Welfare analysis of rent control with side payments: a natural experiment in Cairo, Egypt

Anecdotal evidence suggests that bribery is a common means of obtaining rent controlled apartments. Increased tenant maintenance is a less often noted, but potentially important, phenomenon in controlled markets. Previous empirical studies of the effects of rent control have neglected these side payments, presumably for lack of data. This paper presents evidence on their size and incidence for the controlled market of Cairo, Egypt, as well as estimates of effects such side payments have on welfare gains and losses from controls.     

Effectiveness of employee welfare schemes: differences of specific professional profiles

Corporate social responsibility studies prove that an employee is increasingly a key stakeholder for companies. Firms are starting to think about their workforce as a real opportunity to manage and improve their human and economic capital. Employee welfare and benefit schemes are particularly important in this perspective and top companies are investing significantly in this direction. On the basis of an empirical cross-analysis, conducted on a questionnaire addressed to its own employees, by one of the world's biggest multinational groups, and in which the level of satisfaction of benefits and welfare schemes is investigated, significant results emerged: the utility of benefits is marginally higher in women than in men; an evident direct linear relationship exists between job standing and benefit satisfaction, with the exception of factory workers; seniority and age variance of employees do not imply different marginal utility in benefits. Furthermore, the implementation of some limited cost benefits would generate higher marginal utility in employees than of other, more expensive and exclusive, benefits.     

Real Options, International Entry Mode Choice and Performance

abstract    Recent scholarship suggests that combining insights from real option theory with transaction cost economics may improve decision-making models. In response to this suggestion we develop and test a model of international entry mode choice that draws from both perspectives. Examining samples of Dutch and Greek firms entering Central and Eastern European markets, we found that adding real option variables to a transaction cost model significantly improved its explanatory power. Additionally, firms that used the combined real option/transaction cost predicted choices had significantly higher levels of subsidiary performance satisfaction than firms that did not. Our results suggest that effective managerial decision-making may involve more than mere transaction cost minimization considerations; real option value creation insights also appear to influence the success of decision outcomes.     

THE BENEFITS OF MIGRATION

This article focuses on the potential benefits of migration. Using the author's previous research on remittances and return migration, some of the welfare gains that can stem from the migratory process are highlighted. In the first part of the article, the impact of remittances on child well‐being in Vietnam is investigated. Both the incidence of child labour and school attendance rates in remittance recipient households are assessed. In the second part of the article, the contribution made by Tunisian return migrants to the development of their country of origin is examined. Both analyses suggest that, if certain conditions are met, migration can produce beneficial outcomes for the people and the countries involved in the process.     

Urbanisation,fiscal decentralisation and economic development: A time series evidence

Several empirical tests using Multiple Regression Analyses were conducted on several hypotheses using time series data obtained from the federal and state governments. The results of our analyses establish that the degree of fiscal decentralisation is dependent on intergovernmental transfers and states income per capita. However intergovernmental transfers were not dependent on expenditure decentralisationper se. The degree of urbanisation was found to be inversely related to fiscal decentralisation. The variable measuring the degree of openess was found not statistically significant as an explanatory variable for fiscal decentralisation. However, the share of agriculture was found significant in revenue decentralisation but loses its importance in expenditure decentralisation.The policy implications of the study are that: (i) There is need for the states to develop plans to increase their per capita income, improve their tax collection system, introduce new tax bases and reduce the high degree of free ridership in public goods and services exhibited by the urban population. (ii) The Federal Government should provide specific grants to state governments for urban development, because of the high per capita cost of public goods and services. (iii) The existing Revenue Allocation Act should be reviewed to reflect state government efforts in generating their own revenue from internal sources.     

Do States Play Welfare Games?

This paper uses a panel of state-level annual data from 1983 to 1994 for each of the contiguous United States and the District of Columbia, to explore the degree to which states simultaneously set welfare benefits. Using instrumental variables estimation, we find substantial empirical evidence that is supportive of the notion of welfare competition. Furthermore, we find that state responses to neighbor benefit decreases tend to be significantly larger in magnitude as their responses to neighbor benefit increases. Our results, therefore, have potential implications for public policy in the wake of the increased decentralization of welfare policy associated with the welfare reform of 1996.     

Optimal unemployment policy in a matching equilibrium

This paper considers optimal unemployment policy in a matching equilibrium with risk averse workers and unobserved job search effort. The Planner chooses unemployment benefits, taxes and job creation subsidies to maximise a Utilitarian welfare function. Optimal policy involves a trade-off between higher employment taxes (which finance more generous unemployment benefits) and greater market tightness (which reduces the average unemployment spell). Optimal UI implies the initial UI payment equals the wage, thus ensuring consumption is smooth across the job destruction shock, and UI payments then fall with duration.     

The Mystery of Regional Unemployment Differentials: Theoretical and Empirical Explanations

Abstract.  This paper provides an integrated overview of theoretical and empirical explanations used in the applied literature on regional unemployment differentials. On the basis of 41 empirical studies, four different model types covering nine theoretical constructs of regional unemployment determination and 13 sets of explanatory variables are identified. The overall conclusion is that theoretical and empirical explanations help to reduce the weaknesses in each other. While theory is found to predict that the regional unemployment rate depends on labour supply factors (a collection of factors which affect natural changes in the labour force, labour force participation, migration and commuting), labour demand factors and wage‐setting factors, it is the empirical studies that provide a more profound understanding of the explanatory variables involved. Conversely, whereas most empirical studies provide clear‐cut explanations for the signs of the explanatory variables, it is theory that shows that some of these explanations might be out of proportion. By grouping many studies together, this paper shows that there are indeed clear‐cut trends.     

Improving Incentives in Unemployment Insurance: A Review of Recent Research

Abstract.  This paper provides a review of the recent literature on how incentives in unemployment insurance can be improved. We are particularly concerned with three instruments, i.e. the duration of benefit payments (or more generally the time sequencing of benefits), monitoring in conjunction with sanctions, and workfare. Our reading of the theoretical literature is that the case for imposing a penalty on less active job search is fairly solid. A growing number of empirical studies, including randomized experiments, are in line with this conclusion.     

Targeting and political support for welfare spending

This paper investigates the political support for social assistance policies in a model in which incomes are stochastic (so that welfare policies have an insurance benefit) and unequal ex ante (so that welfare policies have a redistributive effect). With self-interested voting, narrow targeting may so reduce the probability of receiving benefits for the majority that the majority prefers to eliminate benefits altogether, even though the cost of narrowly targeted benefits is close to zero. In contrast, a majority of self-interested voters always supports positive welfare benefits when the policy is targeted sufficiently broadly. If voters are somewhat altruistic, the impact of targeting on political support for welfare spending diminishes but does not disappear. Received: July 1999 / Accepted: May 30, 2000     

Decentralized Welfare: Will There Be Underprovision?

This paper develops an Asymmetric Nash Equilibrium model of welfare provision by states when the benefit payment is a local public good and a fixed population of welfare recipients distributes itself between states with logistic “migration” function. The model shows that state size is an important demand shifter across states because it alters the supply elasticity of recipients. The model provides estimates of how the degree of benefit under provision varies with this migration elasticity. Other demand instruments (such as taxpayer resources and “generosity”) likewise generate positive correlation between benefits and recipients, while supply shifters generate negative correlation between benefits and recipients. The model's predictions are closely matched empirically, when examining the reduced form impact of these instruments on the pattern of welfare benefits and recipients across states. Using these impacts to assign the instruments to either supply or demand sides of the model, it is possible to estimate the model's structural elasticities. These turn out to be high enough so that simulated solutions to the model generate considerable welfare underprovision and thus raise concern about a race to the bottom with decentralized control over AFDC.     

Volatility, growth, and welfare

This paper constructs an endogenous growth model driven by self-fulfilling expectation shocks to explain the stylized fact that the average growth rate of GDP is related negatively to volatility and positively to capacity utilization. The implied welfare gain from further stabilizing the U.S. economy is about a quarter of annual consumption, which is consistent in order of magnitude with estimates based on the empirical studies of Ramey and Ramey (1995) and Alvarez and Jermann (2004). Hence, policies designed to reduce fluctuations can generate large welfare gains because smaller fluctuations are associated with permanently higher rates of growth.     

International competitiveness of japanese manufacturing

This paper deals with the effect of corporate management practices on the efficiency of Japanese manufacturing and their international trade performance. It also looks at the relative cost position in comparison with the major industrialized countries. Such cost comparisons reflect changes in productivity performance, inflation and exchange rate changes that have been so marked that the United States has become the lowest-cost producer of manufactured products recently for the first time in the post-war period. Some effects of these changes on the trade and balance of payments positions of Japan in relation to North America are outlined. The paper includes data for selected years from 1950 to 1988 for real GDP per employed person, real output per hour for manufacturing, and unit labour costs for manufacturing for the United States, Japan, Canada and six of the major European countries.     

Do inter-city differences in intra-city wage differentials have any interesting implications?

Recent research has related characteristics of cities to differences in the distribution of wages across workers with different skill levels. We demonstrate that these differences in wage differentials arise naturally as a compensating variation in Rosen’s theoretical model of inter-city wages. For example, if the income elasticity of demand for housing services is less than unity, cities with higher house prices will have smaller money wage differentials between low and high skill workers. This result has no implications for differences in either absolute or relative real productivity or welfare of unskilled workers. Similarly, changes in the amenity of an urban area may result in changes in relative wages of skilled and unskilled workers with no implications for real productivity or welfare differentials.Empirical tests in which housing cost differentials are added as a determinant of inter-city differences in an intra-urban wage differential model provide empirical confirmation of the theoretical expectations. It appears that intra-urban money wage differentials, differences in the quality of life, and variation in the cost of living in each city are jointly determined variables just as Rosen’s model of inter-city wage differentials predicts.     

Unintended consequences of child care regulations

The effects of regulations governing staff-child ratio, group size, and staff qualifications in child care centers are estimated, using data on a sample of centers. The data contain measures of staff characteristics and wages, price of the service, and the developmental quality of the child care provided. Regulations vary across states, but may be endogenous to these outcomes. Estimates with state fixed effects are feasible because regulations vary within states by age group of children and job title of staff. Estimates with state fixed effects show that tougher regulations have some impact on input use, but have little or no impact on price and quality. The most striking finding is that tougher regulations reduce staff wages, suggesting that the incidence of child care regulations is on employees of day care centers.     

Why cities should not be subsidized

The paper deals with the question of whether fiscal transfers received by cities can be justified by a higher cost of producing publicly provided goods. In the model, increasing the population density implies both a higher output per capita due to agglomeration economies and a higher cost of the publicly provided good due to congestion. It is shown that introducing fiscal transfers to be paid by the region with the lower population density will generally reduce welfare. This result is obtained since the city is already beyond the level of optimum agglomeration.     

Do inter-city differences in intra-city wage differentials have any interesting implications?

Recent research has related characteristics of cities to differences in the distribution of wages across workers with different skill levels. We demonstrate that these differences in wage differentials arise naturally as a compensating variation in Rosen’s theoretical model of inter-city wages. For example, if the income elasticity of demand for housing services is less than unity, cities with higher house prices will have smaller money wage differentials between low and high skill workers. This result has no implications for differences in either absolute or relative real productivity or welfare of unskilled workers. Similarly, changes in the amenity of an urban area may result in changes in relative wages of skilled and unskilled workers with no implications for real productivity or welfare differentials.Empirical tests in which housing cost differentials are added as a determinant of inter-city differences in an intra-urban wage differential model provide empirical confirmation of the theoretical expectations. It appears that intra-urban money wage differentials, differences in the quality of life, and variation in the cost of living in each city are jointly determined variables just as Rosen’s model of inter-city wage differentials predicts.     

Winds of tapering,financial gravity and COVID-19

Real interest rates have fallen dramatically since the early 1980s. Economic theory states that lower real rates discourage savings while promoting spending. However, today, in the world economy, we face a global saving glut problem in which, even in negative real rates, economic agents keep saving. This situation leads to excess demand for safe assets (US Treasuries), lower bond yields, and higher equity valuations. Thus, the world economy has become more dependent on major economies, especially the United States. In this research, we aim to measure the dependency of the world economy on United States monetary policy. We called this new methodology “financial gravity” and tried to quantify the nature by using panel data analysis. We define monetary dependency (financial gravity) by US Investment flows and their reaction against International Reserves, Credit Default Spreads (CDS), and Foreign Exchange Rates. Our empirical findings support that financial gravity is positively related to international reserves and negatively related to Credit Default Swap Spreads (CDS) and Foreign Exchange rates. We also analyzed the COVID-19 period and found that pandemics positively contributed to world reserve accumulation due to economic lock-down measures, fiscal stimulus packages (unemployment benefits), and decreased global spending.     

The Economics of Anti-Begging Regulations

A bstract    The Supreme Court has ruled that asking for money is a form of protected speech. However, it has also ruled that restrictions on the time, place, and manner of begging are constitutional. This paper examines 71 U.S. cities to determine what factors influence a city's propensity to enact anti-begging regulations. The logistic regression results indicate that cities with higher welfare benefits are less likely to regulate begging. Cities with higher crime rates, higher proportions of disabled citizens, and higher proportions of college-educated citizens, and cities that are more densely populated are more likely to regulate begging.
While historians, ethnographers, and legal scholars have studied issues related to begging, economists generally have not. This paper uses the traditional economic model of rational choice to examine why some U.S. cities regulate begging and others do not.     

Impact of China's currency valuation and labour cost on the US in a trade and exchange rate model

Ricardian dynamic general equilibrium analyses show that under free trade arrangements a low income country with lower wage cost and large endowment of labour has comparative advantage in trade. Efficiency gains from this enhance economic growth and welfare of households simultaneously in both low income and advanced economies. Theoretical predictions are empirically validated here with structural VAR analysis based on quarterly data over the time period 1995:1 to 2009:1 on China's relative wage cost, interest rate differential, real effective exchange rate (REER), relative GDP and the US current account balance. It is shown how the relative prices of labour, capital and the currency affect the economic activity in China and current account balance in the US. With free capital inflows and outflows and restrictions on labour mobility, comparative advantage of China and the trade deficit of the US will both be minimised if China allows real appreciation of the Yuan and complete adjustment in prices. Higher production cost and prices in China could reduce welfare of Chinese households and the trade imbalance of the US, while higher relative GDP of China lowers the current account balance for the US.