a model of delegated project choice we present a model in which a principal delegates the choice of project to an agent with different preferences the principal determines the set of projects from which the agent may choose the principal can verify the characteristics of the project chosen by the agent but does not know which other projects are available to the agent two frameworks are considered i a static setting in which the collection of available projects is exogenous to the agent but uncertain and ii a dynamic setting in which the agent searches for projects

merger policy with merger choice we analyze the optimal policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and firms choose which of several mutually exclusive mergers to propose in our model the optimal policy of an antitrust authority that seeks to maximize expected consumer surplus imposes a tougher standard on larger mergers i e those involving firms with a larger pre merger market share or equivalently leading to a larger naively computed post merger herfindahl index the optimal policy is a response to a bias in firms proposal incentives firms always propose a larger merger when it is better for consumers than a smaller one but sometimes will propose the larger one even when it is worse for consumers

wealth distribution in life cycle economies abstract this paper compares the age wealth distribution produced in life cycle economies to the corresponding distribution in the us economy the idea is to calibrate the model economies to match features of the us earnings distribution and then examine the wealth distribution implications of the model economies the findings are that the calibrated model economies with earnings and lifetime uncertainty can replicate measures of both aggregate wealth and transfer wealth in the us furthermore the model economies produce the us wealth gini and a significant fraction of the wealth inequality within age groups however the model economies produce less than half the fraction of wealth held by the top 1 percent of us households

demand for health insurance and precautionary motives for savings among the elderly abstract this paper examines whether or not the elderly have precautionary motives for savings against uncertain and potentially large medical costs i analyze the relationship between purchases of actuarially unfair health insurance and the individual s ability to self insure in order to create a complete model of this behavior the government programs of medicare and medicaid are also incorporated into the analysis the major results from this paper are that individuals do tend to behave in a manner that is consistent with precautionary behavior and that even among those who do not hold private insurance most act in a manner consistent with their being over insured by medicare

strategic use of private standards to enhance international competitiveness vegetable exports from kenya and elsewhere abstract the paper examines how european retailers are using private standards for food safety and quality as risk management and competitive tools and the strategic responses of leading kenyan and other developing country supplier exporters to such standards despite measures to harmonize a single market the european fresh produce market is very diverse in terms of consumer preferences structural dynamics and attention to and enforcement of food safety and other standards leading kenyan fresh produce suppliers have re positioned themselves at the high end including high care segments of the market precisely those that are most demanding in terms of quality assurance and food safety systems an array of factors have influenced this strategic positioning including relatively high international freight costs the emergence of more effective competition in mainstream product lines relatively low labor costs for produce preparation and strong market relationships with selected retail chains to succeed in this demanding market segment the industry has had to invest substantially in improved production and procurement systems upgraded pack house facilities and quality assurance food safety management systems

fiscal policy effects in a heterogeneous agent olg economy with an aging population this paper incorporates the aging population projected by the u s social security administration to a heterogeneous agent olg model with idiosyncratic wage shocks and analyzes its effects on individual households the government budget and the overall economy the fiscal gap caused by the demographic change is 2 92 of gdp under the ssa s intermediate projection the effect of the aging population is large by itself and depends significantly on how the government finances the cost of the demographic change there is a strong trade off between efficiency and equity and this paper quantitatively assesses the pros and cons of stylized fiscal reform plans

mitigating america s demographic dilemma by pre funding social security abstract financing social security benefits at current levels implies significant increases in payroll taxes within the next 20 years under current us demographic developments using a general equilibrium overlapping generations model with realistic patterns of fertility and lifespan extension this study shows that future generations would be harmed during the demographic transition due to rising payroll taxes which crowd out savings and slow real wage growth below the rate of technological progress a faster rate of technological progress would mitigate only some of the payroll tax increase and its economic consequences but could not overcome them addressing the financing problem by reducing social security benefits as needed or by raising the eligibility age for benefits imposes major welfare losses on current or near term retirees by contrast a pre funding of social security financed with consumption taxes more evenly spreads the welfare losses across generations and it helps future generations especially the poor by stimulating capital formation

social security and the rise in health spending abstract in a quantitative model of social security with endogenous health i argue that social security increases the aggregate health spending of the economy because it redistributes resources to the elderly whose marginal propensity to spend on health is high i show by using computational experiments that the expansion of us social security can account for over a third of the dramatic rise in us health spending from 1950 to 2000 in addition social security has a spill over effect on medicare as social security increases health spending it also increases the payments from medicare thus raising its financial burden

wealth inequality and intergenerational links previous work has had difficulty generating household saving behaviour that makes the distribution of wealth much more concentrated than that of labour earnings and that makes the richest households hold onto large amounts of wealth even during very old age i construct a quantitative general equilibrium overlapping generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability i show that voluntary bequests can explain the emergence of large estates while accidental bequests alone cannot and that adding earnings persistence within families increases wealth concentration even more i also show that the introduction of a bequest motive generates lifetime savings profiles more consistent with the data

gm free private standards and their effects on biosafety decision making in developing countries we provide a comprehensive review of international cases where gm free private standards set up by food companies in developed countries have influenced biosafety policymaking in developing countries we find 29 cases where private importers have directly or indirectly affected policy decisions in 21 countries most of the cases relate irrational fear of export losses to excessively precautionary decisions these cases are based on two generally misleading premises the belief that europe or japan represents the only market for exports and the perception that non gm segregation is infeasible or prohibitively costly in all situations our study also demonstrates the importance of information asymmetries across countries and agents and the role of risk aversion in seemingly irrational decision making the combination of these four factors helps us explain why presumed but unproven expected commercial losses still represents a significant impediment to biosafety policymaking in developing countries

uncertain medical expenses and precautionary saving near the end of the life cycle this paper introduces a dynamic structural model of household consumption decisions in which elderly families consider the effects of uncertain future medical expenses when deciding current levels of consumption the model with uncertain medical expenses implies a potentially important role for precautionary saving incentives to explain slow rates of dissaving among elderly americans during retirement rather than just simulating the stochastic dynamic model preference parameters are estimated using panel data on health wealth and expenditures for retired families the health uncertainty model predicts consumption levels closer to observed expenditures than a life cycle model with uncertain longevity however elderly families typically dissave their financial assets more slowly than even the baseline health uncertainty model predicts is optimal

implications of population ageing for economic growth the share of the population aged 60 and over is projected to increase in nearly every country in the world during the period 2005 50 population ageing will tend to lower both labour force participation and savings rates thereby raising concerns about a future slowing of economic growth our calculations suggest that oecd countries are likely to see modest but not catastrophic declines in the rate of economic growth however behavioural responses including greater female labour force participation and policy reforms including an increase in the legal age of retirement can mitigate the economic consequences of an older population in most non oecd countries declining fertility rates will cause labour force to population ratios to rise as the shrinking share of young people will more than offset the skewing of adults towards the older ages these factors suggest that

macroeconomic consequences of population aging in the united states overview of a national academy report author s lee ronald d abstract the us population will age rapidly for several decades and then more slowly with less aging than most rich nations health of the elderly has greatly improved but disability stagnated after 2000 retirement age reversed its decline in the mid 1990s and health status leaves ample room for increased elder labor supply many older people have inadequate retirement savings and face additional risks including uncertainty about both public and private pensions and health insurance population aging may cause a small decline in rates of return the main problem is the impact of population aging on public programs for the elderly

revisiting the palm oil boom in south east asia fuel versus food demand drivers in the past 30 years palm oil production has increased ninefold with almost all the growth occurring in malaysia and indonesia this growth has been associated with extensive deforestation with biofuels often named as the principal driver however other drivers have been less examined in particular restrictions on genetically modified food in europe and on trans fats in many developed countries have led food companies to switch to using palm oil in production this article uses a price analysis to examine the drivers of palm oil production growth during the 1980 2010 boom soya bean oil is used in the analysis as the leading vegetable oil while crude oil represents the energy market the prices of these oils along with palm oil are tested in vector autoregression var and vector error correction models the two models consistently find that palm oil prices do not appear to respond to short run fluctuations in crude oil prices rather they are a function of lagged palm oil prices and current and

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

innovation and cooperation implications for competition and antitrust n k robel laureate robert solow and his colleagues on mit s industrial productivity commission recently noted dertouzos lester and solow 1989 p 7 undeveloped cooperative relationships between individuals and between organizations stand out in our industry studies as obstacles to technological innovation and the improvement of industrial performance and later p 105 that interfirm cooperation in the u s has often though not always been inhibited by government antitrust regulation these striking conclusions warrant further exploration unfortunately industrial organization textbooks still discuss horizontal cooperation and competition almost exclusively in terms of standard cartel theory on the other hand vertical cooperation contracting is viewed differently and some textbooks provide treatments of supplier buyer relationships in which cooperation is viewed as enhancing efficiency both in the textbooks and in policy discussion among economists cooperation among competitors is highly suspect being perhaps the last bastion of what was once referred to as the inhospitality tradition in antitrust as a result very little literature addresses how cooperation among competitors can promote competition notwithstanding that cooperation among competitors may sometimes be essential if innovating firms are to compete in today s increasingly global markets imai and baba 1989 such cooperation is already important in japan and in europe 1

impact of genetic modification on country image of imported food products in european markets perceptions of channel members abstract risk to the image of food exporting countries in foreign markets for food products has been advanced as a reason for them to ban commercial release of genetically modified gm crops the aim of this paper is to explore the reality and intensity of such a risk in depth interviews have been conducted with key distributors in the european food sector to ascertain factors that they consider important in determining reputation of exporting countries and to ascertain whether gm impacts on such reputations highly negative consumer sentiment towards gm in europe seems likely to continue to influence food industry buyers against importing gm food however no evidence was found that presence of gm crops in a country causes negative perception of non gm food imported from that country provided adequate steps are taken to avoid accidental contamination of conventional crops producer countries do not appear at great risk of damaging their overall country image for food products if gm technology is introduced

health and other asset holdings despite clear evidence of correlations between financial and medical statuses and decisions most models treat financial and health related choices separately this article bridges this gap by proposing a tractable dynamic framework for the joint determination of optimal consumption portfolio holdings health investment and health insurance we solve for the optimal rules in closed form and capitalize on this tractability to gain a better understanding of the conditions under which separation between financial and health related decisions is sensible and of the pathways through which wealth and health determine allocations welfare and other variables of interest such as expected longevity or the value of health furthermore we show that the model is consistent with the observed patterns of individual allocations and provide realistic estimates of the parameters that confirm the relevance of all the main characteristics of the model

the effects of health wealth and wages on labour supply and retirement behaviour this paper estimates a life cycle model of labour supply retirement and savings behaviour in which future health status and wages are uncertain individuals face a fixed cost of work and cannot borrow against future labour pension or social security income the method of simulated moments is used to match the life cycle profiles of labour force participation hours worked and assets that are estimated from the data to those that are generated by the model the model establishes that the tax structure of the social security system and pensions are key determinants of the high observed job exit rates at ages 62 and 65 removing the tax wedge embedded in the social security earnings test for individuals aged 65 and older would delay job exit by almost one year by contrast social security benefit levels health and borrowing constraints are less important determinants of job exit at older ages for example reducing social security benefits by 20 would cause workers to delay exit from the labour force by only three months

the value of life and the rise in health spending over the past half century americans spent a rising share of total economic resources on health and enjoyed substantially longer lives as a result debate on health policy often focuses on limiting the growth of health spending we investigate an issue central to this debate is the growth of health spending a rational response to changing economic conditions notably the growth of income per person we develop a model based on standard economic assumptions and argue that this is indeed the case standard preferences of the kind used widely in economics to study consumption asset pricing and labor supply imply that health spending is a superior good with an income elasticity well above one as people get richer and consumption rises the marginal utility of consumption falls rapidly spending on health to extend life allows individuals to purchase additional periods of utility the marginal utility of life extension does not decline as a result the optimal composition of total spending shifts toward health and the health share grows along with income in projections based on the quantitative analysis of our model the optimal health share of spending seems likely to exceed 30 percent by the middle of the century

fiscal cost of demographic transition in japan abstract this paper quantifies the fiscal cost of demographic transition that japan is projected to experience over the next several decades in a life cycle model with endogenous saving consumption and labor supply in both intensive and extensive margins retirement waves of baby boom generations combined with a rise in longevity and low fertility rates raise the old age dependency ratio to 85 by 2050 the highest among major developed countries and generate a significant budget imbalance as the government faces rising costs of public pension and health and long term care insurance preserving the current level of the transfers will require a major increase in taxation using consumption taxes to balance the government budget the tax rate reaches the maximal value of 48 in late 2070s a pension reform to reduce benefits by 20 results in a peak tax rate of 37 which can be reduced further to 28 if the retirement age is also gradually raised by 5 years

do remedies affect the efficiency defense an optimal merger control analysis abstract this paper examines the optimal use of remedies and the efficiency defense for merger control we develop a framework in which merger efficiency gains are endogenously determined and are not observed by the competition authority the possibility of an efficiency defense can push firms to design the merger better leading to greater efficiency gains firms can also submit remedies to the competition authority they interact with the efficiency defense by reducing the firm s incentive to enhance efficiency at the same time remedies improve the assessment of the merger in particular by signaling the true level of efficiency gains we ask to what extent it may be optimal to make use of both instruments simultaneously and thus discuss the possibility that the competition agency refrain from using one of the instruments to try to improve overall merger control performance

consumption and risk sharing over the life cycle a striking feature of u s data on income and consumption is that inequality increases with age this paper asks if individual specific earnings risk can provide a coherent explanation we find that it can we construct an overlapping generations general equilibrium model in which households face uninsurable earnings shocks over the course of their lifetimes earnings inequality is exogenous and is calibrated to match data from the u s panel study on income dynamics consumption inequality is endogenous and matches well data from the u s consumer expenditure survey the total risk households face is decomposed into that realized before entering the labor market and that realized throughout the working years in welfare terms the latter is found to be more important than the former

on the asynchronous approvals of gm crops potential market impacts of a trade disruption of eu soy imports due to their high protein content soybeans are important feedstuffs in the european union eu however the cultivation of soybeans using genetically modified gm varieties in non eu countries is increasing and the eu authorization of gm products takes longer than in other countries leading to an asynchronous approval between the eu and non eu countries that might induce soybean trade disruptions this paper uses an integrated modelling system to simulate argentina brazil and the united states ending soybean exports to the eu the impact on world trade and on the eu import prices of soy products is analysed with a computable general equilibrium model eu soy imports are shown to decline and the import price of soybeans in the eu increases the effects on eu agricultural markets are analysed based on a partial equilibrium model feed costs in the eu are found to increase with poultry and pork the most affected production and exports decline and imports increase however the effects of a trade ban are found to be less profound than in many other studies due to compensating substitution effects at various market levels increasing imports from third countries increasing domestic oilseed production and the use of other protein feeds

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

aging and health financing in the u s a general equilibrium analysis abstract we quantify the effects of population aging on the u s healthcare system our analysis is based on a stochastic general equilibrium overlapping generations model of endogenous health accumulation calibrated to match pre 2010 u s data we find that population aging not only leads to large increases in medical spending but also a large shift in the relative size of private vs public insurance without the affordable care act aca aging by itself leads to a 40 increase in health expenditures by 2060 and a 9 6 increase in gdp which is mainly driven by the increase of the fraction of older higher risk individuals in the economy as well as behavioral responses to aging and the subsequent expansion of the healthcare sector aging increases the premium in group based health insurance ghi markets and enrollment in ghi decreases while the individual based health insurance ihi market medicaid and medicare expand significantly the size of medicare will almost double by 2060 as the elderly dependency ratio increases additional funds equivalent to roughly 2 7 of gdp are required to finance medicare and medicaid the introduction of the aca increases the fraction of insured workers to almost 100 by 2060 compared to 82 without the aca this increase is driven by the stabilization of ghi markets and the further expansions of medicaid and the ihi market the aca mitigates the increase of healthcare costs by reducing the number of the uninsured who pay the highest market price for healthcare services overall the aca adds to the fiscal cost of population aging mainly via the medicaid expansion our findings demonstrate the importance of accounting for behavioral responses structural changes in the healthcare sector and general equilibrium adjustments when assessing the economy wide effects of aging

the real threat to gm crops in poor countries consumer and policy resistance to gm foods in rich countries abstract in most poor countries today farmers still plant no gm food or feed crops at all some are now planting gm cotton but gm food and feed crops have not yet been grown commercially anywhere in developing asia or the middle east and in only one african country south africa government authorities in most of these countries have not yet given farmers official permission to plant any gm food or feed crops superficially in most cases because of precautionary concerns about biological safety the more fundamental reason is now a fear that consumers in high income importing regions such as europe and japan will shun imports from any country that begins planting gm varieties the new eu regulation calling for strict labelling and traceability on all gm derived foods and feeds requiring a costly physical segregation of gm from non gm all the way up the marketing chain will further discourage the planting of gm crops in poor countries