the empirical content of the roy model this paper clarifies and extends the classical roy model of self selection and earnings inequality the original roy model based on the assumption that log skills are normally distributed is shown to imply that pursuit of comparative advantage in a free market reduces earnings inequality compared to the earnings distribution that would result if workers were randomly assigned to sectors aggregate log earnings are right skewed even if one sectoral distribution is left skewed most major implications of the log normal roy model survive if differences in skills are log concave however few implications of the model survive if skills are generated from more general distributions we consider the identifiability of the roy model from data on earnings distributions the normal theory version is identifiable without regressors or exclusion restrictions sectoral distributions can be identified knowing only the aggregate earnings distribution for general skill distributions the model is not identified and has no empirical content with sufficient price variation the model can be identified from multimarket data cross sectional variation in regressors can substitute for price variation in restoring empirical content to the roy model

a multivariate sample selection model estimating cigarette and alcohol demands with zero observations heckman s sample selection model is generalized to the multivariate case and used to estimate demands for cigarettes beer and wine by individuals in the united states the specification allows correlations between the error terms of multiple selection and level equations and nests the popular bivariate sample selection model and two part model empirical results suggest that the proposed model performs better than the restricted specifications differentiated effects of variables on probabilities and levels of consumption also suggest rejection of the tobit system gender differences are present and demographic variables are more important than income in determining consumption of cigarettes beer and wine

a multiplicative model of optimal ceo incentives in market equilibrium this paper presents a unified theory of both the level and sensitivity of pay in competitive market equilibrium by embedding a moral hazard problem into a talent assignment model by considering multiplicative specifications for the ceo s utility and production functions we generate a number of different results from traditional additive models first both the ceo s low fractional ownership the jensen murphy incentives measure and its negative relationship with firm size can be quantitatively reconciled with optimal contracting and thus need not reflect rent extraction second the dollar change in wealth for a percentage change in firm value divided by annual pay is independent of firm size and therefore a desirable empirical measure of incentives third incentive pay is effective at solving agency problems with multiplicative impacts on firm value such as strategy choice however additive issues such as perk consumption are best addressed through direct monitoring jel d2 d3 g34 j3

taxes benefits and careers complete versus incomplete markets abstract an incomplete market life cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non employment benefits we compare aggregate and individual outcomes in this individualistic incomplete market model with those in a comparable collectivist representative family model with employment lotteries and complete insurance markets the incomplete and complete market structures assign leisure to different types of individuals who are distinguished by their human capital and age these microeconomic differences distinguish the two models in terms of how macroeconomic aggregates respond to some types of government supplied non employment benefits but remarkably not to labor tax changes

labor supply and the optimality of social security abstract traditional economic theory predicts that an unfunded public pension system can be justified on the basis of its ability to provide intergenerational transfers and also for its ability to provide partial insurance against mortality and labor income risks in this paper i demonstrate that the quantitative importance of these traditional roles depends on how the pension system distorts households labor supply decisions using a general equilibrium life cycle consumption model calibrated to the u s economy i show that these distortions can be large enough to erase much of the traditional welfare gains from social security i also find that this fact is robust within the range of labor supply elasticities usually encountered in the macroeconomic literature

revisiting wage earnings and hours profiles abstract for the youngest cohorts whose entire working life can be observed hours start falling much earlier than wages wages do not fall if they fall at all until one s late 60s the data suggest that many workers start a smooth transition into retirement by working progressively fewer hours while still facing an upward sloping wage profile this pattern is not an artifact of staggered abrupt retirement or selection this evidence imposes restrictions on dynamic models of the aggregate economy and provide updated numerical profiles that can be readily used in quantitative macroeconomic analysis to incorporate this new pattern into aggregate models

micro and macro elasticities in a life cycle model with taxes we build a life cycle model of labor supply that incorporates changes along both the intensive and extensive margin and use it to assess the consequences of changes in tax and transfer policies on equilibrium hours of work we find that changes in taxes have large aggregate effects on hours of work moreover we find that there is no inconsistency between this result and the empirical finding of small labor elasticities for prime age workers in our model micro and macro elasticities are effectively unrelated our model is also consistent with other cross country patterns

sources of lifetime inequality is lifetime inequality mainly due to differences across people established early in life or to differences in luck experienced over the working lifetime we answer this question within a model that features idiosyncratic shocks to human capital estimated directly from data as well as heterogeneity in ability to learn initial human capital and initial wealth we find that as of age 23 differences in initial conditions account for more of the variation in lifetime earnings lifetime wealth and lifetime utility than do differences in shocks received over the working lifetime jel d31 d91 j24 j31 to what degree is lifetime inequality due to differences across people established early in life as opposed to differences in luck experienced over the working lifetime among the individual differences established early in life which ones are the most important a convincing answer to these questions is of fundamental importance first and most simply an answer serves to contrast the potential importance of the myriad policies directed at modifying or at providing insurance for initial conditions e g public education against those directed at shocks over the working lifetime e g unemployment insurance second a discussion of lifetime inequality cannot go too far before discussing which specific type of initial condition is the most critical for determining how one fares in life third a useful framework for answering these questions should also be central in the analysis of a wide range of policies considered in macroeconomics public finance and labor economics we view lifetime inequality through the lens of a risky human capital model agents differ in terms of three initial conditions initial human capital learning ability and financial wealth initial human capital can be viewed as controlling the intercept of an agent s mean earnings profile whereas learning ability acts to rotate

structural transformation and the deterioration of european labor market outcomes this paper examines hours worked in continental europe and the united states from 1956 to 2003 the empirical work establishes two results first hours worked in europe decline by almost 45 percent compared to the united states over this period second this decline is almost entirely accounted for by the fact that europe develops a much smaller market service sector than the united states a simple model of time allocation is used to understand these patterns i find that relative increases in taxes and technological catch up can account for most of the differences between the european and american time allocations over this period

earnings manipulation and the cost of capital the cost of capital the widespread use of accounting information by investors and financial analysts to help value stocks creates an incentive for managers to manipulate earnings in an attempt to influence short term stock price performance this paper examines the role of earnings management in affecting a firm s cost of capital using an agency model with multiple firms whose cash flows are correlated we demonstrate that the extent of earnings manipulation varies across the business cycle depending on a firm s earnings profile it can have stronger incentives to overstate its performance in good times or in bad times because of this dependence on the state of the economy earnings manipulation can influence a firm s cost of capital despite the forces of diversification

what s my line a comparison of industry classification schemes for capital market research this study compares four broadly available industry classification schemes in a variety of applications common to capital market research standard industrial classification sic codes have been available since 1939 but are being replaced by north american industry classification system naics codes the global industry classifications standard gics sm system jointly developed by standard poor s and morgan stanley capital international msci is popular among financial practitioners whereas the fama and french 1997 algorithm is used primarily by academics our results show that gics classifications are significantly better at explaining stock return comovements as well as cross sectional variations in valuation multiples forecasted and realized growth rates research and development expenditures and various key financial ratios the gics advantage is consistent from year to year and is most pronounced among large firms the other three methods differ little from each other in most applications

long term changes in married couples labor supply and taxes evidence from the us and europe since the 1980s abstract we document the time series of employment rates and hours worked per employed by married couples in the us and seven european countries belgium france germany italy the netherlands portugal and the uk from the early 1980s through 2016 relying on a model of joint household labor supply decisions we quantitatively analyze the role of non linear labor income taxes for explaining the evolution of hours worked of married couples over time using as inputs the full country and year specific statutory labor income tax codes we further evaluate the role of consumption taxes gender and educational wage premia and the educational composition the model is quite successful in replicating the time series behavior of hours worked per employed married woman with labor income taxes being the key driving force it does however capture only part of the secular increase in married women s employment rates in the 1980s and early 1990s suggesting an important role for factors not considered in this paper an independent and important contribution of the paper is that we make the non linear tax codes used as an input into the analysis available as a user friendly and easily integrable set of matlab codes

an analysis of the use of accounting and market measures of performance in executive compensation contracts prior research has provided useful insights into the structure of compensation plans and their incentive effects however one important limitation of these studies is the virtual absence of any cross sectional analyses of the attributes of compensation contracts 2 this absence is related in part to the problems associated with controlling for other factors that affect compensation that is compensation contracts are

social security and retirement across the oecd abstract employment to population ratios differ markedly across organization for economic cooperation and development oecd countries especially for people aged over 55 years in addition social security features differ markedly across the oecd particularly with respect to features such as generosity entitlement ages and implicit taxes on social security benefits this study postulates that differences in social security features explain many differences in employment to population ratios at older ages this conjecture is assessed quantitatively with a life cycle general equilibrium model of retirement at ages 60 64 years the correlation between the simulations of this study s model and observed data is 0 67 generosity and implicit taxes are key features to explain the cross country variation whereas entitlement age is not

implications of power when the ceo can pressure the cfo to bias reports abstract building on archival anecdotal and survey evidence on managers roles in accounting manipulations i develop an agency model to examine the effects of a ceo s power to pressure a cfo to bias a performance measure like earnings this power has implications for incentive compensation reporting quality firm value and information rents predictions from the model provide potential explanations for the differing results from recent empirical studies on the impact of regulatory interventions like sox and the extent to which the ceo s or cfo s incentives significantly impact on earnings management the model also identifies conditions under which either a powerful or a non powerful ceo can extract rents which can help explain mixed empirical results on the association between ceo power and excessive compensation

labor supply and government programs a cross country analysis abstract there are substantial cross country differences in labor supply late in the life cycle age 50 a theory of labor supply and retirement decisions is developed to quantitatively assess the role of social security disability insurance and taxation for understanding differences in labor supply late in the life cycle across european countries and the united states the findings support the view that government policies can go a long way towards accounting for the low labor supply late in the life cycle in the european countries relative to the united states with social security rules accounting for the bulk of these effects

cross country differences in unemployment fiscal policy unions and household preferences in general equilibrium we develop a five period overlapping generations model with individuals who differ by ability and with an imperfect labour market union wage setting for the individuals of lower ability the model explains human capital formation hours worked and unemployment within one coherent framework its predictions match the differences in the unemployment rate across 12 oecd countries remarkably well a shapley decomposition of these differences reveals an almost equal role for fiscal policy variables and union preferences as to fiscal policy differences in unemployment benefits play a much more important role than tax differences differences in households taste for leisure are unimportant

taxation of human capital and wage inequality a cross country analysis wage inequality has been significantly higher in the united states than in continental european countries ceu since the 1970s moreover this inequality gap has further widened during this period as the us has experienced a large increase in wage inequality whereas the ceu has seen only modest changes this paper studies the role of labor income tax policies for understanding these facts we begin by documenting two new empirical facts that link these inequality differences to tax policies first we show that countries with more progressive labor income tax schedules have significantly lower before tax wage inequality at different points in time second progressivity is also negatively correlated with the rise in wage inequality during this period we then construct a life cycle model in which individuals decide each period whether to go to school work or be unemployed individuals can accumulate skills either in school or while working wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks progressive taxation compresses the after tax wage structure thereby distorting the incentives to accumulate human capital in turn reducing the cross sectional dispersion of before tax wages we find that these policies can account for half of the difference between the us and the ceu in overall wage inequality and 76 of the difference in inequality at the upper end log 90 50 differential when this economy experiences skill biased technological change progressivity also dampens the rise in wage dispersion over time the model explains 41 of the difference in the total rise in inequality and 58 of the difference at the upper end

the cyclical and secular behaviour of the labour input comparing efficiency units and hours worked summary a monthly labour input series designed to correct for the fact that all hours worked are not of the same quality is constructed and its properties compared with unadjusted hours worked this efficiency units series is constructed from bls data on hours worked and earnings by age and sex the cyclical fluctuations displayed by the efficiency units series are smaller on average than those displayed by hours worked although the difference is not large however the secular behaviour of the series is quite different hours worked per capita displays a significant positive trend while efficiency units per capita does not

in kind benefits and household behavior the impact of snap on food away from home consumption abstract supplemental nutrition assistance program snap formerly known as the food stamp program provides in kind benefits that can generally be utilized for food at home fah only according to economic theory snap benefits are fungible with cash for inframarginal households which may allow participants to spend benefits on non fah items however empirical evidence for this theory is mixed this paper exploits an underutilized source of state level variation the early 2000 s recession to determine the impact of snap participation on household food away from home fafh consumption in a difference in difference framework i compare households in high post recession snap growth states to households in low post recession snap growth states the results show that snap participation causes a significant decrease in fafh expenditure and fafh s share of total food expenditure

towards a micro founded theory of aggregate labour supply we build a heterogeneous agents life cycle model that captures a large number of salient features of individual male labour supply over the life cycle by education both along the intensive and extensive margins the model provides an aggregation theory of individual labour supply firmly grounded on individual level micro evidence and is used to study the aggregate labour supply responses to changes in the economic environment we find that the aggregate labour supply elasticity to a transitory wage shock is 1 75 with the extensive margin accounting for 62 of the response furthermore we find that the aggregate labour supply elasticity to a permanent compensated wage change is 0 44

uncertain medical expenses and precautionary saving near the end of the life cycle this paper introduces a dynamic structural model of household consumption decisions in which elderly families consider the effects of uncertain future medical expenses when deciding current levels of consumption the model with uncertain medical expenses implies a potentially important role for precautionary saving incentives to explain slow rates of dissaving among elderly americans during retirement rather than just simulating the stochastic dynamic model preference parameters are estimated using panel data on health wealth and expenditures for retired families the health uncertainty model predicts consumption levels closer to observed expenditures than a life cycle model with uncertain longevity however elderly families typically dissave their financial assets more slowly than even the baseline health uncertainty model predicts is optimal

the information content of losses abstract this study hypothesizes that because shareholders have a liquidation option losses are not expected to perpetuate they are thus less informative than profits about the firm s future prospects the results are consistent with the hypothesis they also show that the documented increase in the earnings response coefficent as the cumulation period increases appears to be due exclusively to the effect of losses the liquidation option effect extends to profitable cases where earnings are low enough to make the option attractive alternating explanations for the low informativeness of losses such as mean reversal of earnings are not supported by the tests

working wives and food away from home the box cox double hurdle model household expenditures on food away from home are analyzed with the use of the bls 1989 consumer expenditure survey parameterization and distributional assumptions of cragg s double hurdle model are generalized for this purpose and the resulting model outperforms the more traditional ones results suggest households with working wives and those with higher income are more likely to consume food away from home and also to consume more than others wife s age and household size increase the conditional level of consumption education has conflicting effects on probability and conditional level of consumption

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

breakfast lunch and dinner expenditures away from home in the united states abstract this study investigates the differentiated effects of economic and socio demographic variables on food away from home fafh expenditures by type of meal among different types of households in the united states using data from the 2008 and 2009 consumer expenditure surveys the systems of expenditures on breakfast lunch and dinner are estimated with a multivariate sample selection procedure statistical significance of error correlations among equations justifies estimation of the sample selection systems income work hours race education geographic region and household composition are important determinants of fafh expenditures income contributes to fafh expenditures of all meal types implying that the future of fafh industry is tied to macroeconomic conditions more education is associated with increased expenditures for fafh lunch and dinner effects of the supplemental nutrition assistance program snap are negligible

a welfare analysis of social security in a dynastic framework in this article we study the welfare effects of unfunded social security in a general equilibrium model populated with overlapping generations of altruistic individuals that differ in lifetime expectancy and earnings ability contrary to previous research our results indicate that steady state welfare increases with social security for most households although by very different amounts this result is mainly due to two factors first the presence of two sided altruism significantly mitigates the crowding out effect of unfunded social security second ability shocks and uncertain lifetimes generate significant heterogeneity among households to yield different induced preferences for social security

social security and cross country differences in hours a general equilibrium analysis abstract i develop a general equilibrium life cycle model with an intensive and extensive margin of labor supply and endogenous human capital accumulation i use the model to assess the effects of changes to various features of social security on labor supply outcomes of particular interest are changes to the scale of the program and to the relevant eligibility rules i find that the cross country differences in social security programs account for at least 79 of the differences in employment rates of people aged 55 64 and 17 31 of the differences in aggregate hours worked between the us and continental europe

household consumption of food away from home total expenditure and by type of food facility consistent with prior expectations based on household production theory household income time value size and composition and the environment in which production and consumption occurred were all important determinants of total household expenditures on food away from home however the importance of these factors varied by type of food facility conventional restaurants fast food facilities and other commercial establishments decomposition of the tobit elasticities indicated the differential importance of market participation effects of household size income and time value by level of the variable and by type of food facility

the rewards to meeting or beating earnings expectations abstract this paper finds that firms that meet or beat current analysts earnings expectations mbe enjoy a higher return over the quarter than firms with similar quarterly earnings forecast errors that fail to meet these expectations further such a premium to mbe although somewhat smaller exists in the cases where mbe is likely to have been achieved through earnings or expectations management the findings also indicate that the premium to mbe is a leading indicator of future performance this premium and its predictive ability are only marginally affected by whether the mbe is genuine or the result of earnings or expectations management

saving and pension reform in general equilibrium models in this paper we study saving and pension reform in the context ofgeneral equilibrium models we discuss some of the reasons for the existence of a social security system we highlight the key features of the us data that a general equilibrium model of saving and social security should match the life cycle profiles of savings con sumption and hours worked and the aggregate capital output ratio and saving rate we describe the structure of a general equilibrium model and discuss how its parameters are estimated or calibratedfrom the data we present the quantitative results from some policy experiments previously computed in the literature first in the context of stationary demographics and then with an ageing population and highlight the key policy prescrip tions that we learn from these experiments we conclude by providing some directions for future research

the effects of health insurance and self insurance on retirement behavior this paper provides an empirical analysis of the effects of employer provided health insurance medicare and social security on retirement behavior using data from the health and retirement study we estimate a dynamic programming model of retirement that accounts for both saving and uncertain medical expenses our results suggest that medicare is important for understanding retirement behavior and that uncertainty and saving are both important for understanding the labor supply responses to medicare half the value placed by a typical worker on his employer provided health insurance is the value of reduced medical expense risk raising the medicare eligibility age from 65 to 67 leads individuals to work an additional 0 074 years over ages 60 69 in comparison eliminating 2 years worth of social security benefits increases years of work by 0 076 years

imperfect accounting and reporting bias errors and bias are both inherent features of accounting in theory while errors discourage bias by lowering the value relevance of accounting they can also facilitate bias by providing camouflage consistent with theory we find a hump shaped relation between a firm s propensity to engage in intentional misstatement and the prevalence of unintentional misstatements in the firm s industry for the whole economy and a majority of the industries the result is robust to using firms number of items in financial statements and exposure to complex accounting rules as alternative proxies for errors and to using the restatement amount in net income to quantify the magnitude of bias and errors to directly test for the two effects of errors we show that when errors are more prevalent the market reacts less to firms earnings surprises and bias is more difficult to detect our results highlight the imperfectness of accounting advance understanding of firms reporting incentives and shed light on accounting standard setting

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

the effect of part time work on wages evidence from the social security rules this article identifies the part time wage effect using hours variation caused by the social security rules we show that work hours and wages drop sharply at ages 62 and 65 we argue that the hours decline causes the wage decline resulting in a 25 wage penalty for men who cut their work week from 40 to 20 hours however we find little evidence for such an effect among women we also show that models that fail to account for the joint determination of hours and wages will understate the labor supply response to a tax change by about 26

the impact of performance based compensation on misreporting abstract this paper examines the effect of ceo compensation contracts on misreporting we find that the sensitivity of the ceo s option portfolio to stock price is significantly positively related to the propensity to misreport we do not find that the sensitivity of other components of ceo compensation i e equity restricted stock long term incentive payouts and salary plus bonus have any significant impact on the propensity to misreport relative to other components of compensation stock options are associated with stronger incentives to misreport because convexity in ceo wealth introduced by stock options limits the downside risk on detection of the misreporting

retirement and consumption in a life cycle model consumption expenditure declines sharply at the time of retirement for many households but the majority maintain a smooth consumption path a simple life cycle model with uncertainty about the time of retirement can account for this pattern a richer version of the model is calibrated to data from the health and retirement study hrs the median change in consumption expenditure at retirement generated by the model is zero while the mean is negative matching the hrs data however the magnitude of the drop in consumption among households that experience a decline is too small in the model compared to the data

does social security privatization produce efficiency gains while privatizing social security can improve labor supply incentives it can also reduce risk sharing we analyze a 50 privatization using an overlapping generations model where heterogeneous agents with elastic labor supply face idiosyncratic earnings shocks and longevity uncertainty when wage shocks are insurable privatization produces about 18 100 of extra resources for each future household after all transitional losses have been compensated for with lump sum taxes when wages are not insurable privatization reduces efficiency by about 2 400 per future household we check the robustness of these results to different model specifications as well as policy reforms and arrive at several surprising conclusions first privatization performs better in a closed economy where interest rates decline with capital accumulation than in an open economy second privatization also performs better when an actuarially fair private annuity market does not exist third government matching of private contributions on a progressive basis is not very effective at restoring efficiency and can actually cause harm

westernization of asian diets and the transformation of food systems implications for research and policy abstract rapid economic and income growth urbanization and globalization are leading to a dramatic shift of asian diets away from staples and increasingly towards livestock and dairy products vegetables and fruit and fats and oils while the diversification of diets away from the traditional dominance of rice with rising incomes is expected and observed current food consumption patterns are showing signs of convergence towards a western diet the diet transition is characterized by increased consumption of wheat temperate fruit and vegetables and high protein and energy dense food globalization and the consequent global interconnectedness of the urban middle class is the driving force behind the convergence of diets the rapid spread of global supermarket chains and fast food restaurants is reinforcing the above trends the growing demand for diet diversity cannot be met solely by the traditional food supply chain it requires the modernisation of the food retail sector and the vertical integration of the food supply chain in effect linking the consumers plate to the farmers plow as a consequence asian agriculture is on an irreversible path leading away from its traditional pre occupation with cereal crop production especially rice towards a production system that is becoming increasingly commercialized and diversified this paper describes the determinants and trends in the diversification and westernization of asian diets implications of the evolving demand trends for food supply and retail systems are presented the paper discusses the prospects for small farmer participation in the emerging food supply system with a particular emphasis on asian rice production systems finally the paper considers emerging challenges for food policy small holder welfare and agricultural research and development priorities

durables and wives employment yet again the literature examining the relationship between consumer durables expenditures and wives employment is analyzed several deficiencies in the literature are corrected in a revised model that is estimated with data from the 1977 1978 survey of consumer expenditures this article concludes that durables expenditures and wives employment time are complements

wage risk and employment risk over the life cycle we specify a structural life cycle model of consumption labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects the sources of risk are shocks to productivity job destruction the process of job arrival when employed and unemployed and match level heterogeneity our model allows for four main social insurance programmes in contrast to simpler models that attribute all income fluctuations to shocks our framework allows us to disentangle the effects of the shocks from the responses to these shocks estimates of productivity risk once we control for employment risk and for individual labour supply choices are substantially lower than estimates that attribute all wage variation to productivity risk increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving increases in employment risk have large effects on output and primarily through this channel affect welfare the welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides partial insurance against employment risk and no insurance against persistent shocks

changing household characteristics and the away from home food market a censored equation system approach abstract the american consumer is obtaining more and more of his or her food at a restaurant and that worries some people concerned with the nation s dietary health to date much of this concern seems to be directed at the fast food segment of the restaurant industry this paper asks whether targeting one segment of the industry such as fast food restaurants is justified or whether a more balanced view of eating away from home is required to answer this question we look to the future and ask whether americans can be expected to purchase increasingly more fast food or more and more of the foods typically associated with full service dining one view is that sales at full service restaurants will now grow relatively faster than sales of fast food the argument supporting this position rests on rising incomes the aging of the population smaller household sizes and other changes taking place in the population using a new full information maximum likelihood procedure for estimating a system of censored expenditure equations we find evidence to support this argument

towards a quantitative theory of automatic stabilizers the role of demographics employment volatility is larger for young and old workers than for the prime aged at the same time in countries with high tax rates the share of total hours supplied by young old workers is lower these two observations imply a negative correlation between government size and business cycle volatility this paper assesses in a heterogeneous agent olg model the quantitative importance of these two facts to account for the empirical relation between government size and macroeconomic stability

determinants of household expenditures for services data from the bureau of labor statistics consumer expenditure surveys were used to investigate factors influencing household expenditures for services in the united states there were significant differences between families with full time and part time working wives in expenditures on child care food away from home and total services household production variables had a significant impact on service expenditures in most instances while the effects of other variables such as family life cycle education race and geographic location varied by service category and employment status of wife

the definition of part time employment a switching regression model with unknown sample selection rejecting the standard less than thirty five hours per week categorization of part time workers this paper offers an empirically justified definition of the part time employed the definition is based on the distinction through wage payments that employers make between a high hours full time and a low hours part time group of workers a switching regression model of wage equations with deterministic but unknown sample selection is estimated resulting in a significant split between high hours and low hours workers that is higher than the standard definition wage differentials are calculated and decomposed and estimates from the structural choice model are presented copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effects of health wealth and wages on labour supply and retirement behaviour this paper estimates a life cycle model of labour supply retirement and savings behaviour in which future health status and wages are uncertain individuals face a fixed cost of work and cannot borrow against future labour pension or social security income the method of simulated moments is used to match the life cycle profiles of labour force participation hours worked and assets that are estimated from the data to those that are generated by the model the model establishes that the tax structure of the social security system and pensions are key determinants of the high observed job exit rates at ages 62 and 65 removing the tax wedge embedded in the social security earnings test for individuals aged 65 and older would delay job exit by almost one year by contrast social security benefit levels health and borrowing constraints are less important determinants of job exit at older ages for example reducing social security benefits by 20 would cause workers to delay exit from the labour force by only three months

analysis of food away from home expenditure patterns for u s households 1982 89 the two step decision process for food away from home fafh consumption is empirically estimated using a generalization of the heien and wessells approach household information gathered by the national panel diary group is used for the analysis marginal effects are corrected by untangling the respective variable impacts on the inverse mills ratio expenditure and participation probability elasticities are similar to previous studies income elasticities are about 0 20 suggesting that the fafh commodity is a necessary good for u s society northeastern households are less likely to consume fafh than other households but their expenditures are higher on average

estimating the value of employee stock option portfolios and their sensitivities to price and volatility the costs associated with compiling data on employee stock option portfolios is a substantial obstacle in investigating the impact of stock options on managerial incentives accounting choice financing decisions and the valuation of equity we present an accurate method of estimating option portfolio value and the sensitivities of option portfolio value to stock price and stock return volatility that is easily implemented using data from only the current year s proxy statement or annual report this method can be applied to either executive stock option portfolios or to firm wide option plans in broad samples of actual and simulated ceo option portfolios we show that these proxies capture more than 99 of the variation in option portfolio value and sensitivities sensitivity analysis indicates that the degree of bias in these proxies varies with option portfolio characteristics and is most severe in samples of ceos with a large proportion of out of the money options however the proxies explanatory power remains above 95 in all subsamples

taxation and labor supply of married couples across countries a macroeconomic analysis we document contemporaneous dierences in the aggregate labor supply of married couples across 18 oecd countries relative to their us counterparts european married men work on average 9 to 17 percent and married women in western and southern europe 26 and 31 percent fewer hours married women in scandinavia and eastern europe however work almost as many hours as us married women we nd that a model of joint household decision making can largely replicate these facts if the full non linearity of labor income taxes and the tax treatment of married couples are taken into account going to a system of strictly separate taxation would increase labor supply of married women by more than 100 hours annually in a third of our sample countries

prosperity and depression prosperity and depression are relative concepts today both france and japan are depressed relative to the united states equivalently the united states is prosperous relative to these countries i say these countries are depressed relative to the united states because their output per working age person is 30 percent less than the u s level an interesting and important policy question is why are these countries depressed the answers for these two countries turn out to be very different the united states is prosperous relative to france because the u s intratemporal tax wedge that distorts the trade off between consumption and leisure is much smaller than the french wedge i will show that if france modified its intratemporal tax wedge so that its value was the same as the u s value french welfare in consumption equivalents would increase by 19 percent consumption would have to increase by 19 percent now and in all future periods to achieve as large a welfare gain as that resulting from this tax reform the united states is prosperous relative to japan because production efficiency is higher in the united states in the united states total factor productivity is approximately 20 percent higher than in japan if japan suddenly became as efficient in production as the united states its welfare gain in consumption equivalents would be 39 percent equally interesting and important are big changes over time in relative output per working age person across countries why are new zealand s and switzerland s economies depressed by over 30 percent relative to their 1970 trend corrected levels both of these countries have small populations but depressions are not restricted to small countries japan with its 125 million people is now depressed by 20 percent relative to its 1991 trend corrected level on the prosperity side why are ireland and south korea so prosperous now relative to their 1970 trend corrected levels this lecture is concerned primarily with big international differences among relatively rich industrial countries and changes in these differences over time the countries that receive primary attention all have market economies and healthy well educated populations in the countries considered the variations in aggregate output per working age person are large and reasonably good measures of the factor inputs are available this permits in many cases the identification of the change in policy or the difference in policy that gave rise to prosperity or depression this is in contrast to business cycle theory which provides little guidance to policy except for the important policy implication that a stabilization effort will have either no effect or a perverse effect the output variations studied and analyzed in this lecture are big an order of magnitude larger than the much studied business cycle fluctuations the variations studied however are an order of magnitude smaller than the muchstudied differences between the richest and poorest countries surprisingly only recently have depressions been systematically studied from the perspective of growth theory which is the theory used university of minnesota and federal reserve bank of minneapolis i thank my colleagues at the university of minnesota and the federal reserve bank of minneapolis for helpful discussions and comments in particular i thank tim kehoe ellen mcgrattan and nancy stokey for their help i also thank martin weale and franck portier for providing some british and french tax information used in this lecture thanks also go to sami alpanda and james macgee for research assistance and helpful discussions this lecture draws heavily on collaborative research with fumio hayashi i thank the economic and social research institute cabinet office government of japan and the u s national science foundation for financial support the views expressed herein are those of the author and not necessarily those of the federal reserve bank of minneapolis or the federal reserve system

old sick alone and poor a welfare analysis of old age social insurance programmes all individuals face some risk of ending up old sick alone and poor is there a role for social insurance for these risks and if so what is a good programme a large literature has analysed the costs and benefits of pay as you go public pensions and found that the costs exceed the benefits this article instead considers means tested social insurance mtsi programmes for retirees such as medicaid and supplemental security income we find that the welfare gains from these programmes are large moreover the current scale of mtsi in the u s is too small in the following sense if we condition on the current social security programme increasing the scale of mtsi by 1 3 benefits both the poor and the affluent when a payroll tax is used to fund the increase

aggregate implications of indivisible labor incomplete markets and labor market frictions this paper analyzes a model that features frictions an operative labor supply margin and incomplete markets we flrst provide analytic solutions to a benchmark model that includes indivisible labor and incomplete markets in the absence of trading frictions we show that the steady state levels of aggregate hours and aggregate capital stock are identical to those obtained in the economy with employment lotteries while individual employment and asset dynamics can be difierent second we introduce labor market frictions to the benchmark model we flnd that the efiect of the frictions on the response of aggregate hours to a permanent tax change is highly non linear we also flnd that there is considerable scope for substitution between voluntary and frictional nonemployment in some situations

the economic future of europe after three years of near stagnation the mood in europe is definitely gloomy many doubt that the european model has a future in this paper i argue that things are not so bad and there is room for optimism over the last thirty years productivity growth has been much faster in europe than in the united states productivity levels are roughly similar today in the european union and in the united states the main difference is that europe has used some of the increase in productivity to increase leisure rather than income while the united states has done the opposite still not everything is well unemployment is still high and europe suffers from inefficient regulation here also however there is more action than often perceived and a wide ranging reform process is taking place this process is driven by reforms in financial and product markets reforms in those markets are in turn putting pressure for reform in the labor market reform in the labor market is slowly taking place but not without political tensions these tensions dominate the news but they are a symptom of change not a reflection of immobility

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

a structural retirement model the life cycle model analyzed here constrains most work on the main job to be full time partial retirement entails a wage reduction and frequently a job change maximum likelihood estimates of utility function parameters are designed to incorporate information on the age of leaving full time work and the age of full retirement the model closely tracks retirement behavior including peaks in retirement activity at 62 and 65 the paper explores the relation of these peaks to nonlinearities in the budget constraint created by various retirement programs policy analyses based on this and on earlier models with simpler structures are compared the retirement choice is one of the more prominent manifestations of life cycle behavior the decision is the result of an interplay between an individual s preferences and a set of incentives which change in complicated ways as the individual progresses through his or her late 50 s and 60 s the purpose of this study is to formulate and estimate a structural model which incorporates in a fundamental way this interplay between lifetime preferences and incentives and to illustrate how such a model may be used to investigate retirement behavior a structural model of this type is essential for analyzing potential policy changes which can be expected to affect incentives in varying ways over a number of years in the life cycle the current study incorporates two structural features which have frequently been omitted from previous studies first the model requires that an individual who wishes to reduce work effort below full time must accept a reduced hourly wage rate in order to do so this reflects empirical evidence from micro data sets which indicates that around one third of older individuals engage in part time work at one time or another and that regardless of whether or not these older workers change jobs to obtain part time work they usually take wage cuts as compared to their previous full time work 2 the fact that an individual is willing to accept a lower wage rate in return for the opportunity to work fewer than full time hours contains important information about the preferences of the

does medicare benefit the poor abstract measuring the progressivity of age targeted government programs is difficult because no single data set measures income and benefit use throughout life previous research using zip code as a proxy for lifetime income has found that medicare benefits flow primarily to the most economically advantaged groups and that the financial returns to medicare are often higher for the rich than the poor however our analysis produces the starkly opposed result that medicare is an extraordinarily progressive public program in dollar terms or welfare terms these new results owe themselves to our measurement of socioeconomic status as an individual s education rather than the geographically aggregated measures of income used by previous research we argue that individual education has important practical and conceptual advantages over geographically aggregated measures of income our results suggest the crucial importance of accurate poverty measurement in evaluating the progressivity of complex government programs like medicare or social security

the trend in retirement a model with leisure production and endogenous retirement is used to explain declining labor force participation rates of elderly males the model is calibrated to cross sectional data on labor force participation rates of u s males by age their drop in consumption and leisure good expenditure share in 2000 running the calibrated model for the period 1850 2000 a prediction of the evolution of the cross section is obtained the model accounts for more than 87 of the increase in retirement of men over 65 the increase in retirement is driven by rising wages and falling prices of leisure goods

human capital and earnings distribution dynamics abstract earnings heterogeneity plays a crucial role in modern macroeconomics we document that mean earnings and measures of earnings dispersion and skewness all increase in us data over most of the working life cycle for a typical cohort as the cohort ages we show that i a human capital model can replicate these properties from the right distribution of initial human capital and learning ability ii differences in learning ability are essential to produce an increase in earnings dispersion over the life cycle and iii differences in learning ability account for the bulk of the variation in the present value of earnings across agents these findings emphasize the need to further understand the role and origins of initial conditions

bias and the commitment to disclosure this paper studies the propensity of firms to commit to disclose information that is subsequently biased in the presence of other firms also issuing potentially biased information an important aspect of such an analysis is the fact that firms can choose whether to disclose or withhold information we show that allowing the number of disclosed reports to be endogenous introduces a countervailing force to some of the empirical predictions from the prior literature for example we find that as more firms issue reports or as the correlation across firms cash flows increases the firm biases its report less however when we treat firms disclosure choices as endogenous we show that the number of firms that commit to disclose decreases as the correlation across these cash flows increases and this in turn offsets the direct effect of the correlation on bias this paper was accepted by mary barth accounting

how social security and medicare affect retirement behavior in a world of incomplete markets this paper provides an empirical analysis of how the u s social security and medicare insurance system affect the labor supply of older males in the presence of incomplete markets for loans annuities and health insurance we estimate a detailed dynamic programming dp model of the joint labor supply and social security acceptance decision focusing on a sample of males in the low to middle income brackets whose only pension is social security the dp model delivers a rich set of predictions about the dynamics of retirement behavior and comparisons of actual vs predicted behavior show that the dp model is able to account for wide variety of phenomena observed in the data including the pronounced peaks in the distribution of retirement ages at 62 and 65 the ages of early and normal eligibility for social security benefits respectively we identify a significant fraction of health insurance constrained individuals who have no form of retiree health insurance other than medicare and who can only obtain fairly priced private health insurance via their employer s group health plan the combination of significant individual risk aversion and a long tailed pareto distribution of health care expenditures implies that there is a significant security value for these individuals to remain employed until they are eligible for medicare coverage at age 65 overall our model suggests that a number of heretofore puzzling aspects of retirement behavior can be viewed as artifacts of particular details of the social security rules whose incentive effects are especially strong for lower income individuals and those who do not have access to fairly priced loans annuities and health insurance

spanish food expenditure away from home fafh by type of meal changes in household income wife s labour force participation household size and other demographic factors influence purchasing meals away from home in spain spanish household expenditure on lunch breakfast and snacks away from home were investigated within the household production theory context the becker s model states that consumers maximize their utility subject not only to the budget constraint but also to a time constraint moreover this model assumes that consumers demand not only the food product itself but also the associated convenience to save time in food preparation therefore the relation between the value of time and food away from home has a high relevance data come from the spanish continuous household survey for 1996 due to the large number of zeros in the dependent variable different dependent variable censured models double hurdle infrequency of purchase etc have been specified and estimated these studies found that food purchasing behaviour away from home of spanish

economic crisis and the unemployment effect on household food expenditure the case of spain this paper examines the unemployment effect on food expenditure uefe for spanish households and quantifies its magnitude in boom and crisis periods the results show that the uefe was negative in both contexts but was reinforced during the economic crisis applying propensity score matching and difference in differences techniques to a sample of spanish households for 2006 and 2013 representative of a boom period and a crisis period respectively we found that the uefe amounted to 2 9 in the boom period and to 4 5 in the crisis period quantile difference in differences estimates confirmed that the economic crisis enhanced the uefe for spanish households with this effect decreasing continuously up to quantile 0 9 the uefe was exacerbated mainly in those economically disadvantaged households