a cost benefit analysis of a condom social marketing programme in tanzania this article uses the revealed preference willingness to pay approach to estimate the benefits in a cost benefit analysis of a condom social marketing csm programme in tanzania the demand curve used to derive the consumer surplus had unit elasticity and it was estimated from a cross sectional sample of 1272 persons people were willing to pay different prices for the condoms because perceived quality varied net benefits were close to zero for the minimum estimate that ignored external benefits with external benefits included the csm programme was judged socially worthwhile with our best estimate producing a benefit cost ratio ranging from 1 31 to 1 72

rates of return to human capital a test using el salvador data most of the empirical work on human capital has been confined to conditions in developed countries this is probably due to difficulties in obtaining data for other countries it would be interesting to see how robust the theory and its associated models are in conditions regarded as typical for developing countries this will be considered here using a large data set describing the el salvador labor market two questions will be examined namely a how well does the earnings function of the human capital theory explain earnings distribution in el salvador and b does the return to training called experience here approximate the return to school as is often assumed in human capital research the latter issue is of course related to the notion of overtaking the point in the experience profile when the flat earnings stream is intersected from below by the earnings stream affected by postschool investments

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

tax effects versus budget effects on labor supply this paper analyzes the effects on labor supply of parallel changes in taxes and public spending of various types a number of important recent developments in the labor supply behavior of households are highlighted by such a study of various types of budget effects rather than isolated tax effects this comes out in particular when considering cross substitution effects on labor supply of changes in public spending on goods and services or of the subsidization of goods and services provided by private markets moreover the income effects of tax changes are often mitigated or possibly even removed by the income effects of the accompanying expenditure changes

competitive price discrimination we model firms as supplying utility directly to consumers the equilibrium outcome of competition in utility space depends on the relationship u between profit and average utility per consumer public policy constraints on the deals firms may offer affect equilibrium outcomes via their effect on u f rom this perspective we examine the profit utility and welfare implications of price discrimination policies in an oligopolistic framework we also show that an equilibrium outcome of competitive nonlinear pricing when consumers have private information about their tastes is for firms to offer efficient two part tariffs

labor market adjustment to political conflict changes in the labor market in el salvador during the 1980s abstract i use household survey data for the 1980s to examine changes in the labor market of el salvador the findings suggest that the labor market does adjust to conflict there have been significant effects of conflict on the regional distribution of employment on international migration on internal migration in the areas directly affected other indicators such as labor force participation and self employment rates show outcomes are lower in the areas that were affected by conflict but were lower even before the conflict began and for earnings the level of real hourly earnings has fallen substantially in all areas in the 1980s

consistent estimates of the wage equation when individuals choose among income earning activities one of the most stable relationships in economics is the human capital wage determination equation numerous studies using data from the u s as well as low income countries have found that education raises the individual s wage rate and that experience affects wage rates in a non linear way peaking in the age cross section generally at around thirty years of experience the wage rate is an aggregate concept in that it represents the returns per hour of work regardless of the type of work performed this paper is a first step toward a disaggregation of wages according to income earning activities the activities distinguished here are work in the wage labor market and vork in self employment these activities earn respectively market wages and self employment wages but this nomenclature does not imply that work in self employment is an activity outside the labor market self employment is an individual s choice among labor market alternatives the motivation for this paper is three fold first of all current literature has not explored in any depth the issue whether the determinants of the wage rates earned in the two activities are similar differences may well exist entrepreneurial human capital varies from that of employees the mix of pecuniary wage and non pecuniary compensation may differ entrepreneurs frequently use their own assets like land or capital in their business activity section ii will expound on these theoretical differences in more detail second little is known about self employment wages most wage studies admit to the different nature of the two activities by omitting all individuals reporting self employment earnings from the sample and estimate wage equations for employees only this is not the optimal solution to the problem in developing countries up to one half of the labor force is self employed and even in industrialized countries 10 to 15 percent adds up to a sizeable group in absolute numbers restricting the sample to employees is likely to intro

returns to education a further international update and implications this paper updates evidence on the returns to investment in education by adding estimates for new countries and refining existing estimates to bring the total number of country cases to over 60 the new cross country evidence confirms and reinforces earlier patterns namely that returns are highest for primary education the general curricula the education of women and countries with the lowest per capita income the findings have important implications for directing future investment in education which for efficiency and equity purposes should concentrate on these priority areas

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

mergers when prices are negotiated evidence from the hospital industry in recent years many hospitals have merged in part to gain bargaining leverage with managed care organizations mcos we investigate the price impact of hospital mergers by formulating and estimating an equilibrium bargaining model between hospital systems and managed care health insurers over prices for inpatient services we estimate the parameters of the model using claims and discharge data from northern virginia in 2006 inova health system proposed to acquire prince william hospital we nd that this merger would have raised prices signicantly and that the remedy of separate bargaining imposed by the ftc in a separate hospital case would have resulted in a larger price increase

nonlinear pricing with random participation the canonical selection contracting programme takes the agent s participation decision as deterministic and finds the optimal contract typically satisfying this constraint for the worst type upon weakening this assumption of known reservation values by introducing independent randomness into the agents outside options we find that some of the received wisdom from mechanism design and nonlinear pricing is not robust and the richer model which allows for stochastic participation affords a more general empirical specification we develop a multidimensional methodology for addressing this class of problems providing two important applications to nonlinear pricing first with nonlinear pricing by a monopolist the familiar nodistortion at the top result persists but in tandem with the surprising conclusion that there is either no distortion at the bottom or bunching second in a simple model of product differentiated duopolists competing with nonlinear pricing we show that generally the duopoly outcome is qualitatively similar to the monopoly outcome however when marginal costs are symmetric and competition is sufficiently intense distortions disappear and the equilibrium outcome takes a remarkably simple form efficient quality allocations with cost plus fee pricing

mobility and labor market segmentation the urban labor market in el salvador there is now a large literature examining the hypothesis that there are barriers to mobility between sectors of the labor market in developing countries though there are many explanations for barriers to mobility most versions of the segmented labor market hypothesis are based on restricted access to a higher wage primary or formal sector and free access to a lower wage secondary or informal sector the testable predictions of the hypothesis are the implications of the assumption of excess supply to the primary sector most studies have found results consistent with these predictions including different structures of wages between sectors lower returns to human capital in the secondary sector and lower job tenure by sectors for some demographic groups but as several authors have recently noted it is difficult to distinguish this hypothesis from other competitive explanations for these patterns the competitive model is also consistent with the testable predictions of the segmented labor market hypothesis though the competitive model is consistent with the observed patterns the observed patterns do put restrictions on the version of the competitive model that is appropriate for developing countries for example the finding that earnings tend to be lower in the informal sector is consistent with compensating differentials but this applies only to compensating differentials that are based on formal sector employment as being less desirable such as job flexibility similarly the finding of lower returns to human capital in the informal sector is consistent with life cycle models of investment in human capital but only models in which there is lower labor market attachment of those employed in an informal sector and thus less time to recuperate investments in on the job training but most of the necessary assumptions are reasonable and as a result tests of the segmented labor market hypothesis cannot distinguish among competing explanations

antitrust transaction costs and merger simulation with nonlinear pricing abstractthis article explores the relationship between transaction costs and antitrust it makes three points first the usual antitrust analysis can be seriously misleading as a guide to consumer or society welfare because it assumes that pricing is linear and uniform but the type of pricing endogenously depends on transaction costs including information costs second two key issues in any antitrust analysis are whether transaction costs change as a result of the action under scrutiny and regardless of whether they change how the existence of nonlinear pricing alters the usual antitrust analysis we develop a merger simulation model with nonlinear pricing to illustrate how misleading the standard analysis can be third since transaction costs influence the ability of various coalitions of consumers distributors and manufacturers to form cooperative game theory can provide a unifying perspective into what situations might give rise to the creation and exploitation of market power

upward pricing pressure as a predictor of merger price effects abstract we use monte carlo experiments to evaluate whether upward pricing pressure upp accurately predicts the price effects of mergers motivated by the observation that upp is a restricted form of the first order approximation derived in jaffe and weyl 2013 results indicate that upp is quite accurate with standard log concave demand systems but understates price effects if demand exhibits greater convexity prediction error does not systematically exceed that of misspecified simulation models nor is it much greater than that of correctly specified models simulated with imprecise demand elasticities the results also support that upp provides accurate screens for anticompetitive mergers

maize and the free trade agreement between mexico and the united states setting the price of maize in rural mexico above the world price is inefficient and likely to have negative distributional effects because many subsistence producers and all landless workers are net buyers in fact it screens out the relatively poor rather than the relatively rich the policy objective therefore should be to move toward free trade this would yield large gains in efficiency the free trade agreement provides an ideal opportunity to pursue this objective it will provide freer entrance into the united states for other agricultural products as well as a broad range of manufactured products ensuring secure and sustained access for labor intensive agricultural and manufactured products can help ease the impact on the labor market of a transition away from subsistence maize cultivation

labor supply taxes and government spending a microeconometric analysis the effect of government spending on labor supply behavior is critical to predicting the balanced budget effect of income taxes and to estimating the marginal social cost of public funds yet its very existence not to mention direction and magnitude has not been empirically investigated this research estimates a labor supply function that incorporates income taxation and government spending using microeconomic data for men and women the empirical results suggest that public sector spending may have a significant effect on labor supply thereby leading to estimates of the marginal social cost of public funds that differ from those typically calculated

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

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

the effects of third degree price discrimination in oligopoly retail firms and restaurants commonly offer senior citizen discounts i suspect this practice is not motivated by altruism rather the behavior can be better explained as profit maximizing price discrimination these firms are setting a low price in a market which probably has high elasticity of demand but why should the demand of senior citizens be more elastic than average one possibility is that elderly people have below average income and they would not eat out if restaurant prices were high perhaps a more plausible explanation is that retired people simply have more time on their hands to spend commuting across town to take advantage of discounts the purpose of these discounts may then be to lure senior citizens away from other restaurants rather than to get them out of the house the analysis of third degree price discrimination has a long history a c pigou 1920 joan robinson 1933 and two articles on the subject have recently appeared in this review richard schmalensee 1981 hal varian 1985 the industry structure in these analyses is monopoly but an explicit model of some form of competition is obviously needed to study discriminatory discounts meant to attract customers from rival firms and even discounts meant to get people out of the house may have an oligopoly analysis which is qualitatively different from their monopoly anlysis in this paper i present a simple duopoly model of a differentiated products industry i show that a firm s price elasticity of demand in a market can be expressed as the sum of two parts the industry demand elasticity and the cross price elasticity the first measures the tendency of consumers in a market to stay home when the price goes up the second the tendency to switch suppliers in the monopoly case in which the crossprice elasticity is zero and the collusive case in which the cross price elasticity is irrelevant discrimination between markets is due to differences in industry demand elasticity in the noncooperative oligopoly case equilibrium price differentials can be accounted for both by differences in cross price elasticity as well as differences in industry demand elasticity total industry output when the firms can discriminate between two markets is compared to what it would be if discrimination were impossible which regime has larger output depends on the sum of the adjustedconcavity condition and the elasticity ratio condition the first predominates when the rival products are poor substitutes and the firms have approximate monopoly power while the second predominates at the other extreme where the products are close substitutes and the firms have almost no market power the adjusted concavity condition compares the relative curvature of demands in the two markets and was originally discovered by robinson 1933 in her analysis of monopoly price discrimination the elasticity ratio condition compares the relative difference in industry demand elasticity between the two markets with the relative difference in cross price elasticity according to the elasticity ratio condition a discriminatory discount due to high industry elasticity of demand would be more likely to increase total output than one due to high cross price elasticity the effect of discrimination on profit is also discussed the distinction made here department of economics university of wisconsin madison madison wi 53706 this paper is a revision of part of my doctoral dissertation i am grateful to steve matthews ken judd and john panzar for guidance in this research i also thank seminar participants at wisconsin the justice department and the 1986 econometric society meetings in new orleans and the discussant martin perry the excellent comments of the referees improved the exposition of the paper

agricultural policies in the presence of distorting taxes this article analyzes how distortionary factor taxes affect the welfare impacts of production subsidies production quotas acreage controls subsidies for acreage reductions and cash transfers to farmers pre existing taxes substantially raise the costs of all these policies these additional costs reflect the welfare losses from financing certain policies by distortionary taxes they also reflect interactions with factor markets caused by changes in the costs of producing agricultural output previous studies ignore the latter types of effect consequently they significantly overstate the costs of production subsidies and understate the costs of production quotas acreage controls and subsidies for acreage reductions

on the construction of marginal federal personal and social security tax rates in the u s abstract in this article i correct and extend my earlier series on marginal federal personal income tax rates i also construct a measure of the marginal social security tax rate and add this to the income tax rate to obtain a measure of the effective marginal tax rate on income due to federal taxes finally i compare my series on marginal income tax rates and its method of construction with those of barro and sahasakul

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

measuring the marginal welfare impacts of government regulation the case of supply management the focus in this paper is on the income leakage or loss that occurs when income is transferred from consumers to producers in regulated industries the marginal leakage measure that is developed only requires knowledge about the demand price the supply price and the point elasticity of demand and it can be used to estimate the degree of monopoly power exercised by the regulated firms in the empirical section the canadian supply managed agricultural sectors are examined

government intervention in poultry industries a cross country comparison government intervention affects agricultural industries both in the prices received for products and the prices paid for inputs this paper attempts to demonstrate that analysis of the impact of government intervention on these industries should consider both sets of distortions the concept of effective protection is used to determine the net price distortion the canadian german and british poultry industries during 1975 77 are analyzed to show the value of such an approach results show that consumers have paid higher product prices in each country but producers have not necessarily benefitted moreover social costs of intervention have been high