COSTLY INTERMEDIATION AND CONSUMPTION SMOOTHING

This paper studies quantitatively how intermediation costs affect household consumption loans and welfare. Agents face uninsurable idiosyncratic shocks to labor productivity in a production economy with costly financial intermediation and a borrowing limit. Reducing intermediation costs has two effects: (1) For a given decrease in the interest rate on borrowing, agents' ability to smooth consumption over time improves. (2) The demand for loans increases, which increases the interest rate. The net welfare gain of reducing intermediation costs from 3.927% (U.S. level) to 1% is about 1.14% of equivalent consumption in the baseline economy for an endogenous interest rate and 1.90% for an exogenous interest rate. The gains are distributed unevenly: households at the bottom wealth decile improve welfare by 3.96% and 5.86% of equivalent consumption, while those at the top decile have welfare gains of 0.35% and 0.2%, respectively. Sufficiently high intermediation costs eliminate borrowing and hence the welfare gain of reducing costs is not substantial. The welfare analysis includes transitional dynamics between steady states. (JEL D91, E60, G38)     

COSTLY EXTERNAL FINANCE AND INVESTMENT EFFICIENCY IN A MARKET EQUILIBRIUM MODEL

The corporate finance literature suggests that a financially constrained firm invests less than an identical unconstrained firm. This does not imply that financial frictions cause firms to invest less than in a frictionless economy. When firms compete for investment funds, an increase in financial frictions can lead individual firms to increase their investment levels. A greater than the frictionless level of investment is likely in low-productivity firms, in cash-rich firms, and in firms with cheap external capital. Government programs that make capital cheaper for small firms may lead to lower levels of investment for all firms and decrease efficiency (JEL O16, E22, E44, G20)     

ANTICIPATED INFLATION AND AGGREGATE EMPLOYMENT: THE CASE OF COSTLY PRICE ADJUSTMENT

Even if inflation is perfectly anticipated, a firm that finds nominal price adjustments sufficiently costly will reset its price at multi-period intervals. Consequently, its average output will change in a direction that depends on properties of its profit function. On the basis of this observation, which does not involve money illusion, the paper shows that anticipated inflation can stimulate aggregate employment through a process that entails changes in the factor demands of individual monopolistic firms and in the intersectoral allocation of consumer expenditure. Simulations indicate, however, that the gain in aggregate employment is likely to be modest.     

STICKY WAGES AND IMPLICIT CONTRACTS: A TRANSACTIONAL APPROACH

Sticky wages have been explained in the recent implicit contracts literature as a risk shifting device. Risk averse employees purchase insurance via an implicit contract from risk neutral firms. This paper offers an alternative explanation of the phenomenon. Various alternative organizational forms for labor markets are analyzed from a transactions cost viewpoint. Observed labor market institutions (including sticky wages) are seen as ways to economize on transactions costs. In fact, it is argued that sticky wages would be observed even if workers were risk neutral. Thus the emphasis on risk shifting in the implicit contracts literature seems misplaced.
A fall (in price) arising from temporary distress will be attended probably with no correspondent fall in the rate of wages: for the fall in price, and the distress, will be understood to be temporary, and the rate of wages, we know, is not so variable as the price of goods.     

SOCIALLY OPTIMAL PLEA BARGAINING WITH COSTLY TRIALS AND BAYESIAN JURIES

This paper investigates optimal plea bargaining when trials are costly, defendant guilt is uncertain, and juries rationally respond to the plea bargaining policy employed. The model shows that when innocence rates among the arrested are low, it is optimal to offer all defendants pleas that are acceptable to guilty and innocent defendants. However, as the innocence rate becomes more significant, optimal plea policy switches to one in which plea offers are only acceptable to guilty defendants. However, even when optimal, the societal benefits to such separating policies are limited due to constraints on the frequency such offers can be made. (JEL D6, D8, K4)     

OPTIMISTIC BEHAVIOR WHEN A DECISION BIAS IS COSTLY: AN EXPERIMENTAL TEST

The existence of optimism when biased decisions are costly is investigated experimentally. Subjects make an informed guess about an exogenously determined event: the outside temperature a couple of days later. Payments in the control group depend only on how close the guess was to the realized temperature, while payments in the treatment group also depend positively on realized temperature. The data show the treatment group subjects to guess higher temperatures, that is, higher payments, compared with the control group. Results thus indicate that there is optimism also when a decision bias is costly. (JEL C91, D81, D84)     

NICHE THEORY AND SOCIAL MOVEMENTS: A POPULATION ECOLOGY APPROACH

The application of niche theory to current theories of social movements makes it possible to combine some seemingly disparate hypotheses under a more comprehensive framework. Several major issues are addressed, including: (1) the factors leading individuals to engage in social movements; (2) the relationship that social movements have to one another; (3) the effects of particular strategies on the success of movements; and (4) the potential limits to the number of social movements at any particular time. This article also makes some recommendations about the types of data that would be needed to test the propositions set forth.     

RISK TAKING FOR ONESELF AND OTHERS: A STRUCTURAL MODEL APPROACH

Economic theory makes no predictions about social factors affecting decisions under risk. We examine situations in which a decision maker decides for herself and another person under conditions of payoff equality, and compare them to individual decisions. By estimating a structural model, we find that responsibility leaves utility curvature unaffected, but accentuates the subjective distortion of very small and very large probabilities for both gains and losses. We also find that responsibility reduces loss aversion, but that these results only obtain under some specific definitions of the latter. These results serve to generalize and reconcile some of the still largely contradictory findings in the literature. They also have implications for financial agency, which we discuss.     

INTEGRATIVE MULTI-LEVEL THERAPY: A COMPREHENSIVE INTERPERSONAL AND INTRAPSYCHIC APPROACH*

Integrative Multi-Level Therapy (IMLT) is a comprehensive interpersonal and intrapsychic approach to clinical assessment and therapeutic intervention with distressed individuals, couples and families. In this article, the principles and practice of IMLT are presented and illustrated with clinical examples. Research support for the IMLT approach is described.     

ENHANCED CITIZENSHIP VERIFICATION AND CHILDREN'S MEDICAID COVERAGE

This article examines a potential unintended consequence of the mandated Medicaid citizenship verification requirements of the 2005 Deficit Reduction Act (DRA). We investigate whether or not these new rules led to an increase in the Medicaid exit rate among enrollees using state administrative data from Georgia. We do this by comparing the exit rate for children enrolled in Medicaid whose first coverage recertification occurs just after implementation of the DRA (which we refer to as a “high impact” first recertification) with those whose first recertification occurs just prior (which we refer to as a “low impact” first recertification). Our analysis suggests that children in the high‐impact first recertification group were about 2 percentage points more likely to exit Medicaid than those in the low‐impact group. Furthermore, these additional exits occurred in racial and ethnic groups more likely to be citizens than noncitizens and prereform estimates suggest that there were very few (roughly 0.10%) noncitizen Medicaid enrollees to begin with. Taken together, our results suggest that the DRA‐enhanced citizenship verification rules led to an increase in Medicaid disenrollment, and thus a reduction in coverage, among citizens. (JEL I18, I38, J13)     

AGENT COMPENSATION AND THE LIMITS OF BONDING

Agents in positions of trust may engage in malfeasance which is difficult to detect. This paper develops a model in which employers seek to control malfeasance by paying wages contingent on imperfect monitoring and agents may be required to pay entry fees or post bonds. We conclude that entry fees which exceed agents' assets are ineffective in controlling malfeasance. As a result, conditions exist in which it is optimal to pay agents more than their opportunity cost. Such conditions lead to an excess supply of applicants and allow employers to engage in discrimination at zero cost to themselves.     

OBESITY AND FAMILY SYSTEMS: A FAMILY FIRO APPROACH TO ASSESSMENT AND TREATMENT PLANNING1

This paper offers a model for conceptualizing interactional patterns in families presenting for treatment of obesity, and suggests a method for organizing assessment and for prioritizing treatment strategies. We use the Family FIRO Model as a framework to organize complex assessment issues, to assign priorities for which issues should be treated first, and to select appropriate treatment techniques that cut across different models of family therapy.     

INDUSTRY EQUILIBRIUM IN NEW PRODUCT RESEARCH AND DEVELOPMENT: A SIMPLE APPROACH

In this paper the economic framework of competition in location and/or product variety is extended to include the uncertainty accompanying new product research and development. A simple approach describing the equilibrium industry structure is first presented. Then the effects on a research industry of parametric changes in research costs such as implied by government drug policies is considered. Contrary to the implications of standard supply and demand analysis, these parametric changes are found to affect the level of research, the extent of new product innovation, and research concentration in an ambiguous fashion. For example, it is shown that an increase in research costs can increase the equilibrium level of expected innovation.     

OPTIMAL COPYRIGHT LENGTH AND EX POST INVESTMENT: A MICKEY MOUSE APPROACH

This paper considers a theoretical model of copyright protection in which the value of an intellectual work changes over time because of depreciation and value‐enhancing ex post investments. The first main finding is that, in the case of a single project, granting infinitely lived copyright protection maximizes social welfare when the return on ex post investments is high relative to the return on the initial investment. We also provide simulation results of our model for the case of multiple heterogeneous projects that show how social welfare varies with the length of copyright protection and the returns on initial and ex post investments. We then consider what our framework says concerning the social‐welfare effects of the 1998 Copyright Term Extension Act. Here we show that, depending on the importance of ex post investments, the act may have either increased or decreased social welfare. Our final analysis considers the social‐welfare implications of replacing fixed‐length copyright protection with Landes and Posner's (University of Chicago Law Review, 70(2), 2003, 471–518) idea of indefinitely renewable copyright protection. We find that implementing indefinitely renewable copyright protection frequently increases social welfare provided the returns on ex post investments are sufficiently large. We also provide a brief history of Disney's Mickey Mouse and argue that the history of that character matches quite well with the predictions of our theoretical approach. (JEL O34, K00, L82)     

I, THOU, AND WE: A DIALOGICAL APPROACH TO COUPLES THERAPY

This paper examines the relational view of the person in Martin Buber's philosophy of dialogue. Shifts toward the relational are considered in the context of human development, gender studies, psychotherapy, and family therapy. A dialogical cpproach to couples therapy is presented, in which partners are encouraged to move toward a more collaborative, empathic relationship–a relationship of I and Thou.     

AGGREGATE DEMAND AND INTEREST RATES: A MACROECONOMIC APPROACH TO THE TERM STRUCTURE

This paper develops a model in which the term-structure of interest rates obtains as an equilibrium outcome of the interactions of firms, households and rationally informed speculators. Exogenous disturbances whose impact effects fall only in the market for short-term bonds generate equilibrium movements in the yield on long-term bonds and the level of investment spending. In the case of risk-averse speculators, a purely transitory, unanticipated shock to the money supply generates a long distributed-lag effect on the level of aggregate demand.