the effect of income on child development this study presents estimates of the effect of parental income on children s cognitive social and emotional development the effect of current income is small especially when income is treated as endogenous the effect of permanent income is substantially larger but relatively small when compared to the magnitude of recent policy induced changes in income family background characteristics play a more important role than income in determining child outcomes policies that affect family income will have little direct impact on child development unless they result in very large and permanent changes in income

transaction costs in the theory of unemployment this paper addresses the problem of accounting theoretically for the persistence of large scale unemployment it briefly reviews some of the well known shortcomings of the keynesian account based upon sticky wages and prices and upon robert clower s 1965 concept of effective demand arguing that these shortcomings can be seen as a failure explicitly to integrate transaction costs into the theory of unemployment the main constructive contribution of the paper is an example of a simple macro model along the lines of robert barro and herschel grossman 1971 in which transaction costs are made explicit an essential part of this example is an externality of the sort suggested by peter diamond 1982 the example provides an account of persistent unemployment with many keynesian features yet without some of the keynesian shortcomings in particular it assumes perfect wage and price flexibility

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

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

the impact of parental income on early schooling transitions a re examination using data over three generations abstract this paper applies new semi parametric techniques to estimate the effects of parental income on the probability of being held back in elementary school in france we use information on grandparents past socioeconomic status and parents education level to separate the parental income effects from the effects of the unmeasured determinants of children s performance at school that are correlated with parental income when considering the probability of being held back in elementary school we find that the effects of parental poverty are much larger than the effects of a child s sex or age age within his her class or of the parents education level our findings suggest that policy decisions that increase income transfers to relatively poor families have a potentially very large impact on children s early performance at school

the nature and nurture of economic outcomes this paper uses data on adopted children to examine the relative importance of biology and environment in determining educational and labor market outcomes i employ three long term panel data sets which contain information on adopted children their adoptive parents and their biological parents in at least two of the three data sets the mechanism for assigning children to adoptive parents is fairly random and does not match children to adoptive parents based on health race or ability i find that adoptive parents education and income have a modest impact on child test scores but a large impact on college attendance marital status and earnings in contrast with existing work on iq scores i do not find that the influence of adoptive parents declines with child age this abstract was borrowed from another version of this item

sources of lifetime inequality is lifetime inequality mainly due to differences across people established early in life or to differences in luck experienced over the working lifetime we answer this question within a model that features idiosyncratic shocks to human capital estimated directly from data as well as heterogeneity in ability to learn initial human capital and initial wealth we find that as of age 23 differences in initial conditions account for more of the variation in lifetime earnings lifetime wealth and lifetime utility than do differences in shocks received over the working lifetime jel d31 d91 j24 j31 to what degree is lifetime inequality due to differences across people established early in life as opposed to differences in luck experienced over the working lifetime among the individual differences established early in life which ones are the most important a convincing answer to these questions is of fundamental importance first and most simply an answer serves to contrast the potential importance of the myriad policies directed at modifying or at providing insurance for initial conditions e g public education against those directed at shocks over the working lifetime e g unemployment insurance second a discussion of lifetime inequality cannot go too far before discussing which specific type of initial condition is the most critical for determining how one fares in life third a useful framework for answering these questions should also be central in the analysis of a wide range of policies considered in macroeconomics public finance and labor economics we view lifetime inequality through the lens of a risky human capital model agents differ in terms of three initial conditions initial human capital learning ability and financial wealth initial human capital can be viewed as controlling the intercept of an agent s mean earnings profile whereas learning ability acts to rotate

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

child care choices and children s cognitive achievement the case of single mothers we evaluate the effect of child care versus maternal time inputs on child cognitive development using single mothers from the nlsy79 to deal with nonrandom selection of children into child care we exploit the exogenous variation in welfare policy rules facing single mothers in particular the 1996 welfare reform and earlier state level policy changes generated substantial increases in their work child care use we construct a comprehensive set of welfare policy variables and use them as instruments to estimate child cognitive ability production functions in our baseline specification we estimate that a year of child care reduces child test scores by 2 1

is schooling mostly in the genes nature nurture decomposition using data on relatives we modify r a fisher s model by incorporating measures of the environment that may be correlated across kin groups we estimate a model of schooling attainment using data on eight kin groups and find a large contribution of genetic endowments to the variance in schooling though certain aspects of the environment matter

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

non cognitive child outcomes and universal high quality child care exploiting a rich panel data child survey merged with administrative records along with a pseudo experiment generating variation in the take up of pre school across municipalities we provide evidence of the effects on non cognitive child outcomes of participating in large scale publicly provided universal pre school programs and family day care vis a vis home care we find that compared to home care being enrolled in pre school at age three does not lead to significant differences in child outcomes at age seven no matter the gender or mother s level of education family day care on the other hand seems to significantly deteriorate outcomes for boys whose mothers have a lower level of education finally increasing hours in family day care from 30 40 hours per week to 40 50 hours per week and hours in pre school from 20 30 hours per week to 30 40 hours per week leads to significantly poorer child outcomes

parental childcare and children s educational attainment evidence from china this paper examines the determinants of child educational attainment in addition to those examined in previous studies it is found that maternal childcare is another important determinant of child educational attainment the results are robust after controlling for endogeneity the iv estimates show that once childcare time is controlled for child health does not have an effect on school enrolment age this finding suggests that omitting the childcare time may have biased the estimated effect of child health on school enrolment in previous studies

inter generational effect of parental time and its policy implications abstract motivated by the empirical fact that parents with more human capital spend more time teaching and taking care of their children we develop and estimate a theoretical model in which altruistic parents pass their human capital on in two ways goods investment and time investment based on the estimated model we quantitatively assess how the two types of investment affect wage inequality and inter generational mobility using the model to study the impacts of a public policy that taxes income to finance public schooling we find significantly different policy effects in our model than in a model where time investment does not respond endogenously to the policy

econometric policy evaluation note for successive values of the endogenous variables y with the x treated as deterministic forcing variables here 0 is a parameter vector and the et are random shocks lucas correctly observed that such a formulation is inconsistent with a view of agents as optimizers except in special cases in which the future is irrelevant to present decisions it makes no sense to think of agents as optimizing if they know that their budget constraints are liable to shift arbitrarily i e in a way which is not characterized probabilistically as government policy changes lucas was led to augment the foregoing equation by adding to the system a government policy function

the employment real wage relationship an international study the neoclassical and keynesian theories of employment both predict an inverse relationship between employment and real wages in the short run the observed correlation between employment and real wages however has usually failed to conform to this prediction dunlop 1938 and tarshis 1939 reported a positive correlation between real and money wages which given procyclical movement of money wages was interpreted as evidence against the theoretical prediction the statistical significance of these results was however challenged by ruggles 1940 and tobin 1948 more recent studies by kuh 1966 and bodkin 1969 failed to detect a significant relationship between real wages and employment these findings stimulated a series of contributions by solow and stiglitz 1968 barro and grossman 1971 1976 and others developing alternative models not apparently refuted by the evidence barro and grossman recast macro theory under the assumption that markets did not clear modigliani 1977 argued that the observed relationship between employment and real wages could be accounted for in an oligopolistic model of firm behavior thus both the competitive and equilibrium assumptions of the classical model were diagnosed as the sources of its apparent empirical refutation

tests of equilibrium macroeconomics using contemporaneous monetary data abstract this paper uses contemporaneous monetary data to carry out econometric tests of the equilibrium approach to modelling the relation between monetary disturbances and macroeconomic fluctuations the theoretical analysis introduces into an equilibrium macroeconomic model the availability of preliminary data on current monetary aggregates and the process of accumulation of revised monetary data the econometric analysis tests two hypothesis derived from this extended model one hypothesis concerns the neutrality of perceived monetary policy the econometric results imply rejection of this hypothesis the other hypothesis concerns the non neutrality of errors in preliminary monetary data the econometric results fail to reject the contrary of this hypothesis these tests provide strong evidence against the reality of the equilibrium approach

price inertia and policy ineffectiveness in the united states 1890 1980 this paper introduces a new approach to the empirical testing of the lucas sargent wallace lsw policy ineffectiveness proposition which compares the lsw hypothesis with an alternative that states that prices respond fully in the long run but only gradually in the short run to nominal aggregate demand disturbances the empirical equations estimated for a new set of quarterly data extending back to 1890 exhibit uniformly high responses of real output and low responses of price changes to anticipated changes in nominal gnp the paper compares and tests three alternative methods of introducing persistence effects into the lsw framework

does post ante investment experience matter lessons from fdi in china ample efforts of fdi literature have researched on the motives and determinants of fdi flows based on ex ante conditions little has been studied with regard to the effects of post ante behaviour in determining future investment decisions post ante experience of fdi decisions with regard to foreign investors satisfaction or dissatisfaction and future profit expectations on recurrent decisions are critical this paper thus attempts to investigate fdi in the context of an emerging market environment with emphasis on how environmental and institutional factors and the micro firm effects of how investors post ante views on profits expectations and investment experience would affect mncs decisions on recurrent investment and firm relocation empirical results show that decisions in the short and long run were affected differently by the factors under study specifically the short run decisions were more affected by profit expectations while the long run by post ante experience on investment satisfaction dissatisfaction and environmental and institutional determinants