measurement error in job evaluation and the gender wage gap i introduction wage equations are widely used to estimate the size of the pay gap between male and female dominated jobs when jobs are the unit of observation job wage rates are regressed on job attributes such as skill effort responsibility and working conditions and on the percent of female incumbents in the job the coefficient on the percent female variable estimates the size of the gender pay gap which is often taken as a measure of pay discrimination against women 1 these estimates frequently become the metric for upward adjustment of female dominated job pay to redress the discrimination summarizing the research which uses jobs as the unit of observation ehrenberg 1989 concluded that female dominated jobs are underpaid by 15 34 relative to male dominated jobs similar findings have been reported in studies which use individuals instead of jobs as the unit of observation many criticisms have been raised of these two types of studies one common criticism is that not all relevant control variables for job attributes or individual productivity may be measured or even measurable so that specification error arises if these omitted variables are correlated with the gender variable then the estimated gender pay gap incorporates legitimate differences in productivity and or job attributes however few studies have analyzed the impact of omitted factors bias empirically another common criticism is that there is measurement error in the control variables which in turn leads to biases in estimating the size of the pay gap measured job attributes are highly subjective in nature making measurement error a major problem even human capital measures of education and training are subject to error although one may easily measure years of completed education and experience it is much more difficult to measure years of effective learning or achievement only a few studies have analyzed the size of these biases empirically this paper provides the first estimates of the size of this measurement error bias in the context of job level job attribute wage equations to our knowledge only two previous studies have estimated measurement error bias using individual level human capital wage equations and both are tangential to the major question that we address in particular we find that the estimated gender pay gap is overstated by 34 44 when measurement error bias is ignored in job level wage equation analysis wage adjustments to correct the gender gap in pay which adhere strictly to such biased estimates may lead to millions of dollars in over compensation in the future job evaluation should correct for this bias and we suggest appropriate procedures in addition we provide unique evidence that previous attempts to add measures of seemingly omitted job attributes need not have reduced the bias in the measured pay gap we find that the number of job attributes which enter the wage regression is artificially increased because measurement errors reduce the measured collinearity among job factors the next section explains factor point pay plans and summarizes the few related studies section iii reviews the statistical theory of regression analysis when there is measurement error in the explanatory variables we analyze the effect of independent and correlated measurement errors between job factors on the estimated magnitude of pay discrimination section iv discusses the data and reports the empirical results from implementing various measurement error corrections the final section summarizes our findings and suggests how this study could be used to improve future factor point pay analysis ii background and related research more than half of the workers in the united states are paid according to a pay system at least partly based on job evaluation these systems establish hierarchies of jobs and pay levels using information on a common set of job attributes such as skill effort responsibility and working conditions

energy price shocks input price changes and developmental implications a translog model applied to puerto rico the energy shocks of the 1970s that altered the relative price relationships between factor inputs and induced structural changes are analysed with the use of a translogarithmic cost function that incorporates the inputs capital labour and energy the developmental implications of these structural changes on a small open and energy capital importing region are emphasized taking the case of puerto rico as an example in terms of the partial elasticities of substitution the capital labour relationship moved from highly substitutable in the pre 1973 period to weakly complementary thereafter the energy labour association was transformed from high to low substitutability and that of energy capital from highly complementary to substitute

the pricing of options on assets with stochastic volatilities one option pricing problem that has hitherto been unsolved is the pricing of a european call on an asset that has a stochastic volatility this paper examines this problem the option price is determined in series form for the case in which the stochastic volatility is independent of the stock price numerical solutions are also produced for the case in which the volatility is correlated with the stock price it is found that the black scholes price frequently overprices options and that the degree of overpricing increases with the time to maturity one option pricing problem that has hitherto remained unsolved is the pricing of a european call on a stock that has a stochastic volatility from the work of merton 12 garman 6 and cox ingersoll and ross 3 the differential equation that the option must satisfy is known the solution of this differential equation is independent of risk preferences if a the volatility is a traded asset or b the volatility is uncorrelated with aggregate consumption if either of these conditions holds the risk neutral valuation arguments of cox and ross 4 can be used in a straightfoward way this paper produces a solution in series form for the situation in which the stock price is instantaneously uncorrelated with the volatility we do not assume that the volatility is a traded asset also a constant correlation between the instantaneous rate of change of the volatility and the rate of change of aggregate consumption can be accommodated the option price is lower than the blackscholes b s 1 price when the option is close to being at the money and higher when it is deep in or deep out of the money the exercise prices for which overpricing by b s takes place are within about ten percent of the security price this is the range of exercise prices over which most option trading takes place so we may in general expect the b s price to overprice options this effect is exaggerated as the time to maturity increases one of the most surprising implications of this is that if the b s equation is used to determine the implied volatility of a near the money option the longer the time to maturity the lower the implied volatility numerical solutions for the case in which the volatility is correlated with the stock price are also examined the stochastic volatility problem has been examined by merton 13 geske 7 johnson 10 johnson and shanno 11 eisenberg 5 wiggins 16 and

economies of scope and the cash crop food crop debate in senegal abstract the government of senegal plans to achieve national food self sufficiency by inducing farmers to switch away from cash crops toward food crop production this paper examines selected economic consequences of the planned substitution using empirical data recently collected in southeastern senegal cost function estimates suggest that farmers are currently producing too much food crop and too little cash crop output given existing technology and observed relative prices moreover economies of scope in producing both food crops and cash crops on the same farm result in a 22 cost saving relative to growing both types of crops on separate specialized farms

a dynamic model of occupational choice abstract a dynamic model of occupational choice is developed where within an occupation the match at the current job may help forecast matches at future jobs an index policy is shown to be optimal each occupation is assigned an index and the occupation with the highest index is sampled when training costs are low and layoff risks are nonnegligible occupations in which job matching information is relatively occupation specific receive higher indices however this result is reversed when training costs are sufficiently high

option markets and implied volatility past versus present abstract traders in the nineteenth century appear to have priced options the same way that twenty first century traders price options empirical regularities relating implied volatility to realized volatility stock prices and other implied volatilities including the volatility skew are qualitatively the same in both eras modern pricing models and centralized exchanges have not fundamentally altered pricing behavior but they have generated increased trading volume and a much closer conformity in the level of observed and model prices the major change in pricing is the sharp decline in implied volatility relative to realized volatility evident immediately upon the opening of the cboe

multiproduct technology and market structure a recent line of research has exposed some technological determinants of the structure of industries that produce more than one good the analyses of both multiproduct perfect competition and natural monopoly require a generalized notion of average cost and in addition several newly identified technological characteristics pertinent only to joint production this paper provides an overview of these new results and suggests a unifying framework in which the theory can be further developed

the weekend effect on the distribution of stock prices abstract evidence of weekend effects on the distribution of security returns suggests that returns are generated by a process operating closer to trading time rather than calendar time in contrast accumulation of interest over the weekend follows a calendar time process since both the variance of returns and the interest rate are important parameters of the black scholes option pricing model this paper suggests that the model be stated to account for this by utilizing a trading time variance and a calendar time interest rate empirical evidence indicates that this allows the model to better explain market option prices

earnings functions beyond human capital taking a short run view of the labour market where individuals with given levels of education have to be matched with jobs differing in level of complexity and difficulty wages are related to education and job levels in a sample of some 13 000 observations controlling for age experience and sex a model emphasizing both sides of the allocation process is favoured over the simple human capital view that ignores allocation once education is taken care of it is claimed that the long run human capital model can fruitfully be expanded with this short run allocation structure the empirical results measure the differences in earnings for individuals with given education working at different job levels and shows them to be substantial the relevance of adding job levels to the explanatory variables is illustrated with the case of female earnings discrimination and with differences in age earnings profiles between general and vocational education

informing food security decisions in africa empirical analysis and policy dialogue discussions of economic and agricultural development in africa have focused heavily in recent years on structural adjustment i e basic policy changes aimed at allowing international and domestic markets to play a greater role in coordinating national economic activities often these structural adjustments and accompanying policies aimed at improving economic performance have been based on several implicit assumptions about how african food systems operate yet for many countries little empirical information has been available to test these assumptions hence designing policies too often becomes an exercise in planning without facts this paper argues that not only is there a need to base food security and structural adjustment policies more firmly on empirical information but that the process by which the information is obtained is as important as the information itself agricultural economists and other social scientists can and increasingly should design policy research in africa in ways that simultaneously increase effective demand for empirical information as an input into the ongoing policy process and augment african capacity continually to inform policy deliberations we illustrate the payoffs to such an approach by drawing on selected experience in several african countries weber

earnings functions testing for the demand side abstract to analyze labor market phenomena one may simultaneously grade workers by education and jobs by level of difficulty and complexity human capital theory predicts earnings based on only worker quality thurow s version of a segmented labor market theory predicts that only the job level is relevant and the assignment theory predicts that both variables are relevant using three different data sets for the netherlands testing demonstrates convincingly the superiority of the assignment theory

cash crops food crops and sustainability the case of indonesia abstract recent evidence suggests that the main obstacle to sustainable agricultural development is the failure of any economic policy whether promoting food crops or exports to address adequately problems of natural resource management policies to achieve food self sufficiency may therefore by neither inherently more nor inherently less environmentally sustainable than export oriented agricultural development indonesia serves as a useful illustration as the country s pursuit of both food self sufficiency and export crop promotion strategies has encountered many problems of environmental and resource degradation overcoming these problems will require the explicit integration of natural resource management concerns within the economic policy framework for indonesian agriculture

the behavior of volatility expectations and their effects on expected returns this article examines the behavior of common stock return volatility forecasts implied by call option prices and studies the relationship between implied volatilities and stock returns the author estimates a model that integrates the findings of previous theoretical and empirical research the author finds that implied volatilities are significantly positively related to forecasts of market return volatility and to recent realizations of stock and market volatilities the author s model is able to capture much of the previously unexplained cross sectional and serial correlation in implied volatilities moreover stock returns are found to be significantly positively related to lagged implied volatilities copyright 1993 by university of chicago press

stock price volatility mean reverting diffusion and noise abstract using weekly call option prices on twenty five stocks over a ten year period 1975 1985 and calls on the s p 500 stock index futures we find that ex ante market volatility follows a mixed mean reverting diffusion with noise process changes in volatility are correlated across stocks and a marketwide volatility effect is found strong forces pull the volatility back to its long term value the findings suggest the development of new option pricing models

stock splits volatility increases and implied volatilities a test of the efficiency of the chicago board options exchange relative to post split increases in the volatility of common stocks is presented the black scholes and roll option pricing formulas are used to examine the behavior of implied standard deviations isds around split announcement and ex dates comparisons with a control group of stocks find no relative increase in isds of stocks announcing splits however a relative increase is detected at the ex date therefore the joint hypothesis that 1 the blackscholes and roll formulas are true and 2 the cboe is efficient can be rejected recent studies by ohlson and penman 1985 dravid 1984 and dubofsky and french 1985 have documented significant increases in the observed variance of common stock returns subsequent to splits larger than 25 this is surprising because in theory no real event is associated with the actual day of the split dravid 1988 and lim and vijh 1986 have tried to explain the postsplit variance increase as the effect of stock price discreteness and the bid ask spread the evidence in lim and vijh 1986 and ohlson and penman 1985 suggests however that this is at best a partial explanation 2 although the causes of the volatility increase are not apparent the post split volatility increase should increase prices of calls on the splitting stock that expire after the ex date relative to those that expire before the ex date similarly prices of post split expiration calls on splitting stocks should increase relative to prices of calls on stocks that do not split in an efficient options market these relative price changes should occur at the announcement of the split in fact

the effects of human capital and job characteristics on pay this paper examines the influence of both the worker characteristics and job characteristics on pay data were collected specifically for this purpose we find that both worker characteristics and job characteristics are important determinants of pay in addition we find that females hold jobs that are of lower value to the firm this explains part but not all of the gross male female pay differential it also has implications for the effect of comparable worth policies

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

the persistence of volatility and stock market fluctuations this paper examines the potential influence of changing volatility in stock market prices on the level of stock market prices it demonstrates that volatility is only weakly serially correlated implying that shocks to volatility do not persist these shocks can therefore have only a small impact on stockmarket prices since changes in volatility affect expected required rates of return for relatively short intervals these findings lead us to be skeptical of recent claims that the stock market s poor performance during the 1970 s can be explained by volatility induced increases in risk premia this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

is there an informal employment wage penalty evidence from south africa abstract we estimate the wage penalty associated with working in the south african informal sector to this end we use a rich data set on non self employed males that allows one to accurately distinguish workers employed in the informal sector from those employed in the formal sector and link individuals over time implementing various econometric approaches we find that there is a gross wage penalty of a little over 18 for working in the informal sector however once we reduce our sample to a group for which we can reasonably calculate earnings net of taxes and control for time invariant unobservables the wage penalty disappears

on the valuation of american call options on stocks with known dividends both the roll and the geske equations for the valuation of the american call option on a stock with known dividends are incorrectly specified this note presents the corrected valuation formula explains the misspecifications and provides a numerical example

valuing futures and options on volatility abstract this paper presents simple closed form expressions for volatility futures and option prices and examines their implications for the characteristics of these securities we show that the properties of these volatility derivatives are fundamentally different from those of conventional option and futures contracts this analysis also provides insights into the role that volatility derivatives may play in managing and hedging volatility risk in financial markets

multiproduct cost relationships for retail fertilizer plants volume cost relationships developed from the statistical analysis of accounting data have long provided useful information for evaluating firm efficiency french previous descriptive and statistical analyses of accounting data as well as economic engineering cost studies of retail fertilizer firms have focused on a single product line anderson and miller raikes and heubrock williams foster and simpson service o rourke or have simply summarized industry accounting data akridge and downey problems associated with using accounting data to estimate statistical cost functions include a the failure to handle satisfactorily multiproduct firm cost relationships

the structure of technology in a multioutput branch banking firm we formulate and estimate a multioutput bank s cost function amenable for distinguishing between economies of scale and economies of network density we find significant returns to network density especially for smaller banks diseconomies of scale are found for the larger banks whereas the hypothesis of constant returns to scale could not be rejected for the smaller banks

cash crops in developing countries the issues the facts the policies the issue of cash crops is profoundly controversial the debate uses different definitions of the term and slides across levels of analysis from the household to the international economy it also cuts across arguments crops countries and time periods this paper sets out to order the debate it deals first with definitions and taxonomy and then reviews issues connected with cash crops and a growth b distribution c food security d dependency and e the environment the paper concludes that with appropriate policies cash crops can offer a route to equitable growth