nep-pbe New Economics Papers
on Public Economics
Issue of 2007‒03‒24
48 papers chosen by
Peren Arin
Massey University

  1. International Evidence on Fiscal Solvency: Is Fiscal Policy "Responsible"? By Jonathan David Ostry; Enrique G. Mendoza
  2. Public Ownership and Trade Policy By Ngo Van Long; Frank Staehler
  3. Reforming Federalism German Style - A First Step in the Right Direction By Thomas Döring; Stefan Voigt
  4. The Economic Effects of Direct Democracy - A Cross-Country Assessment By Stefan Voigt; Lorenz Blume
  5. Public Goods, Transferable Utility and Divorce Laws By Pierre-André Chiappori; Murat Iyigun; Yoram Weiss
  6. Precautionary Monetary and Fiscal Policies By Pelin Berkmen
  7. Strategies for Fiscal Consolidation in Japan By Hali J. Edison; Papa M'B. P. N'Diaye; Dennis P. J. Botman
  8. Public Budget Composition, Fiscal (De)Centralization and Welfare By Calin Arcalean; Gerhard Glomm; Ioana Schiopu; Jens Suedekum
  9. Optimal fiscal policy in a multisector model with minimum expenditure requirements. By Steven P. Cassou; Arantza Gorostiaga
  10. Security Income Taxes in a Dynamic Semi-Closed Economy By Marc Rapp
  11. On the Theory and Practise of Fiscal Decentralization By Wallace E. Oates
  12. The Proliferation of Fiscal Incentives and the Nicaraguan State as a Manager of Rents: A Political Economy Perspective on Nicaraguan Industrial Policy Since 1990 By Maas, Hauke
  13. The Dynamics of Reform of India’s Federal System By Singh, Nirvikar
  14. Determinants of Cyclicality of Fiscal Surpluses in The OECD Countries By Michal Mackiewicz
  15. The Redistributive Design of Social Security Systems By J. Ignacio Conde-Ruiz; Paola Profeta
  16. Changes in the Taxation of Superannuation:Macroeconomic and Welfare Effects By John Creedy; Ross Guest
  17. The Labour Supply and Savings Effects of Superannuation Tax Changes By John Creedy; Ross Guest
  18. Should Old-Age Benefits Be Earnings-Tested? By Niku Määttänen; Panu Poutvaara
  19. The single-mindedness of labor unions when transfers are not Lump-Sum By canegrati, emanuele
  20. VAT Fraud and Evasion: What Do We Know, and What Can be Done? By Stephen C. Smith; Michael Keen
  21. Capital Structure and International Debt Shifting By Luc Laeven; Gaetan Nicodeme; Harry Huizinga
  22. Minimum Wages, the Earned Income Tax Credit, and Employment: Evidence from the Post-Welfare Reform Era By David Neumark; William Wascher
  23. Moral hazard among the sick and unemployed: evidence from a Swedish social insurance reform By Larsson, Laura; Runeson, Caroline
  24. Privatization and regulation of toll motorways in europe. By Daniel Albalate; Germa Bel; Xavier Fageda
  25. Corruption, Exogenous Changes in Incentives and Deterrence By Guiseppe Di Vita
  26. Tax Incentives and Business Investment: New Evidence from Mexico By Ramirez Verdugo, Arturo
  27. Modeling the impact of aging on social security expenditures By Juan F. Jimeno; Juan A. Rojas; Sergio Puente
  28. On the Possibility of Political Change – Outcomes in Between Local and Global Equilibria By Olovsson, Conny; Roine, Jesper
  29. Women's Representation and Public Spending By Svaleryd, Helena
  30. The " how to " of fiscal sustainability : a technical manual for using the fiscal sustainability tool By Bandiera, Luca; Budina, Nina; Klijn, Michel; van Wijnbergen, Sweder
  31. Long-Run Effects of Training Programs for the Unemployed in East Germany By Bernd Fitzenberger; Robert Völter
  32. Public policies and agribusiness expansion in Brazilian agricultural frontier By Christoffoli, Pedro Ivan
  33. Credible Redistributive Policies and Migration across US States By Roc Armenter; Francesc Ortega
  34. Lowering blood alcohol content levels to save lives: A European case study By Daniel Albalate
  35. Public Infrastructure, Input Efficiency and Productivity Growth in the Canadian Food Processing Industry By Jeffrey I. Bernstein; Theofanis P. Mamuneas
  36. PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR: By Guillaume Biot-Paquerot; Jean-Luc Rossignol
  37. Network Expansion Decision-making in the Twin Cities By Norah Montes de Oca; David Levinson
  38. A reasonable benchmarking frontier using DEA : an incentive scheme to improve efficiency in public hospitals By Diego Prior; Jordi Surroca
  39. Economic Effects of Lifting the Spring Load Restriction Policy in Minnesota By Brian Smalkoski; Ning Li; David Levinson
  40. Benefit-Entitlement Effects and the Duration of Unemployment : An Ex-ante Evaluation of Recent Labour Market Reforms in Germany By Hendrik Schmitz; Viktor Steiner
  41. Neighborhood effects, public housing and unemployment in France By Florence Goffette-Nagot; Claire Dujardin
  42. Regulating Concessions of Toll Motorways, An Empirical Study on Fixed vs. Variable Term Contracts. By Daniel Albalate; Germa Bel
  43. Territorial Differences in Italian Students’ Mathematical Competencies: Evidence from PISA 2003 By Massimiliano Bratti; Daniele Checchi; Antonio Filippin
  44. Democratic paradox and governance mediums: the case of university boards By Biot-Paquerot, Guillaume
  45. Forecasts of US Short-term Interest Rates: A Flexible Forecast Combination Approach By Guidolin, Massimo; Timmermann, Allan G
  46. Wage Risk and Employment Risk Over the Life Cycle By Low, Hamish; Meghir, Costas; Pistaferri, Luigi
  47. Budget support, conditionality and poverty. By Paul Mosley; Abrar Suleiman
  48. Marriage and Divorce: Changes and their Driving Forces By Betsey Stevenson; Justin Wolfers

  1. By: Jonathan David Ostry; Enrique G. Mendoza
    Abstract: This paper looks at fiscal solvency and public debt sustainability in both emerging market and advanced countries. Evidence of fiscal solvency, in the form of a robust positive conditional relationship between public debt and the primary fiscal balance, is established in both groups of countries. Evidence of fiscal solvency is much weaker, however, at high debt levels. These findings suggest that many industrial and emerging market economies, including several where fiscal solvency has been the subject of recent debates, appear to conduct fiscal policy responsibly. Yet our results cannot reject the hypothesis of fiscal insolvency in groups of countries with high debt ratios.
    Keywords: Fiscal Solvency; Fiscal Policy; Debt Sustainability ,
    Date: 2007–03–14
  2. By: Ngo Van Long; Frank Staehler
    Abstract: This paper discusses the influence of public ownership on trade policy instruments. We demonstrate three important invariance results. First, the degree of public ownership affects neither the level of socially optimal activities nor welfare if the government chooses optimal trade policy instruments. Second, in the case of rivalry between domestic export firms, the optimal export tax is independent of the degree of public ownership. Third, in the case of rivalry in the home market, the optimal import tariff is independent of the degree of public ownership. In this case, the optimal production subsidy decreases with public ownership if the optimal tariff is positive. For the case of Cournot rivalry in a third market, the optimal export subsidy is an increasing function of the public ownership share, while in the case of Bertrand rivalry with differentiated products, the optimal export tax is an increasing function of that parameter. <P>Cet article considère l’influence de la propriété publique sur les choix des politiques commerciales. Nous démontrons trois théorèmes sur l’invariance. Premièrement, le degré de la propriété publique n’a aucun impact sur le niveau des activités optimales si le gouvernement utilise les politiques commerciales optimales. Deuxièmement, dans le cas de concurrence entre les firmes qui exportent, le taux de taxe optimale est indépendant du degré de la propriété publique. Troisièmement, dans le cas de concurrence sur le marché domestique, le taux de tarif douanier optimal est indépendant du degré de la propriété publique. Dans le cas de concurrence à la Cournot sur un troisième marché, le taux d’aide optimale est une fonction croissante du pourcentage de la possession publique, tandis que dans le cas de concurrence à la Bertrand, le taux de taxe optimale en est une fonction décroissante.
    Keywords: Semi-public firms, trade policy, Entreprises semi-publiques, politiques commerciales
    JEL: F12 F13
    Date: 2007–03–01
  3. By: Thomas Döring (University of Kassel); Stefan Voigt (University of Kassel)
    Abstract: The German version of federalism, often called cooperative federalism", has been identified by many as one of the root causes for Germany becoming Europe's new sick man. Now, a number of changes in the institutions defining the relationship between the federal, the state and the local level have been passed. This contribution describes the most important changes and evaluates them from the point of view of fiscal federalism. It concludes that the changes are only a first step in the right direction, but a number of important steps have yet to follow.
    Keywords: German Federalism Reform, Fiscal Federalism,
  4. By: Stefan Voigt (University of Kassel); Lorenz Blume (Economics Department, University of Kassel, Germany)
    Abstract: This is the first study that assesses the economic effects of direct democratic institutions on a cross country basis. Most of the results of the former intra-country studies could be confirmed. On the basis of some 30 countries, a higher degree of direct democracy leads to lower total government expenditure (albeit insignificantly) but also to higher central government revenue. Central government budget deficits are lower in countries using direct democratic institutions. As former intra-country studies, we also find that government effectiveness is higher under strong direct-democratic institutions and corruption lower. Both labor and total factor productivity are significantly higher in countries with direct democratic institutions. The low number of observations as well as the very general nature of the variable used to proxy for direct democracy clearly call for a more fine-grained analysis of the issues.
    JEL: H1 H3 H5 H8
  5. By: Pierre-André Chiappori (Columbia University); Murat Iyigun (University of Colorado and IZA); Yoram Weiss (Tel Aviv University and IZA)
    Abstract: We reconsider the well known Becker-Coase (BC) argument, according to which changes in divorce laws should not affect divorce rates, in the context of households which consume public goods in addition to private goods. For this result to hold, utility must be transferable both within marriage and upon divorce, and the marginal rate of substitution between public and private consumption needs to be invariant in marital status. We develop a model in which couples consume public goods and show that if divorce alters the way some goods are consumed (either because some goods that are public in marriage become private in divorce or because divorce affects the marginal rate of substitution between public and private goods), then the Becker-Coase theorem holds only under strict quasi-linearity. We conclude that, in general, divorce laws will influence the divorce rate, although the impact of a change in divorce laws can go in either direction.
    Keywords: Becker-Coase theorem, collective model, divorce rates
    JEL: C78 D61 D70
    Date: 2007–02
  6. By: Pelin Berkmen
    Abstract: This paper explains why the debt reduction motive for countries that are subject to borrowing constraints and a volatile environment is greater than for those with a more stable environment and relatively better access to the financial markets. In particular, it shows that the possibility of losing the ability to borrow in the future induces precautionary debt reduction. When a government loses its ability to borrow, shocks are more costly to the economy, since they cannot be spread over time. The precautionary motive arises from the need to make these adjustments less painful when the borrowing constraints bind. To avoid large losses in the constrained period, the government prefers to raise taxes and inflation in earlier periods more than would be implied otherwise, leaving less debt to the future periods, and thereby shifting some of the required adjustment to the earlier periods. In other words, the coexistence of large shocks and borrowing constraints forces the government to be more prudent in its management of debt.
    Keywords: Monetary policy , fiscal policy , debt , precautionary motive , Monetary policy , Fiscal policy , Debt ,
    Date: 2007–02–15
  7. By: Hali J. Edison; Papa M'B. P. N'Diaye; Dennis P. J. Botman
    Abstract: Japan's key fiscal challenge is to put public finances on a more sustainable footing. This paper investigates the macroeconomic implications of alternative fiscal strategies for Japan using the IMF's Global Fiscal Model. The results suggest that: (i) an adjustment package that achieves primary balance through lower social transfers and government spending and a higher VAT is the most viable option and has a smaller negative impact on growth than other fiscal measures; (ii) achieving primary balance is not sufficient to stabilize the net debt ratio; (iii) prefunding future aging costs provides greater long-term benefits compared with less front-loaded strategies; (iv) tax reform involving shifting from corporate taxation to consumption taxation could mitigate the short-term output losses associated with fiscal consolidation; and (v) the spillovers to the rest of the world from consolidation in Japan are positive in the medium term, but modest.
    Keywords: Fiscal adjustment , aging , debt sustainability , tax reform , spillover effects , GFM , Fiscal policy , Japan , Tax reforms , Aging , Adjustment policy , Debt sustainability analysis , Public finance , Economic models ,
    Date: 2007–02–23
  8. By: Calin Arcalean (Indiana University Bloomington); Gerhard Glomm (Indiana University Bloomington); Ioana Schiopu (Indiana University Bloomington); Jens Suedekum (University of Konstanz and IZA)
    Abstract: We present a dynamic two-region model with overlapping generations. There are two types of public expenditure, education and infrastructure funding, and governments decide optimally on budget size (tax rate) and its allocation across the two outlays. Productivity of government infrastructure spending can differ across regions. This assumption follows well established empirical evidence, and highlights regional heterogeneity in a previously unexplored dimension. We study the implications of three different fiscal regimes for capital accumulation and aggregate national welfare. Full centralization of revenue and expenditure decisions is the optimal fiscal arrangement for the country when infrastructure spending productivity is similar across regions. When regional differences exist but are not too large, the partial centralization regime is optimal where the federal government sets a common tax rate, but allows the regional governments to decide on the budget composition. Only when the differences are sufficiently large does full decentralization become the optimal regime. National steady state output is instead highest when the economy is decentralized. This result is consistent with the "Oates conjecture" that fiscal decentralization increases capital accumulation. However, in terms of welfare this result can be reversed.
    Keywords: fiscal federalism, decentralization, capital accumulation, infrastructure
    JEL: H72 H74 E62
    Date: 2007–02
  9. By: Steven P. Cassou (Kansas State University); Arantza Gorostiaga (Universidad del País Vasco)
    Abstract: This paper investigates optimal fiscal policy in a static multisector model. A Ramsey type planner chooses tax rates on each good type as well as spending levels on each good type subject to an exogenous total expenditure constraint and requirements that some minimum amount of spending be undertaken in each sector. It is shown that optimal policy does not equally spend in each sector but instead results in one of the minimum expenditure constraints binding.
    Keywords: Ramsey planner; Multisector model; Minimum expenditure constraint.
    JEL: H23
    Date: 2007–03–20
  10. By: Marc Rapp (Leipzig Graduate School of Management (HHL))
    Abstract: This paper analyzes security income taxes in a dynamic two-period model of an economy that is part of a cluster of economies with perfectly integrated bond markets but locally segmented equity markets. For an economic income tax, it is shown that if tax proceeds are immediately redistributed within the cohort of market participants, taxation is non-distortionary in the sense that neither optimal production decisions of firms, nor the optimal aggregate consumption path or security prices are affected by taxation. If, however, tax proceeds are transferred to 'outsiders', i.e. non-market-participants, a shift in the tax rate in general affects the optimal aggregate consumption path and equilibrium security prices reflect the prevailing tax rate. While the equilibrium analysis is concerned with a rather stylized tax code, it is argued that the analysis may be interpreted as a partial equilibrium analysis of capital gains taxes within more general tax systems.
    Keywords: capital income tax, asset prices, home-bias,
    JEL: G12 G18 H24
  11. By: Wallace E. Oates (Department of Economics, University of Maryland)
    Abstract: The traditional theory of public finance has made a strong case for a major role for fiscal decentralization. This case is based on an improved allocation of resources in the public sector. And it has four basic elements. First, regional or local governments are in a position to adapt outputs of public services to the preferences and particular circumstances of their constituencies, as compared to a central solution which presumes that one size fits all. Second, in a setting of mobile households, individuals can seek out jurisdictions that provide outputs well suited to their tastes, thereby increasing the potential gains from the decentralized provision of public services (Tiebout 1956). Third, in contrast to the monopolist position of the central government, decentralized levels of government face competition from their neighbors; such competition constrains budgetary growth and provides pressures for the efficient provision of public services. And fourth, decentralization may encourage experimentation and innovation as individual jurisdictions are free to adopt new approaches to public policy; in this way, decentralization can provide a valuable Alaboratory for fiscal experiments. However, this basic economic rationale for decentralization of the public sector is not quite so simple and compelling as it appears. Some of the more recent literature provides, first, a thoughtful and provocative critique of the traditional view of fiscal decentralization, and, second, some new approaches that reveal its dark side, especially in practice. There is emerging, in short, a broader perspective on fiscal decentralization that raises some serious questions about its capacity to provide an unambiguously positive contribution to an improved performance of the public sector. My purpose in this paper is twofold. First, I want to review the basic theory of fiscal decentralization. There are some loose ends to the traditional argument that open up some intriguing issues. Second, I want to turn to some of new literature on fiscal discipline in multilevel government. This literature has focused attention on some basic and destructive forces that can undermine the economic performance of a relatively decentralized public sector. I find it helpful to begin by revisiting a Decentralization Theorem that I formulated long ago. As a point of departure, I want to explain briefly why I introduced the proposition and the rationale for its particular form and proof.
    Keywords: Fiscal Decentralization, Public Finance
    JEL: H41 H71
    Date: 2007
  12. By: Maas, Hauke
    Abstract: This paper finds that the proliferation of fiscal incentives in the form of tax exemptions in Nicaragua since 1990 represents the indiscriminate allocation of monopoly rents to interest groups. While theory suggests some rents can encourage productive investments, Nicaragua’s tax incentives are merely “assistentialist” and lack effectiveness. For a dynamic industrial policy, opportunity costs would need to be taken into account and rents would need to be performance contingent, which requires selectivity and increased transparency.
    Keywords: Nicaragua; industrial policy; political economy; fiscal incentives; tax incentives; monopoly rents; rent-seeking
    JEL: P16 H32 L5
    Date: 2006–11–07
  13. By: Singh, Nirvikar
    Abstract: This paper analyzes the process of reform of India’s federal system, with a focus on fiscal federalism. We first summarize the basic features of, and recent reforms in intergovernmental relations, including the role of political institutions, assignments of expenditure responsibility and revenue authority, the system of intergovernmental transfers, and institutions and mechanisms for government borrowing. We then discuss the institutional specifics of the reform process, to understand the dynamics of India’s federal system.
    Keywords: federalism; decentralization; intergovernmental relations; economic reform
    JEL: H7 H1 P26 P35
    Date: 2007–03
  14. By: Michal Mackiewicz (Institute of Economics, University of Lodz)
    Abstract: In this paper we examine factors that make some governments revert to procyclical fiscal policies despite the standard normative prescription being to conduct fiscal policy countercyclically. In order to avoid the pitfalls of the two-step methods previous studies have typically used we used a one-step method with interaction variables. We found robust statistical evidence that procyclical fiscal policies are typically run by countries with weak institutions. There was also some empirical support for a hypothesis that countries that have accumulated a high debt-to-GDP ratio tend to run procyclical fiscal policies, possibly as a result of the financial constraints. We found no evidence that any other variable among the ones suggested in the literature explains the way in which governments react to the business cycle.
    Keywords: procyclical fiscal policy, financial constraints, fiscal institutions
    JEL: E60 E63
    Date: 2006–09
  15. By: J. Ignacio Conde-Ruiz; Paola Profeta
    Abstract: Countries with low intragenerational redistribution in social security systems (Bismarckian) are associated with larger public pension expenditures, a smaller fraction of private pension and lower income inequality than countries with more redistributive social security (Beveridgean). This paper introduces a bidimensional voting model to account for these features. Agents different in age, income and in their ability to invest in the capital market vote on the degree of redistribution of the social security system and on the size of the transfer. In an economy with three income groups, a small Beveridgean system is supported by low-income agents, who gain from its redistributive feature, and high-income individuals, who seek to minimize their tax contribution and to invest in a private scheme. Middle-income individuals instead favor a large Bismarckian system.
  16. By: John Creedy; Ross Guest
    Abstract: This paper provides an applied general equilibrium analysis of several alternative taxation regimes applying to superannuation. It is motivated by the decision, announced by the Australian Government in its 2006 Budget, to exempt from tax all superannuation benefits received by recipients over 60 years of age. The analysis focuses on the implications of this and other superannuation tax regimes for intergenerational equity, national living standards, labour supply, saving and social welfare. The method of analysis is simulation of an open economy overlapping generations CGE model, calibrated to Australia. Acknowledgements The authors wish to thank the Australian Research Council for financial support for this work; and the Productivity Commission for providing data on age-specific government spending.
    JEL: H31 H32 J18 E21
    Date: 2007
  17. By: John Creedy; Ross Guest
    Abstract: This paper investigates the effects on labour supply, consumption and savings of a change in the superannuation tax structure, involving the taxation of contributions to a fund, pre-retirement earnings of the fund, and the benefits received from the fund during retirement. The effects on lifetime plans of tax changes are investigated using a simple three-period model in which the final period is retirement. The effects of unanticipated changes, requiring revisions to plans, are examined. Although the partial effects of particular tax changes are unambiguous, the effects of allowing for a government budget constraint mean that it is difficult to predict a priori how labour supply is likely to be affected. However, private savings unambiguously fall.
    Date: 2007
  18. By: Niku Määttänen (ETLA, Helsinki); Panu Poutvaara (University of Helsinki and IZA)
    Abstract: We study the welfare effects of earnings testing flat-rate old-age benefits in a quantitative overlapping generations model with idiosyncratic labor income risk. In our model economy, even a moderate earnings testing reduces individuals’ expected lifetime utility, whenever other taxes are taken into account. Moreover, it also lowers the realized lifetime utilities of those at the bottom of the lifetime utility distribution.
    Keywords: social security, retirement, means-testing
    JEL: H55 J26 C68
    Date: 2007–02
  19. By: canegrati, emanuele
    Abstract: In this paper I analyse a labour market where the wage is endogenously determined according to an Efficient Bargaining process between a firm and a labour union whose members are partitioned into two social groups: the old and the young. Furthermore, I exploit the Single-Mindedness theory, which considers the existence of a density function which endogenously depends on leisure. I demonstrate that, when preferences of one group for leisure are higher than those of the other group the latter suffers from higher tax rates and with lower level of wage rates and lower levels of leisure. Finally, since the former is more single-minded, it may exploit its greater political power in order to get a positive intergenerational transfer which takes place via labour income taxation. Empirical evidence from the WERS 2004 survey confirms main results of the model.
    Keywords: bargaining models; labour unions; labour-income taxation; single-mindedness
    JEL: H23 D11 J23 H61 J21 J18 J26 D74 J52 J58 D72 J22 H21 D63 I38 J51 H31 D91 D78 H24 H55 J11 J14
    Date: 2007–03–19
  20. By: Stephen C. Smith; Michael Keen
    Abstract: Like any tax, the VAT is vulnerable to evasion and fraud. But its credit and refund mechanism does offer unique opportunities for abuse, and this has recently become an urgent concern in the European Union (EU). This paper describes the main forms of noncompliance distinctive to a VAT, considers how they can be addressed, and assesses evidence on their extent in high-income countries. While the practical significance of current difficulties in the EU should not be over-stated, administrative measures alone may prove insufficient to deal with them, and a fundamental redesign of the VAT treatment of intra-community trade required. The current difficulties in the EU largely reflect circumstances that would not apply in the United States.
    Keywords: Value-added tax , sales tax , enforcement , compliance , non-compliance , audit , Value added tax , Europe , Sales taxes , Tax evasion ,
    Date: 2007–02–15
  21. By: Luc Laeven; Gaetan Nicodeme; Harry Huizinga
    Abstract: This paper presents a model of a multinational firm's optimal debt policy that incorporates international taxation factors. The model yields the prediction that a multinational firm's indebtedness in a country depends on a weighted average of national tax rates and differences between national and foreign tax rates. These differences matter because multinationals have an incentive to shift debt to high-tax countries. The predictions of the model are tested using a novel firm-level dataset for European multinationals and their subsidiaries, combined with newly collected data on the international tax treatment of dividend and interest streams. Our empirical results show that corporate debt policy indeed not only reflects domestic corporate tax rates but also differences in international tax systems. These findings contribute to our understanding of how corporate debt policy is set in an international context.
    Keywords: Corporate taxation , financial structure , debt shifting , Debt , Tax rates , Tax policy , Capital , Economic models ,
    Date: 2007–02–26
  22. By: David Neumark (University of California, Irvine, NBER and IZA); William Wascher (Federal Reserve Board)
    Abstract: We study the effects of minimum wages and the EITC in the post-welfare reform era. For the minimum wage, the evidence points to disemployment effects that are concentrated among young minority men. For young women, there is little evidence that minimum wages reduce employment, with the exception of high school dropouts. In contrast, evidence strongly suggests that the EITC boosts employment of young women (although not teenagers). We also explore how minimum wages and the EITC interact, and the evidence reveals policy effects that vary substantially across different groups. For example, higher minimum wages appear to reduce earnings of minority men, and more so when the EITC is high. In contrast, our results indicate that the EITC boosts employment and earnings for minority women, and coupling the EITC with a higher minimum wage appears to enhance this positive effect. Thus, whether or not the policy combination of a high EITC and a high minimum wage is viewed as favorable or unfavorable depends in part on whose incomes policymakers are trying to increase.
    Keywords: minimum wage, Earned Income Tax Credit, welfare reform, employment
    JEL: H24 I38 J2
    Date: 2007–02
  23. By: Larsson, Laura (IFAU - Institute for Labour Market Policy Evaluation); Runeson, Caroline (Institute for Labour Market Policy Evaluation)
    Abstract: This paper looks at a specific type of moral hazard that arises in the interplay between two large public insurance systems in Sweden, namely the sickness insurance (SI) and the unemployment insurance (UI). Moral hazard can arise from the benefit size structure as for some unemployed persons, benefits from the SI are higher than benefits from the UI. We use a reform of the SI system that came in force 1 July, 2003, to identify the effect of economic incentives arising from the different benefit sizes. Our results from a duration analysis show clearly that the higher the benefits, the larger the probability of reporting sick.
    Keywords: Unemployment insurance; sickness insurance; health; duration analysis; discrete hazard models
    JEL: C41 H55 I18 J64 J65
    Date: 2007–03–14
  24. By: Daniel Albalate (Faculty of Economics, University of Barcelona); Germa Bel (Faculty of Economics, University of Barcelona); Xavier Fageda (Faculty of Economics, University of Barcelona)
    Abstract: The private sector plays an increasing and relevant role in highway funding and management. For that reason, the regulation designed and enforced by public authorities becomes even more important for the social welfare results generated by this process. In this study, we analyze the current trends in highway funding and management paying special attention on the recent process of privatization and its motivations. Since public ownership and regulation are substitutes for government intervention, we check the hypothesis that highways privatization induces more strict regulation. Indeed, we observe that as the private sector increases its size, toll regulation becomes more detailed.
    Keywords: transport infrastructures, roads, privatization, regulation and tolls
    JEL: L43 L92 L33
    Date: 2007–03
  25. By: Guiseppe Di Vita (University of Catania)
    Abstract: In this article we apply and extend the model elaborated by Acemoglu and Verdier in their seminal paper (2000), to examine how the economy represented in their theoretical framework responds to an exogenous change in the agent's incentive. In particular, we focus on the consequences of a famous sentence of the Italian Supreme Court in plenary session, no. 500 of 1999, in which a revolutionary interpretation of civil liability rules is introduced, allowing private agents of our economy to appear before the court to demand reimbursement for the damages suffered as a consequence of illicit behavior of the public administration. This is one of the few cases in which the judex substantially makes law in a system of civil law, and the modi modification in incentive whether or not to be corrupted comes from an authority that is not part of the game (the jurisdictional power). Basing our affirmations on the model, we can say that corruption may have declined in Italy since the year 2000, as a result of a change in the incentives for both private agents and bureaucrats.
    Keywords: Bureaucrats, Corruption, Government failure, Incentives, Market failure, Public goods,
    JEL: K13 D23 H41
  26. By: Ramirez Verdugo, Arturo
    Abstract: This paper provides new evidence on the response of business investment to tax incentives. I use the variation provided by recent reforms to the Mexican corporate tax system, including the elimination and reintroduction of accelerated depreciation allowances applicable to investment undertaken outside the three main Mexican metropolitan areas. I show that investment is very sensitive to changes in tax variables and interest rates, with an estimated elasticity of investment with respect to the user cost around -2.0. The results are robust to different specifications and instrumental variables approaches. The large elasticity is shown to be the result of the large cross sectional variation in the user cost of capital and also a product of the small open economy nature of the Mexican economy. In particular, large investment responses of plants owned by multinational firms and a elasticity of imported assets considerably larger than that of domestically purchased goods. Furthermore, the use of panel data at the establishment level allows me to identify the discrete nature of investment decisions and to show that the capital accumulation pattern is consistent with nonconvex adjustment costs and irreversibilities, similar to those found for the US. Thus, the large elasticity compared to US estimates cannot be attributed to differences in adjustment costs. Finally, I provide evidence that the large investment response is not an artifact of misreporting or tax evasion since the elasticity of investment in other assets such as transportation equipment and land, which is harder to misreport, is also high.
    Keywords: Investment; taxes; user cost; manufacturing plants; Mexico
    JEL: E22 H25 E62
    Date: 2005–08–01
  27. By: Juan F. Jimeno (Banco de España; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)); Juan A. Rojas (Banco de España); Sergio Puente (Banco de España)
    Abstract: In this paper we survey the features of different approaches available in the literature used to study the effects of the aging of the population on Social Security expenditures. We comment on the weaknesses and strengths of each of them, and perform a quantitative analysis by comparing the results they imply in the particular case of the Spanish economy. Finally, we highlight some elements of the modeling strategies on which more evidence is needed for a correct evaluation of the problem at hand.
    Keywords: aging, social security, expenditures, modeling
    Date: 2006–01
  28. By: Olovsson, Conny (Dept. of Economics, Stockholm School of Economics); Roine, Jesper (SITE)
    Abstract: We study voting over education subsidies where poor individuals may be excluded and the rich may chose private alternatives. With plausible changes of the standard game we show that this problem typically has multiple equilibria; one with low taxes, many excluded, and many in private schooling; another with high taxes, everyone in schooling, and few choosing the private alternative. Shifts between these equilibria can only happen through jumps in policy, not through gradual change. The method we develop identifies the global, as well as all local majority rule equilibria, and it characterizes "stability regions" around each local equilibrium. Introducing costs into the political system can make the local equilibria the globally stable outcome which, for example, implies that identical countries with different starting points could end up with completely different redistributive systems. Outcomes change in intuitive ways with the parameters and several insights with respect to the possibilities of political change seem general for problems of redistribution with excludability.
    Keywords: political economy; political equilibrium; voting; redistribution; education subsidies; local equilibrium; non-median voter equilibrium
    JEL: D72 H20
    Date: 2007–02–16
  29. By: Svaleryd, Helena (Research Institute of Industrial Economics)
    Abstract: This paper studies whether the degree of women’s representation in Swedish local councils affects local public expenditure patterns. Theoretically, the individual preferences of elected representatives may have an impact on public expenditure if full policy commitment is not feasible. To empirically address the question, I first analyze the preferences expressed by elected local council representatives using survey data. This permits me to make precise predictions about the effects of women’s representation on spending. The subsequent panel study on the composition of public spending in Swedish municipalities supports the predictions derived from the survey.
    Keywords: Political Representation; Local Public Expenditure; Gender; Survey Data; Panel Data
    JEL: C23 C25 D78 H40 J16
    Date: 2007–03–07
  30. By: Bandiera, Luca; Budina, Nina; Klijn, Michel; van Wijnbergen, Sweder
    Abstract: Fiscal sustainability analysis (FSA) is an important component of macroeconomic analysis for many developing countries. To further enhance understanding of fiscal policy and the constraints faced by policymakers, the authors develop a toolkit for FSA in middle-income countries which builds on previous work in this area and on new developments in dealing with uncertainty. The FSA toolkit includes an Excel-based FSA tool and a technical manual accompanying it. The FSA tool is standardized and simple, but at the same time flexible enough to allow for user-defined country-specifics. This manual provides step-by-step technical instructions for running the FSA tool and includes mathematical appendices and a glossary.
    Keywords: Economic Theory & Research,External Debt,Strategic Debt Management,Economic Stabilization,Public Sector Economics & Finance
    Date: 2007–03–01
  31. By: Bernd Fitzenberger (Goethe University Frankfurt, ZEW, IFS and IZA); Robert Völter (Goethe University Frankfurt and CDSEM, University of Mannheim)
    Abstract: Public sector sponsored training was implemented at a large scale during the transition process in East Germany. Based on new administrative data, we estimate the differential effects of three different programs for East Germany during the transition process. We apply a dynamic multiple treatment approach using matching based on inflows into unemployment. We find positive medium- and long-run employment effects for the largest program, Provision of Specific Professional Skills and Techniques. In contrast, the programs practice firms and retraining show no consistent positive employment effects. Furthermore, no program results in a reduction of benefit recipiency and the effects are quite similar for females and males.
    Keywords: multiple treatments, training programs, East Germany
    JEL: C14 J68 H43
    Date: 2007–02
  32. By: Christoffoli, Pedro Ivan
    Abstract: The article discuss the impact derived of the public policies adopted by brazilian government about the expansion of agribusiness activities that causes deforestation and social impacts in the Amazonian and Cerrados regions.
    Keywords: agricultural frontier in Brazil; soybean production; public policies and deforestation
    JEL: Q57 Q56 Q15
    Date: 2006–01
  33. By: Roc Armenter; Francesc Ortega
    Abstract: Does worker mobility undermine governments ability to redistribute income? This paper analyzes the experience of US states in the recent decades. We build a tractable model where both migration decisions and redistribution policies are endogenous. We calibrate the model to match skill premium and worker productivity at the state level, as well as the size and skill composition of migration flows. The calibrated model is able to reproduce the large changes in skill composition as well as key qualitative relationships of labor flows and redistribution policies observed in the data. Our results suggest that regional di¤erences in labor productivity are an important determinant of interstate migration. We use the calibrated model to compare the cross-section of redistributive policies with and without worker mobility. The main result of the paper is that interstate migration has induced substantial convergence in tax rates across US states, but no race to the bottom. Skill-biased in-migration has reduced the skill premium and the need for tax-based redistribution in the states that would have had the highest tax rates in the absence of mobility.
    Date: 2007–02
  34. By: Daniel Albalate (Universitat de Barcelona)
    Abstract: Road safety has become an increasing concern in developed countries due to the significant amount of fatalities and the associated economic losses. Only in 2005 these losses rose to 200,000 million euros, a considerable sum approximately 2% of GDP that easily justifies any public intervention. One measure taken by governments to address this issue is to enact stricter policies and regulations. Since drunk driving is one of the greatest concerns among public authorities in this field, several European countries have lowered their illegal Blood Alcohol Content (BAC) levels to 0.5 mg/ml during the last decade. This study is the first evaluation of the effectiveness of this transition using European panel-based data (CARE) for the period 1991-2003 with the differences-in-differences method in a fixed effects estimation that allows for any pattern of correlation (Cluster-Robust). The results reveal a positive impact on certain groups of road users and on the whole population when the policy is accompanied by enforcement interventions. Moreover, positive results appeared after a time lag of over two years. Finally, I state the importance of controlling for serial correlation in the evaluation of this type of policy.
    Keywords: drunk driving;, road safety;, differences-in-differences;, policy evaluation;, illegal blood alcohol content levels (bac)
    JEL: K32 R41 H73 I18
    Date: 2007
  35. By: Jeffrey I. Bernstein (Department of Economics, Florida International University); Theofanis P. Mamuneas (Department of Economics, University of Cyprus,)
    Abstract: Canadian food processing is an important manufacturing industry, accounting for 13 percent of shipments. By its nature food processing depends on infrastructure capital. Our objective is to estimate infrastructure’s effects on input requirements, cost and productivity. The increase in capital and decrease in materials were respectively 2.5 and 3 times greater than the -0.07 infrastructure elasticity of labor. Infrastructure investment was cost-reducing by inducing reductions in employment and intermediate inputs. A 1 percent increase caused cost to decline by 0.16 percent. Infrastructure capital was a major contributor to productivity, annually contributing 0.5 percentage points. This was nearly double TFP growth.
    Keywords: Food Processing, Infrastructure Capital, Productivity Growth.
    JEL: D24 L66
    Date: 2007–03
  36. By: Guillaume Biot-Paquerot (CEREGE - CEntre de REcherche en sciences de GEstion - [CNRS : EA1722] - [Groupe Sup de Co La Rochelle]); Jean-Luc Rossignol (CUREGE - Centre universitaire de recherche en gestion - [Université de Franche-Comté])
    Abstract: Education supply in universities of most European countries has for the last ten years become a strategic matter. At present, French universities consider education supply as an investment. But they do not utilize all incentive mechanisms in order to drive their strategies. At the beginning of the year 2006, the public sector reform will tend to impose performance measurements of research and educational activities, in order to improve organizational efficiency. The aim of this reform in the French context is to provide driving elements to increase internal efficiency, social and economic impact of higher education system and to reinforce international attractiveness of public education institutions. The substitution of resources management by result management involves an agent's performance responsibility measurement. Evaluation becomes a central factor and is articulated with incentives system. The weakening of the property right system drives project bearers to maximize their utility instead of their incomes. In such a context, the understanding of individual strategies permits to understand constraints of management within universities, and to take into account the impact of stakeholders who take part in the value generation process. The major risk is to constraint the utility function of projects bearers by increasing their burden and their motivation. The result could be the limitation of the number of projects, and as well, the decreasing of university investments.
    Keywords: performance, public sector, universities, efficiency, value generation
    Date: 2007–03–17
  37. By: Norah Montes de Oca; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: This paper presents a qualitative analysis of the decision-rules used by jurisdictions in Minnesota's Twin Cities metropolitan area. Interviews were conducted with staff at the city, county, metropolitan, and state levels to determine how decisions about road investment, expansion and new construction were made. Flowcharts were developed to provide a more systematic way of presenting that information. Most jurisdictions do not have extensive public participation processes, though several, notably the Metropolitan Council, Hennepin and Ramsey Counties and the City of Minneapolis do. Jurisdictions with public participation have the most formal and extensive documentation of their investment decision process. The decision factors vary by jurisdiction, though safety, capacity, and pavement quality were important throughout.
    JEL: R41 R42 R48 H40
    Date: 2006
  38. By: Diego Prior; Jordi Surroca
    Abstract: There exists research relating management concepts with productivity measurement methods that offers useful solutions for improving management control in the public sector. Within this sphere, we connect agency theory with efficiency analysis and describe how to define an incentives scheme that can be applied in the public sector to monitor the efficiency and productivity of managers. To fulfill the main objective of this research, we propose an iterative process for determining what we define as a ‘reasonable frontier’, a concept that provides the foundation required to establish the incentive scheme for the managers. Our ‘reasonable frontier’ has the following properties: i) it detects the presence of outliers, ii) it proposes a procedure to establish the influence introduced by extreme observations, and iii) it sorts out the problem of data masking. The proposed method is applied to a sample of hospitals taken from the public network of the Spanish health service. The results obtained confirm the applicability of the proposal made. Summing up, we define and apply a useful method, combining aspects of agency theory and efficiency analysis, which is of interest to those public authorities trying to design effective incentive schemes which influence the decision making of the public managers.
    Date: 2007–03
  39. By: Brian Smalkoski; Ning Li; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: Spring load restrictions (SLR) regulate the weight per axle carried by heavy trucks during the spring thaw period. This policy aims to reduce pavement damage caused by heavy vehicles and extend the useful life of roads, but it also imposes costs on the trucking industry due to detouring or increased number of truckloads. Although the policies have been implemented for many years, their resulting economic effect has been unclear. The Minnesota Local Road Research Board (LRRB) and the Minnesota Department of Transportation (Mn/DOT) sponsored a cost/benefit study of spring load restrictions in Minnesota. The study, based on the results of surveys of industry costs, a pavement performance model, and a freight demand model, concludes that the benefits of lifting the existing SLR policy outweigh the additional costs. Roadways operating at 5-tons require additional study; however, current analysis warrants repealing SLR and keeping roadways operating year-round at 9-tons. The cost of additional damage should be recovered from those who benefit from the change in policy.
    JEL: R41 R48 R38 D2 D83 D85 H41
    Date: 2006
  40. By: Hendrik Schmitz; Viktor Steiner
    Abstract: Abstract: We analyse benefit-entitlement effects and the likely impact of the recent reform of the unemployment compensation system on the duration of unemployment in Germany on the basis of a flexible discrete-time hazard rate model estimated on pre-reform data from the German Socioeconomic Panel (SOEP). We find (i) relatively strong benefit-entitlement effects for the unemployed who are eligible to means-tested unemployment assistance after the exhaustion of unemployment benefit, but not for those without such entitlement; (ii) non-monotonic benefit-entitlement effects on hazard rates with pronounce spikes around the month of benefit-exhaustion, and (iii) relatively small marginal effects of the amount of unemployment compensation on the duration of unemployment. Our simulation results show that the recent labour market reform is unlikely to have a major impact on the average duration of unemployment in the population as a whole, but will significantly reduce the level of long-term unemployment among older workers.
    Keywords: unemployment duration, unemployment insurance, benefit-entitlement effects, German labour market reforms, ex-ante evaluation, hazard rate model
    JEL: J64 J65 H31
    Date: 2007
  41. By: Florence Goffette-Nagot (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Claire Dujardin (CORE - Center for Operations Research and Econometrics - [Université catholique de Louvain])
    Abstract: This paper is aimed at examining how individual unemployment is influenced both by location in a deprived neighborhood and public housing. Our identification strategy is twofold. First, we estimate a simultaneous probit model of public housing accommodation, type of neighborhood, and unemployment, thus accounting explicitely for correlation of unobservables between the three behaviors. Second, we take advantage of the situation of the public housing sector in France, which allows us to use public housing accommodation as a powerful<br />determinant of neighborhood choices and to use household's demographic characteristics as exclusion restrictions. Our results show that public housing does not have any direct effect on unemployment. However, living within the 35% more deprived neighborhoods does increase the unemployment probability significantly. As expected, the effect of neighborhood substantially decreases when dealing with the endogeneity of neighborhood and when using public housing as a determinant of neighborhood choice.
    Keywords: Neighborhood effects ; public housing ; unemployment ; simultaneous probit models ; simulated maximum likelihood
    Date: 2007–03–13
  42. By: Daniel Albalate (Faculty of Economics, University of Barcelona); Germa Bel (Faculty of Economics, University of Barcelona)
    Abstract: Recent theoretical developments on concession contracts for long term infrastructure projects under uncertain demand show the benefits of allowing for flexible term contracts rather than fixing a rigid term. This study presents a simulation to compare both alternatives by using real data from the oldest Spanish toll motorway. For this purpose, we analyze how well the flexible term would have performed instead of the fixed length actually established. Our results show a huge reduction of the term of concession that would have dramatically decreased the firm’s benefits and the user’s overpayment due to the internalization of an unexpected traffic increase.
    Keywords: Toll motorways, privatization, concessions, regulation.
    JEL: H54 L33 L43 L92
    Date: 2007–03
  43. By: Massimiliano Bratti (University of Milan and IZA); Daniele Checchi (University of Milan and IZA); Antonio Filippin (University of Milan and IZA)
    Abstract: In this paper we investigate the existence and the size of territorial differences in Italian students’ mathematical competencies. Our analysis benefits from a new data set that merges the 2003 wave of the OECD Programme for International Student Assessment (PISA) with territorial data collected from several statistical sources and with administrative school data collected by the Italian Ministry of Education. We consider three different groups of educational inputs: individual characteristics (mainly family background), school types and available resources, and territorial features related to labour market, cultural resources and aspirations. In addition to the standard gradient represented by parental education and occupation, we find that student sorting across school types also plays a significant role. Among the local factors measured at province level, we find a significant impact of buildings maintenance and employment probabilities. When accounting for territorial differences, we find that most of the North-South divide (75%) is accounted for by differences in endowments, while the local school production functions account for the remaining fraction.
    Keywords: education, PISA, students, territorial differences
    JEL: J21 J24 H52
    Date: 2007–02
  44. By: Biot-Paquerot, Guillaume
    Abstract: The aims of this article is to propose a preliminary step for a university governance framework. The second step will to produce an empirical study. We will discuss about the peculiar context of the French university organizations. The contract theory framework and the organizational architecture theory could lead us in this discussion, talking about opportunistic stakeholder's behaviour. In this peculiar frame, university is just an application of the corporate governance theory. And the developpment and improvement of european higer education policies in the Lisbon declaration context makes it more topical.
    Keywords: universités; gouvernance; conseil d’administration; présidents d’université; contrôle
    JEL: G38 I23 H41
    Date: 2006–05
  45. By: Guidolin, Massimo; Timmermann, Allan G
    Abstract: This paper develops a flexible approach to combine forecasts of future spot rates with forecasts from time-series models or macroeconomic variables. We find empirical evidence that accounting for both regimes in interest rate dynamics and combining forecasts from different models helps improve the out-of-sample forecasting performance for US short-term rates. Imposing restrictions from the expectations hypothesis on the forecasting model are found to help at long forecasting horizons.
    Keywords: forecast combinations; term structure of interest rates
    JEL: C53 G12
    Date: 2007–03
  46. By: Low, Hamish; Meghir, Costas; Pistaferri, Luigi
    Abstract: This paper decomposes the sources of risk to income that individuals face over their lifetimes. We distinguish productivity risk from employment risk and identify the components of each using the Survey of Income and Program Participation and the Panel Study of Income Dynamics. Estimates of productivity risk controlling for employment risk and for individual labour supply choices are substantially lower than estimates that attribute all wage variation to productivity risk. We use a partial equilibrium life-cycle model of consumption and labour supply to analyse the choices individuals make in the light of these risks and to measure the welfare cost of the different types of risk. Productivity risk induces a considerably greater welfare loss than employment risk primarily because productivity shocks are more persistent. Reflecting this, the welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides (partial) insurance against employment risk and no insurance against persistent shocks.
    Keywords: Employment risk; life-cycle models; Precautionary savings; Uncertainty; unemployment; Wage risk
    JEL: D91 E21 H31 J64
    Date: 2007–03
  47. By: Paul Mosley; Abrar Suleiman (Department of Economics, The University of Sheffield)
    Abstract: This paper examines the effectiveness of budget support aid as an anti-poverty instrument. We argue that a major determinant of this effectiveness is the element of trust – or `social capital´, as it may be seen – which builds up between representatives of the donor and recipient. Thus we model the conditionality processes attending budget support aid, not purely in the conventional way as a non-cooperative two-person game, but rather as a non-cooperative game which may mutate into a collaborative equilibrium if sufficient trust between the negotiating parties builds up. Whether or not this happens is, we argue, fundamental to the effectiveness of conditionality, and of budget support aid. This then requires us to enquire into the determinants of trust, which - we empirically demonstrate - derive from the experience of the negotiating parties with one another, from the incentives they are able to provide to trust one another and from the processes within which their negotiations are conducted. The model is tested against two samples: extensively against a broad sample of all African countries undergoing budget support operations and intensively against a narrow sample of Ethiopia, Uganda, Malawi and Zambia. The statistical analysis suggests that trust has in practice been achieved not only through a positive `social history´ but by the transmission of forward-looking `signals´ or `bona fides´ concerning fundamentals: high pro-poor expenditure, low military expenditure, and low corruption show a positive relationship with growing trust (measured in terms of freedom from programme interruptions). Where these signals are present, budget support aid is in general growing, and slippage on overt conditionality is in general forgiven; but there are exceptions to this trend, as our case-study analysis demonstrates . A proactive stance in defence of a pro-poor strategy is positive for trust, as are certain procedural reforms including the presence of an IMF resident mission and frequent face-to-face meetings between negotiators for donor and recipient. High trust generates stability of aid, and stability of aid, in conjunction with its level and its targeting, significantly influences growth and poverty outcomes.
    Date: 2005–06
  48. By: Betsey Stevenson (Wharton School, University of Pennsylvania); Justin Wolfers (Wharton School, University of Pennsylvania, CEPR, NBER and IZA)
    Abstract: We document key facts about marriage and divorce, comparing trends through the past 150 years and outcomes across demographic groups and countries. While divorce rates have risen over the past 150 years, they have been falling for the past quarter century. Marriage rates have also been falling, but more strikingly, the importance of marriage at different points in the life cycle has changed, reflecting rising age at first marriage, rising divorce followed by high remarriage rates, and a combination of increased longevity with a declining age gap between husbands and wives. Cohabitation has also become increasingly important, emerging as a widely used step on the path to marriage. Out-of-wedlock fertility has also risen, consistent with declining "shotgun marriages". Compared with other countries, marriage maintains a central role in American life. We present evidence on some of the driving forces causing these changes in the marriage market: the rise of the birth control pill and women’s control over their own fertility; sharp changes in wage structure, including a rise in inequality and partial closing of the gender wage gap; dramatic changes in home production technologies; and the emergence of the internet as a new matching technology. We note that recent changes in family forms demand a reassessment of theories of the family and argue that consumption complementarities may be an increasingly important component of marriage. Finally, we discuss how these facts should inform family policy debates.
    Keywords: marriage, divorce, fertility, cohabitation, remarriage, economics of the family, demography
    JEL: D1 H31 I3 J1 K36 N3
    Date: 2007–02

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