policy watch child support policies with more parents living apart the societal problem of parents who fail to share with each other or with their children becomes more acute although governments have mainly relied on public transfers to address the resulting economic hardships among children the emphasis has been shifting toward mandatory sharing through the rigorous enforcement of child support laws this paper first describes the economic context for child support the expanding federal role in regulating awards and collections the complex array of incentive and equity effects associated with child support the record of obtaining support payments from noncustodial parents and the effects of new award setting and enforcement policies finally it considers the child support assurance system csas approach recently proposed in congress under this plan the government would make up the difference between some minimum assured payment and the child support actually paid by the non custodial parent

children as collective goods and divorce settlements the failure of many divorced fathers to comply with court mandated child support awards has been identified as a major reason why a growing number of children live in poverty in female headed households this paper presents a model that seeks to explain why so many divorced fathers allow their children s welfare to suffer as a consequence of divorce the point of departure is the recognition that children are collective consumption goods from the point of view of the father and mother within marriage proximity and altruism serve to overcome the free rider problem associated with the provision of public goods however on divorce the noncustodial parent suffers a loss of control over the allocative decisions of the custodial parent and it is not feasible for the couple to achieve a pareto optimal allocation of their joint resources a model of optimal marriage contracts is constructed in which a couple decides on the allocation of resources within marriage and on the terms of a settlement in the event

inducing human capital formation migration as a substitute for subsidies abstract when productivity is fostered by an individual s own human capital as well as by the economy wide average level of human capital individuals under invest in human capital the provision of subsidies for the formation of human capital conditional on the subsidy being self financed by tax revenues can bring the economy to its socially optimal level of human capital yet a strictly positive probability of migration to a richer country by raising both the level of human capital formed by optimizing individuals in the home country and the average level of human capital of non migrants in the country can enhance welfare and nudge the economy toward the social optimum indeed under a well controlled restrictive migration policy the welfare of all workers is higher than in the absence of this policy

arbitrage and existence of equilibrium in infinite asset markets this paper develops a framework for a general equilibrium analysis of asset markets when the number of assets is infinite such markets have been studied in financial economics in the context of asset pricing theories a distinctive feature of an equilibrium model of asset markets is that investors portfolio choice sets are typically not bounded below we prove that an equilibrium exists under a condition that markets are arbitrage free the markets are arbitrage free if there is a price system under which no investor has an arbitrage opportunity the concept of an arbitrage opportunity used in this paper differs from the standard concept on an arbitrage portfolio in financial markets which is a portfolio that guarantees a non negative payoff in every event a positive payoff in some event and has zero price we provide an extensive discussion of concepts of an arbitrage opportunity

a necessary and sufficient condition for the compactness of individually rational and feasible outcomes and the existence of an equilibrium abstract in an economy with arbitrary closed and convex consumption sets we show that page s journal of economic theory 1987 41 392 404 condition of no unbounded arbitrage is necessary and sufficient for compactness of the set of individually rational and feasible allocations in strictly reconcilable economies in which at most one agent may have half lines in his indifference surfaces we show that page s condition is necessary and sufficient for compactness of the set of individually rational utility possibilities for the existence of an equilibrium for non emptiness of the core and for the existence of a pareto optimal allocation these results allow one agent to be risk neutral not permitted by werner s econometrica 1987 55 1403 1418 assumption of no half lines in indifference surfaces our proofs that no unbounded arbitrage is necessary and sufficient for the existence of an equilibrium and for a pareto optimal allocation both rely on the result that non emptiness of the core implies no unbounded arbitrage

a comment on why did child support award levels decline from 1978 to 1985 by philip k robins between 1978 and 1985 the mean real value of child support payments due declined 25 percent in this journal philip robins argued most of this decline was the result of an increase in the ratio of female to male earnings but we argue his conclusion is based upon an inappropriate use of decomposition analysis we show child support due declined largely as a result of a secular decline in the real value of new awards which have fallen almost three percent per year since 1961 and we investigate why new awards declined our findings have implications for reforms contained in the family support act of 1988

a brain gain with a brain drain abstract we study human capital depletion and formation in an economy open to out migration as opposed to an economy which is closed under the assumption of asymmetric information the enlarged opportunities and the associated different structure of incentives can give rise to a brain gain in conjunction with a brain drain migration by high skill members of its workforce notwithstanding the home country can end up with a higher average level of human capital per worker

rent seeking activities and the brain gain effects of migration this paper studies migration and rent seeking activities in a framework of heterogeneous ability it is shown that despite the depletion of productive resources known as the brain drain the possibility of migration could sufficiently reduce participation in rent seeking activities and increase participation in productive activities such that the net effect of migration is a brain gain moreover the possibility of migration that sufficiently enlarges the relative reward to ability in the productive sector could result in qualitative improvements in the allocation of talent ce memoire etudie la migration et les activites de chasse aux rentes dans un monde ou les habiletes sont heterogenes on montre que malgre la perte de ressources productives que constitue la perte de cerveaux il se peut que la migration puisse suffisamment reduire la participation aux activites de chasse aux rentes et accroitre la participation aux activites productives pour que l effet net de la migration soit un gain de cerveaux de plus il se peut que la migration augmente suffisamment la recompense des habiletes dans le secteur productif qu il puisse en resulter des ameliorations qualitatives dans l allocation des talents

arbitrage and the flattening effect of large numbers abstract in a model of an exchange economy with a continuum of individuals we show that competitive equilibrium can be regarded as resulting from the elimination of arbitrage opportunities generically the elimination of such opportunities results in a phenomenon we call the flattening effect of large numbers the flattening effect provides a precise meaning to the statement that under perfect competition individuals cannot influence prices they face perfectly elastic demands and supplies the attractive geometry associated with arbitrage and the flattening effect is highlighted in several figures we also link the demonstration of equilibrium through arbitrage with the logic of marginalism journal of economic literature classification number d51

asset market equilibrium with short selling this paper presents simple conditions and a simple proof of the existence of equilibrium in asset markets where short selling is allowed and satiation is possible unlike standard non satiation assumptions the one used here is weak enough to be reasonable in the mean variance capital asset pricing model and in asset market models where investors maximize expected utility and where total returns to individual assets may be negative this paper analyses the existence of equilibrium in exchange economy models where choice sets may be unbounded below and satiation is likely there are two main examples of such models one is an asset market model where investors maximize expected utility and the total return to individual assets may be negative with positive probability the other is the mean variance capital asset pricing model capm where investors do not necessarily maximize expected utility but instead maximize a function of only the mean and variance of return to their portfolios in both of these models the investors choice sets will be unbounded if short selling is allowed to short sell a share of an asset means to borrow it and sell it promising to buy it back and return it to the lender at a later date formally short selling corresponds to holding a negative number of shares if unlimited short selling is allowed then there is no limit to how large negative numbers of shares can be held and therefore the choice sets are unbounded satiation can also occur both in the mean variance model and in the expected utility model unless there is a riskless asset in the expected utility model there may be satiation if the individual assets have negative returns with positive probability as the investor gets more and more shares the potential positive returns get larger and larger but so do the potential negative returns if the investor is very averse to large negative returns then he may eventually be satiated and not want any more shares in the mean variance model the expected return to an investor s portfolio increases as he holds more and more shares of the assets but so does the variance of return it may be that at some point the additional expected return gained from adding more shares to the portfolio is not sufficient to compensate for the increase in variance if so then there will be satiation satiation in the mean variance model iie analysed in nielsen 1987 1988 the expected utility model with short selling has been used in many specific analyses of portfolio selection and asset pricing to name but one connor 1984 studies arbitrage pricing in a general equilibrium model where there are no short sales restrictions the mean variance capm is of course very prominent in the finance literature because the

ethnic discrimination and the migration of skilled labor we develop a model of interdependency between emigration education investment and discrimination in the context of an ethnically divided developing economy assuming a rent extraction basis for discrimination we first endogenize ethnic discrimination in the benchmark case of an economy closed to migration and then explore how migration prospects affect ethnic inequality under the free migration assumption we find the intuitive result that migration prospects have a protective effect on the minority immigration restrictions set by receiving countries on the other hand have the paradoxical effect of creating migration flows that would otherwise have remained latent

human capital depletion human capital formation and migration a blessing or a curse abstract we specify conditions under which a strictly positive probability of employment in a foreign country raises the level of human capital formed by optimizing workers in the home country while some workers migrate taking along more human capital than if they had migrated without factoring in the possibility of migration a form of brain drain other workers stay at home with more human capital than they would have formed in the absence of the possibility of migration a form of brain gain

brain drain and human capital formation in developing countries winners and losers using new data on emigration rates by education level we examine the impact of brain drain migration on human capital formation in developing countries we find evidence of a positive effect of skilled migration prospects on gross human capital formation in a cross section of 127 countries for each country of the sample we then estimate the net effect of the brain drain using counterfactual simulations countries combining relatively low levels of human capital and low emigration rates are shown to experience a beneficial brain drain and conversely there are more losers than winners and the former tend to lose relatively more than what the latter gain

the state preference approach to general equilibrium in corporate finance abstract this paper attempts to implement the state preference approach in a multiperiod exchange economy the procedure is relevant for a further investigation of various important issues in corporate finance such as the results of modigliani and miller and the integration of the state preference and the mean variance approach to asset pricing

the partnered core of an economy and the partnered competitive equilibrium abstract an allocation is partnered if it admits no asymmetric dependencies between players we introduce the partnered core of an economy and the partnered competitive equilibrium in an economy with unbounded consumption sets and local non satiation we show that no unbounded arbitrage is sufficient for non emptiness of the partnered core with strictly concave utility functions we obtain a second welfare theorem for the partnered competitive equilibrium and show that no unbounded arbitrage is necessary and sufficient for non emptiness of the partnered core and the existence of a partnered competitive equilibrium

the impact of state economic differentials on household welfare and labor force behavior abstract this paper calculates state specific income expectations for low income households using a simultaneous model of household labor force and welfare participation decisions a variety of simulations indicate the interlocking effects of existing state differences in welfare wages and taxes on work welfare choices and income significant differences among similar households in different states occur equalization of welfare benefits eliminates some but not all of these differences but generates potentially serious policy problems for the states

brain drain and economic growth theory and evidence we focus on the impact of migration prospects on human capital formation and growth in a small open developing economy we assume that agents are heterogeneous in skills and take their educational decisions in a context of uncertainty regarding future migrations we distinguish two growth effects an ex ante brain effect migration prospects foster investments in education because of higher returns abroad and an ex post drain effect because of actual migration flows the case for a beneficial brain drain bbd emerges when the first effect dominates i e when the average level of human capital is higher in the economy opened to migrations than in the closed economy we derive the theoretical conditions required for such a possibility to be observed using cross section data for 37 developing countries we find that the possibility of a bbd could be more than a theoretical curiosity

a comparison of the labor supply findings from the four negative income tax experiments between 1968 and 1982 the united states federal government sponsored four negative income tax experiments this paper provides a set of consensus estimates of the labor supply responses to these experiments it is found that despite the wide range of treatments and evaluation methodologies the results are remarkably consistent on average husbands reduced labor supply by about the equivalent of two weeks of full time employment wives and single female heads reduced labor supply by about the equivalent of three weeks of full time employment youth reduced labor supply by about the equivalent of four weeks of full time employment estimated income and substitution effects are quite similar to those obtained from nonexperimental studies

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

arbitrage and the existence of competitive equilibrium a general equilibrium model of markets for commodities and assets is considered the author develops the notion of a price system that admits no arbitrage opportunity and demonstrates the fundamenta l role of this concept for the theory of the existence of a competiti ve equilibrium a price system admits no arbitrage opportunity for a consumer if every bundle of desired commodities has a positive market value the author proves that the existence of a price system that a dmits no arbitrage opportunity for all consumers is sufficient for th e existence of an equilibrium copyright 1987 by the econometric society

can a brain drain be good for growth in the source economy this paper analyzes the interaction between income distribution human capital accumulation and migration it shows that when migration is not a certainty a brain drain may increase average productivity and equality in the source economy even though average productivity is a positive function of past average levels of human capital in an economy it is also shown how the temporary possibility of emigration may permanently increase the average level of productivity of an economy

stochastic dominance pareto optimality and equilibrium asset pricing pricing a factor subspace contains the market portfolio and is such that every marketed contingent claim is second order stochastically dominated by a claim from the factor subspace conditions are given for the existence of equilibrium and it is shown how apt and capm can be interpreted in the framework of the paper if sufficiently many call options on the market portfolio are traded then the space spanned by these options can be used as the factor subspace we consider markets in which a collection of financial assets are traded the collection may be finite or infinite markets are frictionless and short sales of assets are permitted asset payoffs are random variables which are elements of a space of contingent claims by forming portfolios of the marketed assets payoffs in a certain linear subspace of the space of all contingent claims can be attained we call this subspace a space of marketed claims we say that a closed subspace of the space of marketed claims is a factor subspace if two conditions are satisfied first the market portfolio payoff i e the payoff of an aggregate endowment of portfolios per capita belongs to this subspace second every marketed contingent claim is dominated in the sense of second order stochastic dominance by some contingent claim in the factor subspace we demonstrate that for each asset market economy there is a well defined minimal factor subspace in the sense that no proper subspace of it can be a factor subspace if markets are complete i e if a full set of arrow securities are traded then the price of any given asset can be expressed in terms of prices of arrow securities or state prices breeden and litzenberger 1978 have shown that state prices can be replaced by the values of options thus in a complete market asset prices are determined either by state prices or call options it is established in this paper that these ideas and methods are applicable to asset pricing theories even when markets are incomplete making use of the argument of second order stochastic dominance we show that every constrained pareto optimal portfolio allocation consists exclusively of portfolios which generate the factor subspace the same holds for an equilibrium portfolio allocation thus for an economy with a factor subspace only a partial set of arrow securities which is large enough to generate the factor subspace is required to price assets this paper establishes that there exists an equilibrium in which the price of a portfolio equals the price of the dominating portfolio with the same expected return in the factor subspace since the dominating

child support enforcement and welfare caseloads although there is a large body of research devoted to the issue of the determinants of welfare caseloads none of these studies has incorporated the effects of child support enforcement cse we employ annual state panel data from 1980 to 1999 and find that states with more effective cse have significantly lower welfare caseloads the improvement in cse over this period reduces welfare caseloads by about 9 percent in 1999 we also discover that individual child support variables may not be good indicators of state cse vigor and that a cse index that includes multiple dimensions of cse is more likely to capture the multiplicative functions of cse

overlapping risk adjusted sets of priors and the existence of efficient allocations and equilibria with short selling the theory of existence of equilibrium with short selling is reconsidered under risk and ambiguity modelled by risk averse variational preferences no arbitrage conditions are given in terms of risk adjusted priors a sufficient condition for existence of efficient allocations is the overlapping of the interiors of the risk adjusted sets of priors or the inexistence of mutually compatible trades with non negative expectation with respect to any risk adjusted prior these conditions are necessary when agents are not risk neutral at extreme levels of wealths it is shown that the more uncertainty averse or risk averse the agents the more likely are efficient allocations and equilibria to exist

increasing returns in infinite horizon economies this paper shows that in a general equilibrium model with an infiniite holizonl in whichi productionl may exhibit increasing returns to scale or non conivexities marginal cost pricing equilibria exist anid are essential that is stable witlh respect to small perturbationis of the economily as in many important models of mairket imperfections marginal cost pricinig equilibria need not be pareto optimal in the presence of noni convexities so the systematic approaches to equilibrium analysis in infinite dimenisionial commodity spaces which rely crucially oln the first welfare theorem cainnot be used instead this paper introduces leray schauder degree theory the extension of degree theor y to banacih and locally convex spaces as the natural methodology for showinlg that equilibria exist and for anialyzing qualitative features of equilibria such as local uniqueness or essentiality

a comparison of the effect of welfare programme features on welfare participation one and two parent families the effect of welfare programme characteristics on the decision to enter the welfare system is modelled as a binary discrete choice latent variable model dependent upon an underlying index function the two chief classes of welfare beneficiaries in the us welfare system are analysed two parent families and single female headed families the data set is a large recent non experimental multiyear cross sectional pooled data set derived from the us census bureaus current population survey behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory newly estimated comprehensive descriptive statistics of the entire welfare system for both single female household heads and married couples with children are employed to characterize the welfare system statistically significant estimates of substantial magnitude are obtained for the impacts on welfare participation for the welfare guarantee level the effective tax rate on earned income and the effec

why did child support award levels decline from 1978 to 1985 we use data from the panel study of income dynamics to examine trends in the receipt of child support and the determinants of trends between 1968 and 1997 the findings suggest that political demographic and economic forces all exerted downward

effective tax rates and guarantees in the afdc program 1967 1982 estimates of effective tax rates on earned and unearned income and estimates of effective guarantees in the afdc program by state are provided for the period 1967 1982 the results indicate that effective real guarantees fell every year from 1967 to 1981 but stabilized in 1982 effective tax rates on unearned income rose steadily from 1967 to 1981 and took a particularly large additional jump in 1982 effective tax rates on earned income fell after 1967 but then gradually rose throughout the 1970s until 1982 when they took a much larger jump thus guarantees fell and tax rates rose over the 1970s as tight budgets forced states to restrict benefits and in the early 1980s tax rates were pushed even higher by federal legislation

child support welfare dependency and poverty female headed families have among the highest poverty rates of any major demographic group in the united states the purpose of this paperis to investigate empirically the effectiveness of current child support enforcement policies and to determine their role in reducing poverty and welfare dependency a special supplement to the april 1982 current population survey provides the data for the analysis the results indicate that child support enforce ment may represent an effective means for re ducing welfare program costs but isunlikely to have a dramatic effect on either welfare de pendency or poverty copyright 1986 by american economic association

on the different notions of arbitrage and existence of equilibrium in this paper we first prove an equilibrium existence theorem for finite dimensional economies with unbounded below consumption sets we only assume that the individually rational utility set is compact and use the demand approach instead of the standard negishi s approach we next compare the different concepts of no arbitrage that have been used in the literature and give conditions for equivalence between absence of arbitrage and existence of equilibrium lastly we introduce the concept of strong unbounded arbitrage and show that the absence of strong unbounded arbitrage implies the compactness of the individually rational utility set journal of economic literature classification numbers c62 d50

child support payment behavior an econometric decomposition growing concern about the cost to families and society from child support noncompliance has resulted in a flurry of scholarly articles and in welfare reform legislation addressing child support the attention has been drawn from reports showing that almost 2 3 million women of the 4 4 million owed support in 1985 did not receive all they were owed many receiving no payment at all 17 the implications of this are far reaching it is well known that over half of all female headed families have children in poverty and many of these families will end up drawing aid to families with dependent children payments child support could help shift the burden from general tax revenues to the responsible father for the family the benefits of additional income may result in reduced stress on the mother and less disruption in the lives of the children taking a longer run view greater family income has been linked to more years of schooling and higher wage rates in the early part of a child s career 7 higher payments of child support then may serve to increase current parental income and help reduce future poverty in this paper we use a more efficient estimator to model child support behavior than has been used the technique allows the extraction of more information from the data than previously has been possible in particular the marginal impact of changes in variables on the probability of being a nonpayer partial payer or full payer and on the expected amounts paid we show the usual practice of combining individuals who only pay a part of their order with those who pay all of their order into one group may lead to misleading policy conclusions the combining of these groups does give a sense of the total amount that can be collected across individuals often as important though are compliance issues centered on those not paying all of their support order while attention has been paid to those paying none of their order partial payers have been ignored in the literature in the course of our work we find support for the effectiveness of the federal child support enforcement program csep in increasing compliance with support

policy watch proposals for time limited welfare this paper summarizes the clinton administration s welfare reform proposal and views the available evidence on the effects of time limiting cash assistance and requiring work among long term aid to families with dependent children users the reforms are designed to increase employment among aid to families with dependent children recipients given changes in the labor market for less skilled workers it is not clear that this will increase income among these families the reform proposals would shift antipoverty spending toward work subsidies child support collection efforts and subsidized jobs that support mandated employment it is unclear that this will produce either a cheaper or more effective antipoverty system than the current one

migration as an antidote to rent seeking abstract we develop a new mechanism through which skilled migration may influence economic performance in the sending country if agents can choose between acting as rent seekers and engaging in productive activities and only productive skills are exportable a positive probability of migration to a more secure economy reduces the relative expected returns from rent seeking thus decreasing the proportion of skilled workers who opt for parasitic activities such an improvement in the allocation of talent may prevail over the loss of skilled workers due to outmigration however we show that this result is not robust to the introduction of endogenous protection if productive workers share their resources between accumulation of productive capital and investment in security prospective migration may induce a weaker protection against rent seeking which in turn might depress average income in the source economy