closing the regional equity gap a critique of the department of trade and industry s regional venture capital funds initiative mason c m and harrison r t 2003 closing the regional equity gap a critique of the department of trade and industry s regional venture capital funds initiative reg studies 37 855 868 the uk labour government has provided support for the establishment of regional venture capital funds in each of the english regions as part of its drive to create an entrepreneurially led knowledge based economy this initiative is a response to persistent gaps in the provision of start up and early stage venture capital in this paper we question the likely effectiveness of the initiative on four counts first there is a lack of early stage venture capital skills available to manage the funds second the small size of the funds will make it difficult for them to achieve financial viability third the funds are targeting the wrong problem the maximum investment that they are allowed to make is 250 000 they may subsequently provide up to an additional 250 000 in follow on financing however the main fundin

learning about a new technology pineapple in ghana this paper investigates the role of social learning in the diffusion of a new agri cultural technology in ghana we use unique data on farmers communication patterns to define each individual s information neighborhood conditional on many potentially confounding variables we find evidence that farmers adjust their inputs to align with those of their information neighbors who were surpris ingly successful in previous periods the relationship of these input adjustments to experience further indicates the presence of social learning in addition applying the same method to input choices for another crop of known technol ogy correctly indicates an absence of social learning effects jel d83 013 033 q16

the demand for money in developing countries assessing the role of financial innovation traditional specifications of money demand have commonly been plagued by persistent overprediction implausible parameter estimates and highly autocorrelated errors the authors argue that some of these problems stem from the failure to account for the impact of financial innovation they estimate money demand for ten developing countries using various proxies for financial innovations they also assess the relative importance of this variable finding financial innovation can be better modeled as a stochastic random walk trend rather than a deterministic time trend financial innovation plays an important role in determining fluctuations of the demand for money the importance of this role increases with the rate of inflation

using maimonides rule to estimate the effect of class size on scholastic achievement the twelfth century rabbinic scholar maimonides proposed a maximum class size of 40 this same maximum induces a nonlinear and nonmonotonic relationship between grade enrollment and class size in israeli public schools today maimonides rule of 40 is used here to construct instrumental variables estimates of effects of class size on test scores the resulting identiecation strategy can be viewed as an application of donald campbell s regression discontinuity design to the class size question the estimates show that reducing class size induces a signiecant and substantial increase in test scores for fourth and efth graders although not for third graders when asked about their views on class size in surveys parents and teachers generally report that they prefer smaller classes this may be because those involved with teaching believe that smaller classes promote student learning or simply because smaller classes offer a more pleasant environment for the pupils and teachers who are in them mueller chase and walden 1988 social scientists and school administrators also have a longstanding interest in the class size question class size is often thought to be easier to manipulate than other school inputs and it is a variable at the heart of policy debates on school quality and the allocation of school resources in many countries see e g robinson 1990 for the united states ofsted 1995 for the united kingdom and moshel ravid 1995 for israel this broad interest in the consequences of changing class size

a model of educational investment social concerns and inequality we consider a model in which educational investments entail productivity gains signaling power and social status the latter depends on the agent s relative achievement in one of three dimensions innate skills level of schooling and income we study the three scenarios separately and characterize the conditions under which social concerns increase or decrease educational and income inequality inequality increases decreases if education lowers the stigma suffered by low skilled workers less more than it boosts the prestige enjoyed by high skilled workers we discuss the expected results of some policies in light of these findings

taking versus taxing an analysis of conscription in a private information economy most countries currently man their militaries through conscription i e a draft conventional wisdom suggests that by lowering the budgetary cost of the military a draft reduces distortionary taxation especially when military needs are large we find that this intuition is misguided when income taxes are set optimally voluntary enlistments lead to less distortionary taxation than a draft because the tax base left behind by a volunteer army tends to be more productive than that after a draft for reasonable parameter values drafts are more distortionary and less socially desirable when military needs are large

inflation and growth impatience and a qualitative equivalence this paper studies the role of an endogenous time preference on the relationship between inflation and growth in the long run in both the money in utility function miuf and transactions costs tc models we establish a qualitative equivalence between the two models in a setup without a labor leisure tradeoff when the time preference is decreasing or increasing in consumption and real balances both the miuf and tc models are qualitatively equivalent in terms of predicting a negative or positive relationship between inflation and growth in a steady state both a decreasing and an increasing time preference in consumption are consistent with the arguments found within the literature while a decreasing time preference in real balances corroborates with empirical evidence there is no evidence in support of an increasing time preference in real balances

competition between private and public schools vouchers and peer group effects a theoretical and computational model with tax financed tuition free public schools and competitive tuition financed private schools is developed students differ by ability and income achievement depends on own ability and on peers abilities equilibrium has a strict hierarchy of school qualities and two dimensional student sorting with stratification by ability and income in private schools high ability low income students receive tuition discounts while low ability high income students pay tuition premia tuition vouchers increase the relative size of the private sector and the extent of student sorting and benefit high ability students relative to low ability students

urban poverty and juvenile crime evidence from a randomized housing mobility experiment this paper uses data from a randomized housing mobility experiment to study the effects of relocating families from high to low poverty neighborhoods on juvenile crime outcome measures come from juvenile arrest records taken from government administrative data our e ndings seem to suggest that providing families with the opportunity to move to lower poverty neighborhoods reduces violent criminal behavior by teens

venture capital programmes in the uk and germany in what sense regional policies sunley p klagge b berndt c and martin r 2005 venture capital programmes in the uk and germany in what sense regional policies regional studies 39 255 273 the paper considers how far and in what ways venture capital policies in the uk and germany have been constructed as regional policy interventions it begins by explaining two justifications for adding a regional dimension to venture capital policy and outlines the development of such policy in the two states it explains the contrasting policy regimes and the means of intervention employed despite their marked differences venture capital policies in both states are regionalized to only a limited degree however the uneven regional operations and effects of such policies are likely to produce an unintended regionalization of outcomes that may contradict the aims of closing regional disparities in risk finance and entrepreneurialism

on analyzing the world distribution of income consideration of world inequality should cause reexamination of the key concepts underlying the welfare approach to measuring income inequality and its relation to measuring poverty this reexamination leads to exploration of a new measure that allows poverty and inequality to be considered in the same framework incorporates different approaches to measuring inequality and allows varied expressions of the cost of inequality applied to the world distribution of income for 1820 1992 the new measure provides different perspectives on the evolution of global inequality

venture capital the regions and public policy the united kingdom since the post 2000 technology crash mason c and pierrakis y venture capital the regions and public policy the united kingdom since the post 2000 technology crash regional studies the geography of venture capital in the united kingdom has been shaped since the year 2000 by a significant increase in public sector venture capital funds venture capital investments are now less concentrated in the south east however investment activity in the midlands and north is dominated by the public sector deal sizes in these regions are small venture capital measured by the total amount invested remains over concentrated in london and the south east where private sector investors continue to dominate this paper concludes by questioning whether this increased dependence of northern regions on public sector venture capital matters mason c and pierrakis y 2000 2000

networks and economic policy over the past two decades economists have made significant advances in understanding how networks affect individual behaviour and shape aggregate outcomes we argue that insights from network economics can play an important role in the design of economic policy focusing on six policy domains we show that network economics not only deepens our understanding of existing policy concerns but also suggests a number of new policy questions in each of these policy areas we evaluate the availability of data and assess the suitability of the network economics toolkit for policy work we conclude with a discussion of challenges to the adoption of network based methods in economic policy along with strategies to overcome them

private incentives and social interactions fertility puzzles in israel this paper explores how private and social incentives for fertility may have combined to produce the complex fertility pattern observed in israel in the past half century fertility has declined within some ethnic religious groups moderately increased in others and parts of the ultra orthodox jewish population have experienced a reverse fertility transition in which childbearing has increased rapidly and substantially we present a theoretical analysis of the social dynamics of fertility that shows how private preferences preferences for conformity to social norms in childbearing and piecewise linear child allowances could have combined to yield such a complex fertility pattern we then explain the identification problem that makes it so difficult to infer the actual israeli fertility process from data on completed fertility jel jel jel jel jel jel

real money balances as a productive input abstract using a translog production function and data from the united states private sector over the period 1929 1972 this paper clarifies the theoretical debate which has occured on whether real money balances are an original factor input or a catalyst with a role similar to technological innovation real money balances are found to be an important factor input that cannot be treated as separable from the primary factor inputs capital and labor furthermore the results indicate that real money balances are substitutes for capital but complements with labor while capital and labor are in a relative sense complements

going to college to avoid the draft the unintended legacy of the vietnam war between 1965 and 1975 the enrollment rate of college age men in the united states rose and then fell abruptly many contemporary observers e g james davis and kenneth dolbeare 1968 attributed the surge in college attendance to draft avoidance behavior under a policy first introduced in the korean war the selective service issued college deferments to enrolled men that delayed their eligibility for conscription these deferments provided a strong incentive to remain in school for men who wanted to avoid the draft for example the college entry rate of young men rose from 54 percent in 1963 to 62 percent in 1968 the peak year of the draft moreover both the college entry rate and the number of inductions dropped sharply between 1968 and 1973 as the draft was being phased out although these parallel trends are suggestive they do not necessarily prove that draft avoidance raised the education of men who were at risk of service during the vietnam war such an inference requires an explicit specification of the counterfactual what would have happened to schooling outcomes in the absence of the draft in this paper we use trends in enrollment and completed schooling of men relative to those of women to measure the effects of draftavoidance behavior during the vietnam war our maintained hypothesis is that in the absence of gender specific factors such as the draft the relative schooling outcomes of men and women from the same cohort would follow a smooth trend in light of the sharp discontinuity in military induction rates between 1965 and 1970 we look for similar patterns in the relative enrollment rate of men and in the relative college graduation rate of men from cohorts that were at risk of induction during this period

determinants of the incidence and scale of seed capital investments by venture capital firms employing both behavioral decision making and agency theories our study seeks to identify those factors that influence a venture capital vc firm s decision to undertake seed capital investments and subsequently the scale of such activity using data on the investments made by 2949 vc funds raised worldwide between 1962 and 2002 we find investor age timing of investment and fund location to be of importance in addition the size of the fund and the existing number of portfolio firms exert opposite influences on the level of seed capital activity of the vc firm these results suggest that seed activity is a valuable source of market intelligence for leading vc firms seeking proactively to identify and invest in novel technologies

social interaction effects in disability pension participation evidence from plant downsizing we estimate the magnitude of social interaction effects in disability pension participation among older workers in norway the problem of omitted variable bias is addressed using the exposure of an individual s neighbors to plant downsizing events as an instrument for the disability entry rate among the individual s previously employed neighbors our instrumental variable iv estimates suggest that an increase of one percentage point in the participation rate of previously employed neighbors increased the subsequent four year entry rate of older workers by about 0 4 percentage points numerous robustness and specification tests appear to support the validity of the identifying assumption in our iv strategy

moving to opportunity in boston early results of a randomized mobility experiment this paper examines the short run impacts of a change in residential neighborhood on the well being of low income families using evidence from a program in which eligibility for a housing voucher was determined by random lottery we examine the experiences of households at the boston site of moving to opportunity mto a demonstration program in five cities families in high poverty public housing projects applied to mto and were assigned by lottery to one of three groups experimental offered mobility counseling and a section 8 subsidy valid only in a census tract with a poverty rate of less than 10 percent section 8 comparison offered a geographically unrestricted section 8 subsidy or control offered no new assistance but continued to be eligible for public housing our quantitative analyses of program impacts uses data on 540 families from a baseline survey at program enrollment a follow up survey administered l to 3 5 years after random assignment and state administrative data on earnings and welfare receipt 48 percent of the experimental group and 62 percent of the section 8 comparison group moved through the mto program one to three years after program entry families in both treatment groups were more likely to be residing in neighborhoods with low poverty rates and high education levels than were families in the control group however while members of the experimental group were much more likely to be residing in suburban communities than were those in the section 8 group the lower program take up rate among the experimental group resulted in more families remaining in the most distressed communities households in both treatment groups experienced improvements in multiple measures of well being relative to the control group including increased safety improved health among household heads and fewer behavior problems among boys experimental group children were also less likely to be a victim of a personal crime to be injured or to experience an asthma attack there are no significant impacts of either mto treatment on the employment earnings or welfare receipt of household heads in the first three years after random assignment

the optimal inflation tax when money reduces transactions costs abstract it has been argued that if money acts as an intermediate good the optimal inflation tax is zero this paper reexamines such a claim in the context of a model in which money reduces transactions costs it is shown that modeling money as an intermediate good does not necessarily imply that the optimal inflation tax is zero the optimality of a zero inflation tax depends on the properties of the transactions costs technology in particular if the transactions costs technology does not exhibit constant returns to scale it is optimal to resort to the inflation tax

household debt and social interactions can concern with relative standing which has been shown to influence consumption and labor supply also increase borrowing and the likelihood of financial distress we find that perceived peer income contributes to debt and the likelihood of financial distress among those who consider themselves poorer than their peers we use unique responses describing perceived peer characteristics from a dutch population wide survey to handle two major challenges of uncovering social interaction effects on borrowing 1 debts unlike conspicuous consumption are often hidden from peers and 1 location is missing in anonymized data we employ several approaches to uncover exogenous rather than correlated effects

lifetime earnings and the vietnam era draft lottery evidence from social security administrative records errata the randomly assigned risk of induction generated by the draft lottery is used to construct estimates of the effect of veteran status on civilian earnings these estimates are not biased by the fact that certain types of men are more likely than others to service in the military social security administrative records indicate that in the early 1980s long after their service in vietnam had ended the earnings of white veterans were approximately 15 percent less than the earnings of comparable nonveterans copyright 1990 by american economic association

crime in the lab detecting social interaction abstract according to the standard economic perspective criminal activities vary with the price of crime which depends on the severity of punishment and the detection probability an alternative view claims that crime is also influenced by social interaction phenomena such as peer pressure or neighbourhood effects detecting social interaction in the field is fraught with difficulties however in this paper we argue that given its extensive control possibilities experiments are well suited to show the potential existence of social interaction effects we present an experimental study where people can engage in criminal activities we find support for the importance of social interaction on average subjects steal the more the more others steal this behaviour can be interpreted in terms of reciprocity

gender and peer effects on performance in social networks we investigate whether peer effects at work differ by gender and whether gender differences in peer effects if any depend on work organization we develop a social network model with gender heterogeneity that we test in a real effort laboratory experiment we compare sequential networks in which information flows from peers to the worker and simultaneous networks where it disseminates bi directionally we identify strong gender differences as females disregard their peers performance in simultaneous networks while males are influenced by peers in both networks females may perceive the environment in simultaneous networks as being more competitive than in sequential networks

the relationship between education and adult mortality in the united states prior research has uncovered a large and positive correlation between education and health this paper examines whether education has a causal impact on health i follow synthetic cohorts using successive u s censuses to estimate the impact of educational attainment on mortality rates i use compulsory education laws from 1915 to 1939 as instruments for education the results suggest that education has a causal impact on mortality and that this effect is perhaps larger than has been previously estimated in the literature copyright 2005 wiley blackwell

peer effects and social networks in education this paper studies whether structural properties of friendship networks affect individual outcomes in education we first develop a model that shows that at the nash equilibrium the outcome of each individual embedded in a network is proportional to her katz bonacich centrality measure this measure takes into account both direct and indirect friends of each individual but puts less weight to her distant friends we then bring the model to the data by using a very detailed dataset of adolescent friendship networks we show that after controlling for observable individual characteristics and unobservable network specific factors the individual s position in a network as measured by her katz bonacich centrality is a key determinant of her level of activity a standard deviation increase in the katz bonacich centrality increases the pupil school performance by more than 7 percent of one standard deviation

social networks and the identification of peer effects there is a large and growing literature on peer effects in economics in the current article we focus on a manski type linear in means model that has proved to be popular in empirical work we critically examine some aspects of the statistical model that may be restrictive in empirical analyses specifically we focus on three aspects first we examine the endogeneity of the network or peer groups second we investigate simultaneously alternative definitions of links and the possibility of peer effects arising through multiple networks third we highlight the representation of the traditional linear in means model as an autoregressive model and contrast it with an alternative moving average model where the correlation between unconnected individuals who are indirectly connected is limited using data on friendship networks from the add health dataset we illustrate the empirical relevance of these ideas

credibly identifying social effects accounting for network formation and measurement error understanding whether and how connections between agents networks such as declared friendships in classrooms transactions between firms and extended family connections influence their socio economic outcomes has been a growing area of research within economics early methods developed to identify these social effects assumed that networks had formed exogenously and were perfectly observed both of which are unlikely to hold in practice a more recent literature both within economics and in other disciplines develops methods that relax these assumptions this paper reviews that literature it starts by providing a general econometric framework for linear models of social effects and illustrates how network endogeneity and missing data on the network complicate identification of social effects thereafter it discusses methods for overcoming the problems caused by endogenous formation of networks finally it outlines the stark consequences of missing data on measures of the network and regression parameters before describing potential solutions

full implementation and belief restrictions we introduce a framework to study the problem of full implementation under general restrictions on agents beliefs which we call implementation first we provide a characterization of the properties of the mechanisms that achieve implementation these conditions relate the possibility of achieving full implementation to the strength of the strategic externalities induced by the mechanism we then study how to achieve full implementation via the design of simple transfer schemes in these context the general conditions for implementation suggest a simple design principle in which belief restrictions are used to weaken the strategic externalities induced by the baseline transfers of the belief free benchmark importantly our results require minimal information on agents beliefs which regard simple moments of the distribution of types these moment conditions arise naturally in applications and in practical problems of mechanism design

public versus private venture capital seeding or crowding out a pan european analysis abstract this paper analyzes the relationship between public and private sources of venture capital in europe and the development of the industry controlling for characteristics of the legal systems in 15 european countries over the period 1990 1996 large public participation is correlated with smaller vc industries but analyses do not support the view that public venture capitalists are acting to seed the industry or that are they crowd out private funds on the contrary public involvement seems to cause greater amounts of money to be invested in the industry as a whole we argue that the effects of public intervention whatever the motives are real and probably result from demonstrating sanctioning the social merit of venture capital and from signaling an enduring commitment to it

crime and social interactions the high variance of crime rates across time and space is one of the oldest puzzles in the social sciences this variance appears too high to be explained by changes in the exogenous costs and benefits of crime we present a model where social interactions create enough covariance across individuals to explain the high cross city variance of crime rates this model provides an index of social interactions which suggests that the amount of social interactions is highest in petty crimes moderate in more serious crimes and almost negligible in murder and rape

mother s education and the intergenerational transmission of human capital evidence from college openings we examine the effect of maternal education on birth outcomes using vital statistics natality data from 1970 to 1999 we also assess the importance of four channels through which maternal education may improve birth outcomes use of prenatal care smoking marriage and fertility in an effort to account for the endogeneity of education attainment we use data about the availability of colleges in the womans country in her 17th year as an instrument for maternal education we find that higher maternal education improves infant health as measured by birth weight and gestational age it also increases the probability that a new mother is married reduces parity increases use of prenatal care and reduces smoking suggesting that may be important pathways for the ultimate effect on health our results add to the growing body of literature which suggests that estimates of the returns to education which focus only on increases in wages understate the total return

work environment and individual background explaining regional shirking differentials in a large italian firm the prevalence of shirking within a large italian bank appears to be characterized by significant regional differentials in particular absenteeism and misconduct episodes are substantially more prevalent in the south we consider a number of potential explanations for this fact different individual backgrounds group interaction effects sorting of workers across regions differences in local attributes different hiring policies and discrimination against southern workers our analysis suggests that individual backgrounds group interaction effects and sorting effects contribute to explaining the north south shirking differential none of the other explanations appears to be of first order importance i introduction whether individual behavior is determined by group interactions or by individual background is undoubtedly a fundamental question for the social sciences this question presented itself forcefully when we stumbled onto the following piece of evidence there appear to be significant regional differentials in the prevalence of shirking among the employees of a large italian bank in particular absenteeism and misconduct episodes are considerably more frequent in the southern branches of the bank in this paper we examine several potential explanations for this fact first individual preferences for shirking versus working may differ according to one s region of hirth we will refer to this hj othesis as one of different individual hackgrounds the second possibility is one of locational sorting low shirking types may tend to migrate to the north high shirking types may tend to migrate to the south or hoth third the northern and southern

the effects of inflation on economic growth lessons from latin america this paper investigates the relationship between inflation and long run growth it presents an endogenous growth model that illustrates the channels through which inflation affects growth the model highlights the effects of inflation on the productivity of capital and the rate of capital accumulation the reduction in growth is caused by a diversion of resources away from activities that lead to faster rates of growth toward activities associated with reducing the costs of inflation the negative association between inflation and growth is assessed empirically for a sample group of latin american countries this abstract was borrowed from another version of this item

the economic consequences of social network structure we survey the literature on the economic consequences of the structure of social networks we develop a taxonomy of macro and micro characteristics of social interaction networks and discuss both the theoretical and empirical findings concerning the role of those characteristics in determining learning diffusion decisions and resulting behaviors we also discuss the challenges of accounting for the endogeneity of networks in assessing the relationship between the patterns of interactions and behaviors

the effects of lottery prizes on winners and their neighbors evidence from the dutch postcode lottery each week the dutch postcode lottery pcl randomly selects a postal code and distributes cash and a new bmw to lottery participants in that code we study the effects of these shocks on lottery winners and their neighbors consistent with the life cycle hypothesis the effects on winners consumption are largely confined to cars and other durables consistent with the theory of in kind transfers the vast majority of bmw winners liquidate their bmws we do however detect substantial social effects of lottery winnings pcl nonparticipants who live next door to winners have significantly higher levels of car consumption than other nonparticipants

economic growth financial evolution and the long run behavior of velocity a general equilibrium model is presented in which buyers and sellers find it increasingly difficult to make private credit arrangements as economic activity spreads into new markets hence the demand for money increases as the structure of production and trade becomes more complex at the same time however financial innovations allow agents to economize on their cash balances together these effects of technological progress account for two empirical regularities the u shaped pattern in velocity and the ever increasing share of productive resources devoted to the private financial sector that are associated with the process of real economic growth

ability tracking school competition and the distribution of educational benefits abstract to study the effects of ability grouping on school competition we develop a theoretical and computational model of tracking in public and private schools we examine tracking s consequences for the allocation of students of differing abilities and income within and between public and private schools private schools tend to attract the most able and wealthiest students and rarely track in equilibrium public sector schools can maximize attendance by tracking students public schools retain a greater proportion of higher ability students by tracking but lose more wealthy lower ability students to the private sector consequently socioeconomic status is a predictor of track assignment in public schools for the entire population public sector tracking has small aggregate effects on achievement and welfare but results in significant redistribution from lower to higher ability students

the failure of input based schooling policies in an effort to improve the quality of schools governments around the world have dramatically increased the resources devoted to them by concentrating on inputs and ignoring the incentives within schools the resources have yielded little in the way of general improvement in student achievement this paper provides a review of the us and international evidence on the effectiveness of such input policies it then contrasts the impact of resources with that of variations in teacher quality that are not systematically related to school resources finally alternative performance incentive policies are described

the growth and geographical anatomy of venture capitalism in the united kingdom martin r l 1989 the growth and geographical anatomy of venture capitalism in the united kingdom reg studies 23 389 403 the 1980s have seen the emergence and rapid growth of venture capitalism in the uk this paper examines this growth both in terms of the spatial organization of the venture capital industry and the regional distribution of venture capital investment the picture that emerges is of an industry which is over centralized in the london area and which in the course of its recent development has tended to concentrate investment in the already more prosperous southeastern and adjacent parts of the country while local venture capital markets are beginning to become established in northern britain it will be some time before the existing regional imbalance is likely to be redressed martin r l 1989 la croissance et la distribution geographique du capital risque au royaume uni reg studies 23 389 403 les annees 1980 ont temoigne de la naissance et de l essor du capital risque au

consumption network effects in this paper we study the relevance and mechanics of consumption network effects we use long panel data on the entire danish population to construct a measure of consumption based on administrative tax records and define the peer groups in terms of workplace occupation education and age we then apply an iv strategy and fixed effect models to recover the effects our instruments arise naturally from the network structure and firms shocks the estimated effects are statistically significant and relevant for policies as they generate non negligible multiplier effects further the results are consistent with a keeping up model

experimental estimates of education production functions this paper analyzes data on 11 600 students and their teachers who were randomly assigned to different size classes from kindergarten through third grade statistical methods are used to adjust for nonrandom attrition and transitions between classes the main conclusions are 1 on average performance on standardized tests increases by four percentile points the first year students attend small classes 2 the test score advantage of students in small classes expands by about one percentile point per year in subsequent years 3 teacher aides and measured teacher characteristics have little effect 4 class size has a larger effect for minority students and those on free lunch 5 hawthorne effects were unlikely

dynamics in a transactions based monetary growth model abstract this paper characterizes the dynamics of a monetary endogenous growth model in which money is introduced into the system via a transactions cost technology a monetary equilibrium that either satisfies the friedman rule of the optimum quantity of money or accommodates the zero inflation rate policy is dynamically unstable with cagan like hyperinflation the monetary equilibrium may either be unstable or exhibit dynamic indeterminacy in which a variety of equilibrium outcomes emerge in transition the rate of monetary expansion the relative magnitudes of the intertemporal elasticity of substitution and the production technological parameter are crucial for determining the stability property of the model

temporal aggregation of univariate and multivariate time series models a survey abstract we present a unified and up to date overview of temporal aggregation techniques for univariate and multivariate time series models explaining in detail although intuitively the technical machinery behind the results some empirical applications illustrate the main issues

the value of time and the transactions demand for money this paper reexamines the hypothesis of dean s dutton and william p gramm and edi karni that the wage rate influences the demand for money as a proxy for the value of transactions time it develops value of time transactions models which yield demand for money equations that have a real wage rate argument and compares it to a non value of time alternative that does not the author finds that the value of time models perform well and that the value of time effect is empirically significant copyright 1990 by ohio state university press

clean evidence on peer effects we study subjects who were asked to fill letters into envelopes with a remuneration independent of output in the pair treatment two subjects worked at the same time in the same room and peer effects were possible in the single treatment subjects worked alone and peer effects were ruled out we find evidence of peer effects in the pair treatment because the standard deviations of output are smaller within pairs than between pairs moreover average output is higher in the pair treatment thus peer effects raise productivity finally low productivity workers are the most sensitive to the behavior of peers

does school quality matter returns to education and the characteristics of public schools in the united states this paper estimates the effects of school quality measured by the pupil teacher ratio average term length and relative teacher pay on the rate of return to education for men born between 1920 and 1949 using earnings data from the 1980 census we find that men who were educated in states with higher quality schools have a higher return to additional years of schooling rates of return are also higher for individuals from states with better educated teachers and with a higher fraction of female teachers holding constant school quality measures however we find no evidence that parental income or education affects average state level rates of return

why do most italian youths live with their parents intergenerational transfers and household structure more than 80 of italian men aged 18 30 live with their parents we argue that one contributing factor to this remarkably high rate of cohabitation is parents tastes for co residence in order to investigate the role of parental preferences we estimate the effect of exogenous changes in parental income on rates of cohabitation in italy using shiw micro data from 1989 to 2000 the key econometric issue is the potential endogeneity of parental income in order to identify a source of exogenous variation in parental income we use changes in fathers retirement age induced by the 1992 reform of the italian social security system as an instrumental variable for parental income by raising retirement age this reform forced some fathers to remain in the labour market longer than they would have otherwise therefore raising their disposable income we use a two sample instrumental variable tsiv strategy our tsiv estimates indicate that a rise in parents income significantly raises the children s propensity to live at home a 10 increase in annual parental income results in approximately a 10 rise in the proportion of boys living with their parents although we cannot definitely rule out alternative interpretations these results are consistent with our hypothesis that cohabitation is a normal good for italian parents

social norms in networks abstract although the linear in means model is the workhorse model in empirical work on peer effects its theoretical properties are understudied in this study we develop a social norm model that provides a microfoundation of the linear in means model and investigate its properties we show that individual outcomes may increase decrease or vary non monotonically with the taste for conformity equilibria are usually inefficient and to restore the first best the planner needs to subsidize tax agents whose neighbors make efforts above below the social norms thus giving more subsidies to more central agents is not necessarily efficient we also discuss the policy implications of our model in terms of education and crime

evaluating the labor market effects of compulsory military service we identify the causal effect of compulsory military service on conscripts subsequent labormarket outcomes by exploiting the regression discontinuity design of the military draft in germany during the 1950s unbiased estimates of the effect of military service on lifetime earnings wages and employment are obtained by comparing men born before july 1 1937 the white cohort who were exempted from compulsory military service to men who were born on or shortly after this threshold date and hence faced a positive probability of being drafted we find that the putative earnings advantage and wage premium of those who served in the armed forces vanish when selection effects are taken into account

what is a peer the role of network definitions in estimation of endogenous peer effects we employ a standard identification strategy from the peer effects literature to investigate the importance of network definitions in estimation of endogenous peer effects we use detailed information on friends in the national longitudinal study of adolescent health survey add health to construct two network definitions that are less ad hoc than the school grade cohorts commonly used in the educational peer effects literature we demonstrate that accurate definitions of the network seriously impact estimation of peer effects in particular we show that peer effects estimates on educational achievement smoking and drinking are substantially larger with our more detailed measures than with the school grade cohorts these results highlight the need to further understand how friendships form in order to fully understand implications for policy that alters the peer group mix at the classroom or cohort level

capital market myopia abstract the purpose in writing this article is to focus attention on a phenomenon we call capital market myopia a situation in which participants in the capital markets ignore the logical implications of their individual investment decisions viewed in isolation each decision seems to make sense when taken together however they are a prescription for disaster capital market myopia leads to overfunding of industries and unsustainable levels of valuation in the stock market we use the winchester disk drive industry to elucidate the phenomenon we argue that capital market participants should have seen the problem coming they should have known that valuation levels were absurd based in large part on the greater fool theory the data necessary to anticipate the problem were readily available before the industry shakeout began and stock prices collapsed there are several lessons which we believe can be learned by careful examination of the disk drive experience in the period under study these include taking the broad view of the industry is the key to profitable investment the investment mania visited on the hard disk industry contained inherent assumptions about long run industry size and profitability and about the future growth profitability and access to capital for each individual company these assumptions had they been stated explicitly would not have been acceptable to the rational investor certainly there are valuations which arise which cannot be justified under any circumstance these are the times for the manager to raise money from the public capital markets those managers who took advantage of unsustainable valuation levels now have a chance to survive the shakeout growth is not equivalent to profitability the high growth rate in the industry made it the focus of considerable managerial investor and technological attention the industry attracted so many resources that the growth had high probability of being unprofitable excesses in the capital market turned an opportunity into a disaster profits for some are not equivalent to a good business many players made high profits by investing in the hard disk drive business including the investment bankers and certain of the venture capital groups which invested early enough to catch the wave of euphoria in the stock market and still sell under rule 144 many others rode the cycle up and down without liquidity for many buyers of disk drive stocks in 1983 losses were massive short term successes of some gave the illusion of long term profitability for all investors should not be fooled by such invevitably ephemeral successes market instability can be all bad news very rapid change often creates entrepreneurial opportunity it also creates risk analysis of the hard disk drive industry reveals the dark side of rapid technological evolution and of customer instability early players are often preempted by changes in technology and in customer needs early birds are not always winners in product markets but late comers are almost always losers recognizing the chain one of the more important lessons to be learned from the tale of the disk drive industry is that all players entreprenuers venture capitalists investment bankers industry analysts and investors must recognize the chains involved in such a process first there was a technological chain a series of bets on technological advances in disk drive components disk drive designs and end user designs then there was a financial chain a series of related bets on the internal financial health of each player in the technological chain and on the nature of access to capital in the private and public markets the likelihood that any player in the disk drive industry would prosper without a serious setback due to a weak link was effectively zero indeed weaknesses in the chain were created by exactly the same people whose financial success depended on an unbroken series of favorable outcomes during this same period the public capital markets were also a large supplier of funds to the disk drive industry the total amount of money raised in public offerings of common stocks for participants in the industry was over 800 million during the middle part of 1983 the capital markets assigned a value in excess of 5 billion to 12 publicly traded venture capital backed hard disk drive manufacturers the strong market valuation of these companies paralleled the boom in other high technology stocks and rising valuation levels in the stock market in general table 2 contains data on stock prices and valuation levels for some disk drive manufacturers and table 3 provides general data on the economy and capital markets

linear social interactions models this paper provides a systematic analysis of identification in linear social interactions models this is a theoretical and econometric exercise as the analysis is linked to a rigorously delineated model of interdependent decisions we develop an incomplete information game for individual choice under social influences that nests standard models as special cases we consider identification of both endogenous and contextual social effects under alternative assumptions regarding an analyst s a priori knowledge of social structure or access to individual level or aggregate data finally we discuss potential ramifications for identification of endogenous formation of social structure

venture capital high technology and regional development florida r l and kenney m 1988 venture capital high technology and regional development reg studies 22 33 48 this paper explores the role of venture capital in technological innovation and regional development both aggregate data and a unique firm level data base are employed to determine the location of major centres of venture capital flows of venture capital investments and patterns of investment syndication or coinvestment among venture capital firms three major centres of venture capital are identified california san francisco silicon valley new york and new england massachusetts connecticut as well as three minor venture capital centres illinois chicago texas and minnesota venture capital firms are found to cluster in areas with high concentrations of financial institutions and those with high concentrations of technology intensive enterprises venture capital firms which are based in financial centres are typically export oriented while those in technology centres tend t

how much and how often a model of repeated consumption with endogenous consumption frequency abstract we study the consumption pattern for a repeated good in which individuals choose both consumption frequency and intensity in response to income price and setup cost results include that increased setup costs reduce frequency and increase intensity and that the effects of a setup cost increase are qualitatively different from those of a price increase or an income reduction

the labor market impact of immigration in western germany in the 1990 s in this article we estimate the wage and employment effects of recent immigration in western germany using administrative data for the period 1987 2001 and a labor market equilibrium model we find that the substantial immigration of the 1990s had very little adverse effects on native wages and on their employment levels instead it had a sizeable adverse employment effect on previous immigrants as well as a small adverse effect on their wages these asymmetric results are partly driven by a higher degree of substitution between old and new immigrants in the labor market and in part by the rigidity of wages in less than flexible labor markets in a simple counter factual experiment we show that in a world of perfect wage flexibility and no unemployment insurance the wage bill loss of old immigrants would be much smaller

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

the effect of education on crime evidence from prison inmates arrests and self reports we estimate the effect of high school graduation on participation in criminal activity accounting for endogeneity of schooling we begin by analyzing the effect of high school graduation on incarceration using census data instrumental variable estimates using changes in state compulsory attendance laws as an instrument for high school graduation uncover a significant reduction in incarceration for both blacks and whites when estimating the impact of high school graduation only ols and iv estimators estimate different weighted sums of the impact of each schooling progression on the probability of incarceration we clarify the relationship between ols and iv estimates and show that the weights placed on the impact of each schooling progression can explain differences in the estimates overall the estimates suggest that completing high school reduces the probability of incarceration by about 76 percentage points for whites and 3 4 percentage points for blacks we corroborate these findings using fbi data on arrests that distinguish among different types of crimes the biggest impacts of graduation are associated with murder assault and motor vehicle theft we also examine the effect of drop out on self reported crime in the nlsy and find that our estimates for imprisonment and arrest are caused by changes in criminal behavior and not educational differences in the probability of arrest or incarceration conditional on crime we estimate that the externality of education is about 14 26 of the private return to schooling suggesting that a significant part of the social return to education comes in the form of externalities from crime reduction

identity and schooling some lessons for the economics of education abstract this review culls noneconomic literature on education by sociologists anthropologists and practitioners to present a new economic theory of students and schools this theory elaborates two themes that have eluded economic analysis first is the student as decision maker whose primary motivation is her identity second is a conception of the school as a social institution this framework suggests a new perspective on questions such as resource allocation and school reform it explains why some educational policies succeed and others fail we show how sociological variables may affect outcomes and suggest ways economists can incorporate them into theoretical and empirical research

a liquidity in advance model of the demand for money under price uncertainty abstract we develop a model of money demand in which the asset and goods markets open sequentially money balances are subject to price level and consumption risk empirical evidence from a bivariate arch framework suggests both sources of risk reduced money demand in the 1970s inflation risk depresses money demand throughout our sample 1962 1987 the econometric analysis resolves conflicting empirical estimates reported in the literature

money and the bias of technical progress in the literature on the behaviour of a monetary economy it has been suggested that in addition to its role as a medium of exchange the role of money in production should be recognized explicityliy however on this latter point there is some disagreement as to the mechanism by which it affects production for example mundell 1971 bailey and friedman 1969 attribute direct productivity to money and consequently sugest that is should be treated as a separate facto of production on the other hand brunner and meltzer 1971 perlman 1971 stein 1971 gabor and pearce 1958 saving 1972 and moroney 1970 emphasize the role of money as an innovational factor while the reasoning varies the basic idea is that the use of money enhances efficiencies of capital and labour in other words money acts as an input augmenting factor in a recent paper subrahmanyam and cosimano 1979 using data on the indian economy for 1950 51 1969 70 and the ces production function framework have tried to test t

inflation and growth pecuniary transactions costs and qualitative equivalence this paper develops a pecuniary transactions costs tc approach to reexamine the principal relationships and results concerning inflation and growth in a model with a general tc function and an endogenous labor leisure choice we consider four special cases by distinguishing among money as 1 a consumption good 2 a production good 3 an investment good and 4 a consumption good as well as an investment good under some weaker conditions as in related studies a reversed tobin effect obtains for all cases a high monetary growth rate leads to lower steady state capital labor consumption and real money balances these findings suggest that a pecuniary tc model is qualitatively equivalent to alternative models in the literature

anticipation of future consumption a monetary perspective we adapt the monetary model sidrauski 1967 to study the hypothesis of anticipation of future consumption we assume that anticipation of future consumption affects an agent s instantaneous utility and that all effects of future consumption on current well being are captured by the stock of future consumption monetary policy effectiveness is thereby reduced and a zero nominal lower interest rate and thus the friedman rule is destabilizing given this we can derive a just stable equilibrium nominal interest rate with matching definitions for inflation and monetary growth we demonstrate that these implied lower bounds match their historical analogues well

vouchers for private schooling in colombia evidence from a randomized natural experiment colombia used lotteries to distribute vouchers which partially covered the cost of private secondary school for students who maintained satisfactory academic progress three years after the lotteries winners were about 10 percentage points more likely to have finished 8th grade primarily because they were less likely to repeat grades and scored 0 2 standard deviations higher on achievement tests there is some evidence that winners worked less than losers and were less likely to marry or cohabit as teenagers benefits to participants likely exceeded the 24 per winner additional cost to the government of supplying vouchers instead of public school places

optimal monetary policy under low trend inflation abstract in the monetary policy literature it is common to assume that trend inflation is zero despite overwhelming evidence that zero inflation is neither empirically relevant nor a practical objective for central bank policy we therefore extend the standard new keynesian model to allow for positive trend inflation showing that even low trend inflation has strong effects on optimal monetary policy and the dynamics of inflation output and interest rates under discretion the efficient policy deteriorates and there is no guarantee of determinacy even with commitment targeting non zero trend inflation leads to substantial welfare losses our results serve as a warning against indiscriminate use of models assuming zero trend inflation

social interactions and schooling decisions abstract the aim of this paper is to study whether a child s schooling choices are affected by the schooling choices of other children identification is based on a randomized targeted intervention that grants a cash subsidy conditional on school attendance to a subgroup of eligible children within small rural villages in mexico progresa this policy change spills over to ineligible children if social interactions are relevant results indicate that the eligible children tend to attend school more frequently and the ineligible children acquire more schooling when the subsidy is introduced in their local village moreover the overall effect of progresa on eligible children is the sum of a direct effect due to cash transfers and an indirect effect due to changes in peer group schooling interestingly the social interactions effect is almost as important as the direct effect

conformism and self selection in social networks i present a model of conformism in social networks that incorporates both peer effects and self selection i show that conformism has positive social value and that social welfare can be bounded by network polarization and connectivity measures i apply the model to empirical data on high school students participation in extracurricular activities i find that the local effect of conformism i e the endogenous peer effect for a fixed network structure ranges from 7 5 to 45 depending on the number of peers that an individual has simulations show that the optimal policies of an inequality averse policymaker change depending on a school s enrollment small schools should encourage shy students to interact more with other students while large schools should focus on promoting role models within the school

the effects of generalized school choice on achievement and stratification evidence from chile s voucher program in 1981 chile introduced nationwide school choice by providing vouchers to any student wishing to attend private school as a result more than 1000 private schools entered the market and the private enrollment rate increased by 20 percentage points with greater impacts in larger more urban and wealthier communities we use this differential impact to measure the effects of unrestricted choice on educational outcomes using panel data for about 150 municipalities we find no evidence that choice improved average educational outcomes as measured by test scores repetition rates and years of schooling however we find evidence that the voucher program led to increased sorting as the bbestq public school students left for the private sector d 2005 elsevier b v all rights reserved

on the equivalence of private and public money abstract when does a swap between private and public money leave the equilibrium allocation and price system unchanged to answer this question the paper sets up a generic model of money and liquidity which identifies sources of seignorage rents and liquidity bubbles we derive sufficient conditions for equivalence and apply them in the context of the chicago plan cryptocurrencies the indian de monetization experiment and central bank digital currency cbdc our results imply that cbdc coupled with central bank pass through funding need not imply a credit crunch nor undermine financial stability

social interactions in high school lessons from an earthquake after an earthquake hit southern italy in 1980 young men from certain towns were exempted from compulsory military service we show that the exemption raised high school graduation rates of boys by more than 2 percentage points we do this by comparing high school graduation rates of young exempt men and older nonexempt men from the least damaged areas and men of the same age groups from nearby towns that were not hit by the quake similar comparisons show that graduation rates of young women in the affected areas also increased since in italy women are not subject to the draft the findings suggest the presence of spillover effects jel i21 j13