DEMAND FOR NATIONAL PUBLIC GOODS: ESTIMATES FROM SURVEYS

This paper presents an empirical method of estimating aggregate demand functions for national public goods. The technique combines survey responses and tax incidence figures in a probit model. The model provides estimates of average willingness-to-pay for federal government services and simultaneously regresses these estimates on socioeconomic characteristics, thus obtaining estimates of the demand function. The main findings are that demand for defense, space, foreign aid, welfare, education and aid to cities is a concave function of income, a negative function of expenditure level (generally) and dependent upon such characteristics as race, age, education level, and sex.     

A behavioral model of nondurable consumption expenditure

This paper employs survey data in an attempt to produce a behavioral model of nondurable consumption expenditure. This model is then applied to Australian data for the period 1976(1) to 1994(2). Despite empirical difficulties associated with the attainment of some time series data, our results prove encouraging for the adoption of behavioral methodologies in the production of nondurable consumption functions, while casting doubts upon the currently accepted rational expectations permanent income model of nondurable consumption expenditure.     

Participation and level of play in the UK National Lottery and correlation with spending on other modes of gambling

The paper analyses UK data, collected from the Family Expenditure Survey, for over 6000 households. The focus is on participation in, and level of expenditure on, the national lotto game. Controlling for standard demographic, socio-economic and income variables, and some non-standard lifestyle indicators, it examines correlation between lotto play and expenditure on six other forms of gambling as well as on alcohol and tobacco. Correlations with lotto participation and expenditure are found to be positive and strong in most cases. Implications for the regulation of the gambling sector and for taxation policy are outlined and discussed.     

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.     

THE LAW OF DEMAND, POSITIVE SLOPING MARGINAL REVENUE, AND MULTIPLE PROFIT EQUILIBRIA

This paper demonstrates that the conditions for a positively sloping marginal revenue curve are much less stringent than is generally recognized. Simple transformations of any well-behaved convex demand function can easily result in a demand for which marginal revenue is positively sloping. For this reason, positively sloping marginal revenue functions must be considered whenever convex demand functions are analyzed. The existence of positively sloping marginal revenue makes multiple profit equilibria for the firm a very real possibility.     

Is Working with Your Spouse Good for Business? The Effect of Working with Your Spouse on Profit for Rural Businesses

The goal of this article is to uncover more precise and unbiased estimates of the relationships between relationship satisfaction, a copreneurial business structure, and profit. Because of the suspected simultaneity between profit levels, the choice to be copreneurial and relationship satisfaction, a multivariate recursive probit is used to test for endogeneity between these variables. The results of the empirical analysis suggest that spouses self-select into a copreneurial business structure depending on the level of satisfaction they feel in their interpersonal relationships. Additionally, copreneurial businesses with high relationship satisfaction are more likely to have higher profit than if they were non-copreneurial.     

Household Decision-Making and Expenditure Patterns of Married Men and Women in Malaysia

This study tests two opposing models of household behavior, the income pooling hypothesis and the bargaining model, by examining the final decision-making and expenditure patterns of married men and women in Malaysia. The data used is from the responses of 1,778 married persons obtained from a survey of employed Malaysians. The results show that women are often the final decision-makers on everyday household expenditures while men make the final decisions on large household expenditures, but both men and women practice autonomy in decisions related to financial investments. In spending, variations are observed between men and women in their level and proportion of expenditure of certain categories of goods and services. Relative earning share is a significant factor in decision making as well as consumption expenditure. These results tend to support the bargaining model of household decision-making.     

THE USE OF COLLATERAL TO ENFORCE DEBT: PROFIT MAXIMIZATION

Collateral lowers the probability of default. This paper modifies the work of Benjamin (1978) by characterizing the competitive lender as a price-taking profit maximizer rather than a profit eliminator. Most of Benjamin's results disappear when profit maximization is assumed; the results are corrected and extended. It is also suggested that the value of the collateral required for a standard loan is a variable that the loan market will adjust until long-run expected profits from secured loans is driven to zero.     

Gambling participation in Australia: findings from the national Household Expenditure Survey

Regression modeling is used to predict gambling patterns in Australia on the basis of the unit record files underlying the Australian Bureau of Statistics’ Household Expenditure Survey of 6,892 households. The four largest categories of gambling expenditure are examined, namely: lottery tickets, lotto-type games and instant lottery (scratch cards), TAB (pari-mutuel wagering) and related on course betting, and poker (slot) machines and ticket machines. Determining factors analyzed include the source and level of household income, family composition and structure, welfare status, gender, age, ethnicity and geographic location. Apart from the determinants of expenditure varying widely across the different types of gambling activity, the results generally indicate that the source of household income is more important than the level of income and that household composition and regional location are likewise significant in determining gambling expenditure.      

Health Expenditure Efficiency in the Commonwealth of Independent States: A Data Envelopment Analysis Approach

Efficiency of expenditure in health sector for the Commonwealth of Independent States is addressed in this paper. The efficiency frontier is built applying Data Envelopment Analysis methodology. Quantity inputs and expenditure measures are used to determine the efficiency outcomes and to detect some sources of inefficiency. The paper proves that the efficiency of expenditure on health varies significantly between these countries. Computing relative efficiency for each country the most efficient and inefficient cases are identified. The results derived herein may provide some insights into relative efficiencies among the Commonwealth of Independent States member countries in provision of health services.     

Healthy, educated and wealthy: A primer on the impact of public and private welfare expenditures on economic growth

In this paper, we provide first evidence of the impact of public and private expenditures in health and education on economic growth, via their influence on people's health, skills and knowledge. We consider a growth accounting framework in order to test whether countries that devote a larger amount of resources to the consumption of health and educational services experience higher growth rates. We also test whether the effects on economic growth of public expenditure in health and education differ from those of private expenditure. Our empirical analysis is based on a panel of 19 OECD countries observed between 1971 and 1998. The results are consistent with the hypothesis that health and education expenditure affects positively growth. The estimated impact is stronger for health than for education. More importantly, we find some evidence that public expenditure influences GDP growth more than private expenditure.     

HAS THE MEDIAN VOTER FOUND A BALLOT BOX THAT HE CAN CONTROL?

This paper examines the appropriateness of the median voter hypothesis within an agenda control framework where the alternative to a proposed expenditure level is the existing level. Evidence from New York State school districts suggests that within this institutional setting the actual level of public service provision does not differ significantly from the median voter's preferred level. The evidence also suggests that demand function parameter estimates for educational expenditures are not sensitive to the assumption that the public service output level corresponds to the median voter's private equilibrium.     

LONG-RUN EQUILIBRIUM IN THE EMPIRICAL STUDY OF MONOPOLY AND COMPETITION

A long-run tendency of industry profit rate to converge to a single competitive level has been a fundamental tenet of the industrial organization approach to the study of competitiveness in a market economy. This paper shows that for the post World War II period a weak equalization can be econometrically identified with different reaction speeds by industry. However, persistent profit rate differences endure. Finally, a portfolio theory of risk is considered as an explanation of these differentials.     

Do the Benefits Justify the Costs? An Evaluation of the ‘Sitter Service’ in Scotland

This research identified the costs and benefits of the sitter service in Scotland. A ‘sitter service’ is one that provides home‐based childcare outside the hours of 8:00 am to 6:00 pm on weekdays and at weekends to support children of shift workers, single parents/carers and for children who require additional support. Nine sitter services, organised by voluntary or not‐for‐profit organisations in Scotland, were contacted; their costs were compared and the views of sitters and users identified. For very little expenditure, they provided a service that resulted in a range of individual and community benefits. However, the research concludes that most sitter services are hat small scale and piecemeal funding endangers their long‐term viability.     

Household size,income and expenditure on food: The case of Cyprus

This paper addresses some of the questions raised in a debate between Deaton and Paxson, 1998, Deaton and Paxson, 2003 and Gan and Vernon (2003) in the Journal of Political Economy. At issue is what, on the basis of theory, the behaviour of households should be in relation to expenditure on food, as household size increases. One argument is that expenditure on food, per capita, should increase as household size increases, but analysis of the data gives very different results. Questions arise as to whether food is a public or private good within households, how food compares to clothing and whether there can be substitution away from food, for example towards clothing.For the purposes of addressing these and related questions in the Cyprus context, a household budget survey was undertaken, in which 625 responses were obtained. The paper describes the survey and uses the results of the survey to run regressions to identify the variables that relate significantly to expenditure on food. What we add to the discussion is the analysis of the determinants of expenditure on food in Cyprus, and the categorisation of this expenditure into food at home, take-away food, food in pubs and cafes, and food in restaurants. Our results tend to support Gan and Vernon (2003); we find, for example, that clothing is more private than food.     

PROFIT-SHARES, BARGAINING, AND UNEMPLOYMENT

This paper considers the effect of profit sharing on unemployment in a simple model with an employment externality, overhead costs, and free entry. When wages are determined by Nash bargains and employment is set by firms, equilibrium unemployment is unambiguously reduced by mandated profit sharing. However, a bargained profit share may have the perverse effect of lowering both employment and compensation in general equilibrium. If overhead costs relevant to firms' entry decisions are excluded from the profit share accounting, then a mandated profit share may also have such a perverse effect. (JEL E24)     

ON THE INFREQUENT ADJUSTMENT OF PRICE BY FIRMS

Many firms change price no more than twice a year. This phenomenon is readily explained by very small price adjustment costs, and the fact that the firm's rate of profit is often insensitive to deviations in the interval between price changes from its optimal level. As a result, firms which change price only once or twice a year may earn almost as much profit as firms that adjust price optimally. This refutes the standard objection that price adjustment costs are too small to matter. The argument does not require extreme assumptions about the flatness of the firm's profit function.     

Citizenship and power in an agent-based model of tax compliance with public expenditure

In this paper we present a model of tax compliance with heterogeneous agents who maximize their individual utility based on income and the conjectured level of per capita public expenditure. We formally include psychological drivers in this model. These drivers affect individual behavior, such as risk aversion, together with appreciation of public expenditure, expectations about peers’ compliance and a natural inclination to comply, all of which we summarize in a quality termed “citizenship”. The enforcement system, based on random inspections, is standard and only partially known to agents.The agent-based model is simulated under a variety of settings, representing different “societies”. We use the artificial data produced by the model to estimate the effects of taxpayers’ traits on personal tax behavior and to build a compliance societal slippery slope. At the individual level, we find a positive dependence of compliance on all variables, with the significant exception of the tax rate, which has a negative impact. As far as societies are concerned, we show how aggregate tax compliance depends on composite indices of citizenship and power, and we find that the former is more important than the latter.     

Inequality and education decisions in developing countries

In this paper we analyze the effect of inequality on school enrollment, preferred tax rate and expenditure per student in developing countries; when parents can choose between child labor, public schooling or private schooling. We present a model in which parents make schooling decisions for their children, weighing the utility benefit of having a child with formal public or private education versus the forgone income from child labor or household work. Parents vote over the preferred tax rate to finance freely provided public education. The utility benefit of an educated child is proportional to expenditure per student, so that there is congestion in public school. We find that when parents can send their children to work or to private school, high inequality leads to exit from public education at both ends of the income distribution. Thus high inequality reduces the support for public education, leading to a low tax rate and expenditure per student. Exit from public education results in both high child labor and a large fraction of students attending private school. In fact there is a threshold level of inequality above which there is no longer support for public education. In addition we explore the implications for the design of foreign aid. The results suggest that foreign aid policies should focus on promoting school attendance rather than increasing school resources, as the later policy might be offset by a reduction in the recipient country’s fiscal effort, with little impact on outcomes.      

CORPORATE CONTROL AND PERFORMANCE IN THE 1930s

This paper tests the Berle and Means thesis that the dissemination of corporate ownership has allowed corporate managers to pursue goals other than profit maximization. Using piece-wise linear regression analysis with a sample of large U.S. corporations in the 1930s, a nonlinear relation is estimated between the degree of dominant stockholder control and corporate performance. The empirical results lend some support for the Berle and Means view of the "modern" corporation. In particular, a small degree of stockholder control is found to be associated with a low level of corporate performance, ceteris paribus.