Child welfare programs and child nutrition: Evidence from a mandated school meal program in India

Utilizing the data I collected on a nationally mandated school meal program in India, I examine the extent to which children benefit from the targeted public transfer. Relying upon built-in randomness in whether a child's 24-hour food consumption recall was for a school or non-school day, I find that the daily nutrient intake of program participants increased substantially by 49% to 100% of the transfers. The results are robust to the potential endogeneity of program placement and individual participation. The findings suggest that for as low a cost as 3 cents per child per school day the scheme reduced the daily protein deficiency of a primary school student by 100%, the calorie deficiency by almost 30% and the daily iron deficiency by nearly 10%. At least in the short-run, therefore, the program had a substantial effect on reducing hunger at school and protein-energy malnutrition.     

Lifetime consumption and investment: Retirement and constrained borrowing

Retirement flexibility and inability to borrow against future labor income can significantly affect optimal consumption and investment. With voluntary retirement, there exists an optimal wealth-to-wage ratio threshold for retirement and human capital correlates negatively with the stock market even when wages have zero or slightly positive market risk exposure. Consequently, investors optimally invest more in the stock market than without retirement flexibility. Both consumption and portfolio choice jump at the endogenous retirement date. The inability to borrow limits hedging and reduces the value of labor income, the wealth-to-wage ratio threshold for retirement, and the stock investment.     

Efficient contract enforcement

We study how the efficient choice of contract enforcement interacts with the efficient allocation of capital in a simple production economy. Contract enforcement makes trade possible but requires an aggregate investment of capital that is no longer available for production. In such an economy, more dispersion in ex-ante marginal products makes it optimal to invest more resources in enforcement. Furthermore, implementing the optimal allocation requires a specific distribution of the cost for enforcement across agents that is not monotonic and results in a redistribution of endowments. At the efficient solution, agents at the bottom of the endowment distribution benefit the most from investment in enforcement and these investments lead to a reduction in consumption and income inequality.     

Optimal Indirect and Capital Taxation

We consider an environment in which agents' skills are private information and follow arbitrary stochastic processes. We prove that it is typically Pareto optimal for an individual's marginal benefit of investing in capital to exceed his marginal cost of doing so. This wedge is consistent with a positive tax on capital income. We also prove that it is Pareto optimal for the marginal rate of substitution between any two consumption goods to equal the marginal rate of transformation. This lack of a wedge is consistent with uniform taxation of consumption goods within a period.     

Aggregate fluctuations, financial constraints and risk sharing

Summary. Private information and costly state verification often result in credit rationing in models with smooth investment, affecting both loan size and total investment. The optimal contract is derived in a dynamic stochastic growth model with capital for two types of models: one with symmetric information and the other with asymmetric information and costly state verification. When all information is observed costlessly, the equilibrium optimal contract provides complete insurance to risk-averse savers against aggregate fluctuations. When information is asymmetric and there is costly state verification, the equilibrium optimal contract provides only partial insurance against aggregate shocks. The extent of insurance is measured by the marginal rate of transformation of consumption between borrowers and lenders which is closely linked to the user cost of capital. The deadweight monitoring costs create a wedge between a borrower's cost of capital and a lender's stochastic discount factor, with two results: (i) fluctuations in the user cost of capital provides a mechanism by which aggregate shocks can be␣propagated; (ii) the distribution of capital's share of output among borrowers, lenders, and monitoring costs varies even if capital's share is constant. Capital market frictions not only amplify aggregate fluctuations but also generate cross-sectional fluctuations that may not be observable in aggregate data. Received: November 17, 1997; revised version: April 20, 1998     

Irreversible investment with regime shifts

Under the real options approach to investment under uncertainty, agents formulate optimal policies under the assumption that firms’ growth prospects do not vary over time. This paper proposes and solves a model of investment decisions in which the growth rate and volatility of the decision variable shift between different states at random times. A value-maximizing investment policy is derived such that in each regime the firm's investment policy is optimal and recognizes the possibility of a regime shift. Under this policy, investment is intermittent and increases with marginal q. Moreover, investment typically is very small but, in some states, the capital stock jumps. Implications for marginal q and the user cost of capital are also examined.     

On investment and exchange-rate movements

We investigate the ways in which permanent exchange-rate changes may affect investment by influencing domestic and foreign revenue, the cost of imported variable inputs and the investment price of imported capital goods. We find that the revenue and investment-price channels have a quantitatively greater effect on investment than the cost channel. The negative effect of the revenue channel, which affects the marginal profitability of capital, outweighs the positive effect of the investment-price channel, which affects the marginal cost of capital, implying that exchange-rate appreciation has a net negative influence on investment. The estimation results are robust to different approaches to extracting the permanent components of exchange rates.     

Can conditional cash transfer programs serve as safety nets in keeping children at school and from working when exposed to shocks?

Income shocks on poor households are known to induce parents to take their children out of school and send them to work when other risk-coping instruments are insufficient. State dependence in school attendance further implies that these responses to short-run shocks have long-term consequences on children's human capital development. Conditional cash transfer (CCT) programs, where the condition is on school attendance, have been shown to be effective in increasing educational achievements and reducing child work. We ask the question here of whether or not children who benefit from conditional transfers are protected from the impacts of shocks on school enrollment and work. We develop a model of a household's decision regarding child school and work under conditions of a school re-entry cost, conditional transfers, and exposure to shocks. We take model predictions to the data using a panel from Mexico's Progresa experience with randomized treatment. Results show that there is strong state dependence in school enrollment. We find that the conditional transfers helped protect enrollment, but did not refrain parents from increasing child work in response to shocks. These results reveal that CCT programs can provide an additional benefit to recipients in acting as safety nets for the schooling of the poor.     

Remittances and the human capital of children: New evidence from Kyrgyzstan during revolution and financial crisis, 2005–2009

We analyze the effect of the receipt of remittances on the education and health of children in Kyrgyzstan during a volatile period of their recent history, 2005–2009. The country experienced revolution in 2005 and the global financial crisis beginning in 2008. Both events impact human capital investment, and the changes vary by region of the country. We use fixed effects estimation and fixed effects, instrumental variables estimation to isolate the effects of remittances and other events on human capital. We find that boys aged 14–18 in remittances’ receiving households are less likely to be enrolled in school than other children. We also find that girls in remittances’ receiving households are more likely to be malnourished (thin). Both effects are relatively small. Remittances do not improve the human capital of children left behind. However, we do find an overall positive improvement in school enrollment among young children between 2005 and 2009 but a negative trend in enrollment among older boys and girls. Nutrition improves over time. Regional differences are apparent in these trends in nutrition and education.     

Intertemporal Emission Permits Trading Under Uncertainty and Irreversibility

This paper analyzes the effect of emission permit banking on clean technology investment and abatement under conditions where the stringency of the future cap is uncertain. We examine the problem of heterogeneous firms minimizing the cost of intertemporal emission control in the presence of stochastic future pollution standards and emission permits that are tradable across firms and through time. A firm can invest in clean capital (an improved pollution abatement technology) to reduce its abatement cost. We consider two possibilities: that investment is reversible or irreversible. Uncertainty is captured within a two period model: only the current period cap is known. We show that if banking is positive and marginal abatement costs are sufficiently convex, there will be more abatement and investment in clean technology under uncertainty than there would be under certainty and no banking. These results are at odds with the common belief that uncertainty on future environmental policy is a barrier to investment in clean capital. Moreover, under uncertainty and irreversibility, we find that there are cases where banking enables firms to invest more in clean capital.     

An adjustment cost model of social mobility

We analyze herein the effects of the human capital adjustment cost on social mobility. Such an adjustment cost is modeled as a rising marginal cost schedule for augmenting human capital. We use a general human capital technology, which disentangles the adjustment cost from the depreciation cost of the human capital. Missing credit markets prevent individuals from equalizing the initial differences in the human capital. We find that a higher adjustment cost for human capital acquisition slows down the social mobility and results in a persistent inequality across generations. On the other hand, a higher rate of human capital depreciation could increase mobility via a positive effect on new investment. The quantitative analysis of our model suggests that the human capital adjustment cost is nontrivial to account for the observed persistence of inequality and social mobility. In addition, we find that the government redistribution policy could account for the large observed variation in estimates of social mobility.     

投资驱动型产业政策、地方固定资产投资与农村人力资本积累——基于中国家庭追踪调查(CFPS)的实证分析

基于中国家庭追踪调查（CFPS）2018年数据与笔者收集的数据,本文采用跨地区和出生队列的变异构造双重差分模型（Cohort DID）分析了地方政府投资驱动型产业政策对农村人力资本积累的影响。研究发现,2008年之后地方政府投资驱动型产业政策引致的大规模传统基础设施投资与农村适龄青年完成高中教育的可能性之间存在显著负相关关系。使用工具变量的检验结果表明,上述研究结论具有较强的稳健性。此外,本文还尝试性地探究了上述效应的作用机制：投资驱动型产业政策引致的传统基础设施投资大幅攀升,一方面增加了建筑业及相关低技能工作的机会,提升了投资教育的机会成本;另一方面带来了低技能劳动力工资的提升,导致了不同教育水平劳动力工资趋同、技能溢价下跌,降低了预期教育回报。本文的研究结论可以为“十四五”时期中国全面构建与创新驱动型经济发展模式相匹配的产业政策体系提供参考。     

The Relation between Real Wage Rates and Employment: An Intertemporal General- Equilibrium Analysis

Abstract. The paper studies the relation between real wage rates and employment in an intertemporal model in which expectations of subsequent real wage rates affect equilibrium capital investments and equilibrium interest rates in previous periods. Whether the wage–employment tradeoff is more favourable or less favourable in this model than in the static model with given capital depends on whether there is relatively more substitution in consumption or in production, or, more precisely, whether the elasticity of substitution in production is less than or greater than the inverse of the elasticity of marginal utility in consumption.     

Measuring subjective expectations in developing countries: A critical review and new evidence

The majority of economic decisions are forward-looking and thus involve expectations of future outcomes. Understanding the expectations that individuals have is thus of crucial importance to designing and evaluating policies in health, education, finance, migration, social protection, and many other areas. However, the majority of developing country surveys are static in nature and many do not elicit subjective expectations of individuals. Possible reasons given for not collecting this information include fears that poor, illiterate individuals do not understand probability concepts, that it takes far too much time to ask such questions, or that the answers add little value. This paper provides a critical review and new analysis of subjective expectations data from developing countries and refutes each of these concerns. We find that people in developing countries can generally understand and answer probabilistic questions, such questions are not prohibitive in time to ask, and the expectations are useful predictors of future behavior and economic decisions. The paper discusses the different methods used for eliciting such information, the key methodological issues involved, and the open research questions. The available evidence suggests that collecting expectations data is both feasible and valuable, suggesting that it should be incorporated into more developing country surveys.     

Economic reform,growth and the poor: Evidence from rural Ethiopia

A new decomposition of poverty changes is developed to analyse the determinants of poverty changes during a period of economic reform (1989–1995) in villages in Ethiopia. Poverty fell substantially, but with diverse experiences across villages. Shocks mattered, but the main factors driving consumption changes were relative prices changes, resulting in changes in the returns to land, labour, human capital and location. The experience of the poor is mixed: one group of the poor in 1989, with relatively good land and location, outperformed all other households, while another group with much poorer endowments and location experienced virtually unchanged and persistent poverty.     

ON THE APPROPRIATE MODEL FOR ANALYZING INVESTMENT IN HUMAN CAPITAL WHERE THE CAPITAL MARKET IS IMPERFECT

This paper suggests a modification of the Becker–Chiswick model for analyzing investment in human capital where the capital market is imperfect. The modification essentially involves the addition of a consumption function to the model. As a result it is possible to include the effects of human capital investment on a student's income expectations, on consumption, and thereby on the availability of funds for the student to finance investment in human capital.     

Undiscounted optimal growth with consumable capital and labor-intensive consumption goods

This paper presents a complete characterization of the optimal policy in a two sector undiscounted growth model. The model is an extension of the Leontief two sector model, which analyzes the optimal allocation of capital and labor to a consumption good sector and an investment good sector. The paper extends this framework to include consumable capital. Thus, the planner has preferences over the consumption good and the consumable capital. Future welfare levels are treated equally as current ones. Geometric techniques are applied to characterize the optimal policy if the consumption good is labor-intensive. The results suggest that if the initial capital stock is above a threshold level, that depends upon the consumption of capital, every optimal program is monotonic, converges to the golden rule stock in a finite number of periods, and undergoes either unemployment or excess capacity of capital.     

Health Selection and the Effect of Smoking on Mortality

We show that individuals who are in poorer health, independently from smoking, are more likely to start smoking and to smoke more cigarettes than those with better non‐smoking‐related health. We present evidence of selection, relying on extensive data on morbidity and mortality. We show that health‐based selection into smoking has increased over the last 50 years with knowledge of its health effects. We show that the effect of smoking on mortality is greater for more highly educated individuals and for individuals in good non‐smoking‐related health.     

AIDS and economic growth: A human capital approach

Using a model that combines growth and health capital equations this study analyses the impact of HIV/AIDS on economic growth. The econometric results indicate that the epidemic's effects have been substantial; in Africa the marginal impact on income per capita of a 1% increase in HIV prevalence rate is minus 0.59%. Even in countries with lower HIV prevalence rates the marginal impacts are non-trivial. Hence while the human and social costs of the HIV/AIDS epidemic are major causes for concern, these results indicate that the macroeconomic affects of the HIV/AIDS epidemic are important.     

Sustainability Policy and Environmental Policy

A theoretical, representative‐agent economy with a depletable resource stock, polluting emissions and productive capital is used to contrast environmental policy, which internalises externalised environmental values, with sustainability policy, which achieves some form of intergenerational equity. The obvious environmental policy comprises an emissions tax and a resource stock subsidy, each equal to the respective external cost or benefit. Sustainability policy comprises an incentive affecting the choice between consumption and investment, and can be a consumption tax, capital subsidy or investment subsidy, or a combination thereof. Environmental policy can reduce the strength of the sustainability policy needed. More specialised results are derived in a small open economy with no environmental effects on utility.