412 research outputs found
Benefit-Cost Analysis: Its Relevance to Public Investment Decisions: Comment
This is a critique of the Arthur Maass article on Benefit Cost Analysis.
Explorations in Economic Research, Volume 4, number 3 (New Directions in Federal Economic Development Programs)
"Self-reliance and Poverty, Net Earnings Capacity versus: Income for Measuring Poverty"
The official U.S. poverty measure defines the poor in terms of a family's actual, yearly cash income relative to an estimate of the income needed to sustain a minimally acceptable standard of living. An alternative definition, designed to reflect a family's ability to achieve economic independence, would instead rest on its capacity for generating income. Net earnings capacity (NEC) is an indicator of the income a family could earn if all working-age family members work full-time, full-year at earnings consistent with their age, education, and other characteristics, with an adjustment made for child care costs. NEC is not intended as a replacement for the official measure, but as a supplement. The official measure identifies the population in need of short-term monetary assistance, whereas NEC identifies the population in need of longer-term skill-enhancing assistance in order to become self-reliant. Two general policy approaches to reduce the prevalence of NEC poverty are to increase the level of education and other income-generating characteristics of those with low earnings capacity and to increase the returns they receive for work.
"'Inability to Be Self-reliant' as an Indicator of U.S. Poverty: Measurement, Comparisons, and Implications"
Given the current emphasis in national policy on self-reliance and a smaller role for government, the official poverty measure, which is based on the premise that all families should have sufficient income from either their own efforts or government support to boost them above a family-size-specific threshold, appears to have less policy relevance now than in prior years. We present here a new concept of poverty based on self-reliance, that is, the ability of a family, using its own resources, to support a level of consumption in excess of needs. Using a measure of net earnings capacity (NEC) to examine the size and composition of the self-reliant-poor population from 1975 to 1995, we find that self-reliance poverty has increased more rapidly than has official poverty. We find that families commonly thought to be the most impoverished--those headed by minorities, single women with children, and individuals with low levels of education--have the highest levels of self-reliance poverty, but have experienced the smallest increases in this poverty measure. Families commonly thought to be economically secure--those headed by whites, men, married couples, and highly educated individuals--have the lowest levels of self-reliance poverty, but have experienced the largest increases. We speculate that the trends in self-reliance poverty stem largely from underlying trends in the United States economy, in particular the relative decline of wage rates for whites and men and the rapidly expanding college-educated demographic group.
"Who are the Truly Poor? Patterns of Official and Net Earnings Capacity Poverty, 1973-1988"
In this paper we study changes in the prevalence and composition of poverty in the United States over the 1973-1988 period, focusing on the first and last years. Over this period, official poverty rose from 23.6 million people (11.4 percent of the population) to 31.9 million (13.1 percent), passing over a peak in the recession of 1981-1983 of over 15 percent of the population.' The official definition of poverty in the United States compares the total income of families to an officially designated "poverty line" that varies with the size and composition of the family. If the income of a family falls below its poverty line, it is said to be poor. Total poverty in the nation is the sum of the individuals living in families whose income falls below their poverty line. One of the most persistent and fundamental criticisms of the official definition is its reliance on a single year of cash income of a family. For many families, annual income is a fluctuating figure. Unemployment, layoffs, income flows from self-employment, the decision to undertake mid-career training or to change jobs, or health considerations may all cause the money income of a household to change substantially from one year to the next. A second fundamental problem with the official definition is its heavy dependence on tastes--in particular, the tastes of the members of the household unit for income versus leisure. Both theoretical and empirical work in economics have recognized these limitations of money income as a measure of economic well-being. Many studies have relied on the average of a number of years of a household's income in order to gain a better estimate of "normal" income--income purged of its transitory elements. Others have taken observed, annual consumption to be a better estimate of real economic well-being than annual income (e.g. Mayer and Jencks, 1991). Consistent with the multiyear perspective, early work by Ando and Modigliani (1963) emphasized a life-cycle perspective. They argued for a measure based on a household's optimal level of real consumption in a period, given the presence of the unit's total resources over its remaining lifetime. Becker's (1965) concept of "full income" extends this concept still further, and includes the time available to the household to be allocated to either work or leisure. A further refinement of this full income measure would adjust for differences in the size and composition of the consumption unit, arriving at a concept of potential real consumption per equivalent consumer unit. Such a concept forms a definition of economic welfare or economic position which rests on economic theory and which reflects a more comprehensive set of considerations than one year of cash income (Moon and Smolensky, 1977). Here we set forth an empirically tractable measure of economic position--Net Earnings Capacity--which seeks to reflect such potential real consumption. This measure abstracts from transitory events and phenomena, unlike current cash income. It also abstracts from individual tastes for income relative to leisure, again differing from the current income measure. And, it reflects the potential of the consumer unit to generate real consumption. Finally, it adjusts for the size and composition of the family unit. Net Earnings Capacity is designed to measure the potential of a family to generate an income stream (which can then be used to support its members) were it to use its human and physical capital to capacity. Individuals living in those households with the lowest levels of Net Earnings Capacity relative to their needs are considered to be the nation's "truly poor" (Garfinkel and Haveman, 1977). We define the concept of Net Earnings Capacity more rigorously, and discuss the empirical techniques that we use in measuring it. Section III presents our empirical estimates of the prevalence and composition of Net Earnings Capacity poverty over the 1973-1988 period. We contrast the nation's "truly poor" families with those families designated as the nation's ''official poor." In Section IV, we estimate the probability that a variety of prototypical families-- families with particular constellations of characteristics--will be either officially poor or Net Earnings Capacity poor. Changes in these probabilities over time will indicate both changes in the underlying character of true poverty in the United States and the extent to which the standard poverty measure conveys an inaccurate picture of the true patterns of low economic position. In the final section, we summarize our findings and indicate some of their policy implications.
Selective Employment Subsidies: Can Okun’s Law Be Repealed?
[Excerpt] Concern that structural factors impede efficient labor market performance is evidenced in both statistical analyses of economic potential and policy proposals for selective employment subsidies. Estimates of the level and expected growth of full-employment GNP have recently been revised downward, as has the 3.2 unemployment multiplier implicit in Okun\u27s Law (see U.S. Council of Economic Advisers and George Perry). These indications of structural changes in labor markets reinforce statistics showing excessively high unemployment rates for youths and blacks, and labor force participation rates that are increasing for women and decreasing for men.
The simultaneous concern with high inflation and high measured unemployment, in the context of major changes in labor force composition and increased variance in sectoral unemployment rates (see Perry), has brought forth numerous and sizable selective employment subsidy policies (SESP) in both the United States and Western Europe. The SESP, changes in potential GNP, and Okun\u27s Law are not unrelated phenomena. This paper explores that relationship. Section I presents a brief taxonomy of the primary SESPs which are currently being discussed in Western industrialized countries. Section II provides the economic rationale underlying these measures. Section III explores the relationship of SESP to the prospective growth of aggregate output, in the context of Okun\u27s Law. Evidence on the existence and magnitude of changes in employment decisions in response to the New Jobs Tax Credit (NJTC) is presented in Section IV
The Revenue Maximization Oligopoly Model: Comment
This is a comment on an article on the revenue maximization hypothesis by William BaumolOligopoly; revenue maximization
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