the macroeconomics of fiscal consolidations in euro area countries we simulate a currency union dynamic general equilibrium model to assess the macroeconomic implications of permanently reducing the public debt to gross domestic product gdp ratio in euro area countries we obtain the following results first tax distortions are quantitatively significant second the best fiscal consolidation strategy is to permanently reduce both expenditures and tax rates third under such a consolidation strategy the transition is generally not costly as the gdp and investment would grow while private consumption would not fall finally spillovers to the rest of the euro area are generally expansionary

dodging the grabbing hand the determinants of unofficial activity in 69 countries across 69 countries higher tax rates are associated with less unofficial activity as a percent of gdp but corruption is associated with more unofficial activity entrepreneurs go underground not to avoid official taxes but to reduce the burden of bureaucracy and corruption dodging the grabbing hand in this way reduces tax revenues as a percent of both official and total gdp as a result corrupt governments become small governments and only relatively uncorrupt governments can sustain high tax rates 2000 elsevier science s a all rights reserved

micro estimates of public spending demand functions and tests of the tiebout and median voter hypotheses responses to questions given to a random sample of michigan households are used to estimate public spending demand functions while income and price elasticities are similar to those obtained from aggregate data positive income elasticities appear to arise because public services are distributed in a prorich manner a relatively small variance in spending demands among urban and suburban communities in metropolitan areas with substantial public service variety suggests that the tiebout mechanism works this interpretation is supported by the fact that actual spending conforms substantially to desired levels in urban areas but less so in rural areas with little public sector choice

individual production community characteristics and the provision of local public services abstract socioeconomic variables reflect differences in individual production functions for such commodities as a personal safety or education where both private goods and community characteristics are inputs to this production government activities are demanded because of their direct impact on community characteristics and indirect contribution to production since each activity affects many characteristics efficient provision depends upon the proper consideration of the cross effects of community activities on characteristics because production functions may differ across demographic groups efficient provision depends upon community demographics and heterogeneity in equilibrium may result a method for indexing public services using community characteristics is suggested allowing the isolation of movements in prices and quantities from expenditure data

on analyzing the world distribution of income consideration of world inequality should cause reexamination of the key concepts underlying the welfare approach to measuring income inequality and its relation to measuring poverty this reexamination leads to exploration of a new measure that allows poverty and inequality to be considered in the same framework incorporates different approaches to measuring inequality and allows varied expressions of the cost of inequality applied to the world distribution of income for 1820 1992 the new measure provides different perspectives on the evolution of global inequality

mixed markets and crime abstract this paper specifies and solves a two stage game theoretic model of a mixed market for crime control in the first stage of the model private targets and the government choose levels of policing in the second stage criminals choose targets and the severity of the crimes that they commit the paper s key results are as follows first private policing can both divert crime to targets that lack private protection and also increase the severity of the crime that these less protected targets suffer second an increase in private policing reduces the aggregate expenditure on traditional policing this is an instance of a political incentive externality where private policing affects the objective function of the government specifically it reduces the level of traditional policing that is consistent with the samuelson condition for efficient provision of a public good third the substitution of private for public policing carries with it a change in the technology of policing in effect private policing leads to a shift from enforcement and punishment towards monitoring and target hardening this in turn may lead to an increase in the severity of crime fourth the mixed policing equilibrium is inefficient and in some situations mixing may reduce the utility of all targets

local characteristics and public production the case of education in a long tradition of papers beginning with borcherding and deacon 5 and bergstrom and goodman 3 local government expenditure is viewed as the outcome of a political process in which the utility of the median voter is maximized subject to an appropriate resource constraint expenditures are specified as a function of the median voter s income the tax price and a set of local characteristics representing the tastes of the jurisdiction s residents the tax price variable incorporates the median voter s tax share and unit costs of providing local public services which depend on input prices and population served local variables though included on the demand side as taste factors are assumed to have no effect on the cost of producing local public services in this paper we ask whether local variables affect production costs directly using california data in which taste factors are virtually eliminated from the demand for education expenditure we find that local variables altect the production of education achievement sign y empirical estimates from median voter models in which local variables are

coming out of the shadows estimating the impact of bureaucracy simplification and tax cut on formality in brazilian microenterprises abstract this paper evaluates the impact of a program of bureaucracy simplification and tax reduction on formality among brazilian microenterprises the simples program we document an increase of 13 percentage points in formal licensing among retail firms created after the program when compared to firms in ineligible sectors the impact on retailers is robust to a series of tests we find no impact on construction transportation services and manufacturing sectors

on the measurement of congestion in the provision of local public goods abstract this paper contends that a measurement problem the zoo effect has led to upwardly biased estimates of the degree to which local public goods are subject to congestion the suggestion is that the observed positive correlation between public expenditure and population size reflects in large measure the wider range of services provided in more populous jurisdictions not simply a high propensity of these goods to become congested

is the median voter decisive evidence from referenda voting patterns abstract this paper examines whether the voter with the median income is decisive in local spending decisions previous tests have relied on cross sectional data while we make use of a pair of california referenda to estimate a first difference specification the referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50 and 67 to 55 respectively we find that voters rationally consider future public service decisions when deciding how to vote on voting rules however the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules especially in communities that have a large share of high income voters with attributes that suggest low demand for public services based on a model that explicitly recognizes that each community contains voters with both high and low demand for public school spending we also find that an increase in the share of low demand voters is associated with a lower decisive voter income percentile for the high demand group this two type model implies that our low demand types individuals over age 45 with no children have demands that are 45 lower than other voters collectively these findings are consistent with high income voters with weak preferences for public educational services voting with the poor against increases in public spending on education

productivity change in state and local governments a model is developed in this paper which allows the growth rate of public sector productivity to be estimated without an explicit measure of sectoral output in this model communities are regarded as generalized households and the goods and services provided by the community s government are interpreted as internally produced household goods the model is then fitted to quarterly data from the u s national income and product accounts and the rate of productivity change is found to average 0 50 per year for the period 1959 1979 the sources of growth approach to productivity measurement distinguishes between the growth in real output due to the growth in factor inputs capital labor materials and the growth in output due to advances in technology managerial practice and other factors related to productive efficiency the former are collectively associated with the movement along an aggregate or sectoral production function while the latter are associated with the shift in that function 2 in practice the shift in the production function is measured by the residual real output not attributed to the growth of the share weighted inputs and termed total factor productivity the sources of growth model is based on the underlying assumption that real output and real input can be measured with a reasonable degree of accuracy while this presumption is correct for many types of economic activity it is essentially incorrect for those sectors which produce services as kendrick 1982 has recently noted approximately one third of the real gross product originating in the service sector of u s private business economy is estimated using employment manhours or labor earnings such procedures systematically misstate the true growth of real output and thus systematically bias the estimated growth in total factor productivity the situation is even worse in the public sector in the u s national income and product accounts the output of general government is defined to be equal to labor input implying that the growth of total factor productivity exactly offsets the effect of nonlabor inputs a model is developed in this paper which allows the growth rate of public sector productivity to be estimated without an explicit measure of sectoral output in this model communities are regarded as generalized households and the goods and services provided by the community s government are interpreted as internally produced household goods this interpretation allows us to appropriate the analytical apparatus of the household production model and thereby permits us to estimate the key parameters of the model including a government total factor productivity parameter without first having to measure the output of the govern

regulation and growth why some countries grow faster than others is one of the most important questions in economics solving this puzzle has the obvious appeal of improving the living standards for a significant proportion of the world population we go further towards answering this question by studying a major determinant of growth regulations governing business activity our results also have significant implications for policy they suggest that countries should put priority on reforming their business regulations when designing growth policies measures of institutions currently used in the growth literature indicate the extent of problems but not how to resolve them by contrast the indicators in the doing business database are directly linked to specific reforms for example the procedures to register a business or property can be cut by combining them at a one stop shop for businesses establishing a credit bureau or reducing mandated severance pay for workers will also improve performance on the business regulations index our findings imply that identifying and implementing such reforms can accelerate economic growth

community composition and the provision of local public goods abstract there is considerable evidence suggesting that the composition of the community that is the characteristics of the residents themselves plays a central role in determining levels of important public outputs such as education and public safety this paper explores the normative implications of this evidence we show that optimal community composition involves a trade off between the gains from homogeneity in demands among residents and the gains from heterogeneity in the production of those goods the analysis establishes a role for equalizing intergovernmental grants on efficiency grounds such grants can provide the needed incentives for sustaining heterogeneous communities

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

self interest and public funding of education abstract the objective of this paper is to study whether publicly funded education can emerge as a political and economic equilibrium in an overlapping generations economy in which selfish agents vote for public funding of education the presence of complementarities between capital and labor in the production function implies that by improving the skills of next period s workers public funding of education increases the return on capital as a result savers will support a publicly financed education system in order to enhance their future income a version of the model calibrated using u s data generates large shares of gnp allocated to education hence the non altruistic incentive to support public education is quantitatively important

bank competition and firm creation we investigate the effects of competition in the financial sector on the creation of firms in the nonfinancial sector explicitly allowing for heterogeneous effects across borrowers characterized by different degrees of asymmetric information we find evidence of a bell shaped relationship between bank competition and firm creation in addition consistently with theories arguing that competition may reduce the availability of credit to informationally opaque firms we find that bank competition results less favorable to the emergence of new firms in industrial sectors where informational asymmetries are more important

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

the role of regulation on entry evidence from the italian provinces this paper studies the effects of differences in local administrative burdens in italy in the years 2005 2007 preceding a major reform that sped up firm registration procedures combining regulatory data from a survey on italian provinces before the reform costs and time to start a business with industry level entry rates of limited liability firms it explores the effects of regulatory barriers on the average of the annual entry rates across industries with different natural propensities to enter the market the estimates of the cross sectional analysis show that lengthier and to some extent more costly procedures reduced entry in sectors with naturally high entry a one day delay in registration procedures reduces the entry rate in highly dynamic sectors by more than 1 percent these results hold when i include measures of local financial development and of efficiency of bankruptcy procedures are included

financial dependence and growth revisited we revisit an earlier highly influential paper on financial dependence and growth by rajan and zingales 1998 we re examine their assumptions and the robustness of their results to alternative theories and interpretations we first show that they may be implicitly testing whether financial intermediaries allow firms to better respond to global shocks to growth opportunities rather than the extent that financial intermediaries allow firms to grow in industries with an inherent technological financial dependence we propose a more direct measure of growth opportunities if u s capital markets are perfect then actual growth in the u s is a good proxy for global growth opportunities we test this directly by including u s industry growth in rajan and zingales s original specification and find that our direct growth measure outperforms their financial dependence measure and is less vulnerable to controlling for outliers and level of development this still suggests an important role for finance in the allocation of resources but shifts the emphasis from financial dependence to global growth opportunities jel f3 g1 o4

an analysis of returns to scale in public production with an application to fire protection abstract this paper analyzes returns to scale in public production existing studies fail to differentiate among three dimensions of scale service quality the level of governmental activity and the number of people served a fourth dimension economies of scope is need for agencies that provide multiple services this paper provides a formal definition of returns to scale for each dimension this framework is applied to fire protection using a translog cost function with two services fire prevention and fire suppression the results indicate economies of scope increasing returns to quality scale and constant returns to population scale

does entry regulation hinder job creation evidence from the french retail industry are product market and entry regulation key sources of low employment growth in many european countries we investigate this question in the context of the french retail trade industry since 1974 approval by regional zoning boards has been required for the creation or extension of any large retain store in france we exploit a unique database that provides time and region specific variation in boards approval decisions we show that stronger deterrence of entry by the boards increased retailer concentration and slowed down employment growth in france

fiscal and spending behavior of local governments identification of price effects when prices are not observed this paper analyzes local public fiscal andspending behavior in a setting where localgovernments represented by the dominantparty or coalition are treated as utilitymaximizing agents the econometricanalysis which is based on a modifiedversion of eles recognizes total spendingas well as total income as endogenousvariables identification of the priceeffects is achieved by utilizing data onenvironmental cost factors and localtastes the performance of the estimatedmodel is investigated by testing itsability to make out of sample predictionsof local government behavior

the role of social capital in financial development to identify the effect of social capital on financial development we exploit social capital differences within italy in high social capital areas households are more likely to use checks invest less in cash and more in stock have higher access to institutional credit and make less use of informal credit the effect of social capital is stronger where legal enforcement is weaker and among less educated people these results are not driven by omitted environmental variables since we show that the behavior of movers is still affected by the level of social capital of the province where they were born

job search in thick markets abstract i analyze empirically the effects of urban and industrial agglomeration on both search behavior and the efficiency of matching the analysis is based on a unique panel data set from the italian labor force survey micro data covering 520 randomly drawn local labor market areas 66 of the total over the four quarters of 2002 i compute transition probabilities from non employment to employment by jointly estimating the probability of searching and the probability of finding a job conditional on having searched i then test whether these are affected by market size industrial variety and or industry specialization the main results indicate that market size and industry specialization raise job seekers chances of finding employment conditional on having searched while industrial variety is not significantly different from zero finally the effect of agglomeration on non employed individuals search behavior cannot be significantly distinguished from zero

regulation and distrust in a cross section of countries government regulation is strongly negatively correlated with social capital we document this correlation and present a model explaining it in the model distrust creates public demand for regulation while regulation in turn discourages social capital accumulation leading to multiple equilibria a key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt we test this and other implications of the model using country and individual level data on social capital and beliefs about government s role as well as on changes in beliefs and in trust during the transition from socialism

elections and aggregation interpreting econometric analyses of local governments this paper analyzes the provision of local government service under the assumption that fiscal policy is set by local officials in order to maximize the expected number of votes in the next election the model includes both the widely used median voter model and the average voter model as special cases further it is a convenient framework for empirical analyses numerical simulations indicate that the vote maximization model is capable of producing levels of government spending either greater or less than those predicted by the median voter model while exhibiting similar responses to changes in incomes grants prices etc thus the model captures the advantages of the median voter model without its objectionable features many avenues for further work remain i will mention briefly only a few of the most obvious the first is to make housing prices endogenously determined within the model in this way one could examine the role of both fiscal incentives capitalization and political incentives votes in the determination of optimal policies a second extension is to introduce explicitly the possibility of a mobile population and examine in the spirit of tiebout 1956 the effects of voting with your feet within the vote maximization framework the possibilities include both setting policies that de facto concede exit of some fraction of the current residents and or setting policies to attract new residents with particular characteristics another extension is to look at decisions over time despite widespread agreement upon the usefulness of the life cycle model of private consumption the median voter is essentially static it seems a minimal extension to include both government and private consumption in an intertemporal framework unfortunately the median voter may change over time making implementation of the median voter model problematic at best in practice intertemporal issues are important emphasizing the absence of an acceptable framework it is often suggested that elected officials will choose inappropriate intertemporal fiscal policies in response to the short run focus of the electoral process for example it appears plausible that officials will borrow in order to finance higher levels of spending and or lower taxes in the present because future residents are not present to vote against these policies the electoral process produces incorrect incentives in the same way this line of reasoning suggests that officials will undertake too little infrastructure investments because the benefits accrue to future residents one countervailing force is the effects of property capitalization to the extent that the local housing market correctly capitalizes future taxes and services into housing values current residents will be affected by inefficient policies and may use the electoral process to provide correct signals to officials there is another possibility as well to the extent that current officials recognize that inefficient current policies reduce the probability of future re election they have an incentive even in the absence of perfect capitalization to adopt intertemporally appropriate tax and spending policies intuitively the official must care about re election what if the particular individual chooses not to run for office again then to the extent that political parties or machines cause the individual to value the election of his successor i e to the extent that political legacies are important the adopted policies may satisfy the conditions for intertemporal efficiency the vote maximization approach provides a framework in which to analyze these issues lastly one could extend the model to situations in which officials care not only about election but also about the policies themselves this provides not only a different tradeoff between the tastes of the public and private sector but also a natural incentive for officials to seek re election

uncertainty and currency crises evidence from survey data this paper studies empirically how uncertainty aects speculation in the foreign ex change markets we use the dispersion of survey forecasts of key macroeconomic variables to measure uncertainty about fundamentals we nd that uncertainty has a non monotone eect on exchange rate pressures namely uncertainty heightens speculative pressures when expected fundamentals are good and eases them when they are bad we prove that this prediction arises from a broad class of currency crisis theories ranging from rst generation to global game models we also show that the proposed empirical strategy remains valid in the presence of forecasters with strategic objectives and use a novel set of instrumental variables to address potential endogeneity bias

observations on the frontiers and fringes of the neoclassical paradigm the neoclassical paradigm is viewed by most economists as broadly based in that a wide range of political and ethical views can be incorporated within it the political spectrum captured by the neoclassical framework includes the socialist writings of lerner as well as the libertarian views of friedman similarly the elitist ethical viewpoint of edgeworth and the egalitarian leanings of pigou both fit comfortably within neoclassical analysis even more fundamental to the long term robust survival of neoclassical thought is the spirit of nineteenth century scientific optimism which is embodied within it the notion that rational thought applied through use of the scientific method will result in genuine social progress is at the core of the neoclassical approach which models each and every consumer as a rational utility maximizer bent on applying these scientific principles to achieving greater personal and social wellbeing one if not the principal policy manifestation of neoclassical thought is use of benefit cost analysis it is here where scientific optimism is most clearly defined an implicit assumption in benefit cost analysis is that the income distribution has already been adjusted to some ideal this in the view of many economists serves to remove most normative aspects from any decision the job of the economist is then simply to see that marginal benefits are set equal to marginal costs to achieve efficiency another implicit assumption in benefit cost analysis is that all values including for example the value of preserving the blue whale can be measured in dollar terms for inclusion in benefit cost analysis both of these implicit assumptions have created real practical difficulties for the application and acceptance of benefit cost analysis and have resulted in challenges to use of the neoclassical paradigm for policy purposes from both philosophers and psychologists for example philosophers object that benefit cost analysis focuses only on consequences and ignores process psychologists note that values placed on avoiding disasters such as might arise from failure of a dam or an airline accident are inconsistent with expected utility theory further people may simply be unable to value commodities with which they have no learning and experience sections two and three of this paper document the historical difficulties in applying benefit cost analysis while the fourth section focuses on the formal theoretical objections to the neoclassical paradigm arising from philosophy and psychology and speculates on the implications of these challenges

the rise of risk based pricing of mortgage interest rates in italy abstract this paper assesses how much mortgage interest rates in italy are priced on credit risk as proxied by the probability of household mortgage delinquency estimated using the eu silc database owing to data availability we restrict the analysis of mortgage pricing to italian households consistent with the more widespread use of credit scoring estimates indicate that italian lenders have increasingly priced mortgage interest rates on household credit risk for mortgages granted between 2000 and 2007 we find that a 1 point increase in the probability of default is associated with a 21 basis point rise in mortgage interest rates lower than the 38 basis point premium edelberg 2006 estimated for the us at the end of the 1990s

the flypaper effect and other anomalies abstract i develop a model in which income both in its own right and as a proxy for other socioeconomic characteristics is an input in the production function for local public services the most obvious example is education though there are other applications as well the comparative statics results from this model yield the following results 1 the observed flypaper effect the tendency for local government to spend a higher fraction of unrestricted grants than income of residents may be due at least in part to the fact that own income but not grants is a substitute for purchased inputs in the technology hence the propensity to spend on purchased inputs out of own income is lower than out of grants 2 the income elasticity of demand for public sector output may be higher than the observed income elasticity of demand for purchased inputs 3 equalization of educational opportunity via wealth neutrality as suggested by feldstein requires major changes in education finance once we recognice the distinction between purchased inputs and output

efficiency of experimental security markets with insider information an application of rational expectations models the study reports on the ability of competing models of market information integration and dissemination to explain the behavior of simple laboratory markets for a one priced security returns to the security depended upon a randomly drawn state of nature some agents insiders whose identity was unknown to other agents knew the state before the markets opened with replication of market conditions the predictions of a fully revealing rational expectations model are relatively accurate prices adjusted immediately to near rational expectations prices profits of insiders were virtually indistinguishable from non insiders and efficiency levels converged to near 100 percent

disentangling the demand function from the production function for local public services the case of public safety abstract in this paper we develop a theoretical framework and an econometric model which allow us to separate the effect of income and other socioeconomic variables on the demand for publicly provided goods from their effect on the price of those goods we apply our approach in a study of expenditures for police protection in a cross section of 73 u s cities and counties our results suggest that studies of public expenditures which fail to incorporate community characteristics in production and cost functions can yield very misleading results

entry industry growth and the microdynamics of industry supply entry is widely discussed but rarely subjected to empirical study this study develops a competitive theory of entry with primary focus on the relationship between entry and industry growth the main ingredients are adjustment costs to firms already in the industry and the distribution of fixed entry cost to potential entrants the theory suggests sufficient conditions under which the entry rate is an increasing convex function of the industry growth rate a regression model correcting for severe heteroscedasticity is applied to data from swedish manufacturing industries the results are consistent with the theoretical prediction for growth and other key variables expected to influence entry significantly

red tape and delayed entry does cutting red tape foster entrepreneurship in industries with the potential to expand we address this question by combining the time needed to comply with government entry procedures in 45 countries with industry level data on employment growth and growth in the number of establishments during the 1980s our main empirical finding is that countries where it takes less time to register new businesses have seen more entry in industries that experienced expansionary global demand and technology shifts our estimates take into account that proxying global industry shifts using data from only one country or group of countries with similar entry regulations will in general yield biased results

property taxation and local public spending the renter effect the point of departure for this study is the pervasive finding that other things equal local jurisdictions tend to spend more on local services the larger the fraction of renters among their residents this paper seeks to determine the approximate magnitude of this renter effect by posing the question how much smaller would local public budgets be if all residents were home owners making use of two quite different approaches the paper finds a typical renter effect on local public expenditure on the order of ten percent this finding suggests that we might do well to reform the administration of the property tax so that changes in property tax liabilities on rental dwellings are directly and visibly transformed into changes of monthly rental payments

majority rule and the public provision of a private good this paper extends the literature on the socialization of commodities by developing a model of voting over the public provision of a private good health care

debt maturity choice of nonpublic italian firms this paper focuses on debt maturity of nonpublic italian firms of small and medium size by international standards and that mainly use bank loans as source of external financing compared to few similar studies the main contributions are that panel estimations allow to control for unobserved firm heterogeneity firms are also permitted to choose simultaneously leverage and debt maturity the evidence is that debt maturity is shorter for companies that are riskier and affected by asymmetric information in areas of the country with poorer legal enforcement in choosing debt maturity lenders lay greater emphasis on indicators of firm information opacity

the unequal enforcement of liberalization evidence from russia s reform of business regulation we document the unequal enforcement of liberalization reform of business regulation across russian regions with different governance institutions which leads to unequal effects of liberalization national liberalization laws were enforced more effectively in subnational regions with more transparent government a more informed population a higher concentration of industry and stronger fiscal autonomy as a result liberalization had a substantial positive effect on the performance of small firms and the growth of the official small business sector in regions with stronger governance institutions in contrast in regions with weaker governance institutions we observe no effect of reform and in some cases even a negative effect

willingness to pay and compensation demanded experimental evidence of an unexpected disparity in measures of value aside from possible income effects measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent unexpectedly wide variations between these sums however have been noted in survey responses to hypothetical options this paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations the results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure which would appear to call into some question various rules of entitlement damage assessments and interpretations of indifference curves

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

does local financial development matter we study the effects of differences in local financial development within an integrated financial market we construct a new indicator of financial development by estimating a regional effect on the probability that ceteris paribus a household is shut off from the credit market by using this indicator we find that financial development enhances the probability an individual starts his own business favors entry of new firms increases competition and promotes growth as predicted by theory these effects are weaker for larger firms which can more easily raise funds outside of the local area these effects are present even when we instrument our indicator with the structure of the local banking markets in 1936 which because of regulatory reasons affected the supply of credit in the following 50 years overall the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements

entry regulation and business start ups evidence from mexico the authors estimate the effect on business start ups of a program that significantly speeds up firm registration procedures the program was implemented in mexico in different municipalities at different dates authors estimates suggest that new start ups increased by about 4 percent in eligible industries and the authors present evidence that this is a causal effect most of the effect is temporary concentrated in the first 10 months after implementation the effect is robust to several specifications of the benchmark control group time trends the authors find that the program was more effective in municipalities with less corruption and cheaper additional procedures