two stage budgeting and exact aggregation this paper presents an econometric model of demand for energy based on two stage budgeting the model provides own price and cross price elasticities of demand for energy and nonenergy commodities for the united states these elasticities are estimated separately for households classified by family size age of head region race and urban versus rural residence price elasticities are presented conditional on total energy expenditure and total expenditure on all commodities the model combines individual cross section data with aggregate time series data and is based on exact aggregation over individual demand functions

causes for changing performance of the business groups in a transition economy market level versus firm level factors in china this article investigates longitudinal changes in the relative performance of business groups utilizing data on listed companies in china over a 10 year period 1994 2003 using a measure of firm value in the stock market and panel regression methods this article finds the initially superior and eventually worsening performance of group affiliated firms compared with stand alone firms to explain the downward performance this article considers several alternative hypotheses namely institutional development increasing competition diversification discount agency costs from state ownership and agents asset diversion behavior this article has found certain differences in the explanatory power of each hypothesis while the institutional development hypothesis is somewhat weak the increasing discount for unrelated diversification as well as serious agency costs revealed in asset diversion in the business groups can better explain the longitudinal decrease in the performance of business groups we find that while diversification still creates values its marginal contribution has decreased over time and that while the state ownership variable negatively affects the values of firms in general it is not the cause of the worsening valuation of business groups copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

indexing government programs for changes in the cost of living this article presents social cost of living indexes constructed from an econometric model of aggregate consumer behavior the econometric price index has the same average inflation rate as a tornqvist price index over the period 1947 1995 but rises less rapidly after 1973 group cost of living indexes are presented for white and nonwhite male and female headed and elderly and nonelderly households elderly households have experienced a slightly higher rate of inflation than the nonelderly since 1980 we recommend indexing government programs such as social security by social and group cost of living indexes rather that the consumer price index

aggregate consumer behaviour and the measurement of inequality this paper presents an approach to inequality measurement based on an econometric model of aggregate consumer behaviour the novel feature of this model is that systems of individual demand functions can be recovered uniquely from the system of aggregate demand functions we present methods for evaluating social welfare based on an explicit social welfare function this social welfare function incorporates measures of individual welfare based on indirect utility functions for all consumer units we develop indexes of inequality based on actual and potential levels of social welfare

on measuring child costs with applications to poor countries the theoretical basis for measuring child costs is discussed and detailed consideration is given to two straightforward procedures for calculation engel s food share method and rothbarth s adult good method each of these methods embodies different definitions of child costs so that the same empirical evidence can generate quite different estimates depending on the method used it is shown that true costs are generally overstated by engel s method and understated by rothbarth s procedure although the latter unlike the former can provide a sensible starting point for cost measurement our estimates from sri lankan and indonesian data suggest that children cost their parents about 30 40 percent of what they spend on themselves

forward integration by a monopolist some extensions vertical integration by imperfectly competitive firms poses both positive and normative economic questions the positive questions concern the incentives of such firms to engage in forward or backward integration on the other hand the normative questions concern the impact of integration by such firms on social welfare if the incentives of imperfectly competitive firms lead to a welfare gain then there is no need for public intercession in the process say by antitrust authorities however if private incentives are at odds with social welfare then public policy attention may be needed these matters are considered in an extensive theoretical and empirical literature on vertical integration a review of the central issues in this literature is provided by machlup and taber 5 and warren boulton 12 here i shall focus on the recent work by schmalensee 8 and warren boulton 11 on forward integration by a monopolist the basic insight of their models is as follows suppose a monopolist is producing a product used as an input by a competitive downstream industry in variable proportions with another input monopoly pricing of the first input induces inefficient input utilization by the downstream industry in the production of the final good the monopoly input price exceeds its marginal costs of production the resulting efficiency loss represents an incentive for the monopolist to integrate forward by producing the final product in an integrated firm the monopolist transfer prices the otherwise monopolized input at marginal costs and thereby converts the efficiency loss into profit this point was originally made by burstein 3 but the recent work appears to have been motivated by the graphical formulation of vernon and graham 10 after developing the case of a fixed proportions technology we present the vernon and graham illustration

welfare analysis of tax reforms using household data abstract this paper discusses a methodology for calculating the distribution of gains and losses from a policy change using data for a large sample of households estimates are based on the equivalent income function which is money metric utility defined over observable variables this enables calculations to be standardised and a computer program to compute the statistics presented in the paper is available for a general demand system equivalent income is related to measures of deadweight loss and standard errors are computed for each of the welfare measures an application to u k data for 5 895 households is given which simulates a reform that involves eliminating housing subsidies

an index of inequality with applications to horizontal equity and social mobility horizontal equity and social mobility are discussed in terms of a non utilitarian social welfare function which takes account of the process by which an ex ante distribution is mapped into an ex post distribution by the tax system for example an index of inequality is proposed which decomposes into two components corresponding to vertical and horizontal equity respectively a functional form for the social welfare function is derived for the purposes of empirical work and an application to data for 5895 uk households is presented the paper contains a theoretical application of the index to a model of optimal taxation it is conventional to assess the merits of alternative public policies in terms of a trade off between equity and efficiency in practice however a change in say the tax system involves three effects first it may have incentive or disincentive effects leading to efficiency gains or losses secondly it may alter the distribution of welfare levels thirdly it may alter the ranking of individuals or households within the distribution these three effects correspond to efficiency vertical equity and we shall argue certain aspects of horizontal equity respectively and any assessment of a tax change must take into account all three the principal assumption of this paper is that government is concerned about the trade off between these three effects a strict utilitarian is concerned only with the consequences of an action and in the evaluation of a particular reform a utilitarian measure of social welfare is defined over the vector of ex post utilities no account is taken of the process by which the vector of ex ante utilities is mapped into the ex post vector and no ethical status is awarded to the ex ante distribution one does not have to adopt an entitlement theory of justice to believe that the utilitarian approach may ignore some relevant considerations such as the fairness of the redistributive process a striking example of this arises in the model used by mirrlees 11 to examine optimal income taxation in that model individuals have identical preferences defined over consumption and leisure and differ only in respect of their potential wage rates or ability levels clearly in the absence of taxation individual utility is an increasing function of ability suppose the government uses redistributive lump sum taxes to achieve the first best optimum then as mirrlees 11 12 shows the first best optimum for a utilitarian social welfare

the social cost of living index abstract household cost of living indexes reflect household preferences analogous indexes for groups of households require a corresponding concept of group preferences in this paper i investigate the social cost of living index a group index based on the bergson samuelson social welfare function i first define the index and examine its properties under the assumption that the investigator constructing it expresses his distributional judgments in an explicit bergson samuelson social welfare function i then examine the maximizing society and the independent society two cases in which the index can be constructed from the information contained in the market demand functions in these two cases a laspeyres index i e the fixed weight index based on the reference consumption pattern is an upper bound on the exact social cost of living index in general however the assumptions required to place bounds on the social cost of living index are much more likely to be satisfied than those required to place analogous bounds on a household s cost of living index

a democratic measure of household income growth theory and application to the united kingdom this paper develops a price and quantity system of indicators structured round atkinson s concept of inequality aversion a democratic indicator of income growth weighting each household s growth experience equally is shown to result when prais democratic price index is used to deflate the geometric mean of equivalised household income a welfare interpretation of the democratic indicator of income growth is provided and it is shown that with heterogeneous but homothetic preferences the deflator can serve as a common scaling social cost of living index when applied to income as well as to consumption application to united kingdom household data suggests that over the interval 2005 6 2015 6 democratic real equivalised household income grew by 0 20 per cent per annum while the plutocratic equivalent grew by 0 52 per cent per annum

on lionel mckenzie s 1957 intrusion into 20th century demand theory in this essay we read mckenzie s 17 paragraphs of 1957 on demand theory without a utility index as an opening to the narrative of 20th century demand theory and as a lever for the understanding of what has now reached culmination as the neoclassical theory of demand in tracking the influence of these paragraphs on both theoretical and applied work we also use them as a foothold for reflection on the process of theorizing to argue for the view that one cannot neglect the changing problematic that the theory is adduced to address that the historical narrative behind a particular theorem is indispensable in understanding the theorem itself this implicit theorizing of the process of theorizing then forces us to consider stigler s distinction between textual and scientific exegesis and confront it to a second order level of theorizing and thereby bring out the continuity possibly not quite seamless between a theorem and its history

business groups in a market economy abstract the purpose of this paper is to examine the nature and significance of the interfirm relationship called the business group first the nature of the japanese business group is discussed it is then pointed out that the business group is not a phenomenon unique to japan and an effort is made to explain the significance of the business group in the context of a market economy using the williamsonian approach to questions of internal organization and the market finally the relationship between the input output relationship of the firms and their group affiliation is tested

coase revisited business groups in the modern economy ronald coase s celebrated query as to why economic actors typically aggregate into entities called firms rather than transacting as individuals in a market has engendered a vigorous stream of research this paper asks a parallel question why is it that in all modern economies firms themselves aggregate into larger entities often more stable than any literature predicts which are here referred to as business groups after establishing some working definitions and discussing the curious conjunction of empirical importance and analytical invisibility of business groups an attempt is made to establish the most significant dimensions along which such groups vary we end with some speculations on the role of these groups in economic development copyright 1995 by oxford university press

welfare comparison under exact aggregation new econometric model of aggregate consumer behavior in the united states and to apply this model to the analysis of impacts of alternative economic policies on the welfare of individual consuming units the model incorporates time series data on quantities consumed prices the level and distribution of income and demographic characteristics of the population it also incorporates cross section data on the allocation of consumer expenditures for households with different demographic characteristics our econometric model is based on the theory of exact aggregation developed by lau 1977a c this theory makes it possible to dispense with the notion of a representative consumer in constructing models of aggregate consumer behavior one of the most remarkable implications of lau s theory of exact aggregation is that systems of demand functions for individuals with common demographic characteristics can be recovered uniquely from the system of aggregate demand functions using the individual demand functions we can analyze the impact of economic policy on consumer welfare

aggregate consumer behavior and the measurement of social welfare this paper describes a new approach to normative economics combining the theory of social choice with econometric modeling of aggregate consumer behavior we first derive a system of aggregate demand functions by exact aggregation over individual demand functions we then construct measures of individual welfare from systems of individual demand functions finally we incorporate these measures into a social welfare function introducing ethical assumptions based on horizontal and vertical equity to illustrate the application of this approach we consider the u s standard of living and its cost over the period 1947 1985 the purpose of this paper is to describe a remarkable convergence that has occurred between economic theory and econometrics over the past decade this conjunction has taken place between the theory of social choice and econometric modeling of aggregate consumer behavior the confluence of these two streams of research has produced a new approach to normative economics this approach has been successfully applied to the evaluation of economic policy the measurement of poverty and inequality and the assessment of the standard of living and its cost a common problem in the modeling of consumer behavior and social choice is the representation of individual preferences in the econometric modeling of aggregate consumer behavior the primary emphasis has been on simplifying aggregate demand functions the most familiar approach to this problem is the model of a representative consumer this model is required to justify applications of the theory of individual consumer behavior to aggregate data on prices and quantities consumed the simplest version of the model is based on identical homothetic preferences for all individuals under identical homothetic preferences aggregate quantities consumed are functions of aggregate expenditure and prices these functions have precisely the same properties as demand functions in the theory of individual consumer behavior the condition of identical homothetic preferences was weakened by gorman 1953 to permit displacements from the origin for individual demand functions gorman showed that a necessary and sufficient condition for aggregate demand functions to depend on aggregate expenditure is that all individu

measuring economic welfare new methods preface 1 an introduction to the money metric 2 the marginal utility of money as an integrating factor 3 calculation of the money metric 4 the approach of dupuit and marshall 5 the hicksian approach 6 approximations based on consumer surplus 7 a reconsideration of the theory of index numbers 8 the money metric as a basis for calculation of social welfare functions 9 measurement of the social costs of monopoly 10 a final comment and conclusion references index

the possibility of social choice the subject of social choice includes within its capacious frame various problems with the common feature of relating social judgments and group decisions to the views and interests of the individuals who make up the society or the group some challenges and foundational problems faced by social choice theory as a discipline are discussed social choice theory is a subject in which formal and mathematical techniques have been very extensively used voting based procedures are entirely natural for some kinds of social choice problems such as elections referendums or committee decisions they are however altogether unsuitable for many other problems of social choice impossibility results in social choice theory led by the pioneering work of arrow 1951 have often been interpreted as being thoroughly destructive of the possibility of reasoned and democratic social choice including welfare economics that view is argued against

business groups and social welfare in emerging markets existing evidence and unanswered questions abstract this paper reviews existing studies of the role of emerging market business groups a ubiquitous but poorly understood organizational form i first suggest that understanding the definition of business groups is itself an interesting albeit under studied research issue i then argue that the existing evidence suggests that the performance effects of group affiliation are large and generally positive there is substantial evidence that part of this is due to welfare enhancing functions originating in the idea that groups substitute for missing outside institutions but that part is also due to welfare reducing minority shareholder exploitation evidence is lacking on the extent to which groups facilitate rent seeking or the exercise of market power evidence is also lacking on the extent to which groups hamper the future development of markets the paper identifies areas where research is needed before current competition policy experiments in countries like china india and korea can be evaluated

changing performance of business groups over two decades technological capabilities and investment inefficiency in korean chaebols abstract this article differentiates itself from the large volume of existing literature on business groups such as korean chaebols in several aspects first it uses productive efficiency rather than financial efficiency as a performance measure second it defines chaebols in three alternative ways and checks whether the results are robust third and most important it explains the sources of the post crisis change in the performance of korean chaebols in terms of technological capabilities and investment inefficiency this study finds that chaebols have become more efficient than non chaebols in the post crisis period compared with the pre crisis period that inefficiency in investment has always been critical in determining productive inefficiency and that after the 1997 financial crisis korean chaebols have improved their performance by reducing investment inefficiencies and enhancing technological capabilities the results of this study are consistent with the often acknowledged advantages of bus

international comparisons of living standards by equivalent incomes we propose a measure of living standards for international comparisons based on gdp per capita the measure incorporates corrections for international flows of income labor risk of unemployment healthy life expectancy household demography and inequalities the method for comparing populations that differ in some non income dimension consists of computing the equivalent variation of income that would make each population indifferent between its current situation and a reference situation with respect to the non income dimension this is applied to 24 oecd countries the obtained ranking of countries differs substantially from the gdp ranking