Relative Affluence and Child Labor—Explaining a Paradox

Some micro level empirical studies found child labor incidence increasing even with improvement in the economic conditions of the poor. This paper provides a possible explanation as to why increase in absolute income may not be sufficient to solve the problem of child labor. We argue that people in general are not just concerned about their own consumption; they are very much affected by the consumption of their peers. While taking decisions regarding the time allocation of their children between work and leisure, parents do keep an eye on their relative position in the society. We develop a theoretical model of household decision making to show that child labor supply from a poor family can increase even with improvements in its economic conditions, if the family's relative position in the society deteriorates and if the relative status effect is sufficiently strong.     

Measuring Scale Efficiency from a Translog Production Function

In parametric analysis based on a frontier production function, usually the scale elasticity rather than scale efficiency level is reported. In this paper we show how one can use an estimated translog production function to obtain output- and input-oriented measures of scale efficiency at an observed input bundle. We also show how the estimated model can be used to determine the optimal quantity of labor input for an exogenously fixed quantity of capital.     

A Theory of Endogenous Coalition Structures

Consider an environment with widespread externalities, and suppose that binding agreements can be written. We study coalition formation in such a setting. Our analysis proceeds by defining on a partition function an extensive-form bargaining game. We establish the existence of a stationary subgame perfect equilibrium for such a game. Our main results are concerned with the characterization of equilibriumcoalition structures. We develop an algorithm that generates (under certain conditions) an equilibrium coalition structure. Our characterization results are especially sharp forsymmetricpartition functions. In particular, we provide a uniqueness theorem and apply our results to a Cournot oligopoly.Journal of Economic LiteratureClassification Numbers: C71, C72, C78, D62.     

The Social Welfare Impact of Indonesian Dairy Policies

The Indonesian dairy sector remains highly regulated, in spite of trade and investment policy reforms elsewhere in the economy. The regulations, aimed mainly at fostering development of local industry, include an import ratio requirement (BUSEP), import tariffs; an import licensing scheme, and restrictions on investment in milk processing The paper shows that the current policy mix has resulted in a significant increase in numbers of dairy cattle and dairy farmers, and in fresh milk and end-product output. However, this policy mix imposes costs. The analysis indicates that the economy, and in particular domestic consumers, would gain if dairy trade and investment restrictions were lessened. The gradual movement towards a more deregulated dairy sector is a necessary condition for improved efficiency and a strengthening of Indonesia's competitive position in the world dairy market.     

Coercion and the Trade Unions: a Reconsideration of Hayek

Friedrich Hayek was an influential critic of trade unions, especially critical of their presumed ability to act 'coercively'. Without coercive power unions could be benign; with coercive power they were seen to be a force for profound loss and danger. The paper examines Hayek's understanding of the general concept of coercion, and discusses how he applied it to the analysis of trade unions. It also looks at his more speculative treatment of trade unions in a 'non-coercive' world to see what that suggests about his analysis of trade unions. I conclude that Hayek's notion of coercion was unsatisfactory, that he was seriously inconsistent in his use of the term, and that he was hopelessly confused in his analysis of unions.     

Outlier Detection in the Lognormal Logarithmic Conditional Autoregressive Range Model

An outlier detection procedure in the lognormal logarithmic conditional autoregressive range (lognormal Log‐CARR) model is proposed. The proposed test statistic is demonstrated to be well‐sized and to have good power using Monte Carlo simulations. Furthermore, the outlier detection procedure suffers less from the masking effect caused by multiple outliers. The results of an empirical investigation show that the proposed method can effectively detect volatility outliers and improve forecasting accuracy.