cake eating exhaustible resource extraction life cycle saving and non atomic games existence theorems for a class of optimal allocation problems abstract this paper investigates the problem concerning the existence of a solution to a diverse class of optimal allocation problems which include models of cake eating exhaustible resource extraction life cycle saving and non atomic games a new formulation that encompasses all these diverse models is provided examples of these models for which a solution does not exist and the causes of the non existence are studied two theorems are provided to tackle the existence problem under different conditions several analytical examples with a closed form solution are offered to illustrate the usefulness of the existence theorems

possibility of dying as a unified explanation of why we discount the future get weaker with age and display risk aversion i formulate a simple and parsimonious evolutionary model that shows that because most species face a possibility of dying because of external factors called extrinsic mortality in the biology literature it can simultaneously explain a why we discount the future b get weaker with age and c display risk aversion the paper suggests that testable restrictions across species across time or across genders among time preference aging and risk aversion could be analyzed in a simple framework jel a10 d90

a rank dependent utility model of uncertain lifetime abstract in a continuous time life cycle model of consumption with an uncertain lifetime we use a non parametric specification of rank dependent utility theory to characterize the preferences of the agent we prove that time consistency holds for a subclass of probability weighting function providing the foundation for a constant rate of time preference that interacts multiplicatively with the hazard rate instead of additively as in the yaari 1965 seminal model we calibrate both models to explain the hump in the life cycle consumption and show that the multiplicative model is more robust

defining the value of a statistical life reply abstract in general empirical estimates of the value of a statistical life vsl are biased however as pointed out by blomqvist 2001 a true blip in the hazard rate can be used to obtain an exact estimate of the vsl the question remains whether individuals and markets are able to value such short drops in the hazard rate

an evaluation of the life cycle effects of minimum pensions on retirement behavior in this paper we explore the effects of the minimum pension program on welfare and retirement in spain this is done with a stylized life cycle model which provides a convenient analytical characterization of optimal behavior we use data from the spanish social security to estimate the behavioral parameters of the model and then simulate the changes induced by the minimum pension in aggregate retirement patterns the impact is substantial there is a threefold increase in retirement at 60 the age of first entitlement with respect to the economy without minimum pensions and total early retirement before or at 60 is almost 50 larger copyright 2007 john wiley sons ltd

the influence of location upon profitability and employment change in small companies this paper examines the hypothesis that firms located in large urban areas suffer from location diseconomies which significantly reduce their profitability and propensity to create employment this hypothesis is tested on a sample of companies located within a single region the north of england over the period 1974 81 the empirical results suggest that neither trading profits nor employment change are significantly influenced by location however the amount taken out of the business in the form of directors remuneration which on average swallowed up 61 5 per cent of trading profits is significantly negatively related to employment change this suggests that with respect to employment creation public policy should focus on influencing the size of directors remuneration rather than on directly increasing trading profits fiscal policies may not be effective in this context however with the result that significantly influencing the behaviour of small firm directors may be a policy role best fitte

measuring risk reduction benefits with discounted longevity there are many ways to assess the benefits and costs of risk reduction policies this paper shows that discounted longevity as a measure of benefits and the negative of net output as a measure of costs can be deduced from the shepard and zeckhauser utility maximization model

alliance strategies of small firms the paper concludes that small firms follow one of two alliance strategies when the firms are small relative to their rivals and to their market they tend to use alliances to gain economies of scale and scope when they are large in relative terms they avoid alliances this behavior is consistent with alliance usage by large firms the paper also analyzes the sources of profit for a small firm that uses a constellation of allies to compete in a scale intensive industry its profits depend on a combination of the group based advantages generated by the constellation and the share of these profits that the firm can appropriate from the group small firms face particular hazards in this regard when their bargaining power within their constellation is weak the paper illustrates these arguments with data froma small survey with case studies from the computer industry and with a simple mathematical model

rates of time preference and valuations of the duration of life abstract this paper develops a multi period markov model of the lifetime choice of occupational fatality risks the empirical model analyzes the wage effects of job risks using the 1982 university of michigan panel study of income dynamics in conjunction with death statistics from the u s national traumatic occupational fatality survey evidence regarding workers intertemporal choices with respect to risks with long term implications is broadly consistent with rational behavior workers implicit real rate of time preference with respect to future life years equals approximately 11 percent this rate of time preference decreases with education

sme growth the relationship with business advice and external collaboration the paper presents multivariate analysis of the relationship of sme growth with the acquisition of external business advice whilst controlling for the influence of sme characteristics of age manufacturing services high technology innovator level of skill of the workforce exporter and number of competitors the relationship of external business advice with sme performance is statistically significant for only a small number of sources and fields obtaining external advice in fields such as business strategy and staff recruitment is associated with positive firm performance the main positive relationships of advice and performance are dominated by private sector sources such as lawyers suppliers customers and business friends relatives collaborative arrangements with suppliers nationally internationally have a strong positive relationship with employment and turnover growth collaboration with local suppliers has a strong positive relationship with growth in profitability there is little evidence of statistically significant relationships between government backed providers of business advice such as business link and firm performance

the principal agent relationship with an informed principal ii common values in many circumstances a principal may have relevant private information when she proposes a contract to an agent we analyze such a principal agent relationship as a noncooperative game the principal proposes a contract which is accepted or rejected by the agent who for most of our analysis has no private information the contract is executed if accepted otherwise the reservation allocation takes effect this allocation may be determined by a pre existing contract which the principal by her proposal is attempting to renegotiate or it may simply be the no trade point in this paper we assume that the principal s information directly affects the agent s payoff before solving the game we discuss pareto efficiency with asymmetric information we define an incentive compatible allocation to be weakly interim efficient wie if there exists no alternative incentive compatible allocation that both parties prefer for all possible beliefs that the agent might have about the principal s private information type we show that any wie allocation is interim efficient ie for some beliefs the rothschild stiglitz wilson rsw allocation relative to the reservation allocation l is the allocation that maximizes the payoff of each type of principal within the class of incentive compatible allocations that guarantee the agent at least the utility he gets from a irrespective of his beliefs about the principal s type the equilibrium set of the contract proposal game consists of the allocations that weakly pareto dominate the rsw allocation thus there is a unique equilibrium outcome if and only if the latter is ie and the equilibrium outcome is the rsw allocation itself after characterizing the equilibrium allocations we study those that are renegotiation proof when either the principal or the agent leads the renegotiation we then compare our contract proposal game which is a signaling model with its screening counterpart we conclude by extending our results to the case in which the agent as well as the principal has private information under the assumption of quasi linear preferences

the career costs of children this paper analyzes the life cycle career costs associated with child rearing and decomposes their eects into unearned wages as women drop out of the labor market loss of human capital and selection into more child friendly occupations we estimate a dynamic life cycle model of fertility occupational choice and labor supply using detailed survey and administrative data for germany for numerous birth cohorts across dierent regions we use this model to analyze both the male female wage gap as it evolves from labor market entry onward and the eect of pro fertility policies we show that a substantial portion of the gender wage gap is explainable by realized and expected fertility and that the long run eect of policies encouraging fertility are considerably lower than the short run eects typically estimated in the literature

public and private expenditures on health in a growth model abstract this paper introduces endogenous longevity into an otherwise standard overlapping generations model with capital in the model a young agent may increase the length of her old age by incurring investments in health such private health investments are assumed to be more productive if accompanied by complementary tax financed public health programs the presence of the public input in private longevity is shown to expose the economy to aggregate endogenous fluctuations and even chaos and such volatility is impossible in its absence the model is capable of generating dramatic reversals in life expectancy as has been observed in many countries

recognizing progeny in the value of life abstract this note generalizes the value of life to incorporate the preferences for descendants of a dynastically altruistic decision maker it derives the value of progeny and shows how it depends on the benthamite vs millian nature of dynastic altruism

optimal life insurance purchase and consumption investment under uncertain lifetime abstract in this paper we consider optimal insurance and consumption rules for a wage earner whose lifetime is random the wage earner is endowed with an initial wealth and he also receives an income continuously but this may be terminated by the wage earner s premature death we use dynamic programming to analyze this problem and derive the optimal insurance and consumption rules explicit solutions are found for the family of crra utilities and the demand for life insurance is studied by examining our solutions and doing numerical experiments

willingness to pay for car safety evidence from sweden this study estimates a marginal willingness to pay wtp function for a road mortality risk reduction observed marginal wtp from the swedish car market is used and found to be positively correlated with the baseline risk of the cars no statistically significant relationships between examined owner attributes e g wealth and background risk and marginal wtp are found when comparing the estimated monetary value of a non marginal risk reduction derived from the integral of the marginal wtp function with an estimate based on marginal wtp we find in line with expectations that the difference between the estimates is negligible for smaller risk reductions and small 4 10 also for relatively large risk reductions

creating good public policy to support high growth firms writing in small business economics scott shane argues that policy makers should stop subsidising start ups and instead focus on supporting the small subset of new businesses with high growth potential however both shane and other scholars who have made the same argument only offer broad brush proposals to achieve this objective the aim of this article in contrast is to engage in a detailed discussion of how to create appropriate policies for high growth firms hgfs drawing on research in scotland we argue that policy makers are looking for hgfs in the wrong places the heterogeneous nature of hgfs in terms of sector age size and origins makes in impractical to target support on particular sectors technologies or types of firms e g new or r d intensive the article proposes a reorientation of hgfs both in terms of appropriate targeting and forms of support public policy also needs to focus on the retention of hgfs which are acquired by non local businesses finally policy makers need to properly reflect upon the specificities of their entrepreneurial environment when devising appropriate policy interventions

social security and retirement in uruguay abstractwe estimate a structural life cycle model for retirement behaviour using work history records of the main uruguayan pension programme the estimated coefficient of relative risk aversion is around 1 5 and the estimated discount rate is about 1 8 per cent per annum the marginal disutility of work increases with age and is larger for women than men and for private than public employees simulations show a very low impact of the 1995 pension reform on retirement ages many individuals in this population respond little to economic incentives and some individuals would advance rather than postpone retirement after the reform

averting catastrophes the strange economics of scylla and charybdis faced with numerous potential catastrophes nuclear and bioterrorism mega viruses climate change and others which should society attempt to avert a policy to avert one catastrophe considered in isolation might be evaluated in cost benefit terms but because society faces multiple catastrophes simple cost benefit analysis fails even if the benefit of averting each one exceeds the cost we should not necessarily avert them all we explore the policy interdependence of catastrophic events and develop a rule for determining which catastrophes should be averted and which should not jel d61 q51 q54

the impact of the correlation between health expenditure and survival probability on the demand for insurance abstract this paper studies the effects of health shocks on the demand for health insurance and annuities along with precautionary saving in a dynamic life cycle model i argue that when the health shock can simultaneously increase health expenses and reduce longevity rational agents would neither fully insure their uncertain health expenses nor fully annuitize their wealth because the correlation between health expenses and longevity provides a self insurance channel for both uncertainties that is when the agent is hit by a health shock which simultaneously increases health expenses and reduces longevity she can use the resources originally saved for consumption in the reduced period of life to pay for the increased health expenses since the two uncertainties partially offset each other the precautionary saving generated in the model should be smaller than in a standard model without the correlation between health expenses and longevity in a quantitative life cycle model calibrated using the medical expenditure panel survey dataset i find that the health expenses are highly correlated with the survival probabilities and this correlation significantly reduces the demand for actuarially fair health insurance while its impact on the demand for annuities and precautionary saving is relatively small

life cycle responses to health insurance status this paper studies the lifetime effects of exogenous changes in health insurance coverage e g medicare ppaca termination of employer provided plans on the dynamic optimal allocation consumption leisure health expenditures status health and wealth and welfare we solve simulate and structurally estimate a parsimonious life cycle model with endogenous exposure to morbidity and mortality risks and exogenous health insurance by varying coverage we identify the marginal effects of insurance when young and or when old on allocations statuses and welfare our results highlight positive effects of insurance on health wealth and welfare as well as mid life substitution away from healthy leisure in favor of more health expenses caused by peaking wages and accelerating health issues

small business growth in the short run this paper examines the determinants of short run employment growth in very small firms in the services sector the study shows evidence of non linearities in the growth size relationship and it is argued that these non linearities reflect the short run constraints that small firms face in adjusting to demand shocks the paper also suggests that there are other systematic influences on growth apart from size the paper draws on survey evidence from the northern region of the united kingdom

comorbidities and the willingness to pay for health improvements we show that the willingness to pay for health improvements increases with the severity and probability of occurrence of comorbidities this result which is obtained under mild restrictions on the shape of the utility function has important implications for cost benefit studies applied to health care in particular it implies that the discrimination of the elderly believed to be implicit in cost benefit analysis is less of a problem than commonly thought

the insurance value of medical innovation abstract economists think of medical innovation as a valuable but risky good producing health benefits but increasing financial risk for consumers and healthcare payers this perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease we present an alternative framework that accounts for all these sources of value and links them to the value of healthcare insurance we show that any innovation worth buying reduces overall risk and generates positive insurance value on its own we conduct a stylized numerical exercise to assess the potential empirical significance of our insights our calculations suggest that conventional methods meaningfully understate the value of historical health gains and disproportionately undervalue treatments for the most severe illnesses where physical risk to consumers is the costliest these calculations also suggest that the value of physical insurance from new technologies may exceed the financial spending risk that they pose

the individual life cycle annuity market imperfections and economic growth we study the effects of an annuity market imperfection on individual agents life cycle decisions and on the macroeconomic growth rate in an overlapping generations model with single sector endogenous growth our model features both age dependent mortality and labour productivity we model imperfect annuities by introducing a load factor on the annuity rate faced by finitely lived agents our main finding is that annuity market imperfections decrease economic growth because less assets are necessary for consumption late in life in addition we find that both the quantitative and qualitative effects of annuity market imperfections are grossly overestimated in a partial equilibrium analysis because it disregards general equilibrium repercussions

optimal choice of health and retirement in a life cycle model abstract we examine within a life cycle model the simultaneous choice of health care and retirement together with consumption health tends to have an impact on retirement through morbidity determining earnings and the disutility of work and through longevity determining the need to accumulate retirement wealth conversely the age of retirement drives the demand for health care through the value of survival and the value of morbidity reductions we characterise the optimal relationship between health expenditure and retirement and apply our model to analyse the effects of moral hazard in the annuity market while moral hazard always induces excessive health investments and an excessive duration of working life it also triggers an excessive level of consumption if the impact of health on the disutility of work is sufficiently large we examine a transfer scheme and mandatory retirement as policies towards curtailing moral hazard numerical analysis illustrates the role of moral hazard in shaping the life cycle allocation

your money or your life green growth policies and welfare in 2050 this paper proposes a simple index of economic progress that weighs in the monetary cost induced by climate change mitigation policies as well as the health benefits arising from the reduction in local air pollution the shadow price of pollution is calculated indirectly through its impact on life expectancy taking into account the health benefits of mitigation policies significantly reduces their monetary cost in china and india as well as in countries with large fossil based energy producing sectors australia canada and the united states

valuing future risks to life environmental policies that alter future mortality rates may affect both current and future generations this paper examines willingness to pay for future risk reductions from the perspective of the current generation the life cycle consumption saving model implies that an individual discounts future risks to himself at the consumption rate of interest if capital markets are perfect the consumption rate equals the market rate of interest otherwise the consumption rate exceeds the market rate and numerical results suggest that the implied discount factor may be substantial the overlapping generations model implies that a member of the current generation discounts the value of risks to future generations at the rate at which current consumption is substituted for a bequest

is it really good to annuitize although rational consumers without bequest motives are better off investing exclusively with annuitized instruments in partial equilibrium we demonstrate the welfare effect of annuitization is ambiguous in general equilibrium on account of pecuniary externalities absent institutional constraints like prices and budgets the optimal consumption rule would have marginal utility increase at the preferential discount rate in a rational competitive equilibrium where households fully annuitize the growth rate of marginal utility will be the discount rate minus the interest rate resulting in a consumption profile that is too flat accidental bequests transfer wealth from the old to the young steepening the consumption profile and yielding a better equilibrium if households are restricted to keynesian consumption functions the optimal irrational equilibrium with standard preferences can replicate observed consumption and macroeconomic behavior and the equilibrium without annuities delivers higher utility than the equilibrium with annuities whereas preceding papers have merely hypothesized that households might engage in socially optimal yet irrational behavior the failure of households to annuitize is a real world example of this policymakers should not take steps to encourage more annuitization by the public

do the near elderly value mortality risks differently wage hedonic models are estimated with the health and retirement study to measure the risk wage tradeoffs value of statistical lives for older workers the analysis explicitly allows for multiple employment states including retirement using a multinomial selection model the results suggest that the oldest and most risk averse workers require significantly higher not lower compensation to accept increases in job related fatality risks

changing use of external business advice and government supports by smes in the 1990s bennett r j and robson p j a 2003 changing use of external business advice and government supports by smes in the 1990s reg studies 37 795 811 this paper uses cross sectional surveys of 1991 and 1997 a panel survey of firms surviving between 1991 and 1997 and comparison with a further cross sectional survey in 1999 to compare the levels of use by smes of external business advice the resource based theory of the firm indicates that smes seek advice in order to increase their competitive capacity over time increasing competition between smes is expected to lead to increasing use of advice however the paper demonstrates that only modest changes over time have occurred in aggregate use of external advice by smes and these are not statistically significant this suggests that earlier growth in external business advice services may now have plateaued there are some significant changes of use by source increasing for advertising personnel and recruitment new technology and computer servic

why nations become wealthy the effects of adult longevity on saving we analyze steady state and out of steady state effects of the transition in adult longevity on the national saving rate using historical data and international panel data the rise in adult life expectancy has a large and statistically significant effect on aggregate saving the effects have been especially pronounced in east asia because its mortality transition was very rapid gains in life expectancy are much more important than declines in child dependency population aging may not lead to lower saving rates in the future if life expectancy and the duration of retirement continue to increase

uncertain lifetime life protection and the value of life saving abstract the analytic innovation is treating life s end as uncertain and life expectancy as partly the product of individuals efforts to self protect against mortality and morbidity risks the demand for self protection is modeled in a stochastic life cycle framework under alternative insurance options the model helps explain the trend and systematic diversity in life expectancies across different population groups as well as the wide variability in reported value of life saving estimates the analysis yields a closed form solution for individuals value of life saving that is estimable empirically it reflects the impacts of specific personal characteristics and alternative insurance options on both life expectancy and its valuation

the competitiveness of business service firms a matched comparison between scotland and the south east of england o farrell p n hitchens d m w n and moffat l a r 1992 the competitiveness of business service firms a matched comparison between scotland and the south east of england reg studies 26 519 533 in this paper we present a comparative analysis of the competitiveness and performance of matched pairs of business service companies in scotland and south east england several dimensions of performance are investigated for five industries market research management consultancy product design graphic design and advertising value added per person is one quarter higher in the english offices and they achieved a much greater degree of export orientation one fifth of sales than the scottish firms at 4 possible demand and supply side causes of such differences are reviewed and potential policy responses considered o farrell p n hitchens d m w n et moffatt l a r 1992 la competitivite des prestataires des services aux entreprises l ecosse par comparaison avec l angleterre du sud est

the economics of risks to life this study asks two questions 1 what is the net value to the representative individual over his life time of activities that alter age specific mortality risks 2 what is the cost to the representative individual of activities that take a life at random at a given age results derived from an economic demographic model with full age specific accounting have a strong actuarial flavor alterations in the mortality schedule caused say by a medical breakthrough should be assessed on the utility of expected additional life years production and reproduction less expected social costs of support loss of life at a specific age due to an accident say should be assessed on the opportunity costs of expected lost years of living lost production and reproduction less expected social support costs the results show that current methods in general leave out an important social transfer term that value of a life lost is highly age dependent and that the degree of diminishing returns to consumption is crucial in calculations of the economic cost of risks

technology transfer under asymmetric information licensing contracts for newly patented innovations are observed to vary along several dimensions including the form and size of the payment to the inventor fixedfee versus some output based royalty the degree of exclusivity and the division of rents in this article we show that theform of the contract can be explained by two problems in technology exchange the superiority of a licensor s precontractual information about the economic value of the innovation and thefact that sharing this information with the licensee mayfacilitate imitation we show that a licensor signals her technology type with an output based payment or royalty and may leave some of the rents with the licensee conditions under which exclusive license contracts linear and nonlinear and nonexclusive linear contracts are used to transfer technology are identified

demand signalling and screening in channels of distribution this paper examines two ways channel members at the manufacturing and retail ends deal with asymmetric information in the context of new product introduction a manufacturer who has private information that demand for a new product will be high can differentiate itself from a manufacturer less confident of demand by undertaking high levels of pre launch advertising and offering a high wholesale price a retailer for its part can screen potentially high demand from potentially low demand products by stipulating a take it or leave it slotting allowance the assumption being that the offer will be accepted only by manufacturers confident of sufficient demand to recover the high initial cost of slotting allowances it is shown that manufacturers prefer to signal demand through advance advertising and wholesale price retailers to screen demand through slotting allowances it is shown that unless advance advertising is sufficiently effective slotting allowances yield higher total channel profits and higher social welfare

does more mean worse three decades of enterprise policy in the tees valley this paper argues that there have been three distinct phases of enterprise policy in the uk in the past 30 years the 1970s saw no effective enterprise policy policy off the 1980s witnessed an attempt to increase the number of start ups and the 1990s saw a concentration on business quality this paper looks at how enterprise has evolved in cleveland tees valley over the past three decades it suggests and finds that businesses in the 1980s were more numerous but of lower quality even if the influence of unemployment is accounted for than those from the 1970s and 1990s this implies that we should be cautious about the value of policy attempts to increase business formation rates in areas such as cleveland tees valley

effects of physical distancing to control covid 19 on public health the economy and the environment physical distancing measures are important tools to control disease spread especially in the absence of treatments and vaccines while distancing measures can safeguard public health they also can profoundly impact the economy and may have important indirect effects on the environment the extent to which physical distancing measures should be applied therefore depends on the trade offs between their health benefits and their economic costs we develop an epidemiological economic model to examine the optimal duration and intensity of physical distancing measures aimed to control the spread of covid 19 in an application to the united states our model considers the trade off between the lives saved by physical distancing both directly from stemming the spread of the virus and indirectly from reductions in air pollution during the period of physical distancing and the short and long run economic costs that ensue from such measures we examine the effect of air pollution co benefits on the optimal physical distancing policy and conduct sensitivity analyses to gauge the influence of several key parameters and uncertain model assumptions using recent estimates of the association between airborne particulate matter and the virulence of covid 19 we find that accounting for air pollution co benefits can significantly increase the intensity and duration of the optimal physical distancing policy to conclude we broaden our discussion to consider the possibility of durable changes in peoples behavior that could alter local markets the global economy and our relationship to nature for years to come

longevity and life cycle savings we add health and longevity to a standard model of life cycle saving and show that under plausible assumptions increases in life expectancy lead to higher savings rates at every age even when retirement is endogenous in a stationary population these higher savings rates are offset by increased old age dependency but during the disequilibrium phase when longevity is rising the effect on aggregate savings rates can be substantial we find empirical support for this effect using a cross country panel of national savings rates

on the costs of food price fluctuations in low income countries abstract conventional welfare measures of the costs of food price fluctuations in low income countries are extended to allow for both economic growth and food security effects the analysis reveals that growth and food security effects may dominate more conventional welfare costs of food price fluctuations although estimating the empirical magnitude of the effects is hampered by the lack of consensus on the extent to which food price fluctuations actually reduce economic growth and food security even if the welfare costs of food price fluctuations are high there are many challenges to the design and successful implementation of price stabilization schemes

compensating wage differentials and the value of life abstract this paper examines the relationship between willingness to pay and compensating wage differential measures of the value of a statistical life it resolves some recently noted discrepancies between such measures

what happens to gazelles the importance of dynamic management strategy the starting point of this study is gibrat s law which is contrasted with strategic management this logic is subsequently applied to a group of remarkably dynamic high growth firms gazelles strategic management theory emphasises the importance of firms adjusting strategies in response to changes in the external environment in our study it is used to explain several key empirical findings using a novel british data set containing information on more than 100 gazelles these findings help explain 1 why gibrat s law of random firm growth processes does not generally hold 2 which strategy and environmental variables have a predictable influence on firm performance and 3 why routine application of best practice strategies is unlikely to foster firm growth in a changing economic environment in so doing this paper contributes to the large body of literature on small firm growth

on consumer preferences and the willingness to pay for term life insurance abstract we run a choice based conjoint cbc analysis for term life insurance on a sample of 2017 german consumers using data from web based experiments individual level part worth profiles are estimated by means of a hierarchical bayes model drawing on the elicited preference structures we then compute relative attribute importances and different willingness to pay measures in addition we present comprehensive simulation results for a realistic competitive setting that allows us to assess product switching as well as market expansion effects on average brand critical illness cover and underwriting procedure turn out to be the most important nonprice product attributes hence if a policy comprises their favored specifications customers accept substantial markups in the monthly premium furthermore preferences vary considerably across the sample while some individuals are prepared to pay relatively high monthly premiums a large fraction exhibits no willingness to pay for term life insurance at all presumably due to the absence of a need for mortality risk coverage we also illustrate that utility driven product optimization is well suited to gain market shares avoid competitive price pressure and access additional profit potential finally based on estimated demand sensitivities and a set of cost assumptions it is shown that insurers require an in depth understanding of preferences to identify the profit maximizing price

the role of intergenerational transfers in aggregate capital accumulation this paper uses historical u s data to directly estimate the contribution of intergenerational transfers to aggregate capital accumulation the evidence presented indicates that intergenerational transfers account for the vast majority of aggregate u s capital formation only a negligible fraction of actual capital accumulation can be traced to life cycle or hump savings a major difference between this study and previous investigations of this issue is the use of more accurate longitudinal age earnings and age consumption profiles these profiles are simply too flat to generate substantial life cycle savings this paper suggests the importance of and need for substantially greater research and data collection on intergenerational transfers life cycle models of savings that emphasize savings for retirement as the dominant form of capital accumulation should give way to models that illuminate the determinants of intergenerational transfers

growth and welfare under endogenous lifetime we study the role of endogenous healthcare choices by households to extend their expected lifetimes on economic growth and welfare in a decentralized overlapping generations economy with the realistic feature that households savings are held in annuities we characterize healthcare spending in the decentralized market equilibrium and its effects on economic growth we then identify the moral hazard effect in healthcare investments when annuity rates are conditioned on average mortality and explain the conditions under which it will lead to over investment in healthcare moreover we specify the general equilibrium effects and macroeconomic repercussions associated with this moral hazard effect calibrating our model to oecd data we find that the moral hazard effect may be substantial and implies sizeable welfare losses of approximately 1 5 at a more general level our study suggests that welfare improvements from longevity increases may be quite lower than sometimes assumed when considered in planner economies

health and other asset holdings despite clear evidence of correlations between financial and medical statuses and decisions most models treat financial and health related choices separately this article bridges this gap by proposing a tractable dynamic framework for the joint determination of optimal consumption portfolio holdings health investment and health insurance we solve for the optimal rules in closed form and capitalize on this tractability to gain a better understanding of the conditions under which separation between financial and health related decisions is sensible and of the pathways through which wealth and health determine allocations welfare and other variables of interest such as expected longevity or the value of health furthermore we show that the model is consistent with the observed patterns of individual allocations and provide realistic estimates of the parameters that confirm the relevance of all the main characteristics of the model

receiver discretion in signalling models information transmission to competing retailers abstract the paper draws attention to the fact that receiver discretion is an integral aspect of any economic situation in which signalling considerations are important we illustrate our main point in a model of a manufacturer privately informed about the strength of demand with a number of competing retailers we show that the manufacturer will not distort his wholesale price as is usual in separating equilibria if the retail competition is sufficiently intense and the retailers discretion in their price decisions therefore limited whether as a consequence of a large number of retailers or of the retailers products being close substitutes

labor market estimates of the senior discount for the value of statistical life abstract this article develops the first measures of age industry job risks to examine the age variations in the value of statistical life because of the greater risk vulnerability of older workers they face flatter wage risk gradients than younger workers which we show to be the case empirically accounting for this heterogeneity in hedonic market equilibria leads to estimates of the value of statistical life age relationship that follows an inverted u shape the estimates of the value of statistical life range from 6 4 million for younger workers to a peak of 9 0 million for those aged 35 44 and then a decline to 3 8 million for those aged 55 62 the decline of the estimated value of statistical life with age is consistent with there being some senior discount in the clear skies initiative analysis

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

health care expenditure in the last months of life in oecd countries a considerable share of health care expenditure hce is spent for the care of the terminally ill this paper derives the demand for hce in the last 2 years of life from a model that accounts for age mortality risk and wealth the empirical tests are based on data of deceased members of a major swiss sick fund the empirical evidence confirms most of the hypotheses derived from the model i e i hce increases with closeness to death ii for retired individuals hce decreases with age and iii low income individuals as compared to high income individuals incur lower hce in the last months of life

the value of life and the rise in health spending over the past half century americans spent a rising share of total economic resources on health and enjoyed substantially longer lives as a result debate on health policy often focuses on limiting the growth of health spending we investigate an issue central to this debate is the growth of health spending a rational response to changing economic conditions notably the growth of income per person we develop a model based on standard economic assumptions and argue that this is indeed the case standard preferences of the kind used widely in economics to study consumption asset pricing and labor supply imply that health spending is a superior good with an income elasticity well above one as people get richer and consumption rises the marginal utility of consumption falls rapidly spending on health to extend life allows individuals to purchase additional periods of utility the marginal utility of life extension does not decline as a result the optimal composition of total spending shifts toward health and the health share grows along with income in projections based on the quantitative analysis of our model the optimal health share of spending seems likely to exceed 30 percent by the middle of the century

the creation and growth of small business service firms in post industrial britain since 1980 the united kingdom has experienced a dramatic growth in firms and employment in information intensive business services such as management consultancy and market research this article reports the results of the first substantial nation wide investigation into the nature and causes of small professional business service firm growth in britain undertaken in 1991 it reveals marked differences in the characteristics markets and competitive requirements of such firms compared with small manufacturing firms the demand for their services comes predominantly from large companies and is more focussed on financial and other services and government but small firms are also making increasing use of business services specialised expertise reputation and educational and professional qualifications are essential prerequisites for the establishment of new business service firms their success is also being enhanced by increasing use of informal networking collaborative partnerships and subcontracting

survival versus consumption we develop an indirect method to estimate utility and willingness to pay wtp for reductions in the risk of death at various ages using a life cycle model of consumption we assume that an individual sets his consumption level each year so as to maximize his expected lifetime utility alternative assumptions about opportunities for borrowing and annuities characterize two polar types of societies in our robinson crusoe case an individual must be entirely self sufficient and annuities are not available in our perfect markets case an individual can borrow against future earnings and purchase actuarially fair annuities we show that under these assumptions wtp is the sum of livelihood discounted expected future earnings and consumer surplus to illustrate our methods we derive wtp for an average financially independent american man under plausible assumptions the model is calibrated to 1978 earnings e g 18 000 per year for men aged 45 54 with at least some income in the robinson crusoe case wtp increases from 500 000 at age 20 to a peak of 1 250 000 at age 40 and declines to 630 000 at age 60 in the perfect markets case age variations are less pronounced wtp is 1 050 000 at age 20 peaks at 1 070 000 at age 25 and declines to 600 000 at age 60 these results suggest that individuals value risks to their lives at several times the pro rata share of their future earnings

spending retirement on planet vulcan the impact of longevity risk aversion on optimal withdrawal rates corrected july 2011 recommendations from the media and financial planners regarding retirement spending rates deviate considerably from utility maximization models this study argues that wealth managers should advocate dynamic spending in proportion to survival probabilities adjusted up for exogenous pension income and down for longevity risk aversion

uncertain lifetime risk aversion and intertemporal substitution abstract this paper describes a simple utility function for dynamic choice problems under uncertain lifetime preferences are time consistent and similar to selden s ordinal certainty equivalent hypothesis for yaari s model of consumption savings decisions holding intertemporal substitution fixed the consumption growth rate is increasing decreasing in the mortality rate if risk aversion is lower higher than under expected utility preferences

willingness to pay and sensitivity to time framing a theoretical analysis and an application on car safety stated preference sp surveys attempt to obtain monetary values for non market goods that reflect individuals true preferences numerous empirical studies suggest that monetary values from sp studies are sensitive to survey design and so may not reflect respondents true preferences this study examines the effect of time framing on respondents willingness to pay wtp for car safety we explore how wtp per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a swedish contingent valuation survey our theoretical model predicts the effect to be nontrivial in many scenarios used in empirical applications in our empirical analysis we examine the sensitivity of wtp to an annual and a monthly scenario our theoretical model predicts the effect from the time framing to be negligible but the empirical estimates from the annual scenario are about 70 higher than estimates from the monthly scenario

social security growth and welfare in overlapping generations economies with or without annuities we examine the impact of a stylized pay as you go paygo social security program in an economy of overlapping generations with equilibrium growth we adopt realistic mortality and other demographic assumptions and allow for the presence or absence of life annuities in all cases steady state economies with paygo social security programs grow more slowly than those without also we find that lifetime expected utilities are lower for existing and future households in steady state economies with social security we also report the effect of social security on the age profile of consumption and explore the effects of longer life expectancy compensating social security program changes and capital subsidies

the welfare value of fda s mercury in fish advisory a dynamic reanalysis assessing the welfare impact of consumer health advisories is a thorny task recently shimshack and ward 2010 studied how u s households responded to fda s 2001 mercury in fish advisory they found that the average at risk household reduced fish consumption by 21 resulting in a 17 reduction in mercury exposure at the cost of a 21 reduction in cardioprotective omega 3 fatty acids based on a static assessment of the health costs and benefits shimshack and ward concluded that the advisory policy resulted in an overall consumer welfare loss in this note we propose a dynamic assessment that links the long term cardiovascular health effects of the advisory to life cycle consumption we find that under reasonable assumptions the welfare loss might be much larger than suggested our analysis highlights the importance of accounting for dynamic effects when evaluating persistent changes in exposure to environmental health risks

employment and smes during crises the persistent increasing duration of unemployment has become an issue during economic crises although lay offs at large firms normally make headlines during crises we still know little about the potential impact of firm size on adjustment behavior in a crisis we studied effects of firm size on employment growth during economic slowdowns using a rich microeconomic database for the 1988 2007 period in portuguese manufacturing industry the results show that economic downturns affect firm growth negatively this negative effect is found to be higher for larger firms both during and immediately following crisis periods small and medium sized enterprises smes emerge as potential stabilizers in downturn periods however larger firms seem to be able to quickly recover from downturn periods our results contribute to the scarce literature and to the understanding of the portuguese case where many smes secure most jobs these first results may be useful because smes play a determinant role in other european union economies

your money or your life a prescriptive model for health safety and consumption decisions in this paper we develop a conceptual framework and model for valuing risks to an individual s health and life and to support decision making about investments in health quality of life and safety our treatment of health risks in the model builds on the popular quality adjusted life year qaly framework that balances health quality and length of life issues we extend this framework to consider financial concerns as well as health quality and length of life our model considers uncertainty in income and health and incorporates the decision maker s ability to adjust consumption over time in response to changes in expectations about health and income we use this model to study the optimal tradeoffs between financial gains or losses and improvements or reductions in health or longevity and apply it in two example medical decision problems

uncertain lifetime and intertemporal choice risk aversion as a rationale for time discounting this article makes explicit the links between preferences over lotteries on length of life and intertemporal choice it shows that the approach used by traditional life cycle models to account for uncertain survival corresponds to a strong assumption of risk neutrality with respect to length of life relaxing such an assumption leads us to develop a more general formulation of lifetime utility in which time discounting is directly related to preferences over length of life exponential and hyperbolic discounting are found to result in a first approximation from constant and hyperbolic risk aversion with respect to length of life

valuing environmental health effects an economic perspective this paper provides an overview of some of the issues involved in comparing benefit cost analysis and cost effectiveness analysis based on quality adjusted life years as alternative approaches to assessing environmental policies that affect human health it concludes that i although qalys have the advantage of reflecting policy impacts on both health status and longevity in a single scalar measure they are not consistent with utility theory unless individuals preferences satisfy some restrictive conditions ii they do not capture other important aspects of the valuation of changes in mortality and morbidity iii cost effectiveness analysis based on qalys as a measure of effectiveness omits non health related effects of environmental policy and iv it leaves unanswered the important question of what level of environmental regulation is appropriate

the existence uniqueness and optimality of the terminal wealth depletion time in life cycle models of saving under uncertain lifetime and borrowing constraint abstract in life cycle models of saving under uncertain lifetime and borrowing constraint the consumer s wealth must be depleted before the maximum lifetime this paper investigates the existence uniqueness and optimality of the terminal wealth depletion time it is proved that the optimal terminal wealth depletion time if such exists must be unique if the equation that determines the optimal terminal wealth depletion has multiple solutions then the location of the optimal solution will depend on the configuration of the solutions an optimality test is developed to verify whether a candidate solution for the terminal wealth depletion time is indeed optimal the paper introduces a method new to economics the dubovitskii milyutin adjoint equation to analyze the properties of the optimal control problem

is there a meaningful definition of the value of a statistical life a definition of the value of a statistical life is derived this definition has a meaningful interpretation in terms of the monetary value of expected present value utility if consumption is age independent in all other cases empirical estimates of the value of a statistical life are biased estimators of the monetary counterpart to expected present value utility