Showing papers in "The Economic Journal in 1990"
TL;DR: In this paper, the invariance proposition of public goods and the optimal tax treatment of charitable giving are discussed. And the authors show that impure altruism is more consistent with observed patterns of giving than the conventional pure altruism approach, and has policy implications that may differ widely from those of the conventional models.
Abstract: When people make donations to privately provided public goods, such as charity, there may be many factors influencing their decision other than altruism. Social pressure, guilt, sympathy, or simply a desire for a "warm glow" may all be important. This paper considers such impure altruism formally and develops a wide set of implications. In particular, this paper discusses the invariance proposition of public goods, solves for the sufficient conditions for neutrality to hold, examines the optimal tax treatment of charitable giving, and calibrates the model based on econometric studies in order to consider policy experiments. Impure altruism is shown to be more consistent with observed patterns of giving than the conventional pure altruism approach, and to have policy implications that may differ widely from those of the conventional models. Copyright 1990 by Royal Economic Society.
5,139 citations
TL;DR: In this article, Frank shows that looking out for Number One may require that we look out for others, and he finds evidence in our emotional acts, like the blush on telling a lie, they can serve as hard-to-fake signals of a commitment to social values.
Abstract: The \"Me\" generation has justified itself by appealing to social scientists who see selfishness as the only rational basis for action. But what are we to make of selfless acts in business, personal life, even politics? In this provocative book, Robert Frank shows us that looking out for Number One may require that we look out for others, too. He finds his evidence in our emotional acts. Like the blush on telling a lie, they can serve as hard-to-fake signals of a commitment to social values. We recognize these signs; we know people we trust; and if we can identify trustworthy fellows we can reject those who do not merit our faith.
1,865 citations
TL;DR: Theoretical rationales for the robust empirical relationships between the share of intraindustry trade between two countries and the average levels of, and inequalities between, their GDPs, per capita GDPs and tariffs have either varied or not been demonstrated formally within a unified analytical framework.
Abstract: Theoretical rationales for the robust empirical relationships between the share of intraindustry trade between two countries and the average levels of, and inequalities between, their GDPs, per capita GDPs, and tariffs have either varied or not been demonstrated formally within a unified analytical framework. This study motivates theoretically the relationships between these six determinants, as well as the average level of, and inequality between, two countries' capital-labor endowment ratios and their share of intraindustry trade. Regression analysis supports, among other results, the presence of both demand and supply roles for per capita income influencing intraindustry trade. Copyright 1990 by Royal Economic Society.
677 citations
TL;DR: In this paper, the authors proposed an energy-aware approach for energy-efficient wireless sensor networks, based on the Energy Policy Research and National Science Foundation, SES-8618502 and SES -8619004
Abstract: MIT's Center for Energy Policy Research and National Science Foundation, SES-8618502 and SES-8619004
618 citations
TL;DR: In this article, a cross-section regression analysis of the relationship between the dependent variable specified as the growth rate of real GDP per cent per annum (hereafter GDP) and aid specified as a percentage of GDP was carried out.
Abstract: The article in this JOURNAL by Mosley et al. (I987) concludes its analysis of aid effectiveness as demonstrating '... inability of development aid over more than twenty years to provide a net increment to overall growth in the Third World' (p. 636). This note purports to show that this conclusion, which is ostensibly 'distressing' as the authors claim, is not warranted. The section of the study which is the basis of the conclusion cited and the subject of this note is a cross-section regression analysis, full details of which are shown in Mosley et al. Table 3. The note is concerned with the relation between the dependent variable specified as the growth rate of real GDP per cent per annum (hereafter GDP) and aid specified as a percentage of GDP (hereafter Aid).' The Aid results, with only two significant positive coefficients in one subsample, certainly give no basis for claiming aid-effectiveness in terms of GDP growth. The intention in this note is to interpret the results which are assumed to be valid. This is made possible by the fact that the authors have helpfully provided the full input set of mean values derived from the raw data. From this it is possible to calculate the GDP/Aid relationship for each country for the second and third period. The procedure for deriving these relationships is as follows. For each country the mean values of the time series of GDP and Aid are extracted from the data for I 960-70 and for I 970-80. Using I 960-70 as the base, the signs of the change in the levels of the GDP and Aid mean values between periods are recorded. This is repeated for I980-4 with I970-80 mean values as the base. The relationship between the two signs is an indication of the effect of Aid on GDP in the period in which the change in levels is effected. Thus in the case of an increase in Aid being combined with a decrease in GDP the latter must have fallen relatively to the former and aid-effectiveness is negative; Mutatis mutandis, for the other three sign combinations, thus generating the appropriate GDP/Aid relationship for each country in each period. A frequency distribution of the four sign-combinations, relating to the full sample, is presented in Table I. Since the signs of the changes in the levels of GDP and Aid are derived by making explicit the arithmetic relationship implicit in the data they form a valid base from which to draw conclusions without requiring any test of
507 citations
TL;DR: In this paper, the authors developed a framework for assessing the consequences of ignoring intra-household inequality in the measurement and analysis of poverty and inequality, and applied this framework to data for the Philippines and concluded that the result of neglecting intra-homehold inequality will probably be considerable understatement of the levels of poverty.
Abstract: In this report the authors develop a framework for assessing the consequences of ignoring intrahousehold inequality in the measurement and analysis of poverty and inequality. They apply this framework to data for the Philippines and conclude that : 1) the result of neglecting intrahousehold inequality will probably be considerable understatement of the levels of poverty and inequality. With the Philippine data, measured levels of inequality and poverty were off 30 percent as a result of ignoring intrahousehold variation, and 2) patterns of inequality revealed by household level data are somewhat different from patterns revealed by individual level data, but the differences seem not to be dramatic. To confirm these results, the exercise should be repeated with data from other countries.
445 citations
TL;DR: In this article, the authors present a diagrammatic approach to endogenous policy theory with specific factors: the theory of Industry Tariffs in Partial Equilibrium, and a long-run theory of National Tariff Levels.
Abstract: Preface Acknowledgments list of results 1. A preview of the results 2. Endogenous policy theory: a diagrammatic approach Part I. Endogenous Policy Theory with Specific Factors: The Theory of Industry Tariffs in Partial Equilibrium: 3. The probabilistic voting model of political efficiency and powerless politicians 4. Endogenous lobbying theory and the contribution specialization theorem 5. Endogenous tariff theory 6. The power function model of endogenous industry lobbying 7. Three simple tests of the Stolper-Samuelson theorem 8. The invisible foot and the waste of nations: lawyers as negative externalities Part II. Endogenous Policy Theory in General Equilibrium: A Long-Run Theory of National Tariff Levels: 9. The 2 x 2 x 2 x 2 model of endogenous redistribution theory 10. A prisoner's dilemma theory of endogenous protection: the Leontief model 11. The compensation effect and the multiple equilibrium trap 12. increasing returns to politics and factor endowments: economic development and Brazilian vitality versus the Indian disease 13. Endogenous protection in the United States, 1900-88 14. A Cobb-Douglas model 15. Black hole tariffs 16. The endowment effect: cross-national evidence on endogenous tariffs Part II. Postscript: 17. The senile-industry argument for protection 18. Optimal obfuscation and the theory of the second worst: the politically efficient policy Mathematical appendices References Author index Subject index.
439 citations
TL;DR: The authors argued that firms will frequently share in the cost of such general training and that a shortage in general training is likely to emerge; this may be especially pronounced in developing countries, where potential trainees are unwilling or unable to pay, general training will not take place.
Abstract: Following the seminal work of Becker (I964), it is widely accepted in the literature that firms will be unwilling to finance training which workers may use in other firms. This paper takes issue with this prediction and suggests that firms will frequently share in the cost of such general training.1 Becker argues that a firm which pays for the training of workers in skills of potential use to other firms will lose these workers: since other firms bear none of the costs of general training, they can attract a worker with such training by outbidding the firm which trained him. Recognising this absence of property rights over an investment in general training, firms will refuse to provide it. Hence, if general training is to take place, the trainee will have to pay for it. If potential trainees are unwilling or unable to pay, general training will not take place. A shortage in general training is likely to emerge; this may be especially pronounced in developing countries.2 In contrast, the outlook for
425 citations
TL;DR: In this article, the authors present some empirical evidence on the prevalence, perceived importance and nature of chartist or technical analysis in the London foreign exchange market and present empirical evidence that chart analysis is used by noise traders.
Abstract: This paper presents some empirical evidence on the prevalence, perceived importance and nature of 'chartist' or 'technical' analysis in the London foreign exchange market. If 'noise traders' (see e.g. de Long et al., I987) are defined as those speculators who do not base their trading strategies on a consideration of market fundamentals, then it clearly encompasses those traders who employ chart analysis i.e. those who base their strategies on the analysis and extrapolation of past price movements alone.
407 citations
393 citations
TL;DR: This article investigated the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control, and demonstrated that important differences in access to information between "borrowers" and "lenders" in financial transactions affect investment decisions of firms and the organization of financial markets.
Abstract: In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.
TL;DR: Geroski and Mueller as mentioned in this paper studied the persistence of profits in the United States and the UK and found that the UK was the most profitable country in the world, while Germany was the least profitable.
Abstract: 1. Profits and the process of competition Dennis C. Mueller 2. Modelling persistent profitability Paul A. Geroski 3. The persistence of profits in the United States Dennis C. Mueller 4. The persistence of profits in US manufacturing industries Ioannis Kessides 5. The persistence of profitability in Canada R. Shyam Khemani and D. M. Shapiro 6. Persistence of corporate profits in the Federal Republic of Germany Joachim Schwalbach and Talat Mahmood 7. The persistence of profits in France Frederic Jenny and Andre-Paul Weber 8. The persistence of profits in Japan Hiroyuki Odagiri and Hideki Yamawaki 9. The persistence of profits in the UK John Cubbin and Paul A. Geroski 10. The persistence of profits: international comparison Hiroyuki Odagiri and Hideki Yamawaki 11. The persistence of profits in perspective Paul A. Geroski and Dennis C. Mueller.
TL;DR: In this article, the authors consider whether foreign aid given for specific categories of expenditure is fungible among them and whether aid reduces tax effort by the recipient government, and they find that aid is largely spent as the donors intended, that aid does not lead to a reduction in tax effort, and aid is not diverted to nondevelopment current expenditures.
Abstract: This paper considers whether foreign aid given for specific categories of expenditure is fungible among them and whether aid reduces tax effort by the recipient government. Models developed to analyze the fiscal relations among different levels of government in the United States are applied to analysis of the impact of foreign aid. Econometric analysis of data for Indonesia reveals that aid is largely spent as the donors intended, that aid does not lead to a reduction in tax effort, and that aid is not diverted to nondevelopment current expenditures. Copyright 1990 by Royal Economic Society.
TL;DR: In this paper, the relative importance of insider forces in wage determination was investigated using firm-level data on 219 U.K. companies over 1974-82, and it was found that a 1 percent rise in a firm's prices or productivity relative to the aggregate economy leads to a rise in relative wages of 0.1-0.2 percent.
Abstract: This paper investigates the relative importance of firm-specific factors (i.e., insider forces) in wage determination. Using firm-level data on 219 U.K. companies over 1974-82, it finds that a 1 percent rise in a firm's prices or productivity relative to the aggregate economy leads to a rise in relative wages of 0.1-0.2 percent. As a corollary to this, outside factors, like the aggregate wage and the unemployment rate, also play an important role. There is evidence for insider-based hysteresis effects, but these are inversely related to the extent to which firms take national agreements into account. Copyright 1990 by Royal Economic Society.
TL;DR: In this paper, the authors provide evidence based on U.K. firm-level data that profit-sharing firms view the total level of remuneration as the marginal cost of labor, which is contrary to much of Weitzman's analysis.
Abstract: This paper provides evidence based on U.K. firm-level data that: (1) the authors cannot reject the view that profit-sharing firms view the total level of remuneration as the marginal cost of labor, which is contrary to much of Weitzman's analysis; (2) there is some support for the popular view that profit sharing raises total remuneration and can, therefore, be inflationary; and (3) the introduction of profit sharing does lead to higher productivity, but, this combined with the employment-reducing consequences of (2) leads the authors to conclude that the net employment effect is small and uncertain. Copyright 1990 by Royal Economic Society.
TL;DR: A survey of the economics of unemployment can be found in this article, which covers competitive and imperfect competition models, the role of different methods of wage determination, and explanation of postwar unemployment patterns in the OECD countries.
Abstract: This paper presents a survey of the economics of unemployment. It covers competitive and imperfect competition models, the role of different methods of wage determination, and explanation of postwar unemployment patterns in the OECD countries. Copyright 1990 by Royal Economic Society.
TL;DR: In this article, the role of internal net worth (holding constant investment opportunities) in the allocation of credit in the presence of asymmetric information in the capital market has been assessed, and a simple general equilibrium model of credit allocation has been developed.
Abstract: This paper assesses the role of internal net worth (holding constant investment opportunities) in the allocation of credit in the presence of asymmetric information in the capital market. The authors consider an economy in which both "symmetric-information" and "information-intensive" entrepreneurs seek funds from the capital market, and they develop a simple general equilibrium model of credit allocation. Their emphasis is on shocks to borrower net worth. Depending on levels of net worth, the symmetric-information allocation, a "credit collapse," or intermediate allocations are possible. The model yields predictions corresponding to accelerator effects on investment and output, as well as real effects of collateral redistributions. Copyright 1990 by Royal Economic Society.
TL;DR: In this article, the authors examined the extent to which product market conditions limit the ability of trade unions to establish wage differentials over nonunion pay and found that the mean union pay differential is of the order of 8 percent to 10 percent in establishments with some degree of product market power, but zero in establishments facing competitive product market condition.
Abstract: This paper examines the extent to which product market conditions limit the ability of trade unions to establish wage differentials over nonunion pay. The mean union pay differential is estimated to be of the order of 8 percent to 10 percent in establishments with some degree of product market power, but zero in establishments facing competitive product market conditions. When competitive conditions are faced, a preentry closed shop and high union coverage of the industry are both required. It is estimated that only 5 percent of the establishments in which there are significant differentials over nonunion pay face generally competitive product market conditions. Copyright 1990 by Royal Economic Society.
TL;DR: A review of recent literature that integrates economics and psychology, contrasting economists' views of rationality with psychologists' research on how expectations and actions are affected by problems of cognition is presented in this article.
Abstract: This paper reviews recent literature that integrates economics and psychology, contrasting economists' views of rationality with psychologists' research on how expectations and actions are affected by problems of cognition. A subjectivist critique of "stimulus-response" approaches to psychology is presented. A discussion of the relevance of theories of motivation follows a review of literature on decision procedures used for evaluating alternatives in situations of complexity. The use of psychology in research on entrepreneurship, productivity, macroeconomic policy, and welfare and public sector economics is explored. The conclusion notes barriers to the general acceptance of a psychologically oriented approach to economics. Copyright 1990 by Royal Economic Society.
TL;DR: In this article, the authors explore the role of both price and quality factors in determining the net trade balances of a number of U.K. manufacturing and service industries and show considerable support for the view that an advanced industrial country like Britain needs to continually upgrade its products to avoid erosion of its domestic and international market shares.
Abstract: A popular explanation for the U.K.'s poor trade performance in the postwar period is that insufficient attention was paid to the quality of goods offered to consumers. The authors explore the role of both price and quality factors in determining the net trade balances of a number of U.K. manufacturing and service industries. Particular attention is paid to the role of innovation, used empirically as a proxy for product improvement. The findings show considerable support for the view that an advanced industrial country like Britain needs to continually upgrade its products to avoid erosion of its domestic and international market shares.
TL;DR: In this article, the authors provided the first direct test of the winner's curse problem proposed by K. Rock (1986) as an explanation to the underpricing of initial public offerings.
Abstract: This paper provides the first direct test of the winner's curse problem proposed by K. Rock (1986) as an explanation to the underpricing of initial public offerings. Moreover, it tests the proposition that the underpricing of initial public offerings in the United Kingdom is due to the combined effect of the winner's curse problem and the particular nature of the settlement mechanism applicable in the British new issues market. The evidence demonstrates that when these two factors--winner's curse problems and interest rate costs--are taken into consideration, the emerging first day net returns are, on average, markedly lower than the level of actual underpricing. Consistently, superior performance can only be achieved by predicting the market's response to the individual new issue. The results, however, indicate that such predictive ability is largely unattainable. Copyright 1990 by Royal Economic Society.
TL;DR: The role of common knowledge assumptions in game theory, Adam Brandenburger and Eddie Dekel repeated games - a survey, H.Sabourian information dynamics and equilibrium, Frank Hahn as discussed by the authors.
Abstract: Part 1: out-of-equilibrium beliefs and out-of-equilibrium behaviour, David M.Kreps the role of common knowledge assumptions in game theory, Adam Brandenburger and Eddie Dekel repeated games - a survey, H.Sabourian information dynamics and equilibrium, Frank Hahn. Part 2: the economics of parallel research, Partha Dasgupta strategy variables and theories of industrial organization, Christopher Doyle bargaining theory, David Canning imperfect competition and international trade, K.Gatsios. Part 3: missing markets - consequences and remedies, David M.Newberry rational expectations, information and asset markets, Margaret Bray decision-making in the presence of risk, Mark J.Machina. Part 4: theoretical modelling of banks and bank runs, Luca Anderlini optimal multi-unit auctions, Eric Maskin and John Riley labour contract theory, Tim Worrall. Part 5: intertemporal general equilibrium models, Timothy J.Kehoe sunspots, Stephen Burnell an introduction to nonlinear dynamics and its application to economics, David Kelsey. Part 6: some micro and macro implications of inventories, J.P.Thomas Keynes's liquidity preference theory - a suggested reinterpretation, Louis Makowski.
TL;DR: The "PcGive" paperback is part of the "P cGive Professional 8.0" package, which offers a range of data description facilities, methods of dynamic model estimation and evaluation tests, and documentation in the form of two books - PcGive and PcFiml.
Abstract: The "PcGive" paperback is part of the "PcGive Professional 8.0" package. This package offers a range of data description facilities, methods of dynamic model estimation and evaluation tests. It is fully interactive and menu-driven, with features that include: 50,000 observations on 500 variables; data import from spreadsheets or ASCII files; up to 16 graphs on screen simultaneously; cross plot and time plot facilities; and documentation in the form of two books - PcGive and PcFiml. Licenses are available on application.
TL;DR: In this article, a structural job search model is proposed for transitions from unemployment to non-participation, which allows transitions from nonparticipation to on-the-job search and prospective wage increases.
Abstract: Using longitudinal micro data on unemployed individuals for 1983-85, a structural job search model is estimated. The model allows for transitions from unemployment to nonparticipation. An extended version of the model deals with the influence of on-the-job search and prospective wage increases on search behavior of the unemployed. The empirical results show that the probability of accepting a job offer is almost one for most unemployed individuals. A large portion of unemployment spells ends in a transition out of the labor force. The effects of changes in benefits on duration appear to be extremely small. Copyright 1990 by Royal Economic Society.
TL;DR: In this paper, it was shown that while nonlinearities could be present, the explanations of the fluctuations had to rest solely on the presence of exogenous shocks that working through the equilibrating mechanism would create the observed randomness.
Abstract: two reasons that led to the dominance of the linear stochastic difference equations approach. The first one was the fact that the nonlinear systems seemed incapable of reproducing the 'statistical' aspects of actual economic time series. At best, such models were able to produce periodic motion1 and an examination of the spectra of economic time series showed the absence of the spikes that characterise periodic data. The emphasis on the equilibrium approach to aggregate economic behaviour (cf. Lucas (i 986)) would make things even more difficult. The plethora of stability results for models of infinitely lived agents with perfect foresight (Turnpike Theorems) suggested that even the regular fluctuations that had been derived in the literature on endogenous business cycles were incompatible with a theory that had solid microeconomic foundations. Further this indicated that while nonlinearities could be present, the explanations of the fluctuations had to rest solely on the presence of exogenous shocks that working through the equilibrating mechanism would create the observed randomness. If such shocks were absent, the system would tend to a stationary state. The second reason was the empirical success of the models based on linear stochastic difference equations. Low order autoregressive processes captured some of the features of aggregate time series. In turn these processes can in principle result from an economy with complete markets where production is subject to exogenous shocks. Though the task of confronting these equilibrium models with actual data has not yielded uncontroversial results (see the discussion and references in Section I) there was no obvious gain in the
TL;DR: In this article, a large cohort of graduates and their decision whether to become teachers or not was studied, and a full structure model of the individual's decision was estimated, which corrects for possible sample selection bias and models endogenously the role of relative earnings.
Abstract: The problem of teacher supply in the United Kingdom has generated considerable concern recently. This paper studies a large cohort of graduates and their decision whether to become teachers or not. A full structure model of the individual's decision is estimated, which corrects for possible sample selection bias and models endogenously the role of relative earnings. The findings provide support for the estimation procedure used and attest to the importance of relative pay in the individual graduate's career decision. Copyright 1990 by Royal Economic Society.
TL;DR: In this paper, it is argued that nutrition intake is a determinant of individual welfare, that at low levels of intake it is a critical determinant, and that in the absence of such a scheme a sizeable fraction of the population would be vulnerable to food deprivation.
Abstract: Two aspects of persons have alternatingly dominated the thinking of social philosophers over the centuries, each true in itself, but each quite incomplete without the other. One sees us capable of deliberation, having the potential capacity to do things. It details agency, choice, independence and selfdetermination, and thereby that aspect of our selves which fashions projects and pursues goals. The other views us as seats of utility or satisfaction; as loci of possible states of mind, attained by the extent to which desires are fulfilled, by the activities that are undertaken and the relationships enjoyed. If one vision sees us doing things, the other sees us residing in states of being. Where the former leads one to the language of freedom and rights, the latter directs one to a concern with welfare and happiness. These are related aspects of course, in fact so closely related that they have often been conflated into one without having caused any obvious damage. Consider for example that people often appeal to a category of socio-economic rights (that is, rights to certain scarce resources) when advocating policies which have an impact on the extent of absolute poverty in a society. Now, it is possible to use instead some notion of aggregate welfare and reach similar conclusions. We may, for instance, be considering the desirability of a nutrition-guarantee scheme. We could advocate it by invoking persons' wellbeing interests, such as certain types of positive rights. (See Section VI.) We could also commend it on grounds of aggregate utility. We could do this by noting first that nutrition intake is a determinant of individual welfare, that at low levels of intake it is a critical determinant, and that in the absence of such a scheme a sizeable fraction of the population would be vulnerable to food deprivation. We could thus argue that the level of aggregate welfare which
TL;DR: In this paper, the authors derived estimates of the consumer-bourne costs of waiting lists for nonurgent medical care using contingent valuation and showed that there exist significant interpersonal differences in valuations.
Abstract: This paper derives estimates of the consumer-bourne costs of waiting lists for nonurgent medical care. The methodology used is contingent valuation. The paper examines the use of this methodology and presents the experimental context and the estimates derived. The estimates indicate the average valuation of a month spent on a waiting list for nonurgent care is approximately 40 pounds, but also show that there exist significant interpersonal differences in valuations. Copyright 1990 by Royal Economic Society.
TL;DR: In this article, an econometric model for the analysis of exploration and production policies of "price-taking" suppliers is developed, and theoretically consistent exploration and output equations for oil are derived.
Abstract: This paper develops an econometric model for the analysis of exploration and production policies of "price-taking" suppliers, and derives theoretically consistent exploration and output equations for oil which explicitly take account of the oil discovery process and the intertemporal nature of exploration and production decision. The model is then applied to an empirical analysis of oil exploration and extraction on the United Kingdom Continental Shelf (UKCS) over the period 1978(1)-1986(4). The analysis explicitly takes account of the available engineering information concerning the pressure dynamics of the petroleum reserves and the geological knowledge pertinent to the discovery process, and presents formal statistical tests of the significance of these factors for the explanation of output and exploration in the North Sea. Copyright 1990 by Royal Economic Society.
TL;DR: In this article, the authors investigated a model of the determination of the share of household expenditure on alcohol using FES data for the United Kingdom, 1970-83, i.e., a time series of cross sections.
Abstract: This paper reports on the investigation of a model of the determination of the share of household expenditure on alcohol using FES data for the United Kingdom, 1970-83, i.e., a time series of cross sections. The authors pay special attention to the occurrence of zero expenditure, variations in characteristics across the population, and the modeling and interpretation of the stochastic term. This term is modeled using the gamma distribution (replacing the normal in Tobit); estimated parameters indicate strong positive skewness. Interactions between household characteristics and expenditure propensities are important. Copyright 1990 by Royal Economic Society.