learning about a new technology pineapple in ghana this paper investigates the role of social learning in the diffusion of a new agri cultural technology in ghana we use unique data on farmers communication patterns to define each individual s information neighborhood conditional on many potentially confounding variables we find evidence that farmers adjust their inputs to align with those of their information neighbors who were surpris ingly successful in previous periods the relationship of these input adjustments to experience further indicates the presence of social learning in addition applying the same method to input choices for another crop of known technol ogy correctly indicates an absence of social learning effects jel d83 013 033 q16

the ins and outs of mortgage debt during the housing boom and bust from 1999 to 2013 u s mortgage debt doubled before contracting sharply i estimate mortgage inflows and outflows that shed light on the sources of volatility during the boom inflows from real estate investors tripled far outpacing other segments such as first time homebuyers during the bust a collapse in inflows keyed the debt decline while an expansion of outflows due to defaults played a more minor role inflow declines partly reflect a dramatic falloff in first time homebuying especially for low credit score individuals further analysis helps support the notion that the differential decline by credit score reflects markedly tightened credit supply

the efficacy of information policy a review of archon fung mary graham and david weil s full disclosure the perils and promise of transparency the economics of information has identified an important role for government to correct situations where competition is not sufficient to reveal valuable information to consumers archon fung mary graham and david weil s full disclosure the perils and promise of transparency provides a thorough discussion of government mandated disclosure policies i use their book to frame an empirical assessment of whether these and other information policies have significantly reduced the costs to consumers created by imperfect information my conclusion which calls for more research is that government information policies have amounted to weak solutions in search of a problem

modeling regional economic dynamics spatial dependence spatial heterogeneity and nonlinearities abstract spatial modeling of economic phenomena requires the adoption of complex econometric tools which allow us to deal with important methodological issues such as spatial dependence spatial unobserved heterogeneity and nonlinearities in this paper we describe some recently developed econometric approaches i e spatial autoregressive semiparametric geoadditive models which address the three issues simultaneously we also illustrate the relative performance of these methods with an application to the case of house prices in the lucas county

habit formation interdependent preferences and demographic effects in the almost ideal demand system the authors model myopic habit formation interdependence of preferences among consumers and demographic effects as taste shifters in a micro consumer demand model of the almost ideal demand variety the model is estimated for dutch micro data the authors investigate the dynamic properties of the model and find that it behaves very differently from models without interdependence of preferences the implications for micro macro modeling are discussed copyright 1991 by royal economic society

debt deleveraging and the liquidity trap a fisher minsky koo approach in this paper we present a simple new keynesian style model of debt driven slumps that is situations in which an overhang of debt on the part of some agents who are forced into rapid deleveraging is depressing aggregate demand making some agents debt constrained is a surprisingly powerful assumption fisherian debt deflation the possibility of a liquidity trap the paradox of thrift a keynesiantype multiplier and a rationale for expansionary fiscal policy all emerge naturally from the model we argue that this approach sheds considerable light both on current economic difficulties and on historical episodes including japan s lost decade now in its 18th year and the great depression itself

the effect of female education on fertility and infant health evidence from school entry policies using exact date of birth this paper uses age at school entry policies to identify the effect of female education on fertility and infant health we focus on sharp contrasts in schooling fertility and infant health between women born just before and after the school entry date school entry policies affect female education and the quality of a woman s mate and have generally small but possibly heterogeneous effects on fertility and infant health we argue that school entry policies manipulate primarily the education of young women at risk of dropping out of school

does the evidence on corruption depend on how it is measured results from a cross country study on microdata sets while much of the existing literature on corruption looks at the effect of corruption on macro variables such as growth rates and income distribution this study provides a departure by focussing on victims of corruption by using microdata to compare civilian and business corruption this study finds that businesses face a stronger incidence of bribe demands than individuals though there are several differences between the determinants of the two forms of bribe victimization there are also some similarities policies to combat corruption need to take into account both the differences and the similarities

child labor and the labor supply of other household members evidence from 1920 america this paper analyses the effect of child labor on household labor supply using 1920 us census micro data the aim of the analysis is to understand who in the household benefits from child labor in order to identify a source of exogenous variation in child labor i use state specific child labor laws i find that a rise in the proportion of working children by household is associated with no variation in parents labor supply i also find a strong negative externality among children as the proportion of working children by household rises everything else equal the probability that each child works falls while the probability that he attends school rises this suggests that parents redistribute entirely the returns from child labor to the children in the household consistent with a model of household labor supply with fully altruistic parents

house prices home equity based borrowing and the u s household leverage crisis us household leverage sharply increased in the years preceding the 2007 eco nomic recession the top panel of figure 1 shows the steady rise in household debt since 1975 which accelerated beginning in 2002 in just five years the household sector doubled its debt balance in comparison the contemporaneous increase in corporate debt was modest the middle panel shows that the increase in household debt from 2002 to 2007 translated into a striking rise in household leverage as mea sured by the debt to income ratio during the same time period corporate leverage declined the dramatic absolute and relative rise in us household leverage from 2002 to 2007 is unprecedented compared to the last 25 years one reason for the rapid expansion in household leverage during this period is that mortgage credit became more easily available to new home buyers mian and sufi 2009 strong house price appreciation from 2002 to 2006 however which may have been fueled by the availability of mortgage credit to a riskier set of new home buyers could also have had an important feedback effect on household lever age through existing homeowners given that 65 percent of us households already owned their primary residence before the acceleration in house prices the feedback from house prices to borrowing may be an important source of the rapid rise in household leverage that preceded the economic downturn our central goals in this study are to estimate how homeowner borrowing responded to the increase in house prices and to identify which homeowners responded most aggressively we examine this home equity based borrowing channel using a dataset consisting of anonymous individual credit files of a national consumer credit bureau agency we follow a random sample of over 74 000 us homeowners who owned their homes as of 1997 at an annual frequency from the end of 1997 until the end of 2008 the bottom panel of figure 1 plots the growth in debt of 1997 homeowners over time and shows that existing homeowners borrow significantly more debt as their house prices appreciate from 2002 to 2006 while the aggregate trend is suggestive

causes and effects of corruption what has past decade s empirical research taught us a survey corruption has fierce impacts on economic and societal development and is subject to a vast range of institutional jurisdictional societal and economic conditions it is this paper s aim to provide a reassessment and a comprehensive state of the art survey of existing literature on corruption and its causes and effects a particularly strong focus is put on presenting and discussing insights resulting from empirical research and contrasting recent with older findings

educational policy and labour productivity an output accounting exercise what is the contribution of education to output productivity or their growth economists have tried to answer this question using output accounting or growth accounting by the decomposing of output or its growth into the contributions of various factors including education the approach in this paper is output accounting of which krueger i968 provides an early example using crude aggregate census data on some 20 mostly developing countries krueger posed the question how much do differences in educational endowments lead to differences in per capita income she estimated the effect on per capita income in the united states of assuming not the u s educational distribution but the distribution in each other country the size of this effect xw as then related to the differences in per capita income krueger explained more than half the difference in per capita income by differences in human capital and so concluded that human capital defined more broadly than educational attainment contributed more than all other factors combined another version of the same exercise but using a three factor production function was conducted by fallon and layard i 9 75 with similar data sources but for a different set of countries they found the contribution of their index of human capital to be lower than krueger s estimate and generally lower than that of physical capital output and growth accounting both suffer from well known drawbacks see for instance bowman i980 and nelson i98i first failing to take account of the other determinants of income can bias estimates of the difference in income and productivity attributable to education secondly in simply assuming that the standardised earnings difference between the educated

using evidence of household income diversification to inform study of the rural nonfarm labor market in africa abstract the labor market literature in developing countries has seldom drawn on the studies of rural household income diversification this paper draws on such studies to inform future study of the rural nonfarm labor market in africa the review of evidence provides some surprising departures from traditional images of nonfarm activities of rural households among the most striking is the dominant importance in the majority of case study areas of nonfarm wage labor as compared to self employment of nonfarm sector earnings as compared to farm sector wage earnings and of local nonfarm earnings as compared to migration earnings the most worrying finding was the poor distribution of nonfarm earnings in rural areas despite the importance of these earnings to food security and farm investments this poor distribution implies significant entry barriers and market segmentation it is probable that this will lead over time to an increasingly skewed distribution of land and other assets in rural africa

arrested development theory and evidence of supply side speculation in the housing market this paper incorporates speculation into the standard supply and demand framework used to analyze housing booms and busts speculation reverses the common intuition that elastic housing supply attenuates housing booms housing market frictions make land a more attractive speculative investment than housing as a result undeveloped land both facilitates construction and intensies

informal groups and health insurance take up evidence from a field experiment summary this paper presents the results of 20 randomized experiments aimed at understanding the low take up of in patient health insurance observed in developing countries take up does not increase when participants receive information about the product or an assistance to register or small subsidies of 2 10 or 30 take up does not increase when the same information is provided by local respected community leaders when participants are offered an in kind gift a chicken if they register when participants are offered the possibility to contribute lower and more frequent payments or the possibility to pay by cellphone a full subsidy generates a mere 45 take up with no retention after one year in contrast to these low take up rates presenting the same information without any subsidies to existing informal groups raises take up to 12 still 7 after one year as well as trust and knowledge of the product social networks play a major role in the adoption of health insurance this paper provides a cost effective way to increase take up of health insurance while subsidies are found to be largely ineffective at raising take up in the long run

economic consequences of housing speculation by exploiting variation in state capital gains taxation as an instrument we analyze the economic consequences of housing speculation during the u s housing boom in the 2000s we find that housing speculation anchored in part on extrapolation of past housing price changes led not only to greater price appreciation economic expansions and housing construction during the boom in 2004 2006 but also to more severe economic downturns during the subsequent bust in 2007 2009 our analysis supports supply overhang and local household demand as two key channels for transmitting these adverse effects

the community reinvestment act and mortgage lending to lower income borrowers and neighborhoods abstractthis paper evaluates the community reinvestment act cra a law mandating that banks help meet the credit needs of lower income households and neighborhoods to measure the effect of the law on lending to targeted groups since 1994 i take advantage of discontinuous targeting rules and abrupt changes in target status on average the cra appears to have had little impact on mortgage lending even during the mid 2000s when lending to lower income areas nevertheless soared i do find a significant effect during the late 1990s and early 2000s in large metropolitan areas when and where the cra may have been most binding i use this episode to test the effect of the cra on overall mortgage availability that is lending by both regulated and unregulated institutions the results are consistent with the notion that government intervention in credit markets may be justified on the grounds that information externalities exist and can depress credit supply

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

residential income segregation a behavioral model of the housing market abstract we represent the functioning of the housing market and study the relation between income segregation income inequality and house prices by introducing a spatial agent based model abm differently from traditional models in urban economics we explicitly specify the behavior of buyers and sellers and the price formation mechanism buyers who differ by income select among heterogeneous neighborhoods using a probabilistic model of residential choice sellers employ an aspiration level heuristic to set their reservation offer price prices are determined through a continuous double auction we first provide an approximate analytical solution of the abm shedding light on the structure of the model and on the effect of the parameters we then simulate the abm and find that i a more unequal income distribution lowers the prices globally but implies stronger segregation ii a spike in demand in one part of the city increases the prices all over the city iii subsidies are more efficient than taxes in fostering social mixing

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

cross sectional patterns of mortgage debt during the housing boom evidence and implications the reallocation of mortgage debt to low income or marginally qualified borrowers plays a central role in many explanations of the early 2000s housing boom we show that such a reallocation never occurred as the distribution of mortgage debt with respect to income changed little even as the aggregate stock of debt grew rapidly moreover because mortgage debt varies positively with income in the cross section equal percentage increases in debt among high and low income borrowers meant that wealthy borrowers accounted for most new debt in dollar terms previous research stressing the importance of low income borrowing was based on the inflow of new mortgage originations alone so it could not detect offsetting outflows in mortgage terminations that left the allocation of debt stable over time and while defaults on subprime mortgages played an important part in the financial crisis the data show that subprime lending did not cause a reallocation of debt toward the poor rather subprime lending prevented a reallocation of debt toward the wealthy

wages equal productivity fact or fiction using a matched employer employee data set of manufacturing plants in three subsaharan countries i compare the marginal productivity of different categories of workers with the wages they earn in each country i observe approximately 135 firms and an average of 5 5 employees per firm under certain conditions the wage premiums for worker characteristics should equal the productivity benefits associated with them i find that equality holds strongly in zimbabwe the most developed country in the sample but not at all for tanzania the least developed country results for kenya are intermediate differences between wage and productivity premiums are most pronounced for characteristics that are clearly related to human capital such as schooling training experience and tenure moreover where the wage premium differs from the productivity benefit general human capital tends to receive a wage return that exceeds the productivity return and the reverse holds for more specific human capital investments schooling tends to be over rewarded even though most of the productivity benefit comes from job training wages tend to rise with experience even though productivity is mostly increasing in tenure sampling errors nonlinear effects and non wage benefits are rejected as explanation for the gap between wage and productivity effects localized labor markets and imperfect substitutability of different worker types provide a partial explanation department of economics university of toronto 150 st george street toronto on m5s 3g7 canada jovb chass utoronto ca seminar participants at the university of illinois kellogg school of management and catholic university of louvain provided useful suggestions funding by the connaught foundation is gratefully acknowledged

bartik instruments what when why and how the bartik instrument is formed by interacting local industry shares and national industry growth rates we show that the typical use of a bartik instrument assumes a pooled exposure research design where the shares measure differential exposure to common shocks and identification is based on exogeneity of the shares next we show how the bartik instrument weights each of the exposure designs finally we discuss how to assess the plausibility of the research design we illustrate our results through two applications estimating the elasticity of labor supply and estimating the elasticity of substitution between immigrants and natives

endogenous peer effects local aggregate or local average a b s t r a c t we develop a unified model embedding different behavioral mechanisms of social interac tions and design a statistical model selection test to differentiate between them in empirical applications this framework is applied to study peer effects in education effort in study ing and sport activities for adolescents in the united states we find that for education students tend to conform to the social norm of their friends while for sport activities both the social multiplier and the social norm effect matter

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

social ties within school classes the roles of gender ethnicity and having older siblings in this paper we identify the lines along which social ties between high school teenagers are primarily formed to this end we introduce interaction weights between pupils in the same school class that are a function of exogenous individual background characteristics such as gender ethnicity and having older siblings the resulting model with endogenous interactions and school specific fixed effects is estimated using data from the dutch national school youth survey nsys a survey in which in principle all pupils in a sampled class are interviewed by combining the 1992 1996 1999 and 2001 nsys data we are able to identify trends in social relationships of teenagers we find that the roles that gender and ethnicity play in how teenagers interact varies strongly across different types of behaviour for example going out shows strong within ethnicity interactions while expenditures on cell phones and on clothing exhibit mainly between girls interactions having older siblings has a minor effect on within school class social interactions there is weak evidence of decreased ethnic segregation within school classes during the decade considered

on the economic impacts of constraining second home investments abstract we investigate how political backlash against wealthy second home investors in high natural amenity places affects local residents we exploit a quasi natural experiment the swiss second home initiative which banned the construction of new second homes in desirable seasonal tourist locations consistent with our model we find that the ban substantially lowered increased the price growth of primary second homes and increased the unemployment growth rate in the affected areas our findings suggest that the negative effect on local economies dominated the positive amenity preservation effect we conclude that constraining second home construction in seasonal tourist locations where primary and second homes are not close substitutes may reinforce wealth inequality

credit supply and the price of housing we show that since 1994 branching deregulations in the u s have signi cantly af fected the supply of mortgage credit and ultimately house prices with deregulation the number and volume of originated mortgage loans increase while denial rates fall but the deregulation has no eect on a placebo sample formed of mortgage compa nies that should not be aected by the regulatory change this sharpens the causal interpretation of our results deregulation acts to relax access to mortgage credit and pushes the demand for house ownership outwards interestingly the fraction of securi tized mortgage loans remains unchanged through the process we nd evidence house prices rise with branching deregulation and particularly in metropolitan areas where construction is inelastic for topographic reasons we document these results in a large sample of counties across the u s we also focus on a reduced cross section formed by counties on each side of a state border where a regression discontinuity approach is possible our conclusions are strengthened jel classi cation numbers g21 g10 g12

payoff complementarities and financial fragility evidence from mutual fund outflows the paper provides empirical evidence that strategic complementarities among investors generate fragility in financial markets analyzing mutual fund data we find that consistent with a theoretical model funds with illiquid assets where complementarities are stronger exhibit stronger sensitivity of outflows to bad past performance than funds with liquid assets we also find that this pattern disappears in funds where the shareholder base is composed mostly of large investors we present further evidence that these results are not attributable to alternative explanations based on the informativeness of past performance or on clientele effects we analyze the implications for funds performance and policies

school attendance and child labor a model of collective behavior this paper theoretically investigates how community approval or disap proval aects school attendance and child labor and how aggregate behavior of the community feeds back towards the formation and persistence of an anti or pro schooling norm the proposed community model continues to take aggregate and idiosyncratic poverty into account as an important driver of low school attendance and child labor but it provides also an explanation for why equally poor villages or regions can display dierent attitudes towards schooling distinguishing between three dierent modes of child time allocation school attendance work and leisure the paper shows how the time costs of schooling and child labor productivity con tribute to the existence of a locally stable anti schooling norm it proposes policies that eectively exploit the social dynamics and initiate a permanent escape from the anti schooling equilibrium an extension of the model explores how an education contingent subsidy paid to the poorest families of a community manages to initiate a bandwagon eect towards education for all the optimal mechanism design of

latent homophily or social influence an empirical analysis of purchase within a social network consumers who are close to one another in a social network often make similar purchase decisions this similarity can result from latent homophily or social influence as well as common exogenous factors latent homophily means consumers who are connected to one another are likely to have similar characteristics and product preferences social influence refers to the ability of one consumer to directly influence another consumer s decision based upon their communication we present an empirical study of purchases of caller ring back tones using data from an asian mobile network that predicts consumers purchase timing and choice decisions we simultaneously measure latent homophily and social influence while also accounting for exogenous factors identification is achieved due to our dynamic panel data structure and the availability of detailed communication data we find strong influence effects and latent homophily effects in both the purchase timing and product choice decisions of consumers this paper was accepted by sandra slaughter information systems

corruption and development a review of issues in this paper we start with a discussion of some of the different denotations of the problem of corruption we then consider the ways in which the damaging consequences of corruption operate in a developing economy while not ignoring its possible redeeming features in some cases we pursue the question of why corruption is perceptibly so different in different societies and also persistent finally we examine the feasible policy issues that arise in this context

misinformed speculators and mispricing in the housing market this paper examines the contribution of out of town second house buyers to mispricing in the housing market we show that demand from out of town second house buyers during the mid 2000s predicted not only house price appreciation rates but also implied to actual rent ratio appreciation rates a proxy for mispricing we then apply a novel identification strategy to address the issue of reverse causality we give supporting evidence that out of town second house buyers behaved like misinformed speculators earning lower capital gains misinformed and consuming smaller dividends speculators

shrouded attributes consumer myopia and information suppression in competitive markets bayesian consumers infer that hidden add on prices e g the cost of ink for a printer are likely to be high prices if consumers are bayesian firms will not shroud information in equilibrium however shrouding may occur in an economy with some myopic or unaware consumers such shrouding creates an inefficiency which firms may have an incentive to eliminate by educating their competitors customers however if add ons have close substitutes a curse of debiasing arises and firms will not be able to profitably debias consumers by unshrouding add ons in equilibrium two kinds of exploitation coexist optimizing firms exploit myopic consumers through marketing schemes that shroud high priced add ons in turn sophisticated consumers exploit these marketing schemes it is not possible to profitably drive away the business of sophisticates it is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms we show that informational shrouding flourishes even in highly competitive markets even in markets with costless advertising and even when the shrouding generates allocational inefficiencies

credit crises precautionary savings and the liquidity trap we use a model a la bewly huggett ayagari to explore the eects of a credit crunch on consumer spending households borrow and lend to smooth idiosyncratic income shocks facing an exogenous borrowing constraint we look at the economy response after an unexpected permananent tightening of this constraint the interest rate drops sharply in the short run and then adjusts to a lower steady state level this is due to the fact that after the shock a large fraction of agents is far below their target holdings of precautionary savings and this generates a large temporary positive shock to net lending we then look at the eects on output here two opposing forces are present as households can deleverage in two ways by consuming less and by working more we show that under a reasonable parametrization the eect on consumer spending dominates and precautionary behavior generates a recession if we add nominal rigidities two things happen i supply side responses are muted and ii there is a lower bound on the interest rate adjustment these two elements tend to amplify the recession caused by the credit tightening

the failure and promise of mandated consumer mortgage disclosures evidence from qualitative interviews and a controlled experiment with mortgage borrowers policy responses to record rates of mortgage delinquency default and foreclosure will likely affect the cost and availability of consumer credit for decades to come although the current crisis began over two years ago one consumer policy change that surely passes a cost benefit test has yet to be adopted consumers still do not receive one clear disclosure document that conveys the key costs and risks of their mortgages the results of this study based on quantitative testing in a controlled randomized experiment with more than 800 mortgage borrowers and in depth qualitative interviews with several dozen additional borrowers suggests that federally mandated consumer mortgage disclosures failed resulting in many borrowers who did not understand the costs and risks of their loans likely contributing to the mortgage crisis an overhaul of consumer mortgage disclosures culminating in a single disclosure document designed using a combination of qualitative and quantitative consumer research could substantially improve consumer understanding of their mortgage choices the failure of mandated disclosures to convey mortgage terms to borrowers was not due to cognitive limitations or irrationality of consumers nor to an irreducible complexity of new mortgage instruments but to poorly designed disclosures disclosure documents failed to include key loan information and the information disclosed was often confusing and sometimes misleading problems with mandated disclosures were evident across a range of consumers and loan types prime and subprime borrowers were similarly confused confusion the failure and promise of mandated consumer mortgage disclosures evidence from qualitative interviews and a controlled experiment with mortgage borrowers

public trust and corruption perception disaster relief public trust in government and nongovernment organizations is essential to the public s willingness to donate and to support those organizations we measure public trust in disaster aid using people s perception of these organizations effectiveness in delivering aid relief to the victims of two recent major earthquakes in china based on the survey data collected in 2013 from about 2100 residents in hong kong we document the vulnerability of these residents trust perceptions in aid delivery we find that the sharp decline in trust perception is highly negatively correlated with their perception of corruption of local governments in china

clean evidence on peer effects we study subjects who were asked to fill letters into envelopes with a remuneration independent of output in the pair treatment two subjects worked at the same time in the same room and peer effects were possible in the single treatment subjects worked alone and peer effects were ruled out we find evidence of peer effects in the pair treatment because the standard deviations of output are smaller within pairs than between pairs moreover average output is higher in the pair treatment thus peer effects raise productivity finally low productivity workers are the most sensitive to the behavior of peers

rates of return on physical and human capital in africa s manufacturing sector in this paper two sets of issues are addressed using panel data from the manufacturing sector of five african countries first how high are the returns to human relative to physical capital second what is the relative importance of technology and endowments of human and physical capital in determining differences in earnings and productivity across the countries evidence from earnings functions shows that the private returns to both experience and education rise with the level of education private returns rise from 3 per cent at the primary level to 10 per cent at the secondary level and 35 per cent for tertiary evidence from the production function gives lower returns on education than from the earnings function rates of return on physical capital exceed 20 per cent and greatly exceed the average return on human capital data is available on the stocks of human and physical capital across the countries productivity and earnings differentials are shown to be large between cameroon and ghana these differences are due almost entirely to differences in physical not human capital endowments this abstract was borrowed from another version of this item

credit booms and lending standards evidence from the subprime mortgage market this paper links the u s subprime mortgage crisis to demand side factors that contributed to the rapid expansion of the u s mortgage market we show that denial rates were relatively lower in areas that experienced faster credit demand growth and that lenders in these high growth areas attached less weight to applicants loan to income ratios the results are robust to controlling for supply side factors including house price appreciation mortgage securitization and other economic fundamentals and to several robustness tests controlling for endogeneity the results are consistent with the notion that a relaxation of lending standards triggered by an increased demand for loans contributed to the boom and the ensuing crisis together with other supply side explanations these findings shed new light on the relationship between credit booms and financial instability

ethnic capital and intergenerational mobility this paper analyzes the extent to which ethnic skill differentials are transmitted across generations i assume that ethnicity acts as an externality in the human capital accumulation process the skills of the next generation depend on parental inputs and on the quality of the ethnic environment in which parents make their investments or ethnic capital the empirical evidence reveals that the skills of today s generation depend not only on the skills of their parents but also on the average skills of the ethnic group in the parent s generation

the role of information and social interactions in retirement plan decisions evidence from a randomized experiment this paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees decisions to enroll in a tax deferred account tda retirement plan within a large university the experiment encouraged a random sample of employees in a subset of departments to attend a benee ts information fair organized by the university by promising a monetary reward for attendance the experiment multiplied by more than e ve the attendance rate of these treated individuals relative to controls and tripled that of untreated individuals within departments where some individuals were treated tda enrollment e ve and eleven months after the fair was signie cantly higher in departments where some individuals were treated than in departments where nobody was treated however the effect on tda enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did we provide three interpretations differential treatment effects social network effects and motivational reward effects to account for these results

decentralization and corruption evidence across countries the relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design the theoretical literature makes ambiguous predictions about this relationship and it has remained virtually unexamined by empiricists the authors make a first attempt at examining the issue empirically by looking at the cross country relationship between fiscal decentralization and corruption as measured by a number of different indices their estimates suggest that fiscal decentralization in government spending is significantly associated with lower corruption moreover they find that the origin of a country s legal system for example civil versus common legal code performs extremely well as an instrument for decentralization the estimated relationship between decentralization when so instrumented and corruption is even stronger the evidence suggests a number of interesting areas for future work including investigating whether there are specific services for which decentralized provision has a particularly strong impact on political rent extraction and understanding the channels through which decentralization succeeds in keeping corruption in check

the employment effects of credit market disruptions firm level evidence from the 2008 9 financial crisis this article investigates the effect of bank lending frictions on employment outcomes i construct a new data set that combines information on banking relationships and employment at 2 000 nonfinancial firms during the 2008 9 crisis the article first verifies empirically the importance of banking relationships which imply a cost to borrowers who switch lenders i then use the dispersion in lender health following the lehman crisis as a source of exogenous variation in the availability of credit to borrowers i find that credit matters firms that had precrisis relationships with less healthy lenders had a lower likelihood of obtaining a loan following the lehman bankruptcy paid a higher interest rate if they did borrow and reduced employment by more compared to precrisis clients of healthier lenders consistent with frictions deriving from asymmetric information the effects vary by firm type lender health has an economically and statistically significant effect on employment at small and medium firms but the data cannot reject the hypothesis of no effect at the largest or most transparent firms abstracting from general equilibrium effects i find that the withdrawal of credit accounts for between one third and one half of the employment decline at small and medium firms in the sample in the year

market power firm performance and real wage growth in zimbabwean manufacturing abstract this paper uses a two year panel of data on 600 zimbabwean manufacturing workers and the employers to examine several aspects of the labor market response to the reforms introduced in the 1991 structural adjustment program the analysis then uses this evidence to explore a number of hypotheses about the functioning of formal urban labor markets in zimbabwe with particular attention to the issue of rent sharing first as one would expect liberalization of trade did indeed act to shift employment from import competing sectors to export sectors although total manufacturing employment was basically unchanged second real wages in manufacturing fell for most workers third the pattern of wage changes across sectors and firms is consistent with a view of labor markets as noncompetitive the evidence provides support for the idea that a rent sharing process of wage determination rather than one based on efficiency wages or government intervention is an appropriate characterization of this labor market

foreclosure contagion and the neighborhood spillover effects of mortgage defaults in this paper i identify shocks to interest rates resulting from two administrative details in adjustable rate mortgage contract terms the choice of financial index and the choice of lookback period i find that a 1 percentage point increase in interest rate at the time of adjustable rate mortgage arm reset results in a 2 5 percentage increase in the probability of foreclosure in the following year and that each foreclosure filing leads to an additional 0 3 to 0 6 completed foreclosures within a 0 10 mile radius in explaining this result i emphasize price effects bank supply responses and borrower responses arising from peer effects

something to talk about social spillovers in movie consumption we exploit the randomness of weather and the relationship between weather and moviegoing to quantify social spillovers in movie consumption instrumenting for early viewership with plausibly exogenous weather shocks captured in lasso chosen instruments we find that shocks to opening weekend viewership are doubled over the following five weekends our estimated momentum arises almost exclusively at the local level and we find no evidence that it varies with either ex post movie quality or the precision of ex ante information about movie quality suggesting that the observed momentum is driven in part by a preference for shared experience and not only by social learning

a discrete choice model with social interactions with an application to high school teen behavior we develop an empirical discrete choice interaction model with a finite number of agents we characterize its equilibrium properties in particular the correspondence between interaction strength number of agents and the set of equilibria and propose to estimate the model by means of simulation methods in an empirical application we analyze the individual behavior of high school teenagers in almost 500 school classes from 70 schools in our baseline model endogenous social interaction effects are strong for behavior closely related to school truancy somewhat weaker for behavior partly related to school smoking cell phone ownership and moped ownership and absent for behavior far away from school asking parents permission for purchases intra gender interactions are generally much stronger than cross gender interactions in a model with school specific fixed effects social interaction effects are insignificant with the exception of intra gender interactions for truancy copyright c 2007 john wiley sons ltd

fluctuations in uncertainty this review article tries to answer four questions i what are the stylized facts about uncertainty over time ii why does uncertainty vary iii do fluctuations in uncertainty matter and iv did higher uncertainty worsen the great recession of 2007 2009 on the first question both macro and micro uncertainty appears to rise sharply in recessions on the second question the types of exogenous shocks like wars financial panics and oil price jumps that cause recessions appear to directly increase uncertainty and uncertainty also appears to endogenously rise further during recessions on the third question the evidence suggests uncertainty is damaging for short run investment and hiring but there is some evidence it may stimulate longer run innovation finally in terms of the great recession the large jump in uncertainty in 2008 potentially accounted for about one third of the drop in gdp

estimating housing demand with an application to explaining racial segregation in cities we present a three stage nonparametric estimation procedure to recover willingness to pay for housing attributes in the first stage we estimate a nonparametric hedonic home price function in the second stage we recover each consumer s taste parameters for product characteristics using first order conditions for utility maximization finally in the third stage we estimate the distribution of household tastes as a function of household demographics as an application of our methods we compare alternative explanations for why blacks choose to live in center cities while whites suburbanize

improved information shock and price dispersion a natural experiment in the housing market abstract this study employs data from a natural experiment to assess the effect of an improved price information shock on subsequent real estate transaction price dispersion while transaction data in the israeli real estate market had not previously been available to the public in 2010 an israeli court ordered the israel tax authority to post all real estate transaction data on its website we employ all housing transactions in the period prior and subsequent to this event to assess its effect on housing price dispersion results provide evidence of significant decrease in the dispersion of quality adjusted prices further we find evidence that the information shock effect on price dispersion varies with household and market characteristics

diagnosing consumer confusion and sub optimal shopping effort theory and mortgage market evidence mortgage loans are leading examples of transactions where experts on one side of the market take advantage of consumers lack of knowledge and experience we study the compensation that borrowers pay to mortgage brokers for assistance from application to closing two findings support the conclusion that confused borrowers overpay for brokers services i a model of effective shopping shows that bor rowers sacrifice at least 1 000 by shopping from too few brokers ii borrowers who compensate their brokers with both cash and a commission from the lender pay twice as much as similar borrowers who pay no cash jel d12 d14 g21 we study a large and financially complex expenditure that the majority of consumers make only a few times in their lives the payment for mortgage origination services in these transactions information is not only imperfect but traditional market practices have likely contributed to consumer confusion these payments range from 0 to 30 000 for mortgages of normal size mortgage brokers receive payments from both borrowers and from wholesale lenders on most loans broker fees paid in cash by the borrower are usually broken down into more than a dozen individual items such as origination fee discount points funding fee and doc prep in addition to these cash payments about half of the value that the bor rower transfers to the broker takes the form of a payment from the wholesale lender to the mortgage broker the borrower bears the burden of this part of the payment in the form of a higher interest rate on the loan these payments compensate mortgage brokers for arranging mortgage loans we stress that this paper is about how and how much borrowers pay their brokers for origination services the broker is an administrator of the process of loan origination the broker bears none of the risk of default on the mortgage so that risk is not a determinant of the broker s compensation under standard theories of pricing because consumers enter the mortgage market infrequently and because features of the market make it difficult to learn the best price mortgage origination pricing

what determines the value of corporate votes this paper studies the determinants of the value of voting rights in u s corporations results support the hypothesis that the price of a vote is determined by the expected additional payment vote holders will receive for their votes in case of a control contest the size of this differential payment is a function of the probability that a vote is pivotal in a control contest and the magnitude of the private benefits obtainable by controlling the company simple proxies for these two factors explain up to 30 percent of the variation of the voting premium across companies and through time my findings also suggest that the value of managerial perquisites are at least partially reflected in the price of votes

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

the impact of the 2007 liquidity shock on bank jumbo mortgage lending this paper explores the consequences of the collapse of the private label residential mortgage backed securities market in 2007 on banks originations of jumbo mortgages we show that jumbo lending declined by more at banks that were more dependent on this market and were less well capitalized in contrast banks that had little dependence on this market and were well capitalized increased jumbo originations these findings highlight how dependence on the secondary market may cause amplification of financial shocks and the potential value of capital requirements that are higher during periods of economic growth in mitigating the amplification effects

an epidemic model of investor behavior i test whether social influence affects individual investors trading and stock returns in each of the 20 most active stocks in finland over 9 years the number of owners in a municipality multiplied by the number of investors who do not own a stock a measure of the rate of transmission of diseases and rumors through social contact predicts individual investor trading i control for known determinants of trade including daily news and show that competing explanations for the relation are unlikely socially motivated trades predict stock returns and the effects are not reversed suggesting that individuals share useful information individuals susceptibility to social influence has declined during the period but the opportunities for social influence have increased

the social multiplier aggregate data is often used to make inferences about individual level behavior if there are social interactions in which one person s actions influence his neighbor s incentives or information then these inferences are inappropriate the presence of positive social interactions or strategic complementarities implies the existence of a social multiplier where aggregate relationships will overstate individual elasticities we present a brief model and then estimate the size of the social multiplier in three areas the impact of education on wages the impact of demographics on crime and group membership among dartmouth roommates in these contexts there is a significant social multiplier jel ho jo co

loan originations and defaults in the mortgage crisis the role of the middle class this paper highlights the importance of middle class and high fico borrowers for the mortgage crisis contrary to popular belief which focuses on subprime and poor borrowers we show that mortgage originations increased for borrowers across all income levels and fico scores the relation between mortgage growth and income growth at the individual level remained positive throughout the pre 2007 period finally middle income high income and prime borrowers all sharply increased their share of delinquencies in the crisis these results are consistent with a demand side view where homebuyers and lenders bought into increasing house values and borrowers defaulted after prices dropped

what determines corruption international evidence from microdata this paper uses a microlevel data set from 49 countries to create a direct measure of corruption which portrays the extent of bribery as revealed by individuals who live in those countries in addition it investigates the determinants of being asked for a bribe at the individual level the results show that both personal and country characteristics determine the risk of exposure to bribery examples are gender income education marital status the city size the country s unemployment rate average education and the strength of the institutions in the country jel k4 d73 p16

multinational banks and the global financial crisis weathering the perfect storm we use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the great recession with lending by a benchmark group of 202 domestic banks contrary to earlier more contained crises parent banks were not a significant source of strength to their subsidiaries during the 2008 09 crisis as a result multinational bank subsidiaries had to slow down credit growth about twice as fast as domestic banks this was particularly the case for subsidiaries of banking groups that relied more on wholesale market funding domestic banks were better equipped to continue lending because of their greater use of deposits a relatively stable funding source during the crisis we conclude that while multinational banks may contribute to financial stability during local bouts of financial turmoil they also increase the risk of importing instability from abroad

modeling choice interdependence in a social network this paper investigates how individuals product choices are influenced by the product choices of their connected others and how the influence mechanism may differ for fashion versus technology related products we conduct a novel field experiment to induce and observe choice interdependence in a closed social network in our experiment we conceptualize individuals choices to be driven by multiattribute utilities and we measure their initial attribute preferences prior to observing their choice interdependence and collecting network information these design elements help alleviate concerns in identifying social interaction effects from other confounds given that we have complete information on choices and their sequence we use a discrete time markov chain model nonetheless we also use a markov random field mrf model as an alternative when the information on choice sequence is missing we find significant social interaction effects our findings show that whereas experts exert asymmetrically gre

quantifying equilibrium network externalities in the ach banking industry we seek to estimate the causes and magnitudes of network externalities for the automated clearinghouse ach electronic payments system using a panel data set on individual bank usage of ach we construct an equilibrium model of consumer and bank adoption of ach in the presence of a network the model identifies network externalities from correlations of changes in usage levels for banks within a network from changes in usage following changes in market concentration or sizes of competitors and from adoption decisions of banks outside the network with small branches in the network and can separately identify consumer and bank network effects we structurally estimate the parameters of the model by matching equilibrium behavior to the data using simulated maximum likelihood and a data set of localized networks and use a bootstrap to recover confidence intervals the parameters are estimated with high precision and fit various moments of the data reasonably well we find that most of the impediment to ach adoption is due to large consumer fixed costs of adoption the deadweight loss from the network externality is moderate the optimal number of ach transactions is about 16 higher than the equilibrium level

speculating on home improvements we develop a speculation based theory of home improvements housing services are produced from a mix of land and structures homeowners have an option to increase their structures i e make improvements holding xed their land speculative improvements arise because overcondent homeowners mistakenly believe they can add to structures for a lower cost than a competitive construction industry improvements are increasing and convex in home prices there is excessive home remodeling in equilibrium and the change in the recoup ratio the ratio of resale value of improvements to construction costs is negatively correlated with construction cost growth controlling for home price appreciation we provide evidence consistent with our theory using data on the costs and recoup values of remodeling projects across u s cities

debt relief and slow recovery a decade after lehman abstract we follow a representative panel of millions of consumers in the united states from 2007 to 2017 and document new facts on the long term effects of the great recession there were about six million foreclosures over this period only a quarter of foreclosed households regained homeownership taking an average four years to do so this persistent loss of homeownership accounts for most of the decline in the u s homeownership rate despite massive stimulus and debt relief policies house prices consumption and unemployment remained below precrisis levels in about half of the zip codes in the united states regions that recovered to precrisis levels took on average four to five years regional variation in the extent and speed of recovery is strongly and persistently associated with frictions affecting the pass through of lower interest rates and debt relief to households

information remedies for consumer protection consumer protection regulation has come under increasing fire from the congress courts and the business community in response regulators have begun to innovate with market interventions that are more compatible with economic incentives these incentive compatible techniques include establishing property rights mandating performance standards instead of design standards increasing competition and encouraging and mandating information disclosure information disclosure allows consumer self protection compatible with individual preferences information is also compatible with sellers incentives inducing them to compete on the basis of information disclosed in addition this competition increases the incentive to generate and disseminate additional product information thereby repeating the cycle in this way information remedies rely on private economic incentives to achieve regulatory goals rather than on expensive direct enforcement by the regulator diagnosis of an information problem and evaluation of alternative remedies requires a number of steps analysis of information production and distribution identification of market failures and their implications for resource allocation in the information and product markets and analysis of alternative remedies in light of these market failures

employment in the great recession how important were household credit supply shocks i pool data from all large multimarket lenders in the united states to estimate how many of the over 7 million jobs lost in the great recession can be explained by reductions in the supply of mortgage credit i construct a mortgage credit supply instrument at the county level the weighted average by prerecession mortgage market shares of liquidity driven lender shocks during the recession the reduction in mortgage supply explains about 15 of the employment decline the job losses are concentrated in construction and finance

financial literacy externalities this paper uses unique administrative data and a quasi field experiment of exogenous allocation to apartments in sweden to estimate medium and longer run effects on financial behavior from exposure to financially literate neighbors it contributes evidence of causal impact of financial literacy and points to a social multiplier of effective programs to enhance it exposure promotes saving in private retirement accounts and stockholding especially when neighbors have economics or business education but only for educated or male headed households findings point to relevant knowledge transfer through social interactions rather than to labor market or other channels linked to local economic conditions

personal experiences and expectations about aggregate outcomes using novel survey data we document that individuals extrapolate from recent personal experiences when forming expectations about aggregate economic outcomes recent locally experienced house price movements affect expectations about future u s house price changes and higher experienced house price volatility causes respondents to report a wider distribution over expected u s house price movements when we exploit within individual variation in employment status we find that individuals who personally experience unemployment become more pessimistic about future nationwide unemployment the extent of extrapolation is unrelated to how informative personal experiences are is inconsistent with risk adjustment and is more pronounced for less sophisticated individuals

on the concavity of the consumption function at least since keynes 1935 many economists have had the intuition that the marginal propensity to consume out of wealth declines as wealth increases nonetheless standard perfect certainty and certainty equivalent versions of intertemporal optimizing models of consumption imply a marginal propensity to consume that is unrelated to the level of household wealth we show that adding income uncertainty to the standard optimization problem induces a concave consumption function in which as keynes suggested the marginal propensity to consume out of wealth or transitory income declines with the level of wealth

can unobserved land quality explain the inverse productivity relationship abstract an inverse relationship between both farm productivity and labor intensity and farm size is a common empirical finding in developing country agriculture the traditional explanation has been imperfect labor markets recently it has been suggested instead that the inverse relationship is a statistical artifact resulting from omitted land quality using a farm level data set from java i investigate whether omitted variable bias can explain the inverse relationship i show that the inverse relationship and accompanying wage responses are inconsistent with a model of neoclassical farm behavior that ignores omitted variable bias instrumental variables techniques yield parameter estimates in which the inverse relationship is eliminated and the estimated wage elasticities are more in line with economic theory further econometric investigation hints that a model of omitted land quality may be a possible source of the inverse relationship these results emphasize the importance of considering the sources of cross sectional variation in estimating microeconomic relationships