The theory of precautionary saving is shown in this paper to be isomorphic to the Arrow-Pratt theory of risk aversion, making possible the application of a large body of knowledge about risk aversion to precautionary saving, and more generally, to the theory of optimal choice under risk In particular, a measure of the strength of precautionary saving motive analogous to the Arrow-Pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving, and to give a new interpretation of the Oreze-Modigliani substitution effect

Precautionary Saving in the Small and in the Large

This chapter reviews and critiques recent work on prejudice, discrimination, and racism, with an emphasis on evidence of continuing discrimination in the United States and efforts to understand its basis in prejudice. Three lines of research are the primary subject of the review: recent work on the measurement of discrimination, especially audit methods; theories of new prejudice and new racism following the Civil Rights movement; and research on implicit prejudicial attitudes. The most sophisticated new work on prejudice and discrimination is characterized by a multidimensional understanding of prejudice and/or the use of experimental methods. This review argues that research on implicit prejudice, largely developed by psychologists, provides an important new understanding of the basis of discrimination and should be incorporated in sociological accounts.

New approaches to understanding racial prejudice and discrimination

In this paper, I selectively review recent literature on illegal migration from Mexico to the United States. I begin by discussing methods for estimating stocks and flows of illegal migrants. While there is uncertainty about the size of the unauthorized population, new data sources make it possible to examine the composition of legal and illegal populations and the time-series covariates of illegal labor flows. I then consider the supply of and demand for illegal migrants. Wage differentials between the United States and Mexico are hardly a new phenomenon, yet illegal migration from Mexico did not reach high levels until recently. An increase in the relative size of Mexico%u2019s working-age population, greater volatility in U.S.-Mexico relative wages, and changes in U.S. immigration policies are all candidate explanations for increasing labor flows from Mexico. Finally, I consider policies that regulate the cross-border flow of illegal migrants. While U.S. laws mandate that authorities prevent illegal entry and punish firms that hire unauthorized immigrants, these laws are imperfectly enforced. Lax enforcement may reflect political pressure by employers and other interests that favor open borders.

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w12141.pdf?abstractid=896214&mirid=3

Illegal Migration from Mexico to the United States

The last thirty years have witnessed a fundamental change in the regulation of infrastructure industries Whereas firms were subject to rate of return regulation and protected from entry in the past, now they face various forms of incentive regulation, competition is actively promoted by many regulators, and both regulators and the firms they regulate must often confront rapid technological progress This paper surveys the literature on the investment implications of different regulatory schemes, highlighting the relevance of modern investment theory, which puts risk and intertemporal issues, such as the irreversibility of much infrastructure investment, center stage It discusses the impact on regulated monopolists' investment behavior of key regulatory characteristics, namely the price flexibility allowed by the regulator, the length of the regulatory cycle, and the costs the regulator will allow the firm to recover at future regulatory hearings It also considers the impact of competition, especially the situation where a vertically integrated firm has its operation of a bottleneck asset regulated, on investment by regulated firms and their competitors

/pdf/regulating-infrastructure-the-impact-on-risk-and-investment-2w7skms5xs.pdf

Regulating Infrastructure: The Impact on Risk and Investment

. Worker absenteeism constitutes a significant loss of work-time and therefore has important implications for both household income and firm productivity. Despite this, the economics profession has been somewhat laggard relative to other disciplines in addressing the phenomenon. The situation is, however, changing, with recent years witnessing a mild flurry of activity. The aim of this paper is to maintain, and if possible, enhance this momentum. We do this firstly by developing some basic theoretical ideas which we consider to be central to an economic analysis of absence. In particular, we address the often cited claim that observed absence is unequivocally inefficient. Second, by reviewing some of the key contributions, we attempt to assess where the literature on the economics of absence stands at present, as well as suggesting some potentially fruitful lines of future enquiry.

The economics of absence: theory and evidence

The behavior of a cooperative firm which is interested in the well-being of its members has attracted economists' attention in quite a few studies The pioneer work of Benjamin Ward compares the policy of such a firm with that of a profit maximizer under perfect competition The analysis is further carried out by Evsey Domar (1966) and Jaroslav Vanek (1969) The comprehensive study of Vanek (1970) establishes a general theory of labor-managed market economies The theory of cooperatives and participatory structures of enterprises has recently been further extended in several directions by S Charles Maurice and Charles E Ferguson, J E Meade, Eirik Furubotn, among others However, the basic assumption in all these studies is that the cooperative operates with complete information about the prices of the final demand markets This paper is concerned with the behavior of a competitive cooperative firm under price uncertainty That is, the price of the final product is not perfectly anticipated, for instance, as a result of inflation, but is rather uncertain and takes the form of a stochastic variable with a known distribution A recent paper of Allan Taub deals with the very same subject However, the treatment here is more comprehensive and the results are entirely different' Compare the output policy of two types of firms: The profit maximizer whose labor input consists of workers with no share in the firm's profits and a second firm which seeks the optimum number of members to maximize profits or net income per member We shall call the first type a capitalist and the second type a cooperative As noted by Vanek (1970) and others, there are several aspects which distinguish the cooperative firm from the capitalist firm However, we disregard all the other characteristics and concentrate in this paper on the difference of the objective functions of the two types of firms Ward has already shown that under perfect competition and with complete price anticipation, a cooperative produces less than a capitalist who has the same production technology On the other hand, Agnar Sandmo and Hayne Leland have found that under price uncertainty a risk-averse capitalist firm produces less than under complete certainty The main finding of this paper is that Sandmo's result does not apply to cooperatives That is, a cooperative even if risk averse produces more under uncertainty and therefore increases its demand for labor input As a consequence of this result, Ward's conclusion is weakened and becomes less significant That is, in the case of price uncertainty the discrepancy between cooperative and capitalist with respect to production and occupation is smaller than under price stability Section I states the assumptions of the model and compares the optimum solution of a capitalist with that of a cooperative firm under certainty as well as under risk conditions Section II presents comparative statics first with respect to the basic parameters of the price distribution (the average price and the variance), and second, with respect to the basic parameters of the profit function (the wage rate and the fixed cost)

Price Uncertainty and the Cooperative Firm

Individual behavior and social choice in a cooperative settlement

The firm operating in an uncertain environment was initially analyzed in detail by Sandmo [1971] and by Leland [1972]. Since these early papers many extensions to the analysis have been explored by such writers as Batra and Ullah [1974], Mayer [1975], Hartman [1976], Holthausen [1976], Stewart [1978], Paroush and Kahana [1979], anid Katz and Paroush [ 1979]. This paper investigates the optimal policy of' a pr-ice discriminating firm which operates under pr-ice uncertainty in one of two markets. The main motivation for the analysis comes from the problems of a firm which sells its output both domestically and abroad. Such a firm often has nearly full information about the domestic market b)ut faces uncertainty in foreign markets. In particular, the firm which has its utility defined over profits denominated in terms of domestic currency will regard the profits on its foreign sales as uncertain given excha nge rate variability even if it has full information about all other conditions in the foreign market. Hence the paper may be regarded both as an extension to the above mentioned analyses of the firm under uncertainty and as an attempt to throw light on the activities of firms involved in international trade. The treatment, being essentially of a mricroeconomic nature, is clearly different from that of such writers as Batra [1-975] and Helpman and Razin [1979], which are essentially macroeconomic treatments.

Nava Kahana

Papers

Price Uncertainty and the Cooperative Firm

Individual behavior and social choice in a cooperative settlement

Price Uncertainty and the Price Discriminating Firm in International Trade

Child labor and temporary emigration

More on alternative objectives of labor-managed firms