Knowledge that Transforms

Poverty population and the environment are closely linked with common property resources as the central element explaining externalities within each component. The essential first step in breaking the cycle of poverty is to increase agricultural productivity. Domestic food production must then be raised followed by measures to ensure that these sectoral gains are environmentally and economically sustainable. Appropriate policy would integrate agriculture as an important component of interventions designed to break into the cycle of poverty population and environmental degradation. For agriculture to play such a positive role however governments cannot allow agricultural investments to remain entirely a matter of response to private incentives generated by world markets. These empirical relationships suggest that prices in world markets undervalue the contribution of agriculture to breaking the cycle of poverty as well as its role in sustaining rapid economic growth. Government policies must endeavor to repair these market failures through the nature of their agricultural investments and the design of their policies if the cycle of poverty is to be broken.

There are many motives for saving. Until recently little attention had been paid to the role which earnings uncertainty might play in determining aggregate savings and the associated stock of wealth in a steady-state economy of identical individuals. Jonathan Skinner (1988), Stephen Zeldes (1989), and more recently in this Review, Ricardo Caballero (1991) have developed models which seek to address this. In each case the authors have argued that income uncertainty is capable of explaining a substanitial proportion of aggregate wealth-perhaps as much as half of the actual stock. Zeldes obtained his results by using numerical methods, Skinner by approximating the Euler equation resulting from a constant relative risk aversion (CRRA) utility function, and Caballero by choosing a specific utility function and income generation process which result in closed-form solutions. The present paper reexamines and generalizes Caballero's (1991) findings. It also corrects some presentational errors in his paper. Generalizing a model that focuses upon a single motive for wealth accumulation is important. In particular, we show that by introducing an intertemporal substitution motive for savings, aggregate wealth stocks emerge which can be considerably different from those presented by Caballero (1991) and Skinner (1988). This relatively simple result is important, because many authors have proposed models which focus upon a single savings motive and claim that their model is able to explain a large component of the wealth stock. Franco Modigliani's life-cycle work (e.g., Modigliani 1988) or the work of Lawrence Kotlikoff and Lawrence Summers (1981) on intergenerational transfers are examples. If we were to sum the explanatory power of all such models we could explain the wealth stock several times over! Therefore, building richer behavioral models is necessary. This paper enriches the uncertainty model. The second purpose of our paper is to argue that any model of wealth accumulation should be validated not simply by referring to the aggregate stock of wealth it can generate, but also by examining its associated wealth distribution.

This paper first sets the demographic consequences of the Great Famine in the context of Irelands long-term population history and then discusses what may be the most puzzling feature of Irish population history the demographic patterns that emerged during the second half of the 19th century. The paper focuses on rural Ireland where these changes were most stark. (EXCERPT)

This study finds that in probit equations 50% of people working 35 hours per week in the US will not be offered benefits or health insurance through their employers to replace services received while on welfare. Women with an average of 39 hours of work per week have an average 76% probability of being offered medical benefits (as one of three example options) while men working an average of 43 hours per week have on average a 72% probability of being offered medical benefits. The probability of being offered medical insurance life insurance and retirement benefits is slightly over 20% for working 35 hours per week. Although women have a slightly higher probability of being offered all the benefits individuals with children have a lower probability of being offered all the benefits which is not significant for medical insurance retirement or flexible work schedules. Individuals working for large firms have a greater probability of being offered benefits excluding flexible scheduling and profit sharing. Working longer hours increases the probability of receiving benefits except in training situations. Higher wages are found in the three stage least squares estimation in reduced form equation to be related to more work experience higher aptitude test scores residence in a standard metropolitan statistical area work at larger firms more work hours per week and not being single. Data are obtained from the 1991 US National Longitudinal Survey of Labor Market Experience of Youth among 1988 persons 26-34 years old who worked and were paid an hourly wage. Persons in the sample earned an average of $9.00 per hour and worked slightly more than 41 hours per week. 33% were Black 20% Hispanic and slightly under 50% were female. About 60% had a child under 6 years old. The average firm size was 5205 employees.

When economists contemplate the invisible hand at work, they generally think of competitive markets. But there are some circumstances in which markets are not supposed to operate well (i.e., in which the invisible hand is thought to falter). A leading cause of market failure, many argue, is the presence of significant externalities. With such externalities, the first welfare theorem does not apply, and so competitive equilibrium-if it exists at all-is not typically Pareto optimal. In the tradition of A. C. Pigou (1932), the typical response to this lack of optimality is for the government to step in and introduce corrective policy, usually in the form of taxes or subsidies. There is, of course, a strong antiPigouvian tradition, as well. Specifically, proponents of the Coase theorem (Ronald Coase, 1960) have contended that, despite externalities, unrestrained bargaining and contracting ought to be sufficient to generate an efficient outcome. (Indeed Coase's own celebrated example was a case of externalities.) Thus, even if formal markets themselves fail, the invisible hand nevertheless succeeds, and outside intervention or design is not required. Recently, Joseph Farrell (1987) argued that, even when free bargaining is permitted, the laissez-faire conclusion inherent in the Coase theorem may founder if agents have incomplete information about one another's relevant characteristics. I shall show, however, that the problem that Farrell identified is due only to monopoly power and is not peculiar to externalities. Indeed, in this paper, I shall take a modified Coasian stance. I shall attempt to show that, in spite of externalities and incomplete information, private contractual agreements suffice to achieve efficiency, as long as no agent is big enough to have significant market power. This conclusion must be qualified, however, with the proviso that, if the externality is (i.e., no one can be excluded from its effects), the government must intervene to prevent free-riding on the agreements. Intervention, in this case, amounts to establishing the right of an agent providing a positive external effect to collect a fee for increasing the effect from all who enjoy it, even if they are not parties to a contract with the provider. Symmetrically, providers of a negative externality can collect a fee for diminishing the effect from all their victims. In either case, however, the fee is set endogenously, that is, it is determined by the contractual arrangements rather than by the government. This result for nonexcludable externalities (which include pure public goods) provides support for a fairly laissez-faire stance toward externalities but turns on an important assumption, namely, that parties always write contracts so as to maximize their social surplus (subject to incentive and individual-rationality constraints). I will return to this assumption in the final section.

From the standpoint of economic theory, the difficulty in regulating workers' performance distinguishes labor markets from commodity markets. Commodities do not respond to incentives. Workers, in contrast, can quit, steal, be hung over, refuse to cooperate with other workers, or generally work at low effort levels. Since direct monitoring is often costly and unreliable, it may not be the profit-maximizing solution to this problem. Economists have discussed various schemes to make productive behavior incentive-compatible for workers. The most frequently discussed schemes fall into two broad categories: efficiency wages and deferred compensation or bonding schemes.! These schemes have been suggested as explanations for a wide variety of labormarket features that appear anomalous from the conventional supply-and-demand perspective. Efficiency-wage models can generate equilibria in which there is involuntary unemployment and in which identical workers are paid different wages in jobs that are otherwise equally attractive. George A. Akerlof and Janet L. Yellen (1985) have argued that they can provide an important component of a model of business cycles. Deferred-compensation schemes have been proposed as explanations for upward-sloping age-earnings profiles, mandatory retirement, pensions, and hierarchical (tournament) promotion structures.2 Because bonding is costless to firms, efficiency-wage and bonding strategies are often viewed as mutually incompatible; profit-maximizing firms should offer efficiency wages only in situations where bonding is impossible. One widely held view argues that in labor markets where agency issues arise, these problems are effectively solved by various bonding arrangements (and moreover, that this observation helps to explain otherwise peculiar features of some labor markets, as mentioned above). It follows that efficiency wages do not generally exist. Proponents of efficiency-wage theory argue that there is considerable evidence of widespread agency problems (e.g., large expenditures by many firms on monitoring) and that there are barriers to the use of bonds, notably moral hazard on the part of firms or legal constraints. Efficiency wages cannot therefore be ruled out a priori as an equilibrium solution to these agency problems.3 In this paper we study these issues surrounding efficient worker compensation in a framework that allows heterogeneity among firms and integrates the financial and

Imagine two models of rural poverty distribution. One (which might be called the model) pictures the poor as confined to poverty regions of great natural adversity, separate and apart from regions. In the normal areas, on the other hand, there might be growing inequality, but there is little or no absolute poverty. The second model (the socioeconomic model) sees poor, rich, and middle class physically interspersed or living in proximity to one another. Which of these models more closely approximates reality is an important question. It affects the visibility of extremes of wealth and poverty, which is a politically sensitive matter. Also, characteristics of antipoverty policy will be very different according to whether it is necessary to identify and treat individual households and neighborhoods widely scattered among the nonpoor population or whether it is possible to target entire poor regions. In China, the ecological model is official