futures prices on yields forward prices and implied forward prices from term structure when futures contracts are settled with respect to underlying asset prices received theory suggests that the differences between futures prices and implied forward prices from the term structure are strictly due to marking to market ceteris paribus empirical evidence appears to indicate that such differences are small for contracts with short maturities what happens when the futures contract settles to yields implied by future prices of underlying assets the eurodollar futures contract which is the most actively traded futures contract in the united states settles to yield as opposed to prices this unique settlement feature is shown to imply that the implied forward prices from the libor term structure should differ from the futures prices even in the absence of marking to market differences due to marking to market effect are small they are shown to vary between 2 to 45 basis points less than one half percent of futures prices on the other hand differences between implied forward prices and futures prices are shown to be relatively large

social class family background and intergenerational mobility abstract this research examines the various approaches taken by economists and sociologists for analyzing intergenerational mobility social mobility models based on social classes arising from an occupational classification scheme are analysed a test for the statistical validity of classification schemes is proposed and tested using danish sample survey data that was first collected in 1976 and augmented in 2000 this is referred to as a homogeneity test and is a likelihood ratio test of a set of linear restrictions which define social classes for denmark it is shown that this test fails for an erikson goldthorpe classification system raising doubts about the statistical validity of occupational classification systems in general we also estimate regression models of occupational earnings household earnings and educational attainment using family background variables as covariates controlling for unobservables measurement error and simultaneous equation bias in these models homogeneity tests are also rejected we conclude from these results that the individual s family background has a small but significant impact on lifetime chances which is not captured by the erikson goldthorpe classification scheme

intergenerational economic mobility in the united states 1940 to 2000 we estimate trends in intergenerational economic mobility by matching men in the census to synthetic parents in the prior generation we find that mobility increased from 1950 to 1980 but has declined sharply since 1980 while our estimator places greater weight on location effects than the standard intergenerational coefficient the size of the bias appears to be small our preferred results suggest that earnings are regressing to the mean more slowly now than at any time since world war ii causing economic differences between families to become more persistent however current rates of positional mobility appear historically normal

income inequality and health lessons from a refugee residential assignment program this paper examines the effect of income inequality on health for a group of particularly disadvantaged individuals refugees our analysis draws on longitudinal hospitalization records coupled with a settlement policy where swedish authorities assigned newly arrived refugees to their first area of residence the policy was implemented in a way that provides a source of plausibly random variation in initial location the results reveal no statistically significant effect of income inequality on the risk of being hospitalized this finding holds also for most population subgroups and when separating between different types of diagnoses our estimates are precise enough to rule out large effects of income inequality on health

the valuation of options on yields abstract many contingent claims incorporate options on yield levels i derive closed form expressions for european yield option prices using a general equilibrium model in which the underlying yield is the relevant state variable the properties of these options differ markedly from those of conventional options on traded assets for example yield call values can be less than their intrinsic value and can be decreasing functions of the underlying yield these features have important hedging implications i examine the empirical implications of the model using price data for the 13 week t bill options traded on the chicago board options exchange

when strong ties are strong networks and youth labour market entry the conditions under which young workers find their first real post graduation jobs are important for their future careers and insufficiently documented given their potential importance for young workers welfare to study these conditions and in particular the role played by social ties we use a swedish population wide linked employer employee data set of graduates from all levels of schooling that includes detailed information on family ties neighbourhoods schools class composition and parents and children s employers over a period covering years with both high and low unemployment together with measures of firm performance we find that strong social ties parents are an important determinant for where young workers find their first job the effects are larger if the graduate s position is weak low education bad grades during high unemployment years and when information on potential openings are likely to be scarce on the hiring side by contrast the effects are larger if the parent s position is strong long tenure high wage and if the parent s plant is more productive the youths appear to benefit from the use of strong social ties through faster access to jobs and by better labour market outcomes as measured a few years after entry in particular workers finding their entry jobs through strong social ties are considerably more likely to remain in this job while experiencing better wage growth than other entrants in the same plant firms also appear to benefit from these wage costs relative to comparable entrants starting at a lower base they also benefit on the parents side parents wage growth drops dramatically exactly at the entry of one of their children in the plant although this is a moment when firm profits tend to be growing indeed the firm side benefits appear large enough for at least small firms to increase job creation at the entry level in years when a child of one of their employees graduates

relative pricing of eurodollar futures and forward contracts past research explains observed spreads between futures and forward eurodollar yields as being due to the futures contract s mark to market feature we derive closed form solutions for this yield spread and show that theoretically it should be small also differences in liquidity taxation and default risk cannot account for the large spreads observed we also present evidence that the spreads which are nonnegligible primarily in the first half of the sample period are likely to be attributable to the mispricing of futures contracts relative to the forward rates and that the mispricing was gradually eliminated over time

the intergenerational causal effect of tax evasion evidence from the commuter tax allowance in austria does tax evasion run in the family to answer this question we study the case of the commuter tax allowance in austria this allowance is designed as a step function of the distance between the residence and the workplace creating sharp discontinuities at each bracket threshold the distance to these brackets is a strong determinant of compliance since it corresponds to the probability of detection the match of different administrative data sources allows us to observe actual compliance behavior at the individual level across two generations to identify the intergenerational causal effect in tax evasion behavior we use the paternal distance to bracket as an instrumental variable for paternal compliance we find that paternal noncompliance increases children s non compliance by about 20 percent

a general equilibrium analysis of the optimal number of firms in a polluting industry in partial equilibrium competitive models in which emissions are proportional to output the optimal output of individual firms in a polluting industry is the same with or without a pigouvian tax the same holds in general equilibrium only if the production function of those firms is homothetic the pigouvian tax increases the price of the polluting good reducing industry output and as a consequence the relative price of the input in which polluting firms are relatively intensive they will adjust their input ratios accordingly and if production functions are non homothetic this will either increase or decrease the level of output at which the total profit of the individual firm is zero une analyse en equilibre general du nombre optimal de firmes dans une industrie polluante dans les modeles concurrentiels en equilibre partiel la production optimale des firmes individuelles dans une industrie polluante est identique qu il y ait ou non une taxe a la pigou on obtient le meme rdsultat en equilibre general si la fonction de production de ces firmes est homothetique la taxe a la pigou augmente le prix du produit polluant reduit le niveau de production de l industrie et par voie de consequence le prix relatif de l intrant employe de fa9on relativement intensive par les firmes polluantes ces firmes vont ajuster les ratios d intrants en consequence si les fonctions de production ne sont pas homothetiques ces ajustements vont augmenter ou reduire le niveau de production qui correspond a un profit total nul pour la firme individuelle

an alternative measure of intergenerational income mobility based on a random coefficient model summary we propose an alternative measure of the degree to which income status is transmitted from one generation to another our indicator of intergenerational income mobility is based on a random coefficient model which allows for variation in intergenerational mobility across families due to multiplicative unobserved family specific characteristics this alternative measure suggests that intergenerational income persistence is typically stronger than when intergenerational income mobility is measured using the standard elasticity of sons income with respect to fathers income copyright 2011 john wiley sons ltd

does increasing women s schooling raise the schooling of the next generation the positive cross sectional relationship between the schooling of mothers and their children is substantially biased upward due to correlations between schooling and heritable ability as well as assortative mating an increase in the schooling of women would not have beneficial effects in terms of the schooling of children increased maternal schooling leads to reduced home time for mothers anticipating the consequences of investing in women s schooling requires attention to the role that schooling plays in the marriage market as well as to opportunities in the labor market for women

intergenerational earnings mobility and equality of opportunity in south africa summary the paper estimates the degree of intergenerational earnings persistence in south africa using microdata from the national income dynamics study nids the paper finds that intergenerational earnings mobility in south africa is low moreover a limited set of inherited circumstances explains a significant fraction of earnings inequality among male adults in particular race is shown to play a significant role the evidence provided for south africa is consistent with the hypothesis that low levels of intergenerational mobility and equality of opportunity are characteristic of high inequality emerging economies

the control of externalities abatement vs damage prevention both public policy discussions and the theoretical literature on externalities have focused on abatement by emitters as the chief means of mitigating the harmful effects of pollution the purpose of this paper is to broaden that focus by illuminating the role of damage reduction activities undertaken by victims and by showing how the efficient solution is affected when these preventive actions are incorporated into the standard theory of externalities finding the efficient solution requires a comparison of emitters abatement costs and the damages sustained by victims as browning 5 has shown the correct short run measure of damage is the loss in the victims profits given that they have acted optimally to minimize the harmful effects of the pollution if victims have no options other than passive acceptance of ambient pollution levels this loss in profits simply equals the profit level in the absence of the externality less the harm inflicted directly by exposure to it however if victims have available to them some cost effective means of reducing the harmful effects of untreated pollution the loss in profits will be smaller since a victim sees damage from pollution as a cost it will attempt to minimize this cost at each level of its output just as it endeavors to minimize other private costs of production such as labor or fuel costs the victim will maximize its profits only if it takes into account both the cost of pollution damages and the cost of damage reduction measures surprisingly the theoretical literature on externalities includes very little explicit discussion of victims defensive actions browning for example displayed a victim s set of marginal cost curves corresponding to different pollution levels each curve was drawn under the assumption that the victim had undertaken the efficient amount of damage prevention given the quantity of pollution it had received the mechanism by which it chose this amount of prevention was not discussed a different approach was taken by bohm 2 3

wealth inequality and intergenerational links previous work has had difficulty generating household saving behaviour that makes the distribution of wealth much more concentrated than that of labour earnings and that makes the richest households hold onto large amounts of wealth even during very old age i construct a quantitative general equilibrium overlapping generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability i show that voluntary bequests can explain the emergence of large estates while accidental bequests alone cannot and that adding earnings persistence within families increases wealth concentration even more i also show that the introduction of a bequest motive generates lifetime savings profiles more consistent with the data

unequal societies income distribution and the social contract this paper develops a theory of inequality and the social contract aiming to explain how countries with similar economic and political fundamentals can sustain such different systems of social insurance fiscal redistribution and education finance as those of the united states and western europe with imperfect credit and insurance markets some redistributive policies can improve ex ante welfare and this implies that their political support tends to decrease with inequality conversely with credit constraints lower redistribution translates into more persistent inequality hence the potential for multiple steady states with mutually reinforcing high inequality and low redistribution or vice versa

intergenerational income mobility in permanent and separated families abstract we focus on the father definition in studies of intergenerational income mobility the association between sons income and their biological fathers income is weaker the less they lived together we also find weaker associations for nonbiological fathers than for biological

self recruitment in the legal profession we argue that lawyers sons follow in their parents footsteps because the occupation lends itself to low cost transfer of relevant skills and knowledge from one generation to the next especially in the context of the family law practice analysis of project talent data reveals that knowledge about the law is transmitted from lawyers to their children and that this transmitted knowledge is a significant factor in a son s decision to follow in his father s legal footsteps second generation lawyers who receive these human capital transfers experience greater earnings than lawyers who have not received such transfers

cross country differences in intergenerational earnings mobility international studies of the extent to which economic status is passed from one generation to the next are important for at least two reasons first each study of a particular country characterizes an important feature of that country s income inequality second comparisons of intergenerational mobility across countries may yield valuable clues about how income status is transmitted across generations and why the strength of that intergenerational transmission varies across countries the e rst section of this paper explains a benchmark measure of intergenerational mobility commonly used in u s studies the second section summarizes comparable empirical e ndings that have accumulated so far for countries other than the united states the third section sketches a theoretical framework for interpreting cross country differences in intergenerational mobility

the impact of collateralization on swap rates interest rate swap pricing theory traditionally views swaps as a portfolio of forward contracts with net swap payments discounted at libor rates in practice the use of marking to market and collateralization questions this view as they introduce intermediate cash flows and alter credit characteristics we provide a swap valuation theory under marking to market and costly collateral and examine the theory s empirical implications we find evidence consistent with costly collateral using two different approaches the first uses single factor models and eurodollar futures prices and the second uses a formal term structure model and treasury swap data the traditional approach to interest rate swap valuation sundaresan 1991a and duffie and singleton 1997 treats a swap as a portfolio of forward contracts on the underlying floating interest rate under specific assumptions regarding the nature of default and the credit risk of the counterparties duffie and singleton 1997 prove that swap rates are par bond rates of an issuer who remains at libor quality throughout the life of the contract this result is extremely useful for extracting zero coupon bond prices pricing swap derivatives and testing spot rate models despite the popularity of the traditional view market practice brings into question some of the underlying assumptions of this approach as the swap market rapidly grew in the late 1980s and early 1990s an increasingly diverse group of counterparties entered the market to mitigate their exposure to counterparty credit risk market participants began using a number of credit enhancements to improve the credit quality of swap contracts without question the most important credit enhancement is the posting of collateral in the amount of the current mark to market value of the swap contract isda 1999 due to these credit enhancements market participants commonly view interest rate swaps as free of counterparty default risk see e g tuckman 2002 this implies that in contrast to the traditional approach swap rates should be discounted not at default risky libor rates but rather at default free rates johannes and sundaresan are with the columbia business school we thank seminar partici

social contacts and occupational choice social contacts help workers to find jobs but those jobs need not be in the occupations where workers are most productive hence social contacts can generate mismatch between a worker s occupational choice and his comparative productive advantage thus economies with dense social networks can exhibit apparently low labor force quality and as a result low returns to firms investment and depressed aggregate productivity we employ us and european data for the 1990 s to test the key prediction that social contacts distort workers occupational choices in a direction that reduces their apparent productivity we find that the use of social contacts helps find jobs one to two months sooner but leads to individual wage discounts of 5 to 7 and produces negative externalities on aggregate productivity

the scandinavian fantasy the sources of intergenerational mobility in denmark and the us this paper examines the sources of differences in social mobility between the us and denmark measured by income mobility denmark is a more mobile society but not when measured by educational mobility there are pronounced non linearities in income and educational mobility in both countries greater danish income mobility is largely a consequence of redistributional tax transfer and wage compression policies while danish social policies for children produce more favorable cognitive test scores for disadvantaged children they do not translate into more favorable educational outcomes partly because of disincentives to acquire education arising from the redistributional policies that increase income mobility

regression toward mediocrity in economic stature this paper provides estimates of the correlation in lifetime earnings between fathers and sons intergenerational data from the national longitudinal survey are used earlier studies conducted for the united states report elasticities of children s earnings with respect to parent s earnings of 0 2 or less suggesting extensive integenerational mobility these estimates however are biased downward by error contaminated measures of lifetime economic status estimates presented in this paper correct for the problem of measurement error and find the intergenerational correlation in income to be on the order of 0 4 this suggests considerably less intergenerational mobility than previously believed jel j62

intergenerational income mobility in the united states social scientists and policy analysts have long expressed concern about the extent of intergenerational income mobility in the united states but remarkably little empirical evidence is available the few existing estimates of the intergenerational correlation in income have been biased downward by measurement error unrepresentative samples or both new estimates based on intergenerational data from the panel study of income dynamics imply that the intergenerational correlation in long run income is at least 0 4 indicating dramatically less mobility than suggested by earlier research copyright 1992 by american economic association

job information networks neighborhood effects and inequality this paper explores the theoretical and empirical literature to examine the use by different social groups of informal sources of information provided by friends relatives and acquaintances during job search and its consequences for the job market it also addresses the role of network structure and size the resource endowments of contacts and nature of the links between contacts to explain differences in the effects of job information networks in doing so the paper also turns to the sociology literature on job information networks and provides an economic perspective on such sociological concepts as strong versus weak ties inbreeding distance from structural holes etc the paper distinguishes between models of exogenous job information networks that is where individuals obtain job related information through a given social structure and endogenous job information networks which are social networks that result from individuals uncoordinated actions the paper pays special attention to such issues as physical and social proximity and sharing of information and discusses them in the context of the recent social interactions and neighborhood effects literature finally the paper outlines a model that integrates job information networks where interactions occur in business cycle frequencies with the dynamics of human capital formation which include the joint effects of parental community and neighborhood human capital and are set in life cycle frequencies for the purpose of organizing suggestions for future research and examining earned income inequality

intergenerational earnings mobility in norway levels and trends using longitudinal data for norwegian children born in 1950 1955 1960 and 1965 we find a relatively high degree of earnings mobility there is no tendency toward decreasing mobility over the cohorts conditioning on the position in the earnings distribution the analysis indicates quite high mobility in the middle of the distribution and somewhat more persistence at the top and bottom this approach also reveals increased mobility over time for sons but a less clear picture for daughters

the empirical implications of the cox ingersoll ross theory of the term structure of interest rates the one factor version of the cox ingersoll and ross model of the term structure is estimated using monthly quotes on u s treasury issues trading from 1952 through 1983 using data from a single yield curve it is possible to estimate implied short and long term zero coupon rates and the implied variance of changes in short rates analysis of residuals points to a probable neglected tax effect the term structure of interest rates is important to economists because the relationship among the yields on default free securities that differ in their term to maturity reflects the information available to the market about the future course of events the expectations hypothesis the liquidity preference hypothesis hicks 10 and the market segmentation hypothesis culbertson 6 are theories of the term structure that predict little more than that the implied forward rate is either equal to or not equal to the expectation of future spot rates cox ingersoll and ross 5 cir model the term structure of interest rates in a competitive equilibrium context their model has elements in common with the earlier hypotheses of the term structure however the cir model has a rich class of empirical implications not only for the pricing of default free securities but also for the pricing of bond options callable bonds and other types of financial claims this paper examines the extent to which the model in its simplest one factor form is descriptive of the prices of u s treasury bills bonds and notes traded from 1952 to 1983 section i describes the model and the parsimonious representation of bond prices which it implies section ii describes the data and section iii outlines the preliminary results obtained by fitting the model to observed data the final section outlines directions for future research

do friends and relatives really help in getting a good job informal contacts are extensively used by both firms and workers to find jobs and fill vacancies the common wisdom in the economic literature is that jobs created through this channel are of better quality and pay higher wages than jobs created through formal methods this paper explores the empirical evidence for european countries using the european community household panel echp and discovers a large cross country as well as cross industry variation in the wage differentials between jobs found through informal and formal methods across countries and industries wage premiums and wage penalties to finding jobs through personal contacts are equally frequent this paper argues that such variation can be explained by looking at firms recruitment strategies in labour markets where employers invest largely in formal recruitment activities matches created through this channel are likely to be of average better quality than those created through informal networks a simple theoretical model is used to show that employers invest more in recruitment for high productivity jobs and for positions that require considerable training the empirical predictions of the theory are successfully tested using industry level data on recruitment costs

economic interpretations of intergenerational correlations science itself for example see galton s 1869 study of the eminence of relatives or his 1889 analysis of the heights of parents and children but extensive use of economic theory to interpret these correlations is much more recent using basic economic concepts such as supply demand investment incentives missing markets and so on theorists hope to explain how and why status is correlated across generations economic theory might provide a unified treatment of a variety of socioeconomic indicators such as earnings income occupation or wealth or it might predict how taxes subsidies and economic regulation affect intergenerational mobility and the operation of markets however while the subject matter earnings consumption wealth occupa tion is clearly interesting to economists it could nonetheless be the case that beyond basic questions of measurement economic theory has not improved our understanding of intergenerational mobility goldberger 1989 is quite explicit in this contention by emphasizing the distinction between genes and environment and by using statistical theory as its main analytical tool the paper by samuel bowles and herbert gintis in this issue implicitly concurs with goldberger we take this challenge very seriously what characterizes an economic approach to mobility while biologists and bowles and gintis distinguish endowments and investments by their source genetic versus environmental factors one focus of economic theorists is motiva

with a little help from my friends quality of social networks job finding and job match quality this paper studies the effect of network quality on job finding and job match quality using longitudinal data and a direct measure of network quality which is based on the employment of friendship ties various identification strategies provide robust evidence that a higher number of employed contacts increases the job finding rate network quality also increases wages for high skilled workers forming networks with non familial contacts instead for low skilled workers more employed familial contacts lead to a negative but not significant effect on wages these findings reconcile previous mixed evidence of network effects on wages indicating heterogeneity by skill level and relationship type

intergenerational mobility in the very long run florence 1427 2011 we examine intergenerational mobility in the very long run across generations that are six centuries apart we exploit a unique dataset containing detailed information at the individual level for all people living in the italian city of florence in 1427 these individuals have been associated using their surnames with their pseudo descendants living in florence in 2011 we find that earnings elasticity is about 0 04 much higher than predicted by traditional models of intergenerational mobility we also find an even stronger role for real wealth inheritance and evidence of persistence in belonging to certain elite professions our results are confirmed when we account for the quality of the pseudo links and when we address the potential selectivity bias due to the differential survival rates across surnames we argue that the quasi immobility of pre industrial society and the positional advantages in the access to certain professions might explain in part the long lasting effects of ancestors socioeconomic status

people i know job search and social networks we assess the strength of information spillovers relating unemployment duration of workers displaced by firm closures to their former colleagues current employment status displaced specific networks are recovered from a 20 year panel of matched employer employee data spillovers are identified by comparing performances of codisplaced workers a one standard deviation increase in the network employment rate reduces unemployment duration by about 8 the effect is magnified if contacts recently searched for a job and if their current employer is spatially and technologically closer to the displaced worker stronger ties and lower competition for information favor reemployment several indirect tests exclude other interaction mechanisms

do birth order and family size matter for intergenerational income mobility evidence from sweden previous studies of intergenerational income mobility have not considered potential birth order or family size effects in the estimated income elasticity this article uses a large sample of individuals born between 1962 and 1964 income elasticities with respect to parents incomes are estimated for individuals with different birth order positions and family sizes results based on labour income and total income for sons and daughters are reported separately the elasticity tends to decrease with family size as well as with birth order for a given family size especially in the labour income analysis of fathers and sons

why the apple doesn t fall far understanding intergenerational transmission of human capital parents with higher education levels have children with higher education levels however is this because parental education actually changes the outcomes of children suggesting an important spillover of education policies or is it merely that more able individuals who have higher education also have more able children this paper proposes to answer this question with a unique dataset from norway using the reform of the education system that was implemented in different municipalities at different times in the 1960s as an instrument for parental education we find little evidence of a causal relationship between parents education and children s education despite significant ols relationships we find 2sls estimates that are consistently lower than the ols estimates with the only statistically significant effect being a positive relationship between mother s education and son s education these findings suggest that the high correlations between parents and children s education are due primarily to family characteristics and inherited ability and not education spillovers

an empirical examination of the convexity bias in the pricing of interest rate swaps abstract this paper examines the convexity bias caused by the non linearity of payoffs in the pricing of interest rate swaps off the eurocurrency futures curve the evidence from four major currencies dm and during 1987 1996 suggests that swaps were initially being priced off the futures curve ignoring the convexity adjustment subsequently the market swap rates drifted below the rates implied by futures prices after rejecting alternative explanations we use alternative term structure models to show that the convexity bias is related to the empirically observed swap futures differential we interpret these results as evidence of mispricing of swap contracts during the early years which was eliminated over time

fortunate sons new estimates of intergenerational mobility in the united states using social security earnings data previous studies relying on short term averages of fathers earnings have estimated the intergenerational elasticity ige in earnings to be approximately 0 4 due to persistent transitory fluctuations these estimates have been biased down by approximately 30 or more using administrative data containing the earnings histories of parents and children the ige is estimated to be around 0 6 this suggests that the united states is substantially less mobile than previous research indicated estimates of intergenerational mobility are significantly lower for families with little or no wealth offering empirical support for theoretical models that predict differences due to borrowing constraints

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

in the name of the son and the daughter intergenerational mobility in the united states 1850 1940 this paper estimates historical intergenerational elasticities between fathers and children of both sexes in the united states using a novel empirical strategy the key insight of our approach is that the information about socioeconomic status conveyed by first names can be used to create pseudo links across generations we find that both father son and father daughter elasticities were flat during the nineteenth century increased sharply between 1900 and 1920 and declined slightly thereafter we discuss the role of regional disparities in economic development trends in inequality and returns to human capital and the marriage market in explaining these patterns jel d63 j12 j16 j24 j62 n31 n32 the degree to which economic status is passed along generations is key to under standing differences across societies and over time in the extent of inequality a low degree of intergenerational mobility can undermine the notion of equality of opportunity and may lead to persistent inequality recent research reveals that today intergenerational mobility in the united states is lower than in most other developed countries corak 2013 this finding stands in contrast with the national ethos of the united states as the land of unlimited opportunity was this view ever justified in this paper we provide a new perspective on the evolution of intergenerational mobility in the united states in the late nineteenth and early twentieth centuries we extend the existing literature by looking at the intergenerational elasticity in economic status between fathers and children of both sexes focusing only on father son cor relations may miss part of the picture daughters should be included if we want to know how the average well being of a generation correlates with that of their parents

informal job search and black youth unemployment in this paper i analyze how young black and white unemployed jobseekers use various methods of search and the employment outcomes which result from their use the focus is on distinguishing informal search methods i e friends and relatives or direct application without referral from more formal ones in analyzing racial differences the results show that the two informal methods of search account for about 90 of the difference in employment probabilities between white and black youth this also accounts for 57 71 of the difference in unemployment rates between the two furthermore most of these results reflect differences in the ability of these methods to generate job offers as opposed to differences in search effort or job acceptance rates however our ability to explain these differences through personal family and household characteristics was generally quite limited this abstract was borrowed from another version of this item

inheritance and wealth inequality evidence from population registers we use new population wide register data on inheritances and wealth in sweden to estimate the causal impact of inheritances on wealth inequality we find that inheritances reduce relative wealth inequality e g the gini coefficient falls by 5 10 percent but that absolute dispersion increases examining different parts of the wealth distribution we find that the top decile s wealth share decreases substantially whereas the wealth share of the bottom half increases from a negative to a positive share in essence wealthier heirs inherit larger amounts but less wealthy heirs inherit more relative to their pre inheritance wealth we also find that post inheritance behavioral adjustments mitigate the equalizing effect of inheritances because less wealthy heirs consume larger shares of their inheritances moreover we find that the swedish inheritance tax reduced the equalizing inheritance effect but that the redistribution of tax revenues could reverse this result finally we show that inheritances increase wealth mobility

intergenerational mobility new evidence from consumption data the intergenerational persistence of consumption describes the extent to which children inherit the living standards of their parents evidence on this parameter is scarce due to limited data on the joint consumption of parents and children this paper identifies parents who participated in the danish expenditure survey links them to their children through population wide danish registries and estimates the intergenerational elasticity of consumption in denmark the results suggest that consistent with intergenerational consumption smoothing the persistence of consumption across generations is higher than the persistence of earnings and income

intergenerational persistence of earnings the role of early and college education recent empirical evidence from the united states indicates a high degree of persistence in earnings across generations designing effective public policies to increase social mobility requires identifying and measuring the major sources of persistence and inequality in earnings we provide a quantitative model of intergenerational human capital transmission that focuses on three sources innate ability early education and college education we find that approximately one half of the intergenerational correlation in earnings is accounted for by parental investment in education in particular early education we show that these results have important implications for education policy

the informational content of surnames the evolution of intergenerational mobility and assortative mating we propose a new methodology for measuring intergenerational mobility in economic well being our method is based on the joint distribution of surnames and economic outcomes it circumvents the need for intergenerational panel data a long standing stumbling block for understanding mobility it does so by using cross sectional data alongside a calibrated structural model to recover the traditional intergenerational elasticity measures our main idea is simple if inheritance is important for economic outcomes then rare surnames should predict economic outcomes in the cross section this is because rare surnames are indicative of familial linkages if the number of rare surnames is small this approach will not work however rare surnames are abundant in the highly skewed nature of surname distributions from most western societies we develop a model that articulates this idea and shows that the more important is inheritance the more informative will be surnames this result is robust to a variety of different assumptions about fertility and mating we apply our method using the 2001 census from catalonia a large region of spain we use educational attainment as a proxy for overall economic well being a calibration exercise results in an estimate of the intergenerational correlation of educational attainment of 0 60 we also find evidence suggesting that mobility has decreased among the different generations of the 20th century a complementary analysis based on sibling correlations confirms our results and provides a robustness check on our method our model and our data allow us to examine one possible explanation for the observed decrease in mobility we find that the degree of assortative mating has increased over time overall we argue that our method has promise because it can tap the vast mines of census data that are available in a heretofore unexploited manner

do parental networks pay off linking children s labor market outcomes to their parents friends this paper examines whether children are better off if their parents have stronger social networks using data on high school friendships of parents we analyze whether the number and characteristics of friends affect the labor market outcomes of children while parental friendships formed in high school appear long lasting we find no significant impact on their children s occupational choices and earnings prospects these results do not change when we account for network endogeneity network persistency and network measurement error only when children enter the labor market we find that friends of parents have a marginally significant but small influence on the occupational choice of children

ethnic enclaves and the economic success of immigrants evidence from a natural experiment recent immigrants tend to locate in ethnic enclaves within metropolitan areas the economic consequence of living in such enclaves is still an unresolved issue we use an immigrant policy initiative in sweden when government authorities distributed refugee immigrants across locales in a way that may be considered exogenous this policy initiative provides a unique natural experiment which allows us to estimate the causal effect on labor market outcomes of living in enclaves we find substantive evidence of sorting across locations when sorting is taken into account living in enclaves improves labor market outcomes for instance the earnings gain associated with a standard deviation increase in ethnic concentration is in the order of four to five percent

environmental regulation cost and industry structure changes nonstationary markov analyses are used to investigate impacts of environmental regulatory costs associated with compliance on changes in market structure in pulp and paper industries results show environmental regulation expenditures have statistically significant effects on the probabilities of capacity moving to a larger company size category so industry structure is affected by environmental regulation however counter to expectations results further show consolidation occurs with higher probability when environmental costs are falling rather than when they are rising policy analyses that presume immediate policy responses to cost changes or that industry structure is unchanged may yield time inconsistent policy conclusions

like godfather like son exploring the intergenerational nature of crime sons daughters with criminal fathers have 2 06 2 66 times higher odds of having a criminal conviction than those with noncriminal fathers one additional paternal sentence increases sons daug

the effect of emission taxes and abatement subsidies on market structure comment abstract conrad and wang 1993 international journal of industrial organization 11 499 518 determine that a tax on emissions decreases the total output of a polluting industry but if demand is sufficiently inelastic can increase the number of firms in that industry this follows from their proposition that the tax reduces the scale of the polluting firm in contrast the scale of the polluting firm in the present model increases when there are increasing returns to scale in abatement whereas conrad and wang extend their results to cases of monopolistic competition the present paper is confined to perfect competition but extends the analysis to the pollution damaged industry

the swedish experiment the deterioration of the economic performance in sweden from about 1970 was to some extent the result of a number of exogenous shocks and unnecessary policy mistakes it was however also related to basic changes in the economic and social system in sweden in the late 1960s and early 1970 when government spending taxes and regulations started to expand dramatically it is also argued in the paper that problematic political economic and social mechanisms had become embedded in the long term dynamics of the system itself these various experiences are the background for recent reforms and retreats of the swedish experiment

correlating social mobility and economic outcomes we apply a novel measure of intergenerational mobility im developed by guell rodr guez mora and telmer 2014 to a rich combination of italian data allowing us to produce comparable measures of im of income for 103 italian provinces we then exploit the large heterogeneity across italian provinces in terms of economic and social outcomes to explore how im correlates with a variety of outcomes we nd that i higher im is positively associated with a variety of good economic outcomes such as higher value added per capita higher employment lower unemployment higher schooling and higher openness and ii that also within italy the the great gatsby curve exists in provinces in which mobility is lower cross sectional income inequality is larger we nally explore the correlation between im and several socio political outcomes such as crime and life expectancy but we do not nd any clear systematic relationship on this respect

a multifactor spot rate model for the pricing of interest rate derivatives we propose a multifactor model in which the spot rate libor follows a lognormal process with a stochastic conditional mean under the risk neutral measure in addition to the spot rate factor the second factor is related to the premium of the first futures rate over the spot libor similarly the third factor is related to the premium of the second futures rate over the first futures rate we calibrate the model to the initial term structure of futures rates and to the implied volatilities of interest rate caplets we then apply the model to price interest rate derivatives such as european and bermudan style swaptions and yieldspread options the model can be employed to price more complex interest rate derivatives such as path dependent derivatives or multi currency dependent derivatives because of its markovian property

stratification social networks in the labour market and intergenerational mobility young individuals taking the locational choices made by their altruistic parents as given decide whether or not to acquire skills the use of location specific word of mouth communication in the transmission of information about skilled job opportunities implies that the local social environment partly determines an individual s expected returns to education stratified equilibria when they exist are characterised by low intergenerational social mobility and inefficient use of talent in addition the equilibrium responses to factors that generally encourage education may in stratified outcomes be highly asymmetric across socio economic groups non stratified equilibria are likely to be destabilised by measures that encourage education

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

preferences for redistribution in the land of opportunities this paper explores how individual preferences for redistribution depend on future income prospects in addition to estimating the impact of individuals socioeconomic background and of their subjective perceptions of future mobility we employ panel data to construct dobjectivet measures of expected gains and losses from redistribution for different categories of individuals we find that such measures have considerable explanatory power and perform better than dgeneral mobilityt indexes we also find that preferences for redistribution respond to individual beliefs on what determines one s position in the social ladder ceteris paribus people who believe that the american society offers equal opportunities are more averse to redistribution d 2004 published by elsevier b v

search method use by unemployed youth this article presents a search model which shows that search method choices should be related to their costs and expected productivities as well as to nonwage income and wage offer distributions the empirical evidence then shows that the most frequently used search methods i e friends and relatives and direct applications without referral are also the most productive in generating offers and acceptances the number of methods used is affected by factors that presumably reflect opportunities as well as income sources and needs specific methods are chosen in a manner that generates positive average effects on outcomes for those using them

intergenerational earnings persistence and economic inequality in the long run evidence from french cohorts 1931 75 this paper analyses long term trends in intergenerational earnings persistence in france for male cohorts born between 1931 and 1975 this time period has witnessed important changes in the french labour market and educational system in particular an important compression of earnings differentials as well as a large expansion in access to secondary and higher education using a two sample instrumental variables approach i estimate two measures of intergenerational economic persistence the intergenerational earnings elasticity ige and the intergenerational correlation igc over the period the ige exhibits a v shaped pattern it falls from a high of value of 0 6 for cohorts born in the 1930s to around 0 4 for those born in the 1950s but subsequently rises to a level close to that at the beginning of the period in contrast the igc remains relatively stable over the period this suggests that changes in the ige are partly driven by transitory responses to changes in cross sectional inequality rather than long term changes in the degree of intergenerational persistence

unspanned stochastic volatility in affine models evidence from eurodollar futures and options unspanned stochastic volatility usv refers to the inability of bonds to replicate volatility sensitive derivative securities affine term structure models require special restrictions on the parameters to exhibit usv we use a joint eurodollar futures and options data set to estimate affine three factor models with and without usv restrictions the unrestricted model captures prices of futures and options well option pricing errors are much larger in the usv model the usv model is rejected in favor of the unrestricted model based on the likelihood ratio and wald tests we use the implications of the unrestricted model as a benchmark for understanding the extant evidence that favors usv specifically we replicate extant tests in samples simulated from the unrestricted model we show that none of the existing findings contradict the model without usv restrictions

unequal but fluid social mobility in chile in comparative perspective a major finding in comparative mobility research is the high similarity across countries and the lack of association between mobility and other national attributes with one exception higher inequality seems to be associated with lower mobility evidence for the mobility inequality link is however inconclusive largely because most mobility studies have been conducted in advanced countries with relatively similar levels of inequality this article introduces chile to the comparative project as the 10th most unequal country in the world chile is an adjudicative case if high inequality results in lower mobility chile should be significantly more rigid than its industrialized peers this hypothesis is disproved by the analysis despite vast economic inequality chile is as fluid if not more so than the much more equal industrialized nations furthermore there is no evidence of a decline in mobility as the result of the increase in inequality during the market oriented transformation of the country

school tracking and intergenerational income mobility evidence from the finnish comprehensive school reform abstract this paper estimates the effect of a major education reform on intergenerational income mobility the finnish comprehensive school reform of 1972 1977 replaced the old two track school system with a uniform nine year comprehensive school and shifted the selection of students to vocational and academic tracks from age 11 to age 16 we estimate the effect of this reform on the intergenerational income elasticity using a representative sample of males born between 1960 and 1966 the identification strategy relies on a differences in differences approach and exploits the fact that the reform was implemented gradually across the country during a six year period the results indicate that the reform reduced the intergenerational income elasticity by 23 from the pre reform elasticity of 0 30 to post reform elasticity of 0 23

the relation between forward prices and futures prices abstract this paper consolidates the results of some recent work on the relation between forward prices and futures prices it develops a number of propositions characterizing the two prices these propositions contain several testable implications about the difference between forward and futures prices many of the propositions show that equilibrium forward and futures prices are equal to the values of particular assets even though they are not in themselves asset prices the paper then illustrates these results in the context of two valuation models and discusses the effects of taxes and other institutional factors

the effect of emission taxes and abatement subsidies on market structure abstract emission taxes and abatement subsidies are considered to be efficient measures for environment protection the purpose of this paper is to quantify their effects on industry output firm output and on the number of firms in the industry three types of market structure are under discussion perfect competition oligopoly and a dominant firm with a competitive fringe it turns out that emission taxes and abatement subsidies affect the structure of the polluting industry in opposite ways while the effects on industry s emissions are similar in direction but different

the effect of immigration on wages exploiting exogenous variation at the national level this paper estimates the effect of immigration on native wages at the national level taking into account the endogenous allocation of immigrants across skill cells time varying exogenous variation across skill cells for a given country is provided by interactions of push factors distance and skill cell dummies distance mitigates the effect of push factors more severely for less educated and middle experienced because the analysis focuses on the united states and canada i propose a two stage approach sub sample 2sls that estimates the first stage regression with an augmented sample of destination countries and the second stage equation with the restricted sub sample of interest i derive asymptotic results for this estimator and suggest several applications beyond the current one the empirical analysis indicates a substantial bias in estimated ols wage elasticities to immigration sub sample 2sls estimates average 1 2 and are very stable to the use of alternative instruments

social networks employee selection and labor market outcomes we provide a direct empirical test of montgomery s 1991 notion that firms hire workers through social ties of productive employees as these workers know others with high unobserved productivity we focus on coworker networks and show that firms recruit workers with better military draft test scores but shorter schooling when hiring previous colleagues of current employees suggesting that firms use these networks to attract workers with better qualities in hard to observe dimensions incumbent workers abilities predict the incidence abilities and wages of linked entrants these results suggest that firms rely on the ability density of the studied networks when setting entry wages

intergenerational mobility and the process of development this paper offers an explanation for some evidence that intergenerational earnings mobility is higher in more developed economies and that mobility is positively correlated with wage equality in the model mobility promotes economic growth via its effect on the accumulation and allocation of human capital growth influences mobility via its effect on incentives to acquire education and its effect on liquidity constraints upon such acquisition in the process of development mobility increases and the distribution of education becomes better correlated with ability redistributive policy has a negative effect on growth in developed economies and a positive effect in developing economies

bequest motives a comparison of sweden and the united states this paper reviews four well known theoretical models of private bequest behavior notes their differing implications for public policy and discusses a way of empirically dis criminating among them then it implements the test with micro data from sweden lls and the u s psid the so called altruistic or dynastic model which among the four models has perhaps the most wide ranging implications for policy receives some support the sign pattern is as the model predicts while the magnitude is much smaller than the altruistic theory implies there is evidence of a potential complication due to a dependence of children s education on parents financial status in the case of the u s 2001 elsevier science b v all rights reserved

the political economy of intergenerational income mobility the intergenerational elasticity of income is considered one of the best measures of the degree to which a society gives equal opportunity to its members while much research has been devoted to measuring this reduced form parameter less is known about its underlying structural determinants using a model with exogenous talent endowments endogenous parental investment in children and endogenous redistributive institutions we identify the structural parameters that govern the intergenerational elasticity of income the model clarifies how the interaction between private and collective decisions determines the equilibrium level of social mobility two societies with similar economic and biological fundamentals may have vastly different degrees of intergenerational mobility depending on their political institutions we offer empirical evidence in line with the predictions of the model we conclude that international comparisons of intergenerational elasticity of income are not particularly informative about fairness without taking into account differences in politico economic institutions jel e24 j62 j68 p16