household saving in ldcs credit markets insurance and welfare some ways in which farmers in ldcs can protect their living standards against fluctuations in income are discussed after considering the theory of consumption under uncertainty when there is no or limited borrowing the case where some borrowing is allowed is also examined empirical evidence from some ldcs is used to look at i household borrowing and lending their importance and timing and their role in smoothing consumption and ii the life cycle behavior of consumption and income the results suggest that hump lifecycle saving is not likely to be a very important generator of wealth in ldcs and provide further evidence on the limited role of credit markets

development and application of a cost benefit framework for energy reliability using probabilistic methods in network planning and regulation to enhance social welfare the n 1 rule although electricity is crucial to many activities in developed societies guaranteeing a maximum reliability of supply to end users is extremely costly this situation gives rise to a trade off between the costs and benefits of reliability the dutch government has responded to this trade off by changing the rule stipulating that electricity networks must be able to maintain supply even if one component fails known as the n 1 rule even in maintenance situations this rule was changed by adding the phrase unless the costs exceed the benefits we have developed a cost benefit framework for the implementation and application of this new rule the framework requires input on failure probability the cost of supply interruptions to end users and the cost of investments a case study of the dutch grid shows that the method is indeed practicable and that it is highly unlikely that n 1 during maintenance will enhance welfare in the netherlands therefore including the limitation unless the costs exceed the benefits in the rule has been a sensible policy for the netherlands and would also be a sensible policy for other countries

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

local resource reallocation considering practical feasibility a centralized data envelopment analysis approach abstractmany studies have addressed resource allocation issues by using centralized data envelopment analysis models however few of them provided a local resource reallocation plan which may be carried out more easily this article proposes two models to get such plans the first one considers an acceptable percentage of changes in resources to ensure practical feasibility the second one further considers a situation where resources can only be allowed to shift within specific units the proposed models are applied to an empirical study based on a hospital system in taiwan to demonstrate the practical feasibility of the suggested plans we compare our reallocation suggestions to a plan that can make the whole system be perfectly efficient the main conclusion is that the plans derived from our models are more practically feasible than that with perfect efficiency

credit markets in northern nigeria credit as insurance in a rural economy this article addresses the issues of imcomplete markets and imperfect information in the context of credit markets in rural northern nigeria in much recent theoretical literature the problems of moral hazard and adverse selection are assumed to be decisive for the organization of agrarian institutions in contrast it is found that in the four villages surveyed credit transactions take advantage of the free flow of information within rural communities information asymmetries between borrower and lender are unimportant and their institutional consequences the use of collateral and interlinked contracts are absent credit transactions play a direct role in pooling risk between households through the use of contracts in which the repayment owed by the borrower depends on the realization of random production shocks by both the borrower and the lender

risk and insurance in a rural credit market an empirical investigation in northern nigeria credit contracts play a direct role in pooling risk between households in northern nigeria repayments owed by borrowers depend on realizations of random shocks by both borrowers and lenders the paper develops two models of state contingent loans the first is a competitive equilibrium in perfectly enforceable contracts the second permits imperfect information and equilibrium default estimates of both models indicate that quantitatively important state contingent payments are embedded in these loan transactions but that a fully efficient risk pooling equilibrium is not achieved the research is based on a year long survey in zaria nigeria conducted by the author

cash transfers and index insurance a comparative impact analysis from northern kenya abstract cash transfers and index insurance have become popular interventions by development agencies worldwide yet surprisingly little is known about these programs comparative impacts on participant behavior or well being this paper exploits exogenous variation in program participation and panel data from kenya to compare the causal impacts of a cash transfer program hsnp and an index based insurance product ibli which were implemented contemporaneously among the same population we find that both programs benefit clients hsnp improves child health as measured by mid upper arm circumference muac and helps households maintain their mobility dependent livestock production strategies households with ibli coverage make productivity increasing investments reduce distress sales of livestock during droughts and see a marked increase in income per adult equivalent estimating the impacts per total program costs reveals that the two programs perform comparably on average while ibli s impacts per unit marginal cost are considerably larger than hsnp s

the economic lives of the poor in what turned out to be a rhetorical master move the 1990 world development report from the world bank defined the extremely poor people of the world as those who are currently living on no more than 1 per day per person measured at the 1985 purchasing power parity ppp exchange rate in 1993 the poverty line was updated to 1 08 per person per day at the 1993 ppp exchange rate which is the line we use in this paper poverty lines have always existed indeed 1 per day was chosen in part because of its proximity to the poverty lines used by many poor countries 1 however the 1 a day poverty line has come to dominate the conversations about poverty to a remarkable extent

industry performance and structural efficiency measures solutions to problems in firm models abstract it is shown that average unit structural efficiency measures do not measure the level of technical efficiency in a firm model of an industry alternative structural efficiency measures generalized to multiple input and multiple output technologies are presented as a solution to the problem of how to estimate the relative performance of an industry as a whole where reallocation of inputs across firms is not feasible compared to existing measures the proposed measures require additional information therefore the linear programming dea models needed to obtain this information are presented this non parametric approach to relative efficiency measurement is also used to obtain economic efficiency estimates for an industry as a whole without imposing a priori restrictions on the relative input and output weights

renewable electric energy integration quantifying the value of design of markets for international transmission capacity abstract integrating large quantities of variable renewable electricity generation remains a political and operational challenge one of the main obstacles in europe to installing at least 200 gws of power from variable renewable sources is how to deal with the insufficient network capacity and the congestion that will result from new flow patterns we model the current methodology for controlling congestion at international borders and compare its results under varying penetrations of wind power with models that simulate an integrated european network using nodal localised marginal pricing the nodal pricing simulations illustrate that congestion and price patterns vary considerably between wind scenarios and within countries and that a nodal price regime could make better use of existing network capacity introducing substantial operational cost savings and reducing marginal power prices in the majority of european countries

the role of intergenerational transfers and life cycle saving in the accumulation of wealth he purpose of this paper is to review what economists know at present about the following question how large a portion of the existing wealth is the result of a bequest motive that is of accumulation for the specific purpose of leaving bequests i will also endeavor to clarify why an answer to this question is of interest in the early keynesian period when the study of national saving first attracted wide interest relatively little attention was paid to what led people to save though it was generally understood that the main systematic reason was to leave bequests j m keynes in the famous chapter 9 of the general theory of employment interest and money 1936 had listed seven distinct motives for saving besides the leaving of bequests but five of these which include to increase one s future income or to insure one s independence and power implied that all or nearly all the accumulation would finally wind up as bequeathed wealth this in turn meant that most private wealth originated through bequests that is it either had been received through bequests or was destined to be bequeathed and indeed how else could society accumulate wealth however keynes 1936 p 107 also mentioned two further motives precaution that is to build up a reserve against unforeseen contingencies and foresight that is to provide for an anticipated future relation between the income and the needs of the individual or his family different from that which exists in the present as for example in relation to old age family education or the maintenance of dependents these motives in contrast to most of the previous ones have the

patterns of rainfall insurance participation in rural india take up of an innovative rainfall insurance policy offered to smallholder farmers in rural india decreases with basis risk between insurance payouts and income fluctuations increases with household wealth and decreases with binding credit constraints these results are consistent with the predictions of a simple neoclassical model with borrowing constraints other patterns are less consistent with the benchmark model for example participation in village networks and measures of familiarity with the insurance vendor are strongly correlated with insurance take up decisions and risk averse households are less not more likely to purchase insurance these results may reflect household uncertainty about the product given their limited experience with it

corporate tax games with cross border externalities from public infrastructure we construct a model of corporate tax competition in which governments also use public infrastructure investment to attract foreign direct investment thus enhancing their tax bases in doing so we allow for cross border infrastructural externalities depending on the externality governments are shown to strategically over or underinvest in infrastructure we also examine how tax cooperation influences investment in infrastructure and find that welfare may be lower under tax cooperation than under tax competition this is the case when infrastructure is very effective in raising the tax base and generates a large negative cross border externality jel f23 h40

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

shocks and agricultural investment decisions abstract this study explores the impact of weather shocks on the investment decisions of farmers we distinguish between the long term effect of exposure to weather shocks measured as past exposure to deviations in average rainfall levels and the effect of weather related shocks that have recently occurred we examine how households cope with shocks in the short term in terms of consumption smoothing and the depletion of liquid assets and whether over the longer term shock exposure impacts on household investment decisions and welfare our results show that households on average manage to smooth consumption in the face of recent shocks by depleting savings and borrowing over the longer term households that are exposed to shocks invest less in productive assets leading to lower consumption levels moreover the investment strategies of these households do not appear to pay off once additional shocks occur later on

wealth weather risk and the composition and profitability of agricultural investments despite the growing evidence that farmers in low income environments are risk averse there has been little empirical evidence on the importance of risk in shaping the actual allocation of production resources among farmers differentiated by wealth the authors use panel data on investments in rural india to examine how the composition of productive and nonproductive asset holdings varies across farmers with different levels of total wealth and across farmers facing different degrees of weather risk income variability is a prominent feature of the experience of rural agents in low income countries the authors report evidence based on measures of rainfall variability that the agricultural investment portfolio behavior of farmers in such settings reflects risk aversion due evidently to limitations on consumption soothing mechanisms such as crop insurance or credit markets the authors results suggest that uninsured weather risk is a significant cause of lower efficiency and lower average incomes a one standard deviation decrease in weather risk measured by the standard deviation of the timing of the rainy season would raise average profits by up to 35 percent among farmers in the lowest wealth quartile moreover rainfall variability induces a more unequal distribution of average incomes for a given distribution of wealth wealthier farmers are willing to absorb significant risk without giving up profits to reduce production risk smaller farmers have to invest their limited wealth in ways that reduce their exposure to risk at the cost of lower profit rates the authors found that at high levels of rainfall variability differences in rates of profit per unit of agricultural assets were similar across classes of wealth but over the sample range of rainfall variability these rates of profit were always higher for the poorer farmers than for the wealthier ones suggesting that the disadvantages of small farmers in risk diffusion are more than offset by their labor cost advantage

shocks individual risk attitude and vulnerability to poverty among rural households in thailand and vietnam summary we examine whether the experience of shocks influences individual risk attitude we measure the risk attitude of more than 4 000 households in thailand and vietnam via a simple survey item the experience of adverse shocks which is typical for poor and vulnerable households is related to a higher degree of risk aversion even when controlled for a large set of socio demographic variables therefore shocks perpetuate vulnerability to poverty via their effect on risk attitude we extend this general finding to various categories of shocks and find differences between thailand and vietnam this suggests that risk coping strategies profit from case specific design

the luenberger indicator and productivity growth a note on the european savings banks sector we employ the luenberger productivity indicator to estimate productivity growth and its decomposition into technical change and efficiency change components for savings banks sectors in 10 eu countries between 1996 and 2003 the luenberger indicator requires less restrictive assumptions than standard nonparametric productivity indexes and it allows the assumption of profit maximization to be made for sample firms we estimate average productivity growth in the savings banks sector to be 2 78 per annum and driven almost entirely by technical change whilst the general results confirm earlier findings this study is one of the earliest to identify cross border differences in productivity growth in the savings banks sector

a postscript on aggregate farrell efficiencies abstract in this note we derive alternative weighting schemes that complement those of fare and zelenyuk 2003 for consistent aggregation of farrell efficiencies when the technology exhibits global constant returns to scale

how does risk management influence production decisions evidence from a field experiment weather is a key source of income risk especially in emerging market economies this paper uses a randomized controlled trial involving indian farmers to study how an innovative rainfall insurance product affects production decisions the authors find that insurance provision induces farmers to invest more in higher return but rainfall sensitive cash crops particularly among educated farmers this shift in behavior occurs ex ante when realized monsoon rainfall is still uncertain the results suggest that financial innovation can mitigate the real effects of uninsured production risk

firm and industry level profit efficiency analysis using absolute and uniform shadow prices we discuss the nonparametric approach to profit efficiency analysis at the firm and industry levels in the absence of complete price information two new insights are developed first we measure profit inefficiency in monetary terms using absolute shadow prices second we evaluate all firms using the same input output prices this allows us to aggregate firm level profit inefficiencies to the overall industry inefficiency besides the measurement of profit losses the presented approach enables one to recover absolute price information from quantity data we conduct a series of monte carlo simulations to study the performance of the proposed approach in controlled production environments

the role of intergenerational transfers in aggregate capital accumulation this paper uses historical u s data to directly estimate the contribution of intergenerational transfers to aggregate capital accumulation the evidence presented indicates that intergenerational transfers account for the vast majority of aggregate u s capital formation only a negligible fraction of actual capital accumulation can be traced to life cycle or hump savings a major difference between this study and previous investigations of this issue is the use of more accurate longitudinal age earnings and age consumption profiles these profiles are simply too flat to generate substantial life cycle savings this paper suggests the importance of and need for substantially greater research and data collection on intergenerational transfers life cycle models of savings that emphasize savings for retirement as the dominant form of capital accumulation should give way to models that illuminate the determinants of intergenerational transfers

formal and informal rural credit in four provinces of vietnam abstract this paper uses a survey of 932 rural households to uncover how the rural credit market operates in vietnam households obtain credit through formal and informal lenders formal loans are almost entirely for production and asset accumulation while informal loans are used for consumption smoothening the determinants of formal and informal credit demand are distinct while credit rationing depends on education and credit history in particular regional differences in the demand for credit are striking a one size fits all approach to credit policy in vietnam would be inappropriate

a generalized dea model for centralized resource allocation abstract in this paper we introduced a new generalized centralized resource allocation model which extends lozano and villa s and asmild et al s models to a more general case in order to uncover the sources of such total input contraction in the generalized centralized resource allocation model we applied the structural efficiency to further decompose it into three components the aggregate technical efficiency the aggregate allocative efficiency and re transferable efficiency components the proposed models are not only flexible enough for the central decision maker to adjust the inputs and outputs to achieve the total input contraction but also identify the sources of such total input contraction thereby giving rise to an important interpretation and understanding of the generalized centralized resource allocation model finally an empirical example is used to illustrate the approach

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

cross border investment expenditure spillovers in european gas infrastructure we investigate the implications of an integrated vis a vis a national perspective regarding investment in natural gas infrastructure in particular we analyze cross border spillovers related to the investment expenditure of five western european countries we develop a practical approach to estimate such cross border investment expenditure spillovers using a multi regional input output model we find that international spillovers are generally larger for employment compensation compared to capital compensation and that the spillovers are unevenly distributed among the countries and the types of labor both high skilled and medium skilled labor is impacted most in the country where the investments take place whereas low skilled labor is mostly generated outside the eu we argue that an integrated european gas infrastructure investment policy is to be recommended

projecting eu demand for natural gas to 2030 a meta analysis abstract gas demand projections for the eu27 from a variety of sources are compared projected demand varies widely between sources even when similar rates of economic growth and policy strength are assumed the divergence is shown to result from differing assumptions concerning future energy intensity on the one hand and the future contribution of nuclear power and renewables res to electricity generation on the other the variation with time of some of these projections is also examined it is found that the gas demand projected by both the international energy agency iea and the european commission ec for 2020 and for 2030 has tended to decrease with each successive projection this is understandable since the penetration of res e has continued to exceed expectations however in an economically depressed post fukushima europe estimates of future growth in both res and nuclear generation may need significant revision the energy efficiency directive as agreed by the council of the european union and the european parliament in april 2012 council of the european union 2012 will also impact significantly on future gas demand even though the measures incorporated are weaker than the original proposal the analysis presented here shows that a nuclear decline due to the fukushima disaster is seen to moderate rather than reverse projected demand decay a significant shortfall in projected res capacity if it were to occur constitutes a potential source of additional gas demand although the emphasis in this paper is on the eu27 as a whole consideration is given to the regional heterogeneity of each of these impacts hence although aggregate demand growth for the next decade or two is likely to be moderate or more probably negative local demand growth in some regions may be significant ensuring adequate access to these specific regions via interconnection to their eu27 neighbours and or directly from extra eu sources will therefore be essential hence implementation of the third energy plan should remain a priority

national strategic investment in european power transmission capacity abstract the transformation of the european electricity system requires substantial investment in transmission capacity to facilitate cross border trade and to efficiently integrate renewable energy sources however network planning in the eu is still mainly a national prerogative in contrast to other studies aiming to identify the pan european continental welfare optimal transmission expansion we investigate the impact of zonal planners deciding on network investment strategically with the aim of maximizing the sum of consumer surplus generator profits and congestion rents in their jurisdiction this reflects the inadequacy of current mechanisms to compensate for welfare re allocations across national boundaries arising from network upgrades we propose a three stage equilibrium model to describe the nash game between zonal planners i e national governments regulators or system operators each taking into account the impact of network expansion on the electricity spot market and the resulting welfare effects on the constituents within its jurisdiction we propose a novel way to solve the resulting gne epec type problem using a variation of a disjunctive constraints reformulation this allows to solve this problem without a priori assumptions on the relative valuation of shared constraints by each player using a four node sample network we identify several nash equilibria of the game between the zonal planners this example illustrates the failure to reach the first best welfare expansion in the absence of an effective framework for cross border cost benefit allocation

technological innovations downside risk and the modernization of agriculture we use a randomized experiment in india to show that improved technology enhances agricultural productivity by crowding in modern inputs and cultivation practices specifically we show that a new rice variety that reduces downside risk by providing flood tolerance has positive effects on adoption of a more labor intensive planting method area cultivated fertilizer usage and credit utilization we find that a large share of the expected gains from the technology comes from crowding in of other investments therefore improved technologies that reduce risk by protecting production in bad years have the potential to increase agricultural productivity in normal years

saving in developing countries theory and review in the literature on economic development much of the interest in saving has been focused on the relation between saving and growth but saving is not only about accumulation it is about smoothing consumption in the face of volatile and unpredictable income and helping to ensure the living standards of poor people whose lives are difficult and uncertain this paper develops a model of households which cannot borrow but which accumulate assets as a buffer stock to protect consumption when incomes are low such households dissave as often as they save do not accumulate assets over the long term and have on average very small asset holdings but their consumption is markedly smoother than their income much of the evidence is as consistent with this view of saving as it is incosistent with standard views of smoothing over the life cycle and with explanations of the link between saving and growth in terms of life cycle saving behavior consumption smoothing is also a useful way of thinking about government policy where volatility in the world prices of taxed commodities can generate sharp fluctuations in government revenues as well as reallocations of revenue between the private and public sectors many important policy issues in developing countries hinge on issues of consumption and smoothing and research on these issues is currently likely to be more productive than work on the relation between saving and growth

solving the puzzles of structural efficiency abstract since the concept of structural efficiency first appeared in farrell farrell m j 1957 the measurement of productive efficiency journal of the royal statistical society series a part iii 120 253 281 attempts have been made to derive measures for the performance of a group of production units often referred to an industry with many firms many empirical studies used the technical efficiency of an average unit to measure the structural efficiency of a group but researchers have been puzzled by the discrepancies between the average of individual efficiency scores and the performance of the group as a whole in this paper we point out that the shadow price model provides a useful framework for understanding the economic meaning of the structural efficiency as well as its components by recognizing these components the puzzles related to the inconsistencies between the individual and group performance can be solved readily

agricultural decisions after relaxing credit and risk constraints the investment decisions of small scale farmers in developing countries are conditioned by their financial environment binding credit market constraints and incomplete insurance can limit investment in activities with high expected profits we conducted several experiments in northern ghana in which farmers were randomly assigned to receive cash grants grants of or opportunities to purchase rainfall index insurance or a combination of the two demand for index insurance is strong and insurance leads to significantly larger agricultural investment and riskier production choices in agriculture the binding constraint to farmer investment is uninsured risk when provided with insurance against the primary catastrophic risk they face farmers are able to find resources to increase expenditure on their farms demand for insurance in subsequent years is strongly increasing with the farmer s own receipt of insurance payouts with the receipt of payouts by others in the farmer s social network and with recent poor rain in the village both investment patterns and the demand for index insurance are consistent with the presence of important basis risk associated with the index insurance imperfect trust that promised

evaluating interconnector investments in the north european electricity system considering fluctuating wind power penetration with increasing amounts of power generation from intermittent sources like wind transmission planning has not only to account for the expected load curve but also for the stochasticity of volatile power infeeds moreover investments in power generation are no longer centrally planned in deregulated power markets but rather decided on competitive grounds by individual power companies this poses particular challenges when it comes to evaluating the benefits of increased interconnection capacities in large scale systems like the european transmission system within this article an approach is presented which allows assessing the benefits of interconnector investments in the presence of stochastic power infeed and endogenous power plant investments this model uses typical days and hours as well as recombining trees to represent both load and infeed fluctuations an application is presented covering 30 european countries and simultaneously optimizing generation investments and dispatch as well as utilization of transmission lines the model is used to evaluate the benefits of further line extensions between the european mainland and northern european countries we compute welfare gains and the distribution of these gains within a business as usual scenario up to 2030

effects of transitory shocks to aggregate output on consumption in poor countries this paper provides instrumental variables estimates of the response of aggregate private consumption to transitory output shocks in poor countries to identify exogenous unanticipated idiosyncratic and transitory variations in national output we use year to year variations in rainfall as an instrumental variable in a panel of 39 sub saharan african countries during the period 1980 2009 our estimates yield a marginal propensity to consume out of transitory output of around 0 2 to explain this result we show using instrumental variables techniques that there is a significant negative effect of transitory output shocks on net current transfers and a significant positive and quantitatively large effect on the trade balance an important implication is that frictions to private financial flows do not necessarily imply large effects of transitory shocks to aggregate output on private consumption in poor countries

central asian gas in eurasian power game abstract following the dissolution of the soviet union various gas pipeline projects have been proposed to diversify transit routes and export markets of the landlocked central asian states to evaluate the pipeline project s impact on the players bargaining power i apply the cooperate game theory to a quantitative model of the eurasian gas trade and quantify the bargaining power structure via the shapley value due to ample production capacities in central asia i observe little strategic interaction between the west and china thus demand competition with china is not necessarily a disadvantage for the west and the turkmenistan china pipeline does not affect the impact of the westbound projects aiming europe and turkey for turkmenistan i e the main supplier in the region a link via the caspian sea to turkey is the most beneficial westbound option although the projects carrying gas from azerbaijan and turkmenistan to europe enjoy the european commission s political support they yield marginal benefits to the european consumers thanks to its transit position turkey collects a large share of the benefits in the east west gas trade