Complementarities in economic reform

The authors report on technical work which examines the implications of combining complementarities and convex adjustment costs in a model of economic reform. The main results are that the optimal pace of reform is higher if there is a larger initial crisis, stronger pro-reform institutions, and greater immediate potential entrepreneurship. This supports the argument that radical reform was appropriate for most countries in Eastern Europe and the former Soviet Union, while gradualism was more appropriate for a country like China.     

Employer Recognition of Same-Sex Relationships in the United States: Legal and Economic Implications

Recognition of same-sex relationships is receiving increasing national attention in the United States. This paper discusses the current availability of employee rights in the United States on the basis of marital status to same-sex couples, and both the direct and indirect economic consequences to organizations of providing such rights. Despite legal recognition in some states and by many employers in the private sector, the availability of marital rights in the workplace for same-sex couples remains tenuous, at most. Although the direct economic consequences of same-sex relationships remain a matter of debate, the indirect economic advantages are several, including being an employer of choice and having a favorable reputation in the consumer, stockholder, and applicant marketplace. Employers should counterbalance indirect economic benefits with opposition to same-sex relationships, including product boycotts. The issue cannot be ignored from a legal or economic perspective.     

Tax subsidies,the rational demand for insurance and the health care crisis

An individual's optimal insurance coverage depends on balancing his gain through avoiding risk against his loss through the distortion of demand. The U.S. tax system subsidizes the purchase of excessive health insurance by excluding employer premium payments from employees' taxable incomes and by permitting the deduction of a portion of individual premiums. The current operational model of demand for health insurance shows that the tax subsidy does substantially increase insurance coverage. Since much of the rise in health care costs can be attributed to the growth of insurance, the tax subsidy is responsible for much of what is widely perceived as a health care crisis.     

U.S. tourism in Mexico: An empirical analysis

This study estimated demand functions for tourism by U.S. residents in Mexico border areas, the Mexican interior, and overseas. There was no evidence that U.S. tourists substitute Mexico for more distant destinations as transportation costs rise. Border tourism is income elastic when the share of U.S. income of the border states is held fixed. Tourism in the Mexican interior is also income elastic. Tourism along the border is price elastic, while tourism in the interior is elastic with respect to U.S. and overseas prices but inelastic with respect to Mexican prices. The rise in the share of the Mexican interior in U.S. overseas tourism is not related to price factors. Recent devaluations of the Mexican peso are unlikely to provide benefits to the Mexican tourism industry.