predicting exchange rate crises mexico revisited abstract this paper predicts ex ante probabilities of currency crises and sizes of expected devaluations month by month for mexico between 1980 and 1986 the forces contributing to speculative attacks on the mexican peso include domestic fiscal and monetary shocks external credit shocks and relative price shocks reducing domestic credit growth increasing the uncertainty surrounding this growth and reducing the size and perhaps increasing the frequency of currency realignments might have greatly reduced the amount of currency speculation against the peso between 1980 and 1986 anticipated external credit supply shocks played a relatively minor role during mexico s balance of payments crises

over identification tests in earnings functions with fixed effects the fixed effects model for panel data imposes restrictions on coefficients from regressions of all leads and lags of the dependent variable on all leads and lags of right side variables in the standard fixed effects model the omnibus goodness of fit statistic is shown to simplify to the degrees of freedom times the rz from a regression of analysis of covariance residuals on all leads and lags of right side variables this result is applied to test models for the union wage effect using data from the national longitudinal survey of youth nlsy identification and estimation of the return to schooling in models with fixed effects is also discussed although schooling is often treated as time invariant schooling increases over a five year period for nearly 20 of continuously employed men in the nlsy the analysis of covariance estimate of the returns to schooling is precisely estimated and roughly twice as large as the ordinary least squares estimate unlike in the union wage effects equation however

stock market returns and inflation evidence from other countries this paper investigates the relation between common stock returns and inflation in twenty six countries for the postwar period our results do not support the fisher hypothesis which states that real rates of return on common stocks and expected inflation rates are independent and that nominal stock returns vary in one to one correspondence with expected inflation there is a consistent lack of positive relation between stock returns and inflation in most of the countries

a model of the interactions between banking crises and currency crises abstract a second generation model of currency crises is combined with a standard banking model in a pegged exchange rate regime after funds have been committed to the banks news arrives about the quality of the banks assets and about the exchange rate fundamentals a run on the banks may cause a currency crisis or vice versa there are multiple equilibria with either twin crises or no crisis depending on depositors expectations of other depositors actions suspension of deposit convertibility can prevent a speculative attack on the currency but last resort lending to solvent banks can induce one

speculative currency attacks with endogenously induced commercial bank crises abstract to date all models of exchange rate crises ignore the existence of a commercial banking sector however if deposit money internal drain is used to purchase foreign exchange external drain then an external drain may give rise to a banking crisis the paper illustrates how an internal drain alters the dynamics of a speculative attack when it results in a cash payments restriction by interrupting the external drain such a restriction postpones devaluation and reduces the size of the initial devaluation the us internal and external drains of 1893 are discussed to provide motivation and support for the model

modelling risk premia in international asset markets abstract the intertemporal capital asset pricing model icapm has been widely used as a vehicle to explain the predictability of excess returns in forward foreign exchange markets this approach ignores the heterogeneity in the assets actually traded in international asset markets in this paper it is shown that the latent variable risk premium model is not rejected by the data when tested on a portfolio including equity and bonds in four currencies however application of a more general test rejects parameter stability suggesting that the latent variable model is not as successful as the previous tests would imply

school expenditures and post schooling earnings evidence from high school and beyond studies based on inputs measured at the state level generally report that school expenditures have substantial effects on students adult wages whereas studies based on less aggregated measures report small effects the author uses wage data from high school and beyond to analyze this discrepancy and to estimate the effect of school expenditures on students post schooling earnings the author finds that the discrepancy in the literature stems mostly from two factors measurement error in district level expenditures and omitted state effects in the earnings regression the author also finds that the effect of school expenditures on earnings is significant but small a 10 increase in school spending would increase students adult wages by only 0 68 copyright 1996 by mit press

human capital versus sorting the effects of compulsory attendance laws under the educational sorting hypothesis a state compulsory school attendance law will increase the educational attainment of high ability workers who are not directly affected hy the law under the human capital hypothesis such laws affect only those individuals whose hehavior is directly constrained we find that compulsory attendance laws do increase enrollment rates in age groups they do not affect directly thus our results contradict the human capital hypothesis and are consistent with the sorting hypothesis i introduction the last decade has seen considerable debate between supporters of the human capital and sorting models of education the former assert that the effect of education on wages reflects increased productivity the latter maintain that it reflects at least in part correlation between education and unobserved ability workers use education to signal their ability while employers use education to screen workers despite the importance of the debate no fully convincing tests of the hypotheses have been developed in fact many members of the profession maintain at least privately that these hypotheses cannot be tested against each other and that the debate must therefore be relegated to the realm of ideology in this paper we show that the models can be tested against each other by examining the effects of state compulsory school attendance laws we show that under the human capital hypotheis such laws will affect the educational attainment only of those who in the absence of the law would have left school prior to the minimum school leaving age on the other hand under the sorting hypothesis the effects of the law will percolate through the system increasing educational attainment even among workers not directly constrained by the law our results are consistent with the predictions of the sorting model

the earnings of male immigrants in england evidence from the quarterly lfs in this paper we estimate earnings functions for native born and foreign born white and non white males in the english labour market using data from the quarterly labour force survey our results highlight the importance of distinguishing between native born and foreign born males when investigating the labour market experience of ethnic minorities furthermore the earnings performance amongst white immigrants varies considerably

buying and selling attacks on fixed exchange rate systems abstract in this paper we show how rational expectations models of speculative attacks on fixed exchange rate systems can be extended to take into account the possibility that the central bank could be forced to either devalue or revalue essential to the analysis are the concepts of buying attack and selling attack by means of which we were able to describe how expectations about the future exchange rate are formed we also provide a discussion on the problem of uniqueness of the equilibrium that may arise in this kind of speculative attack models

bayesian semiparametric estimation of discrete duration models an application of the dirichlet process prior this paper proposes a bayesian estimator for a discrete time duration model which incorporates a non parametric specification of the unobserved heterogeneity distribution through the use of a dirichlet process prior this estimator offers distinct advantages over the nonparametric maximum likelihood estimator of this model first it allows for exact finite sample inference second it is easily estimated and mixed with flexible specifications of the baseline hazard an application of the model to employment duration data from the canadian province of new brunswick is provided copyright 2001 john wiley sons ltd

balance of payments crises and devaluation the collapse of a fixed exchange rate is typically marked by a sudden balance of payments crisis in which speculators fleeing from the domestic currency acquire a large portion of the central bank s foreign exchange holdings faced with such an attack the central bank often withdraws temporarily from the foreign exchange market allowing the exchange rate to float freely before devaluing and returning to a fixed rate regime this paper links the timing of the initial speculative attack to the magnitude of the expected devaluation and to the length of the transitional period off loating an implication of the analysis is that there exist devaluations so sharp and transition periods so short that acrisis must occur the moment the market first learns that the current exchange parity will eventually be altered for sufficiently long transition periods the floating exchange rate overshoots its new peg before appreciating back toward it for shorter periods the rate depreciates monotonically to its new fixed level accordingly the central bank s return tothe foreign exchange market can occasion a capital outflow or a capital inflow this abstract was borrowed from another version of this item

domestic bank runs and speculative attacks on foreign currencies abstract the paper extends the international transmission of financial crisis literature by illustrating how a domestic bank run can cause a speculative attack on foreign currencies the idea is that when domestic banks invest abroad a domestic bank run will give way to a repatriation of foreign capital if the repatriation causes a depletion of the foreign central bank s foreign exchange reserves then the foreign currency will be devalued as such a devaluation will render domestic banks insolvent in the rational equilibrium domestic bank runs will 1 cause a speculative attack on the foreign currency and 2 be self justified

unobserved ability and the return to schooling in the empirical literature it is customary to estimate the return to schooling by ordinary least squares ols or instrumental variable iv techniques 2 the choice of ols is justified only if realized schooling and unobserved labor market ability are uncorrelated if not ols estimates suffer the ability bias and other estimation methods such as iv may be used the volume of work devoted to the return to schooling is a good indication of the importance of this topic as perceived by economists 3 frequently instrumental variables iv techniques are applied in a context where the instrument is only weakly correlated with schooling attainments staiger and stock 1997 as a consequence the validity of very high returns to schooling reported in a simple regression framework should be seriously questioned see manski and pepper 2000 4 when iv techniques are chosen the log wage regression is usually assumed to be linear in schooling however there is no obvious reason to presume that the local returns to schooling are independent of grade level indeed heterogeneity in any component of schooling choices subjective discount rates ability or specific taste for schooling will lead to improper inference if the local returns are erroneously assumed to be constant as individuals with lower taste for schooling tend to stop school earlier ols or iv estimates of the return to schooling which impose equality between local and average returns at all levels of schooling will be strongly affected by the relative frequencies of individuals with high and low taste for schooling more precisely if there are large differences in local returns between various grade levels the ols estimate measuring an average log wage increment per year of schooling will tend to be biased toward the co editor and three anonymous referees for comments and suggestions on this version or earlier versions belzil thanks the social sciences and humanities research council of canada for generous funding the usual disclaimer applies 2 to use the same terminology as in the reduced form literature the return local to schooling refers to the percentage wage increase per additional year of schooling in the paper the terms local and marginal returns may be used interchangeably the average return refers to the slope of the straight line between the intercept and the expected log wage at a given number of years of schooling 3 a world wide web survey of the most recent literature indicates that since 1970 more than 200 published articles or working papers set in a reduced form have been devoted to the estimation of the return to schooling or surrounding issues very often studies based on iv methods conclude that the returns to schooling can be between 20 and 40 above the ols estimates reported estimates around 15 per year for the us are not uncommon although standard errors are typically very high see card 1999 for a survey 4 manski and pepper 2000 obtain upper bound estimates of the return to schooling from a sample taken from the nlsy their results cast doubts on the high returns reported in the literature

does education improve citizenship evidence from the united states and the united kingdom abstract many studies document an association between schooling and civic participation but none credibly investigate causal links we explore the effect of extra schooling induced through compulsory schooling laws on the likelihood of becoming politically involved in the united states and the united kingdom we find that educational attainment is related to several measures of political interest and involvement in both countries we find a strong and robust relationship between education and voting for the united states but not for the united kingdom our us results approach the uk findings when conditioning on registration possibly indicating that registration rules present a barrier to participation

tests of international capm with time varying covariances we perform maximum likelihood estimation of a model of international asset pricing based on capm we test the restrictions imposed by capm against a more general asset pricing model the betas in our capm vary over time as the supplies of assets change and as the conditional covariances or returns on those assets change we let the covariances change over time as a function of macroeconomic data and an alternative model allows the covariances to follow a multivariate arch process we also can identify a modified capm model with measurement error we find that the estimated capm performs much better when variances are not constant over time nonetheless capm is rejected in favour of the lessrestricted model of asset pricing

a critique of latent variable tests of asset pricing models abstract latent variable tests of asset pricing models make assumptions about the joint distribution of observable returns and unobservable benchmark returns these tests can falsely accept models when a mean variance efficient portfolio other than the benchmark satisfies the distributional assumptions imposed on the benchmark portfolio also because the assumptions are untestable there is no way to discover whether a model is being rejected because the assumptions are false without these assumptions however latent variable tests can be viewed only as tests of distributional hypotheses about mean variance efficient portfolios of unknown composition

collapsing exchange rate regimes shocks and biases abstract patterns in domestic credit creation stemming from inconsistent fiscal policies have received widespread attention for their role in aggrevating speculative attacks on central bank foreign exchange reserves and contributing to the collapse of exchange rate regimes this paper acknowledges the importance of monetary and fiscal discipline but also emphasizes the importance of other random shocks to the domestic money market most notably shocks from external credit supplies and relative prices policies of the domestic fiscal authorities are only partial catalysts for speculative attacks on a currency expansion of domestic credit stemming from the monetization of fiscal imbalances may be dominated by involuntary domestic credit expansions which are necessitated by surprise shortages in supplies of external capital further the unexpected availability of external capital translates into a lower net critical reserve floor making the depletion of central bank reserves by a speculative attack more difficult to accomplish relative price shocks also randomize the demand for nominal money balances and therefore may also have a strong direct influence on the probability of an exchange regime collapse empirical studies of exchange rate crises that neglect these considerations will produce biased estimates of both expected collapse probabilities and anticipated post collapse exchange rates

the externalities problem of transboundary and persistent pollution abstract this paper deals with implementing the efficient allocation of transboundary and persistent pollution in particular we adapt varian s compensation mechanism varian a solution to the problem of externalities when agents are well informed amer econ rev 85 1994 1278 1293 to cover situations in which pollutants extend to neighboring regions and their effects persist over time the main contribution of this paper is the design of a mechanism that implements in subgame perfect equilibrium the efficient pollution levels in this context

the effect of subsidies in kind on the choice of a college abstract it is possible that government subsidies to higher education disbursed in kind can produce the anomalous result of reducing the consumption of the good being subsidized in this paper i employ individual and college data to estimate the effect of such subsidies on students choices of college quality empirical estimates from a switching regression model with correction for the joint decisions to apply to college and choose the public or private sector are presented predictions from the model suggest that students choose a substantially lower quality public college than they would have chosen in the private sector

the relation between stock prices and inflationary expectations the international evidence this paper provides empirical evidence on the relation between stock returns and inflationary expectations for nine countries over the period 1971 80 the fisherian assumption that real returns are independent of inflationary expectations is soundly rejected for each major stock market of the world using interest rates as a proxy for expected inflation our data provide consistent support for the geske and roll model whose basic hypothesis is that stock price movements signal negative revisions in inflationary expectations finally a weak real interest rate effect was found for some of these countries

schooling and citizenship in a young democracy evidence from postwar germany this paper examines whether schooling has a causal impact on individuals political interest voting turnout democratic values political involvement and political membership using two national representative samples between 1949 and 1969 the number of compulsory years of schooling was increased from eight to nine years in the federal republic of germany gradually over time and across federal states these legislative changes allow one to investigate the causal impact of years of schooling on citizenship in a young democracy years of schooling are found to be positively correlated with a broad range of citizenship outcomes however when exogenous increase in schooling through legislative changes is used there is little evidence of a causal efiect several potential explanations are examined 1 poor or apolitical teaching practices in the post war period 2 shortages of qualifled teachers and adequate teaching material 3 extra curricular civic education and 4 whether civic knowledge might have been acquired prior to the increase in schooling the estimates reject the flrst three explanations whereas ample historical evidence is in favour of the hypothesis that the fundamentals of democracy were learned already earlier in school

learning about heterogeneity in returns to schooling using data from the national longitudinal survey of youth nlsy we introduce and estimate various bayesian hierarchical models that investigate the nature of unobserved heterogeneity in returns to schooling we consider a variety of possible forms for the heterogeneity some motivated by previous theoretical and empirical work and some new ones and let the data decide among the competing specifications empirical results indicate that heterogeneity is present in returns to education furthermore we find strong evidence that the heterogeneity follows a continuous rather than a discrete distribution and that bivariate normality provides a very reasonable description of individual level heterogeneity in intercepts and returns to schooling

consumption risk and international equity returns some empirical evidence abstract this paper tests whether real stock returns from four countries are consistent with consumption based models of international asset pricing the paper finds that the consumption based model does not adequately describe these returns during the period of generalized floating exchange rates since restrictions on international capital movements were relaxed considerably in the 1980s the tests are carried out for that sub period as well in contrast to the results for the full sample observed real equity returns during the 1980s are found to be consistent with the predictions of the consumption based model

central bank reactions to banking crises in fixed exchange rate regimes abstract until recently speculative attacks and banking crises have been largely treated as separate phenomena however the recent experiences of several southern cone countries indicates that banking difficulties can lead to a currency crises if in combatting them the central bank adopts policies which are inconsistent with the fixed exchange rate regime the paper illustrates how this can be the case and discusses what are the policy responses available to central banks that face banking crises in fixed exchange rate regimes

the linkage between speculative attack and target zone models of exchange rates in this paper we generalize the target zone exchange rate as model formalized by krugman 1988b to include finite sized interventions in defense of the zone the main contributions of these pages consist of linking the recent developments in the theory of target zones to the mirror image theory of speculative attacks on asset price fixing regimes and in using aspects of that linkage to give an intuitive interpretation to the smooth pasting condition usually invoked as a terminal condition this abstract was borrowed from another version of this item

high school completion and future youth unemployment new evidence from high school and beyond in this paper i provide new evidence from high school and beyond hsb on the effects of compulsory attendance on high school completion and future youth unemployment i develop bayesian estimation approaches to the simultaneous equation model with ordered probit and two limit censored regression and the bivariate duration model accounting for the heterogeneity in returns to education and the nonlinearity in the effects of compulsory attendance i find substantial variability in returns to education across schools and evidence of diminishing marginal effects of compulsory attendance on high school completion the simulation results suggest that increasing the compulsory attendance age raises the probability of completing high school and reduces the proportion of time the individuals are unemployed these effects are much more pronounced for disadvantaged students but less pronounced for advantaged students suggesting the potential effects of compulsory attendance on reducing the inequality in education and employment copyright 2005 john wiley sons ltd

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

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

flexible parametric estimation of duration and competing risk models in this paper we specify and estimate a flexible parametric proportional hazards model the model specification is flexibly parametric in the sense that the baseline hazard is non parametric while the effect of the covariates takes a particular functional form we also add parametric heterogeneity to the underlying hazard model specification we specify a flexible parametric proportional competing risks model which permits unrestricted correlation among the risks unemployment duration data are then analysed using the flexible parametric duration and competing risks specifications we find an important effect arising from the exhaustion of unemployment insurance and significantly different hazards for the two types of risks new jobs and recalls

the compelling effects of compulsory schooling evidence from canada abstract compulsory school laws have existed for more than a hundred years and policies to mandate further education continue to be discussed the implications of these laws however are not well understood historical changes to compulsory schooling in canada permit an examination of their effects on would be dropouts under very different circumstances than those during changes in other countries mandating education substantially increased adult income and substantially decreased the likelihood of being below the low income cut off unemployed and in a manual occupation these findings suggest significant gains from this legislation which seem unlikely offset by the costs incurred while having to remain in school jel classification i20 i28

together or apart the relationship between currency and banking crises abstract the purpose of this study is to provide empirical evidence on the links between currency and banking crises panel data probit and bivariate probit models are estimated to a sample of 21 developed and developing countries having monthly observations between the years 1985 and 2010 the findings indicate that banking crises precede currency crises and vice versa currency crises also indirectly influence future banking crises probability through external shocks liberalized financial markets or highly leveraged banking sectors the study also finds evidence of contemporaneous correlation between the two crises the results not only confirm the theoretical links between banking and currency crises but also underline the importance of higher frequency data in analyzing the relationship between various financial crises

term premiums and the integration of the eurocurrency markets abstract this paper provides comparative evidence on the time variation of expected returns across the term of eurocurrency markets first it is shown that forward spot spreads contain substanial information about future changed in 1 month to 5 year rates both in the eurodollar and eurodm markets next a latent variable model is constructed with different benchmark portfolios across currencies integration implies that the time variation of the benchmark portfolios must be the same across currencies little evidence is found against integration of the eurocurrency markets jel g15 g12

using unemployment rates as instruments to estimate returns to schooling i use state unemployment rates during a person s teenage years to estimate the returns to schooling a higher unemployment rate reduces the opportunity costs of attending school using the same 1980 census data set that angrist and krueger 1991 use i also estimate returns to schooling with a modified version of their quarter of birth instrument the estimates from the two stage least squares 2sls model using the unemployment rate and the model using the quarter of birth instruments are almost identical in addition these 2sls estimates are larger than the ordinary least squares ols estimates supporting this counterintuitive yet prevalent result in the literature

returns to education evidence from u k twins we use a new sample of uk female identical twins to estimate private economic returns to education we report findings in three areas first we use identical twins to control for family effects and genetic ability bias and the education reported by the other twin to control for schooling measurement error our estimates suggest a return to schooling for uk females of about 7 7 second we investigate within twin pair ability differences by examining within twin pair and between family correlations of education with observable correlates of ability including birthweight ability tests and reading scores our findings suggest lower ability bias in within twin pair regressions than pooled regressions third using data on twins smoking we show smoking reflects family background and using it as an instrument exacerbates ability bias this abstract was borrowed from another version of this item

bayesian estimation and smoothing of the baseline hazard in discrete time duration models this paper proposes a bayesian approach for estimating and smoothing the baseline hazard in a discrete time hazard model the hazard model is specified as a multiperiod probit model and estimated using a gibbs sampler with data augmentation the baseline hazard specification is smoothed using the smoothness priors introduced by shiller 1973 the methods proposed in this paper are then used to study the effect of canadian unemployment insurance eligibility rules on employment durations from new brunswick canada

financial policy and speculative runs with a crawling peg argentina 1979 1981 abstract in this paper we present a model of a balance of payments crisis and examine the argentine experiment with a crawling peg between december 1978 and february 1981 the approach taken allows us to examine the evolution of a crisis when a collapse is not perfectly foreseen and yields plausible estimates of one month ahead probabilities of a collapse of the crawling peg the results suggest that the viability of an exchange rate regime depends on the consistency of exchange rate policy with domestic credit policy if the two are not consistent confidence in exchange rate policy is undermined

should the holding period matter for the intertemporal consumption based capm abstract empirical studies of the restrictions implied by the intertemporal capital asset pricing model across different asset markets have found conflicting evidence this paper asks whether an auxiliary assumption implicit in these tests could be responsible for the pattern of rejections this auxiliary assumption requires that covariances of returns with consumption move in constant proportion over time the paper tests this condition empirically using data on foreign exchange bonds and equity returns interestingly the evidence suggests that the tendency to reject the intertemporal consumption based asset pricing relationship depends upon the inadequacy of the auxiliary assumption not necessarily the relationship itself

does raising the school leaving age reduce teacher effort evidence from a policy experiment this paper examines the impact of an increase in the school leaving age on high school teachers absence behaviour we estimate differ ence in difference models of absenteeism using count data approaches employing data from the spanish labour force survey our findings suggest that high school teachers reduced their effort due to the re form that raised the age of compulsory education commencing in the academic year 1998 1999 in spain in particular they take 15 more sickness absence in the posttreatment period this result should be of interest to both policy makers and researchers who rely upon com pulsory school law changes as a source of exogenous variation in edu cational attainment

managing exchange rate crises evidence from the 1890s abstract this paper investigates the effectiveness of the monetary authority s borrowing policies in resolving exchange rate cises it shows why obtaining loans or lines of credit in foreign currency may avoid at least temporarily the devaluation of a fixed rate and discusses the problem of the optimal size of the loan and or the line of credit the analysis focuses on a particular episode of foreign exchange rate pressure during the troubled years between 1894 to 1896 the results suggest that the borrowing policy followed by the us treasury in those years was effective in avoiding the collapse of the united states gold standard and that the amount of the borrowing undertaken by the treasury might have been optimal

what do twins studies reveal about the economic returns to education a comparison of australian and us findings conventional estimates of rates of return to education are constrained because they are unable to isolate the returns to schooling from the contribution of individual ability and the influence of family background potentially studies using a sample of twins may overcome these problems monozygotic twins are genetically identical and if they have been reared together share the same family background differences in income between identical twins can therefore be associated with differences in the amount of education they have undertaken in order to estimate the independent influence of education comparisons of such estimates with estimates made from a sample of dizygotic twins who are genetically similar but not identical and who are also reared together may permit evaluation of the biases associated with ability and family background in conventional estimates of the return to education in an important paper jere behrman et al 1977 analyzed data from a sample of male world war ii veteran twins and found that of the overall rate of return to schooling of 8 percent 2 7 percentage points could be attributed to schooling per se 3 2 percentage points could be attributed to genetic factors and 2 1 percentage points could be attributed to shared family environment in a recent paper however orley ashenfelter and alan krueger 1994 have estimated the economic returns to education using data on a new sample of twins which permitted them to adjust their estimate for omitted ability variables and measurement error on this basis they find that family and genetic effects make virtually no contribution to the returns to schooling measurement error however biases the estimated return to schooling downward the findings of ashenfelter and krueger 1994 are very different from previous work in this field and there is now some confusion as to what analysis of twins data really reveals about the economic returns to schooling ashenfelter and krueger s results are based on analysis of data for a sample of 298 individuals 149 pairs of identical twins who attended a twins festival in 1991 they remark at the end of their paper only additional data collection is likely to lead to better estimates of the returns to schooling p 1171

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

the effect of education on crime evidence from prison inmates arrests and self reports we estimate the effect of high school graduation on participation in criminal activity accounting for endogeneity of schooling we begin by analyzing the effect of high school graduation on incarceration using census data instrumental variable estimates using changes in state compulsory attendance laws as an instrument for high school graduation uncover a significant reduction in incarceration for both blacks and whites when estimating the impact of high school graduation only ols and iv estimators estimate different weighted sums of the impact of each schooling progression on the probability of incarceration we clarify the relationship between ols and iv estimates and show that the weights placed on the impact of each schooling progression can explain differences in the estimates overall the estimates suggest that completing high school reduces the probability of incarceration by about 76 percentage points for whites and 3 4 percentage points for blacks we corroborate these findings using fbi data on arrests that distinguish among different types of crimes the biggest impacts of graduation are associated with murder assault and motor vehicle theft we also examine the effect of drop out on self reported crime in the nlsy and find that our estimates for imprisonment and arrest are caused by changes in criminal behavior and not educational differences in the probability of arrest or incarceration conditional on crime we estimate that the externality of education is about 14 26 of the private return to schooling suggesting that a significant part of the social return to education comes in the form of externalities from crime reduction

consumption based versus production based models of international equity markets abstract this paper compares the ability of two discount rate models to explain the cross sectional and time series variation of stock returns in the us japan the uk germany and canada the data consist of quarterly returns on morgan stanley s capital international indices for the period from january 1972 to march 1993 the two models considered are a consumption capm linking the discount rate to the intertemporal marginal rate of substitution in consumption and a production capm linking the discount rate to the intertemporal marginal rate of transformation in production the main result is that a production based capm performs better than the consumption based capm in explaining national stock market returns the results also indicate that time variation in risk premia rather than time variation in betas provides most of the explanatory power in both models jel f30 g12 1997 elsevier science ltd

the timing and size of bank financed speculative attacks abstract the recent epidemic of banking and currency crises has led researchers to consider the role that unhealthy banks may have in currency crises the present paper in contrast investigates the anatomy of a currency crisis when banks are healthy enough to finance it it is shown that when banks finance the crisis an anticipated collapse occurs sooner and an unanticipated collapse is worse than when banks do not increase credit during the crisis the findings imply that restrictions on bank loan activities and careful management of bank balance sheet risks may lessen the severity of or even prevent a currency crisis

strategic complementarities and the twin crises the economic literature has emphasized the role of strategic complementarities in generating banking crises and currency crises motivated by evidence from recent financial crises we study a model where strategic complementarities exist not only within a group of creditors or within a group of currency speculators but also between the two groups the additional type of strategic complementarities generates a vicious cycle between banking crises and currency crises this vicious cycle magnifies the correlation between the two crises and destabilizes the economy we discuss some empirical implications and policy implications and in particular show that due to the interaction between the banking sector and the currency market a lender of last resort might not be able to prevent bank runs

changes in compulsory schooling education and the distribution of wages in europe using data from 12 european countries and the variation across countries and over time in the changes of minimum school leaving age we study the effects of the quantity of education on the distribution of earnings we find that compulsory school reforms significantly affect educational attainment especially among individuals belonging to the lowest quantiles of the distribution of ability there is also evidence that additional education reduces conditional wage inequality and that education and ability are substitutes in the earnings function

collapsing exchange rate regimes some linear examples abstract we construct a pair of linear examples to study the collapse time of a fixed exchange rate regime the first example is a perfect foresight continuous time model which allows calculation of the exact collapse time and the tracking of reserves the second example is a discrete time stochastic model which yields an endogenous probability distribution over the collapse time and produces a forward discount of the exchange rate

borrowing to defend the exchange rate and the timing and magnitude of speculative attacks abstract the paper analyses the implications for the timing and magnitude of a speculative attack on a fixed exchange rate of government borrowing to increase the stock of international reserves it is shown that such borrowing reduces the likelihood of an early collapse and increases the likelihood of an eventual collapse the magnitude of the speculative attack also increases

the exact timing of the collapse of an exchange rate regime and its impact on the relative price of traded goods as of february 28 1983 ninety four countries are classified as having a fixed exchange rate regime 38 are pegged to the u s dollar 13 to the french franc 14 to the special drawing right and 24 to different baskets of currencies the choice of a fixed exchange rate peg implies a specific monetary discipline namely monetary growth equal to the growth rate of the currency or currencies to which a country is pegged monetary policy is thus subject to an exchange rate rule rather than to either a monetary growth rule or alternatively to discretionary policy a fixed exchange rate is a specific case of an active crawling peg where the preannounced rate of change in the exchange rate is zero active crawling peg rules whereby the exchange rate is adjusted downward by a preannounced amount over a specified period of time have been practiced in various places particularly in latin america recent experiments include argentina beginning december 1978 brazil during the 1980 calendar year chile from february 1978 to june 1979 jamaica from may 1978 to may 1979 portugal from august 1977 to june 1979 and uruguay beginning october 1978 1 at times the prean

bank runs and currency peg credibility abstract it is shown that as a currency peg constrains a government s ability to finance a bailout bank runs are more likely in credible fixed exchange rate regimes than in those in which the central bank is less committed to its exchange rate within the context of the model and given the government responses to their respective banking crises during the period 1994 1995 the bank runs in argentina and lack thereof in mexico seem to be rational responses of depositors

educational reform ability and family background in this paper we evaluate the impact of a major school reform that took place in the 1950s in sweden on educational attainment and earnings the reform which has many common elements with reforms in other european countries including the uk consisted of increasing compulsor schooling imposing a national curriculum and abolishing selection by ability into academic and non academic streams at the age of 12 comprehensive school reform our data combines survey data with administrative sources we find that the reform increased both the educational attainment and the earnings of children whose fathers had just compulsory education however the earnings of those with educated parents declined possibly because of a dilution of quality at the top end of the education levels the overall effect of the reform was however positive

exchange rate crises with domestic bank runs evidence from the 1980s abstract the sherman silver purchase act of 1890 led to inflation fears and a series of flights from the dollar in spite of these runs the dollar was never devalued the question remains why grilli 1990 argues that it was the treasury s ability to borrow that prevented collapse while this explains why the gold standard endured from 1894 to 1896 it does not explain why there was no successful attack before that time the paper argues that the gold standard endured during 1893 because an internal drain of commercial bank funds stopped the external drain a revised series of collapse probabilities is provided and shown to be zero during the internal drain

estimates of the returns to schooling from sibling data fathers sons and brothers data on brothers and on fathers and sons from the national longitudinal survey are used to consider the impact of omitted variables and measurement errors on the economic returns to schooling the analysis suggests that the upward bias in estimated returns due to omitted variables is likely offset by an equal downward bias resulting from measurement errors in reported schooling controlling for both of these potential sources of bias yields results comparable to conventional regression estimates of the economic return to schooling

the raising of the school leaving age returns in later life using the recently released uk household longitudinal study we examine whether the raising of the school leaving age in 1972 had a permanent impact on earnings for individuals in their early 50s

priceless the nonpecuniary benefits of schooling copyright 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 by the american economic association permission to make digital or hard copies of part or all of american economic association publications for personal or classroom use is granted without fee provided that copies are not distributed for profit or direct commercial advantage and that copies show this notice on the first page or initial screen of a display along with the full citation including the name of the author copyrights for components of this work owned by others than aea must be honored abstracting with credit is permitted the author has the right to republish post on servers redistribute to lists and use any component of this work in other works for others to do so requires prior specific permission and or a fee permissions may be requested from the american economic association administrative office by going to the contact us form and choosing copyright permissions request from the menu copyright 2016 aea

education earnings and the canadian g i bill canadian second world war veterans benefited from an extensive educational pro gram similar to the u s g i bill because of differences in military enlistment rates how ever a much lower fraction of quebec men were eligible for these benefits than men from other provinces building on this fact we analyse inter cohort patterns of education and earnings for english speaking men from ontario using french speaking men from quebec as a control group we find that the instrumental variables estimates of the return to school ing are typically as big or bigger than the corresponding ols estimates jel classification j24 i21

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item

natural natural experiments in economics the recent literature exploiting natural events as natural experiment instruments is reviewed to assess to what extent it has advanced empirical knowledge a weakness of the studies that adopt this approach is that the necessary set of behavioral market and technological assumptions made by the authors in justifying their interpretations of the estimates is often absent the methodology and findings from twenty studies are summarized and simple economic models are used to elucidate the implicit assumptions made by the authors and to demonstrate the sensitivity of the interpretations of the findings to the relaxation of some of these assumptions