growth and unemployment this paper analyses the effects of growth on long run unemployment using a search model of equilibrium unemployment where growth arises explicitly from the introduction of new technologies that require labour reallocation for their implementation the analysis uncovers and compares between two competing effects of growth on unemployment the first is a capitalisation effect whereby an increase in growth raises the capitalised returns from creating jobs and consequently reduces the equilibrium rate of unemployment the second is a creative destruction effect whereby an increase in growth reduces the duration of a job match thereby raising the equilibrium level of unemployment both directly by raising the job separation rate and indirectly by discouraging the creation of job vacancies this paper asks the question of how the rate of economic growth affects unemployment in the long run the main consideration that leads us to think that this is an interesting question has to do with the re allocative aspect of growth in the long run faster economic growth must come from a faster increase in knowledge to the extent that the advancement of knowledge is embodied in industrial innovations it is likely to raise the job destruction rate through automation skill obsolescence and the bankruptcy associated with the process of creative destruction in short increased growth is likely to produce an increased rate of job turnover and the search theories of lucas and prescott 1974 and pissarides 1990 imply that an increased rate of job turnover will result in a higher natural rate of unemployment this conclusion is also consistent with the empirical results of davis and haltiwanger 1990 which show that periods of high unemployment tend to be periods of high job turnover at the establishment level it suggests the possibility of a positive longrun tradeoff between growth and unemployment at least over some range there has been relatively little attention paid to our question in the literature on longrun determinants of unemployment for example the recent empirical examination by layard nickell and jackman 1991 of unemployment rates among oecd countries did not even consider the rate of economic growth as a possible explanatory variable this is consistent with the seminal theoretical work of phelps 1968 which implies that the natural rate of unemployment is independent of the rate of productivity growth the only

do better schools matter parental valuation of elementary education the evaluation of numerous school reforms requires an understanding of the value of better schools given the difficulty of calculating the relationship between school quality and student outcomes i turn to another method and use house prices to infer the value parents place on school quality i look within school districts at houses located on attendance district boundaries houses then differ only by the elementary school the child attends i thereby effectively remove the variation in neighborhoods taxes and school spending i find that parents are willing to pay 2 5 percent more for a 5 percent increase in test scores this finding is robust to a number of sensitivity checks

the brevity and violence of contractions and expansions abstract early studies of business cycles argued that contractions in economic activity were briefer shorter and more violent rapid than expansions this paper systematically investigates this claim and in the process discovers a robust new business cycle fact contractions in employment are briefer and more violent than expansions but we cannot reject the null of equal brevity and violence for expansions and contractions in output the difference arises because employment typically lags output around peaks but they coincide in their troughs we discuss the performance of existing business cycle models in accounting for this fact and conclude that none can fully account for it we then show that a business cycle model with asymmetric adjustment costs on employment and a choice of when to scrap old technologies can account for the business cycle fact both qualitatively and quantitatively

class size education and wages we use micro data for england and wales to examine the effects of class size on the decision to stay on in full time schooling at 16 and on wages later in life we find that class size has a sizeable and significant effect on the decision to stay on this finding is very robust wage equations show the effect of staying on is significantly positive for wages combining this with the effect of class size on the staying on decision reveals that class size significantly affects future wages reduced form models lead to much less accurate and insignificant estimates

productivity and unemployment over the business cycle abstract the low correlation between cyclical unemployment and productivity over the post war period hides a large sign switch in the mid 1980s from significantly negative the correlation became significantly positive using a search model of unemployment with nominal rigidities and variable labor effort i show that technology shocks can generate a positive unemployment productivity correlation whereas non technology shocks i e aggregate demand shocks tend to do the opposite in this context i identify two events that can quantitatively explain the increase in the correlation i a sharp drop in the volatility of non technology shocks in the mid 1980s and ii a decline in the response of productivity to non technology shocks which from procyclical became acyclical in the last 25 years

recruiting smarter teachers in recent years many states have raised teacher salaries to attract more capable teachers since teacher labor markets are typically in a state of excess supply success of such policies is contingent on containing perverse feedbacks which arise among exit decisions vacancy rates and the willingness of prospective teachers to invest in occupation specific human capital using sat scores as a measure of ability we find that an across the board raise produces modest improvements in the work force at best indeed under plausible parameter values it is possible for mean ability to decline

religious participation and children s education a social capital approach abstract based on the argument in both economic and sociological literature that religion is conducive to children s human capital formation this paper provides a model of religious participation and explores a mechanism that social capital affects children s education a la coleman coleman j s 1988 social capital in the creation of human capital american journal of sociology 94 s95 s120 the model generates several interesting implications which help explain some important stylized facts about education and religion further in a dynamic setting the model shows that there exists a steady state in which individuals allocate a positive amount of time and resources to religious activities thus it complements the existing literature to explain why seemingly unproductive religions can be everlasting

the dynamic eects of monetary policy a structural factor model approach we use the structural factor model proposed by forni giannone lippi and reichlin 2007 to study the eects of monetary policy the advantage with respect to the traditional vector autoregression model is that we can exploit information from a large data set made up of 112 us monthly macroeconomic series monetary policy shocks are identified using a standard recursive scheme in which the impact eects

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

quality of human and physical capital and technological gaps across italian regions scoppa v 2007 quality of human and physical capital and technological gaps across italian regions regional studies 41 585 599 this paper evaluates the relative contribution of factor accumulation and technology in explaining output per worker differences across italian regions the contributions of physical and human capital are separately estimated through the variance decomposition of output per worker whereas from a basic analysis of development accounting with crude data total factor productivity tfp emerges as a fundamental determinant when more accurate data are used in the estimations of human and physical capital to take into account their quality results change radically showing a higher importance of factor accumulation with respect to previous standard estimations scoppa v 2007 la qualite des capitaux humain et physique et les ecarts technologiques a travers les regions d italie regional studies 41 585 599 cet article cherche a evaluer la contribution relative de l accumulati

does immigration induce native flight from public schools into private schools abstract the paper tests whether native born american families respond to inflows of immigrants by sending their children to private school the analysis uses 1980 and 1990 census data from 132 metropolitan areas for primary school students no significant relation between immigration and private school enrolment is found for secondary schools a significant link emerges for every four immigrants who arrive in public high schools it is estimated that one native student switches to a private school white students account for most of this flight natives appear to respond mainly to immigrant children who speak a language other than english at home

the cyclicality of separation and job finding rates this paper uses cps gross flow data to analyze the business cycle dynamics of separation and job finding rates and to quantify their contributions to overall unemployment variability cyclical changes in the separation rate are negatively correlated with changes in productivity and move contemporaneously with them while the job finding rate is positively correlated with and tends to lag productivity contemporaneous fluctuations in the separation rate explain between 40 and 50 percent of fluctuations in unemployment depending on how the data are detrended this figure becomes larger when dynamic interactions between the separation and job finding rates are considered

approaches for estimating noncompliance examples from federal taxation in the united states crime and underground economic activity are a fact of life around the world most societies attempt to control these activities through the expenditure of resources on monitoring prosecution punishment and educational programmes gathering statistics about who is engaging in illegal or underground activity the frequencies with which various crimes or underground transactions are occurring and the severity or magnitude of these acts is crucial for making good decisions regarding our allocation of resources in this area unfortunately in general it is very difficult to obtain accurate information about these issues this is partly because the individuals engaged in such activities wish not to be identified and often take actions to avoid detection and partly because by their very nature the activities tend not to generate economic accounting legal demographic or other cultural records the fact that it is difficult to obtain accurate information about the activities however does not in any way imply that we should not make a concerted effort to try to obtain the best information we can i believe the cost associated with attempting to determine the extent and nature of these activities is in most circumstances well below the expected benefit which includes the likelihood of improved decisionmaking by relevant government personnel and the general public as a result i also believe the debate about developing estimates of illegal or underground economic activity should primarily focus on practical issues related to how best to go about developing estimates that are as reliable as possible in this short article i shall discuss the measurement of noncompliance with laws and regulations my particular area of expertise and shall not discuss the measurement of other kinds of hidden economic behaviours such as informal contracting unmeasured home production and grey market activities in particular i shall discuss three approaches for estimating the aggregate amount of noncompliance with respect to a specific law or regulation i intensive data collection for a focused subsample of the population ii detection controlled estimation and iii the comparision of estimates generated by distinct datasets and models for each i shall describe in general terms what the approach is and how it is implemented review limitations of the approach and present an example of the application of the approach to the measurement of tax noncompliance in the united states my discussion shall necessarily be short and i refer the interested reader to a variety of original research publications for more details especially about the specific examples

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

technology policy interaction in frictional labour markets does capital embodied technological change play an important role in shaping labour market outcomes to address this question we develop a model with vintage capital and search matching frictions where irreversible investment in new vintages of capital creates heterogeneity in productivity among firms matched as well as vacant we demonstrate that capital embodied technological change reduces labour demand and raises equilibrium unemployment and unemployment durations in addition the presence of labour market regulations unemployment benefits payroll taxes and firing costs exacerbates these effects thus the model is qualitatively consistent with some key features of the european labour market experience relative to that of the u s it features a sharper rise in unemployment and a sharper fall in the vacancy rate and the labour share a calibrated version of our model suggests that this technology policy interaction could explain a sizeable fraction of the observed differences between the u s and europe copyright 2007 wiley blackwell

looking at the population problem through the prism of heterogeneity welfare and policy analyses upon introducing heterogeneity and dynamics into a model of the demand for children a problem of optimal population is defined and analyzed it is shown that from the perspective of social welfare better educated individuals produce too few children while less educated individuals produce too many children and all individuals invest too little in the education of their children the impact of several policy tools geared at addressing the population problem is investigated in particular how child allowances and other tax subsidy policies can be harnessed to enhance welfare and how and why early childhood education programs can mitigate the population problem

labor market dynamics and the business cycle structural evidence for the united states we use a 12 dimensional var to examine the aggregate effects of two structural technology shocks and two policy shocks for each shock we examine the dynamic effects on the labor market the importance of the shock for labor market volatility and the comovement between labor market variables and other key aggregate variables in response to the shock we document that labor market indicators display hump shaped responses to the identified shocks technology shocks and monetary policy shocks are important for labor market volatility but the ranking of their importance is sensitive to the var specification the conditional correlations at business cycle frequencies are similar in response to the four shocks apart from the correlations between hours worked labor productivity and real wages to account for the unconditional correlations between these variables a mixture of shocks is required

losses and gains to developing countries from the migration of educated workers this paper synthesizes and extends recent research on the new economics of the brain drain in a unified framework the paper shows that while recently identified adverse repercussions of the brain drain exacerbate the long recognized negative impact of the brain drain longer term consequences turn the brain drain into the harbinger of powerful gains these gains have been studied already in recent research or merit attention in future research

can long run restrictions identify technology shocks gali s innovative approach of imposing long run restrictions on a vector autoregression var to identify the effects of a technology shock has become widely utilized in this paper we investigate its reliability through monte carlo simulations using calibrated business cycle models overall gali s methodology appears to be fruitful the impulse responses derived from the artificial data generally have the same sign and qualitative pattern as the true responses and the approach can be informative in discriminating between alternative models however our results reveal some important quantitative shortcomings including considerable estimation uncertainty about the impact of technology shocks on macroeconomic variables more generally the conditions under which the methodology performs well appear considerably more restrictive than implied by the key identifying assumption this underscores the importance of using economic models to guide in the implementation of the approach in interpreting the results and in assessing its limitations jel c32 e32 o33

protestantism and education reading the bible and other skills during industrialization protestants were more literate than catholics this paper investigates whether this fact may be led back to the intrinsic motivation of protestants to read the bible and to what extent other education motives might have been involved as well we employ a historical data set from switzerland which allows us to differentiate between different cognitive skills reading numeracy essay writing and swiss history we develop an estimation strategy to examine whether the impact of religious denomination was particularly large with respect to reading capabilities we find support for this hypothesis however we also find evidence which is consistent with the view that protestants education motives went beyond acquiring reading skills jel i20

the trade off between child quantity and quality an empirical investigation of trade offs between number of children and their scholastic performance confirms that family size directly affects children s achievement though parents show no favori

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

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

does school quality explain the recent black white wage trend around 1980 the trend toward racial wage convergence essentially stopped i ask whether this break in the convergence trend can be explained by school quality department of education surveys provide earnings data for the high school class of 1972 in 1979 and the class of 1980 in 1986 both linked to data from the respondents high schools by several measures differences between schools attended by blacks and whites were already rather small in the 1970s furthermore i find that measurable school inputs generally have little effect on wages thus school quality explains little of the recent black white wage trend

factor complementarity and labour market dynamics abstract we propose and estimate a dynamic stochastic general equilibrium model featuring search and matching frictions deep habits and a ces production function the model successfully replicates the cyclical properties of labour market variables in the us economy for three main reasons first two of the endogenous mechanisms of the model factor complementarity and unemployment benefits play a key role for explaining the amplification in unemployment and vacancies second deep habits have a smaller but significant role as an endogenous mechanism third capital augmenting productivity investment specific and matching efficiency innovations explain large part of the variation in labour market variables

trend breaks long run restrictions and contractionary technology improvements abstract structural vector autoregressions with long run restrictions are extraordinarily sensitive to low frequency correlations recent literature finds that the estimated effects of technology shocks are sensitive to how one treats hours per capita however after allowing for statistically and economically significant trend breaks in productivity results are much less sensitive hours fall when technology improves the issue is that the common high low high pattern of productivity growth and hours i e the low frequency correlation inevitably leads to a positive estimated response the trend breaks control for this correlation this example suggests a practical need for care in using long run restrictions

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

unequal opportunities and human capital formation abstract this paper develops a tractable heterogeneous agents general equilibrium model where individuals have different endowments of the factors that complement the schooling process the paper explores the relationship between inequality of opportunities inequality of outcomes and aggregate efficiency in human capital formation using numerical solutions we study how the endogenous variables of the model respond to two different interventions in the distribution of opportunities a mean preserving spread and a change in the support the results suggest that a higher degree of inequality of opportunities is associated with lower average level of human capital a lower fraction of individuals investing in human capital higher inequality in the distribution of human capital and higher wage inequality in particular the model does not predict a trade off between aggregate efficiency in human capital formation as measured by the average level of human capital in the economy and equality of opportunity

price stickiness in ss models new interpretations of old results abstract what is the relation between infrequent price adjustment and the dynamic response of the aggregate price level to monetary shocks the answer to this question ranges from a one to one link calvo g 1983 prices in a utility maximizing framework journal of monetary economics 12 383 398 to no connection whatsoever caplin a spulber d 1987 menu costs and the neutrality of money quarterly journal of economics 102 703 726 the purpose of this paper is to provide a unified framework to understand the mechanisms behind this wide range of results in doing so we propose new interpretations of key results in this area which in turn suggest the kind of ss model that is likely to generate substantial price rigidity among these new interpretations we revisit caplin and spulber s monetary neutrality result we show that when price stickiness is measured in terms of the impulse response function this result is not a consequence of aggregation as is often assumed but is due instead to the absence of price stickiness at the microeconomic level we also show that the selection effect according to which units that adjust their prices are those that benefit the most is neither necessary nor sufficient to account for the higher aggregate flexibility of ss type models compared to calvo models instead the key concept is the contribution of the extensive margin of adjustment to the aggregate price response the aggregate price level is more flexible than suggested by the microeconomic frequency of adjustment if and only if this term is positive

school quality and returns to education of u s immigrants using the u s labor market as a common point of reference this article investigates the influence of source country school quality on the returns to education of immigrants based on 1980 and 1990 census data we first estimate country of origin specific returns to education results reveal that immigrants from japan and northern europe receive high returns and immigrants from central america receive low returns next we examine the relationship between school quality measures and these returns holding per capita gdp and other factors constant immigrants from countries with lower pupil teacher ratios and greater expenditures per pupil earn higher returns to education

an alternative explanation of the price puzzle abstract this paper proposes an explanation for the frequent appearance of a price puzzle in vars designed for monetary policy analysis it assumes that the data are generated by a model in which output and output gap are not equivalent while an econometrician follows the common practice of including only output in the var the omission of the output gap is shown to spuriously produce a price puzzle and several other incorrect conclusions in a class of commonly used models this can happen even if the model admits a triangular identification and if the forecasts produced by the misspecified var are optimal when the model is tested on us data all predictions are supported a commodity price index is not needed to solve the puzzle

the ins and outs of unemployment an analysis conditional on technology shocks we analyze how unemployment job finding and job separation rates react to neutral and investment specific technology shocks neutral shocks increase unemployment and explain a substantial portion of it volatility investmentspecific shocks expand employment and hours worked and contribute to hours worked volatility movements in the job separation rates are responsible for the impact response of unemployment while job finding rates for movements along its adjustment path the evidence warns against using models with exogenous separation rates and challenges the conventional way of modelling technology shocks in search and sticky price models

does the new economy measure up to the great inventions of the past abstract during the four years 1995 99 u s productivity growth experienced a strong revival and achieved growth rates exceeding that of the golden age of 1913 72 accordingly many observers have declared the new economy to be an industrial revolution even more important than the second industrial revolution of 1860 1900 which made the golden age of productivity growth possible this paper dissects the recent productivity revival subtracts out a cyclical component and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector the paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past

u s labor market dynamics revisited the picture of u s labor market dynamics is opaque empirical studies have yielded contradictory findings and debates have emerged regarding their implications this paper aims at clarifying the picture which is important for the understanding of the operation of the labor market for the study of business cycles for the explanation of wage behavior and for the formulation of policy the paper determines what facts can be established what are their implications and what remains to be further investigated the main contributions made here are i listing of data facts that can be agreed upon these indicate that there is considerable cyclicality and volatility of both accessions to employment and separations from it hence both are important for the understanding of the business cycle ii presenting the business cycle facts of key series iii pointing to specific gaps in the data picture disparities in the measurement of the sizeable flows between employment and the pool of workers out of the labor force disagreements about the relative volatility of job finding and separation rates across data sets and the fact that the fit of the gross flows data with net employment growth data differs across studies and is not high the definite characterization of labor market dynamics depends upon the closing of these data gaps

productivity shocks and real business cycles abstract productivity shocks play a central role in real business cycles as an exogenous impulse to macroeconomic activity however measured solow prescott residuals do not behave as an exogenous impulse rather econometric evidence provided in this paper indicates that 1 money interest rates and government spending granger cause these impulses and 2 a substantial component of the variance of these impulses between one quarter and one half is attributable to variations in aggregate demand these results are robust to a number of econometric issues including measurement errors specification of the production function and certain forms of omitted real variables

on the timing and efficiency of creative destruction we analyze the timing pace and efficiency of ongoing job reallocation that results from product and process innovation there are strong reasons why an efficient economy ought to concentrate both job creation and destruction during recessions when the opportunity cost of reallocation is lowest incomplete contracting between labor and capital can disrupt this synchronized pattern and decouple creation and destruction transactional difficulties also lead to technological sclerosis characterized by excessively slow renovation government incentives to production may alleviate high unemployment but exacerbate sclerosis in contrast creation incentives increase the pace of reallocation an optimal combination of both policies restores economic efficiency

do technology shocks lead to a fall in total hours worked this paper contributes to the debate initiated by gali in 1999 i provide a theory with capital income taxation labor hoarding as well as long run shifts in the social attitudes to the workplace modelled as leisure at the workplace to argue that there are other shocks that may influence labor productivity in the long run i introduce medium run identification and show it to be superior to long run identification or standard short run identification when applied to artificial data with u s data and medium run identification i find the robust result that technology shocks lead to a hump shaped response of total hours worked which is mildly positive following a near zero initial response jel e32 e24 c32 c15 copyright c 2004 the european economic association

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

the role of human capital in earnings differences between black and white men d uring the past 50 years the earnings of black men have increased substantially both in absolute terms and relative to those of white men as shown in figure 1 in 1940 the black white weekly earnings ratio among men ages 25 34 was 49 percent by 1980 it had increased to 79 percent during the 1980s however the overall black white earnings gap did not narrow and at younger ages the gap actually widened although the 1980s is not the first decade since 1940 in which black men made little or no gains in relative earnings the 1950s was another the lack of progress in the 1980s is nevertheless puzzling and a source of concern this article examines the factors underlying the differential in earnings between black men and white men with a focus on the role of human capital since 1940 successive generations of black men entering the labor force have been increasingly more educated relative to white men both in terms of years of school completed and in the quality of schooling obtained as the education and income levels of black parents increased racial differences in the transmission of human capital in the home were also likely to have narrowed this convergence in educational differences combined with the migration of blacks out of the south contributed to the narrowing in the racial gap in earnings over the 1940 80 period particularly in the first half of the period but human capital factors education and migration were not the only source of convergence in black white differences in earnings the patterns of change in the earnings gap support the contention that declining labor market discrimination against blacks has also contributed to the rise in the black white earnings ratio moreover the acquisition of human capital itself has been strongly affected by societal and governmental discrimination since blacks were long provided with greatly inferior schooling resources

specifying human capital a review of the measures of the stock of human capital used in empiricalgrowth research including adult literacy rates school enrollmentratios and average years of schooling of the working age population reveals that human capital is mostly poorly proxied the simple use ofthe most common proxy average years of schooling misspecifies therelationship between education and the stock of human capital based onhuman capital theory the specification of human capital is extended toallow for decreasing returns to education and for differences in thequality of a year of education the different specifications give riseto hugely differing measures of the stock of human capital acrosscountries and development accounting results show that misspecifiedhuman capital measures can lead to severe underestimation of thedevelopment effect of human capital

production of educational output time series evidence from socioeconomically heterogeneous populations the case of south africa 1927 1993 a number of competing reasons have been advanced for this divergence of findings since standardized test scores and earnings are two distinct outcomes school quality may simply have different impacts on the two outcome measures earnings studies are frequently argued to have insufficient controls for family background variables the effects of local labor market conditions and self selection effects present in samples and earnings studies and school achievement studies tend to employ different types of data with earnings studies tending to rely on historical information and school achievement studies on contemporaneous data the last of these reasons for divergent results between earnings and standardized test score studies is potentially important in pointing to the significance of lags in the impact of schooling inputs on outputs 2 this article furthers understanding of the link between inputs and outputs of the educational production process in contrast to earlier studies our article employs time series data in order to investigate the link between educational inputs and outputs and does so over a relatively long time run from 1910 to 1993 strong results emerge from our analysis we find that educational inputs matter in the determination of educational outputs in the case of south africa

the importance of relative performance feedback information evidence from a natural experiment using high school students we study the effect of providing relative performance feedback information on performance under piece rate incentives a natural experiment that took place in a high school offers an unusual opportunity to test this effect in a real effort setting for one year only students received information that allowed them to know whether they were above below the class average as well as the distance from this average we exploit a rich panel data set and find that the provision of this information led to an increase of 5 in students grades moreover the effect was significant for the whole distribution however once the information was removed the effect disappeared to rule out the concern that the effect may be driven by teachers within the school we verify our results using national level exams externally graded for the same students and the effect remains

small menu costs and large business cycles a macroeconomic model of monopoly i introduction the conflict between modern neoclassical and traditional keynesian theories of the business cycle centers upon the pricing mechanism in neoclassical models prices are fully flexible they represent the continuous optimization of economic agents and the continuous intersection of supply and demand in keynesian models prices are often assumed to be sticky they do not necessarily equilibrate all markets at all times one of the reasons for the resurgence of the equilibrium approach to macroeconomics has been the absence of a theoretical underpinning for this keynesian price stickiness this note shows that sticky prices can be both privately efficient and socially inefficient the business cycle results from the suboptimal adjustment of prices in response to a demand shock to the extent that policy can stabilize aggregate demand it can mitigate the social loss due to this suboptimal adjustment in some keynesian models prices are simply exogenously fixed 2 in others agents must set their prices in advance of the transaction date the act of altering a posted price is certainly costly these costs include such items as printing new catalogs and informing salesmen of the new price yet these menu costs are small and therefore generally perceived as providing only a weak foundation for these fixed price models however this inference is flawed small menu costs can cause large welfare losses the claim that price adjustment costs are small does not rebut the claim that they are central to understanding economic fluctuations

technological acceleration skill transferability and the rise in residual inequality this paper provides a quantitative theory for the recent rise in residual wage inequality consistent with the empirical observation that a sizable part of this increase has a transitory nature a feature that eludes standard models based on ex ante heterogeneity in ability an acceleration in the rate of quality improvement of equipment like the one observed from the early 1970s increases the productivity quality differentials across machines jobs in a frictional labor market this force translates into higher wage dispersion even among ex ante equal workers with vintage human capital the acceleration reduces workers capacity to transfer skills from old to new machines generating a rise in the cross sectional variance of skills and therefore of wages through calibration the paper shows that this mechanism can account for 30 percent of the surge in residual inequality in the u s economy or for most of its transitory component two key implications of the theory faster within job wage growth and larger wage losses upon displacement find empirical support in the data

the effects of class size on student achievement new evidence from population variation abstract i identify the effects of class size on student achievement using longitudinal variation in the population associated with each grade in 649 elementary schools i use variation in class size driven by idiosyncratic variation in the population i also use discrete jumps in class size that occur when a small change in enrollment triggers a maximum or minimum class size rule the estimates indicate that class size does not have a statistically significant effect on student achievement i rule out even modest effects 2 to 4 percent of a standard deviation in scores for a 10 percent reduction in class size

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

the effects of spending on test pass rates evidence from michigan abstract this study uses data on standardized test scores from 1992 through 1998 at michigan schools to determine the effects of spending on student performance the years in the data set straddle 1994 when michigan dramatically changed the way that k 12 schools are funded and moved toward equalization of spending across schools focusing on pass rates for a fourth grade math tests the most complete and consistent data available for michigan i find that increases in spending have nontrivial statistically significant effects on math test pass rates and the effects are largest for schools with initially poor performance

the effects of technology shocks on hours and output a robustness analysis we analyze the effects of neutral and investment specific technology shocks on hours and output long cycles in hours are removed in a variety of ways hours robustly fall in response to neutral shocks and robustly increase in response to investment specific shocks the percentage of the variance of hours output explained by neutral shocks is small large the opposite is true for investment specific shocks news shocks are uncorrelated with the estimated technology shocks copyright 2009 john wiley sons ltd