angel investors around the world we document that the choice between disintermediated individual angel investments and intermediated private equity and venture capital investments depends on legal economic and cultural differences we find evidence of this using pitchbook s comprehensive data on more than 5000 angel and 80 000 private equity and venture capital investments in 96 countries from 1977 to 2012 the data further indicate that investee firms funded by angels are less likely to successfully exit through either an ipo or an acquisition these findings are robust to propensity score matching methods as well as to clustering standard errors and excluding u s observations among other approaches

an update and extension of the canadian evidence on gender wage differentials the paper utilizes the 1989 labour market activity survey to examine the gender wage differential in canada the aim is to update previous studies and extend earlier analysis in two significant ways first occupation is treated as endogenously determined secondly the zabalza and arrufat 1985 imputation method is utilized to estimate the level of female labour market experience the results suggest that the level of estimated gender discrimination is sensitive to the measure of labour market experience the paper also concludes that intra occupation wage effects explain most of gender wage gap

time to share the load gender differences in household responsibilities and business profitability this paper uses data from 2408 micro and small businesses in ecuador to study business profit differentials by gender the results point to unpaid work time devoted to household chores child care and care for the elderly as the largest single factor explaining 33 of the difference in profits observed between male and female run businesses when comparing male and female business owners with similar business and personal characteristics the difference in business profits disappears the results point to initial endowments rather than returns on those endowments as the reason why female run businesses are less profitable also they indicate that male and female entrepreneurs are equally effective as managers provided they have access to the same resources including time

education variation in earnings and nonmonetary compensation the nas nrc twin offspring data support the proposition that for those with low levels of education earnings may be an adequate proxy for compensation whereas the opposite holds for highly educated individuals the inclusion of variables that control for reasons monetary or nonmonetary individuals chose their occupation explains an additional 9 percent of the variation in earnings for those with 16 or more years of education and lowers the male female wage gap by almost 40 percent and only an additional 2 percent for those with 15 years or less no affect on male female wage gap

auction approaches of long term contracts to ensure generation investment in electricity markets lessons from the brazilian and chilean experiences the implementation of auctions of long term electricity contracts is arising as an alternative to ensure generation investment and therefore achieve a reliable electricity supply the aim is to reconcile generation adequacy with efficient energy purchase correct risk allocation among investors and consumers and the politico economic environment of the country in this paper a generic proposal for a long term electricity contracts approach is made including practical design concepts for implementation this proposal is empirically derived from the auctions implemented in brazil and chile during the last 6 years the study is focused on practices and lessons which are especially useful for regulators and policy makers that want to facilitate the financing of new desirable power plants in risky environments and also efficiently allocate supply contracts among investors at competitive prices although this mechanism is generally seen as a significant improvement in market regulation there are questions and concerns on auction performance that require careful design and which are identified in this paper in addition the experiences and proposal described can serve to derive further mechanisms in order to promote the entrance of particular generation technologies e g renewables in the developed world and therefore achieve a clean electricity supply

rising wage inequality and the u s gender gap the u s labor market has recently experienced two dramatic trends a falling male female pay gap and a rising level of labor market inequality after decades of near constancy at about 60 percent the ratio of women s to men s pay has risen steadily since the late 1970 s at the same time there were substantial increases in overall wage inequality for both men and women lawrence f katz and kevin m murphy 1992 blau and kahn 1993 wage inequality rose both within and between education and experience groups and this has been interpreted as reflecting primarily higher returns to both measured and unmeasured labor market skills katz and murphy 1992 chinhui juhn et al 1993 this paper addresses the connection between these two important developments when analyzing gender differentials in pay economists commonly focus on malefemale differences in skills and on differences in the treatment of equally qualified men and women i e discrimination both of these may be considered gender specific factors influencing the pay gap research on these gender specific factors suggests that women tend to be less skilled than men on average and to be located in lower paying industries and occupations this in turn suggests that overall wage structure can also have an important effect on the gender pay gap wage structure describes the array of prices set for various labor market skills measured and unmeasured and the rents received for employment in particular sectors of the economy for example since women on average have less experience than men an increase in the return to experience as in fact occurred over the 1970s and 1980s would cause the gender pay gap to rise even if women s relative level of experience and their gender specific treatment by employers remained the same similarly an increase in the returns to employment in male occupations and industries would widen the gender differential all else equal in earlier work we found overall wage inequality to be very important in explaining international differences in the gender pay gap blau and kahn 1992 1994 in particular we addressed a paradox on the one hand u s women compare favorably to those in other countries in terms of their relative qualifications and occupational status further the united states has had a longer and often stronger commitment to equal pay and equal employment policies than most other industrialized countries yet the gender pay gap in the united states is larger than in most of these countries an important part of the explanation for this pattern is the high level of wage inequality i e high returns to skill in the united states which puts an exceptionally large penalty on being below average in the wage distribution our results suggest that the u s gap would be similar to that in countries like sweden or australia the countries with the smallest gaps if the united states had their level of wage inequality the implication of our earlier research on international differences in the gender gap is that in recent years american women have been swimming upstream in a labor market that was growing increasingly unfavorable to low wage workers in the face of this rising inequality women s relative skills and treatment have to improve merely for the pay gap to remain constant still larger gains are necessary for it to be reduced blau institute of labor and industrial relations university of illinois champaign il 61820 and nber kahn institute of labor and industrial relations university of illinois we thank claudia goldin and participants at the nber labor studies meeting and the university of illinois and cornell labor economics workshops for helpful comments and jennifer berdahl for excellent research assistance portions of this work were completed while the authors were visiting fellows at the australian national university canberra

what do entrepreneurs pay for venture capital affiliation this study empirically evaluates the certification and value added roles of reputable venture capitalists vcs using a novel sample of entrepreneurial start ups with multiple financing offers i analyze financing offers made by competing vcs at the first professional round of start up funding holding characteristics of the start up fixed offers made by vcs with a high reputation are three times more likely to be accepted and high reputation vcs acquire start up equity at a 10 14 discount the evidence suggests that vcs extra financial value may be more distinctive than their functionally equivalent financial capital these extra financial services can have financial consequences a central issue for early stage high tech entrepreneurs is obtaining external resources when the assets of their start up are intangible and knowledge based particularly for entrepreneurs without an established reputation convincing external resource providers such as venture capitalists vcs to provide financial capital may be challenging the literature contains two main lines of research for overcoming this problem one research stream has concentrated on designing institutional structures to permit financing early stage ventures this contractual and monitoring based approach is aimed at solving potential agency problems between investors and entrepreneurs e g admati and pfleiderer 1994 lerner 1995 hellmann 1998 and kaplan and str omberg 2001 2002 2003 a second research stream has suggested that when the quality of a start up cannot be directly observed external actors rely on the quality of the start up s affiliates as a signal of the start up s own quality

assessing the case for social experiments rs ecent academic debates pit two alternative approaches to policy evaluation against one another the first is the experimental approach based on the random assignment of accepted program applicants to a recipient or treatment group and a non recipient or control group the second is the nonexperimental or econometric approach that uses a variety of microdata sources statistical methods and behavioral models to compare the outcomes of participants in social programs with those of nonparticipants the central question addressed in this paper is whether or not randomized social experiments aid in securing answers to basic questions about the evaluation of social programs there are many distinct and complementary approaches to the study of the impact of public policy including full general equilibrium analysis of policy impacts tinbergen 1956 auerbach and kotlikoff 1987 shoven and whalley 1992 kydland and prescott 1991 and less ambitious partial equilibrium microeconomic structural research programs such as those designed to estimate the impact of taxes on labor supply both approaches offer answers to many interesting counterfactual policy questions but their credibility rests critically on the quality of the empirical input used to generate their answers

a nonparametric decomposition of the mexican american average wage gap this paper shows that average wage gap decompositions between any two groups of workers can be carried out using nonparametric wage structures it also proposes an algorithm to correct for sample selection in nonparametric models known as tree structures this paper studies the wage gap between third generation mexican american and non hispanic white workers in the southwest it is shown that the decomposition heavily depends on functional assumptions and that different aproaches to flexibility may render sufficiently good and similar results copyright 2008 john wiley sons ltd

occupational attainment and gender earnings differentials in mexico women earned about 20 8 less than men in mexico in 1987 a difference that increased to 22 0 by 1993 using 1987 93 data from mexico s national urban employment survey the authors study the role of occupational attainment in this wage differential most of the 1987 93 increase in the gender log monthly earnings gap they find can be explained by relative chnges in human capital endowments wage coefficient changes would have slightly reduced the gap all else equal the increasing male female earnings differential was tempered by a substantial decline in gender differences in occupational attainment from 1987 to 1993 most of the male female differences in earnings in both 1987 and 1993 can be explained by differences in rewards to individual endowments rather than gender differences in endowments

measuring investment in education historic debates about the measurement of capital are even more complicated in the case of education and human capital as extensive research demonstrates education resources are not consistently related to student performance in existing elementary and secondary schools this inefficiency in public schools implies that spending and resource measures do not accurately capture variations in school quality this finding then has clear implications for both education policy and economic research because school inputs are poor policy instruments an alternative policy focus that appears much more productive is performance incentives related to student achievement

changes in the u s wage structure 1963 1987 application of quantile regression the 1980 s witnessed rapid changes in the structure of wages in the united states in this study recently developed techniques for quantile regression are applied to every march current population survey since 1964 and changes in the return to schooling and experience at different points of the wage distribution are examined the quantile regression technique parsimoniously describes the entire conditional wage distribution this conditional distribution is used to examine changes in within group wage inequality as measured by the difference between conditional quantiles two linear models are considered a simple one group model and a 16 group model the results suggest that the returns to schooling and experience differ across quantiles of the wage distribution but their patterns of change are similar significant differences in wage inequality are also found across the various skill groups the paper also presents a new imputation method for cps data

the mystery of discrimination in latin america conventional wisdom holds that latin america is a highly discriminatory society this belief is hardly surprising given the history of ethnic and class conflicts in the region and the plethora of anecdotal evidence rein forcing this notion however whereas it cannot be argued that many societies in the region do in fact discriminate the crucial questions have barely been broached understanding the extent of such discrimination and exploring the channels through which it operates deserve special attention how widespread is discrimination in latin america the primary opinion survey in the region latinobar metro explores discriminatory perceptions for representative samples of the population of eighteen countries 1 as shown in figure 1 when individuals were asked in 2001 who they think suffers the most from discrimination they consistently and overwhelmingly highlighted the poor followed by indigenous peoples and afro descendants this pattern is consistent across countries in the region in all the countries surveyed poverty is perceived as being the main driver of discrimination with responses varying from 14 percent in the case of panama to 49 percent in the case of nicaragua figure 2 illustrates these results for the countries surveyed these results however are not entirely consistent with the answers to a similarly worded question asked only a few years later starting in 2004 the same latinobar metro survey asked latin americans why they think people

the gender wage gap among recent post secondary graduates in canada a distributional approach using the national graduates survey we examine the trends in the gender wage gap among recent post secondary graduates in canada between 1988 and 2007 female graduates earn on average 6 14 less than males during the period two to five years after graduation decompositions show that observable personal characteristics and job attributes can explain only a small portion of the wage gap we also find that men earn more than women at every point of the distribution interestingly the wage difference shrank in the lower half of the distribution in recent years while it increased in the upper half l ecart salarial entre les sexes chez les nouveaux diplomes postsecondaires une approche distributionnelle a l aide de l enquete nationale aupres des diplomes nous examinons les tendances dans l ecart salarial entre les sexes chez les nouveaux diplomes postsecondaires au canada entre 1988 et 2007 les femmes diplomees gagnent en moyenne de 6 a 14 moins que les hommes durant les 2 a 5 ans suivant l obtention du diplome des decompositions montrent que les caracteristiques personnelles et les attributs de l emploi observables ne peuvent expliquer qu une petite partie de l ecart salarial nous trouvons aussi que les hommes touchent plus que les femmes a chaque point de la distribution salariale de maniere interessante la difference de salaire a diminue dans la moitie inferieure de la distribution lors des annees recentes alors qu elle a augmente dans la moitie superieure

on the determination of occupational attainment and mobility the underlying motivation for much of the research into the determinants of occupational attainment is to enable inferences to be made as to the relative position of various groups at a point in time or an individual s economic mobility over time in this paper we compare unordered and ordered discrete choice approaches to estimating models of occupational attainment estimates from these methods differ substantially indicating that the determination of which technique is more appropriate is an important issue the ordered method appears to be more consistent with the motivation of previous research and requires less computer time unordered models however are better able to predict occupational distribution

worldwide venture capital intellectual property rights and innovation this study based on the historical data of venture capital vc investment and patenting for 99 countries and 83 industries explores the effects of vc investment on firms innovation in different intellectual property rights ipr environments worldwide utilizing large data sets and various empirical models our negative binomial and panel data analysis presents the significant and positive impacts of vc investment and ipr parameters on firms innovation controlling for cultural regulatory and economic and market conditions of the business environment however vc investment is more effective in weaker ipr environments this effect is robust to a number of different specifications for endogeneity among other things the economic effect is pronounced the impact of vc on patents is up to five times more pronounced between the weakest and strongest ipr regime in the sample

rationales for capacity remuneration mechanisms security of supply externalities and asymmetric investment incentives economics so far provides little conceptual guidance on capacity remuneration mechanisms crm in deregulated electricity markets ubiquitous in real world electricity markets crms are introduced country by country in an ad hoc manner lacking the theoretical legitimacy and the conceptual coherence enabling comparability and coordination they are eyed with suspicion by a profession wedded to a theoretical benchmark model that argues that competitive energy only markets with voll pricing provide adequate levels of capacity while the benchmark model is a consistent starting point for discussions about electricity market design it ignores the two market failures that make crms the practically appropriate and theoretically justified policy response to capacity issues first energy only markets fail to internalize security of supply externalities as involuntary curbs on demand under scarcity pricing generate social costs beyond the private non consumption of electricity second when demand is inelastic and the potential capacity additions are discretely sized investors face asymmetric incentives and will underinvest at the margin rather than overinvest after presenting the key features of the theoretical benchmark model this paper conceptualizes security of supply externalities and asymmetric investment incentives and concludes with some consideration regarding design of crms

disclosure venture capital and entrepreneurial spawning venture capital vc funds have been facing increasing regulatory scrutiny since the 2007 financial crisis particularly with respect to calls for increased disclosure requirements in this paper we examine the effect of more stringent securities regulation on the supply and performance of vc as well as on new business creation i e entrepreneurial spawning using country level and investment level data from 34 countries over the years 2000 2008 we find that more stringent securities regulation is positively associated with the supply and performance of vc around the world more stringent securities regulation is also positively associated with entrepreneurial spawning induced by vc among different forms of securities regulation disclosure stands out as having the most economically meaningful impact which casts doubt on the oft repeated objections to disclosure in vc that it would stifle the vc industry because secrets would have to be revealed to competitors and the public these findings are robust to numerous robustness checks for endogeneity the policy implications are clear however regardless of endogeneity concerns vc and entrepreneurship markets are enabled not curtailed in countries with better disclosure standards when one compares the existing differences in disclosure around the world and changes thereto over the 2000 2008 period

venture capital investment cycles the impact of public markets abstract it is well documented that the venture capital industry is highly volatile and that much of this volatility is associated with shifting valuations and activity in public equity markets this paper examines how changes in public market signals affected venture capital investing between 1975 and 1998 we find that venture capitalists with the most industry experience increase their investments the most when public market signals become more favorable their reaction to an increase is greater than the reaction of venture capital organizations with relatively little industry experience and those with considerable experience but in other industries the increase in investment rates does not affect the success of these transactions adversely to a significant extent these findings are consistent with the view that venture capitalists rationally respond to attractive investment opportunities signaled by public market shifts

sex discrimination and women s labor market outcomes the human capital explanation of sex differences in wages is that owing to specialization in household production women intend to work in the labor market more intermittently than men and therefore invest less leading to lower wage growth an alternative feedback hypothesis is that women experience labor market discrimination and respond with career interruptions less investment and lower wage growth this paper explores the relationship between self reported discrimination and subsequent labor market outcomes to test this alternative hypothesis some of the evidence is consistent with the feedback hypothesis working women who report discrimination are more likely subsequently to change employers to have children and to marry however the evidence is not consistent with the two implications of the feedback hypothesis that most directly challenge the human capital explanation of sex differences in wages women who report discrimination do not accumulate less experience nor do they have lower wage growth

does nonagricultural labor relax farmers credit constraints evidence from longitudinal data for vietnam we examine the relationship between participation in nonagricultural labor activities and farming production decisions focusing on the use of inputs using longitudinal data for vietnam from 1993 to 1998 we find that households engaged in nonagricultural labor spend significantly more on seeds services hired labor and livestock inputs this is consistent with the hypothesis that nonagricultural labor income relaxes credit constraints to farming

do international investors enhance private firm value evidence from venture capital we examine the impact of international venture capital investors on private firm success spanning 81 countries over the years 1995 2010 the data examined indicate that relative to deals in which the investor base is purely domestic private firms that have an international investor base have a higher probability of exiting via an initial public offering ipo and higher ipo proceeds the evidence is consistent with the view that while the benefits of internationalization may be difficult and costly to manage for those firms that succeed in managing cross border coordination costs there is potential value for an ipo firm the benefits relative to the costs of internationalizing the investor base for private firms sold in acquisitions by contrast are much less pronounced the most important source of this benefit appears to be access to capital

changes in the male female wage gap 1976 85 this study uses detailed information on work experience tenure and on the job training collected in the 1976 and 1985 questionnaires of the panel study of income dynamics to account for changes in wage differentials between white men and white women over these nine years decompositions of changes in the wage gap are used to illustrate the contribution of individual factors between 1976 and 1985 the wage gap between white men and women narrowed by approximately 4 percent this study finds that nearly 50 percent of this reduction was due to average changes in job tenure and other work history variables over this period

how much of the diversification discount can be explained by poor corporate governance we investigate whether the diversification discount occurs partly as an artifact of poor corporate governance in panel data models we find that the discount narrows by 16 to 21 when we add governance variables as regression controls we also estimate heckman selection models that account for the endogeneity of diversification and dynamic panel generalized method of moments models that account for the endogeneity of both diversification and governance we find that the diversification discount persists even with these controls for endogeneity however in selection models the discount disappears entirely when we introduce governance variables in the second stage and in dynamic panel gmm models the discount narrows by 37 when we include governance variables

the antidirector rights index revisited the antidirector rights index has been used as a measure of shareholder protection in over a hundred articles since it was introduced by la porta et al law and finance 1998 journal of political economy 106 1113 55 a thorough reexamination of the legal data however leads to corrections for thirty three of the forty six countries analyzed the correlation between corrected and original values is only 0 53 consequently many empirical results established using the original index may not be replicable with corrected values in particular the corrected index fails to support three widely influential claims that shareholder protection is higher in common than in civil law countries that shareholder protection predicts stock market size or ownership dispersion and that weak corporate governance explains the extent of exchange rate depreciation during the asian financial crisis of 1997 1998 the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

schooling and economic well being the role of nonmarket effects standard estimates of the economic value of additional schooling based on earnings differences associated with differences in the level of schooling attained cover only a portion of the total effects of education that are valued by citizens we first identify a catalog of nonmarketed effects many of which have been recently studied by economists and then propose a procedure for estimating a willingness to pay value for these effects using empirical estimates of the magnitude of a selection of these effects found in the literature we calculate willingness to pay values using our proposed procedure these illustrative calculations suggest that standard estimates of the benefit of incremental schooling substantially understate the full value of such investments

farm earnings educational attainment and role of public policy some evidence from mexico abstract using real household survey data from mexico this study evaluates 1 a the impact of schooling on farm earnings through the direct and allocative effects of human capital 2 b the household demand for children s schooling 3 c using macro level data the association between children s school participation and some policy variables the overall rate of return to household heads schooling is estimated at 25 and for wives 19 the allocative effect of schooling of household heads dominates over the direct effect mother s schooling and farm size exercise significantly positive effects on household demand for schooling while in the macro model policy variables government expenditure and pupil teacher ratio appear strong determinants of children s attainment of primary schooling

marital status child rearing and earnings differentials in the graduate labour market differential the importance of family role specialisation for the measurement of the residual earnings differential is examined within a sample selection model of participation and earnings the earnings differential between men and women may be divided into that explained by different characteristics and attributes and that due to residual factors one element of this residual may be discrimination although other factors may be incorporated in the unexplained component the residual also incorporates the effects on earnings associated with the production of home goods see polachek ig75 a b these will occur

regulation by prices quantities or both a review of instrument choice choosing appropriate policy instruments is an important part of successful regulation once objectives are agreed and suitable targets adopted policy makers can employ command and control regulation and or economic instruments and choose between fixing a price or a quantity this paper examines the relative advantages of price quantity and hybrid instruments according to their efficiency under uncertainty the trade off between credible commitment and flexibility implementation international considerations and political economy various illustrations of the theory are provided with two detailed applications to climate change and transport policy specifically congestion and safety pricing

the gender wage gap a comparison of australia and canada using data from the 1989 canadian labour market activity survey and for australia the 1989 90 income distribution survey the authors investigate the reasons for the significantly lower gender wage gap in australia than in canada key similarities and differences between these two countries the authors argue make them a good basis for a natural experiment to investigate the effects of different labor market institutions in particular australia has a stronger union movement and a greater degree of centralization in wage determination than canada and most of its workers are covered by legally binding minimum working conditions the authors conclude that several differences between the countries in labor market structure notably a lower rate of return to education a lower rate of return to labor market experience and a lower level of wage inequality in australia than in canada are largely responsible for the smaller gender wage gap in australia

wage structure and gender earnings differentials an international comparison using microdata to analyse the gender pay gap in ten industrialized nations we focus on the role of wage structure the prices of labour market skills in influencing the gender gap we find wage structure enormously important in explaining why the us gender gap is higher than that in most other countries we conclude that the us gap would be similar to that in sweden and australia the countries with the smallest gaps if the united states had their levels of wage inequality this finding reflects the larger penalty in the united states for those with low skill levels or employed in low wage sectors 650 o 75 the united states was amoung the countries with the largest differ entials oecd ilo usbls this paper uses microdata to analyse inter national differences in the gender pay gap among a sample of ten industrialized nations we focus particularly on explaining the surprisingly low ranking of the united states in comparison with other industrialized countries an advan tage of an international perspective is that countries vary considerably with respect to governmental policies women s relative labour market qualifications and wage setting institutions such variability allows one to infer reasons for differences in the pay gap and by implication the impact of alternative govern ment policies empirical research on gender pay gaps has traditionally focused on the role of gender differences in qualifications and on differences in the treatment of otherwise equally qualified male and female workers i e labour market dis crimination analyses of trends over time in the gender differential within countries as well as inter country comparisons of gender earnings ratios have tended to emphasize these types of gender specific factors an innovative feature of our study is to focus on the role of wage structure as an additional factor influencing the gender gap to analyse the impact of wage structure we adapt a framework developed by juhn et al 1991 to analyse trends over time in race differentials in the united states our findings suggest that labour market institutions that affect overall wage inequality have an extremely impor tant effect on the gender earnings gap wage structure describes the array of prices set for various labour market skills measured and unmeasured and rents received for employment in par

contracts and exits in venture capital finance using a sample of european venture capital vc investments i study the relation between vc contracts and exits the data indicate that ex ante stronger vc control rights increase the likelihood that an entrepreneurial firm will exit by an acquisition rather than through a write off or an ipo my findings are robust to controls for a variety of factors including endogeneity and cases in which the vc preplans the exit at the time of contract choice my findings are consistent with control based theories of financial contracting such as aghion and bolton 1992

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

a market approach to long term security of supply the problem of ensuring that there is enough generation capacity to meet future demand has been an issue in market design since the beginning of the deregulation process although ideally the market itself should be enough to provide adequate investment incentives there are several factors that prevent this result from being achieved and some actual markets have already experienced problems related with a lack of generation capacity a regulatory framework to address this question is presented the procedure is based on an organized market where reliability contracts based on financial call options are auctioned so both their price and their allocation among the different plants are determined through competitive mechanisms this results in a stabilization of the income of the generators and provides a clear incentive for new generation investment with a minimum of regulatory intervention additionally the method represents a market compatible mechanism to hedge demand from the occurrence of high market prices

gender and ethnicity differentials in school attainment and labor market earnings in ecuador summary indigenous people in ecuador are most likely to be disadvantaged and live in poverty this paper reports on the findings of an econometric analysis which explores the extent to which lower educational attainment and labor market discrimination contribute to these disparities the analysis utilizes a proportional hazard regression model to examine which factors raise the probability of early school departure it also employs a classic regression model to explore the relationship between low educational attainment and earnings together with an oaxaca decomposition which parses out the extent to which earning differentials can be attributed to differences in human capital or to discrimination

causal pitfalls in the decomposition of wage gaps the decomposition of gender or ethnic wage gaps into explained and unexplained components often with the aim to assess labor market discrimination has been a major research agenda in empirical labor economics this article demonstrates that conventional decompositions no matter whether linear or nonparametric are equivalent to assuming a probably too simple model of mediation aimed at assessing causal mechanisms and may therefore lack causal interpretability the reason is that decompositions typically control for post birth variables that lie on the causal pathway from gender ethnicity which are determined at or even before birth to wage but neglect potential endogeneity that may arise from this approach based on the newer literature on mediation analysis we therefore provide more attractive identifying assumptions and discuss nonparametric identification based on reweighting

the veteran wage differential there is debate in the literature as to whether military service is rewarded in the economy and the extent to which veterans receive either a wage premium or penalty in this paper we take a new a

matching as a tool to decompose wage gaps abstract this paper presents a methodology that uses matching comparisons to explain gender wage differences the approach emphasizes gender differences in the supports of the distributions of observable characteristics and provides insights into the distribution of unexplained gender pay differences this nonparametric alternative to the blinder oaxaca bo decomposition does not require the estimation of earnings equations and divides the gap into four additive elements two of these are analogous to the elements of the bo decomposition but computed only over the common support of the distributions of characteristics while the other two account for differences in the supports

adapting electricity markets to decarbonisation and security of supply objectives toward a hybrid regime abstract the policy objectives of decarbonisation of the electricity sector whilst maintaining security of supply have led to a new wave of market reforms in many jurisdictions which liberalised their industry there is a wide range of models under this new hybrid regime which essentially combine the energy market with planning and long term risk transfer arrangements this paper takes an institutionalist approach in terms of modularity of the market design and reviews the issues with the standard historical market model which led to the introduction of additional long term modules we then study the interactions between the existing and new modules and identify ways in which the initial market modules can be improved to address inconsistencies with the new modules we conclude by discussing the conditions under which the various changes in market architectures could converge toward a hybrid regime structured around a two step competition with a competition for the market via the auctioning of long term contracts to support investment followed by competition in the market for short term system optimisation via the energy market

women and labor market changes in the global economy growth helps inequalities hurt and public policy matters this report examines the level and changes in female and male participation rates employment segregation and female wages relative to male wages across the world economy it funds sufficient evidence to support the view that labor markets in developing countries are transformed relatively quickly in the sense that gender differentials in employment and pay are narrowing much faster than they did in industrialized countries however the report evaluates the inefficiencies arising from persisting gender differentials in the labor market and finds them to be potentially significant the estimates also indicate that the resulting deadweight losses are borne primarily by women while men gain mainly in relative terms there are no real winners from discrimination the paper concludes that growth benefits women at large inequalities can have significantly adverse effects on welfare and market based development alone can be a weak instrument doe reducing inequality between the sexes to break the vicious cycle of women s low initial human capital endowments and inferior labor market outcomes compared to men s the report proposes greater access to education and training for girls and women enforceable equal pay and equal employment opportunities legislation a taxation and benefits structure that treats reproduction as an economic activity and women as equal partners within households and a better accounting of women s work to include invisible production

institutional differences and the development of entrepreneurial ventures a comparison of the venture capital industries in latin america and asia this paper examines how differences in distinct institutional clusters of countries impact on the vital entrepreneurial activity of venture capital and how individuals organizations and their collective action in turn shape those institutions the focus on venture capital offers researchers the opportunity to view an industry that comes from a common root with strong and consistent traditions in which to examine how the differing institutional settings impact on behaviors in different markets and how the institutions themselves may change in these settings we also focus on emerging economies since such economies offer a natural laboratory to study the impact of institutional change specifically this paper employs an institutional theory perspective to examine venture capital in two regions of the world that form institutional clusters of countries latin america and asia it is found that the venture capital industry exhibits a strong consistency across many dimensions yet institutions in these two distinct settings result in significant differences in industry practice therefore this research is able to contribute to both empirical and theoretical understanding of emerging economies institutions in those environments and venture capital

increasing wage dispersion and the changes in relative employment and wages in mexico s urban informal sector 1987 1993 this study analyses the role of changes in informal formal relative employment wage levels and wage inequality in explaining increasing wage dispersion in mexico during the 1987 1993 period from 1987 to 1993 the variance of the log of hourly wages for mexican workers increased by more than 50 per cent using data from the encuesta nacional de empleo urbano we find that this increase in the overall wage dispersion was mainly driven by increasing wage dispersion in the formal sector coupled with a faster growth in formal sector employment as a percentage of total employment however compression in the distribution of wages within the informal sector contributed to substantially slowdown the increasing overall wage inequality about 60 per cent of the 1987 1993 4 65 percentage point reduction in the informal sector share of total employment is explained by changes in the structure that determines sectoral employment the rest is explained by changes in the composition of the labour force particularly in

the economics of private equity funds this article analyzes the economics of the private equity industry using a novel model and dataset we obtain data from a large investor in private equity funds with detailed records on 238 funds raised between 1993 and 2006 we build a model to estimate the expected revenue to managers as a function of their investor contracts and we test how this estimated revenue varies across the characteristics of our sample funds among our sample funds about two thirds of expected revenue comes from fixed revenue components that are not sensitive to performance we find sharp differences between venture capital vc and buyout bo funds bo managers build on their prior experience by increasing the size of their funds faster than vc managers do this leads to significantly higher revenue per partner and per professional in later bo funds the results suggest that the bo business is more scalable than the vc business and that past success has a differential impact on the terms of their future funds jel g10 g20 g24

fuel mix diversification incentives in liberalized electricity markets a mean variance portfolio theory approach monte carlo simulations of gas coal and nuclear plant investment returns are used as inputs of a mean variance portfolio optimization to identify optimal base load generation portfolios for large electricity generators in liberalized electricity markets we study the impact of fuel electricity and co2 price risks and their degree of correlation on optimal plant portfolios high degrees of correlation between gas and electricity prices as observed in most european markets reduce gas plant risks and make portfolios dominated by gas plant more attractive long term power purchase contracts and or a lower cost of capital can rebalance optimal portfolios towards more diversified portfolios with larger shares of nuclear and coal plants

women s economic status in rural china household contributions to male female disparities in the wage labor market abstract rapid industrial growth in china coupled with economic reforms in the rural areas has created a growing demand for rural women s labor though often at substantially lower wages than those earned by men employed in the same sector an analysis of data collected in rural guangdong province suggests that households may contribute to the observed male female market wage differential through their influence in the formation of individuals reservation wages under these circumstances external employment opportunities while no doubt serving to increase the household s overall level of income may on their own be a less effective mechanism for raising the economic status of women on the contrary market wage signals may serve to reinforce rather than to ameliorate sex based differences that arise within the household

employers discriminatory behavior and the estimation of wage discrimination this paper considers the linkage of empirical estimates of wage discrimination between two groups introduced by oaxaca 1973 to a theoretical model of employers discriminatory behavior it is shown that conditional on different assumptions about employers discriminatory tastes oaxaca s estimators of wage discrimination can be derived that the approach is more generally useful is demonstrated by deriving an alternative estimator of wage discrimination based on the assumption that within each type of labor e g unskilled skilled the utility function capturing employers discriminatory tastes is homogeneous of degree zero with respect to labor inputs from each of the two groups the estimators are compared empirically in an application to male female wage differentials

structural change in developing countries has it decreased gender inequality summary this paper examines the evolution of female labor market outcomes from 1987 to 2008 by assessing the role of changing labor demand requirements in four developing countries brazil mexico india and thailand the results highlight the importance of structural change in reducing gender disparities by decreasing the labor demand for physical attributes the results show that india the country with the greatest physical labor requirements exhibits the largest labor market gender inequality in contrast brazil s labor requirements have followed a similar trend seen in the united states reducing gender inequality in both wages and labor force participation

home ownership unemployed s job search behavior and post unemployment outcomes using detailed german survey data we show that home owners freshly entering unemployment are less geographically mobile than their renting counterparts however they do not compensate their restricted mobility by more intensive or different search behavior and do not face negative effects on labor market outcomes one year later

field experiments of discrimination in the market place controlled experiments using matched pairs of bogus transactors to test for discrimination in the marketplace have been conducted for over 30 years and have extended across 10 countries significant persistent and pervasive levels of discrimination have been found against non whites and women in labour housing and product markets rates of employment discrimination against non whites in excess of 25 have been measured in australia europe and north america a small number of experiments have also investigated employment discrimination against the disabled in britain and the netherlands and against older applicants in the united states

learning from experience the development of the renewables obligation in england and wales 2002 2010 abstract the uk has enviable renewable resources both onshore wind and offshore wind wave and tidal the offshore valuation group 2010 the government has had policy mechanisms in place since 1990 to encourage these resources to be developed the current mechanism the renewables obligation ro was specifically designed to emphasise competition and therefore to fit in with the uk s overall strategic approach to energy policy however as yet it has not delivered the capacity that it was designed to do and as a result the uk faces a difficult challenge in attempting to meet european wide renewable energy targets for 2020 as well as longer term decarbonisation targets this paper explores some of the major reasons why the ro has performed so poorly to date and considers the prospects for improvement up to 2020 it concludes that the strategic emphasis on competition in the support mechanisms has played a key role in limiting renewables development but that the mechanism has changed significantly since it was introduced however these changes together with proposals for electricity market reform still do not address important elements of risk in comparison with a standard feed in tariff

male female wage differentials and policy responses without implicating them for any of the contents of the paper i am grateful to the following for helpful discussions or comments andrea beller university of illinois david bloom harvard and columnbia glen cain university of wisconsin ron ehrenberg cornell victor fuchs stanford bob gregory australian national university jonathan leonard university of california berkeley roberta robb brock university and paul weiler harvard financial support of the humanities and social sciences committee of the research board of the universitu of toronto is eratefullu acknowlede ed

international entrepreneurship the pursuit of entrepreneurial opportunities across national borders in this editorial for the special issue on international entrepreneurship we inter relate key concepts about the pursuit of opportunities from the entrepreneurship and international business literatures in doing so we consider the assessment of opportunities as an individual level cognitive activity the construction of opportunity as a firm level innovative activity and the shaping of opportunity as an institutional level structuring activity we then extend the discussion to explore the notion of a distributed global ecosystem of opportunities and opportunity seekers which we believe may provide a platform for valuable future research

performance based vs socially supportive culture a cross national study of descriptive norms and entrepreneurship this paper is a cross national study testing a framework relating cultural descriptive norms to entrepreneurship in a sample of 40 nations based on data from the global leadership and organizational behavior effectiveness project we identify two higher order dimensions of culture socially supportive culture ssc and performance based culture pbc and relate them to entrepreneurship rates and associated supply side and demand side variables available from the global entrepreneurship monitor findings provide strong support for a social capital ssc and supply side variable explanation of entrepreneurship rate pbc predicts demand side variables such as opportunity existence and the quality of formal institutions to support entrepreneurship

framework for assessing the economic efficiencies of long run network pricing models this paper presents a framework for assessing the economic efficiency of different long run network pricing models the aim is to provide a quantifiable efficiency measure that will inform regulators network operators and network users when an alternative pricing model is contemplated the efficiency measure is derived from the long term network development costs that flow from a dynamic interaction between network pricing and planning that is the response of network users to differing charging models the consequential network investment and new financial incentives that follow reinforcement of the network to illustrate the approach the framework has been used to assess the relative efficiency of three broad class of distribution pricing models in a study undertaken for the great britain gb s regulator for gas and electricity markets in england wales and scotland ofgem the study contemplated three pricing models that are used in practice the efficiency assessment in the ofgem study was conducted on a pseudo distribution reference network on the assumption that the results from the reference network could be scaled up to the national level then the assessment suggests that by moving from the present drm model to the more economic lric approach gb distribution network operators could save in the region of pound200 m over the next 20 years in their network investment costs this paper draws heavily on the project undertaken for ofgem but any views expressed are solely those of the authors

a welfare analysis of electricity transmission planning in germany we analyze the electricity transmission planning process in germany netzentwicklungsplan which separates transmission expansion decisions from generation dispatch we employ an economic modeling approach to analyze two different network planning settings in the first setting there is no trade off between transmission network development and generation dispatch as is currently the case in germany a second setting alternatively allows for such a trade off and thus represents a welfare superior way of transmission network planning applications with the two model variants are carried out for the german electricity system in 2035 the results illustrate overinvestment in transmission capacity and decreased welfare associated with the netzentwicklungsplan

legal framework quality and success of different types of venture capital investments abstract drawing on an analysis of 8 270 companies from 41 countries i explore the relationship between success of venture capital investments and legal frameworks in the investment countries legal framework quality is related to success but the effect varies with the deal type first the significant and positive relationship between legal framework quality and success is more pronounced for domestic deals than for international deals further investigations suggest that international venture capitalists often exit their portfolio companies abroad particularly when these companies are located in countries with inefficient legal frameworks in addition the results lend support to the view that international venture capitalists have a greater experience and reputation second legal framework quality seems to be more important for success in syndicated than in standalone deals this finding supports the view that a sound legal framework may improve the benefit cost balance of syndication while an inefficient legal framework may tend to increase costs in syndicated deals

ethnicity and gender in the labour market in central and south eastern europe the roma are both the largest minority ethnic group in central and south eastern europe csee and the one that suffered most from transition to the market still today nearly 40 years after the introduction of the european union eu 1975 discrimination directive and with the end of the roma decade 2005 15 in sight people from the roma minority have unemployment rates far above and employment rates and wages far below those of majority populations one issue that has received relatively little attention concerns the double discrimination facing roma women not only do roma women face poorer employment and wage outcomes in the labour market than non roma women in most csee countries the gender earnings gap is significantly larger amongst roma compared to non roma this paper seeks to analyse and explain differences in the gender gap in the earnings of roma the paper employs a non parametric matching approach to identify the main factors underlying the gender difference educational attainment plays a relatively small role explaining only around one fifth of the gap industrial and occupational segregation appear to be playing a strong role as do the civil status of individuals household socio economic status and whether or not individuals live in a predominantly roma community

decomposing the gender wealth gap in ecuador abstract unlike the gender earnings gap that has been amply studied the gender wealth gap has only recently begun to receive attention studies of the gender wealth gap have been concentrated on developed countries and have been limited by the use of household level data using individual level and sex disaggregated wealth data for ecuador this paper examines the pattern of wealth inequality across genders at different points of the wealth distribution for sole and then partnered household heads we use a new oaxaca blinder type decomposition method based on unconditional quantile regression to investigate the sources of the gap at different quantiles our results show that among sole heads the gap favors men across the distribution and is largest at the lower tail among partnered heads the gap is much less pronounced throughout the distribution actually reverting at the lower tail for both sole and partnered heads at the lower tail of the distribution the gender gap is primarily associated with differing returns to covariates at the median and upper quantiles gender differences in endowments ownership of savings accounts education and age drive the gap gender bias in inheritance plays a significant role only at lower and median wealth levels overall our results show stark contrasts with results for developed countries and important differences between sole versus partnered heads our study also adds evidence to the long standing debate over whether female household heads are poorer than male heads and calls for the pursuit of wealth differentiated policies and social programs to increase women s participation in the formal economy as well as the returns to their participation

does legal enforcement affect financial transactions the contractual channel in private equity analyzing 210 developing country private equity investments we find that transactions vary with nations legal enforcement whether measured directly or through legal origin investments in high enforcement and common law nations often use convertible preferred stock with covenants in low enforcement and civil law nations private equity groups tend to use common stock and debt and rely on equity and board control transactions in high enforcement countries have higher valuations and returns while relying on ownership rather than contractual provisions may help to alleviate legal enforcement problems these results suggest that private solutions are only a partial remedy

changes in college skills and the rise in the college wage premium the college wage premium for new labor market entrants rose sharply during the 1980s we ask how much of this change arose from changes in the skill level of the typical college graduate we find that skills attained prior to college as measured by standardized test scores and high school grades had no effect on the change in the college wage premium for men in contrast the returns to math ability rose considerably for women failing to account for math skills thus substantially overstates the growth in the female college wage premium skills acquired in college as reflected in the distribution of students across majors had important effects on the relative wages of men the trend away from low skill subjects such as education and toward high skill subjects such as engineering accounts for one fourth of the rise in the male college wage premium

on the decomposition of wage differentials the often used method for decomposing wage differentials into human capital and discrimination components is reformulated so that both t he disadvantage or cost discrimination it imposes on a black or minority wage earner and the advantage or benefit it bestows on a white or majority wage earner can be estimated copyright 1988 by mit press

foreign ownership and wages evidence from hungary 1986 2008 this article estimates the wage effects of foreign direct investment fdi using firm level and linked employer employee panel data containing a large number of foreign acquisitions over a long per

venture capital entrepreneurship and economic growth abstract using a panel of u s metropolitan areas we find that increases in the supply of venture capital positively affect firm starts employment and aggregate income our results remain robust to a variety of specifications including ones that address endogeneity the estimated magnitudes imply that venture capital stimulates the creation of more firms than it funds which appears consistent with two mechanisms first would be entrepreneurs anticipating financing needs more likely start firms when the supply of capital expands second funded companies may transfer know how to their employees thereby enabling spin offs and may encourage others to become entrepreneurs through demonstration effects

private equity returns and disclosure around the world to obtain more funds from the institutional investors private equity pe fund managers may report inflated valuations of private investee companies that are not yet sold however such overvaluations may result in a reputational cost when those investments are realized using evidence from 39 countries we show that there are significant systematic biases in managers reporting of fund performance we find that these biases depend on the accounting and legal environment in a country and on proxies for the degree of information asymmetry between institutional investors and pe fund managers

equal employment opportunity across states the eeoc 1979 1989 this study uses unpublished eeoc data from 1979 89 to concentrate on how dwindling resources and policy changes advocated by the eeoc chairs regarding the time and intensity devoted to anti discrimination cases may have yielded regional variation in discrimination outcomes we arrive at two major conclusions first evidence here suggests that the eeoc counteracted potential regional resistance against anti discrimination laws second we argue that the seeming inefficiency of the eeoc during thomas first years as eeoc chair appears to have occurred because he inherited a large pool of low merit cases

venture capitalists decision policies across three countries an institutional theory perspective this paper examines the influence of economic institutions upon venture capitalists vcs decision policies we conducted policy capturing experiments on 119 vcs across three countries representing distinct economic institutions us mature market economy south korea emerging economy and china transitional economy results show that vcs in rules based market economies us rely upon market information to a greater extent than vcs in emerging economies korea and chinese vcs transitional economy weight human capital factors more heavily than either us or korean vcs findings suggest that although professional institutions may dictate which information is included in vc decision policies the extent to which that information is emphasized is determined partly by the economic institution in which the decision maker operates journal of international business studies 2007 38 691 708 doi 10 1057 palgrave jibs 8400291

a tale of two market failures technology and environmental policy abstract market failures associated with environmental pollution interact with market failures associated with the innovation and diffusion of new technologies these combined market failures provide a strong rationale for a portfolio of public policies that foster emissions reduction as well as the development and adoption of environmentally beneficial technology both theory and empirical evidence suggest that the rate and direction of technological advance is influenced by market and regulatory incentives and can be cost effectively harnessed through the use of economic incentive based policy in the presence of weak or nonexistent environmental policies investments in the development and diffusion of new environmentally beneficial technologies are very likely to be less than would be socially desirable positive knowledge and adoption spillovers and information problems can further weaken innovation incentives while environmental technology policy is fraught with difficulties a long term view suggests a strategy of experimenting with policy approaches and systematically evaluating their success

which model of capitalism best delivers both wealth and equality capitalism is the dominant economic system adopted throughout the global economy but there are many different models of capitalism practiced depending on what the society decides economic effectiveness is in this study we assert that an effective economy simultaneously achieves two seemingly divergent outcomes it 1 creates economic wealth efficiently and 2 shares that wealth equitably employing insights from whitley s national business systems framework and fuzzy set analysis we examine how national institutions collectively configure with respect to the overall level of equitable wealth creation within 48 developed and developing economies we find that three configurations are associated with relatively high levels of equitable wealth creation and another three are associated with relatively low levels as such our analysis supports the notion of equifinality that there is no one optimal model of capitalism furthermore we begin to demonstrate that these models of capitalism are constantly evolving but their evolution is generally slow even when considering the practice of capitalism before and after the 2008 global economic crisis we discuss the implications of these findings for the study of international business with a special emphasis on considering a more holistic context for exploring how multinational enterprises interact with their institutional environment s

venture capitalist certification in initial public offerings this paper provides support for the certification role of venture capitalists in initial public offerings consistent with the certification hypothesis a comparison of venture capital backed ipos with a control sample of nonventure capital backed ipos from 1983 through 1987 matched as closely as possible by industry and offering size indicates that venture capital backing results in significantly lower initial returns and gross spreads in effect the presence of venture capitalists in the issuing firms serves to lower the total costs of going public and to maximize the net proceeds to the offering firm in addition we document that venture capitalists retain a significant portion of their holdings in the firm after the ipo the ability of third party specialists to certify the value of securities issued by relatively unknown firms in capital markets that are characterized by asymmetric information between corporate insiders and public investors has attracted much academic interest in recent years several authors including james 1990 blackwell marr and spivey 1990 and barry muscarella peavy and vetsuypens 1991 have developed and tested models based at least in part on the formal certification hypothesis presented in booth and smith 1986 a related body of work represented by deangelo 1981 beatty and ritter 1986 titman and trueman 1986 johnson and miller 1988 carter 1990 simon 1990 and carter and manaster 1990 has examined how investment bankers and auditors help resolve the asymmetric information inherent in the initial public offering ipo process in this paper we examine whether the presence of venture capitalists as investors in a firm going public can certify that the offering price of the issue reflects all available and relevant inside information we hypothesize that venture capitalists can perform this function that it will be an economically

decomposition of gender differentials in agricultural productivity in ethiopia this paper employs decomposition methods to analyze differences in agricultural productivity between male and female land managers in ethiopia it employs data from the 2011 2012 ethiopian rural socioeconomic survey an overall 23 4 percent gender differential in agricultural productivity is estimated at the mean in favor of male land managers of which 10 1 percentage points are explained by differences in land manager characteristics land attributes and unequal access to resources the endowment effect the remaining 13 4 percentage points are explained by unequal returns to productive components but cannot be easily tied to specific covariates these results are mainly driven by non married female managers mainly single and divorced married female managers do not display such disadvantages further analysis along the productivity distribution reveals that gender differentials are more pronounced at mid levels of productivity and that the share of the gender gap explained by the endowment effect declines as productivity increases detailed decomposition of estimates at selected points of the agricultural productivity distribution provides valuable information for policy intervention purposes

understanding global flows of venture capital human networks as the carrier wave of globalization industry participants and observers view venture capital as fundamentally a local business however recent data show an increasing share of us venture capital investments flowing overseas we suggest that cross border venture capital flows are associated with the formation of transnational technical communities ttcs groups of immigrants active in both home and host country technical networks our results highlight the role of human networks as a mechanism of industry globalization and support the view that ttcs are emerging economic actors in their own right

from the editors endogeneity in international business research this essay builds on the exposition by thomas et al and focuses on analyzing cause and effect in international business research we attempt to explain how endogeneity problems occur and why they are so prevalent in international business research in a non technical fashion we then discuss the importance of explicitly identifying how the chosen research design best approximates a randomized controlled experiment finally we provide some guidelines on achieving this goal and emphasize the practices that seem most relevant to jibs reviewers in evaluating high quality international business research

differences in wage distributions between canada and the united states an application of a flexible estimator of distribution functions in the presence of covariates we construct a tractable flexible functional form estimator of cumulative distribution functions for non negative random variables which admits large numbers of covariates the estimator adopts and extends techniques from the spell duration literature for estimating hazard functions to distribution functions for wages earnings and income we apply these methods to investigate sources of wage inequality for full time male workers between canada and the united states finding that the canadian wage density has a thinner left tail because low educated workers have higher pay and a thinner right tail because of a lower proportion of highly educated workers unions appear to play a large role in these outcomes

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