explaining the border effect the role of exchange rate variability shipping costs and geography this paper exploits a three dimensional panel data set of prices on 27 traded goods over 88 quarters across 96 cities in the us and japan we show that a simple average of good level real exchange rates tracks the nominal exchange rate well suggesting strong evidence of sticky prices focusing on dispersion in prices between city pairs we find that crossing the us japan border is equivalent to adding as much as 43 000 trillion miles to the cross country volatility of relative prices we turn next to economic explanations for this so called border effect and to its dynamics distance unit shipping costs and exchange rate variability collectively explain a substantial portion of the observed international market segmentation relative wage variability on the other hand has little independent impact on segmentation 2001 elsevier science b v all rights reserved

the poverty gap in school spending following the introduction of title i abstract title i of the 1965 elementary and secondary education act explicitly directed more federal aid for k 12 education to poorer areas for the first time in us history with a goal of promoting regional convergence in school spending using newly collected data we find some evidence that title i narrowed the gap in per pupil school spending between richer and poorer states in the short to medium run however the program was small relative to then existing poverty gaps in school spending even in the absence of crowd out by local or state governments the program could have reduced the gap by only 15 percent

the health returns of education policies from preschool to high school and beyond the accessibility of quality schools and educational resources for children are key engines of upward mobility in the united states holding the potential to break the cycle of poverty from one generation to the next inequalities in economic status tend to be correlated across generations in part because of intergenerational correlations in health and education rucker c johnson 2009 residential segregation by race and class that leads to unequal access to quality schools is often cited as a culprit in perpetuating inequality in attainment outcomes over the past four decades three major government interventions have had substantial impacts on the provision of school resources and have narrowed black white differences in access to dimensions of school quality i court mandated school desegregation ii state legislation and legal action aimed to change the distribution and level of school funding and iii the expansion of targeted preschool programs for disadvantaged children through head start court ordered school desegregation has been described as the most controversial and ambitious social experiment of the past 50 years human capital health outcomes and inequality

school segregation educational attainment and crime evidence from the end of busing in charlotte mecklenburg we study the end of race based busing in charlotte mecklenburg schools cms in 2001 school boundaries in cms were redrawn dramatically and half of students received a new assignment using addresses measured prior to the policy change we compare students in the same neighborhood that lived on opposite sides of a newly drawn boundary we find that both white and minority students score lower on high school exams when they are assigned to schools with more minority students we also find decreases in high school graduation and four year college attendance for whites and large increases in crime for minority males we conclude that the end of race based busing widened racial inequality despite efforts by cms to mitigate the effect of segregation through compensatory resource allocation jel codes i20 i24

determinants of international university rankings scores this article analyses the relationship between a university s score in international university rankings its expenditure per student and other factors such as university mission size and productive inefficiency we develop an economic model of rankings and universities and estimate this model with data on universities classified in the top 200 by the times higher education supplement ranking of 2007 we find that the elasticity of a university s ranking score for the expenditure per student is between 4 and 9 and that there are no clear signs of inefficiency in production among the top 200 universities university mission and size are also significant predictors of ranking score these results are especially interesting given the relevance attributed to rankings by government officials university directors and students

international prices costs and markup differences relative cross border retail prices in a common currency comove closely with the nominal exchange rate using product level prices and wholesale costs from a grocery chain operating in the united states and canada we decompose this variation into relative costs and markup components the high correlation of nominal and real exchange rates is driven mainly by changes in relative costs national borders segment markets retail prices respond to changes in costs in neighboring stores within the same country but not across the border prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries jel f31 l11 l81

sixty years after the magic carpet ride the long run effect of the early childhood environment on social and economic outcomes this paper estimates the effect of the early childhood environment on a large array of social and economic outcomes lasting almost 60 years to do this we exploit variation in the living conditions experienced by yemenite children after being airlifted to israel in 1949 we find that children who were placed in a more modern environment i e with better sanitary and infrastructure conditions were more likely to obtain higher education marry at an older age have fewer children and work at age 55 they were also more likely to be assimilated into israeli society to be less religious and have more worldly tastes in music and food however these effects are found mainly for women and not for men we also find an effect on the next generation children who lived in a better environment grew up to have children with more education

cultural transmission and discrimination workers can have good or bad work habits these traits are transmitted from one generation to the next through a learning and imitation process which depends on parents investment in the trait and the social environment where children live if a sufficiently high proportion of employers have taste based prejudices against minority workers we show that their prejudices are always self fulfilled in steady state and minority workers end up having on average worse work habits than majority workers this leads to a ghetto culture affirmative action can improve the welfare of minorities whereas integration can be beneficial to minority workers but detrimental to workers from the majority group

does temporary affirmative action produce persistent effects a study of black and female employment in law enforcement abstract this paper exploits variation in the timing and outcomes of employment discrimination lawsuits against u s law enforcement agencies to estimate the cumulative and persistent employment effects of temporary externally imposed affirmative action aa we find that aa increased black employment at all ranks by 4 5 to 6 2 percentage points relative to national trends we also find no erosion of these employment gains in the fifteen years following aa termination although black employment growth was significantly lower in departments after aa ended than in departments whose plans continued for women in contrast we find only marginal employment gains at lower ranks

do credit constraints favor dirty production theory and plant level evidence abstract this paper explores the effect of credit constraints on production generated pollution emissions i develop a theoretical model wherein polluting firms borrow externally to finance investment in various assets subject to a credit constraint the main insight of the model is that credit constraints distort the composition of assets towards over investment in tangible assets which can be pledged as collateral thereby increasing the intensity of emissions the predictions of the model are tested using a unique dataset consisting of plant level measures of pollution emissions and creditworthiness the empirical results indicate that credit constraints significantly increase pollution emissions even after accounting for the scale effect and the results withstand multiple robustness checks moreover the effect of credit constraints is particularly acute in industries with greater reliance on external credit finally i demonstrate that firm level credit constraints distort the composition of assets and that the composition of assets influences pollution emissions

borders and big macs i measure the extent of international market segmentation using local national and international big mac prices i show that the bulk of time series price volatility observed across the united states arises between neighboring locations using these data i provide new estimates of border frictions for 14 countries i find that borders generally introduce only small price wedges far smaller than those observed across neighboring locations when expressing these wedges in terms of distance equivalents i find that border widths are small in relation to price variations observed across the united states this suggests that international markets are well integrated

anticipated shocks and the acceleration hypothesis the implication of wage indexation in his well cited contribution sachs 14 sets up a macromodel embodying the wage setting process perfect foresight and the portfolio balance feature it examines the exchange rate and current account responses to unanticipated fiscal expansion under alternative wage indexation rules he finds that in the nominal wage rigidity no wage indexation model the exchange rate depreciation coincides with a current account deficit in the real wage rigidity full wage indexation case the exchange rate again depreciates with a current account deficit and appreciates with a surplus 14 744 45 sachs s result is consistent with kouri s 12 acceleration hypothesis a current account deficit is accompanied by currency depreciation and conversely after the publication of the dorbusch and fischer 8 paper the literature on acceleration hypothesis has shifted from unanticipated shocks to anticipated shocks dorbusch and fischer 8 find that a negative correlation between the exchange rate and the current account prevails prior to the implementation of anticipated shocks consequently their conclusion indicates the acceleration hypothesis is not held when the economy experiences anticipated shocks bhandari 4 and papell 13 claim that the status of current account and the response of exchange rate can have either a positive or a negative correlation in response to anticipated shocks based on the fact that sachs 14 does not deal with the anticipated disturbances the first purpose of this paper thus tries to shed light on whether the alternative wage indexation schemes will affect the validity of the acceleration hypothesis in response to an anticipated fiscal expansion in an interesting paper aoki 1 bases on the modified dorbusch 7 model and examines the exchange rate responses to anticipated supply shocks he finds that an entirely different type of exchange rate adjustment pattern misadjustment path can arise when economic vari

a measure of segregation based on social interactions we develop an index of segregation based on two premises 1 a measure of segregation should disaggregate to the level of individuals and 2 an individual is more segregated the more segregated are the agents with whom she interacts we present an index that satisfies 1 and 2 and that is based on agents social interactions the extent to which blacks interact with blacks whites with whites etc we use the index to measure school and residential segregation using detailed data on friendship networks we calculate levels of within school racial segregation in a sample of u s schools we also calculate residential segregation across major u s cities using block level data from the 2000 u s census

a prism into the ppp puzzles the micro foundations of big mac real exchange rates we match big mac prices with prices of its ingredients as a unique prism to study real exchange rates rers this approach has several advantages first the levels of the big mac rer can be measured meaningfully second as the exact composition of a big mac is known the contributions of its tradable and non tradable components can be estimated relatively precisely third the dynamics of the rer can be studied in a setting free of several biases inherent in cpi based rers finally a large cross country dimension allows us to overturn the engel result on what drives rers in most economies the exchange rate is the single most important relative price one that potentially feeds back into a large range of transactions obstfeld and rogoff 2000

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

burgernomics the economics of the big mac standard abstract in the course of ppp research much of the debate over the validity has been over the choice of an appropriate basket for making purchasing power comparisons the different compositions of goods and services in these baskets across countries have resulted in arguments against their usefulness for ppp purposes this problem is augmented by the existence of productivity differentials in traded and non traded goods across countries therefore we consider the use of the big mac as the international monetary standard as being a more palatable alternative it is produced locally in over 80 countries around the world with only minor changes in recipe and thus has the flavour of the perfect universal commodity our results indicate that the big mac index is surprisingly accurate in tracking exchange rates over the long term which is consistent with previous ppp research findings we subsequently enhance our ppp comparisons by taking into account the productivity differentials between countries and excluding non traded goods from the big mac index to derive the no frills index

interactions between workers and the technology of production evidence from professional baseball this paper examines how the effort choices of workers within the same firm interact with each other in contrast to the existing literature we show that workers can affect the productivity of their co workers based on income maximization considerations rather than relying on behavioral considerations such as peer pressure social norms and shame theoretically we show that a worker s effort has a positive effect on the effort of co workers if they are complements in production and a negative effect if they are substitutes the theory is tested using panel data on the performance of baseball players from 1970 to 2003 the empirical analysis shows that a player s batting average significantly increases with the batting performance of his peers but decreases with the quality of the team s pitching furthermore a pitcher s performance increases with the pitching quality of his teammates but is unaffected by the batting output of the team these results are inconsistent with behavioral explanations which predict that shirking by any kind of worker will increase shirking by all fellow workers the results are consistent with the idea that the effort choices of workers interact in ways that are dependent on the technology of production these findings are robust to controlling for individual fixed effects and to using changes in the composition of one s co workers in order to produce exogenous variation in the performance of one s peers

intergenerational correlation and social interactions in education we propose a dynastic model where individuals are born into an educated or uneducated environment that they inherit from their parents we study the impact of social interactions on the correlation in parent child educational status independently of any parent child interaction when the level of social interactions is decided by a social planner we show that the correlation in education status between generations decreases very fast as social interactions increase in turn when the level of social interactions is decided by the individuals themselves we show that the intergenerational correlation still decreases although less rapidly than with exogenous social interactions

desegregation and black dropout rates in 1954 the united states supreme court ruled that separate schools for black and white children were inherently unequal this paper studies whether the desegregation plans of the next 30 years benefited black and white students in desegregated school districts data from the 1970 and 1980 censuses suggest desegregation plans of the 1970 s reduced high school dropout rates of blacks by two to three percentage points during this decade no significant change is observed among whites the results are robust to controls for family income parental education and state and region specific trends as well as to tests for selective migration

does head start improve children s life chances evidence from a regression discontinuity design this paper exploits a new source of variation in head start funding to identify the program s effects on health and schooling in 1965 the office of economic opportunity oeo provided technical assistance to the 300 poorest counties to develop head start proposals the result was a large and lasting discontinuity in head start funding rates at the oeo cutoff for grant writing assistance we find evidence of a large drop at the oeo cutoff in mortality rates for children from causes that could be affected by head start as well as suggestive evidence for a positive effect on educational attainment i introduction head start was established in 1965 as part of the war on poverty to provide preschool health and other social services to poor children age three to five and their families and currently serves over 900 000 children each year at a cost of around 7 billion hhs 2006 this paper provides new evidence on the effects of the head start program on schooling and health by drawing on a new source of variation in program funding spe

the effect of school closings on student achievement abstract many school districts across the country are shutting schools but school closing policies remain a very controversial issue the current study investigates the effects of school closing policies on student achievement by examining over 200 school closings in michigan relative to the previous literature the analysis uses a broader set of school closings to thoroughly investigate heterogeneity in treatment effects based on the performance level of the closed school the results indicate that on average school closings in michigan did no persistent harm to the achievement of displaced students moreover students displaced from relatively low performing schools experience achievement gains the displacement of students and teachers creates modest negative spillover effects on the receiving schools however hence the closing of low performing schools may generate some achievement gains for displaced students but not without imposing spillover effects on a large number of students in receiving schools

group characteristics evolution arising from asymmetric information in asymmetric information problems agents with less information principals or contractors usually take as given the preferences of agents with more information agents or contractees moreover the distribution of characteristics of contractees is supposed to be invariant in this article we consider a mixed framework of asymmetric information adverse selection followed by moral hazard where those two assumptions are excluded specifically the contractor only knows the current distribution of characteristics and the contractees may change them after signing the contract if this improves their welfare thus we find that the asymmetric information problem leads to a group eect changes of characteristics this feedback defines a sequence of temporary equilibria we provide conditions for the convergence of that sequence to a stationary long run equilibrium we also prove that both temporary equilibrium and long run equilibrium coincide with the equilibrium in classical models of adverse selection and the moral hazard problem vanishes in the long run

is school segregation good or bad it has been well documented that segregation across schools denying access to resources inferior educational production functions and so on exacerbates racial differences in achievement using an individual measure of social connections within schools we have shown that this form of segregation asian kids sitting together in the cafeteria has a substantively unimportant relationship with academic achievement or social behavior in school or later in life there are important caveats to our analysis a our estimates of the relationship between within school segregation and outcomes are not causal and b friendships may not be the only relevant cross race social interaction that occurs within a school

the effect of court ordered hiring quotas on the composition and quality of police arguably the most aggressive armative action program ever implemented in the united states was a series of court ordered racial hiring quotas imposed on municipal police departments my best estimate of the eect of court ordered armative action on workforce composition is a 14

racial segregation and the black white test score gap abstract racial segregation is often blamed for some of the achievement gap between blacks and whites we study the effects of school and neighborhood segregation on the relative sat scores of black students across different metropolitan areas using large microdata samples for the 1998 2001 test cohorts our models include detailed controls for the family background of individual test takers school level controls for selective participation in the test and city level controls for racial composition income and region we find robust evidence that the black white test score gap is higher in more segregated cities holding constant family background and other factors a shift from a highly segregated city to a nearly integrated city closes about one quarter of the raw black white gap in sat scores specifications that distinguish between school and neighborhood segregation suggest that neighborhood segregation has a consistently negative impact while school segregation has no independent effect though we cannot reject equality of the two effects additional tests indicate that much of the effect of neighborhood segregation operates through neighbors incomes not through race per se data on enrollment in honors courses suggest that within school segregation increases when schools are more highly integrated potentially offsetting the benefits of school desegregation and accounting for our findings

anticipated and unanticipated disturbances the dynamics of the exchange rate and the current account abstract the pattern of correlation between the exchange rate and the current account is investigated in the context of an econometric portfolio balance model with rational expectations while exchange rate appreciation depreciation is positively correlated with current account surpluses deficits in response to unanticipated disturbances there can be either positive or negative correlation in response to anticipated disturbances using maximum likelihood methods the model is estimated and the response to anticipated disturbances is simulated using data from the current flexible exchange rate period the exchange rate and the current account are found to be positively correlated in response to anticipated disturbances for japan and the united states and negatively correlated for germany and the united kingdom