A child health production function estimated from longitudinal data. Cebu Study Team

Collaborating researchers used a multi equation model to analyze 3080 mother-infant pairs living on the island of Cebu in the central Philippines and to estimate a child health production function. The econometric methods used eliminated obstacles such as heterogeneity and endogeneity of significant explanatory factors. They also maximized the longitudinal quality of the data. The results showed that morbidity in 1 period reduced infant weight in following periods. For example, diarrhea and febrile respiratory infection reduced growth in the time period following the illnesses. Further effects of some contributing factors were great near birth not diminished with age. For example, breast feeding promoted growth and protected against infection, especially diarrhea and febrile respiratory infection, more substantially near birth than it did later. Further, in urban areas, preventive health care positively affected growth independently of its indirect influence on reducing respiratory infection. Yet it had little effect on diarrhea. Diarrhea had a strong adverse effect on growth. Exposure of the infant to enteric pathogens had the greatest influence on production of diarrhea. In urban areas, exposure included water supply contamination, exposure to feces, a more pathogenic diet, and community crowding. In rural areas, however, exposure included community crowding and increased rainfall which presumably washed feces into the water supply. Household crowding in both urban and rural areas and irritation from smoke in urban areas only tended to bring about febrile respiratory infection.     

Detecting policy effects with wage rigidity and instability – evidence on the Taiwan labour market

With stagnant wages and growing productivity, a widening gap is becoming prevalent in global labour markets. The relationship between wages and productivity has become indeterminate, especially after the 2008 financial crisis. This article presents the phenomenon for why salary rarely follows up with productivity after an economy recovers. By using the GMM method, this study shows the interaction among wage, productivity and tightness, in which we illustrate the Taiwan labour market as an example to show how hiring system changes press wages away from an efficient allocation, causing instability and market failure. Surveying 35 labour markets for different industries, we reveal that the situation in the labour markets has drastically changed since 2008. We find that this resulted in a severe problem when the Taiwan firms got used to policies like ‘22K’, ‘fix-term contract’ and ‘unpaid leave’ programmes. These plans negatively impacted the economy and raised market failure with instability.     

When do auctions ensure the welfare‐maximizing allocation of scarce inputs?

We determine when an unfettered auction will ensure the welfare‐maximizing allocation of a scarce input that enhances product quality and may reduce production costs. A supplier values the input for this “use value” and for its “foreclosure value,” because once the input is acquired, it is unavailable to rivals. An unfettered auction often ensures the welfare‐maximizing allocation of an input increment. However, it can fail to do so when the input would increase relatively rapidly the competitive position of a rival with a moderate competitive disadvantage. Bidder handicapping that ensures auctions generate welfare‐maximizing input allocations differ from standard handicapping policies.