credit constraints and the phenomenon of child labor abstract this paper develops an overlapping generations general equilibrium model where inefficient child labor arises due to credit constraints it derives a positive relationship between inequality in the distribution of income and the incidence of child labor looking at policy implications it shows how trade sanctions against countries using child labor may fail to reduce the incidence of child labor it discusses some alternative policies to reduce the incidence of child labor

the complex evolution of a simple traffic convention the functions and implications of habit this chapter presents an agent based simulation of the emergence of a traffic convention concerning whether to drive on the left or the right of the road the interaction between agents and structures involves causal influences in two directions showing how agents constitute institutions and how institutions can have reconstitutive causal effects on individuals

from physical to human capital accumulation inequality and the process of development this paper develops a growth theory that captures the replacement of physical capital accumulation by human capital accumulation as a prime engine of growth along the process of development it argues that the positive impact of inequality on the growth process was reversed in this process in early stages of the industrial revolution when physical capital accumulation was the prime source of growth inequality stimulated development by channelling resources towards individuals with a higher propensity to save as human capital emerged as a growth engine equality alleviated adverse effects of credit constraints on human capital accumulation stimulating the growth process this research develops a growth theory that captures the endogenous replacement of physical capital accumulation by human capital accumulation as a prime engine of economic growth in the transition from the industrial revolution to modern growth the proposed theory offers a unified account for the effect of income inequality on the growth process during this transition it argues that the replacement of physical capital accumulation by human capital accumulation as a prime engine of economic growth changed the qualitative impact of inequality on the process of development in the early stages of the industrial revolution when physical capital accumulation was the prime source of economic growth inequality enhanced the process of development by channelling resources towards individuals whose marginal propensity to save is higher in the later stages of the transition to modern growth as human capital emerged as a prime engine of economic growth equality alleviated the adverse effect of credit constraints on human capital accumulation and stimulated the growth process the proposed theory unifies two fundamental approaches regarding the effect of income distribution on the process of development the classical approach and the credit market imperfection approach 1 the classical approach was originated by smith 1776 and was further interpreted and developed by keynes 1920 lewis 1954 kaldor 1957 and bourguignon 1981 according to this approach saving rates are an increasing function of wealth and inequality therefore channels resources towards individuals whose marginal propensity to save 1 the socio political economy approach provides an alternative mechanism equality diminishes the tendency for socio political instability or distortionary redistribution and hence it stimulates investment and economic growth see the comprehensive survey of benabou 1996b

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

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

intergenerational mobility and macroeconomic history dependence a large literature on endogenous inequality has argued that persistent differences in macroeconomic performance across countries can be explained by historical inequality owing to indivisibilities in occupational choice and borrowing constraints these models are characterized by homogenous agents a continuum of steady states sss and lack of mobility in every ss we show that introducing even a little heterogeneity in order to generate ss mobility shrinks the ss set dramatically mobile sss are generically locally unique and finite in number sufficient conditions for global uniqueness and convergence of competitive equilibrium dynamics are provided

a population macroeconomic growth model for currently developing countries abstract this paper constructs a theoretical model that predicts as observed in some currently developing countries that the average school enrollment ratio may fall even when the average fertility rate declines unlike existing models the current analysis indicates that economic growth may slow down when a fertility transition starts asymmetric behavior with respect to fertility and education between households stemming from income inequality plays an important role in generating this result we examine the implications of an education subsidy policy contrary to intuition in some circumstances this policy may decrease the average school enrollment ratio and future economic growth

public and private expenditures on health in a growth model abstract this paper introduces endogenous longevity into an otherwise standard overlapping generations model with capital in the model a young agent may increase the length of her old age by incurring investments in health such private health investments are assumed to be more productive if accompanied by complementary tax financed public health programs the presence of the public input in private longevity is shown to expose the economy to aggregate endogenous fluctuations and even chaos and such volatility is impossible in its absence the model is capable of generating dramatic reversals in life expectancy as has been observed in many countries

electoral and partisan cycles between us economic performance and presidential popularity a comment on stephen e haynes in this paper we discuss a recent paper by stephen e haynes in which he relates electoral cycles in political support to electoral cycles in economic variables haynes finds that the cycle in support for republican presidents is explained by the cycle in economic variables whereas the cycle in support for democratic presidents is not in our opinion this shortcoming is due to his specification of the popularity function haynes estimates a popularity function which incorporates the notion that voters reward the incumbent for favourable outcomes score hypothesis our popularity function combines the score hypothesis and the notion that voters cast their ballots for the party that best fits the current economic situation issue hypothesis we show that the electoral cycle in popularity of both republican and democratic presidents is explained very well by the cycle in economic variables

economic growth and the persistence of child labor evidence from an indian city abstract this paper examines features of child labor in an area of high economic growth in western india growth was associated with an increase in the number of child workers over the last 15 years the analysis shows that children work at simple repetitive manual tasks that do not require long years of training or experience the work is low paying involves drudgery and is hazardous work forecloses the option of school education for most children in this context i argue that economic growth alone is not sufficient to eradicate child labor

the economics of child labor if child labor as a mass phenomenon occurs not because of parental selfishness but because of the parents concern for the household s survival the popular argument for banning child labor loses much of its force however this assumption about parental decision making coupled with the assumption of substitutability in production between child and adult labor could result in multiple equilibria in the labor market with one equilibrium where children work and another where adult wage is high and children do not work the paper establishes this result and discusses its policy implications copyright 1998 by american economic association

inequality control rights and rent seeking sugar cooperatives in maharashtra this paper presents a theory of rent seeking within farmer cooperatives in which inequality of asset ownership affects relative control rights of different groups of members the two key assumptions are constraints on lump sum transfers from poorer members and disproportionate control rights wielded by wealthier members transfers of rents to the latter are achieved by depressing prices paid for inputs supplied by members and diverting resulting retained earnings the theory predicts that increased heterogeneity of landholdings in the local area causes increased inefficiency by inducing a lower input price and a lower level of installed crushing capacity predictions concerning the effect of the distribution of local landownership on sugarcane price capacity levels and participation rates of different classes of farmers are confirmed by data from nearly 100 sugar cooperatives in the indian state of maharashtra over the period 1971 93

can neoclassical economics handle complexity the fallacy of the oil spot dynamic abstract this paper is essentially a rebuttal of the view that neoclassical economics can handle complexity i have coined the locution oil spot dynamic to denote the neoclassical ability to subsume each and every new perspective the main part of the paper is devoted to showing why the oil spot dynamic cannot work with the complexity approach which is seen as a coherent stand alone research program that stems from the sfi economics program and manifests itself with different nuances the fallacy of the oil spot dynamic is relevant in this period in which economists are beginning to realize that the neoclassical samuelsonian paradigm no longer represents the common language of their profession the spread of the complexity approach and the dissolving notion of mainstream are here interpreted as indicative of a changing economics a short foray into the features of the process of change completes my arguments by showing that the shift from one paradigm to another has many interrelated dimensions and that there may be rigidities internalizing changes

the vp function a survey of the literature on vote and popularity functions after 25 years vp functions explain the support for the government at votes and polls by economic and political variables most studies analyze macro time series we also cover studies of individual voters socio economic groups and regional cross sections the theory starts from the responsibil ity hypothesis voters hold the government responsible for economic conditions it works in two party block systems but not else voters in most countries are found to be sociotropic egotropic voting also occurs voters myopia is well established voting is retrospective as expectations are static it costs the average government almost 2 of the vote to rule

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

das human kapital a theory of the demise of the class structure this paper suggests that the demise of the capitalists workers class structure was a socio economic transformation orchestrated by the capitalists in reaction to the increasing importance of human capital in sustaining their profit rates physical capital accumulation in the process of industrialization enhanced the importance of human capital in production and generated incentives for capitalists to support the provision of public education for the masses triggering the demise of the existing class structure the implications of the theory are consistent with the voting patterns on england s education reform of 1902

child labor cause consequence and cure with remarks on international labor standards although the literature on child labor is enormous it lacks a common theoretical foundation in this paper analytical survey of this field is provided keeping in mind that this is an area where the primary reason for theorizing is ultimately to influence policy overall it is noted that the literature on child labor is an illustration of abundance and anarchy although empirical writings on child labor are numerous they are not usually founded on theory it is argued that there is much that can be done in curbing the issue of child labor several theories were studied in this paper including collaborative intervention such efforts include public action which alters the economic environment such that the parents of their own accord prefer to withdraw the child from labor force another strategy involves the government a legal intervention is enforcing a total ban on the subject although such interventions have good intentions some of them may not be feasible in general it is better to take economy wide measures against child labor and if there is to be a sector specific ban it should be based on the working conditions of that sector rather than the destination of the goods

is child labor inefficient we build a model of child labor and study its implications for welfare we assume that there is a trade off between child labor and the accumulation of human capital even if parents are altruistic and child labor is socially inefficient it may arise in equilibrium because parents fail to fully internalize its negative effects this occurs when bequests are zero or when capital markets are imperfect we also study the effects of a simple ban on child labor and derive conditions under which it may be pareto improving in general equilibrium we show that the implications of child labor for fertility are ambiguous

partisanship theory macroeconomic outcomes and endogenous elections recently there has been a surge of interest in partisanship theories of macroeconomic political interaction unlike political business cycle theory in which economic policy is motivated only by reelection concerns partisanship theory maintains that policy is motivated along ideological lines political parties differ with respect to economic policy and consequently economic performance may differ as well indeed not only is there evidence that political parties in the united states have quite different policy priorities but that this difference in policy priorities is translated into differences in economic outcomes 2

a new view of political accountability for economic performance most political support models imply that in evaluating economic performance voters use a standard that would provide poor predictions of the future and leave the economy vulnerable to manipulation by vote hungry politicians drawing on macroeconomic theory we develop a simple standard of evaluation which encompasses a concern not only for current economic outcomes but also for accurately assessed future consequences of current policies we find that political support for the president can be explained as well by models that assume that voters use this sophisticated standard as by models that assume voter naivete our analysis questions the wisdom of measures typically used to assess voter evaluation of economic performance in a variety of theoretical contexts the results also help to explain the absence of convincing evidence that governments exploit voter ignorance in manipulating the economy

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

contractual structure and wealth accumulation can historical wealth distributions affect long run output and inequality despite rational saving convex technology and no externalities we consider a model of equilibrium short period financial contracts where poor agents face credit constraints owing to moral hazard and limited liability if agents have no bargaining power poor agents have no incentive to save poverty traps emerge and agents are polarized into two classes with no interclass mobility if instead agents have all the bargaining power strong saving incentives are generated the wealth of poor and rich agents alike drift upward indefinitely and history does not matter eventually d31 d91 i32 o17 q15

economic performance voting and political support a unified approach a presidential vote function and a presidential approval ratings function are jointly estimated for u s postwar observations the estimation technique treats the two equations as seemingly unrelated regressions with unequal numbers of observations cross equation restrictions implying that voters and poll respondents use identical standards in judging the economic performance of incumbents are imposed and tested estimates show that both votes and approval ratings are influenced by gnp growth and inflation the results suggest that poll respondents are more inflation averse than voters however tests of this hypothesis are not conclusive copyright 1990 by mit press

popularity functions based on the partisan theory this paper presents popularity function estimates for u s presidents which are based on a model in which voters evaluations reflect an understanding of partisan reputations for differing policies

why children work attend school or stay idle the roles of ability and household wealth abstract this paper offers a theoretical and empirical analysis of child labor schooling and idleness neither work nor school with particular emphasis on the roles of child ability and household wealth in determining these decisions we show theoretically that idleness may be chosen optimally by low income households whose child is of low ability using a rich data set from the philippines we find that while other factors including mother s labor supply the presence of a family business and access to good school quality contribute to these decisions child ability and household wealth are the most important determinants of child idleness and the use of child labor an implication of our findings is that any policy aiming to reduce child labor and increase child schooling should also target improvements in child ability and cognitive development through investments in the nutrition and health of poor children

the efficiency wage given long run employment and concave labor constraint abstract the purpose of this paper is to analyze determination of wage rate in a setting where health capital of labor accumulates over time our conclusions are 1 efficiency wage in a dynamic framework exceeds the static wage rate and 2 there is a possibility of multiple steady state equilibria and a low level equilibrium we have also made some comparative static exercises with respect to some key parameters

inequality lobbying and resource allocation this paper describes how wealth inequality may distort public resource allocation a government seeks to allocate limited resources to productive sectors but sectoral productivity is privately known by agents with vested interests in those sectors they lobby the government for preferential treatment the government even if it honestly seeks to maximize economic efficiency may be confounded by the possibility that both high wealth and true economic desirability create loud lobbies broadly speaking both poorer economies and unequal economies display greater public misallocation the paper warns against the conventional wisdom that this is so because such governments are more corrupt jel d72 d78 d82 016 in this paper we propose a particular channel through which wealth inequality distorts the resource allocation process our analysis rests on four premises

education technologies wages and technological progress abstract we analyze the worker s incentives to acquire skills under technological progress when the costs of education are endogenous and depend on the wage distribution we show that the agent s intergenerational elasticity of substitution plays then a relevant role in determining how incentives and the long run wage distribution react to technological progress moreover whenever poverty traps of unskilled workers exist higher rates of technological progress can even decrease the incentives of low skill workers to acquire skills we also analyze the effects of educational subsidies in contrast with previous analytical findings we obtain that subsidies always decrease the long run skill premium finally we study the efficiency of the resulting competitive equilibria

mortality fertility and child labor abstract we examine the persistence of child labor when adult mortality is endogenous children provide current consumption through child labor and future consumption via an informal social security arrangement poorer parents unable to invest much in their health face higher mortality and send their children to work instead of school fertility decisions exacerbate the problem as parents substitute towards quantity investment in children

electoral and partisan cycles between us economic performance and presidential popularity empirical voting popularity research examines parameters that relate economic performance to voting and popularity not the interaction of these parameters with movements in economic performance which is what actually influences voting and popularity this paper examines that interaction for the usa from 1953 1 1990 4 by decomposing the response of popularity to economic performance by both political party and the quarter of the electoral term averaged over the electoral term economic performance increases the popularity of democrats but decreases it for republicans whereas near the election the opposite occurs overall the results appear consitent with a mix of partisan and electoral influences so that no single approach seems fully adequate

economic growth a panacea for child labor summary in this paper we test whether economic growth decreases child labor by bringing together data from the national sample survey of india and state level macrodata to estimate a bivariate probit model of schooling and labor our results lead us to conclude that contrary to popular wisdom growth actually increases rather than decreases child labor because it increases the demand for child workers the level of state ndp village wages and household incomes are seen as the conduits through which growth influences the supply side of the child labor market

political parties and the business cycle in the united states 1948 1984 this paper tests the existence and the extent of a politically induced business cycle in the u s in the post world war ii period the cycle described in this paper is different from the traditional political business cycle of nordhaus it is based on a systematic difference between the monetary policies of the two parties in a model with labor contracts from an explicit optimization problem we derive a system of equations for output and money growth then we successfully test the non linear restriction imposed by the theory on the parameters of the system of equations we cannot reject the hypothesis that money growth has been systematically different under the two types of administration and that this difference contributes to explain output fluctuations

the macroeconomics of child labor regulation we develop a positive theory of the adoption of child labor laws workers who compete with children in the labor market support a child labor ban unless their own working children provide a large fraction of family income fertility decisions lock agents into specific political preferences and multiple steady states can arise the introduction of child labor laws can be triggered by skill biased technological change which induces parents to choose smaller families the theory can account for the observation that in britain regulations were first introduced after a period of rising wage inequality and coincided with rapid fertility decline

making sense of institutions as a factor shaping economic performance abstract there has recently been a resurgence of interest in how institutions affect economic performance a review of this literature reveals that the concept of an institution means different things to different scholars both within economics and across the social sciences we discuss what factors unify the different definitions of institutions and develop a concept of institutions useful for the analysis of economic performance and economic growth in particular specifically we develop the notion of institutions as standard social technologies economic growth results from the co evolution of physical and social technologies

child labor urban proximity and household composition using detailed survey data from nepal this paper examines the determinants of child labor with a special emphasis on urban proximity we find that children residing in or near urban centers attend school more and work less in total but are more likely to be involved in wage work or in a small business the larger the urban center the stronger the effect is urban proximity is found to reduce the workload of children and improve school attendance up to 3 h of travel time from the city in areas of commercialized agriculture located 3 to 7 h from the city children do more farm work urban proximity effects are accounted for by a combination of local labor supply and demand conditions most notably the local importance of agriculture the education level of the parents and the local wage rate child servants which represent a small proportion of all children work much harder than other children and appear particularly at risk

the schubert effect when flourishing businesses crowd out human capital we show that in family or household firms credit constraints can make business investment a direct competitor to educational investment we test this theory on data collected in cameroon households that are not restricted by credit constraints invest more in education when demand for the product they produce and sell increases however credit constrained households react in the opposite way when demand increases they invest less in education as predicted by our theory we obtain these results controlling for endogeneity of family size of demand conditions and credit constraints

child labor and schooling decisions in urban and rural areas comparative evidence from nepal peru and zimbabwe summary this study sheds some light on the causes of child labor using crosscountry empirical data we find that while poverty is the main cause of child labor in rural areas there is a general lack of support for the poverty hypothesis in urban areas similarly improving access to credit has a greater potential for alleviating child labor and enhancing school attendance in rural areas on the other hand availability of alternative childcare options promises greater impact in urban areas finally the evidence from all countries suggests that efforts to bolster adult educational level and wage will help curb the prevalence and intensity of child labor and improve the likelihood that children stay in school

introduction to development theory abstractthisarticle introduces the symposium on economic development theory 2007 elsevier inc all rights reserved jel classi cation o11 o12keywords development economics development economics a subject that studies institutions growth inequality and povertyin the developing world is a large lively and exciting area of research the objective of thissymposium is to put together some contributions in economic theory with a distinct focus ondevelopment questions much of early development economics as typi ed in the work of paul rosenstein rodan arthurlewis ragnarnurkse tiborscitovsky allynyoung gunnarmyrdal harveyleibenstein alberthirschman amartyasenandothers wastheoretical thoughnotnecessarilyinthesenseofformalmodel building theseauthorsallfelttheneedtobringnewconceptsintoeconomictheory ideas that would capture the essential features of underdevelopment and provide explanationsof the development process existing economic theory with its focus on competitive markets depersonalized exchange steady technical progress and balanced growth simply did not seemrightwhenmatchedwiththegroundrealitiesofunderdevelopment fragmented imperfect orjustplain missing markets highly personalized transactions in credit insurance or agrarian tenancy ambiguousornonexistentpropertyrights andwidespreadevidenceofpovertytrapsandhistoricallock ins a fair bit of modern economic theory was born in some of these early development writings young s article 40 on increasing returns was perhaps the rst systematic study of noncon vexities in economic growth rosenstein rodan s celebrated paper 32 on post war interven tion in europe provided a conceptual foundation for modern thinking on coordination failures

why do diplomas pay an expanded mincerian framework applied to mexico we compare four explanations for the value of diplomas each of which has implications for unemployment and wage variation amongst graduates most of which have not previously been tested for when seeking to explain the effects of diplomas we test for these implications using a refined econometric framework exploiting idiosyncrasies in mexican labour market and educational institutions premiums in mexico appear to result from diplomas tied to jobs with downwards rigid wages an uncommon but simple explanation the standard explanations including screening are not suggested by mexican data our results illuminate how labour markets segmented by diplomas clear this depends upon the nature of the labour market rigidities exactly as predicted by neoclassical theory

is there a child labor trap intergenerational persistence of child labor in brazil this article examines the intergenerational persistence of child labor empirically by looking at household survey data from brazil previous empirical work on child labor has focused primarily on isolating the determinants of child labor using survey data we take a different approach by asking does the child labor status of parents affect the child labor incidence of their children we look at this question in two ways our working assumption is that financial need creates this generational link but we also ask if there exists an intergenerational link over and above that which is transmitted through the production of income perhaps through norms we find strong evidence that this link exists and that it appears to persist even when income is held constant moreover we find that children who did not work as child laborers command higher salaries later in life which suggests that the potential human capital gains through apprenticeship as children are outweighed by the human capital gains children receive through schooling excerpt

economic underdevelopment the case of a missing market for human capital abstract this paper demonstrates that the coexistence of developed and underdeveloped countries can be a stationary equilibrium in a world economy with free trade in consumption goods and physical capital an underdeveloped country is characterized by a high ratio of unskilled workers in the labor force a small stock of physical capital a low gross national product a high rate of return on human capital and a corresponding large wage differential between skilled and unskilled workers the critical assumptions are that future labor earnings cannot serve as collateral on a loan and indivisibilities in education

does child labour displace schooling evidence on behavioral responses to an enrollment subsidy this brief summarizes the results of a gender impact evaluation study entitled does child labour displace schooling evidence on behavioral responses to an enrollment subsidy conducted between 1995 and 1996 in bangladesh the study observed that the subsidy increases schooling but its effect on child labour is ambiguous the subsidy increased schooling by far more than it reduced child labour substitution effects helped protect current incomes from the higher school attendance induced by the subsidy substitution effects helped protect current incomes from the higher school attendance induced by the subsidy the reduction in the incidence of child labour by boys girls represents about one quarter eighth of the increase in their school enrollment rate

child labor and household land holding theory and empirical evidence from zimbabwe summary the relationship between rural household productive assets and child labor in developing countries is complex some empirical evidence shows that child labor tends to increase as land holding increases or there is an inverted u shaped curve relationship between the probability of putting children to work and land holding this paper shows that the relationship between use of children as laborers and land holding is nuanced child labor generally decreases as per capita land holding increases but there can be an upward bump in the relationship between child labor and landholding near the middle of the range of land per capita the bump can be explained theoretically by the relationship between the marginal productivity of a child worker on the farm and the marginal value placed on his her education at different levels of wealth this pattern is repeated in three surveys conducted in zimbabwe in 2001 2007 8 and 2010 11 from the perspective of policy making the policy maker should be alerted that the programs to promote school retention should not necessarily focus only on the poorest households in rural areas there is a high probability that middle wealth households put their children to work and this probability may change by some other factors such as gender of child and agro ecological conditions

transaction cost economics and the carnegie connection abstract this paper tracks my remarks at the september 1993 conference honoring richard m cyert it begins with some recollections of my years as a graduate student at gsia in the early 1960s i then shift to transaction cost economics and how this project relates to what i learned from dick cyert and others at carnegie

inequality and growth why differential fertility matters we argue that inequality and growth are linked through differential fertility and the accumulation of human capital we build an overlapping generations model in which dynasties differ in their initial endowment with human capital growth the income distribution and fertility are endogenous due to a quantiy quality tradeoff families with less human capital decide to have more children and invest less in education when initial inequality is high large fertility differentials lower the growth rate of average human capital since poor families who invest little in education make up a large fraction of the population in the next generation a calibrated model shows that this fertility differential effect is quantitatively important we also provide empirical evidence to confirm the links between inequality differential fertility and growth suggested by the model

the value and allocation of time in rural botswana abstract time use data indicate that there is substantial surplus labor in rural areas of botswana with the incidence of underutilization varying by age sex and asset position time allocations are influenced by economic incentives i e income and productivity effects the more productive capital the household has the more productive work its members perform particularly its children the positive productivity effect of capital on economic work somewhat outweighs its negative income effect time allocations also are constrained by a culturally determined division of labor by age and sex which however shows some flexibility at the margin

shifting boundaries in economics the institutional cognitive strand and the future of institutional economics this paper aims at contributing to the debate on the future of institutional economics and of the field as a whole by starting from the literature that discusses the relationship between old original institutional economics and new institutional economics it suggests that the process of reunifying oie and nie and evolutionary economics prompted by part of the literature could be improved by the contribution of the cognitive institutional economics the paper follows a two stage pathway first it frames the debate on the relationships between nie and the oie and it concentrates on a subset of the literature that shows that nie s recent developments complicate the distinction between nie and oie and it explores the possibility that nie and oie may merge so that an amalgam of nie oie and evolutionary economics becomes the next economic paradigm secondly the paper argues that a step forward in the direction outlined by the literature has been made by cie which is a research stream that developed from cross fertilization among nie oie and the hayekian contributions to the analysis of institutions in the concluding remarks the possible emergence of a single institutional paradigm is discussed in the light of the literature about change in economics

child labor child schooling and their interaction with adult labor empirical evidence for peru and pakistan using data from peru and pakistan this article tests two hypotheses there is a positive association between hours of child labor and poverty and there is a negative association between child schooling and poverty both of these hypotheses are confirmed by the pakistani data but not by the peruvian data the reduction in poverty rates due to income from children s labor is greater in pakistan than in peru the nature of interaction between adult and child labor markets varies with the gender of the child and the adult in peru rising men s wages significantly reduce the labor hours of girls whereas in pakistan there is a strong complementarity between women s and girls labor markets both data sets agree on the positive role that increasing adult education can play in improving child welfare

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

institutions in economics the old and the new institutionalism 1 definitions and issues 2 formalism and anti formalism 3 individualism and holism 4 rationality and rule following 5 evolution and design 6 efficiency and reform 7 conflicts and complementarities

why does child labor persist with declining poverty we develop a dynamic overlapping generations model to highlight the role of income inequality in explaining the persistence of child labor under declining poverty differential investment in two forms of human capital schooling and health in the presence of inequality gives rise to a nonconvergent income distribution in the steady state characterized by multiple steady states of relative income with varying levels of education health and child labor the child labor trap thus generated is shown to preserve itself despite rising per capita income policy recommendations include public provision of education targeted toward reducing schooling costs for the poor or raising the efficacy of public health infrastructure jel i1 j2 o1 o2

financial market globalization symmetry breaking and endogenous inequality of nations this paper investigates the effects of financial market globalization on the inequality of nations the world economy consists of inherently identical countries which differ only in their levels of capital stock each country is represented by the standard overlapping generations model modified only to incorporate credit market imperfection an integration of financial markets affects the set of stable steady states as it changes the balance between the equalizing force of the diminishing returns technology and the unequalizing force of the wealth dependent borrowing constraint the model is tractable enough to allow for a complete characterization of the stable steady states in the absence of the international financial market the world economy has a unique steady state which is symmetric and stable in the presence of the international financial market symmetry breaking occurs under some conditions that is the symmetric steady state loses its stability and stable asymmetric steady states come to exist in the stable asymmetric steady states the world economy is endogenously divided into the rich and poor countries the borrowing constraints are binding in the poor but not in the rich the world output is smaller the rich are richer and the poor are poorer in any of the stable asymmetric steady states than in the unstable symmetric steady state

sorting and long run inequality many social commentators have raised concerns over the possibility that increased sorting in society may lead to greater inequality to investigate this we construct a dynamic model of intergenerational education acquisition fertility and marital sorting and parameterize the steady state to match several basic empirical endings we end that increased sorting will signiecantly increase income inequality four factors are important to our endings a negative correlation between fertility and education a decreasing marginal effect of parental education on children s years of education wages that are sensitive to the relative supply of skilled workers and borrowing constraints that affect educational attainment for some low income households

wage structure as implicit insurance on human capital in developed versus underdeveloped countries abstract this paper explores the role of wage structure as implicit insurance on human capital it illustrates how smaller wage differentials in the developed world can be welfare enhancing by acting as implicit insurance while larger wage differentials in underdeveloped countries make investments in human capital riskier in other words with smaller wage differentials the students in a developed country are insured against poor educational outcomes through the existence of well paid alternative employments which are not present in the economy of a less developed country this result arises as multiple equilibria in a general equilibrium model when there are no insurance markets for human capital

explaining cross country differences in policy response to child labour we develop a model of child labour where poverty and inequality combine to determine policy response to child labour if there are strategic complementarities between parents decisions to educate their children and firms technology choice multiple school enrolment equilibria arise only rich countries and those that are not too poor and have a low wealth inequality benefit from adopting child labour laws this is because such laws commit an economy with either of those initial conditions to the full school enrolment equilibrium which pareto dominates all other equilibria moreover wealth redistribution is not sufficient to eliminate child labour jel classification i20 o33 une explication des differences d un pays a l autre dans la reaction des politiques au phenomene du travail des enfants les auteurs developpent un modele de travail des enfants dans lequel les niveaux de pauvrete et d inegalite se combinent pour determiner les politiques si des complementarites strategiques existent entre les decisions des parents d eduquer leurs enfants et le choix de technologie des entreprises de nombreux equilibres impliquant divers niveaux d inscription a l ecole sont possibles seuls les pays riches et ceux qui ne sont pas trop pauvres ou qui ont un degre d inegalite de la richesse relativement bas tirent profit de lois reglementant le travail des enfants c est le cas parce que de telles lois engagent une economie qui a ces caracteristiques a se diriger vers un equilibre d inscription totale des enfants a l ecole dans ces cas il s agit d un equilibre qui domine au sens de pareto tous les autres equilibres on note de plus que la redistribution de la richesse ne suffit pas pour eliminer le travail des enfants

uneven growth a framework for research in development economics the textbook paradigm of economy wide development rests on the premise of balanced growth that is on the presumption that all sectors will grow in unison over time as a country gets richer this view has served us reasonably well in some circumstances but is not particularly useful for accounts of modern under development in many developing countries economic growth has been fundamentally uneven software development the outsourcing of services sectoral technological change quick compositional shifts between agriculture and other sectors the rise of particular exports special economic zones and so on this paper will discuss both the sources of uneven growth and its implications with greater emphasis on the latter the paper will argue that much of the distributional issues or the reactions to globalization that we see in modern developing societies can be viewed as reactions to a growth process that is fundamentally uneven and is indeed perceived as such

child labor and household wealth theory and empirical evidence of an inverted u some studies on child labor have shown that at the level of the household greater land wealth leads to higher child labor thereby casting doubt on the hypothesis that child labor is caused by poverty this paper argues that the missing ingredient may be an explicit modeling of the labor market we develop a simple model which suggests the possibility of an inverted u relationship between land holdings and child labor using a unique data set that has child labor hours it is found that controlling for child household and village characteristics the turning point beyond which more land leads to a decline in child labor occurs around 4 ac of land per household c 2009 published by elsevier b v

wealth constraints lobbying and the efficiency of public allocation abstract in esteban and ray 1999 inequality public allocation and development mimeo we formalize a model in which individuals lobby before the government in order to benefit from some productivity enhancing government action infrastructures direct subsidies permissions in short the government honestly tries to allocate these permissions to the agents that will make the best use of them as revealed by the intensity of their lobbying if the marginal cost of resources varies with wealth the amount of information transmitted through lobbying will depend on the degree of inequality in this paper we summarize the main approach and examine the special case of equal wealth we show that the nature of signaling equilibria is critically affected by per capita wealth

the effect of microenterprise lending on child schooling in guatemala many recent theoretical models which portray human capital investment as a primary engine of economic growth underemphasize the structure of the microeconomic decision making process which gives rise to human capital investment in both developed and developing countries human capital investment tends to be a household level decision made in the form of child schooling for families in developing countries which operate household enterprises the decision involves an economic trade off between future returns to schooling and the current return to childrens labor in the enterprise the author explores how access to credit in developing countries can affect the child schooling decision a 2 period household model is presented which endogenously generates an optimal level of child schooling by households accounting for the possibility of asymmetric information in credit and labor markets comparative statics are then conducted to show the conditions under which child schooling will increase or decrease when credit constraints are relaxed a brief background of the schooling system in guatemala and a brief description of the survey data collected in guatemala are provided followed by the presentation of empirical tests and a summary of empirical findings with suggestions made for further research