book review feature public policy in an uncertain world by charles f manski cambridge ma harvard university press 2013 pp 224 39 95 isbn 978 0674066892

taxes housing and capital accumulation in a two sector growing economy abstract it is sometimes argued that the favorable tax treatment afforded to housing may lead to an oversupply of housing at the expense of capital this issue is examined in the context of a growing two sector economy in the basic model where the rate of time preference is constant and labor is instantaneously sectorally mobile the long run response of the capital stock to a tax on housing depends upon the relative capital intensities of the two sectors while the long run relative asset price of housing remains unchanged the robustness of these propositions to changes in the model are considered taxes on capital are also analyzed

relaxing intertemporal separability a rational habits model of labor supply estimated from panel data this article relaxes the assumption of separability of preferences over time that although implausible is usually maintained in life cycle labor supply models an empirically tractable rational habits model is specified and estimated on the basis of a 10 year sample of men from the michigan panel of income dynamics the effect of past hours of work in determining current hours decisions is found to be very important and well determined having allowed for permanent individual differences and for time effects

an experimental examination of labor supply and work intensities estimated negative substitution effects on work hours question the empirical validity of the classical labor supply model estimates are reconciled by allowing a dual choice of hours and effort for piecerate workers in such a model these negative substitution effects result from substituting on and off the job leisure we test our model using controlled experimentation on human subjects these experiments while not naturally occurring environments represent real economic choices and can generate data unavailable elsewhere e g effort data the results support our model and they have implications both for labor management and for empirical research focusing only on the hours choice the classical static model of the labor leisure choice offers positive compensated wage effects on hours of work as its main testable implication previous attempts to test this hypothesis with field data have cast doubt on the empirical validity of the static labor supply model due to the frequency of negative estimated compensated wage elasticities a limitation of the model is that it views the choice of hours of work as the only

labor supply of husbands and wives a simultaneous equations approach labor supply functions for married men and women are formulated as a dynamic simultaneous equations system which is estimated using panel data controlling for fixed individual effects allows marginal labor supply responses to be disentangled from permanent patterns in hours worked due to assortative mating the results suggest that the labor supply of husbands and wives without pre school children is not jointly determined in the short run while families with young children exhibit strong interactions in work hours and negative cross earnings effects neither the joint utility model of family labor supply nor an ad hoc traditional family model is supported by these results the data are for the united states and concern 381 couples from the denver income maintenance experiment excerpt

caught in the trap welfare s disincentive and the labor supply of single men abstract youth unemployment is particularly large in many industrialized countries and has dramatic consequences in both the short and long term while there is abundant evidence about the labor supply of married women and single mothers little is known about how young childless singles react to financial incentives the french minimum income revenu minimum d insertion rmi often accused of generating strong disincentives to work offers a natural setting to study this question since childless single individuals primarily males constitute the core group of recipients exploiting the fact that childless adults under age 25 are not eligible for this program we conduct a regression discontinuity analysis using french census data we find that the rmi reduces the participation of uneducated single men by 7 10 at age 25 we conduct an extensive robustness check and discuss the implications of our results for youth unemployment and current policy developments

labour supply estimation and public policy abstract economists devote considerable energies towards refining their econometric techniques to overcome difficulties connected with conducting empirical research despite advances in technique it is not clear whether further refinement in this direction is worthwhile for policy purposes it may be that no further amount of statistical adjustment of inadequate data will increase understanding and that better data is simply necessary to add to our knowledge but rarely is sufficient credit paid to new forms of data in short econometric technique is emphasized to the neglect of data innovation as if new data were merely lying about waiting for an ingenious suggestion for use this paper surveys advances of the last twenty five years in estimating labour supply for policy purposes with a view towards appreciating the relative contribution of both improvements in econometric technique as well as developments of new data after briefly detailing the key parameters which economists have sought to estimate we describe the early first generation research circa 1970 which is plagued by problems of unobservable variables measurement errors truncation and selectivity bias and non linear budget constraints second generation research constitute attempts to resolve one or more of these difficulties and the respective contribution of econometric technique and new data is acknowledged and assessed including the contribution of data generated by large scale social experiments in which participants are randomly assigned to different guaranteed income plans and their labour supply behaviour measured

indices of household welfare and the value of leisure time i introduction a true leisure inclusive welfare index indicates the compensatory change in wage rates goods consumption or nonlabor income required to enable the household to attain some reference period utility given an exogenous change in wage rates and prices although these indices are theoretical constructs for the measurement of individual or household welfare changes empirical analyses of these indices have relied upon aggregate time series data these data provide information on national average changes in wage rates goods consumption and hours worked but do not capture changes in hours worked at the household level due to increased labor market participation while the entry of many new part time workers into the labor market may decrease the national average of hours worked per week there may be a decrease in leisure for many households in addition the aggregate time series approach ignores differences across households in demographic attributes and the occupations and industries in which household members are employed to address these issues two large cross sections of household data the 1972 and 1980 bls consumer expenditure surveys u s bureau of labor statistics 1978 were used to calculate three types of leisure inclusive welfare indices the real wage index goods consumption and nonlabor income indices for each of six household demographic groups households comprising a husband and wife with zero or more dependent non working children were considered as the basic decisionmaking units in this household approach two real wage indices could be constructed that of the husband and that of the wife since the labor services of the two individuals may be valued differently the remainder of the paper is organized as follows in section ii the leisure inclusive welfare indices are developed theoretically the fixed weight bounds on the true indices and the limitations of these indices in the context of a more general but as yet undeveloped intertemporal behavior framework is discussed in section iii the data and empirical results are discussed and analyzed a summary and conclusions follow in section iv along with suggestions for future research

a structural model of labor supply and child care demand this paper specifies and estimates a structural model in which the decision to purchase market child care and the quality purchased is made simultaneously with the employment decision of the mother separate analyses are performed for married mothers and single mothers the structural estimates are used to simulate the effects and costs of changes in the federal child care tax credit the simulations indicate that a refundable child care tax credit would distribute child care benefits more equally across the population by increasing the shares of subsidies received by low income families and would induce a considerable increase in expenditures on market child care labor supply also increases but by considerably less than child care expenditures a surprising result is that despite large increases in child care

the future price of houses mortgage market conditions and the returns to homeownership the purpose of this paper is to provide a simple framework in which to analyze the impact of a perfectly anticipated increase in the future selling price of houses on current house purchase decisions in the presence of capital market imperfections since implicitly it is the after tax selling price of houses that is considered this analysis is equivalent to one of a decrease in the capital gains tax on houses at retirement in this paper assumptions about homeownership mortgage markets and liquidity constraints are added to a life cycle model of asset accumulation taking the date of house purchase as exogenous it is shown that the impact of an exogenous increase in the expected future price of houses depends on current mortgage market conditions the future price of houses relative to the current price and the ratio of liquid assets to future labor income as well as preferences also a simple model of a market for houses is presented to analyze the impact of an increase in the expected future price of houses on the current market clearing price the mortgage market and the redistribution of the housing stock to consumers according to their wealth and liquidity characteristics in the life cycle model as exposited by franco modigliani and robert brumberg an increase in consumption in one period requires a decrease in consumption in another period when owner occupied housing is added to the model the tradeoff between consumption in different periods becomes more complex purchasing a larger house entails an increase in the consumption of housing services and an increase in assets held in the form of a house but a decrease in either nonhousing consumption or the holdings of an alternative asset or both the response of the consumer to price or income changes is also limited by financial market constraints capital market imperfections have been introduced into the life cycle model by a number of authors see for example lester thurow thayer watkins thomas russell clark wiseman and christopher pissarides and several authors have explicitly considered the impact of capital market imperfections on the house purchase decision see william dolde and james tobin william poole donald lessard and modigliani and dolde most similar to this study although developed independently roland artle and p varaiya s paper includes the theoretical incorporation of the house purchase decision into a life cycle model they consider the problem of choosing the date of house purchase while treating the level of consumption of housing services as exogenous in the life cycle model in this paper the consumer chooses the size of house to purchase at an exogenous date to use the life cycle model in the framework of a market of houses it is assumed that the stock of houses and the prices of all other goods including the rate of return on the alternative asset are fixed all consumers are identical except perhaps for initial wealth as noted by irving fisher p 325 in a world of perfect foresight and perfect markets the rates of return on all assets are equated in equilibrium if markets are perfect with the stock of houses and other prices fixed the present price of houses will rise by an amount equal to the present value of an exogenous increase in a future price of houses when mortgage market imperfections are introduced this relationship no longer holds and a future price increase may result in a redistribution of the current stock assistant professor of economics university of michigan this paper is an extension of a chapter of my doctoral thesis at the university of wisconsin madison the helpful comments of donald d hester charles a wilson hal varian and george borts are gratefully acknowledged

rising u s earnings inequality and family labor supply the covariance structure of intrafamily earnings this paper studies the labor supply contributions to individual and family earnings inequality during the period of rising wage inequality in the early 1980 s working couples have positively correlated labor market outcomes which are almost entirely attributable to permanent factors an intertemporal family labor supply model with this feature is used to estimate labor supply elasticities for husbands of 0 05 and wives of 0 40 this implies that labor supply explains little of the rising annual earnings inequality for married men but over 20 percent of the rise in family inequality and 50 percent of the modest rise in female inequality

welfare transfers in two parent families labor supply and welfare participation under afdc up this paper examines the effect of cash transfers and food stamp benefits on family labor supply and welfare participation among two parent families the aid to families with dependent children unemployed parent program has provided cash benefits to two parent households since 1961 despite recent expansions little is known about the program s effect on labor supply and welfare participation i develop a model of family labor supply in which hours of work for the husband and wife are chosen to maximize family utility subject to a family budget constraint accounting for afdc up benefits and other tax and transfer programs the husband s and wife s labor supply decisions are restricted to no work part time work and full time work maximum likelihood techniques are used to estimate parameters of the underlying hours of work and welfare participation equations the estimates are used to determine the magnitude of the work disincentive effects of the afdc up program and to simulate the effects of changes in afdc up benefit and eligibility rules on family labor supply and welfare participation the results suggest that labor supply and welfare participation among two parent families are highly responsive to changes in the benefit structure under the afdc up program

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

habits hysteresis and catastrophes in labor supply abstract this paper investigates the implications of a general model of locally unstable habit formation with respect to consumption household time and corporate time the model is shown to imply multiple long run equilibria exhibiting hysteresis and catastrophes dependent on rationings and the wage rate this can explain profound changes in labor supply preferences and behavior such as when long term unemployed become little motivated to get a new job or when former housewives develop a strong orientation towards paid work

allocation inflexibilities female labor supply and housing assets accumulation are women working to pay the mortgage this article uses data from the 1986 canadian family expenditures survey to estimate a life cycle consistent model of household labor supply and commodity demand that incorporates a mortgage qualification constraint based on earnings both the parametric and nonparametric implications of the model suggest that the labor supply of a nontrivial percentage of married women is constrained by mortgage commitments the results of generalized selectivity models of female labor force participation and labor supply show that the positive effect of a high debt service ratio exceeds the negative effect of young children

evaluation of four tax reforms in the united states labor supply and welfare effects for single mothers an emerging consensus is that labor force participation is more responsive to taxes and transfers than hours worked to understand the implications of participation responses for the welfare analysis of tax reform this paper embeds this margin of labor supply in an explicit welfare theoretic framework we apply the framework to examine the welfare effects on single mothers in the united states following four tax acts passed in 1986 1990 1993 and 2001 we propose a simulation method combining features of fully structural microsimulation studies and simple deadweight loss calculations our approach accounts for the observed heterogeneity in the microdata but is simple to implement because we do not need to specify utility functions and estimate utility parameters we find that each of the four tax acts created substantial welfare gains and that the gains were concentrated almost exclusively on the participation margin our results imply that standard approaches not modeling the participation decision can make large errors

the wisconsin child support assurance system estimated effects on poverty labor supply caseloads and costs the economic impact of a child support assurance system csas is simulated with microdata on custodial families in wisconsin the csas includes a uniform child support standard automatic wage withholding a minimum child support benefit and wage subsidy for eligible families the simulation incorporates a model of the labor supply decision representing the custodial parent s choice of whether to participate in csas or in the current afdc system the results suggest that csas can significantly reduce poverty as well as welfare caseloads if child support collections increase by one half of the difference between estimated ability to pay child support and current collections csas will be less costly than the current system

critique and transformation on the hypothetical nature of ecosystem service value and its neo marxist liberal and pragmatist criticisms abstract ecosystem service valuation esv attempts to transform the opposition of human economic necessity and ecological conservation by valuing the latter in terms of the services rendered by the former however despite a number of esv inspired sustainability initiatives since the 1990s global ecological degradation continues to accelerate this suggests that esv has fallen far short of its goals of sustainable social transformation a failure which has generated considerable criticism this paper reviews three prominent lines of esv criticism 1 the neo marxist criticism which emphasizes the fictitious character of ecosystem commodities 2 the liberal criticism through friedrich hayek s concept scientistic objectivism and 3 the pragmatist criticism of value monism although each form of criticism provides insight into the limitations of esv all share esv s inability to discern what kind of social transformation is possible unable to provide an account of their own immersion in social and historical context these approaches operate in the hypothetical in light of these shortcomings this paper advances a critical theory approach which we contend provides conceptual tools uniquely well suited to more adequately address the question of social transformation

economic response to a guaranteed annual income experience from canada and the united states this article reviews research from the five income maintenance experiments in canada and the united states after sketching the historical and political context of the experiments we compare their designs and discuss some important analytic difficulties our primary focus is the work incentive issue both nonstructural estimates of the experimental effects and elasticity estimates of structural labor supply functions we provide initial estimates of nonstructural and structural models for the canadian experiment we discuss more briefly some non work response findings associated with a guaranteed annual income and offer some personal comments on social experimentation and the policy process

fiscal incidence in an overlapping generations model with a fixed asset abstract we analyze a model of overlapping generations with a fixed factor land malleable capital and labor we consider the dynamic effects of various fiscal policies including taxes on rent wages and creation of public debt on capital accumulation land prices and intergenerational welfare minimal assumptions uniqueness and stability imply that a land tax may initially raise land values but the upper bound is less than one half of the tax revenues assuming homothetic utility the ratio between the long run capital responses to a land tax and to a lump sum transfer of equivalent revenue from the young to the old depends solely on the share of labor

life cycle theory inflation and the demand for housing there has been considerable interest lately in the influence of economywide inflation on the demand for housing under suitable equilibrium conditions such inflation creates three effects each of which may influence housing decisions first inflation raises initial mortgage payments through higher interest rates second it causes such payments to fall rapidly over time in real terms and third it creates a real growth in housing equity as borrowed debt is leveraged against the inflating value of homes two empirical studies one by kearl 6 and more recently by follain 3 have concluded that the sum of these impacts is adverse that is housing demand is reduced by greater economy wide inflation each suggests that credit constraints may explain this result in an attempt to understand better the microeconomic foundations of this empirical result schwab 9 and dougherty and van order 2 have developed fisher type models of intertemporal utility maximization which include a housing consumption choice schwab concludes that with a perfect capital market inflation should induce no distortion in consumer decisions about housing consumption dougherty and van order building on some unpublished work by poterba 8 argue that with interest deductibility from income taxes inflation reduces the after tax cost of housing capital and thereby increases housing demand these conclusions suggest that capital market imperfection must exist to explain the empirical results but just what kind schwab s paper addresses this question by introducing a borrowing constraint into a two period model 9 the constraint is absolute although schwab acknowledges that allowing collateralized borrowing is more realistic schwab s conclusions are two first he argues that if the constraint is nonbinding then the perfect capital market results prevail and second he demonstrates that if the constraints are binding the effect of inflation on

estimating the effect of unearned income on labor supply earnings savings and consumption evidence from a survey of lottery players this paper provides empirical evidence about the effect of unearned income on earnings consumption and savings using an original survey of people playing the lottery in massachusetts in the mid 1980 s the effects of the magnitude of lottery prizes on economic behavior are analyzed the critical assumption is that among lottery winners the magnitude of the prize is randomly assigned it is found that unearned income reduces labor earnings with a marginal propensity to consume leisure of approximately 11 percent with larger effects for individuals between 55 and 65 years old after receiving about half their prize individuals saved about 16 percent

a comparison of the labor supply findings from the four negative income tax experiments between 1968 and 1982 the united states federal government sponsored four negative income tax experiments this paper provides a set of consensus estimates of the labor supply responses to these experiments it is found that despite the wide range of treatments and evaluation methodologies the results are remarkably consistent on average husbands reduced labor supply by about the equivalent of two weeks of full time employment wives and single female heads reduced labor supply by about the equivalent of three weeks of full time employment youth reduced labor supply by about the equivalent of four weeks of full time employment estimated income and substitution effects are quite similar to those obtained from nonexperimental studies

economic valuation of the vulnerability of world agriculture confronted with pollinator decline there is mounting evidence of pollinator decline all over the world and consequences in many agricultural areas could be significant we assessed these consequences by measuring 1 the contribution of insect pollination to the world agricultural output economic value and 2 the vulnerability of world agriculture in the face of pollinator decline we used a bioeconomic approach which integrated the production dependence ratio on pollinators for the 100 crops used directly for human food worldwide as listed by fao the total economic value of pollination worldwide amounted to 153 billion which represented 9 5 of the value of the world agricultural production used for human food in 2005 in terms of welfare the consumer surplus loss was estimated between 190 and 310 billion based upon average price elasticities of 1 5 to 0 8 respectively vegetables and fruits were the leading crop categories in value of insect pollination with about 50 billion each followed by edible oil crops stimulants nuts and spices the production value of a ton of the crop categories that do not depend on insect pollination averaged 151 while that of those that are pollinator dependent averaged 761 the vulnerability ratio was calculated for each crop category at the regional and world scales as the ratio between the economic value of pollination and the current total crop value this ratio varied considerably among crop categories and there was a positive correlation between the rate of vulnerability to pollinators decline of a crop category and its value per production unit looking at the capacity to nourish the world population after pollinator loss the production of 3 crop categories namely fruits vegetables and stimulants will clearly be below the current consumption level at the world scale and even more so for certain regions like europe yet although our valuation clearly demonstrates the economic importance of insect pollinators it cannot be considered as a scenario since it does not take into account the strategic responses of the markets

the non equivalence of labour market taxes a real effort experiment under full rationality a labour market tax levied on employers and a corresponding income tax levied on employees are equivalent with boundedly rational agents this equivalence is no longer obvious in a real effort experiment we study the effects of these taxes on preferences concerning the size of the public sector subjective well being labour supply and on the job performance our findings suggest that employer side taxes induce preferences for a larger public sector subjective well being is higher under employer side taxes while labour supply is lower at least at the extensive margin we discuss three mechanisms that may underlie these results

where is the value in valuing pollination ecosystem services to agriculture abstract current national and global scale monetary valuation of pollination services do not accurately estimate the contribution of wild pollinators to agricultural production first ecosystem wild pollination services remain largely bundled with those of managed pollinators this problem is compounded by the fact that the dependency of crops on pollination a key parameter used in current valuations does not reflect variation in pollinator density crop cultivars and growing conditions that exist in practice over half of the 153 billion of estimated global pollination service value in 2005 is based on estimates of pollinator dependency from crops with fewer than three field studies that measure actual levels of pollinator activity and corresponding fruit set the resulting uncertainty may be most distorting when applied to widely planted intensive oilseed crops furthermore current valuations are underpinned by simplistic assumptions regarding the likelihood of pollinator decline and the impact on agricultural prices although efforts to motivate wild pollinator protection through their ecosystem service value remain highly circumscribed by conceptual and empirical limitations we identify the need to go beyond technical solutions and develop a critical framework that could account for why pollinator conservation has come to be predominantly justified in these terms to begin with

the effects of housing assistance on labor supply evidence from a voucher lottery this study estimates the effects of means tested housing programs on labor supply using data from a randomized housing voucher wait list lottery in chicago economic theory is ambiguous about the expected sign of any labor supply response we find that among working age able bodied adults housing voucher use reduces labor force participation by around 4 percentage points 6 percent and quarterly earnings by 329 10 percent and increases temporary assistance for needy families program participation by around 2 percentage points 15 percent we find no evidence that the housing specific mechanisms hypothesized to promote work such as neighborhood quality or residential stability are important empirically jel i38 j22 r23 r38

unstable bandwagon and habit effects on labor supply abstract this paper develops a dynamic labor supply model based on unstable bandwagon and habit effects it possesses multiple long run equilibria and exhibits hysteresis and transitions between home and market time dependent on the wage rate these properties are robust the model provides an explanation of the long run increase in labor supply by married women in the netherlands the usa and other oecd countries

when financial work incentives pay for themselves evidence from a randomized social experiment for welfare recipients abstract this paper summarizes early findings from a social experiment that provided financial incentives for new welfare recipients to leave welfare and work full time the financial incentive was essentially a negative income tax with a requirement that people work at least 30 h week early results show that the financial incentive increased full time employment earnings and income and reduced poverty furthermore at the end of the period discussed in this paper the program was paying for itself through increased tax revenues

choices without prices without apologies valuing is usually regarded as a process of compressing information about attributes into a single metric armed with this reduced form of compact information the consumer can consider a particular object with a particular price attached or implied and make an informed decision but the process of valuing is less straightforward than we ordinarily suppose when environmental goods and services become the object of information compaction it is possible that important information is lost we comment on the choice problem germane to environmental goods and services and challenge the presumption that environmental choices made without explicit pricing are inferior to those in which hypothetical valuation studies are undertaken

welfare reform in european countries a microsimulation analysis this article compares the effects of increasing traditional welfare to introducing in work benefits in the 15 pre enlargement countries of the european union we use a labour supply model encompassing responses to taxes and transfers along both the intensive and extensive margins and the euromod microsimulation model to estimate current marginal and participation tax rates we quantify the equity efficiency trade off for a range of elasticity parameters in most countries because of large existing welfare programmes with high phase out rates increasing traditional welfare is undesirable unless the redistributive tastes of the government are extreme in contrast the in work benefit reform is desirable in a very wide set of cases

forecasting the effects of a negative income tax program this paper outlines a scheme that forecasts the change in net earnings or in hours worked that results from the introduction of a negative income tax nit program the authors illustrate this scheme by estimating labor supply functions for married men married women and single women who participated in the seattle denver income maintenance experiments these functions are then used to simulate the effects of several nit programs the findings suggest that changes in the wage rate of an individual covered by an nit program result in important changes in the hours of work of the individual s spouse

intertemporal preferences and labor supply in this paper the authors examine whether nonseparable preference structures ar e important in characterizing life cycle labor supply using longitud inal data on prime age males from the panel study of income dynamics they estimate a model of life cycle leisure and consumption under un certainty in which intertemporal preferences are allowed to be nonsep arable in leisure the model tests several alternative specifications considered in the literature they investigate the robustness of the ir findings to certain forms of population heterogeneity and types of model misspecification across alternative specifications the autho rs find that the standard assumption of intertemporally separable pre ferences for leisure is not consistent with the data copyright 1988 by the econometric society

ecology and valuation big changes needed abstract ecological economics has developed as a transdisciplinary science but it has not taken significant steps toward a truly integrated process of evaluating anthropogenic ecological change the emerging dominance within ecological economics of the movement to monetize ecological services when combined with the already well entrenched dominance of contingent pricing as a means to evaluate impacts on amenities has created a monistic approach to valuation studies it is argued that this monistic approach to evaluating anthropogenic impacts is inconsistent with a sophisticated conception of ecology as a complex science that rests on shifting metaphors an alternative pluralistic and iterative approach to valuation of anthropogenic ecological change is proposed

optimal income transfer programs intensive versus extensive labor supply responses this paper analyzes optimal income transfers for low incomes labor supply responses are modeled along the intensive margin intensity of work on the job and along the extensive margin participation into the labor force when behavioral responses are concentrated along the intensive margin the optimal transfer program is a classical negative income tax program with a substantial guaranteed income support and a large phasing out tax rate however when behavioral responses are concentrated along the extensive margin the optimal transfer program is similar to the earned income tax credit with negative marginal tax rates at low income levels and a small guaranteed income carefully calibrated numerical simulations are provided

dynamic hours of work functions for husbands wives and single females hours of work equations are derived from the constrained maximization of a utility function that is not separable over time and that varies with a household s demographic structure these equations are fitted to observations on wage rates nonlabor income and other variables for husbands wives and unmarried women the dependence of each household s current work and consumption behavior upon its work and consumption behavior in the past is examined closely and different interpretations of the relationship are confronted with the data

sample attrition and labor supply response in experimental panel data sample attrition is a potentially serious problem for analysis of panel data particularly experimental panel data in this article a variety of estimation procedures are used to assess the importance of attrition bias in labor supply response to the seattle and denver income maintenance experiments sime dime data from social security administration earnings records and the sime dime public use file are used to test various hypotheses concerning attrition bias the study differs from previous research in that data on both attriters and nonattriters are used to estimate the experimental labor supply response although not conclusive the analysis suggests that attrition bias is probably not a serious enough problem in the sime dime data to warrant extensive correction procedures the methodology used in this study could be applied to other panel data sets

the history of ecosystem services in economic theory and practice from early notions to markets and payment schemes article i nfo this paper reviews the historic development of the conceptualization of ecosystem services and examines critical landmarks in economic theory and practice with regard to the incorporation of ecosystem services into markets and payment schemes the review presented here suggests that the trend towards monetization and commodification of ecosystem services is partly the result of a slow move from the original economic conception of nature s benefits as use values in classical economics to their conceptualization in terms of exchange values in neoclassical economics the theory and practice of current ecosystem services science are examined inthelight ofthis historicaldevelopment from thisreview we conclude thatthefocus onmonetary valuation and payment schemes has contributed to attract political support for conservation but also to commodify a growing number of ecosystem services and to reproduce the neoclassical economics paradigm and the market logic to tackle environmental problems

the quantification and valuation of ecosystem services article i nfo article history received 7 august 2010 accepted 16 october 2010 this paper explores differences between economic and ecological criteria for identifying measuring and evaluating ecosystem services it argues that economic stakeholders user groups generally do well in identifying these services and assigning prices to them these prices arise spontaneously in and serve to coordinate market activity related to the environment the relevant ecological information which markets gather and apply tends to be dispersed contingent particular local transitory and embedded in institutions and practices ecologists and other scientists in contrast often seek to understand how ecosystems work and which populations and processes provide ecosystem services the knowledge science seeks unlike the information markets gather tends to be centralized collaborative collective and consensus based science pursues concepts and principles that are timeless and general rather than ephemeral and site specific the paper contrasts the dispersed and decentralized information organized by markets with the collective and centralized knowledge characteristic of science the paper argues that the conceptual distance between market based and science based methods of assembling information and applying knowledge defeats efforts to determine the value of ecosystem services in any integrated sense

determinants of voluntary overtime decisions determinants of voluntary overtime decisions i introduction since the passage of the fair labor standards act in 1938 the minimum legal overtime pay premium has remained time and one half for persons working more than forty hours per week in 1978 approximately 59 percent of the labor force was subject to this provision and coverage has not changed since then 1 the labor market effects of overtime provisions including the decision on the part of both employers and employees to utilize overtime has generated a great deal of intellectual debate for example union groups have long stressed the importance of raising the legal minimum premium in order to stimulat employment through a substitution of additional employees for longer e g overtime hours previous research by ehrenberg and schumann 1982 has estimated that these effects are likely to be quite small to date studies of overtime behavior such as ehrenberg 1971a have focused on the decisions of employers implicit in these studies is the assumption of a perfectly elastic supply response by the employee to employer overtime policy however just as employers attempt to minimize costs in demanding overtime hours taking into account quasi fixed labor costs in addition to overtime premiums employees attempt to maximize utility in supplying overtime hours from the worker s perspective the decision to work overtime and perhaps more generally to take a job where overtime is regularly available or required can be thought of as resulting from a comparison of the utility derived from an overtime versus a no overtime state within this framework the voluntary overtime decision depends on relative wages overtime to straight time and nonlabor income and will be strongly conditioned on such personal factors as the worker s marital status and age this study attempts to advance our knowledge of the labor market effects of overtime policies by explicitly modelling employee responses to variations in the legal parameters of the overtime system 2 our model allows us to estimate substitution and income elasticities for overtime and thereby enables us to evaluate the effects of a variety of policies on a worker s voluntary overtime decision policy simulations suggest that legislative changes to increase the overtime premium or reduce the number of hours after which the mandatory premium takes effect would induce greater voluntary overtime on the part of worker yet because of offsetting income and substitution effects the net induced effects of such policies are not quantitatively large we also find that mandatory overtime provisions are most likely to be found in settings where quasi fixed employment costs are highest the remainder of this paper is organized as follows section ii develops a theoretical model of the voluntary overtime decision section iii presents the empirical model to be estimated section iv discusses the data used in estimation and the construction of key variables section v presents the empirical findings section vi reports the results of a simulation analysis of the effects of a number of policy alternatives on the voluntary overtime decision section vii investigates the sensitivity of the policy simulations to the empirical specification finally section viii summarizes the major conclusions and gives suggestions for further research ii the voluntary overtime decision the voluntary overtime decision can be though of as resulting from a straightforward maximization of utility subject to a budget constraint consider a worker who possesses a monotonic strictly quasi concave utility function in market goods income and labor supply u y h where y is income and h is hours of work the budget constraint facing the worker is y wh n where w is the net of taxes wage rate and n is net nonwage income to make the problem empirically tractable we utilize the stone geary utility function in this paper

a comparison of the effect of welfare programme features on welfare participation one and two parent families the effect of welfare programme characteristics on the decision to enter the welfare system is modelled as a binary discrete choice latent variable model dependent upon an underlying index function the two chief classes of welfare beneficiaries in the us welfare system are analysed two parent families and single female headed families the data set is a large recent non experimental multiyear cross sectional pooled data set derived from the us census bureaus current population survey behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory newly estimated comprehensive descriptive statistics of the entire welfare system for both single female household heads and married couples with children are employed to characterize the welfare system statistically significant estimates of substantial magnitude are obtained for the impacts on welfare participation for the welfare guarantee level the effective tax rate on earned income and the effec

stochastic control of corporate investment when output affects future prices the advance of the theory of contingent claim pricing has made it possible to model and analyze very complex financial claims when the value ofthe firm can be represented as a contingent claim then the firm s optimal financial policy can be determined with only a slight modification in standard solution techniques for contingent claims in this paper stochastic control theory is used to determine a dynamic investment policy for the valuemaximizing firm the value of future stochastic economic rents i e the net present value ofthe firm and the firm s optimal investment policy must reflect a rational reaction on behalf of its competitors a computationally efficient methodology is presented for solving the simultaneous investment valuation problem for an firm game the primary objectives of this paper are first to present a computationally efficient methodology for solving stochastic control problems that arise in the formulation of financial policy and second to apply stochastic control to the firm s problem of finding a dynamic investment policy that maximizes firm value the value of the firm is modeled as a continuous time contingent claim which is traded in a financial market that is perfect complete and free of riskless arbitrage opportunities in such a world the financial policy of the firm should be designed to maximize firm value the contingent claim pricing model provides sufficient versatility to incorporate diverse policy issues such as firm size asset mix capital structure dividend policy and basic existence issues such as reorganization and liquidation this paper examines the optimal investment policy for a firm when the firm s output decision via total industry output affects the evolution of output prices the investment problem considered here is similar to the optimal control problem of pindyck 28 pindyck analyzes the optimal labor capital mix in the presence of investment adjustment costs and a stochastic demand schedule in

housing and endogenous long term growth abstract in this paper we develop an endogenous growth model where housing plays a role as a consumption and an investment good for households as an input to production and as a production sector we show that the long term endogenous growth rate for the economy while not affected by housing related preference parameters depends critically on housing related production parameters the key modeling assumption is that housing and other assets in the economy are not perfect substitutes with this we can show that the endogenous long term growth rate depends on the relative price of housing and other types of capital accordingly the effects of productivity shocks on growth can be understood through their effects on the relative asset price and the corresponding changes in capital intensity we show that productivity shocks to the three sectors of production manufacturing construction and educational and training activities have positive effects on long term growth for reasonable parameter values however the responsiveness of the long term growth rate to shocks in construction is greater than responsiveness to shocks in manufacturing

automatic responses of crop stocks and policies buffer climate change effects on crop markets and price volatility abstract climate change has the potential to affect crop prices and price volatility however the economic models used in prior assessments largely do not include known automatic stabilizing factors crop storage can stabilize prices and u s crop policy tends to provide support that moves opposite prices we quantify effects of circa 2050 climate forcing on the inter annual variability of u s corn belt corn and soybean yields using statistical crop models and climate scenarios from regional and global climate models climate change generally reduces mean yields and increases the inter annual variability of yields in the midwestern u s using these yield impacts and an economic model with automatic market stabilizers we find only modest increases in price volatility although individual producers and states are negatively affected by the yield reductions the aggregate effect for all corn and soybean producer returns can be positive because of price increases moreover agricultural policies based on price levels or revenue variation offset some of the impacts of market variation on farm income our results differ from other recent results and temper concerns that increasing climate instability necessarily translates to greater uncertainty about agricultural commodity uses including as food and biofuels in the near future

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

monetary policy rules in a new keynesian euro area model the first part of this paper is devoted to describe a new keynesian model which after calibration shows a great fit on euro area macroeconomic data then the stabilizing properties of alternative monetary policy rules are evaluated for consideration of the european central bank ecb our main finding is that a simple rule that provides the reaction of the nominal interest rate to price inflation wage inflation and its previous observation can fairly well approximate the optimal monetary policy this result is robust to including an ecb preference on interest rate smoothing

the role of economic incentives in teenage nonmarital childbearing choices abstract in this paper we explore whether behaviors of youths that are likely to result in a teen nonmarital birth event are influenced by their expectations of the net economic benefits or costs associated with the occurrence of such a birth we posit and find that an increase in the perceived costs associated with the occurrence of a nonmarital birth would lead to a reduction in these risky behaviors and to a lower probability of a nonmarital birth event we represent these economic incentives by the income expectations of young women conditional on either giving birth as an unmarried teen or forgoing childbearing while unmarried and an adolescent we also measure the effects of an extensive list of other factors including the characteristics of the girl s family and its choices the social and economic environment in which she lives including policy related factors such as expenditures by states on family planning programs and the generosity of aid to families with dependent children and her own prior choices

cartels storage and the suppression of futures markets abstract the main demand for futures markets is to hedge storage without which futures markets may collapse the paper proves that a risk neutral cartel would benefit from suppressing a futures market and if it suffered no cost disadvantage would find it profitable to monopolize storage unhedged this might cause the futures markets to collapse but if not and the cartel had sufficient market share it might find it profitable to undertake excessive storage and price stabilization to undermine the futures market the ensuing rise in average price would harm consumers

changes in household size and composition due to financial incentives tax and transfer programs inevitably create incentives relating to the size and composition of households examples of such incentives are the marriage penalty dependents exemptions and the eligibility rules for categorical welfare programs this paper notes that changes in transfer program parameters may encourage recipient households to import nonwage earning individuals especially children and to export wage earners several hypotheses regarding the nature of such responses are derived and supporting evidence is obtained using data from three experimental income maintenance programs the geographic focus is on the united states excerpt

reported vs actual job search by unemployment insurance claimants this study compares self reported job search contacts of unemployment insurance recipients with independently verified job search contacts for the total sample reported contacts averaged 2 61 per week compared with actual contacts of only 1 78 per week nearly one fifth of the sample made no job contacts for the single weeks analyzed the separate equations estimated for reported and actual job contacts suggest that systematic misreporting may distort the conclusions particularly for the impact of unemployment insurance benefits on search intensity that would result from analyzing reported rather than actual contacts some implications of the findings for reported unemployment rates also are explored

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

labour supply impacts of effective welfare programme parameters a reanalysis we quantify the impact of effective welfare programme parameters on the labour supply of single female household heads the primary group of welfare recipients in the usa our panel of data is derived from the us census bureau s current population survey for the years 1979 to 1990 inclusive behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory we find that effective welfare gurantee levels and the effective tax rate on earned income both significantly decrease labour supply the marginal effects of these welfare programme parameters are economically small a us 1000 increase in the expected welfare guarantee level reduces annual labour supply by about 36 hours a 10 percentage point increase in the effective tax rate on earned income reduces annual labour supply by about 7 5 hours

child support welfare dependency and poverty female headed families have among the highest poverty rates of any major demographic group in the united states the purpose of this paperis to investigate empirically the effectiveness of current child support enforcement policies and to determine their role in reducing poverty and welfare dependency a special supplement to the april 1982 current population survey provides the data for the analysis the results indicate that child support enforce ment may represent an effective means for re ducing welfare program costs but isunlikely to have a dramatic effect on either welfare de pendency or poverty copyright 1986 by american economic association

do we really care about biodiversity this paper addresses from an economic perspective the issue of global biodiversity conservation it challenges the perception that the world really cares a great deal about biodiversity and is prepared to pay the full cost of maintaining this stock of natural capital despite the existence of a plethora of international agreements there still seems to be a global deficit of care surrounding efforts to combat challenges such as those posed by global warming and biodiversity conservation more light can be thrown on the degree of care by measuring both the actual expenditures and the stated willingness to pay for biodiversity conservation however actual expenditures are much lower than willingness to pay estimates recorded in the published literature using the criteria that the right amount of conservation effort is one where the marginal economic benefits from conservation just equal the marginal costs of conservation the paper explores the biodiversity conservation conundrum and concluded that on the available evidence the world does not care too much about this natural capital stock and bequests to future generations

economic effects of land taxes in an inflationary economy abstract we investigate the incidence of land taxes using a monetary overlapping generations model the real price of land may be raised with a land tax even when the elasticity of saving with respect to the interest rate is positive we may have the crowding out case which is induced by the substitution from capital and land to money the capital loss suffered by older generations holding land during the transition to a land tax may be partially offset by a gain in money balances as inflation abates

the dynamic efficiency cost of not taxing housing traditional welfare cost estimates of tax subsidies for owner occupied housing are less than 0 5 of gnp in the united states and canada this paper argues that these static measures understate the true cost of the tax subsidy increasing the capital income tax makes untaxed housing more valuable delivering a windfall bonus to existing homeowners at the expense of future generations this intergenerational transfer has real efficiency effects in the presence of pre existing tax distortions when housing is in fixed supply the dynamic efficiency cost of preferential tax treatment for housing is as much as 2 2 of gnp or 120 billion dollars in 1990

a general two sector model of endogenous growth with human and physical capital balanced growth and transitional dynamics abstract we examine a two sector endogenous growth model with general constant return to scale production technologies governing the evolution of human and physical capital we prove the existence uniqueness and saddle path stability of the balanced growth equilibrium a dual approach drawing on techniques from international trade theory is used to provide complete characterization of the transitional dynamics of consumption goods and education outputs human and physical capital inputs and the relative price of human capital investment we investigate the long run effects of changes in time preference and factor taxation and show the emergence of instability or indeterminacy when factor taxes are too distortionary journal of economic literatureclassification number d90

empirical regularities across cultures the effect of children on womans work not conditioning on previous employment we find large differences in the apparent effects of children on married womens labor supply among american born white women and three ethnically distinct groups of newly arrived immigrants to the united states when we account for labor supply in the previous year differences in current employment rates narrow dramatically and similar child status work relations emerge both for women who worked and for those who did not work in the previous year number of children is not associated with the propensity to start or to continue working and with the exception of a baby effect for women who worked previously the age of the youngest child has little effect on the propensity to start or to continue working information about work experience prior to the previous year yields additional valuable information for predicting current labor supply excerpt