government spending effects in low income countries abstract despite the voluminous literature on fiscal policy very few papers focus on low income countries lics this paper develops a new keynesian small open economy model to show analytically and numerically that several prevalent features of lics dependence on external financing public investment inefficiency and a low degree of home bias in public investment play important roles in government spending effects external financing increases the resource envelope mitigating the crowding out effects but it tends to appreciate the real exchange rate lowering traded output although capital scarcity in lics implies high returns to public capital low marginal investment efficiency can substantially dampen the output multiplier also public investment may not be effective in stimulating output in the short run as lics often rely on imports to a large extent to carry out public investment projects weakening its role as a short run demand stimulus

enhancing the internal validity of entrepreneurship experiments by assessing treatment effects at multiple levels across multiple trials abstract treatment effects in entrepreneurship experiments could vary significantly due to environmental uncertainty and individual heterogeneity drawing on critical realism experimental replication is useful for assessing the generalizability of the treatment effects or for confirming treatment effects across diverse entrepreneurship settings yet experiments in entrepreneurship have traditionally relied on single experimental trials and have not considered potential variance in treatment effects across contexts accounting for variance in treatment effects is even more pertinent under higher levels of environmental uncertainty to help assess the contingent effects of treatments across contexts we propose a set of methodological and statistical approaches for entrepreneurship researchers using different types of experimental replications and proposed statistical methods one may draw inferences about treatment effects at the trial the treatment and at the individual level we illustrate the proposed approach using experimental replications across three randomized post test experiments

the impact of body weight on occupational mobility and career development this paper examines the relationship between individuals weight and their employment decisions over the life cycle i estimate a dynamic stochastic model of individuals annual joint decisions of occupation hours worked and schooling the model allows body weight to affect non monetary costs switching costs and distribution of wages for each occupation and also allows individuals employment decisions to affect body weight i use conditional density estimation to formulate the distributions of wages and body weight evolution i find that heavier individuals face higher switching costs when transitioning into white collar occupations earn lower returns to experience in white collar occupations and earn lower wages in socially intensive jobs simulating the model with estimated parameters decreased occupational mobility accounts for 10 percent of the obesity wage gap while contemporaneous wage penalties for body weight are small the cost over the life cycle is substantial an exogenous increase in initial body mass by 20 percent leads to a 10 percent decrease in wages over the life course

foreign capital and the contractionary impact of currency devaluation with an application to jamaica abstract this paper analyses the effects of currency devaluation in a small open economy host to foreign capital using a short run macroeconomic model of the krugman taylor 1978 type it is shown that the presence of foreign capital provides devaluation with an additional contractionary mechanism besides those already identified in the literature the mechanism has its basis on the redistribution of income from wages to profits creasted by devaluation which raises the foreign component of domestic income and tends to reduce gnp and gdp the role of taxation policy in this context is examined finally estimates of the relevant effects are offered for jamaica a small mineral exporter showing that an expansionary effect of devaluation must rely on a relatively high value of the supply elasticity of non mineral exports

trade wages and the political economy of trade protection evidence from the colombian trade reforms abstract worker industry affiliation plays a crucial role in how trade policy affects wages in many trade models yet most research has focused on how trade policy affects wages by altering the economy wide returns to a specific worker characteristic i e skill or education rather than through worker industry affiliation this paper exploits drastic trade liberalizations in colombia in the 1980s and 1990s to investigate the relationship between protection and industry wage premiums we relate wage premiums to trade policy in an empirical framework that accounts for the political economy of trade protection accounting for time invariant political economy factors is critical when we do not control for unobserved time invariant industry characteristics we find that workers in protected sectors earn less than workers with similar observable characteristics in unprotected sectors allowing for industry fixed effects reverses the result trade protection increases relative wages this positive relationship persists when we instrument for tariff changes our results are in line with short and medium run models of trade where labor is immobile across sectors or alternatively with the existence of industry rents that are reduced by trade liberalization in the context of the current debate on the rising income inequality in developing countries our findings point to a source of disparity beyond the well documented rise in the economy wide skill premium because tariff reductions were proportionately larger in sectors employing a high fraction of less skilled workers the decrease in the wage premiums in these sectors affected such workers disproportionately

evolution of gender differences in post secondary human capital investments college majors although women in the united states now complete more college degrees than men the distribution of college majors among college graduates remains unequal with women about two thirds as likely as men to major in business or science we develop and estimate a dynamic overlapping generations model of human capital investments and labor supply we allow for specific college major choices instead of aggregating these choices to the education level results show that changes in skill prices higher schooling costs and gender specific changes in home value were each important to the long term trends abstract from author

the effect of work experience on female wages and labour supply this paper develops and implements a semiparametric estimator for investigating with panel data the importance of human capital and time nonseparable preferences to females when aggregate shocks are present it provides a set of conditions for making statistical inferences about agents expectations of their correlated future choices from a short panel under the assumption that observed allocations are pareto optimal a dynamic model of female labour supply and participation is estimated in which experience on the job raises future wages and time spent off the job in the past directly affects current utility or indirectly through productivity in the nonmarket sector

assessing policies to equalize opportunity using an equilibrium model of educational and occupational choices abstract the inter generational correlation of education in the u s is tremendous for instance in psid data from 1990 young males with college educated parents had a 70 chance of attending college but those with high school drop out parents had only a 15 chance in this paper we analyze the impact of college attendance bonus schemes designed to increase college attendance rates and pv of lifetime income of youth from disadvantaged backgrounds of course policies that increase the supply of skilled labor may reduce the college wage premium see heckman et al heckman james lochner lance and taber christopher explaining rising wage inequality explorations with a dynamic equilibrium model of labor earnings with heterogeneous agents review of economic dynamics 1 1998a 1 58 heckman james lochner lance and taber christopher general equilibrium treatment effects a study of tuition policy american economic review 88 2 1998b 381 386 this may have the unintended consequence of wiping out most of the gains to the targeted groups the strength of such equilibrium effects on wages depends on the substitutability between different types of labor thus it is important to evaluate education subsidies within an equilibrium framework that allows for flexible patterns of substitution across factor inputs this is exactly what we do here using an overlapping generations equilibrium model of the u s labor market fit to psid data from 1968 to 1996 the model allows for imperfect substitution among types of labor differentiated by education gender age and ten 1 digit level occupations a much finer differentiation than has been considered in prior work we find that very large college attendance bonuses are necessary to equate college attendance rates between youth whose parents had only high school degrees or were high school dropouts and youth whose parents attended at least some college the size of these bonuses far exceeds any reasonable measure of college costs suggesting the costs the bonuses overcome are primarily psychic or effort costs for example youth from disadvantaged backgrounds may be poorly prepared for college this suggests that bonuses targeted at college age youth are probably a very inefficient way to reduce inequality earlier intervention is likely called for

relative productivity and search unemployment in an open economy abstract using a panel of eighteen oecd countries we find empirically that the long run effects of higher productivity of tradables relative to non tradables vary across time space and stages of the business cycle more specifically our evidence reveals that elasticities of the relative wage and relative price of non tradables with respect to relative productivity of tradables increase over time our estimates also show that the fall in the relative wage is more pronounced whilst the appreciation in the relative price is less in countries where labor markets are more regulated and during periods of recession to rationalize the evidence we differentiate between labor mobility costs caused by job search efforts and hiring costs resulting from search frictions in the labor market in a two sector open economy model while time declining labor mobility costs can account for the time increasing effects of a productivity differential international differences in labor market regulation and variations of hiring costs across the business cycle respectively can rationalize the cross country and state dependent effects we estimate empirically finally labor market frictions have important implications for sectoral unemployment since labor mobility and hiring costs bias labor demand toward the traded sector which results in a greater decline in unemployment in tradables relative to unemployment in non tradables following higher relative productivity

devaluations and aggregate output fluctuations a random coefficient regression model for mexico the goal of this paper is to investigate whether nominal devaluations had real output growth effects in mexico and if so to assess the significance and duration of such effects a random coefficient regression model to evaluate the output growth effects of 1976 1982 and 1986 devaluations using sectoral data from 1970 to 1991 is specified and estimated the results indicate unambiguous short term contractionary effects of devaluations on non agricultural output in mexico in addition it is found that adjustments to imbalances in the external sector invariably came from temporary contractions in the aggregate output rather than significant resource reallocation from the non tradable sector towards the tradable sector several transmission mechanisms that relate nominal exchange rate movements to real output fluctuations are also considered

imperfect mobility of labor across sectors a reappraisal of the balassa samuelson effect this paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two sector open economy model with imperfect substitutability in hours worked across sectors the balassa samuelson 1964 model predicts that a rise in the sectoral productivity ratio by 1 raises the relative price of non tradables by 1 while leaving the non traded wage traded wage ratio unchanged applying cointegration methods to a panel of fourteen oecd countries over the period 1970 2007 our estimates show that the relative price rises by only 0 78 and the relative wage falls by 0 27 while our first set of empirical findings cast doubt on the quantitative predictions of the balassa samuelson model our second set of evidence highlights the role of imperfect labor mobility the relative price responds more to a productivity differential between tradables and non tradables while the reaction of the relative wage is more muted in countries with higher intersectoral reallocation of labor we show that the ability of the two sector model to account for our evidence quantitatively relies upon two ingredients i imperfect mobility of labor across sectors and ii physical capital accumulation finally our numerical results reveal that the model predicts the relative price response fairly well and to a lesser extent the relative wage response

the return to schooling in structural dynamic models a survey this papers contains a survey of the recent literature devoted to the returns to schooling within a dynamic structural framework i present a historical perspective on the evolution of the literature from early static models set in a selectivity framework willis and rosen 1979 to the recent literature stimulated by keane and wolpin 1997 and which uses stochastic dynamic programming techniques after reviewing the literature thoroughly i compare the structural approach with the iv experimental approach i present their commonalities and i also discuss their fundamental di8erences to get an order of magnitude most structural estimates reported for the us range between 4 and 7 per year on the other hand iv estimates between 10 and 15 per year are often reported the discrepancy prevails even when comparable if not identical data sets are used the discussion is focussed on understanding this divergence the distinction between static and dynamic model specifications is a recurrent theme in the analysis i argue that the distinction between the iv approach and the structural approach may be coined in terms of a trade o8 between behavioral and statistical assumptions for this reason and unless one has very specific knowledge of the true data generating process it is neither possible nor sensible to claim which approach to estimation is more flexible more precisely i show that structural and iv approaches differ mainly at the level of i the compatibility of the underlying models with truly dynamic behavior ii the role of heterogeneity in ability and tastes iii the consideration of post schooling opportunities and iv the specification and interpretation of the mincer wage equation

does wealth explain black white differences in early employment careers in this article i inquire about the effects initial wealth has on black white differences in early employment careers i set up a dynamic model in which individuals simultaneously search for a job and accumulate wealth and fit it to data from the national longitudinal survey 1979 cohort regime changes and decompositions of racial differences reveal that differences in the labor market environment and in preferences account fully for racial gaps in wealth and in wages persisting several years after high school graduation differences in initial wealth partially explain differences in early employment careers

globalization and labour market adjustment how fast and at what cost in this paper we argue that the flexibility of an economy s labour market plays a role in determining the gains from trade liberalization the level of short run adjustment costs and the relative value of these two measures to do so we describe the model introduced in davidson and matusz 2000 which allows us to solve for adjustment costs when workers vary according to ability and jobs differ in terms of the skills that they require we then report results based on simulations of this model we find that economies with sluggish labour markets have the least to gain from liberalization the reason is that while the removal of trade barriers creates large benefits they are almost completely offset by large short run adjustment costs in contrast we find that with either very flexible or very slothful labour market gains from liberalization are always significantly larger than the short run adjustment costs copyright 2000 by oxford university press

the mirage of fixed exchange rates this paper discusses the profound difficulties of maintaining fixed exchange rates in a world of expanding global capital markets contrary to popular wisdom industrialized country monetary authorities easily have the resources to defend exchange parities against virtually any private speculative attack but if their commitment to use those resources lacks credibility with markets the costs to the broader economy of defending an exchange rate peg can be very high the dynamic interplay between credibility and commitment is illustrated by the 1992 swedish and british crises and the 1994 95 mexican collapse we also discuss the small number of successful fixers

education s role in china s structural transformation abstract we explore education s role in improving the allocation of labor between china s agricultural and nonagricultural sectors and measure the portion of china s recent growth attributable to this channel using detailed micro level data and an empirical model that allows for the endogenous selection of education and sector of employment we estimate the relationship between an individual s educational attainment sector and income we find that about 11 of aggregate growth in output per worker from 1978 to 2004 is accounted for by increased education with 9 coming through the labor reallocation channel and 2 attributable to increased within sector human capital

education policy and intergenerational transfers in equilibrium this paper compares partial and general equilibrium effects of alternative financial aid policies intended to promote college participation we build an overlapping generations life cycle heterogeneous agent incomplete markets model with education labor supply and consumption saving decisions altruistic parents make inter vivos transfers to their children labor supply during college government grants and loans as well as private loans complement parental transfers as sources of funding for college education we find that the current financial aid system in the u s improves welfare and removing it would reduce gdp by two percentage points in the long run any further relaxation of government sponsored loan limits would have no salient effects the short run partial equilibrium effects of expanding tuition grants especially their need based component are sizeable however long run general equilibrium effects are 3 4 times smaller every additional dollar of government grants crowds out 20 30 cents of parental transfers

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

an estimate of a sectoral model of labor mobility this paper develops a model of sectoral labor mobility and tests its main implications the model nests two distinct hypotheses on the origin of mobility a sectoral shocks and b worker employer mismatch we estimate the relative importance of each hypothesis and find that the bulk of labor mobility is caused by mismatch rather than by sectoral shift we then try to put a value on society s match specific information that is we ask to what extent the availability of the option to change jobs raises gnp we find that the mobility option raises expected earnings by roughly between 8 5 percent and 13 percent of labor earnings which translates to an increase in gnp of between 6 percent and 9 percent

a dynamic analysis of educational attainment occupational choices and job search this article examines career choices using a dynamic structural model that nests a job search model within a human capital model of occupational and educational choices wage growth occurs in the model because workers move between firms and occupations as they search for suitable job matches and because workers endogenously accumulate firm and occupation specific human capital simulations performed using the estimated model reveal that both self selection in occupational choices and mobility between firms account for a much larger share of total earnings and utility than the combined effects of firm and occupation specific human capital

services outsourcing and innovation an empirical investigation we provide a comprehensive empirical analysis of the links between international services outsourcing domestic outsourcing profits and innovation using plant level data we find a positive effect of international outsourcing of services on innovative activity at the plant level such a positive effect can also be observed for domestic outsourcing of services but the magnitude is smaller this makes intuitive sense as international outsourcing allows more scope for exploiting international factor price differentials therefore giving the establishment higher profits and more scope to restructure production activities towards innovation we also find that international outsourcing has a positive effect on profitability as predicted by theory while this is not true for domestic sourcing the results are robust to various specifications and an instrumental variables analysis

learning your comparative advantages we introduce an equilibrium labor market model where workers gradually learn about their unobserved production abilities while engaged in a productive activity occupation workers observe their output and extract information that allows them to make inferences about their unobserved aptitudes because workers are learning about themselves their output informs them not only about their productivity in their current occupation but about their likely productivity in other occupations as well as workers acquire more information they self select into the occupations in which they expect to perform best and their wages increase returns to experience here capture improved job selection by workers as they sort through occupations and learn

does structure matter the impact of switching the agricultural policy regime on farm structures abstract this paper investigates the relationship between structural change in agriculture and a policy regime switch at the regional level using the agent based spatial and dynamic simulation model agripolis we simulate structural change for two different farm structures in response to a policy change results show that structural adjustment differs depending on the initial structure

a mapping of labor mobility costs in the developing world abstract estimates of labor mobility costs are needed to assess the responses of employment and wages to trade shocks when factor adjustment is costly available methods to estimate those costs rely on panel data which are seldom available in developing countries we propose a method to estimate mobility costs using readily obtainable data worldwide our estimator matches the changes in observed sectoral employment allocations with the predicted allocations from a model of costly labor adjustment we estimate a world map of labor mobility costs and we use those estimates to explore the response of labor markets to trade policy

imperfect mobility of labor across sectors and fiscal transmission abstract our paper investigates the sectoral effects of government spending shocks and highlights the role of labor mobility our var evidence for sixteen oecd countries reveals that a shock to government consumption by 1 of gdp increases non traded value added by 0 7 of gdp and generates a decline in traded value added the value added share of non tradables rises by 0 35 of gdp thus implying that the reallocation of resources accounts for 50 of the sectoral fiscal multiplier consistently our estimates show that the non traded sector is highly intensive in the government spending shock and experiences a labor inflow the shift of hours worked toward the non traded sector is however subject to mobility costs which vary across countries when we explore quantitatively the sectoral effects of a shock to government consumption that is highly intensive in non traded goods we find that the model can replicate the magnitude of the rise in the share of non tradables we document empirically once we allow for both labor mobility and capital installation costs financial openness also matters as it further biases the demand shock toward non tradables to account for the cross country dispersion in the responses of sectoral shares we estimate empirically we have to let the degree of labor mobility vary across countries

economic and ecological concepts for valuing ecosystem services abstract the purpose of this special issue is to elucidate concepts of value and methods of valuation that will assist in guiding human decisions vis a vis ecosystems the concept of ecosystem service value can be a useful guide when distinguishing and measuring where trade offs between society and the rest of nature are possible and where they can be made to enhance human welfare in a sustainable manner while win win opportunities for human activities within the environment may exist they also appear to be increasingly scarce in a full global ecological economic system this makes valuation all the more essential for guiding future human activity this paper provides some history background and context for many of the issues addressed by the remaining papers in this special issue its purpose is to place both economic and ecological meanings of value and their respective valuation methods in a comparative context highlighting strengths weakness and addressing questions that arise from their integration

international trade and unemployment theory and cross national evidence abstract we present a model of trade and search induced unemployment where trade results from heckscher ohlin h o and or ricardian comparative advantage using cross country data on trade policy unemployment and various controls and controlling for endogeneity and measurement error problems we find fairly strong and robust evidence for the ricardian prediction that unemployment and trade openness are negatively related this effect dominates the positive h o effect of trade openness on unemployment for capital abundant countries which turns negative for labor abundant countries using panel data we find an unemployment increasing short run impact of trade liberalization followed by an unemployment reducing effect leading to the new steady state

an equilibrium model of sectoral reallocation this paper constructs a two period two sector model in which there are permanent sectoral shocks it analyzes the equilibrium path of individual labor supply sectoral employment and duration of unemployment in response to these shocks equilibrium allocations are shown to be easy to characterize and comparative statics results are provided

effects of permanent and transitory tax changes in a life cycle labor supply model with human capital i examine effects of labor income taxation in life cycle models with human capital accumulation in this case the opportunity cost of time equals the wage plus returns to work experience this has several interesting consequences first the data appear consistent with larger labor supply elasticities than prior work suggests second contrary to conventional wisdom permanent tax changes can have larger effects on current labor supply than temporary changes third human capital dampens responses of young workers to transitory tax changes fourth labor supply elasticities increase with age fifth human capital amplifies the effect of permanent tax changes in the long run

dynamic female labor supply the increase in female employment and participation rates is one of the most dramatic changes to have taken place in the economy during the last century however while the employment rate of married women more than doubled during the last 50 years that of unmarried women remained almost constant to empirically analyze these trends we estimate a female dynamic labor supply model using an extended version of eckstein and wolpin 1989 to compare the various explanations in the literature for the observed trends this dynamic model provides a much better fit to the life cycle employment pattern than a static version of the model and a standard static reduced form model heckman 1979 the main finding using the dynamic model is that the rise in education levels accounts for about 33 percent of the increase in female employment and the rise in wages and narrowing of the gender wage gap account for another 20 percent while about 40 percent remains unexplained by observed household characteristics we show that this unexplained portion can be empirically attributed to cohort specific changes in preferences or the costs of child rearing and household maintenance finally the decline in fertility and the increase in divorce rates account for only a small share of the increase in female employment rates

household impacts of tariffs data and results from agricultural trade protection how do trade reforms impact households in different parts of the income distribution this paper presents a new database the household impacts of tariffs data set which contains harmonized household survey and tariff data for 54 low and lower middle income countries the data cover highly disaggregated information on household budget and income shares for 53 agricultural products wage labor income nonfarm enterprise sales and transfers as well as spending on manufacturing and services using a stylized model of the first order impacts of import tariffs on household real income this paper quantifies the welfare implications of agricultural trade protection on average unilateral elimination of agricultural tariffs would increase household incomes by 2 50 percentage points import tariffs have highly heterogeneous effects across countries and within countries across households consumers and income earners the average standard deviation of the gains from trade within a country is 1 01 percentage points

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

inside the perpetual motion machine cross country comparable evidence on job and worker flows at the industry and firm level many studies suggest that idiosyncratic firm level characteristics shape both job and worker flows in a similar way in all countries others argue that cross country differences in terms of gross job flows are minor however these statements are usually based on the comparison of national estimates typically collected on the basis of different definitions and collection protocols in contrast in this article we use cross country comparable data on both job and worker flows to examine key determinants of these flows and of their cross country differences we find that idiosyncratic firm characteristics industry age and size play an important role for both gross job and worker flows in all countries nevertheless in contrast with part of the literature we find that even controlling for these idiosyncratic factors cross country differences concerning both gross job and worker flows appear large and of a similar magnitude both job and worker flows in countries such as the usa and the uk exceed those in certain continental european countries by a factor of two moreover the variation of worker flows across different dimensions is well explained by the variation of job flows consistently churning flows that is flows originating by firms churning workers and employees quitting and being replaced display much less variation across countries copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

are devaluations contractionary recently a number of authors have criticized the role of devaluations in traditional stabilization programs it has been argued that contrary to the traditional view devaluations are contractionary and generate a decline in aggregate output in spite of the renewed theoretical interest in the possible contractionary effects of devaluations the empirical evidence on the subject has been quite sketchy in this paper the khan and knight 1981 model is extended to empirically address the issue of contractionary devaluations the extended model considers the effect of money surprises fiscal factors terms of trade changes and devaluations on the level of real output the results obtained using a variance components procedure on data for 12 developing countries provide some support to the short run contractionary devaluation hypothesis the results obtained indicate that in the short run a devaluation will generate a decline in aggregate output it is also found that after one year a devaluation will have an expansionary effecton output the evidence suggests that in the long run devaluations will have no effect on output this abstract was borrowed from another version of this item

biological conservation in dynamic agricultural landscapes effectiveness of public policies and trade offs with agricultural production article i nfo land use change and land management intensification are major drivers of biodiversity loss especially in agricultural landscapes that cover a large and increasing share of the world s surface incentive based agri environmental policies are designed to influence farmers land use decisions in order to mitigate environmental degradation this paper evaluates the effectiveness of agri environmental schemes for biological conservation in a dynamic agricultural landscape under economic uncertainty we develop a dynamic ecological economic model of agricultural land use and spatially explicit population dynamics we then relate policies subsidies to grassland taxation of agricultural intensity to the ecological outcome probability of persistence of a species of interest we also analyze the associated trade offs between agricultural production in value and biological conservation in probability of persistence at the landscape scale

using business simulation games in regulatory impact analysis the case of policies aimed at reducing nitrogen leaching in the past regulatory impact analysis was predominantly based on the rational choice assumption of a completely informed and exclusively profit maximizing homo oeconomicus real economic actors however are multiple goal and boundedly rational decision makers an exclusive reliance on rational choice models therefore generates the risk that both the pace and the type of behavioural adaptations to changing institutional environments are misjudged against this background this article addresses three questions first can we use business simulation games as a convincing but low cost experimental tool for policy analysis second how do intentionally varied nitrogen extensification schemes impact the behaviour of students who participate in an explorative business simulation study third do nitrogen reduction policies that are framed as voluntary as opposed to prescriptive schemes have a different impact on behaviour even if they lead to the same profits respectively in our business simulation game th

does unmeasured ability explain inter industry wage differentials this paper provides empirical assessments of the two leading explanations of measured inter industry wage differentials 1 true wage differentials exist across industries and 2 the measured differentials simply reflect unmeasured differences in workers productive abilities first we summarize the existing evidence on the unmeasured ability explanation second we construct a simple model which shows that if matching is important then endogenous job change decisions can create important self selection biases even in first differenced estimates of industry wage differentials third we analyze a sample that approximates the experiment of exogenous job loss we find that i the wage change experienced by a typical industry switcher closely resembles the difference in the relevant industry differentials estimated in a cross section and ii pre displacement industry affiliation plays an important role in post displacement wage determination

does money matter abstract the desire to attain personal wealth has long been regarded as the foremost motive for entrepreneurship other goals and values however may also contribute to entrepreneurial motivation thus the extent to which money matters relative to other motives is an empirical question in this study we examine the role of wealth as the motive for the decision to found new ventures three focal questions guide our research 1 does money matter more relative to other decision dimensions in deciding to start a new high technology venture 2 does money matter more to entrepreneurs compared to non entrepreneurs and 3 does money matter in absolute terms that is does a decision model that focuses solely on the motive of wealth attainment parsimoniously predict entrepreneurs start up decisions we conducted in depth interviews with 51 entrepreneurs and a control group of 28 senior managers who decided not to start ventures non entrepreneurs in the high technology industry in british columbia to address our research questions the motives we examined are wealth attainment and an aggregate of other dimensions identified by entrepreneurs and managers we considered three components of values participants ratings of the importance of various decision dimensions their rating of the salience of these dimensions and their satisfaction with prior levels of attainment on those decision dimensions we assessed beliefs as participants perceived probability of attaining their desired level of a particular decision dimension in each of three alternatives the position held at the time the venture decision was made the venture itself and the next best career alternative at that time the data were analyzed to compare entrepreneurs values and beliefs regarding wealth with an aggregate of other decision dimensions our relative hypotheses and with those of non entrepreneurs our comparative hypotheses our findings do not support the common perception that money is the only or even the most important motive for entrepreneurs decisions to start new ventures wealth attainment was significantly less important to entrepreneurs relative to an aggregate of 10 other decision dimensions and entrepreneurs did not rate wealth as any more important than did non entrepreneurs non entrepreneurs rated wealth as no more important than other motives wealth attainment was also significantly less salient to entrepreneurs decisions to venture than were other motives non entrepreneurs reported that wealth was significantly more salient to their decision against founding a venture than other dimensions in fact non entrepreneurs rated wealth attainment as significantly more salient to their decision against founding than entrepreneurs rated it for their decision to proceed with starting a high technology business a significant number of entrepreneurs started businesses even when they believed that doing so offered them a lower probability of obtaining their most desired level of wealth than did one of their other alternatives satisfaction ratings and stated beliefs also dispute classical predictions just prior to making the decision to venture the entrepreneurs in our study were as satisfied with wealth as they were with other decision dimensions the non entrepreneurs were actually more satisfied with wealth attainment than with other dimensions a comparison of the groups revealed no difference in satisfaction with wealth attainment levels entrepreneurs did believe that their chances of attaining their desired level of wealth were much greater through founding a new high technology venture than through their other alternatives this difference in beliefs however was not significantly greater than their optimistic beliefs about chances of attaining desired levels of other dimensions it was significantly higher compared to the non entrepreneurs belief difference measures for wealth in fact the entrepreneurs stated beliefs regarding the chances of attaining their desired levels of all dimensions were higher than those of the non entrepreneurs suggesting that entrepreneurs were simply more optimistic at the time of their decision than non entrepreneurs salience findings suggest that these optimistic beliefs about wealth did not motivate the founding decision alone we can distinguish those people who successfully started ventures by their regard for wealth as a less salient factor and their beliefs in higher chances of a venture producing monetary and other returns other motives such as innovation vision independence and challenge were more important and much more salient to this sample of entrepreneurs our findings have implications for practice teaching and research venture capitalists who partially base their assessment of entrepreneurs on the extent to which they are motivated to make a great deal of money may benefit from reconsideration of this criterion we have evidence of one group of high technology entrepreneurs who achieved success without placing much decision weight on attainment of personal wealth nascent entrepreneurs and those who teach entrepreneurship can use this empirical finding to argue two main points 1 not all entrepreneurs found a business for personal wealth reasons and 2 one need not be motivated by personal wealth attainment to be a successful entrepreneur similarly theoretical models that assume money is the primary motive for entrepreneurial activity require re examination future research in entrepreneurship should focus less on wealth attainment and more on other motives for the venturing decision a multiple attribute decision model may be able to more fully explain venturing decisions

labor supply estimation biases from disregarding nonwage benefits labor supply models and research underpinned by labor supply decisions typically assume the agents choices are functions of wage and wage offers however there is evidence that these selections are not only wage driven but at least in part depend on non wage benefits encompassed in jobs and occupations in this paper i develop and estimate a stochastic dynamic model of occupational and job choice where non wage benefits are directly incorporated into the decision alongside wages a nested model within this is a wage model representing common practice in the literature where non wage benefits are disregarded i separately estimate the full model and the nested wage model in order to compare the implications of omitting non wage benefits three analyses are compared elasticities economy wide structural changes in occupations and inequality reduction intervention policies i find that while disregarding non wage benefits generally causes biases there are cases when the two models predict very similar outcomes and have close estimates such as in occupational specific elasticities and job transition elasticities however i demonstrate that these special cases are products of canceling biases and that the same estimates on subpopulations are biased these results suggest that in most cases ignoring non wage benefits will bias estimates by overestimating the importance of wage in the selection process and so any intervention or change in wages will be over emphasized and by disregarding changes in relative prices between wage and non wage benefits such as happens through changes in wage taxes or in non wage benefits these biases can be severe the results suggest that ignoring non wage benefits in labor supply decisions is appropriate only in the special case in which subpopulation biases negate each other which is atypical i would like to thank moshe buchinsky and maria casanova for their invaluable and continual help in this project as well as rosa matzkin arturo harker seth kerstein dan ben moshe peter bergman anonymous referees at review of economics and statistics and seminar participants at ucla rand syracuse university the bureau of labor statistics and the census bureau for numerous helpful comments and suggestions

promotion turnover and compensation in the executive labor market this paper develops a generalized roy model with human capital accumulation moral hazard and career concerns we identify and estimate the model with a large panel that matches data on publicly listed firms to information on their executives the structural estimates obtained are used to decompose the firm size pay gap we find that although total compensation and incentive pay increase with firm size certainty equivalent pay decreases with firm size in larger firms and for more highly ranked executives weaker signal quality about effort results in higher risk premiums this risk premium accounts for roughly 80 percent of the firm size gap in total compensation larger firms are also willing to pay more than smaller ones to attract executives finally the estimated coefficients on human capital accumulation from formal education and experience gained from different firms are individually significant but their collective effect on firm size pay differentials nets out

the use of structural models in econometrics costas meghir has been supported by the cowles foundation and the institution for social and policy studies isps at yale university

lost in transition the costs and consequences of sectoral labour adjustment this paper uses an equilibrium search and matching model to study canada s sectoral labour adjustment in 2002 2006 during an increase in global commodity prices and exchange rate appreciation i estimate economically significant adjustment costs for the aggregate economy in this episode and demonstrate that difficulty in transferring skills between jobs for individual workers can be an important contributor to these aggregate costs the analysis also demonstrates that the level of unemployment benefits impacts the economy s sectoral composition its aggregate productivity and the speed of its adjustment to shocks ce texte utilise un modele d equilibre de la recherche et de l arrimage pour etudier les ajustements sectoriels du travail au canada dans la periode 2002 2006 une periode d appreciation des prix globaux des produits de base et du taux de change j estime que les couts d ajustement sont economiquement significatifs pour l economie agregee au cours de cet episode et que la difficultea transferer les competences entre emplois pour les travailleurs individuels peut etre une source importante de ces couts agreges les analyses montrent aussi que le niveau des prestations d assurance emploi a un impact sur la composition sectorielle de l economie sur la productivite et sur la vitesse des ajustements aux chocs

cyclical fluctuations and sectoral reallocation evidence from the psid abstract this paper documents the correlation between permanent sectoral reallocation and the business cycle using data from the michigan panel study of income dynamics we find that the outflow of workers from goods to services accelerates during recessions the flow from services to stable employment in surables accelerates during booms we also document the contribution of sectoral reallocation to total unemployment permanent switchers account for about a quarter of the total weeks of unemployment during booms this proportion rises to nearly 40 duing recessions

an estimable dynamic general equilibrium model of work schooling and occupational choice this paper develops and estimates a dynamic general equilibrium overlapping generations model of career decisions the model is fit to data on life cycle employment schooling and occupation decisions and on life cycle labor earnings within and between cohorts observed in the us between 1968 and 1993 based on the estimates of the model the impact of cohort size on skill prices and consequently on career decisions is assessed compared to a baseline case in which cohort size increased at a steady average rate and the fertility process was stationary it is found that the male baby bust generations born in the 1930s and 1940s faced higher skill prices by as much as 2 0 completed college at a higher rate by as much as 0 3 percentage points and worked more over the lifetime by as much as 0 1 years in contrast the males from the baby boom generations born in the 1950s and 1960s faced lower skill prices by as much as 1 5 completed college at a lower rate by as much as 1 0 percentage points and worked less over the lifetime by as much as 0 1 years the impact of cohort size is found to differ across gender due to the differential impact of fertility on the value of home production unlike males the female baby bust generations completed college at a lower rate by as much as 1 5 percentage points and worked less over the lifetime by as much as 0 5 years while the female baby boom generations completed college at a lower rate by as much as 1 5 percentage points and worked more over the lifetime by as much as 0 2 years a tuition subsidy experiment is also performed both in a general equilibrium setting in which skill prices are endogenous and in a partial equilibrium setting with fixed skill prices based on the estimated model a 1 increase in tuition is predicted to reduce college enrollment rates by 1 27 in partial equilibrium consistent with previous estimates and by 1 05 in the general equilibrium case thus for this policy experiment the partial equilibrium analysis of schooling choice would not differ significantly from the general equilibrium analysis

resource management under production and output price uncertainty implications for environmental policy various environmental policies have been proposed to control agricultural runoff of nutrients and pesticides the impacts of these policies on input use are complicated because of the various sources of uncertainty farmers face and the precise nature of farmers risk attitude a risk averse farmer s response to changed profit input and output taxes under output price and production uncertainty is examined the impact of these policies on input use depends on the form of production uncertainty risk input relationships risk attitudes and degrees of output price and production uncertainty these results have implications for the design and implementation of environmental and other production related policies copyright 2002 oxford university press

intersectoral labor mobility and the growth of the service sector one of the most striking changes in the u s economy over the past 50 years has been the growth in the service sector between 1950 and 2000 service sector employment grew from 57 to 75 percent of total employment however over this time the real hourly wage in the service sector grew only slightly faster than in the goods sector in this paper we assess whether or not the essential constancy of the relative wage implies that individuals face small costs of switching sectors and we quantify the relative importance of labor supply and demand factors in the growth of the service sector we specify and estimate a two sector labor market equilibrium model that allows us to address these empirical issues in a unified framework our estimates imply that there are large mobility costs output in both sectors would have been double their current levels if these mobility costs had been zero in addition we find that demand side factors that is technological change and movements in product and capital prices were responsible for the growth of the service sector

does devaluation cause stagflation the traditional view that devaluation tends to increase domestic real income and output has been challenged in recent years on the grounds that trade flows including factor imports are relatively insensitive to exchange rate changes especially in developing countries this paper presents a simple macro economic model in which devaluation influences real income and output both through the cost of imported inputs on the supply side of the economy and through exports imports and expenditures on the demand side statistical estimates of the structural parameters of the model for a group of ten industrial and developing countries are used to show that the demand effects dominate the cost effects in most cases thus supporting the traditional view that devaluation has positive real effects in these countries in the short to medium run est ce que la devaluation engendre la stagflation le point de vue conventionnel veut que la devaluation tende a accroitre le niveau du revenu et de la production domestiques c est un point de vue qui a ete remis en question ces dernieres annees parce que dit on les flux de commerce international y compris les flux d importation de facteurs de production semblent relativement insensibles aux changements dans le taux de change ce memoire developpe un modele macro economique simple dans lequel la devaluation influence le niveau de revenu et de production en termes reels via le co ut des facteurs de production importes du cote de l offre et via les exportations les importations et les niveaux de depenses du c6te de la demande les auteurs utilisent la calibration statistique des parametres structurels du modele pour un groupe de dix pays industrialises et en voie de developpement pour montrer que les effets du cot6 de la demande dominent les effets de cofuts dans la plupart des cas voila qui supporte le point de vue traditionnel qui veut que la devaluation ait un impact positif reel dans les pays devaluateurs a court et a moyen tenne

labor market search and schooling investment we generalize a search matching and bargaining model to allow individuals to acquire productivity enhancing schooling prior to labor market entry in general search frictions and weakness in bargaining position contribute to underinvestment in schooling from an efficiency perspective using estimates of a general equilibrium version of the model in which firm vacancy creation decisions are included we find that minimum wages and schooling subsidies improve aggregate welfare but have very different welfare impacts across the ability distribution in particular policies that maximize the average welfare of workers have strongly negative effects on the welfare of the least able

individual heterogeneity and interindustry wage differentials estimates of interindustry wage differentials are obtained using a fixed effects estimator on a long panel the national longitudinal survey of young men nls after controlling for observable worker characteristics 84 percent of the residual variance of log wages across industries is explained by individual fixedeffects only 16 percent of the residual variance is explained by industry dummies since no controls for specific job characteristics are used job characteristics that vary across industries could potentially explain this rather small residual across industry log wage variance that is not attributable to individual effects clearly then these data do not force us to resort to noncompetitive explanations of interindustry wage differentials such as efficiency wage theory furthermore efficiency wage theories predict that wages in efficiency wage paying or primary industries should be relatively rigid therefore industry wage differentials should widen in recessions however no such tendency is found in the data

returns to talent and the finance wage premium to study the role of talent in finance workers pay we exploit a special feature of the french higher education system wage returns to talent have been significantly higher and have risen faster since the 1980s in finance than in other sectors both wage returns to project size and the elasticity of project size to talent are also higher in this industry last the share of performance pay varies more for talent in finance these findings are supportive of finance wages reflecting the competitive assignment of talent in an industry that exhibits a high complementarity between talent and scale received october 11 2017 editorial decision september 4 2018 by editor stijn van nieuwerburgh authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

long term wage fluctuations with industry specific human capital exploiting long term interindustry demand shifts this article provides evidence that 1 industry level wages do not respond to industry demand conditions 2 at the industry level the employment of young workers responds more to demand shifts than does the employment of experienced workers and 3 the postdisplacement wages of displaced workers are strongly affected by demand in their predisplacement industries these findings are consistent with a model in which worker s investments in industry specific skills pose a barrier to interindustry labor mobility and wages do not respond to spot labor market conditions

education mobility and the college wage premium abstract motivated by large educational differences in geographic mobility this paper considers a simple dynamic extension of roy s 1951 model and analyzes it using new evidence on net versus excess mobility and the individual level relationship between mobility and wages according to the model the dispersion of a labor income shock specific to a worker location match is greater for more educated workers and accounts for large educational differences in mobility in the model labor mobility raises both the average wage and the college wage premium a prediction consistent with differences between europe and the u s

fiscal policy and occupational employment dynamics we document substantial heterogeneity in occupational employment dynamics in response to government spending shocks in the united states employment rises most strongly in service sales and office pink collar occupations by contrast employment in blue collar occupations is hardly affected by fiscal policy we provide evidence that occupation specific changes in labor demand are key for understanding these findings we develop a business cycle model that explains the heterogeneous occupational employment dynamics as a consequence of composition effects due to heterogeneous employment changes across industries and occupation specific within industry employment shifts due to differences in the short run substitutability between labor and capital services across occupations

mobility constraints productivity trends and extended crises abstract in this paper we propose an interpretation of the current global financial crisis which emphasizes sectoral dislocation following localized technical change in the presence of barriers to labor mobility this tale is reminiscent of a similar tale concerning the great depression in the 30s technical change was localized in agriculture where income fell because rising productivity could not be offset by a shrinking labor force due to the costs of moving out of agriculture for unemployed workers inelastic demand for agricultural output meant that as output increased income declined as individual incomes fell below the level necessary to finance the transition to manufacturing excess labor became trapped in agriculture reducing wages and exacerbating the rise in output shrinking incomes in agriculture reverberated on the other sectors mainly manufacturing causing a large depression nowadays it is manufacturing that plays the role of epicenter of technical change falling incomes in manufacturing yield a lack of demand for goods produced in the rest of the economy namely the service sector this may be the deep rooted cause of the long lasting slump and the painfully slow recovery

sectoral shifts and interindustry wage differentials the observed differences in wages across industries may arise from a lack of worker mobility particularly among experienced workers allowing the effects of industry shocks to persist for some time although young workers arbitrage wage shocks they will have little effect on the dispersion of experienced workers wages if young and old workers are poor substitutes in production this explanation is investigated using the five censuses of population between 1940 and 1980 the evidence strongly suggests that differences in pay are not temporary phenomena the data provide some support for the role of human capital and ability