public employees as politicians evidence from close elections we analyze the effect of municipal employees political representation in municipal councils on local public spending we use within party as good as random variation in close elections in the finnish open list proportional election system to quantify the effect one more councilor employed by the public sector increases spending by about 1 the effect comes largely through the largest party and is specific to the employment sector of the municipal employee the results are consistent with public employees having an information advantage over other politicians and thus being able to influence policy

women s suffrage political responsiveness and child survival in american history women s choices appear to emphasize child welfare more than those of men this paper presents new evidence on how suffrage rights for american women helped children to benefit from the scientific breakthroughs of the bacteriological revolution consistent with standard models of electoral competition suffrage laws were followed by immediate shifts in legislative behavior and large sudden increases in local public health spending this growth in public health spending fueled large scale door to door hygiene campaigns and child mortality declined by 8 15 or 20 000 annual child deaths nationwide as cause specific reductions occurred exclusively among infectious childhood killers sensitive to hygienic conditions

women as policy makers evidence from a randomized policy experiment in india this paper uses political reservations for women in india to study the impact of women s leadership on policy decisions since the mid 1990 s one third of village council head positions in india have been randomly reserved for a woman in these councils only women could be elected to the position of head village councils are responsible for the provision of many local public goods in rural areas using a dataset we collected on 265 village councils in west bengal and rajasthan we compare the type of public goods provided in reserved and unreserved village councils we show that the reservation of a council seat affects the types of public goods provided specifically leaders invest more in infrastructure that is directly relevant to the needs of their own genders

strategic extremism why republicans and democrats divide on religious values party platforms differ sharply from one another especially on issues with religious content such as abortion or gay marriage given the high return to attracting the median voter why do vote maximizing politicians take extreme positions in this paper we find that strategic extremism depends on an intensive margin where politicians want to induce their core constituents to vote or make donations and the ability to target political messages toward those core constituents our model predicts that the political relevance of religious issues is highest when around one half of the voting population attends church regularly using data from across the world and within the united states we indeed find a nonmonotonic relationship between religious extremism and religious attendance

districting and government overspending theories of government spending driven by a common pool problem in the fiscal revenues pool predict that greater districting of a political jurisdiction raises the scale of government this paper presents evidence on this and related predictions from a cross section of city governments in the united states the main finding is that when other plausible determinants of government spending are controlled for greater districting leads to a considerably greater scale of government activity the results also show that at large electoral systems do not and forms of government that concentrate powers in the office of the executive do break this relationship

trying to explain home bias in equities and consumption investors hold a substantially larger proportion of their wealth portfolios in domestic assets than standard portfolio theory would suggest a phenomenon called equity home bias in the absence of this bias investors would optimally diversify domestic output risk using foreign equities therefore consumption growth rates would tend to co move across countries even when output growth rates do not empirically however consumption growth rates tend to have a lower correlation across countries than do output growth rates a phenomenon i call consumption home bias in this paper i discuss these two biases and their potential relationship as suggested by the literature

optimal portfolio policies with borrowing and shortsale constraints abstract we characterize optimal intertemporal portfolio policies for investors with crra utility facing either a borrowing constraint or shortsale restrictions or both the optimal constrained portfolios are identified as optimal unconstrained portfolios for a higher riskless rate or for a subset of the risky assets or for a combination of the two settings our characterization is based on duality results in cvitanic and karatzas 1992 annals of applied probability 2 767 818 for optimal portfolio investment when portfolio values are more generally constrained to a closed convex nonempty subset of r n

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

the implications of competition among jurisdictions does tiebout need politics the paper investigates whether compensation among local jurisdiction is by itself sufficient to ensure efficient provision of local public goods jurisdictions have fixed boundaries and each has an entrenched government with the power to tax and supply the public good residents can move costlessly among jurisdictions it is shown that competition among numerous jurisdictions is not sificient to guarantee public sector efficiency though residents can vote with their feet land is immobile hence governments can unsurp some land rents for their own ends increasing the number of jurisdictions limits but cannot completely eliminate the ability to exercise discretionary governmental power

the rationale of the mean standard deviation analysis skewness preference and the demand for money publisher summary this chapter discusses the rationale of the mean standard deviation analysis skewness preference and the demand for money in january 1969 issue of the review of economic studies karl borch and martin feldstein separately criticized the widely used mean variance analysis of portfolio selection borch contended that any system of upward sloping mean standard deviation e s indifference curves can be shown to be inconsistent with the basic axiom of choice under uncertainty he pointed out that one can always pick any two points on an upward sloping indifference curve to represent two bernoulli distributions with probability 1 p of gaining the same amount x in both the cases and probability p of gaining y1 in the case of one distribution and y2 in the case of the second distribution with y2 y1 if the second distribution represents the point to the northeast of the other point then by the dominance axiom the second distribution must be preferred to the first which contradicts the basic meaning of indifference curves feldstein by using a log utility function and a lognormal distribution for investment outcome showed that e s indifference curves for a risk averter need not be convex downwards though upward sloping they would change from convex to concave once the standard deviation of the outcome exceeds the mean multiplied by on the face of it this seems to suggest that risk aversion might decrease as risk is increased beyond a certain extent

does gender matter for political leadership the case of u s mayors abstract what are the consequences of electing a female leader for policy and political outcomes we answer this question in the context of u s cities where women s participation in mayoral elections increased from negligible numbers in 1970 to about one third of the elections in the 2000 s a novel data set of u s mayoral elections from 1950 to 2005 was used and a regression discontinuity design was employed to deal with the endogeneity of female candidacy to city characteristics in contrast to most research on the influence of female leadership we find no effect of gender of the mayor on policy outcomes related to the size of local government the composition of municipal spending and employment or crime rates these results hold both in the short and the long run while female mayors do not implement different policies they do appear to have higher unobserved political skills as they have at least a 5 percentage point higher incumbent effect than a comparable male but we find no evidence of political spillovers exogenously electing a female mayor does not change the long run political success of other female mayoral candidates in the same city or of female candidates in local congressional elections

did women s suffrage change the size and scope of government this paper examines the growth of government during this century as a result of giving women the right to vote using cross sectional time series data for 1870 1940 we examine state government expenditures and revenue as well as voting by u s house and senate state delegations and the passage of a wide range of different state laws suffrage coincided with immediate increases in state government expenditures and revenue and more liberal voting patterns for federal representatives and these effects continued growing over time as more women took advantage of the franchise contrary to many recent suggestions the gender gap is not something that has arisen since the 1970s and it helps explain why american government started growing when it did

life expectancy and human capital investments evidence from maternal mortality declines longer life expectancy should encourage human capital accumulation since a longer time horizon increases the value of investments that pay out over time previous work has been unable to determine the empirical importance of this life expectancy effect due to the difficulty of isolating it from other effects of health on education we examine a sudden drop in maternal mortality risk in sri lanka between 1946 and 1953 which creates a sharp increase in life expectancy for school age girls without contemporaneous effects on health and which also allows for the use of boys as a control group using additional geographic variation we find that the 70 reduction in maternal mortality risk over the sample period increased female life expectancy at age 15 by 4 1 female literacy by 2 5 and female years of education by 4 0 authors

can mentoring help female assistant professors interim results from a randomized trial while much has been written about the potential benefits of mentoring in academia very little research documents its effectiveness we present data from a randomized controlled trial of a mentoring program for female economists organized by the committee for the status of women in the economics profession and sponsored by the national science foundation and the american economics association to our knowledge this is the first randomized trial of a mentoring program in academia we evaluate the performance of three cohorts of participants and randomly assigned controls from 2004 2006 and 2008 this paper presents an interim assessment of the program s effects our results suggest that mentoring works after five years the 2004 treatment group averaged 4 more nsf or nih grants and 3 additional publications and were 25 percentage points more likely to have a top tier publication there are significant but smaller effects at three years post treatment for the 2004 and 2006 cohorts combined while it is too early to assess the ultimate effects of mentoring on the academic careers of program participants the results suggest that this type of mentoring may be one way to help women advance in the economics profession and by extension in other male dominated academic fields this abstract was borrowed from another version of this item

diagnosing discrimination stock returns and ceo gender a vast labor literature has found evidence of a glass ceiling whereby women are under represented among senior management a key question remains the extent to which this reflects unobserved differences in productivity preferences prejudice or systematically biased beliefs about the ability of female managers disentangling these theories would require data on productivity on the preferences of those who interact with managers and on perceptions of productivity financial markets provide continuous measures of the market s perception of the value of firms taking account of the beliefs of market participants about the ability of the men and women in senior management as such financial data hold the promise of potentially providing insight into the presence of mistake based discrimination specifically if female headed firms were systematically under estimated this would suggest that female headed firms would outperform expectations yielding excess returns examining data on s p 1500 firms over the period 1992 2004 i find no systematic differences in returns to holding stock in female headed firms although this result reflects the weak statistical power of our test rather than a strong inference that financial markets either do or do not under estimate female ceos jel j7 g14 j44

credibility and policy convergence in a two party system with rational voters the traditional approach to modeling political parties behavior based upon the contribution of anthony downs 1957 assumes that the parties unique objective is to win elections thus they maximize their popularity the crucial implication of this assumption for a two party system is that if the two parties have the same information about voters preferences full convergence of policies results from electoral competition this is the crucial implication of the median voter theorem more generally it may be argued that different parties are motivated differently because they represent different constituencies parties may not care only about winning elections per se but also about the quality of the policies resulting from an election in this case the candidates of the two parties view winning an election not only as a goal per se but also as a means of implementing a better policy for their respective constituencies this paper shows that electoral competitions imply dynamic inconsistency if the voters are modeled as rational and forwardlooking agents and parties do not care exclusively about being elected but also about which policy to implement once elected the dynamic inconsistency arises as follows the parties have an incentive to announce convergent platforms to increase their chances of election however if the elected party is not committed to its electoral platform it has an incentive to follow its most preferred policy rather than the policy announced in its platform if voters are rational they account for this incentive thus in general in a one shot electoral game the only timeconsistent equilibrium is one in which no convergence is possible the two parties follow their most preferred policies and the voters rationally expect this outcome full convergence of parties platforms results only as a limiting case when the parties are completely indifferent with respect to the quality of the policies resulting from the election thus these results differ from the existing literature on ideologically motivated politicians for instance donald wittman 1977 1983 randall calvert 1985 which implicitly assumes the possibility of binding commitments to electoral platforms complete or partial policy convergence can be the outcome of political competition if the interaction between the parties and the voters is modeled as an infinitely repeated game in fact if the candidates have concave objective functions the welfare maximizing policy rule implies a complete convergence of parties policies however this cooperative and agreed upon policy may or may not be sustainable as a subgame perfect equilibrium depending on parameter values in particular it depends on the discount rates of the two parties the degree of polarization of their preferences and the relative popu graduate school of industrial administration carnegie mellon university pittsburgh pa 15213 and national bureau of economic research cambridge ma 02138 this paper is based upon a chapter of my unpublished doctoral dissertation at harvard university i am greatly indebted to jeffrey sachs for directing my attention toward these issues and for many conversations i also wish to thank andrew abel dilip abreu olivier blanchard ramon caminal andrew caplin alex cukierman morris fiorina benjamin friedman herschel grossman howard rosenthal and the referees for very useful comments the responsibilitv af anv n mtnkieis af calrirp nfnlv mine the result of policy convergence in a two party system is more general than the median voter theorem for discussions of convergence results not at the median see john ledyard 1984 peter coughlin 1984 coughlin and shmuel nitzan 1981 melvin hinich 1977 for earlier work on spatial competition see richard mckelvey 1975 hinich ledyard and peter ordeshook 1972 1973 and the references quoted therein the present paper focuses on the result of convergence rather than on the median voter theorem per se

do political parties matter evidence from u s cities are cities as politically polarized as states and countries no is the answer from our regression discontinuity design analysis which shows that whether the mayor is a democrat or a republican does not affect the size of city government the allocation of local public spending or crime rates however there is a substantial incumbent effect for mayors we investigate three mechanisms that could account for the striking lack of partisan impact at the local level and find the most support for tiebout competition among localities within metropolitan areas

the causes of legal rents extraction evidence from spanish municipalities this paper analyzes the causes of legal political rent extraction by using a direct measure of it namely local top politicians wages in particular we investigate whether local politicians incentives to extract rents by setting their own wages are influenced by the degree of political competition and voter information we use a sample of the largest spanish municipalities over the years 2008 2010 the results indicate that weaker political competition and lesser voter information are related to more rent extraction in an additional analysis we show that higher wages do not ensure better financial management these findings confirm that when politicians can set their own salaries higher wages do not mean better management but they are just political rents

gender quotas and the quality of politicians we analyze the effects of the introduction of gender quotas in candidate lists on the quality of elected politicians as measured by the average number of years of education we consider an italian law which introduced gender quotas in local elections in 1993 and was abolished in 1995 as not all municipalities went through elections during this period we identify two groups of municipalities and use a difference in differences estimation we find that gender quotas are associated with an increase in the quality of elected politicians with the effect ranging from 0 12 to 0 24 years of education this effect is due not only to the higher number of elected women who are on average more educated than men but also to the lower number of low educated elected men the positive effect on quality is confirmed when we measure the latter with alternative indicators it persists in the long run and it is robust to controlling for political ideology and political competition

does partisan affiliation impact the distribution of spending evidence from state governments expenditures on education abstract how and why does partisan affiliation impact policy using a regression discontinuity strategy and focusing on state education spending we find that democratic and republican governors allocate spending differently in particular school districts with higher shares of minority students receive larger state transfers than other districts under democratic governors a similar pattern occurs in state transfers to higher education institutions this is true regardless of whether the governor is eligible for reelection we find no evidence that democrat governors are simply sending money to areas with a larger share of democrats these results suggest that the observed policy divergence is driven by differences in preferences of elected candidates

business as usual politicians with business experience government finances and policy outcomes abstract are government finances and policy outcomes different under politicians with business experience we study california city councils and implement a regression discontinuity strategy to provide causal evidence on this issue ultimately we find no evidence that the election of a candidate with business experience impacts city expenditures revenues unemployment rates and other outcomes future vote shares for candidates with business experience are also unaffected which suggests that these politicians are not having an impact that is observed to voters but unobserved in our data

on the distributional conditions for a consumption oriented three moment capm in this paper we develop sufficient conditions on probability distributions for a three moment mean variance and skewness consumption oriented capital asset pricing model capm to price correctly a subset of assets the assumptions that individuals in an allocationally efficient capital market have identical probability beliefs and monotone increasing strictly concave utility functions displaying nonincreasing absolute risk aversion imply an aggregate preference function that exhibits preference for expected return aversion to variance of return and preference for positive skewness for otherwise arbitrary preferences we show that quadratic characteristic lines are sufficient for a subset of assets to be priced according to a three moment consumption oriented capm

on the measurement of the international propagation of shocks is the transmission stable abstract the empirical literature on contagion focuses mainly on two questions 1 what are the channels through which shocks are transmitted across countries trade macro similarities financial weaknesses or investor behavior 2 is there a shift in the transmission of shocks during crises are crises spread with higher intensity if so why this paper concentrates on the econometric problems that arise in dealing with the second question the data where most of these issues are raised are plagued with problems of simultaneous equations omitted variables and heteroskedasticity the standard methodologies used in the literature are inappropriate if all three are present this paper applies a new procedure that allows one to test for parameter stability taking into account all three predicaments the paper tests for the stability of the transmission mechanisms among 36 stock markets during the last three major international financial crises mexico 1994 asia 1997 and russia 1998

party affiliation and public spending evidence from u s governors this paper investigates whether the party affiliation of governors democrat or republican has an impact on the allocation of state expenditures exploiting gubernatorial election results from 1960 to 2012 and a regression discontinuity design rdd we find that democratic governors allocate a larger share of their budget to health hospitals and education sectors we find no significant impact of the political party of governors on total spending only on the allocation of funds the results are robust to a wide range of controls and model specifications jel d72 h75 h72

systemic risk and international portfolio choice returns on international equities are characterized by jumps moreover these jumps tend to occur at the same time across countries leading to systemic risk we capture these stylized facts using a multivariate system ofjump diffusion processes where the arrival of jumps is simultaneous across assets we then determine an investor s optimal portfolio for this model of returns systemic risk has two effects one it reduces the gains from diversification and two it penalizes investors for holding levered positions we find that the loss resulting from diminished diversification is small while that from holding very highly levered positions is large returns on international equities are characterized by jumps 1 moreover these jumps tend to occur at the same time across countries implying that conditional correlations between international equity returns tend to be higher in periods of high market volatility or following large downside moves 2 our objective in

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

pricing weather derivatives this article presents a general method for pricing weather derivatives specification tests find that a temperature series for fresno ca follows a mean reverting brownian motion process with discrete jumps and autoregressive conditional heteroscedastic errors based on this process we define an equilibrium pricing model for cooling degree day weather options comparing option prices estimated with three methods a traditional burn rate approach a black scholes merton approximation and an equilibrium monte carlo simulation reveals significant differences equilibrium prices are preferred on theoretical grounds so are used to demonstrate the usefulness of weather derivatives as risk management tools for california specialty crop growers

a natural experiment on discrimination in elections abstract we exploit a natural experiment to study discrimination in elections in illinois republican presidential primaries voters vote for delegates bound to presidential candidates but delegates names convey information about their race and gender we identify discrimination from variation in vote totals among delegates bound to the same presidential candidate and who face the same voters examining delegate vote totals from 2000 to 2016 we estimate nonwhite delegates receive 9 fewer votes we find essentially no gender discrimination negligible incentives for statistical discrimination costs to preferred presidential candidates and heterogeneity are consistent with an interpretation of this behavior as taste based

estimating security price derivatives using simulation simulation has proved to be a valuable tool for estimating security prices for which simple closed form solutions do not exist in this paper we present two direct methods a pathwise method and a likelihood ratio method for estimating derivatives of security prices using simulation with the direct methods the information from a single simulation can be used to estimate multiple derivatives along with a security s price the main advantage of the direct methods over resimulation is increased computational speed another advantage is that the direct methods give unbiased estimates of derivatives whereas the estimates obtained by resimulation are biased computational results are given for both direct methods and comparisons are made to the standard method of resimulation to estimate derivatives the methods are illustrated for a path independent model european options a path dependent model asian options and a model with multiple state variables options with stochastic volatility

the contribution of weather variability to economic sectors every day people make economic decisions based on the weather affecting sales of companies in a wide range of economic sectors in many cases the impact of weather on sales is not constant from

gender interactions within hierarchies evidence from the political arena this paper studies gender interactions within hierarchical organizations using a large data set on the duration of italian municipal governments elected between 1993 and 2003 a municipal government can be viewed as a hierarchy whose stability over time depends on the degree of cooperation between and within ranks we find that in municipalities headed by female mayors the probability of early termination of the legislature is higher this result persists and becomes stronger when we control for municipality fixed effects as well as for non random sorting of women into municipalities using regression discontinuity in gender mixed electoral races decided by a narrow margin the likelihood that a female mayor survives until the end of her term is lowest when the council is entirely male and in regions with less favourable attitudes towards working women this evidence is suggestive that group dynamics are an important factor in driving the gender difference other interpretations receive less support in the data our results may provide an alternative explanation for the underrepresentation of women in leadership positions

mixed diffusion jump process modeling of exchange rate movements this study demonstrates that the mixed diffusion jump process is superior to the stable laws or a mixture of normals as a model of exchange rate changes for the british pound french franc and the we st german mark relative to the united states dollar the parameter value s for the mixed diffusion jump process are dependent on the monetary policy regime in force in the united states with the estimates for the franc and mark being intertemporally similar but different from the pound copyright 1988 by mit press

on jump processes in the foreign exchange and stock markets exchange rates exhibit systematic discontinuities even after allowingfor conditional heteroskedasticity in the diffusion process the results are much more significant in theforeign exchange market than in the stock market which suggests differences in the structure of these markets finally this jump component is shown to explain some of the empirically observed mispricings in the currency options market the objective of this article is to analyze and compare the empirical distribution of returns in the stock market and in the foreign exchange market there are a number of reasons why a better understanding of the stochastic processes driving prices in these markets would be useful many financial models rely heavily on the assumption of a particular stochastic process while relatively little attention is paid to the empirical fit of the postulated distribution as a result models like option pricing models are applied indiscriminately to various markets such as the stock market and the foreign exchange market when the underlying processes may be fundamentally different the foreign exchange market for instance is characterized by active exchange rate man

does personal background influence a finance minister to cook the books an investigation of creative accounting in swiss cantons abstractthis article aims to identify the factors influencing the use of creative accounting in the public sector its distinctive feature is that it sheds light on creative accounting when used not to hide public deficits but to conceal surpluses it especially explores the impact of the finance minister s fm s background on the phenomenon we take advantage of the quasi experimental settings of the swiss cantons in which the financial management act sets out the possibility of implementing certain accounting gimmicks including mainly additional depreciation charges these charges which are depreciations in name only enable the fm to artificially inflate expenses thus increasing the deficit or reducing the surplus our panel data set of the 26 cantons over the period 1980 2012 includes a new data set of creative accounting and of 116 cantonal fms our results indicate that the fms cook the books irrespective of their personal or ideological background with the exception that trained economists

the sampling error in estimates of mean variance efficient portfolio weights this paper presents an exact finite sample statistical procedure for testing hypotheses about the weights of mean variance efficient portfolios the estimation and inference procedures on efficient portfolio weights are performed in the same way as for the coefficients in an ols regression ols t and f statistics can be used for tests on efficient weights and when returns are multivariate normal these statistics have exact t and f distributions in a finite sample using 20 years of data on 11 country stock indexes we find that the sampling error in estimates of the weights of a global efficient portfolio is large

skewness preference and portfolio choice one of the virtues of parameter preference models presented in general form in rubinstein 23 is their empirical content applied models of financial theory rely heavily on the mean variance mv version of parameter preference as spelled out in samuelson 25 mv models are adequate with compact distributions of returns and when portfolio decisions are made frequently so that the risk parameter becomes sufficiently small

women prefer larger governments growth structural transformation and government size i introduction in developing and developed economies alike growth of income per capita is generally accompanied by a rise in the share of government expenditure in gross domestic product gdp as well as an increase in the participation of women in the labor force we argue that these phenomena are causally related propose a model that motivates that relation and provide evidence in its support the share of total government spending in gdp has increased by 10 in organization for economic cooperation and development oecd countries in the last two decades alone see world bank 2001 and this rise comes in the wake of significant secular increases in government spending in the 20th century 1 apace with this rise in the government s share of gdp female labor force participation has also risen from 28 to 41 in the same countries and the same period 2 as for the long run goldin 1995 reports an increase in female labor force participation in the united states between 1900 and 1980 from 3 1 to 50 of the labor force 3 while according to tanzi and schuknecht 2000 the share of government spending rose in the same period from 8 to 30 figure 1 plots the change in government size as a share of gdp versus the change in female labor force participation from 1972 to 1999 for a sample of selected countries the twin increases in female labor force participation and government size are not a coincidence they are causally related the mechanism at work is twofold as wages rise with development and women choose to work more hours in the market they increase their demand for services that tend to be provided by the government including education healthcare care for the elderly and the unemployed the additional provision of government services further encourages female labor market participation as it decreases the time necessary to perform those home and family activities whose burden falls disproportionately on women 4 this circle of causation leads to higher female participation and larger governments our growth model extends galor and weil 1996 in addition to female participation in market activities fertility and output government size is also endogenously determined the rise in hourly wages that accompanies development and capital accumulation leads to an increase in female labor force participation as the opportunity cost of caring for the children increases in our model government spending decreases the time cost of performing household chores one obvious connection is the provision of extra school hours and child care which decrease the time cost of child rearing as couples women in particular participate more in market activities they choose higher government spending to compensate for time spent in the market under certain conditions which we make explicit they also choose higher tax rates with the result that female labor force participation and government size increase apace 5 as female labor force participation leads to a larger government the total cost of raising children is reduced for two reasons the total time at home decreases and the time cost per child also falls as public spending partly substitutes for home production of child care education and other activities 6 the decision to work outside the home is likely to lead women to demand wider and better provision of the public services that alleviate their unequal burden as caregiver at home in addition the role of women as insurer of family risks may lead to a demand for more government intervention as women become less present at home there is an additional mechanism through the composition of the public labor force government jobs in teaching and health which are a large portion of total public jobs tend to be filled mostly by women 7 our model draws on the solid literature on growth fertility and female labor force participation which is supported by microevidence

the tiebout model bring back the entrepreneurs several recent papers in the literature have reformulltlated the nature of equilibrium in ifiebout mo lels by alssliuim ing an exogenous number of communities inflexible commullity l ou alaries anti in pirticular inactive lantlowners and developers ihis paper argues that these assumptions are unwarranted and resul1t iin in eterminate solutions and incorrect analyses determinate lon1g run1 solutions require equilibrium in intercommui land markets which in turn require giving lantlowners and or entrepreneurial leveloelers an active role in the models the role of politics in these models and its juxtaposition with entrepreneurial activities are also analyzed

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

international portfolio diversification with estimation risk international portfolio diversification has long been advocated as a way of enhancing average returns while reducing portfolio risk for the investor who considers diversifying into foreign securities this proposition however relies on the assumption that the required inputs to the classical mean variance analysis are known with certainty typically expected returns variances and covariances are simply replaced by their ex post sample values and the optimal portfolio is derived without mentioning the uncertainty inherent in these parameter values but the rational investor should take this uncertainty into account when forming expectations and probably will consider estimators that are less subject to estimation error than the classical sample mean this paper investigates alternative estimators of expected returns and their implications for the alleged gains from diversification an important observation is the crucial influence that errors in estimating expected returns have on portfolio analysis a closer examiprevious studies of international portfolio diversification have relied on ex post meanvariance analysis without considering the problem of estimation risk typically past averages are substituted for expected returns and no allowance is made for the uncertainty inherent in these parameter values first i demonstrate the shortcomings of such an approach and second i investigate another method of estimating expected returns initially proposed by stein by shrinking the sample averages toward a common mean i find that the out of sample performance of the optimal portfolio is substantially increased one of the implications of this method is that the classical conclusions vastly overestimate the possible gains in average returns instead benefits from diversification are more likely to accrue from a reduction in risk this paper draws on part of my dissertation at the university of chicago i am grateful to arnold zellner michael mussa george constantinides and especially john bilson for useful discussions and comments numerous improvements were also suggested by the referee this research received the generous financial support of the college interuniversitaire d etudes doctorales dans les sciences du management

optimal portfolios in good times and bad recent experience with emerging market investments and hedge funds has highlighted the fact that risk parameters are unstable to address this problem we introduce a procedure for identifying multivariate outliers and use the outliers to estimate a new covariance matrix we suggest that a covariance matrix estimated from outliers characterizes a portfolio s riskiness during market turbulence better than a full sample covariance matrix we also introduce a procedure for blending an inside sample covariance matrix with one from an outlier sample this procedure enables one to express views about the likelihood of each risk regime and to differentiate one s aversion to them our framework collapses to the markowitz mean variance model if 1 we set the probabilities of the inside and outlying covariance matrixes equal to their empirical frequencies 2 we are equally averse to both risk regimes and 3 we estimate the inside and outlying covariances around the full sample s mean

turnout and closeness evidence from 60 years of bavarian mayoral elections one prediction of the calculus of voting is that electoral closeness positively aects turnout via a higher probability of one vote being decisive i test this theory with data on all mayoral elections in the german state of bavaria between 1946 and 2009 importantly i use constitutionally prescribed two round elections to measure electoral closeness and thereby improve on existing work that mostly uses expost measures that are prone to endogeneity the results suggest that electoral closeness matters a one standard deviation increase in closeness increases turnout by 1 68 percentage points which corresponds to 1 of a standard deviation in this variable i also evaluate how other factors like electorate size or rain on election day aect turnout dierentially depending on the closeness of the race

gender gaps in policy making evidence from direct democracy in switzerland this paper uses a unique data set on individual voting decisions to shed new light on gender gaps in policy making our analysis focuses on switzerland the world leader in direct democracy where all citizens directly decide on a broad range of policies at the ballot box analysing all federal votes held between 1981 and 2003 we show that there are large gender gaps in the areas of health environmental protection defence spending and welfare policy the gender gaps typically persist even conditional on socio economic characteristics we also find that female policy makers have a substantial effect on the composition of public spending but a small effect on the overall size of government

women and power unpopular unwilling or held back we use spain s equality law to test for the existence of agency problems between party leaders and their constituents the law mandates a 40 percent female quota on electoral lists in towns with populations above 5 000 using pre and postquota data by party and municipality we implement a triple difference design we find that female quotas resulted in slightly better electoral results for the parties that were most affected by the quota our evidence shows that party leaders were not maximizing electoral results prior to the quota suggesting the existence of agency problems that hinder female representation in political institutions

single party rule public spending and political rents evidence from finnish municipalities in this paper i investigate the differences in public spending and extraction of political rents between single party and coalition governments common pool theories predict that coalitions tend t

volatility in the foreign currency futures market we examine the volatility implications of around the clock foreign exchange trading with transaction data on futures contracts from the chicago mercantile exchange and the london international financial futures exchange we find higher u s european and u s japanese exchange rate volatilities during u s trading hours and higher european cross rate volatilities during european trading hours while the diclosure of private information through trading may partly explain these volatility patterns we conclude that the increased volatility is more likely driven by macroeconomic news announcements an analysis of inter and intraday data also reveals that volatility increases at times that coincide with the release of u s macroeconomic news article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

portfolio selection and skewness evidence from international stock markets abstract this paper finds that the returns of the world s 14 major stock markets are not normally distributed and that the correlation matrix of these stock markets was stable during the january 1988 december 1993 time period polynomial goal programming in which investor preferences for skewness can be incorporated is utilized to determine the optimal portfolio consisting of the choices of 14 international stock indexes the empirical findings suggest that the incorporation of skewness into an investor s portfolio decision causes a major change in the construction of the optimal portfolio the evidence also indicate that investors trade expected return of the portfolio for skewness

why do markets move together an investigation of u s japan stock return comovements this article explores the fundamental factors that affect cross country stock return correlations using transactions data from 1988 to 1992 we construct overnight and intraday returns for a portfolio of japanese stocks using their nyse traded american depository receipts adrs and a matched sample portfolio of u s stocks we find that u s macroeconomic announcements shocks to the yen dollar foreign exchange rate and treasury bill returns and industry effects have no measurable influence on u s and japanese return correlations however large shocks to broadbased market indices nikkei stock average and standard and poor s 500 stock index positively impact both the magnitude and persistence of the return correlations stock return cross country covariances play a key role in international finance changes in these covariances affect the volatility of portfolios and asset prices as these covariances increase one expects that a fewer domestic risks are internationally diversifiable so portfolio volatility increases b the risk premium on the world market portfolio increases 1 c the cost of capital increases for individual firms and d the domestic version of the capm becomes increasingly inadequate 2 despite the important economic consequences of changes in cross country covariances the determinants of the levels and dynamics of these covariances have been little studied from an academic

do voters affect or elect policies evidence from the u s house there are two fundamentally different views of the role of elections in policy formation in one view voters can affect candidates policy choices competition for votes induces politicians to move toward the center in this view elections have the effect of bringing about some degree of policy compromise in the alternative view voters merely elect policies politicians cannot make credible promises to moderate their policies and elections are merely a means to decide which one of two opposing policy views will be implemented we assess which of these contrasting perspectives is more empirically relevant for the u s house focusing on elections decided by a narrow margin allows us to generate quasi experimental estimates of the impact of a randomized change in electoral strength on subsequent representatives roll call voting records we find that voters merely elect policies the degree of electoral strength has no effect on a legislator s voting behavior for example a large exogenous increase in electoral strength for the democratic party in a district does not result in shifting both parties nominees to the left politicians inability to credibly commit to a compromise appears to dominate any competition induced convergence in policy

estimating sensitivities of temperature based weather derivatives pricing of temperature based weather derivatives has been studied in the literature however there is no analysis of the estimation of the sensitivities of weather derivatives in a stochastic model of temperatures we use pathwise derivative and kernel methods to derive monte carlo estimators for the sensitivity greeks of temperature based weather derivatives these sensitivities can be used by investors for choosing the most suitable weather contracts for partial hedging or speculation temperature data from new york atlanta and chicago are used in the discussion of numerical results

why have women become left wing the political gender gap and the decline in marriage the last three decades have witnessed the rise of a pohtical gender gap in the united states wherein more women than men favor the democratic party we trace this development to the decline in marriage which we posit has made men richer and women poorer data for the united states support this argument first there is a strong positive correlation between state divorce prevalence and the political gender gap higher divorce prevalence reduces support for the democrats among men but not women second longitudinal data show that following marriage divorce women are less more likely to support the democratic party