Isaac Ehrlich

Participation in Illegitimate Activities: A Theoretical and Empirical Investigation

A theory of participation in illegitimate activities is developed and tested against data on variations in index crimes across states in the United States. Theorems and behavioral implications are derived using the state preference approach to behavior under uncertainty. The investigation deals directly with the interaction between offense and defense: crime and collective law enforcement. It indicates the existence of a deterrent effect of law-enforcement activity on all crimes and a strong positive correlation between income inequality and crimes against property. The empirical results also provide some tentative estimates of the effectiveness of law enforcement in reducing crime and the resulting social losses.

Market Insurance, Self-Insurance, and Self-Protection

The article develops a theory of demand for insurance that emphasizes the interaction between market insurance, “self-insurance,” and “self-protection.” The effects of changes in “prices,” income, and other variables on the demand for these alternative forms of insurance are alalyzed using the “state preference” approach to behavior under uncertainty. Market insurance and self-insurance are shown to be substitutes, but market insurance and self-protection can be complements. The analysis challenges the notion that “moral hazard” is an inevitable consequence of market insurance, by showing that under certain conditions the latter may lead to a reduction in the probabilities of hazardous events.

Productivity Growth and Firm Ownership: An Analytical and Empirical Investigation

We focus on the effect of state versus private ownership on the rates of firm-specific productivity growth and cost decline by developing a model of endogenous, firm-specific productivity growth and testing its implications against panel data on 23 international airlines of varying levels of state ownership over the period 1973-83. Our model and empirical results show that state ownership can lower the long-run annual rate of productivity growth or cost decline, but not necessarily their levels in the short run. Observed level differences in productive efficiency across private and state-owned firms may thus be a function of the age distribution of the firms being compared. These results appear to be independent of whether the firms operate under apparently more or less competitive or regulated markets and whether they differ in production scales. The analysis offers new insights concerning the recent trend toward privatizing state-owned enterprises that has been observed in many countries.

The Problem of Development: Introduction

No abstract available.

Sensitivity Analyses Of The Deterrence Hypothesis: Let's Keep The Econ In Econometrics

Leamer and McManus applied Extreme Bound Analysis (EBA) in an empirical study of the deterrent effects of capital punishment and other penalties. Their analysis has questioned the validity of the deterrence hypothesis. The thrust of our paper is twofold: first, by applying EBA to well-known econometric models of demand, production, and human-capital investment, our analysis exposes and illustrates the inherent flaws of EBA as a method of deriving valid inferences about model specification. Second, since the analysis shows Leamer and McManuss inferences about deterrence to be based on a flawed methodology, we offer an alternative, theory-based sensitivity analysis of estimated deterrent effects using similar data. Our analysis supports the deterrence hypothesis. More generally, it emphasizes the indispensable role of theory in guiding sensitivity analyses of model specification. Copyright 1999 by the University of Chicago.

On the Economics of Compliance With the Minimum Wage Law

This paper reexamines the issues of compliance with and enforcement of the minimum wage law recently addressed in this Journal by Ashenfelter and Smith and by Grenier. Pursuing a more rigorous methodology we are able to add new general conclusions, and correct and reconcile some previous conflicting conclusions concerning the role of the disparity between the minimum and free market wages, the level and elasticity of labor demand, and the magnitude of deterring monetary sanctions on the noncompliance decision. Our formulation also addresses the law evasion (reduced wages) as well as the law avoidance (modified employment) aspects of the noncompliance decision, which previous formulations have ignored.

The Optimum Enforcement of Laws and the Concept of Justice: A Positive Analysis

No abstract available.

The Evolution of Income and Fertility Inequalities over the Course of Economic Development: A Human Capital Perspective

Using an endogenous‐growth, overlapping‐generations framework in which human capital is the engine of growth, we trace the dynamic evolution of income and fertility distributions and their interdependencies over three endogenous phases of economic development. In our model, heterogeneous families determine fertility and children’s human capital, and generations are linked via parental altruism and social interactions. We derive and test discriminating propositions concerning the dynamic behavior of inequalities in fertility, educational attainments, and three endogenous income inequality measures—family‐income inequality, income‐group inequality, and the Gini coefficient. In this context, we also reexamine the “Kuznets hypothesis” concerning the relation between income growth and inequality.

Insurance, Protection from Risk, and Risk-Bearing

By extending Ehrlich and Beckers analysis of the demand for insurance we derive several new propositions concerning the demand for self-insurance, self-protection, and market insurance under alternative market conditions. A key behavioural prediction is that if the price of market insurance were responsive to self-protection, then the latter would induce a substitution away from self-insurance and towards market insurance, regardless of the fairness of insurance terms, as long as the utility function exhibits constant or decreasing absolute risk aversion. We compare two of our results to earlier results recently published in this journal by Boyer and Dionne.

Why Does Human Capital Need a Journal

No abstract is available for this item.