habits costly investment and current account dynamics abstract we analyze the current account dynamics for a small country model with habit forming consumers and costly investment the model has several empirical and policy implications i it is consistent with stylized facts regarding the effects of productivity shocks and increases in fiscal spending and regarding the savings investment co movement ii the long run effect of a temporary shock on net foreign assets is often opposite to that of a permanent shock iii under strong habit persistence the welfare dynamics are sluggish so that a beneficial tax financed fiscal policy may have a harmful hangover effect on welfare

habit formation in children evidence from incentives for healthy eating we present findings from a field experiment conducted at 40 elementary schools involving 8000 children and 400 000 child day observations which tested whether providing short run incentives can create habit formation in children over a 3 or 5 week period students received an incentive for eating a serving of fruits or vegetables during lunch relative to an average baseline rate of 39 providing small incentives doubled the fraction of children eating at least one serving of fruits or vegetables two months after the end of the intervention the consumption rate at schools remained 21 above baseline for the 3 week treatment and 44 above baseline for the 5 week treatment these findings indicate that short run incentives can produce changes in behavior that persist after incentives are removed

an axiomatic characterization of yitzhaki s index of individual deprivation abstract this note presents and discusses a number of properties a measure of individual deprivation should satisfy the axioms we propose are necessary and sufficient to characterize yitzhaki s index of deprivation making the structure of the index more transparent

fdi as an outcome of the market for corporate control theory and evidence abstract much foreign direct investment fdi takes the form of mergers and acquisitions m a it is commonplace in finance to view acquisitions as manifestations of the market for corporate control following on that insight we propose a model of fdi in which headquarters bid to control overseas assets we derive an equation for bilateral fdi stocks that resembles the recently developed fixed effects approach to modelling bilateral trade flows we estimate the model and use its parameters to construct benchmarks for evaluating multilateral inward and outward fdi

the hidden persuaders institutions and individuals in economic theory in his classic book the hidden persuaders vance packard claimed that large corporations manipulated consumers using advertising techniques john kenneth galbraith and others have repeated a similar view against this gary becker and george stigler have claimed that advertising is essentially informative rather than manipulative in contrast it is argued here that both of these opposed accounts of human agency neglect the more subtle and undesigned processes by which institutions bear upon and mould individuals this paper proposes a concept of reconstitutive downward causation in which institutions act upon individual habits and dispositions the mechanisms involved do not fall foul of past critiques of holism or methodological collectivism this argument involves a rehabilitation of the concept of habit in social science with far reaching implications

welfare implications of the interaction between habits and consumption externalities we analyze the welfare properties of the equilibrium path of a growth model where both habits and consumption externalities affect the utility of consumers our analysis highlights the crucial role played by complementarities between externalities and habits in order to generate an infficient dynamic equilibrium in particular we show that the competitive equilibrium is inefficient when consumption externalities and habit adjusted consumption are not perfect substitutes

agency relationships in family firms theory and evidence does owner management necessarily eliminate the agency costs of ownership drawing on agency literature and on the economic theory of the household we argue that private ownership and owner management expose privately held owner managed firms to agency threats ignored by jensen s and meckling s 1976 agency model private ownership and owner management not only reduce the effectiveness of external control mechanisms they also expose firms to a self control problem created by incentives that cause owners to take actions which harm themselves as well as those around them jensen 1994 p 43 thus shareholders have incentive to invest resources in curbing both managerialand owner opportunism we extend this thesis to the domain of the family firm after developing hypotheses which describe how family dynamics and specifically altruism exacerbate agency problems experienced by these privately held owner managed firms we use data obtained from a large scale survey of family businesses to field test our hypotheses and find evidence which suggests support for our proposed theory finally we discuss the implications of our theory for research on family and other types of privately held owner managed firms

testing for forward looking behaviour evidence from the enactment of smoking restrictions abstractthis paper develops a new test for forward looking behaviour based on the establishment of public smoking restrictions given that the announcement of these restrictions effectively increases the future cost of smoking we should expect forward looking smokers to curb their consumption before the restriction is effective due to complementarity between present and future consumption i perform the estimation using detailed high frequency household level purchase data the results provide evidence against the forward looking behaviour of smokers households do not reduce their cigarette purchases before announced public smoking restrictions are established they only do so once the restriction is in effect

trade protection during the crisis does it deter foreign direct investment this paper looks empirically at the implications that protectionist measures implemented during the current crisis may have had for a country s ability to attract foreign direct investment the research utilises data on such measures that are available from global trade alert combined with bilateral fdi data between oecd countries and a large number of partner countries for 2006 to 2009 this allows us to examine the short run effect that protectionist measures may have had on bilateral fdi flows the verdict from this analysis is clear a country that implements new protectionist measures may expect that this may result in lower foreign direct investment inflows into the economy the point estimates from our preferred specifications suggest that depending on the empirical model the implementation of a trade protection measure is associated with about 40 to 80 per cent lower fdi inflows trade protection does not appear to have any implications for the country s fdi outflows however the negative effect on fdi inflows does not appear to be due to direct investment measures but rather to actions related to intellectual property rights protection and other more trade related measures

aggregate cigarette demand and regional differences in china national educational level final consumption expenditure average propensity to cigarette consumption apcc and cigarette price are adopted to research the regional and national aggregate cigarette demand of china under the condition that the effects of anti smoking education in the chinese current educational system are not remarkable the theoretical model shows that cigarette demand will increase with the increase of national educational level empirical analysis points out that cigarette demand increases with the increase of educational level estimates also suggest that cigarette price consumption expenditure and apcc will affect cigarette demand significantly and that there are great differences for cigarette demand by region

smoking cessation a model of planned vs actual behavior for time inconsistent consumers we offer a simple model of intertemporal choice to characterize how planned versus actual behaviors evolve for time inconsistent smokers our results suggest that smokers participation and cessation decisions are governed by the interplay between three effects the cessation effect leads smokers to advance their plans to quit smoking whereas the procrastination effect leads them to consecutively revise their planned quitting age upwards consequently the duration of smoking is effectively governed by which one of these two effects is dominant finally for certain consumer segments a threshold effect causes an all or nothing type of extreme smoking behavior based on certain critical values of present biased preferences our results provide some preliminary evidence that both marketing efforts by tobacco firms and public policy initiatives can have a significant influence on smoking behavior in particular we find that reductions in the age at which individuals start smoking may not only vastly extend their duration of smoking but also convert potential never smokers into lifetime smokers finally we estimate a hazard model using survey data from over 800 smokers to provide evidence in support of our theoretical model

taxation or regulation looking for a good anti smoking policy abstract this paper investigates the relative ability of two anti smoking policies taxes and regulation in inducing reductions in cigarette consumption and in providing incentives to stop smoking or not to start to our results based on canadian data show that cigarette demand responds to taxes elasticity of 0 28 but not to regulation while the converse is true for the proportion of smokers in the population

consumer habituation this paper examines how consumers willingness to pay for goods is determined by past patterns of consumption the central result is atheorem of interior maximum which states that willingness to pay for a good is maximized at a moderate level of habitual consumption the theorem is derived from a simple model of adaptive behavior that involves a shifting s shaped value function the detailed analysis of the impact of consumption frequency and intensity on willingness to pay reveals an unsuspected implication of diminishing sensitivity even as it leads to a formalization of consumer habituation patterns including sensitization habituation and response recovery upon withdrawal that matches and integrates the most robust empirical regularities attendant on nonassociative learning in neurobiology and behavioral psychology an examination of the implications for demand dynamics and pricing highlights deterministic recurrent and transient patterns of consumption at higher price points

the determinants of cross border equity flows abstract we explore a new panel data set on bilateral gross cross border equity flows between 14 countries 1989 1996 we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions gross transaction flows depend on market size in source and destination country as well as trading costs in which both information and the transaction technology play a role distance proxies some information costs and other variables explicitly represent information transmission an information asymmetry between domestic and foreign investors and the efficiency of transactions the geography of information is the main determinant of the pattern of international transactions while there is weak support in our data for the diversification motive once we control for the informational friction we broaden the scope of our results by presenting some evidence linking the results on equity transactions to equity holdings

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

price knowledge in household demand for utility services a household s decision to acquire price knowledge is endogenous in the demand for utility services and may affect elasticities and consumption levels a simultaneous equation model with endogenous switching is developed to evaluate the effects of price knowledge and other sources of heterogeneity results indicate informed households were more responsive to average and marginal price signals informed households also use less water but this is due to heterogeneity rather than price knowledge controlling for heterogeneity price knowledge actually increases monthly water usage the implications of accounting for differences in price knowledge in utility demand modeling and demand management policy are discussed

the economic functioning of online drugs markets abstract the economic functioning of online drug markets using data scraped from online platforms is studied analysis of over 1 5 million online drugs sales shows online drugs markets tend to function without the significant moral hazard problems that a priori one might think would plague them only a small proportion of online drugs deals receive bad ratings from buyers and online markets suffer less from problems of adulteration and low quality that are a common feature of street sales of illegal drugs furthermore as with legal online markets the market penalizes bad ratings which subsequently lead to significant sales reductions and to market exit the impact of the well known seizure by law enforcement of the original silk road and the shutdown of silk road 2 0 are also studied together with the exit scam of the market leader at the time evolution there is no evidence that these exits deterred buyers or sellers from online drugs trading as new platforms rapidly replaced those taken down with the online market for drugs continuing to grow

gauging the potential for social unrest it stands to reason that social unrest does not erupt out of the blue although there are a great many reasons why social dismay might descend into social disorder only few yardsticks or indices can plausibly be used to gauge the potential for social unrest psu if policy makers want to undertake public action to prevent social dismay escalating into social disruption they obviously need to draw on practical sensors this paper assesses critically the adequacy of two such measures the polarization p index and the total relative deprivation trd index the paper proposes a tentative guide to selecting between these two measures a review of three stylized scenarios suggests that where income redistributions reduce the number of distinct income groups and when each group is characterized by a strong sense of within group identity the p index surpasses the trd index as a basis for predicting psu when the within group identification is weak however it is better to use the trd index to predict psu

are wages habit forming evidence from micro data although utility functions play a central role in economics the axiom that utility depends only on the absolute levels of its arguments is rarely tested this paper uses panel data on 2000 british employees who remain with the same employer and who are not promoted from one wave to the next it is shown that one important measure of well being overall job satisfaction is strongly positively correlated with the change in the worker s pay between waves but is unrelated to the current level of pay empirical tests suggest that a reference dependent satisfaction function where individual well being depends on current pay relative to past pay is more consistent with these regression results than are productivity or agency explanations of increasing wage profiles some evidence is presented of greater job satisfaction effects of pay rises for lower paid less well educated and younger workers these results provide some micro evidence consistent with the theory widespread in social science of habituation individuals may become used to any given level of consumption or income as such they tie in with the finding that a country s well being as measured by the average happiness of its citizens is only weakly correlated with its per capita gnp

rational exuberance at the mall addiction to carrying a credit card balance the becker murphy model of rational addiction is tested with new zealand credit card debt data the results clearly favour the rational addiction model over the myopic backward looking model the estimated short run and long run price elasticities are 0 58 and 2 32 respectively and the estimated rate of time preference is 6 7 per quarter

proximity sensitive individual deprivation measures we characterize a generalization of the linear index of individual deprivation our class allows for an income increase of a higher income individual to have a stronger impact the closer they occur to the income of the person under consideration

economic integration and the profitability of cross border mergers and acquisitions abstract the 1990s was a decade of increased economic integration the decade also witnessed a sharp increase in cross border mergers and acquisitions from a theoretical perspective the increase in international mergers in more integrated economies is rather puzzling it is a well established result that due to the business stealing effect mergers in integrated markets are not likely to be profitable a reasonable conjecture would therefore be that closer integration of markets would reduce the attractiveness of cross border mergers and acquisitions the present paper demonstrates that this is not necessarily the case economic integration may trigger cross border acquisitions by reducing the business stealing effect and by reducing the reservation price of the target firm the paper thus provides explanations to the observed increase in cross border mergers in a world of more integrated economies

a cue theory of consumption psychological experiments demonstrate that repeated pairings of a cue and a consumption good eventually create cue based complementarities the presence of the cue raises the marginal utility derived from consumption in this paper such dynamic preferences are embedded in a rational choice model behavior that arises from this model is characterized by endogenous cue sensitivities costly cue management commitment and cue based spikes in impatience the model is used to understand addictive habit forming behaviors and marketing the model explains why preferences change rapidly from moment to moment why temptations should sometimes be avoided and how firms package and position goods

motives for private transfers over the life cycle an analytical framework and evidence for peru abstract this paper tests for the motives for private income transfers we consider two motives altruism and exchange the question of private transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income using a household survey for peru we find that transfer amounts received increase with recipient pre transfer income which contradicts a key prediction of the strong form of the altruism hypothesis but is consistent with exchange we also find that capital market imperfections are likely to be an important cause of private transfers and that social security benefits crowd out the incidence of private transfers

life cycle consumption of a harmful and addictive good david goldbaum this article demonstrates that the endogenous desire to quit smoking can result from a rational consumption path chosen at the time the consumer begins smoking this result is obtained without relying on hidden costs or unknown preferences a finite lived agent chooses a path of consumption of a harmful and addictive good to maximize present discounted utility the consumer chooses his consumption rate to account for the future health consequence of smoking and the withdrawal costs of quitting a consumer may choose to smoke even if it means a lowered utility level for the majority of the time spent smoking jel d91 c61 i12 i introduction some of what we consume for pleasure can be harmful economists assume that consumers take measure of the potential harm and balance it against the pleasure derived from consumption when both the pleasure and the harm occur at the time of consumption the decision is straightforward some goods though impose a cost borne at some future date requiring intertemporal planning these present a greater challenge to the consumer and to the economist trying to explain the consumer s behavior at times observed behavior implores us to question whether the consumer is properly weighing the costs and benefits in a manner that maximizes his or her utility theoretically for each item under consideration the rational consumer properly balances the lifetime benefits derived from the consumption against the lifetime costs some observed behavior seems to contradict this rational approach to consumption in particular it is common for people to begin smoking cigarettes during their youth only to endogenously make a decision to quit at a future date to integrate this behavior with rationality modelers have proposed hidden costs multiple selves changing preferences or other strategies that limit the decision making ability of the youth in all of these cases for some consumers the decision to smoke is a mistake made during youth that has to be reversed at some cost as a middle aged adult this article aims to demonstrate that a lifetime path of consumption in which a person consumes a harmful and addictive good while young and quits at some later date is a path that is perfectly consistent with rational behavior it is not necessary to assume that mid life quitters are displaying irrational or time inconsistent behavior if all information regarding a good s harmful properties is revealed some consumers will still choose a path that requires quitting mid life this paper primarily examines the consumption of cigarettes but also includes analysis of a nonaddictive unhealthy good both of these harmful goods provide the consumer with immediate pleasure but at the cost of decreasing life expectancy background becker and murphy 1988 bm introduced the concept of rational addiction the idea that addicts are forward looking rational consumers present consumption choices reflect not only current utility considerations and budget constraints but also incorporate the anticipated impact of present consumption on future utility and budget constraints bm examine the behavior response of addicts to exogenous shocks changes from a steady state including the desire to quit originate only from exogenous shocks such as a change in the relative price of the good or a revelation about the detrimental health consequences of the addictive good that alters the consumer s utility derived from consumption the model offers no mechanism by which smokers may choose to alter behavior endogenously in contrast to bm s smokers many of today s smokers appear to quit in absence of an external shock anyone who began smoking after 1966 has been subjected to the legislated health warnings appearing on cigarette packages since that time 1 antismoking messages in radio and television advertisements during the 1950s and 1960s also helped to make the health consequences of smoking common knowledge

foreign acquisition plant survival and employment growth this paper analyses the effect of foreign acquisition on survival probability and employment growth of target plant using data on swedish manufacturing plants during the period 1993 2002 an improvement over previous studies is that we take into account firm level heterogeneity by separating the targeted plants into those within swedish mnes swedish exporting non mnes and purely domestic firms before foreign takeover the results controlling for possible endogeneity of the acquisition dummy using an iv and propensity score matching approach suggest that acquisition by foreign owners increases the lifetime of the acquired plants only if the plant was an exporter the effect differs depending on whether the acquisition is horizontal or vertical we also find robust positive employment growth effects only for exporters and only if the takeover is vertical not horizontal

reference groups and individual deprivation abstract we provide an axiomatization of yitzhaki s index of individual deprivation our result differs from an earlier characterization due to ebert and moyes in the way the reference group of an individual is represented in the model

information and capital flows the determinants of transactions in financial assets abstract we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions our results support the hypothesis that informational asymmetries are responsible for the strong negative relationship between asset trade and distance this result is very important for theories of asset trade portfolio adjustments and home bias we strengthen it by investigating the roles of explicit informational variables as well as distance in explaining separately cross border trade in corporate equities corporate bonds and government bonds

how do cross border mergers and acquisitions answer to deregulation in services whereas competition in the manufacturing sector was progressively ensured beginning with the end of the second world war services have been progressively opened to international competition only since the late 1980s and are still among the most regulated sectors in oecd countries in this paper we analyse the impact of deregulation in that sector on cross border mergers and acquisitions m as in services we find that deregulation favours inward m as in services this positive effect occurs through two channels a reduction in entry costs and an increase in investment opportunities on the other hand deregulation has an ambiguous impact on outward m as that depends on the initial level of regulation in the acquiring country in particular we provide some evidence of a u shaped relationship between deregulation and outward m as in the service sector in countries that are initially highly deregulated deregulation fosters outward m as conversely in situations in which government control is large privatisation and deregulation are likely to reduce the incentive for firms to engage in cross border m a deals

evidence for the effect of monitoring costs on foreign direct investment abstract a proposed reason for the significant inverse relationship between distance both physical and cultural and foreign direct investment is the increased costs for a parent firm to monitor an affiliate when there is greater distance between them we provide the first direct test of this hypothesis using o net data on occupational skills to construct industry level measures of the importance of monitoring related skills we exploit this cross industry variation to examine whether physical and cultural distances have a greater impact on cross border m a in industries where monitoring related skills are more important using data on worldwide cross border m a activity from 2005 through 2014 we find significant evidence for the effect of monitoring costs on cross border m a activity we also show that the relatively low importance of monitoring related costs in manufacturing industries compared to those in other sectors is an important factor in explaining why cross border m a in manufacturing is so large despite its relatively small share in most countries

national champions and globalization in this paper we offer an explanation why globalization falling trade costs may increase the government incentive to block foreign takeover of domestic firms and increase its incentive to allow mergers among national firms this creation of national champions occurs not only because the government may have a bias against foreign takeover but also because consumer welfare gains associated with foreign acquisitions decrease with globalization endogenizing the government bias through lobbying efforts of the domestic firms the paper shows that the bias does not need to be very strong before the government promotes domestic champions provided that barriers to trade are low dans ce memoire on offre une explication de pourquoi la mondialisation couts de commerce en declin peut accroitre la propension du gouvernement a bloquer la prise de controle de firmes domestiques par des interets etrangers et la propension a permettre des fusions de firmes nationales cette creation de champions nationaux se produit non seulement parce que le gouvernement a un malaise face aux prises de controle par des interets etrangers mais aussi parce que les gains de bien etre des consommateurs associes aux acquisitions par des interets etrangers decroissent avec la mondialisation en endogeneisant ce malaise du gouvernement attribuable au lobbying des firmes domestiques on montre que ce malaise n a pas besoin d etre tres fort pour que le gouvernement promeuve les champions nationaux a condition que les barrieres commerciales soient faibles

mergers and acquisitions trade a global value chain analysis the present paper deals with how the insertion in international trade and global value chains gvcs of countries affects their capacity of attracting foreign mergers and acquisitions m as to this end we combine data for bilateral m as and trade in value added for the period 2001 15 and estimate an augmented gravity equation results indicate that trade openness per se does not favour m as nevertheless bilateral free trade agreements heterogeneity of destinations sources for exports imports of intermediate and final goods and position and participation in global value chains are relevant for explaining bilateral m as moreover their role is significantly different depending on the level of development of the home and host countries

illicit drug use and labour market achievement evidence from the uk this study using data from the british crime survey bcs examines the effect of drug use on occupational achievement it starts by attempting to overcome the identification problem that results from the limited set of drug use questions presented in the bcs taking this into account and allowing for the endogeneity of drug use in equations for unemployment and labour market outcomes that a mild positive association with soft drugs and occupational achievement is observed that diminishes with age this relationship holds for males but not for females in contrast it is also found that past use of hard drugs significantly increases the likelihood of current unemployment although it appears to be unrelated to occupational success conditional on achieving employment

the simple analytics of tobacco taxation with illegal supply this paper examines the impact of tobacco excise taxes where legal and illegal supplies coexist the government s objective is to minimize cigarettes smoked in the economy or to maximize revenue or to minimize illegal activity it reacts to a competitive illegal supply in an adjoining jurisdiction a model of consumer choice is used to demonstrate how demand response to tax changes can yield counterintuitive results while the model mimics the canadian market similar situations characterize the us and european markets a novel element of the paper is the treatment of externalities on the supply side rather than the demand side resume analytique simple des taxes sur le tabac quand il y a offre illegale ce memoire examine l impact des taxes sur la vente de tabac quand des offres legale et illegale coexistent l objectif du gouvernement est de minimiser les cigarettes fumees dans l economie ou de maximiser le revenu fiscal ou de minimiser l activite illegale il doit prendre en compte l offre concurrentielle illegale dans une juridiction contigue on utilise un modele de choix du consommateur pour montrer comment la reaction de la demande aux changements dans les taxes peut engendrer des resultats contre intuitifs bien que le modele soit concu pour le marche canadien on trouve des situations avec des caracteristiques similaires dans les marches americain et europeens un element novateur du memoire est sa prise en compte des externalites du cote de l offre plutot que du cote de la demande

dynamic corrective taxes with time varying salience abstract economies across the globe are becoming increasingly cashless and many payment systems have become automated driving a temporal wedge between consumption and payment and generally making the costs of consumption intermittently salient since this inconsistent price salience alters demand elasticities it is a particular concern for goods that generate externalities and the price based policies deployed to address them this paper derives optimal dynamic corrective taxes for suboptimal and persistent consumption decisions these taxes depend on the agent s ability to commit to a future consumption path we also characterize a second best constant tax and the excess burden from time invariant tax rates when calibrated to u s residential electricity consumption the model shows that the second best constant tax is more than twice the marginal external cost of carbon emissions

a class of proximity sensitive measures of relative deprivation abstract we introduce a new class of generalized measures of relative deprivation the class takes the form of a power mean of order p a characteristic of the class is that depending on the value of the proximity sensitive parameter p the class is capable of accommodating both a decreasing weight the case of p 1 and an increasing weight the case of p 0 1 accorded to given changes in the incomes of the individuals who are wealthier than the reference individual depending on their proximity in the income distribution to the reference individual

income redistribution going awry the reversal power of the concern for relative deprivation abstract we demonstrate that a rank preserving transfer from a richer individual to a poorer individual can exacerbate income inequality when inequality is measured by the gini coefficient this happens when individuals preferences depend negatively not only on work time effort but also on low relative income it is rigorously shown that the set of preference profiles that gives rise to this perverse effect of a transfer on inequality is a non empty open subset of all preference profiles a robust example illustrates this result

rational habit formation abstract this paper discusses consumer demand under rational habit formation if consumer tastes change endogenously through habit stocks depending on past consumption the rational consumer will make allowance of the future habit forming effects of current consumption a model with rational habit formation is made formally equivalent to an intertemporal consumer model without habit formation by redefining the cost of consumption and wealth the cost of consumption is obtained by adding the cost of future induced consumption to the rental price of the commodity the extended wealth concept is obtained by subtracting the cost of the initial stocks of habits and the cost of future physically necessary consumption from wealth the paper also investigates the implication of rational habit formation for constructing one period cost of living indices

the duration of the smoking habit i introduction most smokers smoke out of habit once the habit is ended many of smoking s most harmful effects decline rather quickly preventing and ending cigarette addiction is therefore the straightest path toward preventing the health damage done by cigarette smoking consequently the related questions of why people start smoking and why they quit are central to formulating and evaluating effective antismoking policies duration or hazard models are designed to measure the probability of transition between states and are thus ideal for investigating the structural determinants of the transition between addiction and non addiction nevertheless most previous work in the economics literature uses the aggregate smoking participation rate defined as the percentage of people who currently smoke or an individual s probability of participation rather than a hazard rate to measure the attractiveness of habitual smoking this paper models the hazard rates of both starting and quitting the cigarette smoking habit the starting hazard rate is the probability that an individual will start smoking in a given time period conditional on being a nonsmoker until then the quitting hazard rate is the probability of quitting smoking in a given time period conditional on being a smoker since the starting date both of these rates should rise and fall in response to changes in the attractiveness of smoking the two rates will respond differently to different stimuli since the starting hazard reflects the point of view of nonsmokers and the quitting hazard reflects the point of view of smokers hazard or duration models possess several advantages over smoking participation models most obviously smoking participation rates cannot directly distinguish between increased starting rates and decreased quitting rates but the hazard models can also in a participation rate model it is difficult to control for the effect of the duration of the habit whereas duration models are designed specifically to allow for and measure the dependence of the hazard rate on duration another advantage is that the participation rate at any one time will oversample the number of long term smokers relative to those who had a short term habit whereas a duration model is designed to avoid this source of bias one drawback however is that because of their inherent panel nature the data requirements of duration models are somewhat more difficult to satisfy as shall be seen the only previous work in the economics literature that estimates the hazard rate of starting smoking is douglas and hariharan 1994 my paper improves upon douglas and hariharan in at least three important ways first it estimates the hazard rate of quitting smoking as well as that of starting second it takes into account variation in state level regulation third its time varying covariate model allows hazard rates to respond dynamically to changes in cigarette price regulation and information variables the use of time varying covariates is important because it brings the empirical model into much closer accord with theory the decision whether or not to start or quit smoking is an ongoing decision made one day at a time on the basis of current information the hazard of starting is greatest when the cost of the habit appears lowest and its benefit appears highest this comparison of cost and benefit changes through time as price information income and life cycle variables change while douglas and hariharan 1994 used price information from the potential smoker s most vulnerable age on the theory that its marginal effect is greatest at that time the model used in this paper allows each individual s hazard rate to respond to changes in price and public information as they occur the leading theoretical model of the decision to smoke is the rational addiction model of becker and murphy 1988 which assumes that consumers of addictive goods begin smoking only after fully weighing the costs and benefits of the habit

alcoholism work and income this article reports on an empirical analysis of the relationships between alcoholism and income and working we show that the relationships between alcoholism and labor market success have important age or life cycle dimensions we present evidence that alcoholism may affect income more by restricting labor market participation than by affecting the wages of workers finally we demonstrate that the effects of alcoholism on earnings depend on the extent to which one controls for other covariates associated with alcoholism as such we suggest that there may be important indirect as well as direct effects of alcoholism on labor market success

cross border mergers and acquisitions and the role of trade costs abstract cross border mergers and acquisitions m as have increased dramatically over the last two decades this paper analyses the role of trade costs in explaining the increase in the number of cross border m as in particular we distinguish horizontal and non horizontal m as and investigate whether trade costs affect these two types of mergers differently we analyse this question using industry data for 23 oecd countries for the period 1990 2001 our findings suggest that while in the aggregate trade costs affect cross border merger activity negatively its impact differs importantly across horizontal and non horizontal mergers the impact of trade costs is less negative for horizontal mergers which is consistent with the tariff jumping argument

tax incidence with strategic firms in the soft drink market abstract because soft drink sd consumption is considered to be a contributor to the epidemic of obesity there is a growing interest in evaluating the impact on sd consumption of alternative tax policies in this paper we propose a methodology to evaluate the impact of taxation of a food market taking into account the strategic price response of both manufacturers and retailers we apply this methodology to the french sd market and simulate the impacts of ad valorem and excise taxes we find that firms behave differently when facing an ad valorem tax or an excise tax an excise tax is overshifted to consumer prices while an ad valorem tax is undershifted to consumer prices we find that an excise tax based on the sugar content of sd is the most effective at reducing sd consumption our results also indicate that ignoring strategic pricing by firms leads to misestimations of the impact of taxation by between 15 and 40 depending on the products and the tax implemented in the short term that is ignoring positive long term health effects a 9 cents l excise tax has a small negative welfare effect about 1 person year

logistic infrastructure and the international location of fragmented production abstract casual evidence suggests that multinational companies increasingly look for places with adequate transport and logistic infrastructure to locate affiliates that participate in cross border production sharing yet there are no systematic empirical analyses examining how logistic infrastructure interacts with the location decisions made by multinationals most studies on the determinants of fdi address the issue of transportation logistics by examining the impact of distance on the relevant outcome but distance does not capture by itself the quality of the logistic systems in place we overcome this shortcoming in the literature by embedding indicators of infrastructure into an empirical framework that examines whether countries with adequate logistic systems attract more vertical fdi and particularly in industries that are more dependent on logistic services we find that logistic infrastructure positively impacts vertical fdi in addition to the impact typically found on distance a change from the first quartile to the third quartile of the distribution of logistic infrastructure is associated with an average increase in the number of vertically integrated subsidiaries equivalent to 29

employment wages and alcohol consumption in russia 1 introductionconcerns regarding the relationship between alcohol consumption and labor market productivity are well grounded if problem drinking or alcoholism is considered a disease then it may have depressant effects on labor market productivity causing reductions in employment earnings and other labor market outcomes mullahy and sindelar 1993 1996 kenkel and ribar 1994 however there is a medical literature that documents a u shaped relationship between alcohol consumption and the risk of cardiovascular disease according to this literature moderate drinkers have a lower risk of cardiovascular disease than do either abstainers or heavy drinkers beaglehole and jackson 1992 doll et al 1994 consistent with this evidence several economists have found a positive association between moderate drinking and earnings berger and leigh 1988 french and zarkin 1995 heien 1996 hamilton and hamilton 1997 zarkin et al 1998 macdonald and shields 2001 this article investigates the impact of alcohol consumption on employment and wages in russia the primary contributions of the article are twofold first it enhances the economic literature on the relationship between alcohol consumption and labor market behavior by using data from a longitudinal survey the use of a longitudinal data set enables the estimation of a fixed effects model which helps avoid the potential bias caused by unobserved individual factors not captured in cross sectional models the use of a fixed effects model is an important extension to the literature because the data sets used in previous studies are cross sectional and usually lack adequate variables that could serve as identifying instruments to control for the endogeneity of alcohol consumption 1 furthermore the richness of the data set used in this article allows for the application of three alternative measures of alcohol consumption in the empirical analysis this is important because the relationship between alcohol consumption and labor market outcomes may be sensitive to the alcohol measure that is used the second notable contribution of this article is that it provides the first empirical evidence on the association between alcohol consumption and labor market outcomes in russia excessive alcohol consumption is a widespread problem in russia where per capita alcohol consumption is around 14 liters per year the world health organization who considers 8 liters to be a sign that a country has a critical consumption level for health problems quinn judge 1997 furthermore the dramatic fluctuations in mortality rates experienced in russia over the past 15 years have generated considerable attention to the potential effect of alcohol consumption on the overall health of the russian population it is important to investigate how labor market outcomes would be affected by alcohol consumption in a country which demonstrates such dramatic fluctuations in alcohol consumption and mortality consistent with the previous studies cross sectional results generally support the hypothesis of an inverse u shaped relationship between alcohol consumption and wages and employment results from the fixed effect models are found to be quite different from those of cross sectional models the positive effect of alcohol consumption on employment disappears for both males and females once the individual fixed effects are controlled for the results of the wage model lend support to a small and linear return to alcohol consumption but the effects are significant only at the 10 level the fixed effects estimates are smaller in magnitude and estimated with less precision compared with cross sectional estimates section 2 reviews the previous literature section 3 discusses the conceptual issues and empirical strategy section 4 introduces the data set section 5 provides a discussion of the results and sensitivity analyses section 6 concludes the article

on the existence of balanced growth equilibrium the authors characterize the class of dynamic models that allow for the most commonly used types of sustained economic growth balanced and asymptotically balanced they show that under a constant returns to scale technology asymptotically constant discount rate and asymptotically constant elasticity of marginal felicity are not only necessary but also sufficient conditions for the existence of a n asymptotically balanced growth equilibrium path the authors provide examples of recursive utility models that accept a n asymptotically balanced growth equilibrium and discuss their implications on cross country differences in growth rates as well as on savings behavior and wealth distribution copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

linking yitzhaki s and dagum s gini decompositions in this article we show that the gini coefficient is simultaneously decomposable both by sources of income and by populations of income receivers for nonoverlapping income distributions the so called first best gini multi decomposition we show that this multidimensional decomposition is useful for many reasons i it is related to the degree of inequality aversion of the decision maker ii it is especially well suited to study inequalities between poor and nonpoor people iii it enables one to measure the impact of marginal tax reforms on within and between group inequalities respectively

same as it ever was europe s national borders and the market for corporate control abstract national borders continue to be strong barriers for mergers and acquisitions in europe using regional data we construct a gravity model and find that the restraining impact of national borders decreased by more than 17 percent between 1991 and 2007 however no significant change has occurred since the mid 1990s i e four years before the introduction of the euro in comparison we run a corresponding analysis in the united states using the 10 federal regions as country equivalents the resulting quasi border effect in the united states is weaker than that in the european union yet its decline by 43 percent is much stronger in the same period we conclude that european integration policy has had little effect on fostering m a cross border transactions

privatization and foreign competition abstract this paper determines the equilibrium market structure in an international oligopoly where a state enterprise is sold at an auction the paper suggests that high greenfield costs and high trade costs do not necessarily induce foreign acquisitions in privatizations despite the fact that foreign firms would gain considerably from acquiring in such situations the reason is that domestic firms can then prevent foreign firms from becoming strong local competitors and thus their willingness to pay for the state assets is high