financing and funding health care optimal policy and political implementability health care financing and funding are usually analyzed in isolation this paper combines the corresponding strands of the literature and thereby advances our understanding of the important interaction between them we investigate the impact of three modes of health care financing namely optimal income taxation proportional income taxation and insurance premiums on optimal provider payment and on the political implementability of optimal policies under majority voting considering a standard multi task agency framework we show that optimal health care policies will generally differ across financing regimes when the health authority has redistributive concerns we show that health care financing also has a bearing on the political implementability of optimal health care policies our results demonstrate that an isolated analysis of optimal provider payment rests on very strong assumptions regarding both the financing of health care and the redistributive preferences of the health authority

taxes redistribution and the minimum wage a theoretical analysis this paper considers a simple general equilibrium model that contains two types of workers with differing levels of ability and a social welfare maximizing government the paper shows that social welfare can sometimes be increased by supplementing an optimal linear income tax with a minimum wage but that social welfare can never be increased by supplementing an optimal nonlinear income tax with a minimum wage

the returns from schooling in a diversified rural economy controlling for the endogeneity of activity choice and considering both household head and family schooling we findevid ence of high returns from schooling in both crop andnoncrop activities as schooling levels increase the returns from schooling shift away from crop production failure to control for activity selection andfamily schooling is likely to result in biasedestimates of the returns from schooling in individual activities copyright 2000 oxford university press

undocumented immigration and income inequality in the native born population of the us econometric evidence according to the theoretical models suggested by chiswick and others the growing presence of undocumented immigrants in the us should have a disequalizing effect on income distribution in the native born population however this proposition has not been subjected to empirical test here an econometric model of income inequality in native born households is constructed and census based estimates of the state distribution of undocumented immigrants are used to estimate model parameters the results show that such immigration has been disequalizing but that the impact has been small ranking behind several other socio economic variables

migration remittances and inequality a sensitivity analysis using the extended gini index abstract this paper uses the extended gini inequality index to examine the sensitivity of measurements of impacts of migrant remittances on the distribution of household income by size to different value judgements when measuring inequality the results illustrate the robustness of earlier findings that the impacts of migration on village income distributions differ for different types of migration and for different periods in a village s migration history the magnitude of these impacts however appears to be quite sensitive to the weights attached to incomes at different points in the village income distribution for example in a village with considerable mexico to u s migration experience remittances from mexico to u s migrants have a favorable effect on the village income distribution however the extended gini analysis shows that this favorable impact decreases as more weight is attached to incomes in the poorest households this finding is consistent with the view that barriers to high paying mexico to u s migration work exist for households at the bottom of the village income distribution

the politics of redistributive social insurance this paper analyses the political support for a social insurance that includes elements of redistribution when there exists an imperfect private insurance alternative individuals differ both in their income and risk the social insurance is compulsory and charges an income related contribution with pooling of risks the private insurance is voluntary and charges a contribution based on individual risks however due to the adverse selection problem private insurance companies provide only partial insurance adopting a non expected utility model we show that there is a general majority support for social insurance and that this support is increasing with risk aversion we also show that a mixed insurance is politically impossible regardless of the degree of redistribution of social insurance and the joint distribution of risk and income in the population lastly we analyse how the political support for social insurance is affected by any change in its redistributive component and the possibility of using genetic tests

social insurance and redistribution with moral hazard and adverse selection rochet 1991 showed that with distortionary income taxes social insurance is a desirable redistributive device when risk and ability are negatively correlated this finding is re examined when ex post moral hazard and adverse selection are included and under different informational assumptions individuals can take actions influencing the size of the loss in the event of accident or ill health social insurance can be supplemented by private insurance but private insurance markets are affected by both adverse selection and moral hazard we study how equity and efficiency considerations should be traded off in choosing the optimal coverage of social insurance when those features are introduced the case for social insurance is strongest when the government is well informed about household productivity

economic policy advice and political preferences this essay argues that public choice offers an appropriate approach for thinking about economic policy advice first i discuss the nature of the policy advice that is proffered by economists then i specifically suggest that one of the most common modeling features in the public choice literature viz the assumption that individuals have political preferences may be useful in helping us understand the nature of this advice finally i also carry out a tentative exploration of the implications of accepting the perspective that is provided when the suggested modeling feature is used in this context

coyote ugly the deadweight cost of rent seeking for immigration policy many studies use a harberger triangle method to estimate the immigration surplus to the native born population and conclude that the benefit of immigration is very small in proportion to the size of the us economy and thus the united states does not to stand to lose much if immigration is further restricted this calculation neglects the rent seeking costs that the us economy bears when immigration policy is politically determined this study estimates the rent seeking losses that the us economy could suffer if immigration policy were reformed to further close the borders

motivations to remit evidence from botswana in this article a theory of motivations to send remittances is described and tested with data from botswana altruism is one of the motivations tested and found to be an insufficient explanation for remittances among migrants in botswana a refinement of the model stipulates a modified altruism or enlightened self interest in this model the relationship between the migrant and family is tempered by an implicit understanding of mutual benefit the household strategy may be to encourage some members to migrate as a means of spreading risk and sharing gains the household strategy is similar to an insurance policy where migration is to places where market potential is high the risks incurred might be high the example is given of migration during a drought in botswana migrant remittances were greater in households with more cattle or households with more to lose drought alone was not statistically related to remittances increases in remittances were related to increased levels of education it is suggested that repayment was the motive for parents investment in migrants education migrants gains are identified as the potential for an inheritance the security of channeling investments through a trusted family member and security in having a home to return to it is pointed out that the altruism and family remittances from urban migration were strategies that bridged the simple dynamic of either urban development or rural development impacting on family welfare it is suggested that household models of economy adopt some measure to express the relationship of household wealth to remittances from urban migrants

nonmonotonic demand for income redistribution benefits the case of afdc two different motives are often advanced to explain taxpayer nonrecipient support for income redistribution programs the first motive is the result of interdependent utilities between nonrecipients and the recipients of redistribution program benefits the source of this interdependence could be taxpayer altruism alternatively redistribution might be seen as one way to alleviate the potential for crime or social unrest recent theoretical analyses have suggested a second motiveincome redistribution programs act as protection against the possibility of unforseen loss in personal income 5 6 21 32 researchers using panel data find widespread random and temporary movements in individual income poverty and welfare program use that would seem to suggest a potentially significant insurance demand for redistribution programs 2 the results from one study for example indicate that while four to five percent of the total u s population could be classified as persistent recipients of welfare program benefits between 1969 and 1978 receiving program benefits in at least five of those years over one quarter of the u s population participated in welfare programs at least once over this same ten year period 9 74 in the past researchers estimating nonrecipient support for income transfer programs have considered only one of these two motives while ignoring the other 3 this paper extends the examination of the demand for income redistribution by integrating the public good and social insurance demand motives into one model the first part of the paper sets up the individual s decision model for income redistribution one consequence of interacting the public good and social insurance motives into one model is that support for higher benefit payments is expected to come from the tails of the income distribution low income individuals both recipients and nonrecipients benefit directly from the reduced risk of income randomness while high income

determinants and effects of income diversification amongst farm households in burkina faso using four years of household data from three agroecological zones in burkina faso sahelian sudanian and guinean the article examines the determinants and effects of household income diversification harvest shortfalls and terms of trade are found to drive diversification but land constraints do not income diversification is associated with higher incomes and food consumption and more stable income and consumption over years

disaggregated rural economywide models for policy analysis summary this paper presents a disaggregated rural economywide modeling drem approach to explore how agricultural and trade policy reforms play out within rural economies of less developed countries ldcs drems combine the strengths of aggregate computable general equilibrium cge and microagricultural household models we calibrate our model with new microsurvey data from central mexico and we use the model to explore the impacts of policy changes on individual rural household groups as well as on the rural economy as a whole simulations highlight how rural market constraints and heterogeneous household responses shape the outcomes of policy reforms

the political economy of immigration law impact of simpson rodino on the united states and mexico about two years ago the united states passed the immigration reform and control act also called the simpson rodino bill of 1986 the act called for increased enforcement of migration policy employer sanctions and amnesty for those who could prove continuous residence since 1982 despite considerable discussion and debate prior to the act the legislation was passed without any comprehensive economic analysis of its potential impact on the united states or its main source of undocumented immigration mexico notwithstanding the politically charged atmosphere surrounding the bill the sense among many in congress and the white house that we need to restore control over our borders and the determination by mexico to stay out of what it regarded as a domestic u s legislative matter the absence of attention to basic economics in a bill so fundamental to the performance of both countries was surprising in this paper we shall look at some implications of the recent immigration law for both economies given their widely differing levels of income and productivity the challenges each faces to restructure its economy given increased international competitiveness and the particular problems and opportunities presented by a common border with growing labor market interdependence by our calculations the economic opportunity cost of simpson rodin o as compared to continuation of the prior status quo will add up to a present value of 110 billion between now and the year 2000 a general equilibrium approach to the problem of migration policy indicates that the united states has even more to gain than mexico from greater accessibility to mexican labor in the next decade than simpson rodino would permit however the gains to capital and the majority of higher skilled workers would be partially offset by slower earnings growth for the lowest 10 percent of its wage earners mexico on the

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

public choice and public policy the vulnerability of economic advice to the interpretation of politicians the confidence with which politicians defend their policies is in marked contrast to the qualifications which academic researchers attach to their results the difference is indicative of a failure of the political market whereby politicians have an incentive to select policies for electoral and ideological reasons and to minimise any uncertainty associated with policy effectiveness in this scenario dissension between economists is of value if it alerts individuals to the sensitivity of policy answers to the framework in which they are derived moreover with government failure public choice analysts are faced with the problem of how best to amend policy advice in order to allow for potential distortion at the hands of politicians

does income inequality raise aggregate saving this paper reviews analytically and empirically the links between income distribution and aggregate saving consumption theory brings out a number of direct channels through which income inequality can affect overall household saving positively in most cases however recent political economy theory points toward indirect negative effects of inequality through firm investment and public saving on aggregate saving on theoretical grounds the sign of the saving inequality link is therefore ambiguous this paper presents new empirical evidence on the relationship between income distribution and aggregate saving based on a new and improved income distribution database for both industrial and developing countries the empirical results using alternative inequality and saving measures and various econometric specifications on both cross section and panel data provide no support for the notion that income inequality has any systematic effect on aggregate saving these findings are consistent with the theoretical ambiguity q 2000 elsevier science b v all rights reserved

on migration and risk in ldcs the authors develop the hypothesis that aversion to risk rather than expectations of higher income is the primary motivation for rural urban migration in developing countries this hypothesis maintains that an optimizing risk averse small farmer family will try to place a family member in the urban sector in order to diversify its income portfolio an additional hypothesis related to risk is also considered at the individual rather than the family level annotation

a test of dual labor market theory despite substantial differences in their views of the appropriate policy response to the existence of poverty neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis this paper presents a test of the two central propositions of dual market theory 1 the existence of two distinct labor markets with different wage setting mechanisms and 2 the existence of barriers to mobility between the labor markets we find considerable support for both hypothesis estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations the one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience the other equation is flat with no returns to human capital these two equations resemble the predictions of dual market theory for the primary and secondary markets respectively further we present evidence that at least some non white workers are involuntarily confined to the secondary market this crowding of minority workers into the low wage labor market accounts for a substantial portion of white non white wage differences we interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels in addition combining the efficiency wage argument with the observation that much of the white non white wage difference is explained by the exclusion of non whites from the primary sector suggests an explanation for the persistance of wage differences this abstract was borrowed from another version of this item

premium subsidies and social health insurance substitutes or complements premium subsidies have been advocated as an alternative to social health insurance these subsidies are paid if expenditure on health insurance exceeds a given share of income in this paper we examine whether this approach is superior to social health insurance from a welfare perspective we show that the results crucially depend on the correlation of health and productivity for a positive correlation we find that combining premium subsidies with social health insurance is the optimal policy

budget effects of health care vouchers abstract several proposals aim at developing private insurance markets as a substitute for government financing of health care spending reform proposals typically include the use of the fiscal system we look at the effects of vouchers as an instrument for inducing individuals to opt out from public health insurance plans we show that vouchers do lead individuals mainly good health risks to opt out from the social program this is accompanied by an overall increase in government spending due to transfers to be made unless significant savings due to moral hazard control are available this may run against the government s objective of public spending containment the result is fairly general and does not depend on the existence of a solidarity component as it has been commonly argued

public health insurance and optimal income taxation abstract if individuals differ not only in their inherent capacity to earn income but also in the probability that they will fall ill can subsidized public health insurance be justified on the grounds that it serves as an efficient tool to redistribute welfare this question is analyzed in a model where the social welfare function is a weighted average of individual expected utilities and where taxation is by a linear income tax the answer is yes except in certain special cases

optimal social health insurance with supplementary private insurance abstract this paper investigates the structure of a national health service in which there is compulsory social insurance covering a package of essentials a given part of individuals health expenditure and supplementary private policy topping up the remaining services the latter insurance contract provides for a co payment by patients limiting the so called third party payer effect thus an individual s health expenditure is divided into three parts the first covered by social insurance the second by a private policy and the third out of pocket such mixed system design has received increasing attention in recent years and has been adopted by several industrialized countries the conditions for optimal rates of social insurance coverage and of private coinsurance are analysed and discussed the optimality requirements refer to efficiency as well as equity concerns

majority rule and the public provision of a private good this paper extends the literature on the socialization of commodities by developing a model of voting over the public provision of a private good health care

voluntary public health insurance we look at the consequences of allowing public health insurance puhi to be voluntary when its coverage can be supplemented in the market puhi redistributes with respect to risk and income and the market is affected by adverse selection we argue that making puhi voluntary does not lead to its collapse since individuals always participate in it additionally in some cases a voluntary puhi scheme increases market efficiency because participation in it sends a signal to private insurers of an individual s health risk type the welfare consequences depend on the status quo if in the status quo no political support exists for a compulsory puhi making it voluntary constitutes a pareto improvement and in some cases all individuals are strictly better off if instead the status quo implements compulsory puhi making it voluntary then results in less redistribution

the parallel market of illegal aliens a computational approach abstract this paper develops the notion of illegal aliens as a parallel market in coexistence with the regular market of legal labor in the presence of both price controls on legal labor by minimum wage legislation and quantity controls on illegal aliens by immigration laws illegal aliens involve not only rural urban migration but also tax evasion and deportation costs we develop an analytical equilibrium structure which links markets for legal labor and illegal aliens illustrate how much an equilibrium can be computed and explore some implications of the linkage using united states data

fundamentals uncertainty bubbles and exchange rate dynamics abstract using a monetary model of exchange rate determination we study exchange rate dynamics with bubbles which depend on stochastic market fundamentals these dynamics can be either stochastically stable or unstable and either monotonic or non monotonic including cyclic in an extreme case they converge with probability one and exhibit cyclic movements implications for the analysis of time dependent regime shifts are also explored exchange rates with bubbles are likely to appear less volatile than the fundamentals in finite samples both the variance bounds and cointegration tests might thus be ineffective in testing the absence of bubbles under fundamentals uncertainty

undocumented mexico u s migration and the returns to households in rural mexico this paper presents estimates of net income gains to a sample of households in rural mexico from sending migrants illegally to the united states correcting for sample selectivity bias and it examines the role of expected income gains in driving illegal mexico u s migration there is no evidence that people who migrate illegally to the united states are above average contributors to household income either as workers in mexico or as mexico u s migrants however other things being equal villagers who are in the best position to contribute to household income as workers in mexico are positively selected not to migrate to the united states

the utility maximizing government economic adviser a comment the author drawing on his experience as a chief economic adviser deputy secretary in the uk government 1973 76 and occasional adviser in the 1980s denies that his previous economic analyses of advice giving support the thesis that government economic advisers become the slaves of politicians in power