household choices and child development the growth in labor market participation among women with young children has raised concerns about the potential negative impact of the mother s absence from home on child outcomes recent data show that mother s time spent with children has declined in the last decade while the indicators of children s cognitive and noncognitive outcomes have worsened the objective of our research is to estimate a model of the cognitive development process of children nested within an otherwise standard model of household life cycle behavior the model generates endogenous dynamic interrelationships between the child quality and employment processes in the household which are found to be consistent with patterns observed in the data the estimated model is used to explore the eects of schooling subsidies and employment restrictions on household welfare and child development

equilibrium incentive contracts and efficiency wages we analyze the optimal efficiency wage contract when output is contractible but firms neither observe the workers effort nor their match specific productivity firms offer wage contracts that optimally trade off effort and wage costs as a result employed workers enjoy rents which in turn creates unemployment nonetheless the incentive power of the equilibrium wage contract is constrained efficient in the absence of taxes and unemployment benefits we also show that more high powered incentive contracts tend to be associated with higher equilibrium unemployment rates jel e24 j30 j41

the consumption response to predictable changes in discretionary income evidence from the repayment of vehicle loans abstract although the life cycle permanent income hypothesis is the primary framework for understanding household consumption and savings decisions only a few studies have used clearly identifiable income changes to test the basic predictions of the model the estimates produced using this empirical strategy have yet to lead to a consensus of beliefs since the results have both favored and rejected the model this paper contributes to this literature by examining the consumption reaction to predictable increases in discretionary income following the final payment of a vehicle loan using data from the consumer expenditure survey the results show that a 10 increase in discretionary income due to a loan repayment leads to a 2 to 3 increase in nondurable consumption additional analysis suggests that these findings may be explained by the presence of borrowing constraints

the perceived returns to education and the demand for schooling economists emphasize the link between market returns to education and investments in schooling though many studies estimate these returns with earnings data it is the perceived returns that affect schooling decisions and these perceptions may be inaccurate using survey data for eighth grade boys in the dominican republic we find that the perceived returns to secondary school are extremely low despite high measured returns students at randomly selected schools given information on the higher measured returns completed on average 0 20 0 35 more years of school over the next four years than those who were not

a major in science initial beliefs and final outcomes for college major and dropout taking advantage of unique longitudinal data we provide the first characterization of what college students believe at the time of entrance about their final major relate these beliefs to actual major outcomes and provide an understanding of why students hold the initial beliefs about majors that they do the data collection and analysis are based directly on a conceptual model in which a student s final major is best viewed as the end result of a learning process we find that students enter school quite optimistic about obtaining a science degree but that relatively few students end up graduating with a science degree the substantial overoptimism about completing a degree in science can be attributed largely to students beginning school with misperceptions about their ability to perform well academically in science copyright 2014 oxford university press

a model of efficiency wages as a signal of firm value we consider performance contracts with firm private information the verifiable components of the contract an up front wage and employment may serve both as a signal and a performance incentive job rent may be necessary for signaling and since efficient signaling is multidimensional there is an inextricable link between job rent and underemployment signaling can explain the lack of explicit bonding in actuality though our basic model is static our underemployment result is not a consequence of firm myopia when the firm is farsighted it will not maximize the joint future surplus if it cannot extract the worker s share at present copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

termination of dynamic contracts in an equilibrium labor market model i construct an equilibrium model of the labor market where workers and firms enter into dynamic contracts that can potentially last forever but are subject to optimal terminations upon a termination the firm hires a new worker and the worker who is terminated receives a termination contract from the firm and is then free to go back to the labor market to seek new employment opportunities and enter into new dynamic contracts the model permits only two types of equilibrium terminations that resemble respectively the two kinds of labor market separations that are typically observed in practice involuntary layos and voluntary retirements the model allows simultaneous determination of its equilibrium turnover unemployment and retirement as well as the expected utility of the new labor market entrants

nash equilibrium efficiency wage distributions this paper extends the shirking model of efficiency wages by introducing worker heterogeneity with respect to the disutility of effort heterogeneity leads to a problem of adverse selection in addition to the moral hazard problem that is present in the original model as a result of adverse selection an equilibrium in which all firms offer the same efficiency wage cannot exist rather a continuously differentiable distribution of wages will be offered in equilibrium we demonstrate this equilibrium by construction and derive it explicitly in the case of a uniform distribution of the effort aversion parameter

determinants of college major choice identification using an information experiment this article studies the determinants of college major choice using an experimentally generated panel of beliefs obtained by providing students with information on the true population distribution of various major specific characteristics students logically revise their beliefs in response to the information and their subjective beliefs about future major choice are associated with beliefs about their own earnings and ability we estimate a rich model of college major choice using the panel of beliefs data while expected earnings and perceived ability are a significant determinant of major choice heterogeneous tastes are the dominant factor in the choice of major analyses that ignore the correlation in tastes with earnings expectations inflate the role of earnings in college major choices we conclude by computing the welfare gains from the information experiment and find positive average welfare gains

is universal child care leveling the playing field abstract we assess the case for universal child care programs in the context of a norwegian reform which led to a large scale expansion of subsidized child care we use non linear difference in differences methods to estimate the quantile treatment effects of the reform we find that the effects of the child care expansion were positive in the lower and middle parts of the earnings distribution of exposed children as adults and negative in the uppermost part we complement this analysis with local linear regressions of the child care effects by family income we find that most of the gains in earnings associated with the universal child care program relate to children of low income parents whereas upper class children actually experience a loss in earnings in line with the differential effects by family income we estimate that the universal child care program substantially increased intergenerational income mobility to interpret the estimated heterogeneity in child care effects we examine the mediating role of educational attainment and cognitive test scores and show that our estimates are consistent with a simple model where parents make a tradeoff between current family consumption and investment in children taken together our findings could have important implications for the policy debate over universal child care programs suggesting that the benefits of providing subsidized child care to middle and upper class children are unlikely to exceed the costs our study also points to the importance of universal child care programs in explaining differences in earnings inequality and income mobility across countries and over time

chasing after good jobs do they exist and does it matter if they do most people believe that there are such things as good jobs jobs that a worker would consider herself lucky to get but for economists the existence of good jobs is debatable in this paper i provide a definition of a good job based on various theories of the labour market a job that involves a surplus captured partly by the worker i use that definition to guide an empirical investigation of the existence and importance of good jobs i conclude that good jobs do exist that the labour market does not just function according to a roy model with wage differentials reflecting only skill differentials compensating differentials or bond posting and that their impact on the overall wage structure is substantial finally i discuss the implications of the existence of good jobs for policy setting and for assessments of the justice of a society resume la chasse aux bons emplois est ce qu ils existent et est ce que cela importe qu ils existent la plupart des gens croient qu il y a telles choses que de bons emplois des emplois qu un travailleur se trouverait chanceux d avoir mais pour les economistes l existence de bons emplois est discutable dans ce texte l auteur propose une definition de bon emploi fondee sur diverses theories du marche du travail un emploi qui engendre un surplus capture en partie par le travailleur il utilise cette definition pour guider son enquete empirique sur l existence et l importance de bons emplois on conclut que les bons emplois existent que le marche du travail ne fonctionne pas seulement selon le modele de roy avec des differentiels de salaires qui refletent seulement les differentiels d habiletes les differentiels compensatoires ou le depot d une caution et que leur impact sur la structure globale des salaires est substantielle finalement l auteur discute les implications de l existence de bons emplois sur la definition de politiques et sur l evaluation du caractere juste d une societe

estimating the production function for human capital results from a randomized controlled trial in colombia we examine the channels through which a randomized early childhood intervention in colombia led to significant gains in cognitive and socio emotional skills among a sample of disadvantaged children aged 12 to 24 months at baseline we estimate the determinants of material and time investments in these children and evaluate the impact of the treatment on such investments we then estimate the production functions for cognitive and socio emotional skills the effects of the program can be explained by increases in parental investments which have strong effects on outcomes and are complementary to both maternal skills and child s baseline skills

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

tournaments as a worker discipline device c c yang i introduction in the absence of unemployment a worker caught shirking and subsequently fired could obtain a new job at the market wage without difficulty as a result of this and the imperfect monitoring of workers on the job effort shapiro and stiglitz 1984 argued that there must be involuntary unemployment in equilibrium to serve as a worker discipline device making job loss costly so as to discourage shirking 1 in response to shapiro and stiglitz s argument carmichael 1985 suggested that workers could pay employment fees to purchase their jobs and that the competition among workers for jobs would raise such fees until all involuntary unemployment disappeared alternatively there is the so called bonding scheme bonds are posted by workers when initially hired and forfeited if the workers are caught shirking the fear of losing the bonds then substitutes for the threat of becoming unemployed in creating work incentives the competition among workers for jobs would allow firms to charge an amount for bonds until there were no difference between employment and unemployment and so again there would be no involuntary unemployment in a nutshell the introduction of an employment fee or a bonding scheme can eliminate involuntary unemployment making obsolete unemployment as a worker discipline device in the real world however rarely are employment fees or bonding observed why do employment fees bonding or the like not then emerge to arbitrage the difference between employment and unemployment so as to eliminate involuntary unemployment this is a puzzle for shirking models romer 1996 461 2 it has been claimed that contracts with upward sloping age earning profiles the so called implicit bonding can act as perfect substitutes for contracts with explicit employment fees or bonds akerlof and katz 1989 negate this claim and show that the implicit bonding in general does not eliminate the need for involuntary unemployment as a worker discipline device to resolve the bonding issue katz 1986 suggests that future theoretical work is required to analyze the problem in an explicitly contractual setting this article offers an attempt in this direction we study a type of contract which is prevalent in the real world and most importantly can act as a perfect substitute for the employment fee or bonding scheme as far as the elimination of involuntary unemployment is concerned the contract in question is the so called tournament 3 a tournament contract compensates workers on the basis of their relative performance prizes arising from tournaments are fixed in advance and a worker receives the winner s prize not by being good in the absolute sense but by being better than the other workers contracts with the characteristics of tournaments are prevalent in labor markets the salesman who sells the most is given a large bonus the best worker gets promoted to become the company manager etc the incentive effects of tournaments have been analyzed in detail by lazear and rosen 1981 green and stokey 1983 nalebuff and stiglitz 1983 malcomson 1984 and others 4 in contrast to the extensive analysis of the microeconomic incentives of tournaments this article focuses on the macroeconomic implications of tournaments in the vein of shirking models it is shown that all involuntary unemployment will disappear if it is feasible for firms to exploit tournaments to full flexibility this finding pinpoints the power of tournament contracts in resolving involuntary unemployment as a consequence of this result the generation of equilibrium unemployment will require that there be certain impediments to the full exploitation of tournaments we suggest institutional constraints legal rules or social norms as possible candidates for the impediments the rest of this article is organized as follows

innis lecture universal early childhood interventions what is the evidence base universality is a hallmark of canadian social policy for very young children the evidence base for these policies is small non experimental and offers mixed results in contrast the evidence base for targeted early childhood interventions is largely experimental and offers strong guidance policy makers and advocates often cite the research on targeted programs in support of universal programs although this is problematic for a number of reasons universal programs require a better understanding of the developmental trajectories of more advantaged children evidence from the nlscy suggests there are some potentially important differences in the association of early and later childhood developmental outcomes by family economic resources l universalite est une caracteristique de la politique sociale canadienne pour la petite enfance les resultats sur lesquels on peut construire ces politiques sont minces et non experimentaux et pas toujours coherents d autre part les resultats pour les interventions ciblees sont largement experimentaux et fournissent des directions claires les definisseurs de politiques ainsi que leurs supporteurs citent souvent les resultats de recherches sur les programmes cibles pour articuler leur support pour des programmes universels meme si c est problematique pour diverses raisons les programmes universels reclament une meilleure comprehension des trajectoires de developpement des enfants plus avantages les resultats de l enquete longitudinale nationale sur les enfants et les jeunes suggerent qu il y a des differences potentiellement importantes dans le developpement des enfants de familles qui ont des ressources economiques differentes

superstars and mediocrities market failure in the discovery of talent a basic problem facing most labor markets is that workers can neither commit to long term wage contracts nor can they self nance the costs of production i study the eects of these imperfections when talent is industry speci c it can only be revealed on the job and once learned becomes public information i show that rms bid exces sively for the pool of incumbent workers at the expense of trying out new talent the workforce is then plagued with an unfavorable selection of individuals there are too many mediocre workers whose talent is not high enough to justify them crowding out novice workers with lower expected talent but with more upside potential the result is an ine ciently low level of output coupled with higher wages for known high talents this problem is most severe where information about talent is initially very imprecise and the complementary costs of production are high i argue that high incomes in pro fessions such as entertainment management and entrepreneurship may be explained by the nature of the talent revelation process rather than by an underlying scarcity of talent jel d30 j31 j6 m5

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

the rate of return to the high scope perry preschool program abstract this paper estimates the rate of return to the highscope perry preschool program an early intervention program targeted toward disadvantaged african american youth estimates of the rate of return to the perry program are widely cited to support the claim of substantial economic benefits from preschool education programs previous studies of the rate of return to this program ignore the compromises that occurred in the randomization protocol they do not report standard errors the rates of return estimated in this paper account for these factors we conduct an extensive analysis of sensitivity to alternative plausible assumptions estimated annual social rates of return generally fall between 7 and 10 with most estimates substantially lower than those previously reported in the literature however returns are generally statistically significantly different from zero for both males and females and are above the historical return on equity estimated benefit to cost ratios support this conclusion

endogenous monitoring intensity the period of contractual precommitment and the slope of the wage earnings profile abstract we consider the determination of the shape of the wage earnings profile as well as the pattern of monitoring intensity in a model where marginal monitoring cost is positive since the contract specifies that a worker detected shirking will be fired immediately monitoring intensity can be interpreted as the conditional probability of job separation given shirking we argue that a crucial determinant of the shape of these two profiles is the length of the contractual horizon and hence the length of the firm s precommitment to future job rent the longer this horizon is the steeper is the rent profile derived from the wage earnings profile and the more sharply falling with seniority is the monitoring intensity profile when this contractual horizon is short both profiles tend to be flat thus the length of contractual horizon may help to reconcile with received theory some recent evidence on the return to seniority

reciprocated unilateralism in trade policy abstract using the menu auction approach to endogenous determination of tariffs and allowing additionally for lobby formation itself to be endogenous this paper analyzes the impact of unilateral trade liberalization by one country on its partner s trade policies we find that such unilateral liberalization may induce reciprocal tariff reductions by the partner country intuitively unilateral liberalization by one country has the effect of increasing the incentives for the export lobby in the partner country to form and to lobby effectively against the import competing lobby there for lower protection

intertemporal consumption durables and liquidity constraints a cohort analysis we provide a theoretical framework to analyse the response of life time maximizing consumers to intertemporal prices of non durable goods and durable goods when the borrowing limit depends on the market value of the stock of durables owned by the consumer we use pseudo panel data on purchases of non durables and durable goods cars and demographic characteristics from the uk family expenditure survey as well as estimates of the durable stock constructed using the uk national travel survey to estimate the equations derived in the first part of the paper we evaluate the shadow prices of these restrictions which were significantly positive for younger consumers in the mid seventies and immediately prior to the 1982 financial liberalisation

intertemporal nonseparability or borrowing restrictions a disaggregate analysis using a u s consumption panel we propose a method to test for liquidity constraints which relies on using the within period marginal rate of substitution condition as a benchmark to evaluate the intertemporal euler equation if spot markets for nondurable goods exist but financial markets either do not exist or are imperfect we show how the comparison of first order conditions involving the relevant spot and intertemporal prices can be used to detect the imperfection we apply our methodology to a large sample of u s households drawn from twelve years of the consumer expenditure survey allowing for a general nonseparable preference structure our estimates of first order conditions do not indicate the presence of liquidity constraints with the possible exception of young households

wage premiums and profit maximization in efficiency wage models abstract the standard shirking model of efficiency wages is essentially a continuous time repeated prisoners dilemma game thus to sustain an equilibrium with employment requires sufficient gains from future co operation each division of these gains corresponds to some equilibrium efficiency wages correspond to employees receiving the gains bonds allow firms to receive them in markets well informed about agents pasts employment is independent of the distribution of gains but in anonymous markets with more workers than jobs employment is highest in efficiency wage equilibria efficiency wages thus arise naturally as the unique efficient equilibrium without recourse to assumptions that limit bonding

on reputation a microfoundation of contract enforcement and price rigidity we study the impact of reputational incentives in markets characterised by moral hazard problems social preferences have been shown to enhance contract enforcement in these markets while at the same time generating considerable wage and price rigidity reputation powerfully amplifies the positive effects of social preferences on contract enforcement by increasing contract efficiency substantially this effect is however associated with a considerable bilateralisation of market interactions suggesting that it may aggravate price rigidities surprisingly reputation in fact weakens the wage and price rigidities arising from social preferences thus in markets characterised by moral hazard reputational incentives unambiguously increase mutually beneficial exchanges reduce rents and render markets more responsive to supply and demand shocks

profit sharing unemployment and effort abstract efficiency wages above market clearing arising from unobservable individual effort are not compatible with profit sharing based on collective output if profit sharing is a feasible contract then full employment is the unique nash equilibrium of the economy

estimating marginal returns to education this paper estimates marginal returns to college for individuals induced to enroll in college by different marginal policy changes the recent instrumental variables literature seeks to estimate this parameter but in general it does so only under strong assumptions that are tested and found wanting we show how to utilize economic theory and local instrumental variables estimators to estimate the effect of marginal policy changes our empirical analysis shows that returns are higher for individuals with values of unobservables that make them more likely to attend college we contrast our estimates with iv estimates of the return to schooling

involuntary unemployment in dynamic contract equilibria in this paper the set of bilateral wage contracts in a dynamic model with observable effort is characterized our first result demonstrates that bond payments and severance pay do not increase the size of the set of incentive compatible contracts second we show that unobservable effort can lead to voluntary unemployment this abstract was borrowed from another version of this item

correlation consumption confusion or constraints why do poor children perform so poorly the economic and social mobility of a generation may be largely determined by the time it enters school given early developing and persistent gaps in child achievement by family income and the importance of adolescent skill levels for educational attainment and lifetime earnings after providing new evidence of important differences in early child investments by family income we study four leading mechanisms thought to explain these gaps an intergenerational correlation in ability a consumption value of investment information frictions and credit constraints in order to better determine which of these mechanisms inf uence family investments in children we evaluate the extent to which these mechanisms also explain other important stylized facts related to the marginal returns on investments and the effects of parental income on child investments and skills

does head start help hispanic children abstract poor educational attainment is a persistent problem among us hispanic children relative to non hispanics many of these children are immigrants and or come from households that use a minority language in the home this paper examines the effects of participation in a government sponsored preschool program called head start on these children we find that large and significant benefits accrue to head start children when we compare them to siblings who did not participate in the program on average head start closes at least 1 4 of the gap in test scores between hispanic children and non hispanic white children and 2 3 of the gap in the probability of grade repetition however we find that the benefits of head start are not evenly distributed across sub groups

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

is work special justice and the distribution of employment i investigate from an egalitarian welfarist standpoint the issue of whether state guaranteed employment should be offered as a matter of right to able bodied poor citizens who suffer chronic or persistent unemployment an affirmative answer is defended one consideration supporting this right to work is that provision of transfer aid in the form of jobs rather than cash screens nonneedy bohemians from the class of beneficiaries the main conclusion of the essay is defended from one objection based on efficiency wage models of the labor market and from another based on the alleged impossibility of maintaining the self respect and self esteem of able bodied individuals who fail to earn their own keep independently in a market economy

on the production of skills and the birth order effect first born children tend to outperform their younger siblings on measures such as cognitive exams wages educational attainment and employment using a framework similar to cunha and heckman 2008 and cunha heckman and schennach 2010 this paper finds that differences in parents investments across siblings can account for more than one half of the gap in cognitive skills among siblings the study s framework accommodates for endogeneity in parents investments measurement error missing observations and dynamic impacts of parental investments

life cycle schooling and dynamic selection bias models and evidence for five cohorts of american males this paper examines an empirical regularity found in many societies that family influences on the probability of transiting from one grade level to the next diminish at higher levels of education we examine the statistical model used to establish the empirical regularity and the intuitive behavioral interpretation often used to rationalize it we show that the implicit economic model assumes myopia the intuitive interpretive model is identified only by imposing arbitrary distributional assumptions onto the data we produce an alternative choice theoretic model with fewer parameters that rationalizes the same data and is not based on arbitrary distributional assumptions

child cash benefits and family expenditures evidence from the national child benefit income may improve child outcomes through two mechanisms as a direct input into health and education or indirectly by reducing household financial stress we exploit policy induced changes in refundable tax benefit income in canada to study these two potential mechanisms our findings suggest that additional income may improve outcomes through both mechanisms some benefit income is spent on direct education inputs while some is spent on everyday items likely to improve the general conditions children face additionally some families reduce spending on risky behaviour items spending responses to benefit generosity appear to vary by income and by child age prestations pour enfants en especes et depenses des familles ce que revele la prestation nationale pour enfants le revenu permet d ameliorer le developpement d un enfant gr ce a deux mecanismes en contribuant directement a l education et a la sante et en reduisant indirectement les difficultes financieres au sein du foyer afin d etudier ces deux mecanismes nous nous appuyons sur les modifications politiques apportees au credit d impot remboursable de type prestation fiscale pour revenu de travail au canada nos resultats suggerent que par l entremise de ces deux mecanismes la situation peut s ameliorer gr ce a un revenu additionnel une partie de ces prestations est depensee directement pour l education tandis qu une autre est utilisee pour les biens quotidiens susceptibles d ameliorer les conditions de vie generales de l enfant de plus certaines familles reduisent les depenses d articles pouvant induire des comportements a risque les types de depenses lies aux prestations sociales semblent varier en fonction des revenus et de l ge des enfants

producer protection legislation and termination damages in the presence of contracting frictions this study models producer protection legislation ppl that would grant growers the right to claim damages if their contracts are prematurely terminated in the absence of contracting frictions that prevent contractors from redesigning contracts to accommodate exogenous policy changes producer protection legislation damages ppld would not be distortionary or redistributive if contracting frictions exist then ppld would have efficiency and redistributive effects though the direction and magnitude depends on the size of ppl damages vis a vis expected damages under existing contract law this study clarifies the conditions under which ppld would decrease efficiency and protect growers

are workers willing to pay to join a better team using data from the major league baseball free agent market this study is the first to show that the productivity expected of the team a worker will join produces a significant negative compensating wage differential the younger workers in the sample drive this result trading 25 of their wages to join teams with an expected productivity one standard deviation higher this investment can be recouped if a reasonable increase in human capital occurs these results are robust to contract length wage simultaneity and indicate that investment in human capital motivates the observed tradeoff suggesting a new pathway through which human capital accumulation can affect wages reliable measures of workers own past productivity and the productivity expected of a worker s future team provide key advantages to identifying these effects jel j31 j24 m54

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

limits to environmental bonds abstract bonds have recently been promoted as an alternative tool to control environmental damages particularly in those instances when the innovative activities of a firm have uncertain future impacts under this mechanism a firm would post a bond ex ante forfeiting all or a portion of the bond if its activities harmed environmental resources while the benefits of bonds have been developed there has been little systematic effort to explore their limitations in contrast the labor literature has extensively studied the limits of bonds as a mechanism to prevent worker shirking using insights from this parallel problem this paper explores the limits to environmental bonds focusing on the problems of moral hazard liquidity constraints and legal restrictions each limit offers a challenge to the success of environmental bonds we explore the use of bonds in surface mining and agricultural nonpoint pollution as motivating examples we also consider how other incentive schemes suggested by the labor literature might prove useful in the context of environmental management we consider the labor mechanisms of efficiency wages increasing wage profiles trust funds and rank order tournaments

does head start improve children s life chances evidence from a regression discontinuity design this paper exploits a new source of variation in head start funding to identify the program s effects on health and schooling in 1965 the office of economic opportunity oeo provided technical assistance to the 300 poorest counties to develop head start proposals the result was a large and lasting discontinuity in head start funding rates at the oeo cutoff for grant writing assistance we find evidence of a large drop at the oeo cutoff in mortality rates for children from causes that could be affected by head start as well as suggestive evidence for a positive effect on educational attainment i introduction head start was established in 1965 as part of the war on poverty to provide preschool health and other social services to poor children age three to five and their families and currently serves over 900 000 children each year at a cost of around 7 billion hhs 2006 this paper provides new evidence on the effects of the head start program on schooling and health by drawing on a new source of variation in program funding spe

the intergenerational effects of worker displacement this article uses variation induced by firm closures to explore the intergenerational effects of worker displacement using a canadian panel of administrative data that follows more than 39 000 father son pairs from 1978 to 1999 we find that children whose fathers were displaced have annual earnings about 9 lower than similar children whose fathers did not experience an employment shock they are also more likely to receive unemployment insurance and social assistance the estimates are driven by the experiences of children whose family income was at the bottom of the income distribution

early and late human capital investments borrowing constraints and the family we develop a dynastic human capital investment framework to study the importance of family borrowing constraints and uninsured labor market risk as well as the process of intergenerational ability

signalling ability to pay and rent sharing dynamics abstract it is often argued that competitive and rent sharing models of wage determination should be distinguished by their long run properties in general rent sharing models predict the existence of a long run relationship between wages and firm specific ability to pay but the competitive model does not i present a two period counter example which demonstrates that rent sharing can be merely a short run phenomenon in the separating equilibria the firm signals ability to pay through first but not second period wage offers the model also has pooling equilibria in which the firm pays rents in the long run

the revenge of homo economicus contested exchange and the revival of political economy recent developments in microeconomic theory have shown that the self interested behavior underlying neoclassical theory is artificially truncated it depicts a charmingly victorian but utopian world in which conflicts abound but a handshake is a handshake but a handshake is not always a handshake studies of principal agent analysis the economics of information radical political economy mechanism design and transactions cost economics have all focused on the difficulties involved in policing and enforcing the actual process of market exchange abandoning the victorian world of neoclassical theory will redirect economists to an older conception of their profession what once was called political economy by taking optimizing more seriously post walrasian economics has inspired a revolution in economic thought fostering both new theoretical departures and alternative conceptions of the capitalist economy we will offer our own interpretation of this literature focusing on the widely recognized fact that the terms arising from exchange are not generally enforceable at zero cost to the exchanging parties where some aspect of the good or service supplied is both valuable to the buyer and costly to provide the absence of third party enforcement of claims gives rise to endogenous enforcement strategies we refer to this relationship as a contested exchange because unlike the transactions of walrasian economics the benefit the parties derive from the transaction depends on their own capacities to enforce competing claims

profit sharing risk sharing and firm size implications of efficiency wages by taking account of output fluctuations this paper constructs a synthesis of profit sharing and efficiency wage models to highlight the role of the risk attitudes of the firm and its employees we show contrary to the traditional efficiency wage theory that in a profit sharing economy unemployment is no longer a necessary device to induce work effort and consequently the labor market equilibrium may be characterized by full employment such a result is more likely to be true when the economy is characterized by small sized firms in addition we also provide a preliminary sketch of the situations in which the firm chooses a profit sharing program or a fixed wage one and discuss how a firm determines its pay parameters and employment in response to output fluctuations

parental beliefs about returns to educational investments the later the better in this paper we study parental beliefs about the returns to parental investments made during different periods of childhood using two independent samples we document that parents perceive the returns to different late investments to be higher than the returns to early investments and that they perceive investments in different time periods as substitutes rather than complements we show that parental beliefs about the returns to investments vary substantially across the population and that individual beliefs are predictive of actual investment decisions moreover we document that parental beliefs about the productivity of investments differ significantly across socioeconomic groups perceived returns to early parental investments are positively associated with household income thereby potentially contributing to the intergenerational persistence in earnings

the impact of family income on child achievement evidence from the earned income tax credit using an instrumental variables strategy we estimate the causal effect of income on children s math and reading achievement our identification derives from the large nonlinear changes in the earned income tax credit the largest of these changes increased family income by as much as 20 percent or approximately 2 100 between 1993 and 1997 our baseline estimates imply that a 1 000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run test gains are larger for children from disadvantaged families and robust to a variety of alternative specifications jel h24 h31 i21 i38 j13