International Poverty Comparisons on Unit Record Data of Developing and Developed Countries

Cross country poverty comparisons on unit records have, rarely, involved both developing and developed countries. The present study attempts to fill this gap by comparing poverty across fourteen nations with diverse economic and demographic characteristics and at vastly different stages of economic development. The study contains evidence on (a) cross country variation in the equivalence scales estimated in the presence of both household size economies and adult/child relativities, (b) impact of demographic adjustment of the poverty line, that incorporate household size and composition changes, on the poverty rates, and (c) sensitivity of the poverty estimates and their rankings to the ‘equivalence elasticity’. The study finds that country rankings based on per capita GNP bear very little resemblance with that based on the aggregate poverty rates. The latter hide substantial variation in the poverty estimates across different household types.     

Bargaining power and enforcement in credit markets

In a credit market with enforcement constraints, we study the effects of a change in the outside options of a potential defaulter on the terms of the credit contract, as well as on borrower payoffs. The results crucially depend on the allocation of “bargaining power” between the borrower and the lender. We prove that there is a crucial threshold of relative weights such that if the borrower has power that exceeds this threshold, her expected utility must go up whenever her outside options come down. But if the borrower has less power than this threshold, her expected payoff must come down with her outside options. In the former case a deterioration in outside options brought about, say, by better enforcement, must create a Lorenz improvement in state-contingent consumption. In particular, borrower consumption rises in all “bad” states in which loans are taken. In the latter case, in contrast, the borrower's consumption must decline, at least for all the bad states. These disparate findings within a single model permit us to interpret existing literature on credit markets in a unified way.     

Governments do Compete for Citizens - in Australia

Michael van Notten suggested in these pages that consumers of national laws should use supranational legislatures to allow themselves to choose between competing suppliers of law. His proposal was greeted as outlandish, if intriguing. But, Australian economist John Ray reveals, it is already happening.     

“Fifty in five”: The prospects for merger in the electric utility industry

By analyzing four case studies of merger attempts between electric utilities, we conclude that there are not strong incentives for a wave of combinations in the industry. Potential synergy gains do not provide a strong motivation since they are likely already being captured through joint ventures and coordination agreements. Those that still exist would most likely be distributed to rate payers by regulatory decisions. Managerial incentives of the bidder are countered by the desire of target management to remain independent. Potential gains to the financial community from a wave of mergers are large, but the regulatory process provides a dampening of this otherwise strong incentive.     

National policies and local economic initiatives: Evaluating the effectiveness of UK coal and steel closure area re-industrialisation measures

With the collapse that took place in coal, steel and engineering, job creation subsidiaries of certain nationalised industries were set up such as British Coal (Enterprise) Ltd and British Steel Corporation (Industry) Ltd. What have they achieved and what lessons are to be learned?     

An Intertemporal Empirical Analysis of the Renter's Decision to Purchase a Home

In recent years a controversy has developed regarding the responses of different types of families to increases in the relative cost of homeownership. In order to provide evidence on this question, this study employs samples of renters from the Panel Study of Income Dynamics to estimate the marginal probability of home purchase and the conditional expectation of the house value to income ratio. These cross-section estimations are performed for two separate time periods: 1968–70 and 1974–76. Among the conclusions reached (by analyzing intertemporal changes in predicted purchase probabilities and value to income ratios) are (1) that first-time homebuyers have not stretched their housing budgets in response to inflationary expectations, and (2) that the probability of purchase by many of these families has declined over time, especially at low income levels.