some macroeconomic implications of alternative compensation systems a basic theme of this paper is the idea that some structural reform of employee compensation arrangements is necessary to make reasonable price stability compatible with reasonably full employment in this view even the best designed macroeconomic policies are much too aggregative to get at the heart of the stagflation problem the ultimate solution involves going inside the workings of a modern capitalist economy and correcting the underlying structural flaw directly on the level of the individual firm stagflation represents an especially intractable policy dilemma for macroeconomics without a decisive tendency of the economic system to remain near full employment there is a strong prima facie case for fighting recessions by exogenously stimulating aggregate demand but the usual keynesian expansionary policies tend to impart an inflationary inertia that is difficult to choke off and of course the basic strategy for fighting inflation is to cool down the economy by restrictive monetary and fiscal policy thereby increasing unemployment and closing the viscous circle because the practical macroeconomic policies for dealing with unemployment and inflation are so diametrically opposed stagflation is a pervasive structural problem when for whatever reason there is basically an unfavourable short run tradeoff between unemployment and inflation economic policy tends to vacillate between expansion of demand to fight unemployment and restriction of demand to fight inflation polarising the electorate and distracting society from dealing effectively with its underlying real economic problems even the difficulty of attaining external balance in foreign accounts is largely a spillover into the international payments arena of an inability to achieve an acceptable internal balance between full employment and price stability this paper takes what might be called a comparative systems approach to the problem of stagflation at the heart of modern industrial capitalism is an incredibly complicated system of overlapping monopolistic competitors 2 a starting point for the paper is the realisation that the coordination difficulty which can cause some systems to suffer involuntary unemployment is not inherent in laissez faire private enterprise per se it is closely tied to one particular property of a conventional wage payment system namely compensation of each firm s employees is stuck to an outside numeraire whether money or a cost of

efficiency and equalization payments in a federal system of government a synthesis and extensions of recent results this paper investigates the rationale for a system of equalization transfers in a federal system of government the existing sources of inefficiency of resource allocation in economies with more than one level of government are synthesized in the framework of a simple decentralized multiprovince model with mobile factors of production the sources of inefficiency arise first because migrants respond at the margin to incorrect signals owing to the phenomena of rent sharing and fiscal exterality and second because of global rather than local inefficiencies the model is then extended to consider the role of the federal government in providing intergovernmental transfers in the face of such inefficiencies in addition to synthesizing the sources of inefficiency in federal models the equity arguments for equalization are briefly recounted efficacite et paiements de perequation dans un systeme federal de gouvernement synthese et extensions de certains resultats recents ce memoire examine la logique qui soustend un systeme de paiements de perequation dans un systeme fdderal de gouverement les auteurs utilisent un modele simple d un systeme multi provincial decentralise avec des facteurs de production mobiles pour definir les sources d inefficacite dans l allocation des ressources dans les dconomies qui possedent plus d un niveau de gouvernement ces inefficacites proviennent de ce que d abord ceux qui se deplacent le font en reponse a la marge a des signaux incorrects engendres par le partage de la rente sur la base de la residence et par les phenomenes d exteralites fiscales elles sont aussi le resultat d inefficacites globales plutot que locales dans le cadre de ce modele les auteurs analysent le role du gouvernement federal effectuant des transferts inter gouverementaux pour corriger ces inefficacites en plus de presenter une synthese des sources d inefficacite dans les regimes federaux les auteurs font un bref rappel en passant a l ensemble des arguments fondes sur l equite qu on utilise pour rationaliser les paiements de perequation this paper is a linear combination of two papers presented at the may 1982 meetings of the canadian economics association in halifax entitled the case for equalization payments by the authors and recent developments in the theory of regional economic policy in canada by boadway the authors are grateful for comments by the discussants jim johnson and baxter macdonald and by jack mintz brian scarfe gerard belanger david sewell tom courchene and the referees we are especially heavily indebted to dan usher for many stimulating comments and suggestions while the work was in progress some of the above persons will undoubtedly disagree with the emphasis we have chosen to put on various aspects of the analysis for policy purposes support for some of this work has been provided by the economic council of canada and is gratefully acknowledged canadian journal of economics revue canadienne d economique xv no 4 november novembre 1982 printed in canada imprimd au canada 0008 4085 82 0000 0613 01 50 1982 canadian economics association this content downloaded from 207 46 13 127 on wed 12 oct 2016 04 27 47 utc all use subject to http about jstor org terms 614 robin boadway and frank flatters

black white differences in schooling investment and human capital production in segregated schools the lower level of school quality available for blacks relative to whites in the segregated era is frequently cited as a primary cause for the currently observed gap in black white average wages the inferior education provided to black children is argued to have caused lower levels of human capital production in black schools than white schools the gap in black white wages can be traced to this gap in human capital similarly the convergence in black and white average wages during the 1960 s and 1970 s may be explained by the steady convergence in black and white school quality and attendance which began in the 1940 s this abstract was borrowed from another version of this item

labor market returns to two and four year college the paper examines labor market returns to a two and four year college education analysis of the 1972 national longitudinal survey of youth observation that the average person who attended a two year college earned about 10 percent more than those without any college education comparison with the wages of those who attended a four year college education

affirmative action and the racial wage gap among the many disturbing changes in the structure of wages in recent years the stagnation in the male racial wage gap may be the most disheartening race remains america s oldest and most persistent cause of social and economic disparity but many of us had been encouraged by the steady and significant economic progress since the second world war the recent stagnation challenges that optimism in this paper i attempt to identify the reasons why the wage stagnation took place many americans particularly those in the media and political arena believe they already know the reason according to them this stagnation is the predictable consequence of the affirmative action policies associated with the reagan administration one reason why many believe that the reagan era deserves principal responsibility for the racial stagnation is the belief that equal employment opportunity commission eeoc resources were gutted during this period eeoc inflation adjusted budgets grew almost 15 percent per year during the 1970 s while there was some slowdown in the last half of the decade constantdollar eeoc budgets expanded by 7 2 percent per year during the carter administration and almost 1 400 budgeted positions were added to the eeoc a growth of 50 percent between 1976 and 1980 there is no question that the reagan era witnessed an abrupt end to the growth in resources that would have taken place eeoc constant dollar budgets actually fell during this period and the number of positions declined by almost one thousand and as eeoc resources and personnel fell during the 1980 s so did the measurable outputs the sharp break in the 1980 s was not so much in the aggregate level of activity but in its composition and the resources available per case spurred by the passage of the age discrimination act in 1979 age came into its own during this decade starting with only 14 cases in the year after passage of the act the number of age cases rose at an astonishing pace to over 30 000 by 1992 even without this explosion in age related charges the significance of race was declining while the number of race charges increased by 10 percent after 1980 sex charges were expanding by 40 percent by 1992 only 40 percent of all cases involved race issues compared to 85 percent of all charges in 1970 and 61 percent in 1980 the declining importance of race in the eeoc s agenda reflects a more general dilution of race as the core civil rights labormarket concern since 1965 the road to equal rights has become very crowded the quest for racial justice was the clear moral force behind the civil rights act with women added in an unsuccessful attempt to scuttle the legislation subsequently hispanics have begun to rival blacks in their political clout and protected minority group status was extended to men over 40 those with a disability and gays the end result is that more than three quarters of today s labor force enjoy protected minority group status blacks are now a minority within the protected minority class which itself represents the majority

skills schooling and household income in ghana this article examines the impact of cognitive skills on the income of households in ghana it uses scores on mathematics and english tests to measure cognitive skills and estimates the returns to these skills based on farm profit off farm income and total income the article uses powell s censored least absolute deviations and symmetrically trimmed least squares estimators to estimate farm and off farm income in contrast to heckman s two step or the tobit estimator powell s estimators are consistent in the presence of heteroscedasticity and are robust to other violations of normality the results show that cognitive skills have a positive effect on total and off farm income but do not have a statistically significant effect on farm income

examining the role of economic opportunity and amenities in explaining population redistribution abstract this paper develops a model of migration integrating equilibrium and disequilibrium components in which individuals and firms form rational expectations about future opportunities levels of migration are derived as functions of variations in factors influencing migrant labor demand economic opportunity and migrant labor supply residential amenities the model is used to estimate the extent to which migration in the united states over the period 1950 1980 is determined by these two classes of exogenous factors

international migration capital mobility and transitional dynamics much of recent thinking on the problems of the central and east european countries ceecs centres on how long it will take them to catch up to oecd economies and how various policies will hasten or hinder the transition this paper using a highly stylized framework focuses on a quite different set of issues how the nature of the transition can effect the nature of the long run equilibrium the mechanism we focus on is factor mobility and factor complementarity excerpt

race and human capital while human capital has been used with some success to analyze recent changes in racial income differences scholars have repeatedly pointed to a major empirical problem that appears to severely limit the historical relevanlce and scope of skill based theories as applied to racial questions the challenge they raise is legitimate put simply if measured skill disparities between the races narrowed throughout the twentieth century why did income ratios first begin to converge in the 1960 s in this paper i address this question relying on some unexploited census data by race on education literacy occupations and income using these data that begin with the 1890 census i present new estimates of agespecific relative income positions of black men for all postslavery birth cohorts in addition to reconciling the apparently inconsistent skill and income series these income ratios offer a very different historical record than many economists believe to have been the case to cite a prominent example gunnar myrdal s classic work 1944 saw the economic position of his contemporary black america not only as dismal but made even more so by its sense of hopelessness given the absence of any hint of progress or change while myrdal s pessimism is understandable it appears that even in his day seeds had long been sown that were already permanently altering and improving the relative economic status of black men

government management of village commons comparing two forest policies abstract when monitoring or enforcement is difficult governments may find it impossible to manage village forest commons directly village level institutions might be better able to manage these commons yet villagers management objectives may not coincide with those of the state this article considers the effects of two different government policies on the local management of village commons one policy tool attempts to induce villagers to conserve forest commons by giving them a share of the timber harvest we investigate the question of whether or not this scheme joint forest management jfm is preferred either by the villagers or the government to a simple benchmark policy under which the government harvests at random we show that when villagers are sufficiently patient for any equilibrium jfm policy there exists a benchmark policy which gives villagers the same level of utility however whether the government is similarly indifferent between these two arrangements depends on the villagers ability to enforce collective agreements and on the curvature of villagers utility functions

how teachers unions affect education production this study helps to explain why measured school inputs appear to have little effect on student outcomes particularly for cohorts educated since 1960 teachers unionization can explain how public schools simultaneously can have more generous inputs and worse student performance using panel data on united states school districts i identify the effect of teachers unionization through differences in the timing of collective bargaining especially timing determined by the passage of state laws that facilitate teachers unionization i find that teachers unions increase school inputs but reduce productivity sufficiently to have a negative overall effect on student performance union effects are magnified where schools have market power

white discrimination in provision of black education plantations and towns abstract we present a model of public provision of education for blacks in two discriminatory regimes white plantation controlled and white yeoman town controlled we show that the ability to migrate to a non discriminating district constrains the ability of both types of regimes to discriminate the model produces time series of educational outcomes for whites and blacks that mimic the behavior seen in post reconstruction south carolina to the onset of the civil rights act it also fits the post world war ii black white income differentials

transboundary pollution and household mobility are they equivalent abstract recent research has shown that perfect household mobility can serve as a disciplinary mechanism inducing national policy makers to internalize interregional externalities caused by transboundary pollution this paper develops a differential game to illustrate that the result is not necessarily robust when migration costs and explicit dynamics are introduced the paper shows that if governments constantly reoptimize imperfect household mobility leads to a tragedy of the commons and individual countries overemit even when pollution is purely local moreover these dynamic externalities get worse as the degree of household mobility increases and there is a qualitative difference between almost perfect and perfect mobilty that is a discontinuity at zero migration costs

interregional interactions and population mobility the institutional level at which policies should be determined is an important issue that has been extensively treated in the economics literature in particular the literature has discussed to what extent decentralization of policy decisions give an inefficient outcome with a homogeneous population and perfect population mobility as it conventionally is modeled the following result is derived for a very general class of economies with interregional interactions a socially efficient outcome is a nash equilibrium of the game of decentralized and uncoordinated policy setting however if decisions about migration take a longer time to make than decisions of policy changes the general result above no longer holds with this decision sequence decentralization may give an inefficient outcome also in situations where the decentralized outcome is efficient in the absence of population mobility

transboundary pollution in the black sea comparison of institutional arrangements this paper analyses the transboundary pollution between romania and ukraine coastal states along the black sea and studies the welfare consequences of institutional arrangements for controlling this problem to achieve this goal we use a dynamic and strategic framework we compare in terms of total welfare for two countries a first best case with three different institutional arrangements the non cooperative game of countries the uniform emission policy and the constant emission policy as proposed by the black sea commission our findings indicate that the non cooperative game provides a better level of total welfare than the other rules

education and economic performance simplistic theories and their policy consequences a largely unquestioned consensus proclaims that educational policy is an effective tool for delivering prosperity and increasing rates of economic growth this consensus rests on far less secure foundations than is commonly supposed international comparisons confirm that as they become richer people seek ever more education for their children but provide no clear cut evidence of economic benefits accruing to countries which are high spending in education terms analyses which extrapolate from the incomes of educated individuals rest on assumptions about how wages are determined and the extent to which rewards are for skills acquired in schooling which are highly questionable moreover an uncritical belief in educational expansion leads to target driven policies with serious negative effects on educational quality a more realistic view of education s economic impact and a move away from centralized planning for economic ends would actually improve the quality of education copyright 2004 oxford university press

collective reputation and quality firms who sell regional or specialty products often share a collective reputation based on aggregate quality collective reputation can be approached as a dynamic common property resource problem we show that for an experience good without firm traceability individual firms have the incentive to choose quality levels that are sub optimal for the group these results support minimum quality standards trigger strategies are analyzed as an alternative solution to this problem finally the implications of these results are discussed as they relate to the case study of washington apples specialty regional authentic and local food products have become a more important part of consumer purchases in recent years firms have responded by marketing food products that come from specific geographic areas this trend in consumers preferences has led the european union to introduce protected designations of origin labels and protected geographical identification labels which provide protection of food names on a geographical or traditional basis ranging from parmesan cheese to such lesser known items such as galician veal in the united states there are popular state products that carry labels such as washington apples idaho potatoes

segregated schools and the mobility hypothesis a model of local government discrimination around the turn of the century southern blacks lost the right to vote and discrimination against them by local government officials intensified this paper argues that in the case of the de jure segregated public schools attended by black children the ability of southern blacks to vote with their feet placed limits on local government discrimination

trade transboundary pollution and foreign lobbying in this paper we explore the use of trade policy in addressing transboundary stock pollution problems such as acid rain and water pollution we show that a tariff determined by the current level of accumulated pollution can induce the time path of emissions optimal for the downstream polluted country but if the upstream polluting country can lobby the downstream government to impose lower tariffs distortions brought by corruption and foreign lobbying lead to a rise in the upstream country s social welfare and to a decrease in social welfare in the downstream country thus the usefulness of trade policy as a tool for encouraging cooperation and internalizing transboundary externalities depends critically on the degree of governments susceptibility to foreign political influence

the commons and the optimal number of firms the problem of the commons is a frequently cited example of market failure in which exploiters pursuit of profits does not lead to the attainment of a social or pareto optimum in particular a free access equilibrium induces an unrestricted number of exploiters or firms to equate the variable input s average product instead of its marginal product to the input s real rental rate hence the rents of the variable input are driven to zero haveman 1973 1 when the number of firms in a commons is unrestricted the scarce factor e g the fishery the hunting ground is not imputed a rent a social optimum can be achieved if a single firm exploits a commons and sells its output in a perfectly competitive market weitzman 1974 the purpose of this note is to derive an expression for the optimal number of firms exploiting a commons when the resulting output is sold in an imperfectly competitive market 2 since demand inelasticity due to monopoly power leads to overconservation while an increase in the number of exploiting firms typically leads to underconservation a finite number of firms for a commons can be found corresponding to a social or pareto optimum in particular the optimum number of firms depends directly on the elasticity of the input productivity and inversely on the price elasticity of market demand

fiscal inequivalence incentive equivalence and pareto efficiency in a decentralized urban context abstract we develop a simple urban model consisting of a center and a suburb populated by a fixed number of identical individuals who can migrate costlessly between jurisdictions land ownership ranges from rent sharing to an absentee landlord who owns all urban land we discuss laissez faire equilibrium and show that it is pareto efficient we then introduce local governments which are only concerned about the welfare of their residents and which can collect head and land taxes whereas the former is purely local the latter will extend to both jurisdictions if individuals own a positive share of the entire urban land and beyond if there is an absentee landlord this produces a simple kind of fiscal inequivalence tax exporting since local governments do not provide public goods their role is limited to stopping the flow of resources leaving their jurisdiction they then redistribute this revenue as a head subsidy to the residents of their jurisdiction if it just happens that the head subsidy is equal between jurisdictions the equilibrium is both pareto efficient and a preferable to laissez faire from the viewpoint of urban residents if however it varies between jurisdictions the equilibrium is pareto inefficient the jurisdiction providing a higher per head subsidy becomes overpopulated we thus arrive at a classic market failure in the literature of competing regions correction involves aggregate interjurisdictional transfers to equalize head subsidies which in the literature must be undertaken by a central government following myers j public econ 43 107 121 1990 we treat this as an assumption rather than a necessity we show that if aggregate transfers become a local instrument the nash equilibrium will be both pareto efficient and preferable to laissez faire this happens because free mobility compels noncooperative local governments to act in a cooperative way we then extend this result to public goods which need be neither purely public congestion nor purely local spillovers we conclude by discussing implications for the existing urban literature

the schooling of southern blacks the roles of legal activism and private philanthropy 1910 1960 improvements in education and educational quality are widely acknowledged to be major contributors to black economic progress in the twentieth century this paper investigates the sources of improvement in black education in the south in the first half of the century and demonstrates the important roles of social activism especially naacp litigation and private philanthropy in improving the quality and availability of public schooling many scholars view education as a rival to social activism in explaining black economic progress but such a view misses the important role of philanthropic and legal interventions in promoting education

learning by doing and learning from others human capital and technical change in agriculture household level panel data from a nationally representative sample of rural indian households describing the adoption and profitability of high yielding seed varieties hyvs associated with the green revolution are used to test the implications of a model incorporating learning by doing and learning spillovers the estimates indicate that i imperfect knowledge about the management of the new seeds was a significant barrier to adoption ii this barrier diminished as farmer experience with the new technologies increased iii own experience and neighbors experience with hyvs significantly increased hyv profitability and iv farmers do not fully incorporate the village returns to learning in making adoption decisions

decentralized and efficient control of transboundary pollution in federal systems abstract decentralized control of transboundary pollution in federal systems can be efficient when population crowding is socially costly in this paper an upstream region abates pollution or makes an interregional income transfer to the downstream region with the sole intent of deterring immigration because either instrument abatement expenditure or interregional income transfer alone implements an efficient population distribution between the regions interregional income transfers are unnecessary for efficiency without explicit income transfers each region provides the efficient portion of the aggregate level of pollution abatement in the nash equilibrium

optimality free mobility and the regional authority in a federation abstract this paper examines the efficiency properties of a federation characterized by strategically competing regions and freely mobile homogeneous individuals analyses of this economy have concluded that achieving a pareto optimal will require intervention by a national authority this paper makes one basic point the nash equilibrium of regional authority behavior is pareto optimal the implication is that there is no role for a national authority in either providing interregional transfers or correcting for decentralized provision of public goods the nash equilibrium involves samuelson public goods provision and regions purchasing preferred population distributions with optimal interregional transfers

population mobility and transboundary environmental problems abstract a standard result in the literature on environmental economics is that efficient environmental policies regulating transboundary pollution will be adopted only if there is interjurisdictional coordination efficient policies can be adopted as a result of interregional treaties or mandated by a central authority the present paper demonstrates that if there is perfect population mobility between the regions affected by the transboundary pollution the efficient outcome is a nash equilibrium of the policy game between regional authorities this is true independently of what policies are available to the regional authorities however there may be more than one nash equilibrium so that policy coordination may be necessary in order to achieve the best equilibrium

stackelberg versus cournot a differential game approach abstract we propose an infinite horizon differential oligopoly game where at each point in time m stackelberg leaders and n m stackelberg followers exploit a common pool renewable resource and sell their harvest in the marketplace at a price that depends on total harvest we derive a feedback generalized stackelberg nash cournot equilibrium a generalization of the feedback stackelberg equilibrium nesting feedback stackelberg and feedback cournot as special cases we proceed with a comparison between the feedback stackelberg and the feedback cournot equilibria and find a number of interesting results in contrast with static oligopoly theory as to the relative efficiency of the two equilibria we show that the cournot equilibrium can be more efficient than the stackelberg equilibrium this holds true in the short run at the steady state and in terms of discounted welfare

the effect of sibling sex composition on women s education and earnings this paper documents the impact of siblings on the education of men and women born in the united states between 1920 and 1965 we examine the effect of the number and sex composition of a boy or girl s siblings on that child s educational attainment we find that throughout the century women s educational choices have been systematically affected by the sex composition of her siblings and that men s choices have not women raised only with brothers have received on average significantly more education than women raised with any sisters controlling for household size since sibling sex composition affects women s educational attainment and plausibly may be unrelated to other determinants of earnings it may provide a useful instrument for education in earnings functions for women our results suggest that standard estimates significantly underestimate the return to schooling for women

sex wages and productivity an empirical analysis of israeli firm level data sex discrimination in labor markets may generate a wage gap between men and women that exceeds any gap in marginal productivity we test for this type of discrimination using unique firm level data on manufacturing firms in israel there is a statistically significant negative association between wages and the proportion of a firm s workforce that is female however there is also a statistically significant negative association between marginal productivity and the proportion of females the difference beween the wage and productivity gaps is small relative to wage regression estimates of wage discrimination and is not statistically significant which is most consistent with no discrimination

social welfare in a common property oligopoly output in a markov nash cournot equilibrium to a noncooperative differential game in which in oligopolists extract a common property nonrenewable resource is bounded by the output of in firm and in i firm static oligopolies we discuss the welfare effects of the number of firms and of the divergence between private and social discount rates we compare extraction under the markov and open loop equilibria and then offer an explanation for the possibility that the resource is exhausted instantaneously in a continuous time game this explanation does not depend on the fact that the period of commitment is infinitesimal this essay models the extraction by an oligopolistic industry of a common property nonrenewable resource we characterize the markov perfect equilibrium mpe in a game amongst firms and then provide general conditions under which the resource is exhausted instantaneously if there is unrestricted access to a resource agents perceive its shadow value to be 0 and extract too rapidly when access is restricted to a finite number of agents in none of whom possess exclusive property rights an additional complication may arise if firms behave as oligopolists in the product market they have an incentive to extract the resource too slowly in order to increase the price thus where m firms exploit a resource in the absence of property rights there are conflicting tendencies the absence of property rights encourages excessive exploitation whereas the finite number of firms encourages insufficiently rapid exploitation there are a number of situations where the lack of property rights and the presence of market power coexist examples include i national fisheries which are large enough to affect fish populations and output prices ii common exploitation of aquifers or rivers where individual use affects the price of an agricultural output or of another input iii production by oligopolistic firms which degrades the environment we consider the case of nonrenewable resources such as oil this implies a simple equation of motion for the stock of the resource and emphasizes the role of the number of firms and the stock size such models are often appropriate even if the resource is not literally nonrenewable for example tropical forests or groundwater aquifers are potentially renewable given enough time as indeed oil deposits may be however the rate of replenishment may be insignificant given

common pool equities an arbitrage based non cooperative solution to the common pool resource problem abstract it is proposed that a new type of property right termed a common pool equity can solve the common pool resource problem this equity may be presented to any firm that extracts from the resource for a share in profits it is shown that a profit arbitrage condition ensures that the market and socially efficient solutions correspond whenever market power is absent the cost externalities are fully internalized

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

aggressive oil extraction and precautionary saving coping with volatility the effects of stochastic oil demand on optimal oil extraction paths and tax spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic without prudence optimal oil extraction is governed by the hotelling rule and optimal budgetary policies by the tax and consumption smoothing principle volatile oil demand brings forward oil extraction and induces a bigger government surplus with prudence the government depletes oil reserves even more aggressively and engages in additional precautionary saving financed by postponing spending and bringing taxes forward especially if it has substantial monopoly power on the oil market gives high priority to the public spending target is very prudent and future oil demand has high variance uncertain economic prospects induce even higher precautionary saving and if non oil revenue shocks and oil revenue shocks are positively correlated even more aggressive oil extraction in contrast prudent governments deliberately underestimate oil reserves which induce less aggressive oil depletion and less government saving but less so if uncertainty about reserves and oil demand are positively correlated

the decline in black teenage labor force participation in the south 1900 1970 the role of schooling between 1950 and 1970 the labor force participation rate of southern black males aged 16 19 declined by 27 percentage points this decline has been attributed to two demand side shocks the mechanization of cotton agriculture in the 1950s and extensions in the coverage of the federal minimum wage in the 1960s we show however that participation rates of southern black teens fell continuously between 1900 and 1950 the proximate causes of the pre 1950 decline in black teen participation were increases in school enrollment rates and decreases in labor force participation by teens enrolled in school because the underlying causes of both effects had not run their course by mid century we conclude that about half of the post 1950 decline in black teen participation in the south would have occurred even if cotton agriculture had not mechanized in the 1950s or coverage of the minimum wage had not been extended in the 1960s this abstract was borrowed from another version of this item

estimates of the economic returns to schooling from a new sample of twins this paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling the data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent a higher estimate of the economic returns to schooling than has been previously found copyright 1994 by american economic association

are educated workers really more productive abstract this paper presents a new method for examining the productive nature of education it outlines an econometric model which simultaneously estimates an earnings function and a production function for workers and the firms where they are employed this approach permits a direct comparison to be made between the relative wage and relative productivity of workers with different levels of education using a unique data set from ghana two primary questions are addressed 1 are educated workers more productive than workers with no formal education and 2 do earnings differentials between workers with different levels of education reflect genuine productivity differentials the results suggest that education is positively correlated with productivity in ghanaian manufacturing and that firms pay workers according to their productivity

inefficiency of credible strategies in oligopolistic resource markets with uncertainty abstract the implications of different information patterns for firms in oligopolistic resource markets are considered the traditional open loop nash equilibrium with static information sets is one of many possible nash equilibria and is not suitable for stochastic environments when shocks to resource growth are serially uncorrelated there are no gains from conditioning the harvest on past stock levels and the feedback or credible nash equilibrium is the appropriate nash equilibrium concept this credible equilibrium assumes that firms have knowledge of current stocks of reserves which typically leads to more rapid extraction of the resource and possibly extinction since the open loop nash equilibrium is efficient when demand is iso elastic and extraction costs are zero it is clear that an increase in information can be detrimental to firms in the industry

are earnings profiles steeper than productivity profiles we test competing explanations of rising age earnings profiles by obtaining direct estimates of marginal productivity differentials between workers in different age groups and comparing these to associated earnings differentials using contemporary data from israeli manufacturing firms the results indicate that controlling for other productive inputs and firm characteristics for the unskilled or less skilled workers who represent most of the workers in our sample both earnings and productivity profiles are upward sloping moreover these profiles mirror each other closely and are statistically indistinguishable however the estimates of the profiles are sufficiently imprecise that even sizable deviations between point estimates of earnings growth and productivity growth would not be statistically significant while we view the results as most consistent with a general human capital model of rising earnings profiles over the life cycle there is not strong evidence with which to reject alternative models

oil field unitization contractual failure in the presence of imperfect information an empirical analysis of the impact of transaction costs on contracting shows that imperfect in formation can seriously limit the effectiveness of private contracting the case under study is the widespread failure of private crude oil producing firms to use us oil fields to reduce rent dissipation rent dissipation follows as multiple firms compete for migratory oil in common oil pools unitization is the obvious private contractual solution to rent dissipation the authors argue that despite large net gains from unitization imperfect information and information asymmetries among the negotiating parties regarding lease values prevents consensus on unit shares as a result contracts are often not completed or only fragmented units are completed 9 references 1 figure 4 tables

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

human capital and economic development abstract this paper develops a general equilibrium model of fertility and human capital investment with young adult mortality because young adult mortality is negatively related to average young adult human capital human capital accumulation lowers mortality inducing demographic transition and industrial revolution data confirm that young adult mortality is related negatively to schooling and the rate of return to schooling and positively to fertility the data indicate a negative relationship between tfp growth and schooling accumulation the model fits the data on country populations per capita incomes human capital total fertility rates infant mortality life expectancy and conditional life expectancy

an open access fishery with rational expectations explain the evolution of the fish stock and the boat fleet as well as determine their equilibrium levels 2 while the changes in the fish stock are described by a biological rule entry and exit from the fishing industry are determined by how expectations are formed we examine a general model in which entry and exit are proportional to the present value of expected profits and compare two special cases of adaptive myopic expectations and rational expectations although both expectations mechanisms lead to the same equilibrium values they lead to different adjustment paths where expectations solely depend on current values myopic expectations it is well known that boats enter the fishery only when the fish stock is greater than its steady state stock 3 with rational expectations however boats may enter when the fish stock is much lower than its steady state value provided the boat fleet is sufficiently small this difference in adjustment is observable and in principle leads to an obvious test on how agents form expectations section 2 develops a general dynamic model for studying fisheries in section 3 we show that the model standardly used in the literature is equivalent to a myopic adaptive expectations model a rational expectations model is analyzed in section 4 the standard and rational expectations models are compared in section 5 section 6 illustrates this comparison using a simulation based on a schaefer model of the pacific halibut fishery section 7 presents the conclusions

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

black white wage inequality in the 1990s a decade of progress mary c daly using current population survey data we find that the gap between the wages of black and white males declined during the 1990s at a rate of about 60 percentage point per year wage convergence was most rapid among workers with less than 10 years of potential experience with declines in the gap averaging 1 40 percentage points per year using standard decomposition methods we find that greater occupational diversity and reductions in unobserved or residual differences are important in explaining this trend general wage inequality tempered the rate of wage convergence between blacks and whites during the 1990s jel j15 j31 i introduction following the passage of the civil rights act of 1964 and other measures aimed at reducing labor market discrimination during the 1960s the differential in average weekly wages between black and white men in the united states narrowed substantially among male workers aged 18 64 the black white wage gap fell from 50 in 1967 to 30 in 1974 or by about 1 per year 1 after 1974 however the proportional difference in black and white wages remained essentially constant at 30 through the end of the 1980s following more than a decade of stasis the black white wage gap once again began to decline during the 1990s narrowing at an average annual rate of about 60 percentage point per year a great deal of past research has focused on why the black white wage gap did not continue to decline following the initial progress made through the mid 1970s see for example bound and freeman 1992 and juhn et al 1991 hereafter jmp the results point to a number of important factors including shifts in industry demand greater occupational crowding relative deterioration of unobservable skills among blacks and rising overall male wage inequality see altonji and blank 1999 for a detailed review of this literature in this article we investigate the role that each of these factors played in the wage convergence observed in the 1990s we begin by documenting the recent progress in black white wage convergence placing the 1990s in the context of the past 30 years following previous researchers we then use standard decomposition techniques to examine the role of individual characteristics the employment structure and overall male wage inequality in reducing the racial gap in earnings during the decade of the 1990s we find that greater occupational diversity and reductions in unobserved or residual differences are important in explaining this trend general wage inequality tempered the rate of wage convergence between blacks and whites during the 1990s ii data we use data from the march current population survey cps for the years 1969 1999 as administered by the u s census bureau for the u s bureau of labor statistics these files provide information on earnings hours and related variables for the calendar year prior to the survey date thus our analyses apply to income years 1968 1998 in the formal decomposition analysis we focus on three periods 1968 1979 1979 1989 and 1989 1998 these years span our sample and generally coincide with three business cycles our sample consists of black and white males ages 18 64 who participated in the labor force at least 39 weeks worked at least 1 week during the year and usually worked full time workers who are enrolled in school are excluded from the analysis throughout the analysis we focus on two groups our full sample and men with less than ten years of potential experience i e min age education 6 age 18 2 our empirical analysis focuses on weekly earnings calculated as the ratio of annual earnings to weeks worked during the year weekly earnings are deflated using the personal consumption expenditure deflator from the national income and product accounts to avoid problems associated with changes in cps top coding procedures over the years our sample excludes individuals in the top and bottom 1 of the weekly earnings distribution

efficiency inducing tax for a common property oligopoly the author characterizes the markov perfect tax that induces a common property oligopoly to extract efficiently a nonrenewable resource for linear and isoelastic demand he provides closed form expressions of the unique specific tax industry profits may be higher or lower in the oligopoly with the tax relative to the competitive equilibrium with property rights for linear or isoelastic demand there exists no feasible open loop tax that induces efficient extraction in this case the policymaker gains no advantage from being able to make binding commitments copyright 1992 by royal economic society

equity and efficiency in human capital investment the local connection a general model of community formation and human capital accumulation with social spillovers and decentralized school funding is used to analyse the causes of economic segregation and its consequences for equity and efficiency significant polarization arises from minor differences in endowments preferences or access to capital markets this makes income inequality more persistent across generations but the same need not be true for wealth equilibrium stratification tends to be excessive resulting in low aggregate surplus whether state equalization of school resources can remedy these problems hinges on how purchased social and family inputs interact in education and in mobility decisions

determining the impact of federal antidiscrimination policy on the economic status of blacks a study of south carolina this paper evaluates alternative explanations for the dramatic increase in black employment in south carolina manufacturing that occurred in the mid 1960s black progress in traditionally segregated sectors of manufacturing in operation at the time jim crow laws were passed cannot be attributed to tight labor markets the decline of agriculture or the growth of education of the black workforce the only plausible explanation is federal government civil rights and affirmative action policy for newer industries that entered the state on a large scale after world war ii the growth of skills among blacks accounts for black economic progress copyright 1989 by american economic association

interregional spillovers in the presence of perfect and imperfect household mobility abstract when households are immobile across regions the decentralized provision of public goods that generate interregional benefit spillovers is inefficiently low we analyze this problem in an environment of interregional household migration and obtain the following results if households are perfectly mobile across regions then the decentralized provision of public goods generating spillovers is socially efficient there is no need for central government intervention if households are attached to particular regions for cultural or nationalistic reasons however at least one of two regions undersupplies the public good central government intervention can enhance efficiency

efficient equilibrium convergence heterogeneity and growth abstract an endogenous growth model arising from task specialization is used to examine the effects of differing initial human capital distributions two macroeconomic phenomena are produced income convergence and leapfrogging of living standards income convergence occurs for all countries in the same market arising from diminishing returns to individual human capital leapfrogging occurs by comparing countries in two separate markets income leapfrogging can occur because the stationary growth rate increases with market size and human capital heterogeneity reduces growth the introduction of coordination costs of task assignment can produce gains in welfare and growth from human capital heterogeneity

the relevance of standard estimates of rates of return to schooling for education policy a critical assessment abstract this paper examines the accuracy and usefulness of estimated rates of return to schooling based on the standard human capital model of becker and mincer regarding accuracy it investigates whether failure to account for differences in ability and school quality lead to significant biases estimates using ghanaian data confirm this possibility even when accurate estimated rates of return to additional years of schooling may have limited policy implications more useful for governments are rates of return to investments in school quality the paper uses data on cognitive skills to estimate rates of return to three types of school quality improvements

africa s education enigma the nigerian story abstract in the last two decades the social and economic benefits of formal education in sub saharan africa have been debated anecdotal evidence points to low returns to education in africa unfortunately there is limited econometric evidence to support these claims at the micro level in this study i focus on nigeria a country that holds 1 5 of africa s population i use instruments based on the exogenous timing of the implementation and withdrawal of free primary education across regions in this country to consistently estimate the returns to education in the late 1990s the results show the average returns to education are particularly low in the 90s in contrast to conventional wisdom for developing countries 2 8 for every extra year of schooling between 1997 and 1999 surprisingly i find no significant differences between ols and iv estimates of returns to education when necessary controls are included in the wage equation the low returns to education results shed new light on both the changes in demand for education in nigeria and the increased emigration rates from african countries that characterized the 90s

schooling information and nonmarket productivity contraceptive use and its effectiveness information from two u s fertility surveys on couples knowledge about and use of specific contraceptives are used to estimate the technology of human reproduction in order to examine the association between schooling and productivity in the household sector the results indicate that more schooled couples have a wider knowledge of contraceptive methods use more efficiently those contraceptive methods for which there is little information and large scope for misuse and are better able to mitigate the effects of their biological constraints fecundity on their fertility compared to less schooled couples excerpt

education achievement in segregated school systems the effects of separate but equal educational achievement in segregated school systems was considerably lower in the black schools than in the white schools economic historians have argued that the racial achievement gap reflected the discriminatory funding of the black schools this paper assesses counterfactually the historical effects of a separate but equal policy of educational finance using cross sectional data from 1930 and 1940 i estimate race specific educational production functions eliminating race differences in inputs supplied by school boards explains 40 50 percent of the racial achievement gap depending on how achievement is measured the remainder appears to reflect the impact of family background on achievement of which the most important effect was adult black illiteracy a legacy of slavery and educational backwardness in the late 19th century the paper also shows how school boards marginal valuation of black achievement can be recovered from the production function estimates compared to preferences that would have led them to voluntarily practice equality southern school boards judged black achievement to be worth roughly half the value they placed on white achievement this abstract was borrowed from another version of this item

race and human capital reply to arrive at a tenable interpretation of black history it is important to resolve the conflict between my measure retrospective years of schooling completed and robert margo s measure prospective accumulation across ages of cohort specific attendance rates my series reconciled the apparent inconsistency between the stagnant pre 1940 black white income ratios and what scholars had previously thought was a steady narrowing of racial education differences margo s series not only would restore that incon

race and human capital comment according to human capital theory changes in the racial schooling gap are a key factor in the historical evolution of blackwhite male income ratios in a recent paper in this review 1984 james smith points out a basic paradox in the human capital explanation race differences in years of schooling have diminished sharply and continuously for male cohorts born in the twentieth century black white male income ratios however rose only slightly in the aggregate before 1960 after 1960 the ratios increased appreciably smith resolves the paradox by constructing new estimates of the racial schooling gap for cohorts stretching back to the civil war based on retrospective educational attainment data from the 1940 and subsequent censuses race differences in years of schooling widened among males born from 1886 to 1910 additionally the quality of black schooling fell relative to the quality of white schooling since these cohorts dominate the census occupation and income statistics until 1960 smith claims the relative constancy of black white income ratios until 1960 is consistent with the human capital model this comment challenges one of smith s conclusions the increase in the racial schooling gap is shown to be spurious scholars often interpret census attainment data as a measure of years of schooling but the data refer to highest grade completed historically the average black pupil took longer than a single school year to complete a grade retention alone would not bias the census attainment data most blacks born in the late nineteenth century however were educated in ungraded schools for them census attainment data measure years of schooling not grades the shift from ungraded to graded schools took place throughout the period of educational retrogression identified by smith it is the change from years to grades that causes black schooling levels to appear to lag behind white schooling levels consistent data show a continuously decreasing racial schooling gap whatever the merit of smith s explanation it cannot rest on census attainment data beginning in 1890 the u s bureau of the census reported school attendance rates for narrow age groups for example ages 5 to 9 1 i use these data to construct new estimates of average years of schooling in the following manner let p j proportion of children of age j at school a e minimum age at entering school and a l maximum age at leaving school i assume that a e 5 and a l 20 since attendance rates before age 5 or after age 20 were negligible for the period because data are unavailable for single years of age i also assume the agespecific attendance rates are equal to the average attendance rate for the relevant age 2 j a l group the sum ej a e p j estimates average years of schooling 3 empirically the number of students who skip a grade is less than the number who fail the grade hence average years of schooling should exceed average highest grade completed table 1 presents the cohort specific estimates of years of schooling according to my calculations the racial schooling gap fell from 3 8 years among 1886 90 cohorts to 2 5 years among 1906 10 cohorts according

attachment to home and efficient purchases of population in a fiscal externality economy abstract this paper examines the efficiency properties of an economy characterized by strategically competing regions and individuals with varying degrees of attachment to home in an otherwise standard fiscal externality setting regional authorities may make interregional transfers in purchasing preferred populations however there is a range of distributions of resources over which neither region makes transfers nevertheless all equilibrium allocations resulting from the nash behavior of regional authorities including those that involve no transfers are efficient therefore in contrast to the standard conclusions of the fiscal externality literature there is no efficiency role for a central authority

consumer surplus enhancing cooperation in a natural resource oligopoly abstract in this study we use a differential game to illustrate that cooperation among oligopolists selling a common pool renewable resource may lead not only to higher industrial output consumer surplus and resource stock in the stationary equilibrium but also a greater discounted sum of consumer surplus a priori this finding is not straightforward an increase in the coefficient of cooperation causes industry output to first decrease and then increase over time thus making consumers worse off in the short run and better off in the long run this study establishes the conditions under which the long run effects outweigh the short run effects of cooperation leading to an increase in the discounted sum of consumer surplus our analysis suggests that in some cases conservation cartels should be promoted on the basis of not only resource conservation but also efficiency

the compleat fish wars biological and dynamic interactions abstract in this article we study an example of a fishery in which there are two agents each harvesting two species of fish there are two externalities in the model the dynamic externality studied in levhari and mirman 1980 and the biological externality examined in fischer and mirman 1992 this model allows us to study the interactions between agents in a model in which the species of fish interact we find the unique closed loop nash equilibrium in the context of a differential game and we compare the resulting catch ratios to the results of the earlier papers which allow for only one externality we also study the efficiency of the solution

understanding black white wage differentials 1960 1990 understanding black white wage differentials 1960 1990 author s james j heckman thomas m lyons petra e todd source the american economic review vol 90 no 2 papers and proceedings of the one hundred twelfth annual meeting of the american economic association may 2000 pp 344 349 published by american economic association stable url http www jstor org stable 117248 accessed 16 08 2008 00 56

dynamic demand and noncompetitive intertemporal output adjustments abstract this paper integrates dynamics on the demand and on the supply side which are characteristic for many goods in particular fuels due to costly adjustments furthermore firms often pursue a quantity strategy and decide on output adjustments additional capacities etc instead of fixing prices e g opec moved from posting prices to adjusting output in 1986 this paper provides a corresponding framework surprisingly ignored in the literature and derives intertemporal market equilibria cooperative and noncooperative in open loop and in markov strategies the equilibrium in markov strategies is different mostly opposite to the much discussed sticky price models the qualitative properties are non trivial and some of them are even surprising e g increased demand sluggishness can raise supply

human capital vs signalling explanations of wages increases wages by directly increasing the worker s productivity this learning explanation is usually associated with human capital theory however it seems unlikely that learning explains all the wage differences associated with schooling and work history better educated workers are not a random sample of workers they have lower propensities to quit or to be absent are less likely to smoke drink or use illicit drugs and are generally healthier it is unlikely that employers make full use of differences in propensities to quit or to be absent or sick when hiring workers these characteristics are often not directly observed and the americans with disabilities act precludes firms from using either poor health or the likelihood of future sickness as a hiring criterion unless it is directly related to job performance however if low levels of education are associated with these unfavorable employee characteristics and employers are allowed to take education into account when hiring workers we would expect employers to favor better educated workers as a means of reducing their costs of sickness and job turnover in turn students will take these hiring criteria into account when deciding how long to stay in school students will choose a length of schooling to signal their ability to employers and employers will demand a minimum level of schooling

mitigating the tragedy of the commons through cooperation an experimental evaluation abstract in a commons each firm s costs rise with industry output this externality can be mitigated if firms jointly restrict harvests but higher prices result repeated interaction usually facilitates cooperation that lowers harvest rates increased cooperation suggests there should be more firms in the socially optimal market structure using experimental markets with two to five firms we observe the influence of industry size on harvest rates cooperation increases the socially optimal number of firms in markets when there are static externalities but not for dynamic externalities finally even when the initial stock is low there is little tendency toward resource extinction

the optimal number of firms in the commons a dynamic approach we consider a common property resource sold in imperfectly competitive markets there is a dynamic externality current harvests lower future stocks raising future harvest costs and a static crowding externality increasing industry size raises costs but lowers prices thus it has ambiguous welfare effects the optimal industry size typically changes over time so that a first best outcome cannot be obtained with a fixed number of firms single firm exploitation is optimal only under special circumstances the socially optimal open loop steady state industry size corresponds to the static optimum both generally differ from the closed loop steady state optimum

does talent migration increase inequality a quantitative assessment in football labour market abstract i analyze the links between talent migration and cross country inequality by exploiting the 1995 elimination of mobility restrictions on the european football labor market i develop a simple model and employ an empirical dataset to estimate its parameters through simulation analysis i compare actual data with a counterfactual no mobility restriction trajectory and conclude that the elimination of mobility barriers increases not only cross country inequality by 25 but also global output in the football economy by stimulating the production of new talent in africa latin and central america

on the markovian efficiency of bertrand and cournot equilibria we characterize and compare closed loop feedback price and quantity strategies within a full fledged dynamic model of oligopolistic competition in which production requires exploitation of a renewable productive asset unlike previous papers on the strategic exploitation of productive assets we allow for imperfect product substitutability which enables us to deal with price competition we show that the traditional result that the bertrand equilibrium is more efficient than the cournot equilibrium does not necessarily hold in a markovian environment either in the short run or at the stationary equilibrium or using the discounted sum of welfare as a criterion for relative efficiency

teachers growth and convergence this paper examines the role of individual instruction and teacher quality in determining economic growth and convergence across school districts the model shows that if teacher quality is more important for human capital accumulation than individual instruction human capital convergence will occur between two school districts this convergence arises because a poor school district hires relatively better teachers but uses them in larger classes in comparison with a rich school district the model is estimated on panel data of the states of the united states from 1882 to 1990 the estimates indicate that teacher quality is relatively more important for human capital accumulation than individual instruction the model accounts for all the mean growth in state per capita incomes and between 80 and 100 percent of convergence in state per capita incomes

the quality of schooling quantity alone is misleading although much research discusses the quantity of schooling as an effective impact on productivity and earnings most such research leaves out the idea of the quality of schooling which may cause biases in the estimated returns to schooling this paper consequently attempts to extend the standard mincerian approach to incorporate school quality as well as quantity it demonstrates how exclusion of quality in the standard procedure may cause biases in the estimated returns to years of schooling probably in the upward direction the paper explores the implications of this extension of the standard model for the case of young brazilian males it shows that the estimate of the private return to years of schooling using the preferred quality inclusive specification is only one half the estimate using the standard procedure indicating substantial upward bias in the standard estimates it further outlines a method for estimating a social return to quality and finds that it exceeds substantially the social return to quantity the paper then shows why this in turn suggests there may be an equity productivity trade off in schooling investments

earnings schooling ability and cognitive skills conventional estimates now available for a large number of countries generally indicate that the social returns to education are positive large and competitive with returns to investment in physical capital that such estimates are good guides for public resource allocation has however been questioned the heart of the problem lies in the interpretation of the positive relationship between the education and the earnings of workers whether as the conventional estimates assume the coefficient of the education variable in the earnings function measures the effect on the productivity of workers of human capital acquired in school it has been hypothesized that education in part or instead represents screening for native ability and motivation or credentialism and that as a consequence conventional measures of the social benefit of education are substantially upward biased 2 in this paper we attempt to distinguish the influence on earnings of cognitive achievement native ability and years of education as a means of adjudicating the human capital screening and credentialist hypotheses our econometric analysis is based on two rigorously comparable micro data sets from kenya and tanzania generated by surveys of the urban wage labor force specifically for this study these data sets contain the usual variables found in earnings function estimates of the benefits of schooling individual earnings years of education and years of employment experience in addition they contain two variables measures of the worker s cognitive skills and of his or her reasoning ability not previously found in studies of developing countries and only rarely found in studies of the education earnings relationship in developed countries 3 with these variables we can estimate the direct effects on earnings of cognitive skills ability and years of schooling by using them to estimate educational production functions and educational attainment functions and linking these functions with the earnings function in a recursive framework we can also assess the various indirect effects on earnings of ability and years of schooling having data sets from two countries very similar with respect to size resource endowments structure of production and employment and level of development means that not only can we subject our results to the usual statistical tests but we can also assess their replicability both kenya and tanzania have nearly achieved the objective of universal primary education while university enrollments remain at less than 1 percent of the relevant age group the important policy issues re boissiere development research department the world bank 1818 h street washington d c 20433 knight institute of economics and statistics oxford university sabot williams college williamstown ma 01267 we are grateful to the educational testing service of princeton for the design of tests used in this study and to j armitage j behrman j hausman d hendry d jamison and an anonymous referee for their insights and advice helpful comments were also received from participants in seminars at oxford and yale universities the views presented here are our own they should not be interpreted as reflecting those of the world bank george psacharopoulos 1973 1981 contains a listing of 44 countries in which rate of return studies had been conducted and of the estimates obtained 2for instance kenneth arrow 1973 mark blaug 1976 samuel bowles and herbert gintis 1976 john riley 1979 michael spence 1976 and lester thurow 1975 3for attempts to control for ability and or for cognitive achievement in studies for the united states see jere behrman et al 1980 gary chamberlain and zvi griliches 1977 griliches and william mason 1972 michael olneck 1977 paul taubman and terence wales 1974 taubman 1975 and david wise 1975 see also the survey articles by griliches 1977 1979 in most instances the data refer to special subgroups in the population and clear distinction cannot be made between natural ability and cognitive skills acquired in school

heterogeneity stratification and growth macroeconomic implications of community structure and school finance this paper examines how socioeconomic stratification and alternative systems of education finance affect inequality and growth agents interact through local public goods or externalities school funding neighborhood effects and economywide linkages complementary skills knowledge spillovers sorting families into homogeneous communities often minimizes the costs of existing heterogeneity but mixing reduces heterogeneity faster integration therefore tends to slow down growth in the short run yet raise it in the long run a move to state funding of education presents society with a similar intertemporal trade off local and global complementarities play major roles in determining the efficient social and educational structures copyright 1996 by american economic association

oligopoly exploitation of a private property productive asset abstract in this paper we build a closed loop nash equilibrium of a private property productive asset oligopoly we compare and contrast private with common property in terms of exploitation rates and social welfare and provide a comparative dynamic analysis with respect to the number of firms in the industry contrary to previous studies on oligopolistic exploitation of productive assets before exploitation begins the resource is parcelled out each firm privately owns and manages the assigned parcel over the entire planning horizon compared with the common property regime we find a new set of results both in the short and in the long run as for social welfare we provide conditions on the implicit growth rate and the initial asset stock under which the socially optimal allocation of the resource implies a natural monopoly

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded