BENEFITS AND COSTS OF INTENSIVE FOSTER CARE SERVICES: THE CASEY FAMILY PROGRAMS COMPARED TO STATE SERVICES

The foster care system attempts to prepare children and youth who have suffered child maltreatment for successful adult lives. This study documents the economic advantages of a privately funded foster care program that provided longer term, more intensive, and more expensive services compared to public programs. The study found significant differences in major adult educational, health, and social outcomes between children placed in the private program and those placed in public programs operated by Oregon and Washington. For the outcomes for which we could find financial data, the estimated present value of the enhanced foster care services exceeded their extra costs. Generalizing to the roughly 100,000 adolescents age 12-17 entering foster care each year, if all of them were to receive the private model of services, the savings for a single cohort of these children could be about $6.3 billion in 2007 dollars. ( JEL D61, H75)     

An Experimental Investigation of the Effect of Cost Information and Feedback on Product Cost Decisions*

Abstract. In this paper we report the results of an experiment designed to investigate the potential benefits of more accurate costing systems. Subjects in our experiment participated in one of four single-person decision making settings, which varied in terms of the accuracy of costing systems (less accurate versus more accurate cost reports) and in the complexity of the economic environment (less heterogeneous versus more heterogeneous products). The costing systems provided imperfect reports that subjects could use to select forecasts of future product costs. Forecast accuracy determined the resulting payoffs for subjects. In addition to having the cost reports when making forecasts, subjects also observed the association between forecasts and actual profits for previous periods and the rank ordering of the products' relative usage of resources at each of the production processes. The results from our experiment indicate that subjects did not select forecasts based only on reported costs. Rather they updated forecasts using profit feedback and the supplemental rank information about the products' relative usage of resources. We found that profits decreased as the complexity of economic environment increased but increased with the accuracy of cost reports. The profits associated with less accurate costing systems, however, were not as low as we would have predicted had the subjects used the cost reports as their forecasts. In fact, using profit feedback, subjects were able to converge toward optimal profits even with imperfect cost information.     

Predicting Stock Returns in an Efficient Market

An intertemporal general equilibrium model relates financial asset returns to movements in aggregate output. The model is a standard neoclassical growth model with serial correlation in aggregate output. Changes in aggregate output lead to attempts by agents to smooth consumption, which affects the required rate of return on financial assets. Since aggregate output is serially correlated and hence predictable, the theory suggests that stock returns can be predicted based on rational forecasts of output. The empirical results confirm that stock returns are a predictable function of aggregate output and also support the accompanying implications of the model.     

Ramsey,Pigou, Heterogeneous Agents,and Nonatmospheric Consumption Externalities

This paper analyzes the effects of nonatmospheric consumption externalities on optimal commodity taxation and on the social cost and optimal levels of public good provision. A negative consumption externality, by lowering the social cost of public good provision, may require the second‐best level of public good provision to exceed the first‐best level. If those households who are most important for building up the consumption reference level respond the least to commodity taxation, the second‐best commodity tax rate may fall short of the first‐best rate. Moreover, in this case, heterogeneity may imply an equity‐efficiency tradeoff. This tradeoff is present only if the consumption externality is of the nonatmospheric type.     

Media Advocacy: A Case Study of Philip Sokolof's Cholesterol Awareness Campaigns

Elevated blood cholesterol has been identified as a major causal factor underlying heart disease. Through effective use of the mass media, Philip Sokolof was instrumental in increasing cholesterol awareness, forcing major changes in the food industry, and facilitating the passage of tough, new food labeling legislation. Drawing on a variety of published sources and a personal interview with Mr. Sokolof, this article describes his efforts to use the mass media to promote change in the public health domain.     

Capital Market Regimes and Bank Structure in Europe

We hypothesize that fundamental features that distinguish European capital markets have predictably influenced emerging national differences in bank capitalization and loan growth. Using bank‐level data from 13 European countries, 1998 to 2004, we find evidence of positive effects of “equity‐friendly” market features on bank capitalization and positive effects of both “equity‐friendly” and “credit‐friendly” market features on loan growth. The findings are strongest in small banks and in banks with cooperative charters. Our results suggest that ongoing and prospective integration of European banking markets is mitigated by relatively static features of the equity and credit markets on which banks rely.     

The Process of Becoming Homeless: An Investigation of Female-Headed Families Living in Poverty

Homelessness is modeled as a three-state process in which female-headed families move between primary residency in their own homes (residence) to doubling-up in other families' homes (doubling-up) and finally to homeless shelters (shelter). The most important explanatory factors for families in residence are rent/income variables, while the most important factors for families doubling-up pertain to sharing difficulties. The results support early intervention in the homelessness process as an important public policy goal.