central bank constitutions for federal monetary unions abstract in a monetary union the central bank constitution must distribute the power over monetary policy between the members and the administrative center of the union we compare alternative distributions and evaluate their performance dominance of regional interests always leads to inefficient monetary stabilization policies whether or not dominance of regional interests leads to a higher long run rate of inflation depends on the union s political constitution

independent central banks low inflation at no costs a widely held view suggests that politically independent central banks bring about relatively low and stable inflation rates a more debated question is whether one has to pay for this good outcome with more real instability in his seminal contribution kenneth rogoff 1985 suggests that an independent and inflation averse central bank reduces average inflation but as a result increases output variability the conservative central banker reduces the inflation bias due to the time inconsistency problem but stabilizes less however alesina and summers 1993 do not find that at least within the oecd countries more independent central banks are associated with more variability of growth or unemployment thus they conclude that independent central banks bring about low inflation at no apparent real costs the point of this paper is to provide theoretical underpinnings to this finding which is in contrast to rogoff 1985 2 the basic idea is that one can isolate two sources of output variability one is the economic variability induced by standard exogenous shocks that monetary policy is supposed to stabilize for instance money demand shocks or supply shocks the second source of variability is political or more generally policy induced this is the variability introduced in the system by the uncertainty about the future course of policy for instance alesina 1987 studies the effect of uncertain electoral outcomes in a model where the two contending parties have different preferences over inflation and unemployment an inflation averse independent central banker does not stabilize as much the economic variability in order to keep inflation low and stable this is rogoff s point however by insulating monetary policy from political pressures an independent central bank can reduce the political variability the overall effect of independence on output variability is thus ambiguous this result is consistent at least prima facie with the evidence in alesina and summers 1993 on the lack of correlation between centralbank independence and output variability in fact it is possible that when the politically induced output variability is predominant a more independent central bank reduces average inflation and the variance of output

information school choice and academic achievement evidence from two experiments we examine a natural experiment and a field experiment that provided direct information on school test scores to lower income families in a public school choice plan receiving information significantly increases the fraction of parents choosing higher performing schools parents with high scoring alternatives nearby were more likely to choose nonguaranteed schools with higher test scores using random variation from each experiment we find that attending a higher scoring school increases student test scores the results imply that school choice will most effectively increase academic achievement for disadvantaged students when parents have easy access to test score information and good options from which to choose

the role of application assistance and information in college decisions results from the h r block fafsa experiment growing concerns about low awareness and take up rates for government support programs like college financial aid have spurred calls to simplify the application process and enhance visibility we present results from a randomized field experiment in which low income individuals receiving tax preparation help were also offered immediate assistance and a streamlined process to complete the free application for federal student aid fafsa for themselves or their children treated participants were also provided with aid estimates that were compared against tuition cost amounts for nearby colleges the combined assistance and information treatment substantially increased fafsa submissions and ultimately the likelihood of college attendance persistence and aid receipt in particular high school seniors whose parents received the treatment were 8 percentage points more likely to have completed two years of college going from 28 to 36 during the first three years following the experiment families who received aid information but no assistance with the fafsa did not experience improved outcomes the findings suggest many other opportunities for using personal assistance to increase participation in programs that require filling out forms to become eligible jel codes i2 h4 j24 copyright 2012 oxford university press

the perceived returns to education and the demand for schooling economists emphasize the link between market returns to education and investments in schooling though many studies estimate these returns with earnings data it is the perceived returns that affect schooling decisions and these perceptions may be inaccurate using survey data for eighth grade boys in the dominican republic we find that the perceived returns to secondary school are extremely low despite high measured returns students at randomly selected schools given information on the higher measured returns completed on average 0 20 0 35 more years of school over the next four years than those who were not

how delegation improves commitment abstract mccallum 1995 american economic review papers and proceedings 85 2 207 211 conjectures that delegation merely relocates the commitment problem but does not solve it this holds if optimal ex ante policies do not change if additional information becomes available however with a flexibility credibility trade off delegation improves credibility

the anti inflationary influence of corporatist structures and central bank independence the importance of the hump shaped hypothesis many studies have found strong negative correlations between central bank independence and inflation but the casual significance of this relationship is often challenged we find that the negative relationship remains even when a number of other explanatory variables are considered special attention is given to the role of corporatism following calmfors and driffell it is argued that both high and low levels of centralization should be associated with lower inflation we present empirical support for his hump shaped hypothesis and find that the inclusion of corporatism does not diminish the significance of central bank independence

education choices and returns to schooling mothers and youths subjective expectations and their role by gender abstract in this paper we investigate the role of expected returns to schooling and of perceived risks of unemployment and earnings as determinants of schooling decisions moreover our data also allow us to analyze whether youths and or mothers expectations predict schooling decisions and whether this depends on the age and gender of the youth in particular we use mexican data that contain labor market expectations of mothers and youths we find that expected returns and risk perceptions are important determinants of schooling decisions the latter in particular from the perspective of the mother boys expectations predict the decision to enter college but not to enter high school while girls own expectations do not predict either of the two educational decisions mothers expectations are particularly strong predictors of their daughters decisions

agent discretion regulatory policymaking and different institutional arrangements this paper examines agent discretion that is a result of the structure of the legislative process based on several distributions of lawmaking powers different games are analyzed in which players decide on regulatory policies the analysis shows that agent discretion increases as lawmaking powers are differentiated and assigned to specialized players particularly monopoly initiation power which allows a player to act as a gatekeeper has a substantial impact on discretion agent discretion will be even larger when these players also have heterogenous preferences the framework that is developed in this paper permits comparisons across different political systems with regard to agent discretion and legislative control on policymaking

education choices and returns on the labor and marriage markets evidence from data on subjective expectations in this paper we analyze the role of expected labor and marriage market returns as determinants of the college enrollment decisions of mexican high school graduates moreover we investigate whether the relative weights of these factors differ by gender we use data on individuals expectations regarding future labor market outcomes which we directly elicited from the youths and two different measures of marriage market returns first marriage market returns are proxied by the net supply of potential partners in the youths local marriage markets second we use data which elicits youths beliefs about their future spouse s earnings conditional on their own education level we find that labor market as well as marriage market returns are important determinants of the college enrollment decision however boys and girls preferences differ in terms of the relative role of the two determinants in that the relative weight of labor market versus marriage market returns is larger for boys than for girls

intended college attendance evidence from an experiment on college returns and costs abstract we conduct an information experiment about college returns and costs embedded within a representative survey of us household heads baseline perceptions of college costs and benefits are substantially biased with larger biases among lower income and non college households respondents are randomly exposed to objective information about average college returns or costs we find a significant impact of the returns experiment persisting in a follow up survey two months later intended college attendance expectations increase by about 0 2 of the standard deviation in the baseline likelihood and gaps by household income or parents education decline by 20 30 we find no impact of the cost information treatment further analysis supports the information s salience as opposed to information based updating as the main channel through which the returns intervention impacts intentions

the importance of information targeting for school choice although school choice programs are common we know little about the underlying decision making processes in this study we randomly assigned 900 junior high schools in ghana a country with universal secondary school choice to 1 of 3 treatment arms 1 information to students 2 information to students and guardians and 3 control group we observe changes in beliefs behaviors and the decision maker s identity through a survey of guardians our intervention increased the likelihood that guardians were involved with and informed about the school selection process moreover specifically targeting guardians led to significantly larger changes for most outcomes

political influence on the central bank international evidence political influence on the central bank is measured bere by looking at the probability that a central bank governor will be replaced shortly after a political change of government the governor changes about half the time witbin six months of a nonconstitutional or other radical change of government a military coup or a restoration of democracy the governor is much less likely to change within six months following a routine change in the head of government about one fourth of the time in developing countries and one tenth in industrial countries these indicators vary across countries and correlate statistically with inflation and its variability and with real growth and real interest rates differences in the vulnerability of the central bank to political instability in political instability itself and in central bank turnover in nonpolitical periods seem to be a major part of the explanation for why developing countries have on average higher and more variable inflation than industrial countries do

does aid matter measuring the effect of student aid on college attendance and completion does student aid increase college attendance or simply subsidize costs for infra marginal students settling the question empirically is a challenge because aid is correlated with many characteristics that influence educational investment decisions a shift in financial aid policy that affects some youth but not others can provide an identifying source of variation in aid in 1982 congress eliminated the social security student benefit program which at its peak provided grants totaling 3 7 billion a year to one out of ten college students using the death of a parent as a proxy for social security beneficiary status i find that offering 1 000 1998 of grant aid increases educational attainment by about 0 16 years and the probability of attending college by four percentage points the elasticities of attendance and completed years of college with respect to schooling costs are 0 7 to 0 8 the evidence suggests that aid has a threshold effect a student who has crossed the hurdle of college entry with the assistance of aid is more likely to continue schooling later in life than one who has never attempted college this is consistent with a model in which there are fixed costs of college entry finally a cost benefit analysis indicates that the aid program examined by this paper was a cost effective use of government resources this abstract was borrowed from another version of this item

returns to education a further international update and implications this paper updates evidence on the returns to investment in education by adding estimates for new countries and refining existing estimates to bring the total number of country cases to over 60 the new cross country evidence confirms and reinforces earlier patterns namely that returns are highest for primary education the general curricula the education of women and countries with the lowest per capita income the findings have important implications for directing future investment in education which for efficiency and equity purposes should concentrate on these priority areas

bureaucratic discretion or congressional control regulatory policymaking by the federal trade commission this paper extends stigler and peltzman s approach to regulation by incorporating a legislature the model yields comparative statics results and hence testable implications the paper then tests between two opposing approaches about regulatory agency behavior the first assumes agencies operate independently of the legislature and hence exercise discretion the second assumes that congress controls agency decisions the recent behavior of the federal trade commission provides the empirical setting substantial evidence is found for the specific predictions of the model including the hypothesis of systematic congressional influence over ftc decisions

investing in schooling in chile the role of information about financial aid for higher education we investigate the impacts of providing low income chilean adolescents with information about how to finance higher education and ask whether providing parents with the same information magnifies the effects on schooling outcomes we randomly assigned eighth graders and some parents to receive information about aid for higher education exposure to information raised college preparatory high school enrollment primary school attendance and financial aid knowledge with gains concentrated among medium and high grade students parental exposure to information did not significantly magnify these effects our results demonstrate that access to relevant information about financial aid affects important schooling choices long before tertiary education begins

congressional influence on u s monetary policy abstract congressional influence is generally discounted or ignored in political models of federal reserve behavior here i show that changes in the leadership of the senate banking committee are significantly correlated with monetary base growth more liberal committee leaders are associated with significantly higher base growth other factors held constant the result is shown to hold across several econometric specifications and different definitions of the congressional preference variable

variation in central bank independence across countries some provisional empirical evidence in this paper seven hypotheses to explain variation in central bank independence across countries are tested the predictions based upon the theory that delegation of authority by politicians to the central bank is used as a commitment device are not supported central bank independence is not higher the larger the employment motivated inflationary bias the higher political instability or the larger the government debt central bank independence is positively related to historical inflation experience and negatively with political instability we do only find limited support for the view that countries with a universal banking system and countries whose central banks do not regulate financial institutions have more independent central banks

credibility of optimal monetary delegation while optimal monetary policy is subject to a credibility problem it is often argued that the government should appoint a central banker whose incentives differ from the government s the author argues however that such delegation does not overcome credibility problems given that delegation is discretionary and without costs reappointment costs of delegation are shown to improve suboptimal outcomes but credibility of optimal monetary policy turns out be worsened at best delegation therefore has no effects on credibility but only if reappointment has no costs copyright 1997 by american economic association

the behavioral and distributional implications of aid for college subsidizing the cost of education is one of the most common and expensive activities of governments while primary and secondary schooling is available tuition free in the united states among post secondary students the direct cost of schooling is quite heterogeneous first tuition prices vary widely across schools during the 2000 2001 academic year college tuitions varied from zero at some community colleges to over 27 000 at ivy league institutions second institutions heavily discount these sticker prices for many students using detailed information on family finances and academic merit to engage in finely tuned price discrimination third the federal and state governments provide individual subsidies such as the pell grant and low interest stafford loan that are portable across institutions the standard model of human capital clearly predicts that such cost subsidies will raise the optimal level of schooling while the theoretical predictions are clear it is an empirical question how much a given dollar of subsidy affects behavior answering this empirical question is a challenge since eligibility for subsidies is certainly not random and in fact is likely to be correlated with many other determinants of schooling as a result estimates based on the cross sectional correlation of aid eligibility with schooling are subject to multiple sources of bias this paper examines work that has used quasi experimental methodology to isolate exogenous sources of variation in schooling costs in order to determine their effect on schooling decisions

group decision making with uncertain outcomes unpacking child parent choice of the high school track predicting group decisions under uncertainty requires disentangling individual members utilities over the consequences of choice their expectations for uncertain outcomes and their choice process as a group i estimate simple bayesian models of child parent choice of high school track with subjective risk and unilateral or bilateral nonstrategic decisions by combining families actual choices with novel survey information about children s and parents subjective probabilities over choice consequences their individually preferred choices and their decision roles a set of policy counterfactuals confirms the importance of introducing the beliefs and decision roles of individual members in models and policy analysis of group decisions

central bank independence and macroeconomic performance some comparative evidence this note uses information on a sample of sixteen oecd countries to assess the relationship between central bank independence and macroeconomic performance as previous work suggests politically controlled central banks are more likely to pursue policies that lead to high and variable inflation however the authors find little evidence that political control of central bank policy has any impact on measures of the level or variability of growth unemployment or the ex ante real interest rate copyright 1993 by ohio state university press

the political economy of american monetary policy preface 1 introduction thomas mayer 2 studying the fed towards a broader public choice perspective thomas willett 3 the federal reserve reaction function a specification search salwa khouri 4 corporate profitability as a determinant of restrictive monetary policy estimates for the post war united states gerald epstein and juliet schor 5 federal reserve behavior since 1980 a financial market perspective william melton and v vance roley 6 the federal reserve and its institutional environment a review michael munger and brian roberts 7 the political economy of monetary policy robert hetzel 8 political monetary cycles nathaniel beck 9 congress and the fed why the dog does not bark in the night nathaniel beck 10 the federal reserve as a political power james pierce 11 monetary policy and political economy the federal reserve and the bank of japan thomas cargill and michael hutchinson 12 a positive analysis of the policymaking process at the federal reserve raymond lombra and nicholas karamouzis 13 a theory of fomc dissent voting with evidence from the time series thomas havrilesky and robert schweitzer 14 explaining fomc members votes john gildea 15 fed behaviour and x efficiency theory toward a general framework harinder singh and roger frantz 16 minimizing regret cognitive dissonance as an explanation of fomc behavior thomas mayer 17 the discount window william poole 18 leaning against the wind the behavior of the money stock in recession and recovery 1953 8 elmus wicker 19 bureaucratic self interest as an obstacle to monetary reform edward kane index

two fallacies concerning central bank independence this paper takes issue with two basic conclusions prevalent in the literature on central bank behavior first the paper argues that it is inappropriate to presume that central banks will in the absence of any precommitment technology necessarily behave in a discretionary fashion that implies an inflationary bias since there is no functional connection between average rates of money creation or inflation and policy responsiveness to cyclical disturbances it is entirely feasible for the bias to be avoided in other words there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any absolute precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it this abstract was borrowed from another version of this item

central bank independence an update of theory and evidence this paper reviews recent research on central bank independence cbi after we have distinguished between independence and conservativeness research in which the inflationary bias is endogenised is reviewed finally the various challenges that have been raised against previous empirical findings on cbi are discussed we conclude that the negative relationship between cbi and inflation is quite robust

does inequality cause inflation the political economy of inflation taxation and government debt a democratic society in which the distribution of wealth is unequal elects political parties that are likely to represent the interests of poor people it is in the interests of the clientele of the resulting governments to attempt to levy inflation taxes in order to erode the real value of debt service and redistribute from the rich to the poor consequently inequality and high levels of nominal government debt sow the seeds for inflation some cross country evidence for this proposition is provided

the disadvantage of tying their hands on the political economy of policy commitments incumbents are more likely to be re elected if they have a comparative advantage in the eyes of voters on some central issue this paper argues that incumbents have an incentive to avoid reforms that reduce the government s role in deciding these issues in order to increase their chances of re election this point is illustrated in the context of the choice of an exchange rate regime in an economy characterized by an inflation bias a flexible exchange rate allows the government to use monetary policy as a stabilization tool while fixed exchange rates remove the inflation bias of the economy on the one hand it is shown that a more inflation averse government may refrain from choosing fixed exchange rates in order to capitalize on the inflationary reputation of its opponent this incentive is contrasted with the opposite incentive to tie the hands of the future government should be incumbent be defeated on the other hand it is shown that electoral considerations may reinforce the incentive of the more inflationary government to tie its own hands with fixed exchange rates

the schooling decision family preferences intergenerational conflict and moral hazard in the brazilian favelas this paper experimentally analyzes the schooling decisions of poor households in urban brazil we elicit parents choices between monthly government transfers conditional on their adolescent child attending school and guaranteed unconditional transfers of varying sizes in the baseline treatment an overwhelming majority of parents prefer conditional transfers to larger unconditional transfers however few parents prefer conditional payments if they are offered text message notifications whenever their child misses school these findings suggest important intergenerational conflicts in these schooling decisions a lack of parental control and observability of school attendance and an additional rationale for conditional cash transfer programs the monitoring they provide

checks and balances and the supply of central bank independence abstract the paper analyzes the institutional conditions under which policymakers can credibly commit to an independent central bank and thereby mitigate the well known time consistency problem in monetary policy it is shown theoretically that granting independence via a statute is only credible for legislative systems with at least two heterogeneous decision making bodies which both have veto rights for example bicameral systems this thesis is supported by empirical evidence the legal independence of central banks is significantly higher in those oecd countries whose legislative processes are characterized by extensive checks and balances furthermore the negative relation between legal independence and inflation is larger in countries with checks and balances than in countries without checks and balances

parent child bargaining parental transfers and the post secondary education decision schooling decisions are often modelled within a unitary preference framework in this article an alternative to the unitary preference model is proposed in which parents and child have conflicting preferences over parental transfers and the level of post secondary schooling and participate in cooperative bargaining as a means of resolving this conflict comparisons of the implications of the bargaining and unitary preference models motivate tests of parental altruism and income pooling to test these hypotheses reduced form transfer and schooling equations are estimated using data from the high school and beyond surveys the evidence suggests that the unitary preference model be rejected

school markets the impact of information approximating schools effectiveness abstract the impact of competition on school performance is likely to depend on whether parents are informed about schools effectiveness or value added which may or may not be correlated with absolute measures of their quality and on whether this information influences their school choices thereby affecting schools market outcomes this paper explores this by considering chile s sned program which seeks to identify effective schools selecting them from homogeneous groups of comparable institutions its results are widely disseminated and the information it generates is different from that conveyed by a simple test based ranking of schools which turns out to approximate a ranking based on socioeconomic status we use a sharp regression discontinuity to estimate the effect that being identified as a sned winner has on schools enrollment tuition levels and socioeconomic composition through five applications of the program we find no consistent evidence that winning a sned award affects these outcomes

central bank behavior a positive empirical analysis abstract the central bank is analyzed as a utility maximizing unit acting in the framework of a politico economic model it derives utility from keeping the price level stable and is constrained by government the structure of the economy and the political commitment to stable exchange rates it uses a satisficing strategy concentrating on keeping conflicts with government below a certain level in the case of serious conflict the central bank follows the policy directions undertaken by government but with a time lag the complete model comprising endogenous consumer voters government and central bank is econometrically tested for germany with good results

child control in education decisions an evaluation of targeted incentives to learn in india i report the results of a field experiment in gurgaon india that offered cash and noncash incentives to learn either to children or to their parents while i find no evidence that the identity of the recipient or form of the reward mattered in the aggregate noncash incentives targeted to children were more effective for initially low performing children while cash incentives were more effective for high performing children to explore the mechanisms behind this result i present a model of household education production and find additional empirical results consistent with the model

time consistent monetary policy under output persistence this note merges the fact that real activity is persistent with a barro gordon type model of endogenous monetary policy it shows that persistence crucially affects policy choices this applies in non cooperative games with a finite horizon and in games with an infinite horizon always enforceable inflation announcements move higher when output persistence increases policymakers who discount future utility by 10 annually produce about ten times as much inflation under near hysteresis as in a natural rate scenario a change in the policymaker s time preference may affect inflation both ways depending on present time preference and persistence

political and monetary institutions and public financial policies in the industrial countries institutions and policies vittorio grilli donato masciandaro and guido tabellini why do countries as similar as the industrialized oecd countries go through such different experience in terms of public deficits and debts or in terms of inflation the answer cannot come from macroeconomic policy responses to different disturbances nor from the principles of optimal taxation but rather from politics this article focuses on the role that particular institutions exert in providing constraints and incentives which shape the actions of policymakers the electoral process and political traditions affect the ability of governments to deal with deficits and mounting debts what seems to matter most it is found is the effect of the durability of governments governments with short horizons act myopically and never quite tackle the hard choices such governments typically exist in countries with an electoral system favouring many small political parties central bank independence promotes low inflation with no apparent costs in terms of real economic performance irrespective of the political institutions in fact there is no link between monetary and fiscal discipline these findings carry powerful implications for countries facing high indebtedness or stubborn inflation but also for the construction of the european economic and monetary union

efficient investment in a dynamic auction environment abstract we analyze an environment in which bidders private values change over time due to both private investments and exogenous shocks we demonstrate that a highly decentralized mechanism achieves efficiency the mechanism requires a stage of costly public announcements i e signaling to induce efficient investment for this reason an equilibrium selection issue arises but can be handled by a minor modification in the spirit of virtual implementation

is new zealand s reserve bank act of 1989 an optimal central bank contract this paper evaluates the reserve bank of new zealand act of 1989 from a principal agent perspective arguing that the act represents a dismissal rule the optimal dismissal rule requires that the central banker be dismissed whenever inflation exceeds a critical level that depends on aggregate supply disturbances and measurement error in the inflation index this is essentially the structure established by the act the scope for renegotiating the target rate however creates an incentive for the government to set the critical rate too high consequently the inflation bias of discretion is reduced but not completely eliminated copyright 1995 by ohio state university press

money and monetary stability in europe 1300 1914 abstract this paper investigates the determinants of monetary stability in europe from the late medieval era until world war i through this period the anchor for monetary policy was the silver or gold value of the monetary unit states however frequently abandoned this anchor some depreciating their monetary units against silver and gold less than 10 fold and others more than 10 000 fold between 1500 and 1914 to understand the determinants of these differences we compile a new and comprehensive monetary history dataset for all major states in europe and test alternative theories we find strong evidence that political factors and in particular fiscal capacity political regime and warfare explain patterns of monetary stability this finding is robust to addressing endogeneity controlling for the instability induced by the mechanics of the monetary system and accounting for the impacts of new monetary technologies and the advent of fiat standard

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

training wages and sample selection estimating sharp bounds on treatment effects this paper empirically assesses the wage effects of the job corps program one of the largest federally funded job training programs in the u s even with the aid of a randomized experiment the impact of a training program on wages is difficult to study because of sample selection a pervasive problem in applied microeconometric research wage rates are only observed for those who are employed and employment status itself may be affected by the training program this paper develops an intuitive trimming procedure for bounding average treatment effects in the presence of sample selection in contrast to existing methods the procedure requires neither exclusion restrictions nor a bounded support for the outcome of interest identification results estimators and their asymptotic distribution are presented the bounds suggest that the program raised wages consistent with the notion that the job corps raises earnings by increasing human capital rather than solely through encouraging work the estimator is generally applicable to typical treatment evaluation problems in which there is nonrandom sample selection attrition copyright wiley blackwell