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

income and outcomes a structural model of intrahousehold allocation there is evidence from several sources that one cannot treat many person households as a single decision maker if this is the case then factors such as the relative incomes of the household members may affect the final allocation decisions made by the household we develop a method of identifying how incomes affect outcomes given conventional family expenditure data the basic assumption we make is that household decision processes lead to efficient outcomes we apply our method to a sample of canadian couples with no children we find that the final allocations of expenditures on each partner depend significantly on their relative incomes and ages and on the level of lifetime wealth

bequest as a public good within marriage a note bequest to and marriage of children can lead to a pareto inefficient allocation the inefficiency or market failure arises because one family making a bequest to its own child ignores the contribution to the utility of the other family whose child enters the marriage this note shows that an assortative mating rule based on bequests can improve or even restore pareto efficiency when parents take account of the rule in deciding the amount of bequests to their own children

renewable energy integration in zonal markets in this paper we investigate the impact of zonal network management in the operation of power systems with significant levels of renewable energy integration our study is inspired by the current state of the european energy market and we focus on a case study of the central western european cwe system first we present a hierarchy of models that account for unit commitment the separation of energy and reserves and the simplified representation of transmission constraints in a zonal market in order to examine the impact of these factors on efficiency in a regime of large scale renewable energy integration second we simulate operations of the cwe system under the zonal market design using a detailed instance that consists of 656 thermal generators 679 nodes and 1073 lines with multiarea renewable energy production and 15 minute time resolution zonal market operations are compared against deterministic and stochastic unit commitment using high performance computing in order to tackle the scale of the resulting models we find that market design can have an influence on cost efficiency which far exceeds the benefits of stochastic unit commitment relative to deterministic unit commitment we conduct a detailed analysis of the numerical results in order to explain the relative performance of the different models

market clearing with stochastic security part ii case studies this paper analyzes the market clearing formulation with stochastic security developed in its companion paper through two case studies solved using mixed integer linear programming techniques the generation and reserve schedules as well as the nodal prices of energy and security are assessed under various conditions such as a line flow limits b when nonspinning reserve is excluded from the formulation c demand side valuation of energy not served d generator ramping limits and e the set of pre selected contingencies

gorman and musgrave are dual an antipodean theorem on public goods abstract this paper examines the conditions under which the allocation branch of the government can determine the optimum provision of public goods independently of the distribution of private goods we draw attention to the duality with the literature on aggregation over consumers private goods economies

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

bequests and the size of population when population is endogenous the consequences of interfamily bequests and endogenous population size for optimal and competitive population sizes and bequests are explored when individuals utility is a function of own consumption the number of children and the welfare of their children when a bequest benefits each member of a second generation family we show that competition leads to underprovision for future generations under a separability assumption the number of children is also shown to be too large

does immigration impact institutions the economics literature generally finds a positive but small gain in income to native born populations from immigrants and potentially large gains in world incomes but immigrants can also impact a recipient nation s institutions a growing empirical literature supports the importance of strong private property rights a rule of law and an environment of economic freedom for promoting long run prosperity but little is known about how immigration impacts these institutions this paper empirically examines how immigration impacts a nation s policies and institutions we find no evidence of negative and some evidence of positive impacts in institutional quality as a result of immigration

the rising price of husbands a hedonic analysis of dowry increases in rural india dowries in south asia have steadily risen over the last 40 years and now often amount to over 50 percent of a household s assets this paper attempts to investigate the reasons behind this increase it adapts rosen s implicit market model to the indian marriage market and tests predictions from the model with data from six villages in south central india and from the indian census it is found that a marriage squeeze caused by population growth resulting in larger younger cohorts and hence a surplus of women in the marriage market has played a significant role in the rise in dowries

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

towards an equilibrium level of market reform how politics affects the dynamics of policy change in this article we examine the dynamics of economic reforms that are implemented by incumbent policy makers interested in maintaining their political power we use a sample of 86 countries over a time period going from 1980 to 2001 and find that the achievement of an equilibrium level of market liberalization is highly costly our results are robust to endogenity and model specification

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

credit for what informal credit as a coping strategy of market women in northern ghana abstract this paper explores the use of informal credit as a strategy for managing risks by market women in northern ghana a broad concept of the costs of risk management strategies is introduced and encompasses both a time and monetary dimension based on qualitative data the analysis reveals that market women invest a considerable amount of time in maintaining complex networks of informal credit providers to ensure their access to credit once a shock occurs informal credit involves high transaction costs and prevents market women from growing out of poverty in the long term

the effect of marital endowments on domestic violence in india abstract numerous studies have documented a relationship between income and wealth of a woman and domestic violence one such factor that could potentially impact domestic violence is the gold endowment a woman receives at the time of marriage india presents a unique setting in which to test this relationship as despite being unlawful both dowry practices and domestic violence continue to prevail as actual marital endowments may endogenously affect spousal match quality i use the deviation of the price of gold at the time of marriage from its long term trend as a source of exogenous variation to proxy for initial marital endowment and examine its effect on domestic violence results show a positive and significant effect of an unusually high price of gold at the time of marriage on domestic violence

understanding economic policy reform one of the eventual consequences of the global debt crisis was a wave of market oriented economic reforms this paper discusses the state of our knowledge on the political economy of this process why were inefficient and often unsustainable policies maintained for so long why are so many governments reforming now after decades of adherence to policies of an opposite kind have the reformers internalized the correct lessons from the east asian experience finally are there any helpful rules for reformers to follow in guiding their policies through complicated political terrain

collective labor supply and welfare the paper develops a general collective model of household labor supply in which agents are characterized by their own possibly altruistic preferences and household decisions are only assumed to be pareto efficient an alternative interpretation is that there are two stages in the internal decision process agents first share nonlabor income according to some given sharing rule then each one optimally chooses his or her own labor supply and consumption this setting is shown to generate testable restrictions on labor supplies moreover the observation of labor supply behavior is sufficient for recovering individual preferences and the sharing rule up to a constant finally the traditional tools of welfare analysis can be adapted to the new setting

stochastic optimization of sub hourly economic dispatch with wind energy we present a stochastic programming framework for a multiple timescale economic dispatch problem to address integration of renewable energy resources into power systems this framework allows certain slow response energy resources to be controlled at an hourly timescale while fast response resources including renewable resources and related network decisions can be controlled at a sub hourly timescale to this end we study two models motivated by actual scheduling practices of system operators using an external simulator as driver for sub hourly wind generation we optimize these economic dispatch models using stochastic decomposition a sample based approach for stochastic programming computational experiments conducted on the ieee rts96 system and the illinois system reveal that optimization with sub hourly dispatch not only results in lower expected operational costs but also predicts these costs with far greater accuracy than with models allowing only hourly dispatch our results also demonstrate that when compared with standard approaches using the extensive formulation of stochastic programming the sequential sampling approach of stochastic decomposition provides better predictions with much less computational time

marital transfer and intra household allocation a nash bargaining analysis this paper explores the implications of inter generational marital transfers on the allocation of resources within a conjugal household adopting a nash bargaining framework with alternative models of the threat points it is argued that parents have greater incentive to make transfers to a married child than to a single child because of the efficiency gains from joint consumption and production of family public goods and because of the increase in bargaining power of the child in the allocation of private consumption such transfers also enhance marital stability by increasing the efficiency gains from marriage

a fresh look at the rotten kid theorem and other household mysteries gary becker s rotten kid theorem asserts that if all family members receive gifts of money income from a benevolent household member then even if the household head does not precommit to an incentive plan for family members it will be in the interest of selfish family members to maximize total family income i show by examples that the rotten kid theorem is not true without assuming transferable utility i find a simple condition on utility functions that is necessary and sufficient for there to be the kind of transferable utility needed for a rotten kid theorem while restrictive these conditions still allow one to apply the strong conclusions of the rotten kid theorem in an interesting class of examples

how robust is the relationship between economic freedom and economic growth using various indicators for economic freedom it is shown that increases in economic freedom are robustly related to economic growth this conclusion holds even if the impact of outlying observations is taken into account the level of economic freedom is not related to growth

a theory of privatisation public enterprises around the world have proved to be highly inefficient primarily because they pursue strategies such as excess employment that satisfy the political objectives of politicians who control them privatization of public enterprises can raise the cost to politicians of influencing them since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms in this way privatization leads to efficient restructuring of firms moreover privatization is more effective when combined with a tight monetary policy and when the new owners of firms are profit maximizing investors rather than their employees or even managers copyright 1996 by royal economic society

economic valuation of reserves in power systems with high penetration of wind power this paper proposes a methodology to determine the required level of spinning and nonspinning reserves in a power system with a high penetration of wind power the computation of the required reserve levels and their costs is achieved through a stochastic programming market clearing model spanning a daily time horizon this model considers the network constraints and takes into account the cost of both the load shedding and the wind spillage the methodology proposed is illustrated using an example and a realistic case study some conclusions are finally drawn

economic reform and dynamic political constraints in this paper we examine the impact of political constraints on economic reform plans with special reference to the transition from centrally planned to market economies we analyse the problem of an agenda setting reform minded government facing a bureaucracy or industrial sector for which allocative efficiency requires redundancies and an increase in work intensity the government also tries to minimize the rents conceded to its heterogeneous workforce we examine two types of political constraints unanimity rule and majority rule both in a one period and a two period horizon the main results are the following first of all we show how adverse selection and time consistency may generate the widely observed feature of gradualism as an ingredient of an optimal reform second under a majority rule it is shown to be possible for the government to obtain a majority vote for a reform scheme that intertemporally hurts majority interests indeed the government can improve rent extraction through the strategic use of the threat of future proposals the group which expects to be in the minority tomorrow may accept concessions while its votes can be used to extract rents from another group these results suggest that in a dynamic context democratic constraints should not be overestimated as an obstacle against efficiency enhancing economic reforms the results of this paper may throw some light on the political economy of current reforms in eastern europe governments and political decision makers in general always face political constraints when elaborating reform proposals they know that the need to overcome potential opposition from various groups of the population constrains proposals for change political constraints vary depending on the specific institutional structure of society and are clearly different under a military dictatorship than under a parliamentary democracy the role of political constraints seems particularly important in eastern europe today where new democratic governments face the huge task of achieving the transition to a market economy while the introduction of democracy may have removed some important obstacles to economic change namely the veto power of a powerful nomenclatura under communist one party rule fears are expressed that it could potentially jeopardize economic reforms which may during the transition period hurt a majority of the population what can economic theory tell us about optimal economic reform under political constraints this paper starts addressing this ambitious question by looking at structural reform focusing on a restructuring of economic sectors which requires massive redundancies and a significant rise in labour productivity our model illustrates the case of planning

dowry and wife s welfare a theotrical and empirical analysis becker attributes the existence of marital transfers to inflexibility in the division of joint product within the marriage if that were the only reason we would not have observed the coexistence of dowries and bride prices this paper offers an alternative analysis while becker s interpretation is retained for bride prices a dowry is now represented as a premortem bequest by altruistic parents for a daughter it not only increases the wealth of the new conjugal household but also enhances the bargaining power of the bride in the allocation of the output within the household thereby safeguarding here welfare using micro data from taiwan we found that a dowry improves the bride s welfare whereas a bride price has no effect these empirical results support the theoretical predictions of the model

marriage markets and assortative mating with household public goods theoretical results and empirical implications this paper analyzes marriage market equilibria when the gains from marriage result from joint consumption of household public goods assuming transferable utility within marriage the paper proves that marriage markets will be characterized by positive assortative mating on wealth when spouses differ only in endowments and the gains to marriage result only from public goods when spouses differ in wages and household public goods are produced at home the results imply offsetting effects with public good economies creating an incentive for positive assortative mating on wages and gains from specialization creating an incentive for negative assortative mating on wages the results help explain the persistent lack of empirical support for becker s prediction of negative assortative mating on wages and have implications for empirical analysis of all joint living arrangement decisions

independence of allocative efficiency from distribution in the theory of public goods when is the pareto optimal amount of public goods independent of income distribution subject to some regularity conditions the answer is when preferences of every individual i can be represented by a utility function of the form u x i y a y x i b i y where x i is i s consumption of private goods and y is the amount of public goods

consequences of constitutions the paper presents empirical findings regarding the economic policy consequences of constitutional arrangements in three different dimensions first the data are consistent with several theoretical predictions about the consequences of electoral rules and forms of government for fiscal policy and rent extraction even when non random constitution selection is taken into account second empirical tests of the predictions from a new comprehensive model of parliamentary democracy show that proportional elections raise government spending through their indirect consequences for party structures and types of government rather than through their direct effects on policymaking incentives third new empirical results suggest that constitutional arrangements may have important consequences for structural policies that promote long run economic performance hinting at a missing link in the causal chain from history to current economic performance all these empirical findings appear statistically robust and the estimated effects are large enough to be of genuine economic interest jel d72 e60 h00 o11

economic backwardness in political perspective government policies and institutions shape economic incentives and via this channel have a first order impact on economic development why then do many societies adopt policies that discourage investment and maintain institutions that cause economic backwardness perhaps politically powerful groups elites are not in favor of economic growth but why it would appear that economic growth would provide more resources for these groups to take over or tax increasing their economic returns so why don t powerful groups always support economic development in this paper we develop a theory of inefficient government policies and institutions all else equal politically powerful groups would welcome superior institutions and technologies but in practice all else is not equal because superior institutions and technologies may reduce their political power and make it more likely that they will be replaced at the center of our theory is therefore the idea that changes in institutions or the introduction of new technologies often create turbulence eroding the political advantages and future economic rents of incumbent elites alternatively new technologies may enrich competing groups increasing their threat to incumbents these considerations make politically powerful groups fear losing power and oppose economic and political change even when such change will benefit society as a whole to understand the mechanism at work and its potential applications consider a concrete example industrialization in the nineteenth century bairoch 1982 estimates that between 1830 and 1913 world manufacturing output increased by a factor of 5 see table 1 panel a nevertheless this process was highly uneven across regions and countries bairoch also calculates that over the same period manufacturing output in developed countries europe and north america increasedbyafactorofover10 whereasitdeclinedinthe third world among developed countries there were

separate spheres bargaining and the marriage market this paper introduces the separate spheres bargaining model a new model of distribution within marriage it differs from divorce threat bargaining models e g manser brown mcelroy horney in that the threat point is not divorce but a noncooperative equilibrium within marriage this noncooperative equilibrium reflects traditional gender roles the predictions of our model thus differ from those of divorce threat bargaining models in the separate spheres model cash transfer payments to the mother and payments to the father can but need not imply different equilibrium distributions in existing marriages in the long run the distributional effects of transfer policies may be substantially altered by changes in the marriage market equilibrium

property rights over marital transfers in developing countries the extent to which women possess property rights is shaped in large part by transfers received at the time of marriage focusing on dowry we develop a simple model of the marriage market with intra household bargaining in order to understand the incentives for brides parents to allocate the rights over the dowry between their daughter and her groom in doing so we clarify and formalize the dual role of dowry as a pre mortem bequest and as a market clearing price identified in the literature we use the model to shed light on the intriguing observation that in contrast to other rights women s rights over the dowry tend to deteriorate with development we show how marriage payments are utilized even when they are inefficient and how the marriage market mitigates changes in other dimensions of women s rights even to the point where women are worse off following a strengthening of such rights we also generate predictions for when marital transfers will disappear and highlight the importance of female human capital for the welfare of women

expenditure decisions of divorced mothers and income composition in this paper we analyze the relationship between the income sources of custodial divorced parents and their expenditure patterns we use data from the consumer expenditure survey to directly investigate the issue of whether or not divorced mothers receiving child support income spend larger amounts on child goods than those not receiving child support holding total household income constant by comparing the estimated coefficients on child support income and other income in an endogenous engel curve specification we argue that we can classify child goods as being public or private and say something about the expenditure patterns of noncustodial fathers under a nash equilibrium model of parental expenditures on public child goods and some plausible assumptions regarding the manner in which child support transfer decisions are made by noncustodial fathers our empirical results indicate that income composition does affect the expenditure patterns of divorced mothers and that consumption externalities exist even among divorced parents