fiscal consequences of budget baselines abstract governments have two main choices for a budgetary baseline procedure the dollars spent the year before or the level of services that those dollars bought which is labelled a current services baseline this paper analyzes the effects of different baselines on fiscal policy first by developing a conceptual framework and then by examining american state data to compare government spending patterns under alternative baseline rules controlling for a host of institutional economic and demographic factors we estimate that a current services baseline rule raises the annual growth rate in state spending by half a percentage point

voluntary disclosure of evaded taxes increasing revenue or increasing incentives to evade many countries apply lower fines to tax evading individuals when they voluntarily disclose the tax evasion they committed i model such voluntary disclosure mechanisms theoretically and show that while such mechanisms increase the incentive to evade taxes they nevertheless increase tax revenues net of administrative costs i confirm the importance of administrative costs in a survey of german competent local tax authorities i then test the effects of voluntary disclosure on the tax evasion decision using the introduction of the 2009 offshore voluntary disclosure program in the u s for identification the analysis confirms that the introduction of voluntary disclosure increases tax evasion

debt futures and options optimal price linked financial contracts under moral hazard and limited liability this paper characterizes the optimal financial contract between a risk neutral entrepreneur and risk neutral lender investors when the entrepreneur has limited liability there is moral hazard and the investor payoff function can depend on both output and output price but is nondecreasing in output in this setting the optimal contract is a price contingent commodity bond that can be replicated by combining pure debt commodity futures and commodity call option contracts although a pure commodity bond contract is sometimes optimal a pure debt contract is almost never optimal various properties of the entrepreneur s optimal price contingent promised payment are described copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the supply and demand side impacts of credit market information abstract we utilize a unique pair of experiments to isolate the ways in which reductions in asymmetric information alter credit market outcomes a guatemalan microfinance lender gradually started using a credit bureau across its branches without letting borrowers know about it one year later we ran a large randomized credit information course that described the existence and workings of the bureau to the clients of this lender this pairing of natural and randomized experiments allows us to separately identify how new information enters on the supply and the demand sides of the market our results indicate that the credit bureau generated large efficiency gains for the lender and that these gains were augmented when borrowers understood the rules of the game the credit bureau rewarded good borrowers but penalized weaker ones increasing economic differentiation

irs as loan shark tax compliance with borrowing constraints abstract this paper considers a simple dynamic model of tax compliance in which people may face binding borrowing constraints the model leads to much different conclusions and policy recommendations than static models in particular the government cannot generate full compliance by setting the expected value of cheating to be negative also it is possible for the government to set penalties in a way that will increase tax revenue over that of full compliance the government can increase welfare by playing the role of loan shark to people whose borrowing is constrained on the private market

economic growth comparative advantage and gender differences in schooling outcomes evidence from the birthweight differences of chinese twins abstract data from two surveys of twins in china are used to contribute to an improved understanding of the role of economic development in affecting gender differences in the trends in levels of and returns to schooling observed in china and in many developing countries in recent decades in particular we explore the hypothesis that these phenomena reflect differences in comparative advantage with respect to skill and brawn between men and women in the context of changes in incomes returns to skill and or nutritional improvements that are the result of economic development and growth

beauty and the labor market the authors examine the impact of looks on earnings using interviewers ratings of respondents physical appearance plain people earn less than average looking people who earn less than the good looking the plainness penalty is 5 to 10 percent slightly larger than the beauty premium effects for men are at least as great as for women unattractive women have lower labor force participation rates and marry men with less human capital better looking people sort into occupations where beauty may be more productive but the impact of individuals looks is mostly independent of occupation suggesting the existence of pure employer discrimination copyright 1994 by american economic association

reputation and hierarchy in dynamic models of employment the employment relationship with employees ability and their actions both private information thus combining adverse selection with moral hazard is modeled as a repeated game with self enforcing contracts being perfect bayesian nash equilibria under termination contracts the equilibrium contract structure consists of a hierarchy of ranks finite in number even though ability is continuous reputation acts as an effective device for worker discipline without the need for involuntary unemployment selection by bonding is not in general incentive compatible but selection by promotion of employees through the ranks is many other features correspond to observed employment structures

comparative advantage learning and sectoral wage determination we develop a model in which a worker s skills determine the worker s current wage and sector the market and the worker are initially uncertain about some of the worker s skills endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills we show how the model can be estimated using nonlinear instrumental variables techniques we apply our methodology to study wages and allocation of workers across occupations and industries using individual level panel data from the national longitudinal survey of youth we find that high wage sectors employ high skill workers and offer high returns to workers skills

sharing default information as a borrower discipline device abstract creditors often share information about their customers credit records besides helping them to spot bad risks this acts as a disciplinary device if creditors are known to inform one another of defaults borrowers must consider that default on one lender would disrupt their credit rating with all the other lenders this increases their incentive to perform however sharing more detailed information can reduce this disciplinary effect borrowers incentives to perform may be greater when lenders only disclose past defaults than when they share all their information in some instances by fine tuning the type and accuracy of the information shared lenders can raise borrowers incentives to their first best level

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

sorting it out international trade with heterogeneous workers each worker brings a bundle of skills to the workplace for example quantitative and communication skills since employers must take this bundle as a package deal they choose workers with just the right mix of skills we show that international differences in the distribution of worker skill bundles for example japan s abundance of workers with a modest mix of both quantitative and teamwork skills have important implications for international trade industrial structure and domestic income distribution formally we model two dimensional worker heterogeneity and show that the second moments of the distribution of skills are critical as in the roy model

the determinants of earnings a behavioral approach we survey the determinants of earnings and propose a framework for understanding labor market success we suggest that the advantages of the children of successful parents go considerably beyond the benefits of superior education the inheritance of wealth or the genetic inheritance of cognitive ability we suggest that noncognitive personality variables such as attitudes towards risk ability to adapt to new economic conditions hard work and the rate of time preference affect both earning and the transmission of economic status across generations

reputation in a public goods game taking the design of credit bureaus to the lab abstract we present the results of a new laboratory experiment designed to mimic the ways in which credit bureaus will alter microfinance markets where loans are taken in groups bureaus can build reputations for borrowers at the group or the individual level and the optimal contract is not obvious in a modified public goods game with ejection and re assignment played by guatemalan micro entrepreneurs we find the use of group reputation to be effective in increasing contributions given the costs of transitioning microfinance bureaus to the sharing of individual information our results suggest that this change would not be cost effective

productivity health and inequality in the intrahousehold distribution of food in low income countries a model is formulated incorporating linkages among nutrition labor market productivity health heterogeneity and the intrahousehold distribution of food and work activities in a subsistence economy empirical results based on a sample of households from bangladesh indicate that despite considerable intrahousehold disparities in calorie consumption households are averse to inequality furthermore consistent with the model the results also indicate that both the higher level and greater variance in the calories consumed by men relative to women reflect in part the greater participation by men in activities in which productivity is sensitive to health status copyright 1990 by american economic association

causation spending and taxes sand in the sandbox or tax collector for the welfare state causal relations between federal expenditure and taxation are analyzed using an approach based on the invariance of econometric relationships in the face of structural interventions institutional evidence for interventions or changes of regime combined with econometric tests for structural breaks are used to investigate the relative stability of conditional and marginal probability distributions for each variable the patterns of stability are the products of underlying causal order the authors find two distinct causal structures operating in the postwar era before the mid 1960s taxes appear to cause spending after the late 1960s taxes and spending are causally independent copyright 1992 by american economic association

risky debt investment incentives and reputation in a sequential equilibrium the agency relationship of corporate insiders and bondholders is modeled as a dynamic game with asymmetric information the incentive effect of risky debt on the investment policy of a levered firm is studied in this context in a sequential equilibrium of the model a concept of reputation arises endogenously resulting in a partial resolution of the classic agency problem of underinvestment the incentive of the firm to underinvest is curtailed by anticipation of favorable rating of its bonds by the market this anticipated pricing of debt is consistent with rational expectations pricing by a competitive bond market and is realized in equilibrium some empirical implications of the model for bond rating debt covenants and bond price response to investment announcements are explored

from the cradle to the labor market the effect of birth weight on adult outcomes lower birth weight babies have worse outcomes both short run in terms of one year mortality rates and longer run in terms of educational attainment and earnings however recent research has called into question whether birth weight itself is important or whether it simply reflects other hard to measure characteristics by applying within twin techniques using an unusually rich dataset from norway we examine the effects of birth weight on both short run and long run outcomes for the same cohorts we find that birth weight does matter despite short run twin fixed effects estimates that are much smaller than ols estimates the effects on longer run outcomes such as adult height iq earnings and education are significant and similar in magnitude to ols estimates

learning by doing and learning from others human capital and technical change in agriculture household level panel data from a nationally representative sample of rural indian households describing the adoption and profitability of high yielding seed varieties hyvs associated with the green revolution are used to test the implications of a model incorporating learning by doing and learning spillovers the estimates indicate that i imperfect knowledge about the management of the new seeds was a significant barrier to adoption ii this barrier diminished as farmer experience with the new technologies increased iii own experience and neighbors experience with hyvs significantly increased hyv profitability and iv farmers do not fully incorporate the village returns to learning in making adoption decisions

state income tax amnesties causes the purpose of this paper is to analyze empirically for the years 1980 88 the factors which led states with state income taxes to run tax amnesty programs we find a principal factor to be the level of irs auditing in particular we find that states have tended to free ride on the irs if the irs is active in a state then that state is less likely to run a tax amnesty program indeed our estimates indicate that had the irs audit rate remained constant during the 1980 88 period instead of falling by almost one half then the cumulative probability that an average state would have a tax amnesty by 1988 would have fallen by almost one half compared to its actual level

do population control policies induce more human capital investment twins birthweight and china s one child policy in this paper we address the issues of whether reductions in fertility increase human capital investments per child and whether twinning can identify the quantity quality q q trade off we show that estimates of the effects of twinning at higher parities on the outcomes of older children in prior studies do not identify family size effects but are confounded by inter child allocation effects because of the endowment deficit and close spacing of twins however examining the effects of twinning by birth order net of the effects stemming from the endowment deficit of twins can provide upper and lower bounds on the trade off between the family size and average child quality our estimates based on data from china indicate that an extra child at parity one or at parity two net of one component of birth endowment effects associated with birth weight significantly decreases the schooling progress the expected college enrolment grades in school and the assessed health of all children in the family despite the evident significant trade off between number of children and child quality in china the findings suggest that the contribution of the one child policy in china to the development of its human capital was modest copyright wiley blackwell

credit information systems in less developed countries a test with microfinance in guatemala abstract increases in formal sector lending among the poor have created a need for credit information systems that provide potential lenders with borrower information in this article we present fixed effects estimations that attempt to measure the effect of a newly implemented credit information system in guatemala our results indicate that improved screening effects from the system caused the level of portfolio arrears to decline approximately 2 percentage points after it was implemented in branch offices we observe an even more substantial and significant effect of the information system in reducing late payments that occur during the loan cycle

economic effects of positive credit information sharing the case of korea in many countries in addition to negative credit information such as loan default and arrears positive credit information is also exchanged on a voluntary and reciprocal basis employing optimal credit decision models of profit maximizing banks and utilizing a unique dataset of 2 million consumer loan obligors in korea we investigate the economic effects of sharing positive credit information in addition to negative credit information already exchanged we find that the discriminatory power of the credit scoring model improves significantly we proceed to investigate the economic effects of the information gap in a competitive credit market by assuming two representative banks that differ only in the level of credit information sharing the bank that utilizes negative information only suffers from deterioration of the borrower pool and reduced profit as high credit risk borrowers are more concentrated on this bank due to underpricing of risks our finding suggests that banks have incentives to volunt

stature skills and adult life outcomes evidence from indonesia abstractwe investigate the effect of height on earnings occupational choices and a subjective measure of wellbeing among indonesian men we explore the extent to which height captures the effects of endowments set before entry in the labour market physical and cognitive skills co determined with stature early in life do not explain much of the height earnings premium directly yet human capital more broadly including cognition educational attainment and other factors related to childhood conditions explains around half of the height premium and does so through occupational sorting indeed taller workers tend to have more education and educated workers tend to work in more lucrative occupations that require brain and social skills not brawn the unexplained share of the height earnings premium may reflect a specific role of stature on social interaction labour market advantages or self assurance we also find a height premium in happiness half of which simply accounts for the educational and e

does information sharing reduce the role of collateral as a screening device this is the authors accepted refereed and final manuscript to the article publisher s version available at http dx doi org 10 1016 j jbankfin 2014 02 010

credit reporting relationship banking and loan repayment how does information sharing between lenders affect borrowers repayment behavior we show in a laboratory credit market that information sharing increases repayment rates as borrowers anticipate that a good credit record improves their access to credit this incentive effect of information sharing is substantial when repayment is not third party enforceable and lending is dominated by one shot transactions if however repeat interaction between borrowers and lenders is feasible the incentive effect of credit reporting is negligible as bilateral banking relationships discipline borrowers information sharing nevertheless affects market outcome by weakening lenders ability to extract rents from relationships copyright 2007 the ohio state university

taxation of economic rents economic rents have long been identified as an efficient tax base in addition the recent literature documents that rent income is highly concentrated and that rents are quickly increasing rent taxation thus seems attractive for reasons of both efficiency and equity nevertheless rent taxation remains a marginal topic in research and policy making in a systematic review of the neoclassical literature on different rent types we find that some types of rents reflect inefficiencies and should thus be minimized while others reward investments and should be supported in line with social welfare what remains for taxation are land rents one of the few true scarcity rents land rents have significant potential to improve the efficiency of the tax system we then begin to develop a comprehensive theory of land rent taxation by identifying relevant efficiency and equity effects the interaction of many of these effects remains unexplored which might explain policymakers hesitation in using land taxes to date

a general characterization of optimal income tax enforcement this paper develops a general approach to characterizing optimal income tax and enforcement schemes our analysis clarifies the nature of the interplay between tax rates audit probabilities and penalties for misreporting in particular it is shown that for a variety of objective functions for the principal the optimal tax schedule is in general concave at least weakly and monotonic the marginal tax rates determine the audit probabilities and less harsh penalties lead to higher enforcement costs our results imply that there exists a tradeoff between equity and efficiency considerations in the enforcement context which is similar to that in the moral hazard context for tax policy it is well accepted by now that informational asymmetries generate important constraints on the formulation of economic policy an early and classic example is given by mirrlees 1971 who considers the problem of optimal income taxation when individuals differ in their ability to transform effort into income it is assumed that ability and effort of an individual cannot be observed at any cost whereas income which is the product of these two unobservables is perfectly and costlessly observable taxes can thus depend only on final income under these informational conditions the equity efficiency tradeoffs that constrain the choice of tax policy arise only because of the presence of moral hazard associated with taxation of income if there were no moral hazard i e individual efforts and therefore incomes were exogenous the problem of optimal income taxation would be a trivial one since by assumption individual incomes are perfectly and costlessly observable in much of the recent literature on optimal income taxation in the presence of costly enforcement reinganum and wilde 1985 border and sobel 1987 and others on the other hand individual incomes are treated as exogenous i e there is no moral hazard however informational constraints arise from another important consideration namely an individual s income cannot be directly observed it can only be verified through a costly

the occurrence of tax amnesties theory and evidence this paper presents a theoretical model and empirical evidence to explain the occurrence of tax amnesties we treat amnesties as endogenous resulting from a strategic game between many taxpayers discounting future payments from punishment and a government that balances costs and benefits of amnesty programs from the model we derive hypotheses about the factors that should influence the occurrence of tax amnesties to test these predictions empirically we rely on amnesty information from us states between 1981 and 2011 in line with the theoretical model our empirical findings suggest that the likelihood of amnesties is mainly driven by a government s fiscal requirements and the taxpayers expectations on future amnesties

credit market efficiency and tax policy in the presence of screening costs after establishing the existence of capital market equilibrium in the presence of asymmetric information and screening costs this paper examines tax policies designed to correct the attendant externalities when projects differ in expected returns it is shown to be ambiguous whether costly private screening weakens or strengthens the case for an interest income tax however when projects differ only in riskiness as in the model of stiglitz and weiss screening opportunities cause the efficiency case for tax intervention to disappear

the suspension of borrowing an implicit penalty for loan default under imperfect information abstracta credit seeker may be suspended from borrowing for a period of time due to a previous default such suspension is widely used in bank lending through credit check our work analyses the effects of suspension on the investment choice of borrowers under uncertainty and on the lending policy of banks facing asymmetric information we show that suspension should be tightened at low loan rates but loosened otherwise to improve the repayment performance of borrowers we also show that although credit rationing may not be completely removed due to imperfect information the excess demand for credit or transitive waiting in the market can actually be attenuated by such efficient use of suspension our theoretical predictions are consistent with observed cyclical patterns of changes in lendingrates and suspension severity

school subsidies for the poor evaluating the mexican progresa poverty program abstract this paper evaluates how the progresa program which provides poor mothers in rural mexico with education grants has affected enrollment poor children who reside in communities randomly selected to participate in the initial phase of the progresa are compared to those who reside in other control communities pre program comparisons check the randomized design and double difference estimators of the program s effect on the treated are calculated by grade and sex probit models are also estimated for the probability that a child is enrolled controlling for additional characteristics of the child their parents local schools and community and for sample attrition to evaluate the sensitivity of the program estimates these estimates of program short run effects on enrollment are extrapolated to the lifetime schooling and the earnings of adults to approximate the internal rate of return on the public schooling subsidies as they increase expected private wages

inequality as a determinant of malnutrition and unemployment policy this paper explores the policy implications that are obtained once it is recognized that at low nutrition intakes a person s productivity is an increasing function of intake in the context of a fully general equilibrium model it is shown that if aggregate assets in an economy are neither large nor small certain patterns of lorenz improving asset redistributions or nutrition transfers increase aggregate output and reduce the volume of involuntary unemployment and the incidence of undernourishment copyright 1987 by royal economic society

why are the returns to schooling higher for women than for men many studies have found that the impact of schooling on earnings is greater for females than for males despite the fact that females tend to earn less both absolutely and controlling for personal characteristics this study investigates possible reasons for this effect using data from the national longitudinal survey of youth 1979 one explanation is that education appears to have a double effect on the earnings of women it increases their skills and productivity as it does with men and in addition it appears to reduce the gap in male and female earnings attributable to factors such as discrimination tastes and circumstances the latter appear to account for about half of the differential in the returns to schooling

too much investment a problem of asymmetric information this paper shows that under plausible assumptions the inability of lenders to discover all of the relevant characteristics of borrowers results in investment in excess of the socially efficient level raising the rate of interest above the free market level will restore optimality this conflicts with generally held views and is contrasted with the stiglitz weiss model it is shown that the assumptions which yield overinvestment support debt as the equilibrium method of finance however under the stiglitz weiss assumptions used to derive an underinvestment result equity is shown to be the equilibrium method of finance

tax evasion in new disguise examining tax havens international bank deposits abstract recent efforts to reduce international tax evasion focus on information exchange with tax havens using bilateral bank data for 1397 countrypairs in a balanced quarterly panel from 2003 i to 2017 iv we first show that information on request treaties with tax havens reduce bank deposits in tax havens by 27 5 second also deposits from tax havens in high tax countries decline after such treaties are signed giving authorities a second angle to detect tax evasion both reactions dissipate overt time and treaties signed after 2010 trigger no further reactions these results cannot be explained by deposit shifting alone and we find no evidence of transitioning into legality third recent policy initiatives based on the automatic exchange of bank information lead to very similar initial reactions as earlier treaties consistent with adjustments on the part of tax evaders this suggests that tax evaders adapt to established information exchange treaties by using new disguises to hide their true income and react again to new measures these results cast doubt on the effectiveness of current forms of information exchange to tackle international tax evasion

income tax compliance in a principal agent framework previous analyses have modeled income tax evasion as a portfolio problem deriving the optimal consumption of the risky asset unreported income under the assumption of a fixed probability of detection the purpose of this paper is to examine some of these issues in tax compliance starting from a different set of assumptions in particular we compare alternative audit policies to the standard random audit policy we focus on an audit cutoff policy in which an agent triggers an audit if his or her reported income is too low and is not audited if reported income is sufficiently high this paper establishes two major results first random audit rules are weakly dominated by audit cutoff rules it can be shown given lump sum taxes and fines that these audit cutoff rules are the least cost policies which induce truthful reporting of income second the dominance of audit cutoff rules over random audit rules holds for lump sum as well as proportional taxation in fact the equilibrium consequences of the two are equivalent

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

human capital investment and the gender division of labor in a brawn based economy we use a model of human capital investment and activity choice to explain facts describing gender differentials in the levels and returns to human capital investments these include the higher return to and level of schooling the small effect of healthiness on wages and the large effect of healthiness on schooling for females relative to males the model incorporates gender differences in the level and responsiveness of brawn to nutrition in a roy economy setting in which activities reward skill and brawn differentially empirical evidence from rural bangladesh provides support for the model and the importance of the distribution of brawn

is more information always better a case in credit markets this paper studies the impact of behavioral and non behavioral information contained in consumer credit reports on the credit market a repeated game of incomplete information between a borrower and a sequence of lenders is considered lenders beliefs regarding the borrower s type depend on the borrower s historical loan performance and other informative signals it is established that for low beliefs strategic defaults occur in equilibrium as the borrower defaults on his loans despite having the ability to repay them further as the ancillary signals become increasingly informative of the borrower s type the range of beliefs over which strategic defaults occur expands this increase in strategic defaults highlights an unintended negative effect of allowing informative signals to influence beliefs on the upside the informative signals allow lenders to learn the borrower s type more quickly

health nutrition and economic development the relationship between health and economic development is explored focusing on nutrition based health indicators the spotlight is placed on the inter related feedbacks between the influence of health on productivity on one hand and the influence of income on health status on the other disentangling causality in these relationships has preoccupied much of the literature we evaluate different empirical strategies that have been adopted and assess the results there is now a body of evidence based on careful empirical studies that demonstrates a causal relationship between health and labor productivity there is also evidence that at least among the very poor additional income is spent on improved nutrition there are two issues that have received little attention although we argue they are likely to be very important first measurement of health is discussed in detail evidence is presented on how taking into account differences in the extent of measurement error is critical for interpreting the impact of health on wages the same theme emerges in studies of the effect of income on health specifically calorie intake the key role of non linearities in these relationships is highlighted and we demonstrate that a good deal of the variation in estimates of income elasticities of demand for calories can be ascribed to the role of measurement and functional form authors

height skills and labor market outcomes in mexico abstract taller workers are paid higher wages a prominent explanation for this pattern is that physical growth and cognitive development share childhood inputs inducing a correlation between adult height and two productive skills strength and intelligence this paper explores the relative roles of strength and intelligence in explaining the labor market height premium among mexican men while cognitive test scores account for a limited share of the height premium roughly half of the premium can be attributed to the educational and occupational choices of taller workers taller workers obtain more education and sort into occupations with greater intelligence requirements and lower strength requirements suggesting a possible role for cognitive skill

a simple test of the nutrition based efficiency wage model abstract in the nutrition based efficiency wage model wages in labor markets in developing countries are rigid because lowering them would reduce worker productivity and increase the cost per efficiency unit i evaluate this claim using data from rural india i find that contrary to what has been assumed in these models a wage cut should lower the cost per efficiency unit of labor

nudging farmers to use fertilizer theory and experimental evidence from kenya we model farmers as facing small fixed costs of purchasing fertil izer and assume some are stochastically present biased and not fully sophisticated about this bias such farmers may procrastinate post poning fertilizer purchases until later periods when they may be too impatient to purchase fertilizer consistent with the model many farmers in western kenya fail to take advantage of apparently profit able fertilizer investments but they do invest in response to small time limited discounts on the cost of acquiring fertilizer free deliv ery just after harvest calibration suggests that this policy can yield higher welfare than either laissez faire policies or heavy subsidies

the effects of poor neonatal health on children s cognitive development we make use of a new data resource merged birth and school records for all children born in florida from 1992 to 2002 to study the relationship between birth weight and cognitive development using singletons as well as twin and sibling fixed effects models we find that the effects of early health on cognitive development are essentially constant through the school career that these effects are similar across a wide range of family backgrounds and that they are invariant to measures of school quality we conclude that the effects of early health on adult outcomes are therefore set very early

moral hazard and limited liability implications for the theory of the firm this paper presents a theory of the firm based on moral hazard in the provision of effort by an owner manager who borrows money in financial markets under conditions of limited liability the authors examine the relationship between the financial structure of the firm and the effort and output decisions of the owner manager results are reported concerning the determination of the firm s optimal financial structure and concerning the positive and normative implications of financial structure for pure competition and monopoly they also identify a strategic advantage from equity finance under cournot oligopoly copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effect of adolescent experience on labor market outcomes the case of height taller workers receive a wage premium net of differences in family background the disparity is similar in magnitude to the race and gender gaps we exploit variation in an individual s height over time to explore how height affects wages controlling for teen height essentially eliminates the effect of adult height on wages for white men the teen height premium is not explained by differences in resources or endowments the teen height premium is partially mediated through participation in high school sports and clubs we estimate the monetary benefits of a medical treatment for children that increases height

tax compliance and firms strategic interdependence we focus on a relatively neglected area of the tax compliance literature in economics the behaviour of firms we examine the impact of alternative audit rules on receipts from a tax on profits in the context of strategic interdependence of firms the enforcement policy can have an effect on firms behaviour in two dimensions their market decisions as well as their compliance behaviour an appropriate design of the enforcement policy can thus have a double dividend by manipulating firms in both dimensions

credit bureau policy and sustainable reputation effects in credit markets welfare increasing reputation effects arise in credit markets when adverse selection gives rise to borrower reputation formation incentives that mitigate moral hazard problems this paper shows that welfare stemming from reputation effects will diminish over time as the private information of borrowers is revealed to lenders in the form of lengthening credit histories aggregate borrower welfare may therefore decrease over time unless reputation effects can be sustained restricting a lender s access to a borrower s credit history via credit bureau policy is shown to be one method of sustaining reputation effects and preventing a decline in welfare copyright 1995 by the london school of economics and political science

the effect of information sharing between lenders on access to credit cost of credit and loan performance evidence from a credit registry introduction abstract using a rich dataset from a commercial bank in albania we utilize the introduction of a public credit registry by the albanian central bank in january 2008 as a natural experiment to analyze the effect of information sharing between lenders on 1 access to credit 2 cost of credit and 3 loan performance our results suggest that information sharing by means of a credit registry does not affect access to or cost of credit but improves loan performance specifically loans granted after the introduction of the credit registry are 3 points less likely of turning problematic representing a 35 reduction of the overall sample average arrear probability we further find that the effect is more pronounced for repeat borrowers and in areas where competition is weak this indicates that information sharing among lenders improves loan performance mainly by disciplining borrowers to repay in their concern about future access to credit

the medium run effects of educational expansion evidence from a large school construction program in indonesia this paper studies the medium run consequences of an increase in the rate of accumulation of human capital in a developing country from 1974 to 1978 the indonesian government built over 61 000 primary schools the school construction program led to an increase in education among individuals who were young enough to attend primary school after 1974 but not among the older cohorts 2sls estimates suggest that an increase of 10 percentage points in the proportion of primary school graduates in the labor force reduced the wages of the older cohorts by 3 8 10 and increased their formal labor force participation by 4 7 i propose a two sector model as a framework to interpret these findings the results suggest that physical capital did not adjust to the faster increase in human capital

the demand for food and calories we investigate nutrition and expenditure in rural maharashtra in india we estimate that the elasticity of calorie consumption with respect to total expenditure is 0 3 0 5 a range that is in accord with conventional wisdom the elasticity declines only slowly with levels of living and is far from the value of zero suggested by a recent revisionist literature in these indian data the calories necessary for a day s activity cost less than 5 percent of the daily wage which makes it implausible that income is constrained by nutrition rather than the other way around

schooling and labor market consequences of school construction in indonesia evidence from an unusual policy experiment between 1973 and 1978 the indonesian government engaged in one of the largest school construction programs on record combining differences across regions in the number of schools constructed with differences across cohorts induced by the timing of the program suggests that each primary school constructed per 1 000 children led to an average increase of 0 12 to 0 19 years of education as well as a 1 5 to 2 7 percent increase in wages this implies estimates of economic returns to education ranging from 6 8 to 10 6 percent

the desirability of a permanent tax amnesty abstract there are two main concerns about tax amnesty first if it is anticipated it may increase cheating and reduce the efficiency of the tax system second amnesty may be inequitable by letting cheaters off the hook however several federal governments currently hold a policy of long term or permanent tax amnesty in apparent defiance of these concerns this paper examines fully anticipated tax amnesty and finds that it is possible for a permanent tax amnesty to actually increase rather than decrease the efficiency and equity of the tax system

long term financial contracts can mitigate the adverse selection problem in project financing this paper shows that long term contracts can be used in competitive financial markets to separate entrepreneurs of different abilities in equilibrium poor entrepreneurs are financed with a sequence of standard debt contracts good entrepreneurs are financed with a modified contract in which the terms of the second part of the contract are contingent upon whether default is observed at the first date sorting is achieved through the contingent term in the contract in equilibrium good entrepreneurs will typically pay high interest rates to start with followed by relatively lower rates later if they are successful the solution in the paper is contrasted with the use of collateral incomplete information plays an important role in explaining the existence and form of enduring relationships when agents have private information and cannot precommit to future actions and announcements there may be a role for multiperiod contracts see townsend 1982 and hart and holmstrom 1986 such contracts tie future contractual terms to current behaviour moreover these contracts can be self enforcing simply relying upon the self interest of agents to see them through this paper shows that long term relationships may help overcome adverse selection problems the basic idea is very simple entrepreneurs have different probabilities of completing successive projects successfully observation of the returns cannot reveal the type of project however repeated observation of returns does give information about the type of project by the law of large numbers even if there are only two observations at successive dates it may be possible to separate types by making the terms of the contract at the second date conditional upon whether default is observed at the first we consider an entrepreneur who is risk neutral and who has a project at each of two successive dates the projects may require outside finance from banks risk neutral banks offer two period credit contracts to the entrepreneur we assume that there are two types of entrepreneur one with a high probability of completing projects successfully and a second with a low probability the probability of success is private information to the entrepreneur it is not known by the bank the problem of generalising the analysis to more entrepreneur types is discussed in the conclusion in section 2 of the paper it is shown that in this setting an adverse selection problem may arise we consider a sequence of standard debt contracts which specify a fixed payment at each date the important point to note here is that with

sorting by height education and economic outcomes of women in less developed countries abstracttaller height is commonly found to correlate with educational and economic outcomes most studies focus on a relationship to earnings and consider samples from individual countries this p

accounting for the effect of health on economic growth i use microeconomic estimates of the effect of health on individual outcomes to construct macroeconomic estimates of the proximate effect of health on gdp per capita i employ a variety of methods to construct estimates of the return to health which i combine with cross country and historical data on height adult survival rates and age at menarche using my preferred estimate eliminating health differences among countries would reduce the variance of log gdp per worker by 9 9 percent and reduce the ratio of gdp per worker at the 90th percentile to gdp per worker at the loth percentile from 20 5 to 17 9 while this effect is economically significant it is also substantially smaller than estimates of the effect of health on economic growth that are derived from cross country regressions

under the weather health schooling and economic consequences of early life rainfall life in rural areas of developing countries is prone to many kinds of risk such as illness or mortality of household members crop or other income loss due to natural phenomena weather insect infestations or fire for example and civil conflict in addition to their contemporaneous effects the effects of certain types of shocks may still be felt many years or even decades later from a public policy standpoint it is particularly important to identify shocks that have large long run effects moreover the mechanics underlying the persistence of shocks may be of con siderable interest for example a health shock may have a long run effect simply because the health shock itself persists over time alternately the health shock may not directly affect long run outcomes but it could affect some other outcome such as educational attainment that helps determine long run well being in this paper we focus on shocks that occur at the very beginning of life we ask how sensi tive long run individual well being is to environmental conditions around the time of birth in particular we examine the effect of weather shocks around the time of birth on the adult health education and socioeconomic outcomes of indonesian women and men born between 1953 and 1974 in addition we attempt to shed light on the intervening pathways connecting early life rainfall to adult outcomes illuminating the roles of health and educational attainment in deter mining adult socioeconomic status this investigation has considerable data requirements it necessitates information on weather shocks experienced by individuals several decades earlier as well as detailed current informa tion on adult outcomes we use information in the indonesian family life surveys ifls on an individual s year and location of birth and link each individual in that survey to locality specific rainfall data for their birth year for individuals born in rural areas on whom we focus rainfall variation across space and time should generate corresponding variation in agricultural output and thus household income to deal with measurement error in the rainfall data we run instrumental variables regressions where variables for rainfall measured at slightly more distant rainfall stations serve as instruments for rainfall in the individual s birthplace and birth year we examine the impact of early life rainfall on a range of adult outcomes observed in 2000 we find that higher early life rainfall leads to improved health schooling and socioeconomic status for women women with 20 percent higher rainfall relative to normal local rainfall in their year and location of birth are 3 8 percentage points less likely to self report poor or very poor health they attain 0 57 centimeters greater height attain 0 22 more completed grades of

skill transferability migration and development evidence from population resettlement in indonesia we use a natural experiment in indonesia to provide causal evidence on the role of location specific human capital and skill transferability in shaping the spatial distribution of productivity from 1979 1988 the transmigration program relocated two million migrants from rural java and bali to new rural settlements in the outer islands villages assigned migrants from regions with more similar agroclimatic endowments exhibit higher rice productivity and nighttime light intensity one to two decades later we find some evidence of migrants adaptation to agroclimatic change overall our results suggest that regional productivity differences may overstate the potential gains from migration

the economics of tax amnesties abstract this paper examines some of the economic implications of tax amnesties we present a model where individuals are initially uncertain about the disutility from tax evasion when they file their tax returns if they later learn that they would like to be more honest than they have been an amnesty gives them an opportunity to report additional income we also show that as the probability of an amnesty rises people report less income as a consequence an optimal collection policy requires the government to balance the cost of lost tax revenue against the gains from an amnesty

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