer use and program impacts given recent evidence that 33 or more of total program fertilizer may be diverted before being received by intended beneficiary farmers the failure to account for program diversion is shown to overestimate the contribution of the subsidy programs to national fertilizer use by 67 3 in the case of malawi by 61 6 for zambia and by 138 0 for kenya the second major finding is that the incremental value of maize output produced from these subsidy programs is considerably less than their costs in most years except under unusually high maize price assumptions conventional bc analyses that do not account for crowding out and diversion may seriously overestimate the benefits of input subsidy programs greater attention to program design and implementation details to reduce problems of crowding out and diversion can substantially raise the returns to such programs

gender roles and human capital inverstment the relationship between traditional attitudes and female labour market performance this paper investigates the relationship between the labour market behaviour of females and their attitudes towards traditional gender roles an attitudes index is constructed by employing individuals responses to statements related to the role of women and examined to determine whether it is correlated with individual characteristics the paper examines whether these attitudes influence human capital attainment and whether they are weakly exogenous to educational attainment it also focuses on the impact of these traditio nal attitudes upon labour supply and the return to education the results are dramatic it is found that females attitudes towards working women are developed in their youth and result in substantial reductions in their human capital investment labour supply and rates of return to education furthermore it is found that these attitudes are determined outside the educational process

price convexity and skewness this paper develops a model in which investors who are prohibited from short selling agree to disagree on the precision of a publicly observed signal the model implies that the equilibrium price is a convex function of the public signal the model predicts that 1 the stock price reacts more to good news than to bad news 2 the skewness of stock returns is positively correlated with contemporaneous returns but negatively correlated with lagged returns 3 short sale constraints increase rather than decrease skewness and 4 disagreement about information precision increases skewness empirical tests conducted find supportive evidence for all these predictions

the effects of adaptation measures on hurricane induced property losses which fema investments have the highest returns abstract this paper evaluates the relative effectiveness of fema expenditures on hurricane induced property losses we find that spending on fema ex ante mitigation and planning projects leads to greater reductions in property losses than spending on ex post adaptation programs specifically a one percent increase in annual spending on ex ante risk reduction and warning projects reduces damages by 0 21 percent while a one percent increase in ex post recovery and clean up spending reduces damages by 0 12 although both types of program spending are effective we find the marginal return from spending on programs that target long term mitigation and risk management to be almost twice that of spending on ex post recovery programs with the predicted increases in the frequency and severity of north atlantic hurricanes in the future our findings suggest there are important potential gains that could be realized from the further diversification of fema spending across project categories

publicity requirements in public procurement evidence from a regression discontinuity design abstract we document whether and how publicizing a public procurement auction causally affects entry and the costs of procurement we run a regression discontinuity design analysis on a large database of italian procurement auctions auctions with a value above the threshold must be publicized in the regional official gazette and two provincial newspapers we find that the increased publicity requirement induces more entry and higher winning rebates which reduces the costs of procurement and rationalizes public spending the evidence suggests that the number of bidders is the channel through which publicity affects rebates increased publicity also selects different winners it increases the likelihood that the winner hails from outside the region of the public administration and that the winner is a large company such companies tend to win repeated auctions gaining market share publicity seems to have no adverse effect on the ex post renegotiations of the works as measured by the percent of works delivered with delay or that are subcontracted estimates are robust to alternative measures of publicity alternative model specifications different sample selections to a falsification analysis at simulated thresholds and to the possibility that firms learn about auctions from a web based for profit information provider

wishful thinking in strategic environments towards developing a theory of systematic biases about strategies i analyse strategic implications of a particular bias wishful thinking about the strategies i identify a player as a wishful thinker if she hopes to enjoy the highest pay off that is consistent with her information about the others strategies i develop a straightforward elimination process that characterizes the strategy profiles that are consistent with wishful thinking mutual knowledge of wishful thinking and so on every pure strategy nash equilibrium is consistent with common knowledge of wishful thinking for generic two person games i further show that the pure nash equilibrium strategies are the only strategies that are consistent with common knowledge of wishful thinking my analysis also illustrates how one can characterize the strategic implications of general decision rules using the tools of game theory copyright 2007 wiley blackwell

information endogeneity and consumer health behaviour application to dietary intakes due to heightened public health interest a growing number of consumer health behaviour studies are focusing on the effect of health information on the demand for health inputs and outcomes many of these studies however have overlooked the potential endogeneity of information variables stemming from unobserved individual heterogeneity due to simultaneity bias ignoring endogeneity may lead to inaccurate estimates of informational effects on health behaviour using dietary intake data for fat saturated fat cholesterol and fibre this paper illustrates the pitfalls of treating health information related to these nutrients as exogenous variables in their demand equations in most of the estimated models the exogeneity of information is statistically rejected when the information variables are treated as exogenous variables their effects on dietary intakes are underestimated the estimated effects of key intake determinants such as income education ethnicity and race are also different in such a

ambiguity and the corporation group disagreement and underinvestment abstract we study a dynamic corporate investment problem where decisions have to be made collectively by a group of agents holding heterogeneous beliefs and adhering to a utilitarian governance mechanism in which each agent has a given influence in the decision in this setting we show that i group decisions are typically dynamically inconsistent ii dynamic inconsistency leads to inefficient underinvestment and iii the ability to trade securities among insiders or with outsiders may restore efficient investment decisions but it may in some cases lead to inefficient overinvestment our theory can help explain the empirical evidence on the effect of diversity of groups such as corporate boards on firms outcomes and more generally on the difference between group and individual behavior

imperfect competition in agricultural markets evidence from ethiopia abstract drawing upon unique transaction level data from rural ethiopia this paper tests for general forms of imperfect competition among rural wholesale traders these are key to the grain distribution system as they purchase from farmers and perform interregional trade tests show that traders in a typical source market engage in imperfectly competitive behavior in purchasing from farmers driving down the price paid to farmers approximately 3 in contrast there is no conclusive evidence of imperfect competition among traders in the larger more centrally located market studied thus efficiency losses due to market structure are likely to be greatest in markets which also have poor road links and lesser volumes of marketed grain

regionalism in standards good or bad for trade regional agreements on standards have been largely ignored by economists and unconditionally blessed by multilateral trade rules the authors find theoretically and empirically that such agreements increase trade between participating countries but not necessarily with the rest of the world adopting a common standard in a region that is harmonization boosts exports of excluded industrial countries to the region but it reduces exports of excluded developing countries possibly because developing country firms are hurt more by an increase in the stringency of standards and benefit less from economies of scale in integrated markets mutual recognition agreements are more uniformly trade promoting unless they contain restrictive rules of origin in which case intra regional trade increases at the expense of trade with other especially developing countries the authors propose a modification of international trade rules to strike a better balance between the interests of integrating and excluded countries

are farmers decisions to work off the farm related to their decisions to participate in the conservation reserve program since both working off the farm and participating in the conservation reserve program crp remove important resources from us agricultural production we utilize two econometric specifications to test hypotheses regarding whether these two decisions by farmers are independent we find statistical evidence that decisions to participate in crp and work off the farm are correlated characteristics of farm households and farm operations affect both decisions directly and indirectly as do local economic conditions and participation in other farm programs to illustrate their importance we simulate the combined direct and indirect effects of changes in decoupled payments and farm size on the probabilities of farm households engaging in these two activities we also illustrate that the probability of engaging in these two activities depends on whether the farm is located in a state or local agricultural district or participates in a related farmland retention program

the more we know about the fundamental the less we agree on the price i allow trading horizon heterogeneity across groups in a standard differential information model of a financial market this approach can explain the well established phenomenon that after a public announcement trading volume increases more private information is incorporated into prices and volatility increases in such environments public information has the important secondary role of helping agents learn about the information of other agents therefore whenever the correlation between the private information of different groups is sufficiently low a public announcement increases disagreement among short horizon traders regarding the expected selling price even as it decreases disagreement about the fundamental value of the asset additional testable implications are also suggested

precautionary saving and accidental bequests this paper presents a simple general equilibrium model of precautionary saving and accidental bequests this model is used to analyze the implications of individual lifetime uncertainty for aggregate consumption and capital accumulation a precautionary demand for saving arises because an individual consumer does not know in advance the date at which he will die and he wants to avoid low levels of consumption in the event that he lives longer than expected an implication of this precautionary saving is that when death does occur the consumer is generally holding some wealth which is then passed on to his heirs in the form of an accidental bequest even if all consumers have the same ex ante mortality probabilities there will be some intracohort variation in the date of death consequently there will be a nondegenerate distribution of bequests left by consumers in a cohort this nondegenerate distribution of bequests left by one generation induces variation in the distributions of wealth consumption and bequests of subsequent generations the importance of bequests in aggregate saving has been established by laurence kotlikoff and lawrence summers 1981 who reported that 80 percent of u s household wealth is inherited wealth one interpretation of this finding is that the simple life cycle model without bequest motives is an inadequate description of saving behavior in the united states but the model i present demonstrates that accidental bequests by selfish consumers can account for a potentially sizeable fraction of aggregate wealth although some part of bequests especially by the wealthy undoubtedly results from an explicit bequest motive accidental bequests also play a role in the intergenerational transfer of wealth as well as in the intragenerational variation in wealth in order to focus on the role of accidental bequests i purposely exclude a bequest motive from the specification of the utility function the effects of lifetime uncertainty on individual consumption behavior were first examined formally in a seminal paper by menachem yaari 1965 yaari s model provided the basic framework for virtually all subsequent work on uncertain lifetimes including well known papers by nils hakansson 1969 stanley fischer 1973 robert barro and james friedman 1977 david levhari and leonard mirman 1977 and kotlikoff and avia spivak 1981 however all of these papers focused on the consumption decision of an individual and ignored the effect of accidental bequests on the behavior of the recipients of these accidental bequests 2 as will be shown at various points in this paper changes in the economic environment can have effects on aggregate behavior which differ sharply from the effects on individual behavior because of the endogenous adjustment of bequests the effects of department of economics harvard university cambridge ma 02138 this paper is a revised version of bequests and social security with uncertain lifetimes nber working paper no 1372 june 1984 i thank olivier blanchard john burbidge christopher cavanagh robert clower stanley fischer benjamin friedman elhanan helpman mervyn king nobuhiro kiyotaki laurence kotlikoff robert mcdonald james pesando julio rotemberg lawrence summers lars svensson mark watson and jeffrey wolcowitz for valuable conversations and correspondence i also thank the participants in seminars at boston university columbia university cornell university federal reserve board harvard university university of iowa mit university of minnesota university of montreal national bureau of economic research north carolina state university the wharton school and yale university and two anonymous referees for their helpful comments i also thank the national science foundation for financial support 1 in the presence of perfect annuity and life insurance markets there may or may not be bequests depending on the presence or absence of a bequest motive but there would be no accidental bequests 2 kotlikoff and spivak focus on the role of the family in providing an incomplete annuities market but stop short of a full scale overlapping generations model in which the distribution of bequests is determined endogenously

a theory of equity carve outs and negative stub values under heterogeneous beliefs we develop a theory of new project financing and equity carve outs under heterogeneous beliefs in our model an employee of a firm generates an idea for a new project that can be financed either by issuing equity against the cash flows of the entire firm integration or by undertaking an equity carve out of the new project alone non integration while the patent underlying the new project is owned by the firm the employee generating the idea needs to be motivated to exert optimal effort for the project to be successful the firm s choice between integration and non integration is driven primarily by heterogeneity in beliefs among outside investors each of whom has limited wealth to invest in the equity market and between firm insiders and outsiders if the marginal outsider financing the new project is more optimistic about the prospects of the project than firm insiders and this incremental optimism of the marginal outsider over firm insiders is greater regarding new project cash flows than that about assets in place cash flows then the firm will implement the project under non integration rather than integration two other ingredients driving the firm s financing choice are the cost of motivating the employee to exert optimal effort and the potential synergies between the new project and assets in place we derive a number of testable predictions regarding a firm s equilibrium choice between integration and non integration we also provide a rationale for the negative stub values documented in the equity carve outs of certain firms e g the carve out of palm from 3com and develop predictions for the magnitude of these stub values

asset float and speculative bubbles we model the relationship between asset float tradeable shares and speculative bubbles investors with heterogeneous beliefs and short sales constraints trade a stock with limited float because of insider lockups a bubble arises as price overweighs optimists beliefs and investors anticipate the option to resell to those with even higher valuations the bubble s size depends on float as investors anticipate an increase in float with lockup expirations and speculate over the degree of insider selling consistent with the internet experience the bubble turnover and volatility decrease with float and prices drop on the lockup expiration date

superstition in the housing market we provide the first solid evidence that chinese superstitious beliefs can have significant effects on house prices in a north american market with a large immigrant population using real estate data on close to 117 000 house sales we find that houses with address number ending in 4 are sold at a 2 2 discount and those ending in 8 are sold at a 2 5 premium in comparison to houses with other addresses these price effects are found either in neighborhoods with a higher than average percentage of chinese residents consistent with cultural preferences or in repeated transactions consistent with speculative behavior jel d03 r2 z1

nonwage benefits in a simultaneous model of wages and hours labor supply functions of young females this article argues that the negative relationship between weekly hours worked and the gross hourly wage rate is due to the provision of fringe benefits as the total weekly wage increases employers and employees avoid taxation by substituting wages with nontaxable nonwage benefits i produce a wage that incorporates the benefit effects and estimate the corresponding labor supply elasticities an estimator is presented for the wage hours market locus and the structural labor supply function an empirical application indicates that an estimated negative labor supply elasticity associated with the observed gross wage is reversed when the adjusted wage is employed

speculative overpricing in asset markets with information flows in this paper we derive and experimentally test a theoretical model of speculation in multiperiod asset markets with public information flows the speculation arises from the traders heterogeneous posteriors as they make different inferences from sequences of public information this leads to overpricing in the sense that price exceeds the most optimistic belief about the real value of the asset we find evidence of speculative overpricing in both incomplete and complete markets where the information flow is a gradually revealed sequence of imperfect public signals about the state of the world we also find evidence of asymmetric price reaction to good news and bad news another feature of equilibrium price dynamics under our model markets with a relaxed short sale constraint exhibit less overpricing

public private sector wage gap by gender in egypt evidence from quantile regression on panel data 1998 2018 abstract this paper estimates the public formal private wage gap in egypt using egypt labor market panel survey for the 20 year period of 1998 2018 for men and women separately we estimate the public formal private sector wage gap with wage equations including a public sector indicator both at the mean and at different quantiles of the conditional wage distribution using the panel feature of the data we also address the endogenous employment and the sector of employment selection issue and find a persistent public wage penalty for the males and public wage premium for the females except at the top even after controlling for the observable and the time invariant unobservable characteristics we further examine the public wage gap over time and in different sub samples by potential experience skill levels and regions generally the results are consistent with a decrease in the public wage gap for both men and women over the period considered we further provide evidence on the quality of workers we find that the public sector fails to attract better quality men throughout the conditional wage distribution while it manages to attract better quality women in the lower parts of the conditional wage distribution but not at the top all on the basis of time invariant unobservable attributes these results indicate concern for the efficient provision of public services

future lending income and security value i test the duffie g rleanu and pedersen hypothesis that security prices incorporate expected future securities lending income to determine whether institutional investors anticipate gains from future lending of securities i examine their trading behavior around loan fee increases the evidence suggests that institutions buy shares in response to an increase in lending fees and that this could explain the premium associated with high lending fee stocks expected future lending income affects stock prices although the effect seems to be attenuated by the negative information that arises from short selling