[This paper presents a general proof of a fundamental proposition of rationing theory and demonstrates that it applies to some basic postulates of macroeconomic theory, including the consumption function. The approach used is to study individual consumer behavior under conditions of quantity constraints. In so doing, the choice-theoretic foundations of the household sector's excess demand functions, as well as the functions themselves, in a general disequilibrium model are developed. These functions include quantities as well as prices as arguments. The response to a change in an effective quantity constraint is shown to depend on the substitutability between the goods involved. Responses to price changes are also determined. The results are then related to the literature on macroeconomic disequilibrium.]

PERSONAL saving rates, i.e., the ratios of personal saving to personal disposable income, in many industrialized countries have risen dramatically in recent years. A number of attempts to explain the phenomenon of rising saving rates coinciding with price inflation have drawn upon the work of George Katona (1975), who has stressed the feeling of uncertainty and pessimism about the future caused by inflation that, in turn, encourages saving. In this paper a general model of aggregate household saving behavior is formulated. Data on Canada, Germany, Japan, the United Kingdom, and the United States are used to estimate the personal saving function in each of the countries and the results are used to test various hypotheses about personal saving behavior. This paper has two major objectives: to test for a direct influence of inflation on personal saving after taking into account the influence of other relevant factors, including any indirect channels by which inflation may exert an influence (e.g., the level of real liquid assets); and to determine what factors in each country are important for explaining saving behavior.

Barbara Katz and Machiko Nissanke have presented two comments that are critical of my application of the Barro-Grossman disequilibrium model to the Soviet Union. In the empirical work reported in my 1976 article, I found that the disequilibrium model performed well in that the Soviet data were consistent with the model's predictions. In the present paper, I will not only reply to the criticisms in the Katz and Nissanke papers, but will also report some additional results.

Robert Clower has presented a hypothesis of household behavior under conditions of involuntary unemployment; in his analysis, Clower contends that a constraint in labor supply implies a decrease in demand for consumer goods. Robert Barro and Herschel Grossman (1971, 1974) generalized Clower's analysis to include the case where the quantity of consumer goods available is less than the demand at the going price, i.e., the case of excess demand. The Barro-Grossman disequilibrium model provides a framework for analyzing the effects of repressing inflation by means of price controls. The model predicts that such a policy will lead to increased saving and, more importantly, a reduction in labor supply. The latter response will have a multiplier effect on outptit. Given the potential importance of the implications of these effects, particularly the labor supply response, it would seem of utmost importance to test this model empirically. Such tests must have two objectives: to test the direction of response, i.e., the predictive ability of the theory; and to measure the size of the response. This paper is an attempt to accomplish these two objectives. The Soviet Union is chosen here as a case study. It is generally believed that there was repressed inflation in the Soviet economy during the period 1955-67,1 the years chosen for this study. Although conditions were getting better during this period, many of the controlled prices on the official retail markets were set below market-clearing levels; thus creating the possibility of the various spillover effects referred to by Barro and Grossman.2 A model similar to that of Barro and Grossman is applied here to the Soviet household sector. For the Soviet case one other market must be introduced, the uncontrolled or free consumer good market (for example, the collective farm market). Prices and availability of goods on the state and cooperative retail market are government policy parameters and these prices are usually set below marketclearing levels. Household saving mostly takes the form of increases in savings deposits (and cash hoards). The disequilibrium model predicts that if the amount of goods available on the state and cooperative retail market decreases (increases) then labor supply decreases (increases), demand on the collective farm market and other free markets increases (decreases), and saving increases (de* International Finance Division, Federal Reserve Board. Most of this research was done at the University of Virginia and was supported by the Thomas Jefferson Center Foundation of Charlottesville, Virginia. This paper represents my views solely and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or other members of its staff. I would like to thank the managing editor and an anonymous referee for helpful comments on an earlier draft of this paper. For a brief discussion of the evidence for this belief, as well.as a partial listing of those holding it, see the author (1975, pp. 57-59). For another partial listing of those who hold the belief, as well as a dissenting view, see Richard Portes. 2 In fact, they refer to the applicability of their model to the situation in the U.S.S.R. See Barro and Grossman (1971, p. 91, fn. 18).

The Medicare hospice program is intended to provide palliative care to terminal patients, but patients with long stays in hospice are highly profitable, motivating concerns about overuse among the Alzheimer's and Dementia (ADRD) population in the rapidly growing for-profit sector. We provide the first causal estimates of the effect of for-profit hospice on patient spending using the entry of for-profit hospices over 20 years. We find hospice has saved money for Medicare by offsetting other expensive care among ADRD patients. As a result, policies limiting hospice use including revenue caps and antifraud lawsuits are distortionary and deter potentially cost-saving admissions. (JEL H51, I11, I12, I18, J14, L84)