Toward an Improved Definition of Poverty

This paper is motivated by the observation that the type and the combination of assets are associated with the likelihood of poor households' experience of shock. Focusing on the case of adivasi households in the south Indian state of Kerala, we find that the type, number and combinations of specific assets (primarily social and physical capital) yield varied magnitudes of association with households' experience of shock, which is a measure of vulnerability. Thus, going beyond mere welfare considerations, social policies that prioritise and sequence the type and combination of asset building based on contextual factors help minimise the incidence of shocks and improve livelihood choices.     

Child labor and schooling responses to anticipated income in South Africa

Forward looking, unconstrained households make child labor and schooling decisions considering their permanent income and weighing the relative returns to child time in various potential activities. The timing of anticipated changes in income should have no effect on child labor and schooling in a setting where households can borrow against permanent income. However, this study documents large increases in schooling attendance and declines in total hours worked when black South African families become eligible for fully anticipatable social pension income. As an explanation, the data are most consistent with liquidity constraints for black elder males forcing rural families into less schooling for boys than they would choose absent the constraint, perhaps because of schooling costs.     

The optimal disposition decision for product returns

We provide an analytic model for the optimal disposition decision for product returns. The manager decides which product returns to accept for processing at the remanufacturing facility, and which ones to sell immediately as-is at a salvage value. High congestion levels in the remanufacturing facility delay the sale of the remanufactured product at the secondary market, decreasing the value at which it can be sold; this may imply a more attractive salvaging option. This is particularly important for high-tech products with short life cycles, such as computers and printers. We propose a two-step policy. In the first step, the returned product’s random processing time is observed. In the second step, a disposition decision is made: if the processing time is larger than a threshold k* the product is salvaged; otherwise the product is remanufactured. We provide an approximate procedure to compute k* in industrial settings. Our numerical study demonstrates the superiority of our policy over the current industrial practice ignoring the time value of money.     

Internet Technology and the Extensive Margin of Trade: Evidence from eBay in Emerging Economies

Online platforms such as eBay offer technologies that make it easier for firms to export. This paper dissects a new firm‐level dataset that covers sales made through eBay by sellers based in 21 emerging economies to provide a new lens through which to look at the effect of trade costs on the extensive margin of trade. Comparing eBay sellers with “offline” firm‐level data from the World Bank's Exporter Dynamics Database allows us to test whether the observed trade patterns on eBay fit with the trade‐liberalization predictions of heterogeneous‐firm models. We find that eBay firms export to more destinations, suggesting low destination‐specific fixed costs on eBay. We then show that the distribution of export destinations across eBay sellers is well approximated by a balls‐and‐bins model of frictionless trade, suggesting eBay indeed lowers fixed export costs. Finally, we compare the gravity of eBay with that of offline trade and find geographic distance, languages, and trade agreements to matter less for online trade.     

Functional components of public expenditure,fiscal consolidations,and economic activity

This paper analyses how the functional components of public expenditure and spending‐driven consolidations affect the economic growth, unemployment, and income inequality. A dynamic panel data least squares dummy variable estimator estimator is employed over a sample of 15 European Union countries during the period 1990–2012. The empirical results show that real GDP growth decreases when fiscal austerity measures are implemented, especially if they are spending‐driven. Cuts in public expenditure undermine economic growth, namely if they slash spending on public order, recreation, and education. Spending cuts on education, in particular, affect the investment in human capital, harming not only growth but also economic, social, and human development. The unemployment rate also proved to be significantly boosted when austerity measures restrict spending on education, whereas income inequality rises when social protection expenditures are cut.     

Banking Panics,Information, and Rational Expectations Equilibrium

This paper shows that bank runs can be modeled as an equilibrium phenomenon. We demonstrate that some aspects of the intuitive “story” that bank runs start with fears of insolvency of banks can be rigorously modeled. If individuals observe long “lines” at the bank, they correctly infer that there is a possibility that the bank is about to fail and precipitate a bank run. However, bank runs occur even when no one has any adverse information. Extra market constraints such as suspension of convertibility can prevent bank runs and result in superior allocations.     

The Passthrough of Labor Costs to Price Inflation

We use a time‐varying parameter/stochastic volatility VAR framework to assess how the passthrough of labor costs to price inflation has evolved over time in U.S. data. We find little evidence that independent movements in labor costs have had a material effect on price inflation in recent years, even for compensation measures where some degree of passthrough to prices still appears to be present. Our results cast doubt on explanations of recent inflation behavior that appeal to such mechanisms as downward nominal wage rigidity or a differential contribution of long‐term and short‐term unemployed workers to wage and price pressures.     

Mutual supervision in preshipment inspection programs

Preshipment inspection (PSI) programmes are implemented in many developing countries to assist governments in the collection of revenue at their borders. These programs consist of the delegation of the inspection of imports to a private firm. To study these PSI programmes, we develop a hierarchical agency model in which the government authority can rely on two supervisors, namely the private inspection firm and the customs administration, to control importers' declarations. The government's optimal contract is fully characterized. We devote some attention to the inspection policy and its comparative statics properties. In particular, we identify the situations in which PSI programmes are revenue enhancing. We also discuss the reconciliation policy, i.e. what to do in case of conflicting inspection reports by the inspection firm and the customs administration. In the optimal mechanism, mutual supervision between the inspection firm and the customs administration is used to provide adequate incentives to all parties.