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

parastatal pay policy in africa abstract public enterprises have grown to represent a significant share of modern sector employment in many african economies with wage and employment issues near the top of the policy agenda in africa attention should be given to public enterprise compensation and employment policies after describing the institutions which govern public enterprise pay in a number of sub saharan countries the paper considers the policy dilemma in choosing between the two basic alternative pay setting regimes for public enterprise enterprise wage autonomy versus unified salary scales with the civil service

how does aversion to intertemporal variation affect hedging behavior standard models of hedging behavior assume that hedgers wish to minimize net price variation they treat variation as risk and fail to distinguish random variation at a specific point in time from pre determined intertemporal variation recursive utility differentiates between random and nonrandom variation by allowing the elasticity of intertemporal substitution eis to be imperfect the inverse of the eis measures the hedger s aversion to intertemporal variation and is distinct from aversion to risk optimal hedge ratios decline toward zero as aversion to intertemporal variation increases these results may help explain why hedgers commonly hedge less than recommended by standard models

natural resources national income and economic growth in africa abstract because standard measures of aggregate income such as gross domestic product gdp do not account for natural resource depletion their use as gauges of economic performance tends to exaggerate the benefits of resource extraction accounting for natural resource depletion in 18 african countries indicates different patterns of growth than those suggested by gdp figures use of the revised measures in analyses of the link between exports and growth suggests that export expansion may generate increases in measured gdp without stimulating increased production in contrast real exchange rate alignment is correlated with growth in both conventional gdp and the revised accounts

the public private wage differential in a poor urban economy the occupational structure of wages is generally more compressed in high than in low income countries the role of non market forces in determining the structure of wages is of interest for reasons of allocative efficiency as well as for distributional concerns this paper considers how wage differentials may be generated between the public and private sectors of a developing economy data from a 1971 household survey of the tanzanian urban wage labor force are used to determine the pattern of wage differences across employer groups after standardizing by worker characteristics public sector employees are found to have earned a substantial wage premium over workers employed in the private sector the non market character of these differentials is examined in light of a number of hypotheses on public sector wage determination

evaluating welfare reform in the united states this paper reviews the economic literature on welfare reform over the 1990s a brief summary of the policy changes is followed by a discussion of the methodological techniques that analyze the effects of these changes on outcomes the paper then critically reviews the econometric and experimental literature on caseload changes labor force changes poverty and income changes and family formation changes a growing body of evidence suggests that recent policy changes have influenced economic behavior and well being one particular set of new style welfare programs seems to show especially promising results with significantly increased work and earnings and reduced poverty

labor market discrimination in a poor urban economy labor market discrimination by sex and by race in a poor urban economy is analyzed using a survey of manufacturing employees in tanzania there are large differences in mean wages by both sex and race using techniques previously applied to developed countries it is found that whereas the sex difference in mean wages can be explained mainly in terms of sex differences in personal characteristics the race difference is mainly the result of wage and job discrimination an attempt is made to explain the results which run counter to common presuppositions about discrimination

some comments on depletion and degradation costs in income measurement abstract this paper discusses the controversy regarding adjustments needed to be introduced in national accounts to determine sustainable income measures the issue is presented separately for depletion and degradation costs in order to take into account inter and intratemporal considerations it is argued that the approaches proposed in recent literature to measure natural resources depreciation can be considered as special cases of a distinct sustainability hypothesis apart from these theoretical issues sustainable income measurement also entails very difficult empirical questions

pollution abatement and balanced growth the analysis of endogenous growth models with pollution often concentrates on steady state trajectories under the assumption that the steady state is in some sense stable in the present note we provide examples showing that this issue should be dealt with carefully we use the rebelo ak model augmented with a stock of pollutants causing a negative externality it is found that optimal growth is not necessarily balanced contrary to the outcome of the standard rebelo model moreover the existence of the externality may affect long run optimal growth rates

a switching regression model for wage determinants in the public and private sectors of a developing country governments in less developed countries face severe budgetary constraints given that public sector employment is a large part of modern sector employment the government wage bill h as come under increased scrutiny the central question is how do gove rnment wages compare with those in the private sector in this paper the authors develop and estimate a model to answer this question an important aspect of this model is the endogenous treatment of sector choice the estimation results full information maximum likelihood sound a strong warning against the use of ordinary least squares est imates that are based on sector specific samples data are from the i vory coast copyright 1988 by mit press

pension coverage for parents and educational investment in children evidence from urban china when social security is established to provide pensions to parents their reliance upon children for future financial support decreases and their need to save for retirement also falls in this study the expansion of pension coverage from the state sector to the non state sector in urban china is used as a quasi experiment to analyze the intergenerational impact of social security on education investments in children in a difference in differences framework a significant increase in the total education expenditure is found to be attributable to pension expansion the results are unlikely to be driven by other observable trends they are robust to the inclusion of a large set of control variables and to different specifications including one based on the instrumental variable method

national product related welfare measures in the presence of technological change externalities and uncertainty the purpose of this paper is to discuss under what conditions welfare can be measured by observables related to the national product or hamiltonian along the optimal trajectory under nonattributable technological or environmental change welfare will depend on time itself meaning that the hamiltonian along the optimal trajectory will be a biased measure of welfare this result will also hold if we make the time dependence of welfare endogenous by replacing technological change will externalities that are not internalized during optimization on the other hand if we take the externalities fully into account then the hamiltonian will represent the appropriate measure of welfare similar results also hold in the case of uncertainty where we show that a generalized hamiltonian provides a welfare measure and that the deterministic measures are special cases of their stochastic counterparts

educational policy and labour productivity an output accounting exercise what is the contribution of education to output productivity or their growth economists have tried to answer this question using output accounting or growth accounting by the decomposing of output or its growth into the contributions of various factors including education the approach in this paper is output accounting of which krueger i968 provides an early example using crude aggregate census data on some 20 mostly developing countries krueger posed the question how much do differences in educational endowments lead to differences in per capita income she estimated the effect on per capita income in the united states of assuming not the u s educational distribution but the distribution in each other country the size of this effect xw as then related to the differences in per capita income krueger explained more than half the difference in per capita income by differences in human capital and so concluded that human capital defined more broadly than educational attainment contributed more than all other factors combined another version of the same exercise but using a three factor production function was conducted by fallon and layard i 9 75 with similar data sources but for a different set of countries they found the contribution of their index of human capital to be lower than krueger s estimate and generally lower than that of physical capital output and growth accounting both suffer from well known drawbacks see for instance bowman i980 and nelson i98i first failing to take account of the other determinants of income can bias estimates of the difference in income and productivity attributable to education secondly in simply assuming that the standardised earnings difference between the educated

longer term effects of head start specially collected data on adults in the panel study of income dynamics are used to provide evidence on the longer term effects of head start an early intervention program for poor preschool age children whites who attended head start are relative to their siblings who did not significantly more likely to complete high school attend college and possibly have higher earnings in their early twenties african americans who participated in head start are less likely to have been booked or charged with a crime there is some evidence of positive spillovers from older head start children to their younger siblings language en

single mothers and their children evaluating a work encouraging welfare reform abstract using rich administrative data from norway we evaluate a 1998 work encouraging reform targeted at single parents we especially focus on educational performance for the children of the involved single mothers for these children average school grades at age 16 dropped significantly by 0 7 of a standard deviation per additional year that their mothers were exposed to the reform furthermore we find that the reform affected single mothers by increasing their working hours and thereby reducing their time at home we find no average effect on disposable income mothers traded off reductions in benefits with increases in earnings thus reduced parental time at home seems to be the main mechanism for the observed moderate drop in children s grades in line with this we find that the reform increased the use of formal after school care and we find a larger reform effect for children of mothers with no informal network to help with child care

who should buy long term bonds according to conventional wisdom long term bonds are appropriate for conservative long term investors this paper develops a model of optimal consumption and portfolio choice for infinite lived investors with recursive utility who face stochastic interest rates solves the model using an approximate analytical method and evaluates conventional wisdom as risk aversion increases the myopic component of risky asset demand disappears but the intertemporal hedging component does not conservative investors hold assets to hedge the risk that real interest rates will decline long term inflation indexed bonds are most suitable for this purpose but nominal bonds may also be used if inflation risk is low

comparing earnings profiles in urban areas of an ldc rural to urban migrants vs native workers abstract we use tanzanian data to test a recently proposed hypothesis that rural to urban migrants have an incentive to supply greater work effort than native urban workers because of the migrants positive probability of returning to the low wage rural areas we treat the choice between public and private sector employment as endogenous and for theoretical and empirical reasons distinguish migrants with access to rural land from those without access our results show that migrants in both sectors face lower initial wage offers than native urban workers but the wage gap is eliminated within a decade or less and thereafter migrants surpass the wage offers of native workers

what has 20 years of public private pay gap literature told us eastern european transitioning vs developed economies this paper surveys the literature on public private sector pay differentials based on 20 years of research in transitioning countries of eastern europe ee and compares the results with estimates obtained from developed market economies the majority of empirical studies from ee economies found evidence of public sector pay penalties during the period of economic transition from a communist to market based economy in developed economies however the average differential is usually around zero or positive the public sector pay inequality reducing effect relative to the private sector is greater in transitioning economies than in developed economies nevertheless there is evidence that the sign of the public sector pay gap as well as the relative public sector pay distribution change with the progress of economic transition towards those usually observed in developed economies different pay setting arrangements between private and public sectors and competition for workers seem to be major arguments for the existence of systematic pay differences between the two sectors

changing time attitudes in intertemporal analysis intertemporal analysis is extended by generalizing the time weight function of an investor s utility function to account for changes in time attitudes the resulting measures of decreasing constant and increasing time attitudes are comparable to the arrow pratt measures of risk attitudes they help to enrich intertemporal theory provide meaningful hypotheses for testing and broaden the scope for decision analysis over time effects of the time attitude measures are illustrated in a model of an agricultural firm

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

distribucion salarial y educacion en lima metropolitana 1970 1984 this paper evaluates tbe effects of educational expansion on the wage distribution in metropolitan lima from 1970 to 19i34 the analysis is based on the dynamic decomposition of the second inequality measured proposed by theil the theil l and makes use of peruvian household surveys the main results suggest that such effects depend on the kind of educational expansion that takes place and that they not necessarily contribute to improve the distribution

using consumption and asset return data to estimate farmers time preferences and risk attitudes the generalized expected utility model is fitted to u s farm data to estimate farm operator s time preferences and risk attitudes the estimated farmer s utility parameters are quite reasonable and exhibit high accuracy the forward looking expected utility model is soundly rejected in favor of the generalized expected utility paradigm importantly the generalized expected utility model is also found to fit the data better than the myopic model typically used to study agricultural production under risk finally u s farmers relative aversion to risk appears to have diminished significantly over time

wage differentials in brazil theory and evidence the investigation of wage determination and wage differentials in developing countries has concentrated on the effects of human capital and different sources of segmentation associated with institutional arrangements and structural characteristics on earnings in this article we use micro data for brazil for the 1980s and 1990s to test several competitive theories and models with segmentation explained by efficiency wages we find that unmeasured abilities and efficiency wage models seem to play a role in wage determination while compensating differentials and transitory difference theories were found to be irrelevant to wages formation

africa s overgrown state reconsidered bureaucracy and economic growth how close is the link between outsized states and economic stagnation in africa this article shows that african public bureaucracies are not as large as often portrayed that they have been getting smaller and that reducing their size alone has not bee n a prescription for economic revival to the contrary the countries with higher levels of public employment such as botswana and mauritius are apt to have the better economic records these findings suggest that a superabundance of public personnel is not in itself a major impediment to growth in africa too much attention has been paid to quantitative or first generation bureaucratic problems and too little attention has been given the second generation issues of bureaucratic quality

interest rate management in ldc s the mckinnon argument that higher time deposit rates raise output and lower inflation in the short run and increase medium term growth by raising the savings rate are shown to depend crucially on the assumption that portfolio shifts into td s come out of an asset providing less intermediation than the banking system we show that if instead the shift is out of an asset providing more intermediation e g loans on a curbmarket raising td rates is contractionary in the short run may have negative impacts on growth and can lead to more rather than less inflation in the short run

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

aggregate estimate of environmental degradation for zimbabwe does sustainable national income ensure sustainability abstract standard measures of economic growth do not adequately reflect changes in aggregate welfare over time sustainable national income is therefore defined as net national product with adjustments for the degradation of renewable and non renewable capital productivity loss rather than replacement cost is the most theoretically correct way to value resource depletion modified net product is estimated for the agriculture and forestry sectors of zimbabwe by valuing the loss of forest stock and soil erosion the results show that traditional measures overstate the value of the agricultural sector s product by approximately 10 in 1989 it is argued that indicators of sustainable national income do not ensure sustainable development as with all macroeconomic indicators they do not account for distributional and equity issues which are at the crux of sustainable development nor do they point to mechanisms that would ensure sustainable resource management rising sustainable income over time is therefore a necessary but not sufficient condition for the achievement of sustainable development

autoregressive modelling and money income causality detection abstract a step wise procedure based on granger s concept of causality and abaike s final prediction error criterion is suggested as a practical means to identify the order of lags of each variable in a multivariate autoregressive process the model seems useful because it can serve as a reduced form formulation to avoid imposing often spurious or false restrictions of the model it also provides a reasonably powerful test of causality the idea is applied to u s postwar money and income data it is found that between m1 and gnp a bivariate feedback model fits the data best between m2 and gnp a one way causal model from money to income performs better diagnostic checks applied to our model seem to indicate the adequacy of our approach

discount rates natural resources and the measurement of aggregate economic growth in africa abstract over the last decade there has been a growing interest in depreciation of natural capital in national income accounts within this literature there has been limited discussion of the sensitivity of measurement to the choice of discount rate and the effect of using depreciated measures of growth in empirical analyses without attempting to estimate or justify a specific discount rate this paper presents alternative sets of growth data for 18 african countries based on different assumptions of the appropriate discount rate to apply to natural capital the data sets are then used in a statistical test of the causes of economic growth results of the statistical analysis indicate sensitivity to the choice of discount rate

the effects of public sector hiring and compensation policies on the egyptian labor market this article examines the combined impact of the employment guarantee for graduates and public sector compensation policies on the egyptian labor market besides contributing to an unsustainable rate of growth in the government labor force these policies have encouraged queuing for government jobs contributed to high graduate unemployment rates and reduced the employment of graduates in the private sector despite substantial wage erosion in the public sector in recent years government wages when appropriately corrected for observed heterogeneity and sample selection are on a par with or higher than private sector wages especially for graduates when combined with the more desirable nonwage aspects of government jobs these compensation levels explain the attractiveness of public sector employment to graduates government pay scales are especially advantageous to female secondary school graduates who appear to face considerable discrimination in the private sector

the american high school graduation rate trends and levels abstract this paper applies a unified methodology to multiple data sets to estimate both the levels and trends in u s high school graduation rates we establish that a the true rate is substantially lower than widely used measures b it peaked in the early 1970s c majority minority differentials are substantial and have not converged for 35 years d lower post 1970 rates are not solely due to increasing immigrant and minority populations e our findings explain part of the slowdown in college attendance and rising college wage premiums and f widening graduation differentials by gender help explain increasing male female college attendance gaps

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

public private employment choice wage differentials and gender in turkey abstract the main objective of this article is to examine the factors that explain the employment choice and the wage differentials in public administration state owned enterprises and the formal private wage sector in turkey selectivity corrected wage equations are estimated for each sector for men and women separately oaxaca blinder decomposition of the wage differentials between sectors by gender and between men and women by sector are carried out results indicate that when controlled for observed characteristics and sample selection for men public administration wages are higher than private sector wages except at the university level where the wages are at par state owned enterprise wages for men are higher than private sector wages similar results are obtained for women further while the wages of men and women are at parity in the public administration there is a large gender wage gap in the private sector in favor of men private returns to schooling are found to be lower in the noncompe

causality between exports and economic growth abstract this paper utilizes granger causality tests in investigating the relationship between exports and national income from a consistent data set for 47 developing countries in africa new empirical results as well as suggestions for future research are presented

educational expansion and the kuznets effect the objective in this note is to show the change in wage dispersion in response to increases in the relative supply of educated workers in two low income countries we also measure the relative contributions to that change of its two components the effect of the educational expansion on the educational composition of the labor force holding the educational structure of wages constant and the resultant compression of that structure holding composition constant the paper s analysis is based on three precisely comparable surveys of wage employees conducted in tanzania in 1971 and 1980 and in kenya in 1980

exports growth and causality in developing countries abstract previous empirical studies have interpreted results in regressions of output variables on export variables as providing support for an export promotion development strategy such an interpretation is questionable since these regressions provide no means of determining the direction of causality this paper performs causality tests between exports and growth for 37 developing countries the results cast considerable doubt on the validity of the export promotion hypothesis

the interaction between nonexpected utility and asymmetric market fundamentals this paper studies a nonexpected utility general equilibrium asset pricing model in which market fundamentals follow a bivariate markov switching process the results show that nonexpected utility is capable of exactly matching the means of the risk free rate and the risk premium asymmetric market fundamentals are capable of generating a negative sample correlation between the risk free rate and the risk premium moreover an equilibrium asset pricing model endowed with asymmetric market fundamentals is consistent with all five first and second moments of the risk free rate and the risk premium in the u s data in their seminal work mehra and prescott 1985 argue that the observed historical average for the equity risk premium is too large and the average risk free rate is too small to be rationalized by a complete and frictionless asset pricing model the result of mehra and prescott which is known as the equity premium puzzle has triggered a great deal of research much of this research has attempted to resolve the puzzle by relaxing the assumptions of their analysis the agent has von neumann morgenstern time additive expected utility the return to the stock market is approximately equal to the return on the market portfolio and the consumption growth rate follows a symmetric markov chain one branch of research focuses on nonexpected utility functions of the kreps and porteus 1978 1979 type as a means of resolving the puzzle it is well known that von neumann morgenstern time additive expected utility has an intrinsic restriction that the reciprocal of the coefficient of relative risk aversion equals the elasticity of intertemporal substitution kreps and porteus establish a nonexpected utility framework which is capable of distinguishing the coefficient of relative risk aversion from the elasticity of intertemporal substitution however kocherlakota 1990a and weil 1989 demonstrate that relaxing the restriction between the coefficient of relative risk aversion and the elasticity of intertemporal substitution is not capable of resolving the puzzle

changes in the returns to education in costa rica abstract i document patterns in the returns to education in costa rica from 1976 to 1992 the most important change during this period was that from the late 1970s to the mid 1980s the return to education fell by about one fourth i construct demand and supply indices within a fixed manpower requirements framework to estimate demand and supply shifts i find a significantly positive relationship between measures of demand for education and a significantly negative relationship between measures of supply for education these findings suggest that calculations based on the returns to education such as the returns to social investments in education must take into account future changes in the returns to education as supply and demand conditions develop

the intergenerational transmission of welfare receipt a nonparametric bounds analysis using a nonparametric bounding method and data from the panel study of income dynamics i examine the effect that growing up in a household that receives aid to families with dependent children af

educational expansion government policy and wage compression abstract the main objective is to measure the elasticity in the response of relative wages by education to relative supplies of educated labour using rigorously comparable urban wage labour market surveys an econometric comparison is made of kenya and tanzania countries which constitute a natural experiment having different secondary education policies but being similar in other relevant respects post primary educational expansion as kenya is an effective means of compressing wages however the tanzanian scarcity premium on post primary education is held down by the alternative means of public sector pay policy the analysis suggests an important role for occupation in the wage adjustment process

market power firm performance and real wage growth in zimbabwean manufacturing abstract this paper uses a two year panel of data on 600 zimbabwean manufacturing workers and the employers to examine several aspects of the labor market response to the reforms introduced in the 1991 structural adjustment program the analysis then uses this evidence to explore a number of hypotheses about the functioning of formal urban labor markets in zimbabwe with particular attention to the issue of rent sharing first as one would expect liberalization of trade did indeed act to shift employment from import competing sectors to export sectors although total manufacturing employment was basically unchanged second real wages in manufacturing fell for most workers third the pattern of wage changes across sectors and firms is consistent with a view of labor markets as noncompetitive the evidence provides support for the idea that a rent sharing process of wage determination rather than one based on efficiency wages or government intervention is an appropriate characterization of this labor market

public private sector wage gap by gender in egypt evidence from quantile regression on panel data 1998 2018 abstract this paper estimates the public formal private wage gap in egypt using egypt labor market panel survey for the 20 year period of 1998 2018 for men and women separately we estimate the public formal private sector wage gap with wage equations including a public sector indicator both at the mean and at different quantiles of the conditional wage distribution using the panel feature of the data we also address the endogenous employment and the sector of employment selection issue and find a persistent public wage penalty for the males and public wage premium for the females except at the top even after controlling for the observable and the time invariant unobservable characteristics we further examine the public wage gap over time and in different sub samples by potential experience skill levels and regions generally the results are consistent with a decrease in the public wage gap for both men and women over the period considered we further provide evidence on the quality of workers we find that the public sector fails to attract better quality men throughout the conditional wage distribution while it manages to attract better quality women in the lower parts of the conditional wage distribution but not at the top all on the basis of time invariant unobservable attributes these results indicate concern for the efficient provision of public services

measuring producers risk preferences a global risk attitude construct in applied agricultural economic research various risk attitude elicitation techniques are used here we investigate whether risk attitude measures rooted in the expected utility framework are related to measures rooted in the multi item scale framework using a second order factor analytical model and data obtained from personal computer guided interviews with 373 farmers we investigate whether the common variance among the latent risk attitude measures can be accounted for by a global risk attitude construct we find that the different risk attitude measures are related and that the global risk attitude construct is significantly related to farmers intention to use futures contracts our research suggests that farmers risk attitude is a higher order characteristic that cannot be effectively extracted by a single measure in empiricalstudies deal ing with risk risk attitudes and producers market behavior various risk attitude measures are used two major approaches to quantify directly farmers risk attitudes can be distinguished measures derived from the expected utility framework and measures derived from responses to multi item scales e g antle chavas and holt goodwin and schroeder saha shumway and talpaz smidts the purpose of this research is to test whether risk attitude measures rooted in the expected utility framework are related to the risk attitude scales rooted in the multiitem scale approach and if so whether these risk attitude measures share a common

the demand for hedging and the value of hedging opportunities hedging strategies typically assume that hedging is costless and that only one futures market exists when these assumptions are dropped the demand for hedging is shown to depend on basis risk price risk and the hedger s risk preference the marginal and incremental value of hedging opportunities are computed for the general cases of one and two markets and applied to the specific case of pennsylvania dairy input hedging copyright 2000 oxford university press

developments in non expected utility theory the hunt for a descriptive theory of choice under risk this article reviews recent developments in the economic theory of individual decision making under risk since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways considerable research effort has now been devoted to the project of developing a superior descriptive model following an overview of non expected utility theories which distinguishes between conventional and non conventional approaches the paper seeks to assess these alternative models in terms of empirical success using laboratory and field data and theoretical usefulness the closing sections reflect on some new directions emerging in this literature

declining inequality in schooling in brazil and its effects on inequality in earnings abstract household survey data demonstrate that brazilian males born between 1925 and 1963 experienced steady increases in mean schooling and significant declines in schooling inequality the variance in years of schooling increased for cohorts born up until 1950 with steady declines for more recent cohorts decomposition of a standard human capital earnings equation indicates that trends in schooling tended to reduce earnings inequality from 1976 to 1985 due to reductions in both the variance of schooling and in returns to schooling these improvements were more than offset however by increases in other sources of inequality although the net increase in earnings inequality from 1976 to 1985 is disturbing the reduction in schooling inequality represents a fundamental improvement in the determinants of earnings inequality in brazil that will have beneficial effects for decades

natural resources national accounting and economic depreciation abstract the current value hamiltonian in an aggregate optimal growth problem with heterogeneous capital stocks including exhaustible renewable and environmental stocks is the nnp function routine substitutions reveal that the using up of natural resource stocks is representable as easy to interpret economic depreciation magnitudes we obtain true nnp inclusive of natural resource stock diminution implications for actual national accounting practices are also discussed

intergenerational effects of welfare reform on educational attainment abstractthis paper estimates the impact of the fundamental welfare reforms of the 1990s on the educational attainment of children in low income families using administrative records and individual survey data spanning the early 1990s to the mid 2000s we find large positive effects of welfare reform income gaps in school enrollment and dropout rates narrow by more than 20 percent unlike the significant and growing relative gains in the years following state welfare reforms we find no evidence of relative gains for low income adolescents in the years preceding the reforms these findings are robust under alternative definitions of the treatment and control groups and after controlling for contemporaneous economic and policy changes

wage differentials and moonlighting by civil servants evidence from cote d ivoire and peru as part of their efforts to reduce fiscal deficits many governments have allowed public sector salaries to erode often on the assumption that government workers are overpaid vis a vis those in the private sector that assumption is tested by analyzing public private pay differentials in cote d ivoire and peru switching regressions models are estimated using full information maximum likelihood fiml and the results are compared to those obtained using ordinary least squares ols techniques the ols yields seriously biased estimates of the pay structure suggesting that public wages are higher than private wages the fiml estimates show the opposite our probit analysis also shows that the wage disadvantage of civil servants is a determinant of the greater prevalence of moonlighting among public than private employees the evidence suggests that reductions in employment rather than pay while being less palatable in the short term will be more effective in the long run

an intertemporal consumption leisure model with non expected utility abstract this paper tests an intertemporal consumption leisure model with non expected utility there is evidence to reject the commonly used expected utility specification and to accept the non expected utility one as the model s restrictions are not rejected by the data

the interaction of factor and product market distortions in developing countries this essay will examine distortions in product and factor markets in developing countries and the interaction of these distortions in respect to the development strategies applied the analysis will concentrate on policy imposed distortions where departures from efficient resource allocation result from policy actions these contrast with distortions resulting from market imperfections 1

taxes and bribery the role of wage incentives this paper presents a simple model to evaluate alternative payment schemes for tax inspectors in the presence of corruption we consider problems of both moral hazard which arises because taking bribes cannot be observed without costly monitoring and adverse selection since not all potential tax inspectors can be identified as being honest or dishonest we identify three wage regimes first one could pay the same wage that a tax inspector could earn elsewhere his reservation wage second one could pay a wage which solves the moral hazard problem i e deters bribery this we call an efficiency wage by analogy with recent models examined i n macro economics third the government could pay a wage below the reservation wage at which only the dishonest become tax inspectors the capitulation wage we make precise the conditions under which each yields the greatest amount o f tax revenues net o f administrative costs many countries in the developing world are undergoing structural adjustment programmes which require fundamental fiscal changes outside agencies advise restoration of budget balance a task which involves expenditure cuts and tax increases the treatment of public employee pay scales often poses a particular dilemma i n this process wages and salaries are a significant component of government expenditures and one important question concerns the extent to which wages rather than employment cuts should be used to save money there is sometimes a reluctance to advocate wage cuts stemming in part from a feeling that this might impair the performance of the public sector hence tanzi 1990 argues that a policy of wage cutting is likely to increase the inefficiency of public sector employees especially at a time when the public sector is expected to play a larger role in restructuring the economy p 16 in the context of tax collection the issue is particularly pressing given the need to raise more tax revenues a reduction in efficiency in this branch of the government i s likely t o mean that fewer returns are processed and when individuals living standards are squeezed their incentive to accept bribes in lieu o f collecting taxes i s increased o n this count i t i s even sometimes suggested that wages of tax inspectors should be increased to aid the effort to the comments of henry bienen john hey and two anonymous referees have been helpful in revising this paper the authors are also grateful t o the john m olin program for the study o f economic organization and public policy at princeton university and the pew charitable trusts for financial support mclaren also acknowledges support from the international finance section of princeton university none of the above should be implicated in any way see for example goode 1984 chapter 1 3 and gould and amaro reyes 1983

public private wage differentials in haiti do public servants earn a rent abstract this study uses a newly collected data set on haiti where data are very limited to assess how individuals are selected into the public vs private sectors and to estimate public private sector wage differentials the central question is whether or not public servants are earning a rent the estimation procedure is an extension of heckman s 1979 sample selection technique to the case where two selection rules generate the sample the procedure first estimates by bivariate probit analysis the probability of employment in the public or private sector and then for those in the public sector the probability of employment in the state owned enterprises soes vs public administration wage functions are then estimated for all three sectors using the inverse mills ratios from reduced form probits selectivity bias is found to exist in one sector soes correction for this bias in the wage equations lowers the wage differentials between the soe and the private sector and the soe and public administration as is clearly demonstrated by the oaxaca decomposition of these estimated mean differentials nevertheless the corrected findings still indicate that the public sector especially the soes earn a sizable rent

the use of the discount rate in a cost benefit analysis for different uses of a humid tropical forest area abstract the linkage between ecology and economics can be made by describing our physical surroundings as a collection of possible uses these are called environmental functions as soon as the use of functions compete with each other the environment has an economic aspect the main conflict boils down to using environmental functions such as the functions of a tropical rain forest in an unsustainable way by maximizing production in the short run on the one hand and using functions sustainably in order to benefit from them in the long run on the other the intensity of preferences for the future availability of functions cannot be established from this it follows that the level of the discount rate when calculating long term environmental effects can also not be set using the market interest as the discount rate for calculating the present value of long term environmental costs and benefits means that the preferences for sustainable use of the environment amount to zero for in that case the present value of a dollar earned 100 years from now is practically nil this is a strong supposition the correctness of which cannot be proven unfortunately most cost benefit analyses such as those of the world bank and a recent study of the world resources institute repetto et al 1989 are based on this supposition

earnings schooling ability and cognitive skills conventional estimates now available for a large number of countries generally indicate that the social returns to education are positive large and competitive with returns to investment in physical capital that such estimates are good guides for public resource allocation has however been questioned the heart of the problem lies in the interpretation of the positive relationship between the education and the earnings of workers whether as the conventional estimates assume the coefficient of the education variable in the earnings function measures the effect on the productivity of workers of human capital acquired in school it has been hypothesized that education in part or instead represents screening for native ability and motivation or credentialism and that as a consequence conventional measures of the social benefit of education are substantially upward biased 2 in this paper we attempt to distinguish the influence on earnings of cognitive achievement native ability and years of education as a means of adjudicating the human capital screening and credentialist hypotheses our econometric analysis is based on two rigorously comparable micro data sets from kenya and tanzania generated by surveys of the urban wage labor force specifically for this study these data sets contain the usual variables found in earnings function estimates of the benefits of schooling individual earnings years of education and years of employment experience in addition they contain two variables measures of the worker s cognitive skills and of his or her reasoning ability not previously found in studies of developing countries and only rarely found in studies of the education earnings relationship in developed countries 3 with these variables we can estimate the direct effects on earnings of cognitive skills ability and years of schooling by using them to estimate educational production functions and educational attainment functions and linking these functions with the earnings function in a recursive framework we can also assess the various indirect effects on earnings of ability and years of schooling having data sets from two countries very similar with respect to size resource endowments structure of production and employment and level of development means that not only can we subject our results to the usual statistical tests but we can also assess their replicability both kenya and tanzania have nearly achieved the objective of universal primary education while university enrollments remain at less than 1 percent of the relevant age group the important policy issues re boissiere development research department the world bank 1818 h street washington d c 20433 knight institute of economics and statistics oxford university sabot williams college williamstown ma 01267 we are grateful to the educational testing service of princeton for the design of tests used in this study and to j armitage j behrman j hausman d hendry d jamison and an anonymous referee for their insights and advice helpful comments were also received from participants in seminars at oxford and yale universities the views presented here are our own they should not be interpreted as reflecting those of the world bank george psacharopoulos 1973 1981 contains a listing of 44 countries in which rate of return studies had been conducted and of the estimates obtained 2for instance kenneth arrow 1973 mark blaug 1976 samuel bowles and herbert gintis 1976 john riley 1979 michael spence 1976 and lester thurow 1975 3for attempts to control for ability and or for cognitive achievement in studies for the united states see jere behrman et al 1980 gary chamberlain and zvi griliches 1977 griliches and william mason 1972 michael olneck 1977 paul taubman and terence wales 1974 taubman 1975 and david wise 1975 see also the survey articles by griliches 1977 1979 in most instances the data refer to special subgroups in the population and clear distinction cannot be made between natural ability and cognitive skills acquired in school

dynamic resource management intertemporal substitution and risk aversion we consider resource management with recursive preferences these generalize expected utility while eliminating some well known difficulties monotonicity and convergence properties of optimal decision rules are established using lattice programming methods empirical applications are rangeland and groundwater management decreasing the intertemporal elasticity of substitution implies greater lower resource usage with limited abundant stocks this moderates stock evolution and stabilizes consumption increasing risk aversion implies the same or reduced usage over the state space intertemporal substitution has a substantial effect on the optimal decision rule and a moderate effect on the limiting distribution while risk aversion has a very small effect

the central government private sector wage differential since ehrenberg and schwarz 1986 there has been a plethora of articles investigating the relationship between public and private sector wages this article examines part of this post 1986 literature by reviewing articles that examine central government private sector wage differentials in sum most articles find that there is a premium paid to central government workers although the premium has declined in recent years in developing countries however the differential is usually negative women and minorities tend to do better in the public sector relative to their private sector counterparts the evidence on union premiums between sectors is mixed although the premium tends to be higher in the private sector however public sector union workers do not do much better than private sector union members the magnitude of all of the wage differentials discussed are sensitive to the estimation technique and data source used the most common explanation for the public sector wage premium is economic rent accruing to government workers although the public sector wage determination literature suggests that the differential is due to returns to political and vote producing activities not relevant in the private sector

welfare the earned income tax credit and the labor supply of single mothers during 1984 1996 welfare and tax policy were changed to encourage work by single mothers the earned income tax credit was expanded welfare benets were cut welfare time limits were added and welfare cases were terminated medicaid for the working poor was expanded as were training programs and child care during this same time period there were unprecedented increases in the employment and hours of single mothers we show that a large share of the increase in work by single mothers can be attributed to the eitc and other tax changes with smaller shares for welfare benet cuts welfare waivers training programs and child care programs