a general equilibrium analysis of production subsidy in a harris todaro developing economy an application to india since 1950s india has advocated import substituting industrialization policies to promote its manufacturing sector the end result was creation of a dual economy highly favored manufacturing sector with high and rigid wages and neglected agricultural sector with low wages and poverty because of the higher wages in the manufacturing sector the rural laborers migrate to the urban sector a typical characteristic of the harris todaro developing economy realizing this crisis the indian government recently initiated policies to boost agricultural production to curb the labor migration and improve the welfare of the rural population in this study we develop a computable general equilibrium cge model for india by incorporating harris todaro economic characteristics of unemployment labor migration farm dependant population and labor intensive agriculture we use the model to analyze the effects of agricultural production subsidy policies on employment factor price output price output levels and we

binary choice models with social network under heterogeneous rational expectations abstract this paper extends brock and durlauf s 2001a 2001b binary choice complete network or group interaction model with homogeneous rational expectations to a general network model with heterogeneous rational expectations in our model individuals will form expectations regarding peers behaviors taking into account their characteristics endogenous contextual and correlated effects are all identifiable conditions for unique equilibrium are established for a complete network with heterogeneous rational expectations multiple equilibria can be characterized by an aggregate scalar index the empirical results on adolescents smoking behaviors show significant endogenous and contextual effects even after controlling for school grade random effects and school fixed effects

estimating demand for local telephone service with asymmetric information and optional calling plans in this paper i study the theoretical and econometric implications of agents uncertainty concerning their future consumption when a monopolist offers them either a unique mandatory nonlinear tariff or a choice in advance from a menu of optional two part tariffs agents uncertainty is resolved through individual and privately known shocks to their types in such a situation the principal may screen agents according to their ex ante or ex post type by offering either a menu of optional tariffs or a standard nonlinear schedule the theoretical implications of the model are used to evaluate a tariff experiment run by south central bell in two cities in kentucky in 1986 the empirical approach explicitly accounts for the existence of informational asymmetries between local telephone users and the monopolist leading to different nested econometric specifications under symmetric and asymmetric information the empirical evidence suggests that there exists a significant asymmetry of information between consumers and the monopolist under both tariff regimes all expected welfare components failed to increase with the introduction of optional tariffs for the estimated value of the parameters copyright 2002 wiley blackwell

from plan to plant effects of certification on operational start up in the emergent independent power sector in this paper we study the transition from planned venture to operational start up in the emergent independent power sector planned ventures face tremendous obstacles in assembling the resources necessary to begin operations we hypothesize and show that formal certification from authorized actors increases the likelihood of making this transition moreover we find that the effects of certification are contingent on the legitimacy of the sector as a whole certifications have a stronger effect on start ups when sector legitimacy is low than when it is high this research helps us understand a rarely studied organizational transition from entrepreneurial intention to actual operations within nascent sectors it directs attention to the legitimating effects of formal certification highlights the importance of a multilevel approach to legitimacy and contributes to the growing rapprochement between entrepreneurial studies and institutional theory

temporary pareto optimum theory abstract the purpose of this paper is to introduce bounded rationality in the framework of pareto optimality this is done by altering the usual definition of the attainable set to take account of the fact that agents are represented by expectation functions induced by their learning processes two polar cases are examined first we show that a temporary pareto optimum is a temporary competitive equilibrium when expectations are strongly roy consistent second in the general case of weak roy consistency the temporary version of the second welfare theorem cannot always be true moreover the characterizations of a temporary pareto optimum bear some resemblance to those of optimal taxation in an atemporal second best framework

trade policies and welfare in a harris todaro economy in many developing countries rising unemployment is often attributed to increases in foreign imports triggered by declining foreign prices of imports to correct the chronic unemployment problem some developing countries chose an import substitution strategy by shutting off imports whereas others adopted an outward oriented policy by promoting exports north american free trade agreement nafta was favored by mexico but opposed by organized labor in this country because it was feared that nafta may increase unemployment in the u s which of these policies is more effective in reducing unemployment and raising domestic income protection has been ardently supported as a practical cure for unemployment in chile and argentina and many other ldcs in latin america similarly india adopted import substitution strategies behind high protection and a considerable bias against exports 1 the literature has also justified the use of tariffs for small countries under uncertainty and unemployment 10 9 but in general protection distorts the trade pattern and magnify the extent of the leontief paradox by limiting imports of capital intensive products into these developing countries that suffer from high labor unemployment 7 in the literature there have been two types of models that analyze trade problems in the presence of unemployment the generalized unemployment models have been developed by brecher 5 6 and batra and seth 3 2 in these models wage rigidity is ubiquitous and unemployment exists in all sectors and they are appropriate to analyze the impact of trade policies on unemployment in developed economies the harris todaro ht hereafter model 13 on the other hand assumes sector specific wage rigidity and permits unemployment only in the urban sector thus the ht model is appropriate for investigating the impacts of trade policies of ldcs that suffer

individual and opportunity factors influencing job creation in new firms we build on multiple theoretical perspectives to investigate the unique and joint effects of individual and opportunity level factors affecting job creation in new firms we tested hypotheses using survey data from individuals who transitioned from unemployment to self employment under the auspices of a german public policy program our findings reveal that an entrepreneur s breadth of knowledge has a negative influence on the firm s job creation whereas the entrepreneur s leadership experience has a positive influence however as the sector specific labor requirements of a business opportunity increase both breadth of knowledge and leadership experience allow founders to operate their firms with fewer employees

why have urban poverty and income inequality increased so much argentina 1991 2001 abstract this article analyzes the trends in income inequality and poverty among argentine households during the nineties we assess the effect of changes in labor force participation unemployment educational levels and returns to individual characteristics on income inequality and poverty by using a microsimulation approach we found that unemployment accounts for a large part of the increase in income inequality and poverty experienced in the past decade changes in labor force participation had an equalizing effect over the whole period while changes in the returns to workers sociodemographic characteristics could be associated with a small increase in income inequality with respect to poverty unemployment affected negatively the proportion of households below the poverty line amplified the poverty gap and increased the severity of poverty in contrast changes in labor force participation are associated with a reduction in the poverty rate

pattern of trade between underemployed economies in this paper the authors analyze the factors determining the pattern of trade between underemployed economies they find among other things that a low wage land abundant country exports the land using labor intensive product to a high wage capital abundant country the authors also find conditions under which a high wage capital rich country may export the labor intensive product the leonteif paradox copyright 1990 by the london school of economics and political science

the distribution of economic losses among displaced workers a replication this paper estimates the impact of unemployment on earnings following re employment for a large and representative sample of british men 1984 94 unemployment incidence is found to have only a temporary effect an average earnings setback of 10 on

trade protection and industry wages in india this paper examines the link between trade protection and industry wage premia in india using a unique dataset combining employment survey data with industry level data for various years between 1983 and 2000 the author finds that india s trade reforms were not distributionally neutral the impact of protection on industry wage premia was positive and statistically significant though modest in magnitude workers employed in industries with high tariffs received higher wages than apparently identical workers in low tariff industries because industries with high initial levels of protection were also those with the largest tariff reductions during this period and had the highest share of unskilled workers the positive tariff wage effect implies that the trade reforms were likely to have increased wage inequality as the relative wages of the predominantly unskilled workers in these manufacturing industries fell

interactions neighborhood selection and housing demand abstract this paper contributes to the growing literature that aims at identifying and measuring the impact of social context on individual economic behavior we develop a model of housing structure demand with neighborhood effects and neighborhood choice modeling neighborhood choice is of fundamental importance in estimating and understanding endogenous and contextual neighborhood effects controlling for non random sorting into neighborhoods allows for unbiased estimates and provides a means for identifying endogenous neighborhood effects estimation of the model exploits a household level data set that has been augmented with contextual information at two different levels scales of aggregation one is at the neighborhood level consisting of about ten neighbors with the data coming from the neighborhood clusters sub sample of the american housing survey a second level is the census tract to which these dwelling units belong these data were geocoded by means of privileged access to confidential us census data our results for the neighborhood choice model indicate that individuals prefer to live near others like themselves our estimates of the housing structure demand equation confirm that neighborhood effects are important in particular one s demand for housing depends on the mean of neighbors demand for housing

second best analysis with markets in disequilibrium public sector pricing in a keynesian regime the paper develops pricing rules for a public sector subject to a budget constraint in an economy where the private sector experiences keynesian unemployment excess supply of labour and of commodities both second best and welfare improving pricing rules are studied it is found that such rules can be defined in operational terms in general they are quite complex involve quantities which are not directly observable reservation wages and prices and require evaluation of income and employment multipliers the general equilibrium approach to second best theory thus involves standard macroeconomic concepts and techniques some discussion of methodological issues and of policy objectives inflation versus unemployment is offered in order to facilitate interpretation the corresponding results for an economy with a competitive private sector are first restated

crime and social interactions the high variance of crime rates across time and space is one of the oldest puzzles in the social sciences this variance appears too high to be explained by changes in the exogenous costs and benefits of crime we present a model where social interactions create enough covariance across individuals to explain the high cross city variance of crime rates this model provides an index of social interactions which suggests that the amount of social interactions is highest in petty crimes moderate in more serious crimes and almost negligible in murder and rape

would nonprofit workers accept to earn less evidence from france this article focuses on wage differentials between french nonprofit for profit and public sectors considering the public sector allows testing more extensively the labour donation theory preston 1989 the findings support this theory because nonprofit workers accept to earn significantly less than they would earn in the for profit and public sectors they also suggest differences in the motivations of workers in these sectors nonprofit workers are attracted to their work for reasons transcending material compensation

do the near elderly value mortality risks differently wage hedonic models are estimated with the health and retirement study to measure the risk wage tradeoffs value of statistical lives for older workers the analysis explicitly allows for multiple employment states including retirement using a multinomial selection model the results suggest that the oldest and most risk averse workers require significantly higher not lower compensation to accept increases in job related fatality risks

using trivariate copulas to model sample selection and treatment effects simultaneous nonlinear econometric models with discrete outcomes are often difficult to implement this article considers the use of the copula approach for a model with three jointly determined outcomes it also deals with the discrete case in which outcomes include a mixture of dichotomous choices and discrete count data we apply this technique to study self selection and interdependence between health insurance and health care demand among married couples the full model consists of a dichotomous choice equation for family insurance and a separate negative binomial equation for each spouse s health care use

premiums to employment in larger establishments evidence from peru abstract examination of the employer size wage effect for males in urban peru suggests the following higher wages in larger establishments do not merely compensate for higher worker quality or inferior working conditions size differences in the use of rising wage tenure profiles cannot provide a market clearing explanation for the employer size wage effect unless workers are extremely impatient thus larger employers appear to pay premiums unionization explains none of the premiums and minimum wage compliance explains at best a small fraction shirking based efficiency wage explanations for premiums are implausible because peruvian job security legislation greatly inhibits dismissals in larger establishments explanations meriting further research involve the use of high wages to reduce turnover and to improve productivity enhancing morale

do neighborhoods affect hours worked evidence from longitudinal data using a confidential version of the nlsy79 we estimate large effects of neighborhood social characteristics and job proximity on labor market activity a variety of neighborhood social characteristics are associated with less market work social characteristics have nonlinear effects with the greatest impact in the worst neighborhoods social characteristics are also more important for less educated workers exploiting the panel aspects of our data we find that estimates that do not account for neighborhood selection on the basis of time invariant and time varying unobserved individual characteristics substantially overstate the social effects of neighborhoods but understate the effects of job access

crossing the border self selection earnings and individual migration decisions many empirical studies on the determinants of international migration flows rely exclusively on macro data and do not account for migrants self selection we analyze a very interesting episode in international migration for which we are able to gather individual level data covering all relevant countries namely the exodus of ecuadorians to spain and the us in the aftermath of the economic collapse of 1999 specifically we produce selection corrected predictions of counterfactual individual earnings and use them to estimate a discrete choice migration equation that allows for correlated errors across destinations and a rich structure of migration costs we find that earnings significantly shape individual migration decisions even in an episode in which ecuadorians mostly chose spain where earnings were lower than in the us and they contribute to explaining the observed composition of migration flows moreover our estimates show that changes in earnings at a particular destination have a larger effect on destination choice conditional on migration than on the scale of migration

evaluation of swedish youth labor market programs this paper evaluates two swedish active labour market programmes for youth namely youth practice and labour market training a non parametric matching approach is applied to estimate the average p

discrete choice with social interactions this paper provides an analysis of aggregate behavioural outcomes when individual utility exhibits social interaction effects we study generalized logistic models of individual choice which incorporate terms reflecting the desire of individuals to conform to the behaviour of others in an environment of noncooperative decisionmaking laws of large numbers are generated in such environments multiplicity of equilibria in these models which are equivalent to the existence of multiple self consistent means for average choice behaviour will exist when the social interactions exceed a particular threshold local stability of these multiple equilibria is also studied the properties of the noncooperative economy are contrasted with the properties of an economy in which a social planner determines the set of individual choices finally a likelihood function based on the theoretical model is given and conditions for the econometric identifiability of the model are established

does it pay to attend an elite private college cross cohort evidence on the effects of college type on earnings although a substantial and rising labor market premium is associated with college attendance in general little is known about how this premium varies across institutions of different types and across time in this paper we explicitly model high school students choice of college type characterized by selectivity and control based on individual and family characteristics including ability and parental economic status and an estimate of the net costs of attendance we estimate selectivity corrected outcome equations using data from both the national longitudinal study of the high school class of 1972 and high school and beyond which permit us to determine the effects of college quality on wages and earnings and how this effect varies across time even after controlling for selection effects strong evidence emerges of a significant economic return to attending an elite private institution and some evidence suggests this premium has increased over time

a comparison of choice based multinomial and nested logit models the family structure and welfare use decisions of divorced or separated women home based work differs from other employment because the work site is the home itself this difference means that the fixed costs of working at home are less than the fixed costs of working on site and that home based workers may engage in joint market

binary choice under social interactions an empirical study with and without subjective data on expectations this paper examines two methods of modeling binary choice with social interactions models assuming homogeneous rational expectations and models using subjective data on expectations exploiting a unique survey conducted during the 1996 us presidential election that was designed to study voting behavior under social context we find that in various model specifications using subjective expectations consistently improves models goodness of fit and that subjective expectations are not rational as formulated by brock and durlauf specifically members characteristics are individually important in forming expectations we also include correlated effect in the rational expectation model this extension provides a remedy to the selection issues that often arise in social interaction models copyright 2008 john wiley sons ltd

group decision making with uncertain outcomes unpacking child parent choice of the high school track predicting group decisions under uncertainty requires disentangling individual members utilities over the consequences of choice their expectations for uncertain outcomes and their choice process as a group i estimate simple bayesian models of child parent choice of high school track with subjective risk and unilateral or bilateral nonstrategic decisions by combining families actual choices with novel survey information about children s and parents subjective probabilities over choice consequences their individually preferred choices and their decision roles a set of policy counterfactuals confirms the importance of introducing the beliefs and decision roles of individual members in models and policy analysis of group decisions

urban unemployment and the gains from trade a welfare ranking of alternative commercial policies is constructed for the mobile capital harris todaro economy it is sh own that despite the presence of unemployment most noninterventioni st policies suggested by the competitive model of gains from trade ca rry over to the mobile capital harris todaro economy yet in contradi ction to the competitive model it is shown that all forms of trade i ntervention are not detrimental to welfare only those that reduce th e volume of trade are the export promotion policies so copiously fol lowed by developing countries are vindicated but their import substi tution policies are shown to be without justification copyright 1987 by the review of economic studies limited

imperfect labor mobility and unemployment in ldcs in the two sector two factor general equilibrium literature generic unemployment has been introduced under the assumption of decreasing returns to scale in production see e g batra and seth 1 295 306 and yu 10 399 404 whereas sector specific unemployment has been introduced under the assumption of sticky wages e g harris and todaro 6 136 42 corden and findlay 5 59 78 khan 8 527 47 and marjit 9 527 47 in either case however labor is assumed to be perfectly mobile between two sectors the latter assumption has recently been a major topic of further research in the two sector general equilibrium literature specifically it is argued that in a perfectly competitive environment despite significant intersectoral wage differential caused by various parametric policy changes enough labor do not move from the low wage to the high wage sector to equate the wage rates in two sectors even in the long run locational preferences attachment to existing arrangements and also the high costs of relocation are usually cited as the possible reasons behind the sluggish movement of labor from one sector to the other casas 2 747 61 in a pioneering article has modeled this phenomenon of general immobility of labor in a standard two sector model of production in his model however casas assumes full employment of labor the purpose of the present paper is to extend the casas model further by incorporating unemployment caused by sector specific sticky wages of the harris todaro variety and examine the effects of growth and trade policies on output employment and welfare of a small country we will highlight the role of the elasticity of labor mobility parameter in our main results and demonstrate that there exists a critical minimum value of the elasticity of labor mobility parameter that will ensure the validity of the conventional results even in the world of imperfect labor mobility several interesting results emerge from our analysis in particular we have shown that capital accumulation causes urban unemployment to rise and the optimal tariff for a small open economy is positive the paper is organized as follows in section ii we lay out the basic model of labor immobility and unemployment and in section iii we derive the basic comparative static results in

evaluating the role of subsidy reform in addressing poverty levels in malaysia a cge poverty framework abstractmalaysia as one of the top subsidised countries around the world has launched to reduce subsidies to capture its development goals this study therefore analyses the effects of the subsidy reform on the macroeconomic welfare and poverty levels of malaysia by applying a cge model the findings suggest that subsidy removal leads to significant falls in both income and consumption of rural urban and non citizen households and consequently decreases their welfare however poverty levels among rural households will most likely increase significantly when compared to urban households due to their relatively low level of income compared to other groups

neighbourhood effects and housing demand in this paper we estimate a model of housing demand with neighborhood eects we exploit special features of the national sample of the american housing survey and properties of housing markets that allow us to create natural instruments and therefore identify the impact of social interactions we find evidence of both endogenous and contextual neighborhood eects we report two alternative sets of estimates for neighborhood eects that dier in terms of the instruments we use for estimating the model when the endogenous neighborhood eect is large the respective contextual eects are weak and vice versa the elasticity of housing demand with respect to the mean of the neighbors housing demands the endogenous eect ranges from 0 19 to 0 66 and is generally very significant the contextual eects are also very significant a key such eect the elasticity with respect to the mean of neighbors permanent incomes ranges from 0 17 to 0 54

impacts of energy subsidy reform on the malaysian economy and transportation sector malaysia is paying a high level of subsidies on the consumption of energy about 5 of its gdp therefore reforming the energy subsidies as planned by the government will have a significant impact on household welfare and energy intensive sectors such as the transport sector this study employs a computable general equilibrium cge model to highlight the transmission channels through which the removal of energy subsidies affects the domestic economy the findings show that the shock increases real gdp and real investment while decreasing malaysian total exports and imports the removal of energy subsidies also decreases the aggregate energy demand and consequently decreases the level of carbon emissions in the malaysian economy in addition households experience significant falls in their consumption and welfare the transport sector is significantly influenced through an increase in production costs due to an increase in the prices of intermediate inputs the total output and total exports of the whole transport sector decrease while its imports increase in addition the use of all kinds of transport by households decreases significantly the malaysian energy subsidy reform leads to an initial decrease in co2 emissions and demand for electricity gas and petroleum products in the entire transport sector

the taxation of drivers and the choice of car fuel type in this paper the choice of the car fuel type is studied in the dutch situation three types are important gasoline diesel and lpg with 80 of the cars using gasoline incentives for using diesel or lpg are provided by the tax system that implies higher fixed cost but lower variable cost for users of these fuel types we start by studying fuel type choice on the basis of a logit model and move on to estimate demand functions for kilometres driven for social purposes while correcting for the possible selectivity bias we find that diesel and lpg are in general regarded as inferior alternatives but that monetary incentives are sufficiently strong to overcome this hurdle for drivers with a large demand for kilometres we also find that there are significant effects of the lower variable cost for diesel and lpg drivers on their demand for kilometres the conclusions are confirmed by estimation of a structural model in which fuel type choice and demand for kilometres are consistently explained on the basis of one set of preferences and unobserved heterogeneity is taken into account

a discrete choice model with social interactions with an application to high school teen behavior we develop an empirical discrete choice interaction model with a finite number of agents we characterize its equilibrium properties in particular the correspondence between interaction strength number of agents and the set of equilibria and propose to estimate the model by means of simulation methods in an empirical application we analyze the individual behavior of high school teenagers in almost 500 school classes from 70 schools in our baseline model endogenous social interaction effects are strong for behavior closely related to school truancy somewhat weaker for behavior partly related to school smoking cell phone ownership and moped ownership and absent for behavior far away from school asking parents permission for purchases intra gender interactions are generally much stronger than cross gender interactions in a model with school specific fixed effects social interaction effects are insignificant with the exception of intra gender interactions for truancy copyright c 2007 john wiley sons ltd

what makes a new business start up successful this paper seeks a good measure of new business performance and then explains this measure by various dimensions of business strategy three criteria are used to create a one dimensional ordinal ranking of high medium and low performance for new business starts employment growth return on capital employed and labour productivity it is shown that statistical cluster analysis provides a convincing separation of a sample of new business starts into high medium and low performance categories using a minimum distance criterion for clustering an ordinal logit model with selection is then used to explain this performance ranking the results indicate that many widely discussed features of small business strategy have little or even negative impact on performance of the numerous aims that owner managers may adopt survival growth etc only one appears to have a major impact on performance the pursuit of the highest rate of return on investment many entrepreneurial perceptions of their own capabilities appear false or unimportant with the exception of organisational features and systems

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

jobs off the farm wealth human capital and social group in rural eastern india abstractthis study examines the effects of wealth human capital and social group on the occupational choice and income of farm households to gain an understanding of the mechanism underlying the

utility subsidy reform in abu dhabi a review and a computable general equilibrium analysis abstract electricity and water consumption in abu dhabi has increased substantially in recent years along with rapid economic and population growth as one of the oil producing economies located in arid regions abu dhabi s electricity and water are produced predominantly with fossil fuel based power water co generation which generate carbon emissions the consumption of electricity and water is heavily subsidized to support industrial growth lower cost of living and distribute state wealth to the population the low utility prices however may have contributed to high per capita carbon emissions for the emirate this paper reviews critical literature on energy subsidy policy for oil exporting economies we then examine the economic and environmental effects of water and electricity subsidy reduction in abu dhabi using a computable general equilibrium analysis the result shows that utility subsidy reduction alone increases gross domestic product gdp of the emirate through expanding the high value added service sector and reduces carbon emissions with decreasing carbon intensive industrial and utility productions meanwhile private consumption declines with decreasing wage electricity subsidy reduction in general has greater economic and environmental effects than water subsidy reduction the positive economic and environmental gains may incentivize utility subsidy reform in the long run when the negative wage effect is mitigated

personal networks and nonagricultural employment the case of a farming village in the philippines abstract this article based on an intensive village survey in the philippines analyzes the effects of personal networks on rural villagers access to nonagricultural occupations and the terms of employment given to them a key finding is that personal networks are selectively used to reduce transaction costs and their impacts on employment conditions vary by size and by location of enterprises we find that when villagers are employed in unskilled work at small enterprises those who use family relative networks receive wage premiums however if we limit our sample to small enterprises located near our study village the family relative network premiums become insignificant presumably because of the overriding influence of the community wide network within a narrow local community contrary to the case of small enterprises unskilled workers wages at large enterprises are not much affected by personal networks but are largely determined by years of schooling and work experience the recent developmen

schooling and earnings distributions with endogenous labour force participation marital status and family size this paper investigates the impact of various schooling investment strategies on family and per capita earnings within a framework that integrates effects on earnings family size marital status and labour force participation data are from a 1977 1978 survey of urban nicaraguan women aged 15 45 excerpt