challenges to mismeasurement explanations for the u s productivity slowdown the u s has been experiencing a slowdown in measured labor productivity growth since 2004 a number of commentators and researchers have suggested that this slowdown is at least in part illusory because real output data have failed to capture the new and better products of the past decade i conduct four disparate analyses each of which offers empirical challenges to this mismeasurement hypothesis first the productivity slowdown has occurred in dozens of countries and its size is unrelated to measures of the countries consumption or production intensities of information and communication technologies icts the type of goods most often cited as sources of mismeasurement second estimates from the existing research literature of the surplus created by internet linked digital technologies fall far short of the 2 7 trillion or more of missing output resulting from the productivity growth slowdown the largest by some distance is less than one third of the purportedly mismeasured gdp third if measurement problems were to account for even a modest share of this missing output the properly measured output and productivity growth rates of industries that produce and service icts would have to have been multiples of their measured growth in the data fourth while measured gross domestic income has been on average higher than measured gross domestic product since 2004 perhaps indicating workers are being paid to make products that are given away for free or at highly discounted prices this trend actually began before the productivity slowdown and moreover reflects unusually high capital income rather than labor income i e profits are unusually high in combination these complementary facets of evidence suggest that the reasonable prima facie case for the mismeasurement hypothesis faces real hurdles when confronted with the data

household electricity demand revisited respond to price changes this paper develops a model for evaluating the effects of alternative tariff designs on electricity use the model concurrently addresses several interrelated difficulties posed by nonlinear pricing heterogeneity in consumer price sensitivity and consumption aggregation over appliances and time we estimate the model using extensive data for a representative sample of 1300 california households the results imply a strikingly skewed distribution of household electricity price elasticities in the population with a small fraction of households accounting for most aggregate demand response we then estimate the aggregate and distributional consequences of recent tariff structure changes recent efforts to restructure electricity markets have renewed interest in electricity demand and pricing this interest reflects a broad desire to improve the efficiency of electricity markets and policy makers concerns over the impact of price changes on consumers how new pricing mechanisms would affect households consumption and expenditures is a matter of considerable uncertainty however this uncertainty has provoked controversy and debate in the regulatory policy arena hampering market reforms using econometric methods to assess the effects of electricity price changes presents several challenges these include the nonlinear structure of tariff schedules aggregation of metered consumption behaviour over time and appliances and the interdependence of energy use with longer term household decisions over appliance ownership and dwelling characteristics the first two issues introduce complex simultaneity problems between marginal prices and consumption the third issue imposes high data requirements information on household specific appliance holdings and residence features and creates heterogeneity in consumption responses related to the characteristics of these durable goods when the researcher s objective is to develop a model for simulating the effects of prospective tariff changes ignoring these issues will provide an incomplete assessment of demand responses and potentially misleading predictions of a new tariff s consumption and revenue consequences in this paper we estimate a model of household electricity demand that can be used

a trait based model of the potential demand for a genetically engineered food crop in a developing economy we predict the potential demand of smallholder farmers for genetically transformed varieties of a food crop the cooking banana of the east african highlands farmer demand for planting material is derived in an agricultural household model that accounts for variety traits and missing markets the demand for candidate host varieties is predicted using a zero inflated poisson zip regression system the fitted model is used to illustrate the sensitivity of farmer demand for improved planting material to a investments in research and development represented by the effectiveness of gene insertion and expression and b other public investments in education extension and market infrastructure that support diffusion by comparing the characteristics of agricultural households we demonstrate that the choice of host variety can have social consequences favoring one rural population compared with another clients for transgenic banana planting material are likely to be poorer subsistence oriented farmers in areas greatly affected by biotic constraints a model of this type might be useful in assessing the investments needed to support the systematic dissemination of improved planting material the approach can be generalized to other crop biotechnologies for smallholder farming systems particularly in developing economies

an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

measuring the impact of negative demand shocks on car dealer networks the goal of this paper is to study the behavior of consumers dealers and manufacturers in the car sector and present an approach that can be used by managers and policy makers to investigate the impact of significant demand shocks on profits prices and dealer networks more specifically we investigate consumer demand substitution patterns and price decisions across different cars and dealer locations to identify dealerships with low margins or high fixed costs and measure the value of closing down dealerships for manufacturers we apply our model empirically to the san diego area using a transactional data set with information about the locations of dealers and consumers as well as manufacturer and retail prices we find strong consumer disutility for travel and find that dealers have local demand areas that are shared with a small set of competitors we show that a reduction of market demand by 30 over two years similar to the economic crisis of 2008 2009 results in an annual drop in prices of approximately 11 we discuss this price drop in the context of the 2009 federal policy measure known as the car allowance rebate system program we compare predictions and actual dealership closings in the general motors and chrysler dealer networks as an application of our approach

household saving micro theories and micro facts in this survey we review the recent theoretical and empirical literature on household saving and consumption the discussion is structured around a list of motives for saving and how well the standard theory captures these motives we show that almost all of the motives for saving that have been suggested in the informal saving literature can be captured in the standard optimizing model particular attention is given to recent work on the precautionary motive and its implications for saving and consumption behavior we also discuss the behavioral or psychological approach that eschews the use of standard optimization techniques and focuses instead on direct consideration on saving we provide a section on facts who save and how much we then discuss informally the recent decline in the u s saving rate and whether the theory is of much use in understanding this and other changes in aggregate saving rates over time we do not find any convincing explanation for the change in saving rates we also discuss some analyses of saving behavior over the life cycle addressing such questions as whether households save enough for retirement and whether the consumption patterns of older households can be rationalized within a simple life cycle model we also review a great number of studies of the consumption euler equations based on our analysis of the studies cited we conclude that there is still mixed evidence that consumption is excessively sensitive to income we also examine in depth the recent empirical literature on the precautionary motive we conclude that although some households do seem to have a significant precautionary motive at some points in their life cycle this motive is not so strong empirically as some investigators suggest

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

new products quality changes and welfare measures computed from estimated demand systems this paper examines the construction of a price index based on an estimated demand system in principle the method examined can produce a price index that takes account of the introduction of new p

household production and the excess sensitivity of consumption to current income empirical research on the permanent income hypothesis pih has found that consumption growth is excessively sensitive to predictable changes in income this finding is interpreted as strong evidence against the pih we propose an explanation for apparent excess sensitivity that is based on a quantitative equilibrium model of household production in which permanent income consumers respond to shifts in sectoral wages and prices by substituting work effort and consumption across home and market sectors although the pih is true this mechanism generates apparent excess sensitivity because market consumption responds to predictable income growth

the welfare effects of temporary tax cuts and subsidies theory estimation and applications this article presents a tractable and intuitive theory on the welfare effects of temporary tax cuts and subsidies fiscal policies that i generically term holidays the kaldor hicks efficiency effects are theoretically ambiguous with competing pro and anti efficiency effects on newly incentivized versus time shifted purchases to rectify this ambiguity i derive expressions for the welfare effects that are consistent with constant elasticity assumptions and depend only upon readily and reliably observed information to demonstrate the framework s broad applicability i analyze two different policies the 2009 cash for clunkers program and states sales tax holidays i estimate that both policies generated substantial deadweight loss jel h21 h30 d91

cellular telephone new products and the cpi since their introduction in 1983 cellular telephones adoption has grown at 25 35 per year at year end 1997 about 55 million cellular telephones were in use in the united states the bureau of labor statistics bls did not know that cellular telephones existed at least in terms of calculating the consumer price index cpi until 1998 when they were finally included in the cpi omitting cellular telephones from the cpi created a significant bias i estimate a bias in the bls estimate of the telecommunications services index of between 8 1 9 per year because of the omission of the cellular telephone rather than telecommunications service prices increasing at about 1 1 per year the correct calculation has them decreasing at about 8 per year omission of new goods from the cpi for significant periods of time leads to important bias in the calculation of the cpi

the determinants of coupon usage this paper uses a large sample of survey data to investigate the empirical determinants of coupon usage the broad set of control variables allows for comparisons of the relative importance of indi

endogeneity and simultaneity in competitive pricing and advertising a logit demand analysis in this article we use four data sets to provide a benchmark study of the effects of accounting for endogeneity and simultaneity in estimating marketing mix effects in a logit demand framework we compare the results obtained from accounting for endogeneity only to those from accounting for both endogeneity and simultaneity and in the latter case we allow for more general models of firm behavior to examine the consequences of imposing assumptions about the behavior of firms we find that accounting for both endogeneity and simultaneity not only affects the parameter estimates but also results in efficiency gains that affect the statistical significance of the estimates

measuring the welfare gain from personal computers i introduction what is the welfare gain to consumers from the development of and improvements in personal computers pcs this is the question addressed here the answer offered is that welfare increased by somewhere between 2 and 3 measured in terms of total personal consumption expenditure due to the introduction of the pc and its subsequent price decline this finding is obtained by employing a model of consumer behavior based upon more or less standard preferences which is fit to aggregate national income and product account data using a direct and simple calibration estimation strategy to estimate the welfare gain from the introduction of a new product one must know what utility is in the absence of the good a conventional isoelastic utility function has two problems first at zero consumption the utility function returns a value of minus infinity whenever the elasticity of substitution is less than one in this case the welfare gain from the introduction of the new good is infinitely large second marginal utility at zero consumption is infinite so long as the elasticity of substitution is finite therefore consumers will always purchase some of the good in question no matter how high the price is albeit perhaps in infinitesimal quantities to avoid these problems a form for preferences will be adopted that gives a finite level for marginal utility and hence one for total utility at zero consumption with this utility function high prices may result in the consumer optimally choosing to buy none of the new good in addition the consumer s surplus associated with the introduction of a new good is generally finite this paper contributes to the growing literature on measuring the welfare gains from new goods a classic example is the work by hausman 1999 who studies the introduction of cellular telephones he finds that their tardy inclusion in the consumer price index cpi some 15 years after their debut results in a bias of up to 2 per year in the telecommunications services price index to obtain this estimate hausman 1999 effectively integrates back the estimated demand curve for cellular telephones to recover the indirect utility function for consumers this function can be inverted to obtain the expenditure function from which welfare measures can be calculated the procedure was developed earlier in work by hausman 1981 analytical solutions for the expenditure function can be obtained when the demand equation is ln linear when the demand equation is not linear the indirect utility function may have to be recovered by numerically solving a differential equation this procedure is dual to the one presented here which focuses on the consumer maximization problem some utility functions such as the one employed in the current work may not lead to a linear demand equation of the form that is conventionally estimated hausman 1999 also suggests an approximate measure of welfare based on a linear demand curve while he states explicitly that this measure of welfare is a lower bound this caveat is often forgotten in applied work it may work well in the cell phone example that he studies as illustrated in the pc example studied here however this approximate demand curve method can lead to a serious underestimate of the welfare gains arising from the introduction of a new product similarly the use of conventional price indices such as the fisher ideal and tornqvist price indices may lead to inaccurate estimates of the consumer surplus that arises from the introduction of a new good and or the good s subsequent price decline the accuracy of such methods will depend on how fast the marginal utility for a new good rises as the quantity consumed goes to zero figuring this out is part and parcel of the new goods problem that is what utility function or demand equation should be used for estimating the welfare associated with the introduction of a new good

using multimarket data to predict brand performance in markets for which no or poor data exist abstract the authors show how multimarket data can be used to make predictions about brand performance in markets for which no or poor data exist to obtain these predictions the authors propose a model for market similarity that incorporates the structure of the u s retailing industry and the geographic location of markets the model makes use of the idea that if two markets have the same retailers or are located close to each other then branded goods in these markets should have similar sales performance other factors being held constant in holdout samples the proposed spatial prediction method improves greatly on naive predictors such as global market averages nearest neighbor predictors or local averages in addition the authors show that the spatial model gives more plausible estimates of price elasticities it does so for two reasons first the spatial model helps solve an omitted variables problem by allowing for unobserved factors with a cross market structure an example of such unobse

price and quality of desktop and mobile personal computers a quarter century historical overview when introduced in 1976 personal computers pc s had only several kilobytes of randomaccess memory ram and no hard disk processed commands at speeds of less than 1 megahertz mhz yet typically cost several thousand dollars today s pc s have megabytes mb of ram and gigabytes of hard disk memory process commands at speeds exceeding 1 000 mhz and often cost less than 1 000 ever more powerful pc boxes have been transformed into increasingly smaller and lighter notebooks in the context of such rapid technological progress government statistical agencies face the formidable tasks of reliably tracking real output growth in the pc industry and adjusting pc prices for quality changes in 1986 following collaboration with ibm researchers the bureau of economic analysis bea began adjusting mainframe computer prices for quality change using hedonic price methods rosanne cole et al 1986 in 1990 the bureau of labor statistics bls first published an experimental price index for mainframe computers also based on hedonic methods today the bls publishes producer and consumer price indexes for a number of electronic goods including informationprocessing equipment using hedonic price methods dennis fixler et al 1999 the hedonic regression methods employed by researchers and government statisticians to adjust pc prices for quality changes are usually based on pooled cross section and time series data and they typically assume some parameter equality across models as well as some parameter stability over time here we report on results from an examination of the stability of annual pc hedonic price parameters over almost the first quarter century of their history 1976 1999 and on the equality of estimated hedonic price parameters between desktop and mobile models we compute price indexes based on alternative assumptions concerning parameter equality and stability and we assess at what point in time when constructing price indexes mobile and desktop models were appropriately treated as distinct product groups

the effect of ownership structure on prices in geographically differentiated industries i analyze how ownership structure and market geography jointly influence fast food prices i estimate a model of demand and supply that accounts for the market geography and run counterfactual experiments that demonstrate how mergers affect prices i find that the impact of mergers can be large that this impact decreases as the merging outlets are farther apart that mergers among market leaders generally increase prices more than mergers among weaker firms and that mergers can increase prices even if the outlets are so far apart that neither outleti s presence affects prices at the other before the merger

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

market roll out and retailer adoption for new brands this paper proposes a descriptive model of the spatial and temporal evolution of retail distribution for new packaged goods the distribution model postulates separate processes for local market entry by manufacturers and adoption by retailers given entry of special interest is whether retail adoption occurs along a competitive network with retailers as nodes and overlapping trade areas of these retailers as links the model is calibrated on data covering the introduction of two very successful new brands in the frozen pizza category for these brands manufacturers sequentially enter markets based on spatial proximity to markets already entered spatial evolution and on whether chains in these markets adopted previously elsewhere market selection a retail chain adopts new brands based on the adoption timing of competing chains within its trade territory competitive contagion and on the fraction of its trade area in which the new brand is available trade area coverage the effects of market selection and of trade area coverage create dependencies between market entry and retail adoption because of these dependencies the attraction of a particular market as a lead market depends on its location in the geographic structure of the u s retail trade

the estimated ex ante economic impact of bt cowpea in niger benin and northern nigeria genetically modified gm crops could increase economic growth and enhance living standards in africa but political issues have slowed the use of biotechnology this is the first study that assesses the potential impact of gm crops in africa while considering the preferences of producers and consumers towards gmos as well as the income and price risks they face the study uses a choice experiment to estimate the ex ante economic impact of a novel technology bacillus thuringiensis bt cowpea on producers and consumers in benin niger and northern nigeria the experiment involves the simulation of a market transaction similar to those in open air markets in west africa during the market simulation respondents are informed about the advantages and disadvantages including health risks of bt cowpea the results from the study suggest that cowpea growers and consumers in benin and northern nigeria prefer bt to conventional cowpea for health safety reasons the results estimate that social welfare in benin niger and northern nigeria would increase by at least us 11 82 per capita annually with bt cowpea if seed sectors are operating smoothly with inefficiencies in seed sectors and the potential for cowpea acreage increase the estimated social welfare increase in the region would be about us 1 26 per capita annually

the potential benefits of herbicide resistant transgenic rice in uruguay lessons for small developing countries abstract in many developing countries the potential benefits from adopting a transgenic variety developed by a multinational corporation are limited by the crop s small production base this paper presents an ex ante evaluation of the economic impact of herbicide resistant transgenic rice in a small developing country uruguay to fully account for the multinational s market power the firm s seed markup is assumed to affect the adoption rate for the variety stochastic simulation techniques are employed to understand how potential benefits may vary with changes in technology yield costs and adoption parameters the results indicate a 1 82 million mean net present value for producers from the development and utilization of transgenic rice in uruguay and 0 55 million for the multinational these relatively small multinational firm benefits suggest that a firm will not undertake significant efforts to develop transgenic varieties adapted to local conditions without either strategic partnerships with local institutions or access to wider regional markets

unobserved retailer behavior in multimarket data joint spatial dependence in market shares and promotion variables marketing scholars and practitioners frequently infer market responses from cross sectional or pooled cross section by time data such cases occur especially when historical data are either absent or are not representative of the current market situation we argue that inferring market responses using cross sections of multimarket data may in some cases be misleading because these data also reflect unobserved actions by retailers for example because the opportunity costs of doing so do not outweigh the gains retailers are predisposed against promoting small share brands as a consequence local prices and promotion variables depend on local market shares the higher the local share the higher the local observed promotion intensity we refer to this reverse causation as an endogeneity ignoring it will inflate response estimates because both the promotion effects on share as well as the reverse effects are in the same direction in this paper we propose a solution to this inference problem using the fact that retailers have trade territories consisting of multiple contiguous markets this implies that the unobserved actions of retailers cause a measurable spatial dependence among the marketing variables the intuition behind our approach is that by accounting for this spatial dependence we account for the effects of the retailer s behavior in this context our study hopes to make the following contributions at the core of which lies the above intuition first we separate the market response effect from the reverse retailer effect by computing responses to price and promotion net of any spatial and therefore retailer influence second underlying this approach is a new variance decomposition model for data with a panel structure this model allows to test for endogeneity of prices and promotion variables in the cross sectional dimension of the data this test aims to complement the one developed by villas boas and winer 1999 who test for endogeneity along the temporal dimension third to illustrate the approach we use information resources inc iri market share data for brands in two mature and relatively undifferentiated product categories across 64 iri markets whereas we only use data with very short time horizons to estimate price and promotion responses with the spatial model we do have data over long time windows we use the latter to validate the approach specifically within market estimates of price and promotion response are not subject to the same endogeneity because we hold the set of retailers constant therefore comparing within and across market estimates of price and promotion responses is a natural way to validate the approach consistent with our argument ignoring the reverse causation in the cross sectional data leads to inferences of price and promotion elasticities that are farther away from zero than the elasticities obtained from within market analysis in contrast cross sectional spatial estimates and time series estimates show convergent validity from a practical point of view this means it is possible to obtain reasonable within market estimates of price and promotion elasticities from predominantly cross sectional data this may benefit marketing managers the manager who would act on the inflated elasticities will over allocate marketing resources to promotions because she ignores retailers censorship of promotions on the basis of already existing high share we explore other approaches to correct for the inference bias and discuss further managerial issues and future research

a prospective evaluation of biotechnology in semi subsistence agriculture abstract the paper analyses ex ante the economic implications of transgenic virus and weevil resistant sweet potatoes in kenya these technologies are being developed within international projects involving public and private organisations it is expected that the resistant varieties will significantly reduce the crop losses in farmers fields model calculations show that both innovations are likely to bring about substantial growth in economic surplus the projected annual gross benefit is 5 4 mus million us for virus resistance and 9 9 mus for weevil resistance due to the semi subsistence nature of sweet potato the producing households will be the main beneficiaries however market consumers will also capture about one fourth of the aggregate welfare gains the high profitability of the projects is confirmed by significantly positive returns on research investments the examples demonstrate the viability of successful research partnerships between the public and private sectors as most of the basic biotechnology tools available to date are patented by private companies in the north which often do not have sufficient market incentives to develop end technologies for the south more interactions of this kind are required from a development policy perspective working with typical semi subsistence crops is particularly appealing because it immediately targets the poor and avoids conflicts with the private sector s commercial interests

a reconsideration of hedonic price indexes with an application to pc s this paper compares hedonic to matched model indexes matched model indexes are averages of the price changes of goods that remain on sampled stores shelves since goods that disappear tend to have falling market values matched model indexes select from the right tail of price changes the bls can construct hedonic indexes that correct for this selection and are justified by standard arguments in an empirical study of pc s hedonics produce sharp price declines while matched model indexes are near zero also though there are modifications to hedonics that seem desirable they are not those in current use

disability earnings income and consumption using longitudinal data for the period 1968 2005 for a sample of male household heads we determine the prevalence of disability during the working years and examine how the extent of disability affects a range of outcomes including earnings income and consumption we have seven main findings first disability rates are high we divide the disabled along two dimensions based on the persistence and severity of their work limiting condition we estimate that a person reaching age 56 has a 53 percent chance of having been disabled at least once during his working years and a 19 percent chance that he has begun a chronic and severe disability second the economic consequences of disability are frequently profound ten years after disability onset a person with a chronic and severe disability on average experiences a 68 percent decline in earnings a 32 percent decline in after tax income a 22 percent decline in food and housing consumption and a 21 percent decline in food consumption third the various economic consequences differ sharply across disability groups the outcome declines for those with a chronic and severe disability are often more than twice as large as those for the average disabled fourth our findings show the partial and incomplete roles that individual savings family support and social insurance play in reducing the consumption drop that follows disability only about half of this most disabled group reports receiving social security disability insurance or supplemental security income fifth we find a noticeable fall in earnings and income prior to the onset of a reported disability consumption also falls somewhat suggesting that future disability is partially but incompletely predictable in the short run sixth time use and detailed consumption data further indicate that disability is associated with a decline in well being seventh the quantities we have estimated combined with elasticities from the literature allow us to examine the optimality of current compensation for the disabled we find that the current compensation for our most disabled group appears to be lower than is optimal

valuing consumer products by the time spent using them an application to the internet for some goods the main cost of buying the product is not the price but rather the time it takes to use them only about 0 2 of consumer spending in the u s for example went for internet access in 2004 yet time use data indicates that people spend around 10 of their entire leisure time going online for such goods estimating price elasticities with expenditure data can be difficult and therefore estimated welfare gains highly uncertain we show that for time intensive goods like the internet a simple model in which both expenditure and time contribute to consumption can be used to estimate the consumer gains from a good using just the data on time use and the opportunity cost of people s time i e the wage the theory predicts that higher wage internet subscribers should spend less time online for non work reasons and the degree to which that is true identifies the elasticity of demand based on expenditure and time use data and our elasticity estimate we calculate that consumer surplus from the internet may be around 2 of full income or several thousand dollars per user this is an order of magnitude larger than what one obtains from a back of the envelope calculation using data from expenditures this abstract was borrowed from another version of this item

product positioning and competition the role of location in the fast food industry this paper examines optimal product positioning strategies of asymmetric firms in the context of retail outlet locations in the fast food industry the relationships between profits and product differentiation reveal that both mcdonald s and burger king are better off avoiding close competition if the market area is large enough however in small market areas mcdonald s would prefer to be located together with burger king rather than have the two outlets be only a slight distance apart in contrast burger king s profits always increase with greater differentiation offsetting these incentives is the desirability of locating centrally to appeal to the most customers the equilibrium depends on the market s size in small markets mcdonald s locates near the center of the market and burger king locates to the side of the market in larger markets mcdonald s and burger king choose locations on opposite sides of the market although mcdonald s locates closer to the optimal central location than burger king i also show that the role of price competition on product positioning is fundamentally different under asymmetric competition than under symmetric competition price competition unambiguously induces symmetric firms toward differentiation in contrast with asymmetric firms price competition shifts burger king s incentives toward locating closer to mcdonald s even while price competition increases mcdonald s desire for differentiation as a result equilibrium locations with asymmetric firms are approximately the same regardless of whether prices adjust with location

distinguishing income from substitution effects in disability insurance a set of studies conducted over the last 15 years has produced a near consensus that the social security disability insurance system ssdi has substantial disincentive effects on the labor supply of near elderly males diminishing labor force participation increasing the sensitivity of labor force exit decisions to adverse economic shocks and encouraging those nearing retirement to claim disability benefits and subsequently transfer into the social security retirement program yet efforts by the social security administration ssa to encourage labor supply among the disabled by removing the work disincentives built into ssdi have been almost entirely unsuccessful most notably in 1999 congress authorized the ticket to work program which provides an array of inducements for current ssdi beneficiaries to take up employment including permitting a trial work period of up to nine months providing 7 75 years of ongoing medicare eligibility following return to work and providing three years of automatic benefit reinstatement when claimants workplace earnings fall below a threshold level each of these steps reduces the implicit tax placed on labor supply by the ssdi program despite these lures fewer than 1 400 0 01 percent of the 12 2 million tickets issued to date have led to successful workforce integration autor and duggan 2006

taxes and time allocation evidence from single women and men the classic model of becker 1965 suggests that labor supply decisions should be analyzed within the broader context of time allocation and market good consumption choices but most empirical work on policy has focused exclusively on measuring impacts on market work this paper examines how income taxes affect time allocation during the entire day and how these time allocation decisions interact with expenditure patterns using the panel study of income dynamics from 1975 to 2004 we analyze the response of single women s housework labor supply and other time to variation in tax and transfer schedules across income levels number of children states and time we find that when the economic reward to participating in the labor force increases market work increases and housework decreases with the decrease in housework accounting for approximately two thirds of the increase in market work analysis of repeated cross sections of time diary data from 1975 to 2004 shows that home production decreases substantially when market hours of work increase in response to policy changes data on expenditures from the consumer expenditure survey from 1980 to 2003 show some evidence that expenditures on market goods likely to substitute for housework increase in response to a greater incentive to join the labor force the baseline estimates imply that the elasticity of substitution between consumption of home and market goods is 2 61 the results are consistent with the becker model meanwhile single men show little response to changes in tax policy and we are able to rule out an elasticity of substitution between home and market goods for this group of more than 1 52

potential benefits of agricultural research and extension in peru the benefits of agricultural research and extension are examined in an ex ante consumer producer surplus framework for five commodities in peru the effects of demand shifts over time and government pricing policies on research and extension benefits are considered data for the analysis include the results of research and extension questionnaires administered at seven sites in peru the projected rates of return to research and extension indicate substantial returns to public investments

spatial price competition a semiparametric approach we investigate the nature of price competition among firms that produce differentiated products and compete in markets that are limited in extent we propose an instrumental variables series estimator for the matrix of cross price response coefficients demonstrate that our estimator is consistent and derive its asymptotic distribution our semiparametric approach allows us to discriminate among models of global competition in which all products compete with all others and local competition in which products compete only with their neighbors we apply our semiparametric estimator to data from u s wholesale gasoline markets and find that in this market competition is highly localized

what accounts for the variation in retirement wealth among u s households even among households with similar socioeconomic characteristics saving and wealth vary considerably life cycle models attribute this variation to differences in time preference rates risk tolerance exposure to uncertainty relative tastes for work and leisure at advanced ages and income replacement rates these factors have testable implications concerning the relation between accumulated wealth and the shape of the consumption profile using the panel study of income dynamics and the consumer expenditure survey we find little support for these implications the data are instead consistent with rule of thumb mental accounting or hyperbolic discounting theories of wealth accumulation jel di d91 e21

competitive positioning in markets with nonuniform preferences we investigate the nature of competitive equilibrium for brands competing in a multi attribute product space when consumer preferences for product attributes follow nonuniform distributions we establish subgame perfect equilibria in a two stage game where firms choose positions in the first stage and prices in the second stage two types of entry scenarios are investigated in the first the number of brands is given exogenously and all of them choose positions simultaneously in the second scenario firms enter in sequence and the early entrants can choose strategies to deter the entry of later entrants we find the equilibria for two three and four brands for consumer preferences that follow a beta distribution nonuniform distributions result in equilibrium configurations that are substantially different from those obtained for uniform consumer distributions in the two brands case for sufficiently concentrated distributions we find asymmetric position equilibria with one firm at the corner of the market and one firm at an interior position in the case of three brands for sufficiently concentrated preferences we find symmetric equilibria that do not yield maximal differentiation we also establish an equilibrium for the case of four competing brands in addition we characterize entry deterring positioning strategies and examine how they vary with the distribution of consumer preferences

the role of spatial demand on outlet location and pricing abstract in this article the authors consider the problem of outlet pricing and location in the context of unobserved spatial demand the analysis constitutes a scenario in which capacity constrained firms set prices conditional on their location demand and costs this enables firms to develop maps of latent demand patterns across the market in which they compete the analysis further suggests locations for additional outlets and the resultant equilibrium effect on profits and prices using bayesian spatial statistics the authors apply their model to seven years of data on apartment location and prices in roanoke va they find that spatial covariation in demand is material in outlet choice the 95 spatial decay in demand extends 3 6 miles in a region that measures slightly more than 9 5 miles they also find that capacity constraints can cost complexes upward of 100 per apartment as they predict price elasticities and costs are biased downward when spatial covariance in demand is ignored costs a

estimating equilibrium models of sorting across locations while there is growing interest in measuring the size and scope of local spillovers it is well understood that such spillovers cannot be distinguished from unobservable local attributes using solely the observed location decisions of individuals or firms we propose an empirical strategy for recovering estimates of spillovers in the presence of unobserved local attributes for a broadly applicable class of equilibrium sorting models our approach relies on an iv strategy derived from the internal logic of the sorting model itself we show practically how the strategy is implemented provide intuition for our instruments discuss the role of effective choice set variation in identifying the model and carry out a series of monte carlo simulations to demonstrate performance in small samples

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

the long run consumption effects of earnings shocks although prior studies of job displacement and disability have measured the impact of these shocks in terms of lost earnings no previous research has linked these permanent earnings shocks to the

an econometric model of location and pricing in the gasoline market abstract the authors propose an econometric model of both the geographic locations of gasoline retailers in singapore and price competition among retailers conditional on their geographic locations although market demand for gasoline is not observed the authors are able to infer the effects of such demand from stations locations and pricing decisions using available data on local market level demographics using the proposed location model which is based on the assumption of social welfare maximization by a policy planner the authors find that local potential gasoline demand depends positively on the local demographic characteristics of the neighborhood using the proposed pricing model which is based on the assumption of bertrand competition between retail chains the authors find that retail margins for gasoline are approximately 21 the authors also find that consumers are willing to travel up to a mile for a savings of 03 per liter using the estimates of the proposed econometric model the a

homework in labor economics household production and intertemporal substitution abstract we argue that estimates of intertemporal substitution elasticities obtained from standard life cycle models are subject to a downward bias because they neglect changes in work done at home over the life cycle we extend the standard life cycle model to include home production and estimate it using data from three time use surveys we find that the downward bias is large

consumption versus expenditure previous authors have documented a dramatic decline in food expenditures at the time of retirement we show that this is matched by an equally dramatic rise in time spent shopping for and preparing meals using a novel data set that collects detailed food diaries for a large cross section of u s households we show that neither the quality nor the quantity of food intake deteriorates with retirement status we also show that unemployed households experience a decline in food expenditure and food consumption commensurate with the impact of job displacement on permanent income these results highlight how direct measures of consumption distinguish between anticipated and unanticipated shocks to income whereas measures of expenditures obscure the distinction