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Liqun Liu, Andrew J Rettenmaier, Thomas R Saving
January 11, 2006
Abstract
Two important unresolved issues in the evaluation of health care programs are the treatment of indirect costs and the selection of the appropriate discount rate. This paper emphasizes the role of distortionary taxation in addressing these issues. It establishes that: (i) indirect government-paid costs should be treated differently from indirect privately-paid costs; (ii) direct and indirect government costs of a health program should be discounted by the gross rate of return, while consumers' monetary valuations of the program's effects, less direct private costs, should be discounted at the net rate of return; and (iii) the present value of total government costs should be multiplied by a marginal cost of funds before it is comparable to the present value of net private benefits.
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Sarah L Stafford
July 27, 2006
Abstract
Although most models of environmental compliance are based on a variation of the rational polluter model, regulated entities may not always intentionally decide to violate based on the relative costs and benefits of doing so. According to the complexity critique, a significant amount of noncompliance may be the result of ignorance about the requirements of the law. Using hazardous waste regulations as a case study, this paper examines the role that rationality and complexity play in environmental compliance. The results suggest that both are necessary to explain hazardous waste compliance behavior. In support of the rational polluter model, the results show that factors which increase the cost of compliance also increase the likelihood of a violation while factors that increase the likelihood of inspections and detection decrease the probability of a violation. In support of the complexity critique, the results show that larger facilities and facilities of multi-plant companies are less likely to violate, while facilities that are subject to more complex regulations are more likely to violate. Also in support of the complexity critique, facilities learn from past inspections and facilities in states with programs directed toward reducing complexity are less likely to violate. This mixed support holds across various subgroup of facilities, although there does appear to be some difference in the factors that contribute to different types of violations. In particular, non-management violations appear to be driven less by a rational comparison of the costs and benefits of violations than by the complexity of regulations.
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Jan Guldager Jørgensen, Philipp J. H. Schröder
July 10, 2006
Abstract
This paper presents a two-country intra-industry trade model with bilateral ad valorem tariffs and fixed export costs that are heterogeneous across firms. In this model not all firms will choose to export. We examine the effects of reciprocal changes in the tariff and the fixed export barrier on the number of firms, firm profits, tariff revenue and consumer welfare. We show that both types of trade barriers reduce (increase) the number of exporting (pure domestic) firms. However, the sum of available home and foreign varieties increases for small tariffs. Firm profits are falling in both tariff and fixed export cost barriers. Tariff revenue falls when fixed export costs increase whereas we have a Laffer curve effect for the tariff. Welfare falls when fixed export costs increase and increases for small tariffs and falls for large tariffs, i.e. there exists a welfare maximizing tariff.
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Bharat Bhole
July 10, 2006
Abstract
This paper analyzes how university patents encourage university-firm collaboration for technology transfer. Focusing on factors other than competition, I find that the two may not collaborate either because the firm finds in-house development cheaper, or because of a disagreement about the potential product's profitability. In both cases, university patents can encourage collaboration by increasing the invention's diffusion time, and therefore play a role even in the absence of any competition. The model also suggests instances in which we can expect to see a greater impact of university patents on collaboration. Even when patents increase collaboration, they do not necessarily increase welfare. The findings are relevant for the debates on the Bayh-Dole Act, which gave universities a blanket right to patent and license inventions resulting from federally funded research.
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Eckhard Janeba
November 14, 2006
Abstract
Many political issues like abortion, gay marriage or assisted suicide are strongly contested because individuals have preferences not only over their own choice but also about other individuals' actions. The paper models and compares the equilibria of three institutional regimes (ranging from centralized to decentralized decision making) in an economy where individuals choose their residence and vote over a single-dimensional regulatory policy at the regional and national level. Moral federalism describes a phenomenon where the majority of people who favor a restrictive policy try to impose their preferences through the federal government on jurisdictions where permissive policies are favored. The majority group's gain is larger, the smaller it is in size relative to the entire population. At the normative level, the outcome under centralized and decentralized decision making is the worst when societies are polarized. Allowing the federal government to restrict regional choices is never optimal.
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Abdulkadir Civan, Michael T. Maloney
September 26, 2006
Abstract
Our maintained hypothesis is that drug development responds to the intensity of consumer demand. We look at the distribution of drug development by disease and link this to the economic harm caused by disease as measured by mortality. Mortality data represent the net effect of human frailty and the efficacy of the existing drugs on the market. If people continue to die from a given condition then existing drugs are not perfect and there are potential profits from developing a more effective compound. We aggregate economic harm worldwide and into three broad regions: the United States, other developed countries, and underdeveloped countries. We find that economic harm motivates the distribution of drug development across diseases, but it is economic harm in the United States alone that matters.
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Jose Anson, Olivier Cadot, Marcelo Olarreaga
December 3, 2006
Abstract
This paper provides a new approach to the evaluation of pre-shipment inspection (PSI) programs as ways of improving tariff-revenue collection and reducing fraud when customs administrations are corrupt. We build a model highlighting the contribution of private surveillance firms to the generation of information and describing how incentives for underinvoicing and collusive behaviour between importers and customs are affected by the introduction of PSI. It is shown theoretically that the introduction of PSI has an ambiguous effect on the level of fraud. Empirically, our econometric results suggest that the introduction of PSI services increased underinvoicing in Argentina and Indonesia, and reduced it in the Philippines.
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Yazid Dissou
September 15, 2006
Abstract
Emissions trading with output-based allocation (OBA) of emissions allowances is gaining popularity as a mean to address sectoral distribution issues related to the use of market-based instruments in pollution control. Using a dynamic general equilibrium framework, this paper assesses the potential trade-off between efficiency and uneven sectoral distributional effects. It compares OBA and other alternative emissions trading systems, with special attention to the heterogeneity among energy-intensive industries. Because abatement is achieved at a higher marginal cost with OBA, it is less efficient than emissions trading systems in which permit revenues are used to reduce payroll taxes. Nonetheless, the implicit output subsidy in OBA improves the sectoral distributional outcome of the abatement policy to the benefit of energy-intensive industries as a whole. The simulation results also suggest that energy-intensive industries that do not produce energy are the main beneficiaries of OBA. In the new carbon-constrained environment, energy intensive industries that produce energy could not benefit from OBA.
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Michele Campolieti
May 22, 2006
Abstract
I examine the effects of a change in Canada Pension Plan disability program adjudication criteria on individual reports of medical problems. The estimates from this paper suggest that more stringent screening requirements are associated with a statistically significant decline in the reports of hard-to-diagnose conditions, such as low back pain. On the other hand, my estimates also indicate that changes in adjudication requirements do not have a statistically significant effect on the reports of easier to diagnose conditions.
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Karen M. Pence
July 16, 2006
Abstract
Researchers may want to estimate the percentage change of a variable, such as household wealth or corporate profits, that takes on economically significant nonpositive values. Using the logarithmic transformation, however, requires discarding observations with nonpositive values. This paper describes a possible solution to this problem-the inverse hyperbolic sine transformation-and shows how to implement this transformation optimally in the case of median regression. As an illustration of the usefulness of this transformation, I revisit a specification sometimes used to estimate the effect of tax incentives on household saving.
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Audrey Light, Alfonso Flores-Lagunes
May 11, 2006
Abstract
The value of sibling data for identifying the causal effect of schooling on wages hinges on our ability to eliminate biases due to the mismeasurement of schooling. Analysts typically assume errors in schooling reports are "classical." In this study, we use generalized method of moments to estimate the parameters of a range of measurement error models, including forms of both classical and mean-reverting error models; we estimate the models using a sample of identical twins and a sample of non-twin siblings. The results of likelihood ratio-type tests reveal that variants of classical measurement error models fit both datasets about as well as more flexible models.
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Heather Bednarek, Thomas D. Jeitschko, Rowena A Pecchenino
February 15, 2006
Abstract
We present a model in which agents value food, leisure and health, and take into account how their food consumption and leisure affect their health. Drawing insights from behavioral psychology and medical practice, agents face adjustment costs in choosing consumption and leisure. We find that recent increases in obesity rates are not cause for concern from either the standpoint of individually assessed well-being, nor necessarily of the medical practitioner. However, the fact that agents who hope to adjust their lifestyles face adjustment costs indicates that there is potential for policy in increasing individual welfare: first, by taking measures that may decrease the incidence of supra-optimal consumption and leisure and, second, by taking measures that may facilitate behavioral change. However, it must be recognized, especially in the latter case, public policy may be limited by diverse circumstances faced by individuals that will not be amenable to general "one-size-fits-all" types of policies.
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Fei Liu, David M. Zimmer
July 28, 2006
Abstract
The switching of health insurance plans and health care utilization are potentially correlated with both observable and unobservable information. This paper presents a two-period model of health care utilization, and attempts to account for unobserved heterogeneity that simultaneously affects utilization and the decision to switch plans. Data used in this paper are drawn from the Medical Expenditure Panel Survey. Results indicate that non-HMO enrollees increase their utilization of non-emergency related care prior to switching to HMOs, and they decrease utilization after switching. Conversely, individuals enrolled in HMOs report lower levels of utilization before and higher utilization after they switch to non-HMOs.
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Daniel L Millimet, Le Wang
February 14, 2006
Abstract
We compare several income distributions in urban China in the late 1980s and mid-1990s using tests for stochastic dominance in order to decompose gender differentials. Examination of the entire distribution gives insight into the uniformity of such differentials across the distribution. Moreover, tests based on stochastic dominance allow for robust welfare comparisons. Our analysis reveals: (i) large and increasing differentials in predicted earnings across gender in the lower tail of the distribution, but few differences in the upper tail, (ii) discrimination explains one-third to one-half of the total predicted earnings differential in the lower tail of the distribution, and little of the disparity in the upper tail, (iii) gender equity has eroded during China's economic transition, particularly for the youngest cohort, and (iv) significant nonuniformities in earnings differentials suggest the need to broaden analyses of gender differentials to incorporate earnings dispersion.
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M. Christopher Auld
April 28, 2006
Abstract
The elasticity of risky sexual behavior to changes in local HIV infection prevalence is estimated using a longitudinal survey of the sexual behavior and health of gay men in San Francisco during the 1980s. An average respondent decreases risky behavior by about 5% in response to a 10% increase in disease prevalence. The average response obscures substantial variation across respondents: High-risk people reduce risky behavior less than low-risk people as prevalence increases. This result is consistent with the predictions of theoretical economic epidemiology and has implications for epidemic dynamics.
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James E Anderson, Leslie Young
November 13, 2006
Abstract
We model imperfect contract enforcement when the victims of default resort to spot trading because the act of repudiation reveals a favorable outside option. We show that enforcement imperfection is essentially distinct from the contract incompleteness analyzed in the previous literature. Improved contract execution benefits traders on the excess side of the spot market by attracting potential counter-parties, but harms them by impeding their exit from unfavorable contracts. Multiple optima are possible, with anarchy a local optimum, perfect enforcement a local minimum and imperfect enforcement a global optimum. LDCs exhibit parameter combinations such that imperfect enforcement may often be optimal.
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Raffaele Miniaci, Maria Laura Parisi
October 31, 2006
Abstract
In the light of recent policies aiming at raising the computer literacy of young generations and at reducing the digital divide, this paper analyzes to what extent the probability of an individual having computer abilities is affected by the computer skills of her household's other members, i.e. if there are significant within household peer effects. We show how peer effects can be identified when skills are measured with a continuous variable and the learning costs are increasing and convex. Our application on a sample of Italian households indicates that peer abilities within a family significantly increase the individual probability of being skilled.
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Thomas J Kniesner, W. Kip Viscusi, James P Ziliak
January 31, 2006
Abstract
Our research presents new evidence on the age pattern of the implicit value of life revealed from workers' differential wages and job safety pairings. Although aging reduces the number of years of life expectancy, aging can affect the value of life through an effect on planned life-cycle consumption. The elderly could, a priori, have the highest implicit value of life if there is a life-cycle plan to defer consumption until old age. We find that largely due to the age pattern of consumption, which is non-constant, the implicit value of life rises and falls over the lifetime in a way that the value for the elderly is higher than the average over all ages or for the young. There are important health policy implications of our empirical results. Because there may be age-specific benefits of programs to save statistical lives, instead of valuing the lives of the elderly at less than the young, health policymakers should more correctly value the lives of the elderly at as much as twice the young because of relatively greater consumption lost when accidental death occurs.
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Austan Goolsbee
April 5, 2006
Abstract
With fixed costs of developing technology, taxes can generate large efficiency costs by slowing the rate of diffusion and these costs are not accounted for in conventional analyses. This paper illustrates the potential importance of this idea in the context of taxes on broadband Internet access at an early stage of its existence by combining data on individual demand by area with data on supplier entry into those markets. Applying a tax to broadband in 1998 would have reduced the quantity and generated a large deadweight loss in the conventional model but when the analysis accounts for the fixed costs of entering new markets, taxes lead to delayed entry in several markets. In these places, the lost consumer surplus is additional deadweight loss and it more than doubles the true efficiency costs from taxation. The conventional model also dramatically understates the share of the tax burden borne by consumers.
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Scott E Carrell, Susan A Carrell
April 28, 2006
Abstract
The American School Counselor Association (ASCA) recommends that there be no more than 250 students to each school counselor. Although numerous studies in the education literature show that school counselors play a positive role in educating children, to our knowledge, this is the first study answering the question of whether lower student to counselor ratios, all else equal, improve student outcomes. Using data provided to us by Florida's Alachua County School District and the University of Florida Counselor Education Department, we show that lower student to counselor ratios decrease both the recurrence of student disciplinary problems and the share of students involved in a disciplinary incident. These effects are greater for minority and low-income students. The fixed-effect models used, control for all unobserved heterogeneity across schools, isolating the effects on discipline from the within-school changes in the student-to-counselor ratio. The empirical methodologies employed produce unbiased estimates as long as the variation in the student to counselor ratio is not driven by unobserved factors that affect disciplinary outcomes.
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Pierre M Regibeau, Katharine E Rockett
September 19, 2006
Abstract
We study a two-country model where two firms, one domestic and the other foreign, must decide when to introduce their new product into a market. The home government may apply an import tariff, an administrative delay, or both to the product of the foreign firm. An administrative delay imposes a waiting period between the time when the quality of the foreign product is determined and the time when the product can actually be sold. Our main interest is the differential effect of the tariff and the administrative delay on the timing of new product introductions and the resulting change in home, foreign and world welfare. We show that administrative delays are less efficient instruments for maximizing home welfare than tariffs. With a tariff, the home government can affect the timing of entry to ensure that the domestic firm moves first at the socially optimal date. Although an optimally chosen delay can achieve the same pattern of introduction, it does not yield any tariff revenues. As a result, if the tariff may be set optimally, administrative delays are not used in a discriminatory manner. If trade liberalization constrains the import tariff to be below its domestically optimal level, discriminatory administrative delays may become part of the optimal policy of the home country. As the optimal delay policy leads to lower levels of world welfare than the optimal tariff, trade liberalization can be welfare decreasing.
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Joel Waldfogel, Julie Wulf
July 10, 2006
Abstract
This paper examines the effects of multimarket contact on advertising prices in the U.S. radio broadcasting industry. While it is in general difficult to measure the effect of multimarket contact on competition, the 1996 Telecommunications Act substantially relaxed local radio ownership restrictions, giving rise to a major and exogenous consolidation wave. Between the years of 1995 to 1998, the average extent of multimarket contact in major U.S. media markets increased by 2.5 times. Importantly, the extent of change in multimarket contact varies across markets, and the change in multimarket contact varies separately from the change in concentration. Using a panel data set on 248 geographic U.S. radio broadcast markets, 1995-1998, we find that multimarket contact has little effect on advertising prices. This paper contributes to the empirical literature on multimarket contact by analyzing a different industrial context and using longitudinal data surrounding an ownership deregulation.
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David J. Cooper, James B Rebitzer
July 10, 2006
Abstract
We analyze the effect that competition between HMOs has on the cost and quality of medical services. Our key result is that increasing competition enhances consumer utility while also moderating the impact of managed care on quality and costs. Indeed, we find that heightened competition between HMOs can cause an overall increase in care quality and costs. This result derives from an important, but overlooked, feature of the managed care market place. Plans differentiate themselves by the size and depth of their provider network. The resulting competition to attract physicians exerts a moderating effect on the incentive contracts HMOs write with providers.
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Catalina Amuedo-Dorantes, Sara De la Rica
April 21, 2006
Abstract
This paper presents new evidence on the role of gender segregation and pay structure in explaining gender wage differentials of full-time salaried workers in Spain. Data from the 1995 and 2002 Wage Structure Surveys reveal that raw gender wage gaps decreased from 0.24 to 0.14 over the seven-year period. Average differences in the base wage and wage complements decreased from 0.09 to 0.05 and from 0.59 to 0.40, respectively. However, the gender wage gap is still large after accounting for workers human capital, job and pay structure characteristics, and female segregation into low-paying industries, occupations, establishments, and occupations within establishments.
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Jonathan P Caulkins, Peter Reuter, Lowell J Taylor
January 24, 2006
Abstract
The standard model of markets for illicit drugs predicts that tougher enforcement against sellers will raise prices; yet cocaine and heroin prices have fallen substantially during a period of massive increases in enforcement. We present a model in which the basic mechanisms at work in the textbook model may be substantially altered by an important feature of illegal marketsviolence that creates inheritable heterogeneity along a dimension that both determines relevant production cost and imposes externalities on other suppliers. Dealers frequently make use of violence and threat of violence in the normal course of trade. A seller who is particularly effective in the use of violence may face lower enforcement costs than other dealers and generate an external cost borne by those sellers. Together these features generate a number of counter-intuitive policy implications. For example the arrest of a particularly violent dealer reduces external costs borne by other dealers. The net effect is a possible reduction in costs for the marginal dealer and hence a reduction in price.
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Yolanda K. Kodrzycki, Pingkang Yu
August 18, 2006
Abstract
We develop a flexible, citations- and reference-intensity-adjusted ranking technique that allows a specified set of journals to be evaluated using a range of alternative criteria. We also distinguish between the influence of a journal and that of a journal article, with the latter concept arguably being more relevant for measuring research productivity. The list of top economics journals can (but does not necessarily) change noticeably when one examines citations in the social science and policy literatures, and when one measures citations on a per-article basis. The changes in rankings are due to the broad interest in applied microeconomics and economic development, to differences in citation norms and in the relative importance assigned to theoretical and empirical contributions, and to the lack of a systematic effect of journal size on influence per article. We also find that economics is comparatively self-contained but nevertheless draws knowledge from a range of other disciplines.
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Julio R Videras, Ann L Owen
April 19, 2006
Abstract
Using a broad multi-country sample, we find that individuals who contribute to the public good of environmental protection report higher levels of life satisfaction and happiness. We show that this result is robust to the use of an instrumental variables technique and provide several pieces of evidence that this positive relationship between contributions and well-being is due to a warm-glow motive. First, well-being does not increase proportionally with contributions, consistent with the warm-glow model that it is the act of giving that generates utility. Second, individuals who think of themselves as socially responsible derive greater satisfaction from their contribution to environmental protection as would be the case if the contribution reinforces a favorable self image. Interestingly, conforming to a social norm may be a motivation for some individuals, but the presence of this motive depends on individual attitudes towards social responsibility. Among those who express the highest level of social responsibility, conforming to the norm makes them less satisfied with life. However, individuals with a moderate level of social responsibility do report higher levels of happiness when their public goods contributions conform to societal norms.
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Satya P Das, Rajat Deb
August 18, 2006
Abstract
This paper analyzes the problem of child labor in an infinite-horizon dynamic model with a variable rate of time preference and credit constraints. The variability in the rate of time preference leads to the possibility of multiple steady states and a poverty trap. The paper considers the long-run and short-run effects of an array of policies like enrollment subsidy, improvement in primary education infrastructure, lump-sum subsidy, and variations in loan market parameters. We distinguish between policies that reduce child labor in the long run only in the presence of a variable discount rate and other policies which work whether or not the discount rate is variable. Credit-related policies belong to the former group. Policies that reduce child labor and increase family consumption in the long run may have an adverse effect of lowering consumption in the short run.
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Josh Ederington, Jenny Minier
November 13, 2006
Abstract
Barriers to trade are commonly viewed as a result of political systems in which politically influential groups benefit from and successfully lobby for protection. However, trade policy is a highly inefficient tool for redistributing income. Although recent theoretical research has focused on explanations of why (inefficient) trade barriers might be preferred to more direct means of redistribution, this research has been carried out with little empirical support. We address this gap in the literature with an exploratory cross-country empirical investigation of the economic factors correlated with a reliance on tariffs over subsidies. We find that the existing theoretical literature is consistent with the cross-country evidence.
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Ching-Yi Chung, Gary Richardson
December 4, 2006
Abstract
Eight states established deposit insurance systems between 1908 and 1917. All abandoned the systems between 1921 and 1930. Scholars debate the costs and benefits of these policy experiments. New data drawn from the archives of the Federal Reserve Board of Governors demonstrate that deposit insurance influenced the composition of bank suspensions in these states. In typical years, suspensions due to runs fell. Suspensions due to mismanagement rose. During the penultimate year of each system, the bank failure rate rose to an unsustainable height and the system ceased operations.
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Benjamin Alamar, Stanton A. Glantz
March 17, 2006
Abstract
The dominant model of addictive consumption in economics is the theory of rational addiction. The addict in this model chooses how much they are going to consume based upon their level of addiction (past consumption), the current benefits and all future costs. Several empirical studies of cigarette sales and price data have found a correlation between future prices and consumption and current consumption. These studies have argued that the correlation validates the rational addiction model and invalidates any model in which future consumption is not considered. An alternative to the rational addiction model is one in which addiction spreads through a population as if it were an infectious disease, as supported by the large body of empirical research of addictive behaviors. In this model an individual's probability of becoming addicted to a substance is linked to the behavior of their parents, friends and society. In the infectious disease model current consumption is based only on the level of addiction and current costs. Price and consumption data from a simulation of the infectious disease model showed a qualitative match to the results of the rational addiction model. The infectious disease model can explain all of the theoretical results of the rational addiction model with the addition of explaining initial consumption of the addictive good.
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Drusilla K Brown
August 8, 2006
Abstract
Child labor-free product labels are efficiency-enhancing when child welfare is a public good only if resources are generated to enhance the well-being of children. However, for a small price-taking economy with at least as many goods as factors and competitively supplied labels, the premium paid by consumers is dissipated by a production inefficiency associated with the adult-only technology. Child labor will decline if labeling firms bid the adult wage above the threshold at which families begin to withdraw their children from the workforce. Alternatively, monitoring agencies may offer consumers a donation label, which claims that some fraction of the purchase price will be donated to a child-welfare fund. A donation label is more efficient than the child labor-free label as it eliminates the production inefficiency and the inefficient competition among certification agencies. The standard contract offered in the child labor free labeling sector has elements of a donation label.
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Naci H. Mocan, Erdal Tekin
May 1, 2006
Abstract
Although there is a sizeable literature on the effect of private school attendance on academic student outcomes, the number of studies that investigate the impact of school sector on non-academic outcomes is limited. Using a rich data set, we analyze the impact of Catholic school attendance on the likelihood that teenagers use or sell drugs, commit property crime, have sex, join gangs, attempt suicide, or run away from home. We employ propensity score matching methods to control for the endogeneity of school choice. Catholic school attendance reduces the propensity to use cocaine and to have sex for female students. However, it increases the propensity to use and sell drugs for male students.
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Ming-Jen Lin
January 12, 2006
Abstract
This paper analyses the personnel records of a Taiwanese auto dealer employing three distinct internal labor markets (ILMs), adding new evidence that builds upon recent empirical and theoretical works on ILMs. We show that the public learning model proposed by Farber and Gibbons (1996) is not supported in general by our data because the behaviors of empirical wage residuals covariance matrix contradict the martingale predictions derived from the their model. However, public learning may not be unrealistic once individual specific learning speed is introduced. Furthermore, we find that the positive effects of levels, on both salary and bonus equations, are smaller under a fixed effects model than under an OLS (combined) model. However, part of the wage variations is contributed by individual heterogeneity rather than the hierarchy itself. Evidence also shows that education plays an important role in the determination of levels.