soft skills hard skills and the black white wage gap this study examines the relative importance of soft skills versus hard skills across occupations and its impact on the observed wage gap between blacks and whites in the united states it posits that the black white pay gap may vary across occupations that require the use of different types of skills we classify occupations into hard skill intensive versus soft skill intensive jobs using the skill content measures of different occupations from the occupational information network o net we then use data from the national longitudinal survey of youth nlsy and current population survey cps to investigate the impact of job skill type on the wage gap consistent with our theoretical predictions we show that this wage gap in white collar jobs is smaller for hard skills jobs than it is for soft skills jobs moreover we demonstrate that in response to variations in the wage gap across different occupations blacks are more likely to self select themselves into hard skills jobs ceteris paribus this shows not only that discrimination against blacks varies across occupations but also that such discrimination induces the self selection of blacks into certain occupations moreover this finding highlights the role played by co worker customer discrimination in explaining the racial wage gap in the u s labor market jel j15 j31

early life circumstance and adult mental health we show that psychological well being in adulthood varies with circumstance in early life combining a time series of real producer prices of cocoa with a nationally representative household survey

bank capital shocks and countercyclical requirements implications for banking stability and welfare abstract this paper incorporates anticipated and unanticipated shocks to bank capital into a dsge model with a banking sector we apply this model to study basel iii countercyclical capital requirements and their implications for banking stability and household welfare we introduce three different countercyclical capital rules the first countercyclical capital rule responds to credit to output ratio the second countercyclical rule reacts to deviations of credit to its steady state and the third rule reacts to credit growth the second rule proves to be the most effective tool in dampening credit supply housing demand and household debt as well as in enhancing the banking stability by ensuring that banks have higher bank capital and capital to asset ratio after conducting a welfare analysis we find that the second rule outranks the other ones followed by the first rule the baseline and the third rule respectively in terms of welfare accumulation

behavioral theories of the business cycle we explore the business cycle implications of expectation shocks and of two well known psychological biases optimism and overconfidence the expectations of optimistic agents are biased toward good outcomes whereas overconfident agents overestimate the precision of the signals that they receive both expectation shocks and overconfidence can increase business cycle volatility while preserving the model s properties in terms of comovement and relative volatilities in contrast optimism is not a useful source of volatility in our model jel e3

factors affecting the output and quit propensities of production workers we formulate a simultaneous equation model to explain the wages output education and quit propensities of a sample of production workers our principal finding is that individuals that choose more education than we would expect from their observed characteristics have lower than expected quit propensities this relationship would bias standard estimates of rates of return to education we also find that the output of non whites was no lower than that of whites although their wages on previous jobs were lower and that workers with high levels of output were more likely to quit than were workers whose output was average

news shocks in the data olympic games and their macroeconomic effects we examine the macroeconomic effects of bidding for the olympic games using panel data for 188 countries during the period 1950 2009 our findings confirm that economies react to news shocks investment consumption and output significantly increase 9 to 7 years before the actual event in bidding countries hosting countries also experience significant increases in investment consumption and output 5 to 2 years before the hosting of the games mapping the olympics into a macroeconomic model we show that we can match our empirical findings if we assume that an olympic bid represents news about increases in government investment

the effects of surprise and anticipated technology changes on international relative prices and trade abstract this paper argues that it is important to distinguish surprise and anticipated components of total factor productivity tfp when we study the international transmission of tfp shocks we document that surprise and anticipated shocks to us tfp induce distinct dynamics for international relative prices the real exchange rate and the terms of trade and international trade real exports real imports and the trade balance our empirical findings can reconcile some conflicting empirical results in the literature and hence lead to a better understanding of the international transmission of tfp shocks in addition we evaluate a standard international macroeconomic model and discuss the mechanisms that may help to replicate our empirical findings

high powered performance pay and crowding out of nonmonetary motives a previous literature cautions that paying workers for performance might crowd out nonmonetary motives to work hard empirical evidence from the field however has been based on between subjects designs that are best suited for detecting crowding out due to low powered incentives high powered incentives in the workplace tend to increase output but it is unknown whether this masks crowding out this paper uses a within subject experimental design and finds evidence that crowding out also extends to high powered incentives in a real work setting with paid workers there is individual heterogeneity however with a minority of workers reporting crowding in of motivation thus the impact of performance pay might depend on the mix of worker types data and the online appendix are available at https doi org 10 1287 mnsc 2017 2846 this paper was accepted by uri gneezy behavioral economics

who benefits from job corps a distributional analysis of an active labor market program summary using recently developed econometric techniques to estimate quantile treatment effects qte and experimental data we examine the impact of job corps on earnings distribution our results indicate a great deal of heterogeneity in the effects of job corps the qtes show an increasing pattern along the earnings distribution with much more pronounced differences at the upper quantiles for males whites and ages 20 24 moreover we find the qtes to be very small at quantiles below the median for males ages 16 17 and 18 19 and non resident students we propose strong economic conditions and skill hypotheses to explain the heterogeneity observed over the earnings distribution copyright 2013 john wiley sons ltd

pride and prejudice using ethnic sounding names and inter ethnic marriages to identify labour market discrimination labour markets discriminate against workers with particular ethnic sounding names we use non random sorting into interethnic marriage and salient differences between sephardic and ashkenazi surnames to evaluate the causal impact of sephardic affiliation on wages using the 1995 israeli census we estimate the effect of a sephardic sounding surname on wages we first compare the wages of israeli jewish males born to sephardic fathers and ashkenazi mothers sa who are more likely to carry a sephardic surname with the wages of israeli jewish males born to ashkenazi fathers and sephardic mothers as we find that israeli labor markets discriminate based on perceived ethnicity sa workers earn significantly less than their as counterparts we then exploit the custom of women to adopt their husbands surnames to disentangle actual ethnicity from the ethnicity perceived by the market consistent with ethnic discrimination based on surnames we find that it is father in law s ethnicity rather than father s ethnicity that shapes female wage rates finally we find that labor markets discriminate based on surname only when those names provide additional information about ethnicity when ethnicity can be discerned from skin tone surnames do not provide additional explanatory power with respect to wages

why does trend growth affect equilibrium employment a new explanation of an old puzzle that the employment rate appears to respond to changes in trend growth is an enduring macroeconomic puzzle this paper shows that in the presence of a return to experience a slowdown in productivity growth raises reservation wages thereby lowering aggregate employment the paper develops new evidence that shows this mechanism is important for ex

learning by doing skills and jobs in urban ghana abstractthis paper investigates the relationship between on the job mathematics skills acquisition and jobs that involve the handling of money in urban ghana this relationship is identified in a panel dataset by examining individuals who change jobs between survey rounds while controlling for individual time invariant characteristics we argue that the process of job choice in ghana allows us to identify causal impacts the findings show that money handling is positively associated with higher mathematics skills

news noise and fluctuations an empirical exploration a common view of the business cycle gives a central role to anticipations consumers and firms continuously receive information about the future which is sometimes news and sometimes just noise based on this information consumers and firms choose spending and because of nominal rigidities spending affects output in the short run if ex post the information turns out to be news the economy adjusts gradually to a new level of activity if it turns out to be just noise the economy returns to its initial state therefore the dynamics of news and noise generate both short run and long run changes in aggregate activity this view appears to capture many of the aspects often ascribed to fluctuations the role of animal spirits in affecting demand spirits coming here from a rational reaction to information about the future the role of demand in affecting output in the short run together with the notion that in the long run output follows a natural path determined by fundamentals in this paper we examine whether this view is consistent with the data we reach three main conclusions the first two methodological the third substantive structural vars typically cannot recover news and noise shocks the reason is straightforward if agents face a signal extraction problem and are unable to separate news from noise then the econometrician faced with either the same data as the agents or a subset of these data cannot do it either while structural estimation methods cannot recover the actual time series for news and noise shocks either they can recover underlying structural parameters and thus the relative role and dynamic effects of news and noise shocks estimation of both a simple model and then of a more elaborate dsge model suggest that agents indeed solve such a signal extraction problem and that noise shocks play an important role in determining short run dynamics recent efforts to estimate business cycle models in which expectations about the future play an important role include christiano et al 2010 and schmitt grohe and uribe 2012 those papers follow the approach of jaimovich and rebelo 2009 and model news as perfectly anticipated productivity changes that will occur at

the importance of noncognitive skills lessons from the ged testing program it is common knowledge outside of academic journals that motivation tenacity trustworthiness and perseverance are important traits for success in life thomas edison wrote that genius is 1 percent inspiration and 99 percent perspiration most parents read the aesop fable of the tortoise and the hare to their young children at about the same time they read them the story of the little train that could numerous instances can be cited of high iq people who failed to achieve success in life because they lacked self discipline and low iq people who succeeded by virtue of persistence reliability and self discipline the value of trustworthiness has recently been demonstrated when market systems were extended to eastern european societies with traditions of corruption and deceit it is thus surprising that academic discussions of skill and skill formation almost exclusively focus on measures of cognitive ability and ignore noncognitive skills the early literature on human capital e g gary becker 1964 contrasted cognitive ability models of earnings with human capital models ignoring noncognitive traits entirely the signaling literature e g michael spence 1974 emphasized that education was a signal of a one dimensional ability usually interpreted as a cognitive skill most discussions of ability bias in the estimated return to education treat omitted ability as cognitive ability and attempt to proxy the missing ability by cognitive tests most assessments of school reforms stress the gain from reforms as measured by the ability of students to perform on a standardized achievement test widespread use of standardized achievement and ability tests for admissions and educational evaluation are premised on the belief that the skills that can be tested are essential for success in schooling a central premise of the educational testing movement since its inception much of the neglect of noncognitive skills in analyses of earnings schooling and other lifetime outcomes is due to the lack of any reliable measure of them many different personality and motivational traits are lumped into the category of noncognitive skills psychologists have developed batteries of tests to measure noncognitive skills e g robert sternberg 1985 these tests are used by companies to screen workers but are not yet used to ascertain college readiness or to evaluate the effectiveness of schools or reforms of schools the literature on cognitive tests ascertains that one dominant factor g summarizes cognitive tests and their effects on outcomes no single factor has yet emerged to date in the literature on noncognitive skills and it is unlikely that one will ever be found given the diversity of traits subsumed under the category of noncognitive skills studies by samuel bowles and herbert gintis 1976 rick edwards 1976 and roger klein et al 1991 demonstrate that job stability and dependability are traits most valued by employers as ascertained by supervisor ratings and questions of employers although they present no direct evidence on wages and educational t discussants susan mayer university of chicago cecilia rouse princeton university nan maxwell california state university hayward janet currie university of california los angeles

reexamining the cyclical behavior of the relative price of investment we document the cyclical behavior of the relative price of investment goods for the us economy over the last fifty years there is no robust evidence that this relative price is countercyclical for the post 1983 period it is predominantly procyclical

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

occupational choice and the spirit of capitalism the british industrial revolution triggered a socioeconomic transformation whereby the landowning aristocracy was replaced by industrial capitalists rising from the middle classes as the economically dominant group we propose a theory of preference formation under financial market imperfections that can account for this pattern parents shape their children s preferences in response to economic incentives middle class families in occupations requiring effort skill and experience develop patience and a work ethic whereas upper class families relying on rental income cultivate a refined taste for leisure these class specific attitudes which are rooted in the nature of preindustrial professions become key determinants of success once industrialization transforms the economic landscape i introduction the industrial revolution was more than capital accumulation and growth it also set off a social and political transformation that redefined hierarchies in society and reshaped the distribution of income and wealth before the onset of industrialization in eighteenth century britain wealth and political power were associated with the possession of land over the course of the nineteenth century a new class of entrepreneurs and businessmen emerged as the economic elite for the most part the members of this class rose from humble beginnings and had their social origins in the urban middle classes the landed elite was left behind and eventually lost its political and economic predominance many observers of the time linked this reversal in economic fortunes to differences in values attitudes and ultimately preferences across social classes there are countless examples both in scholarly and in fictional writing of portrayals of members of the landowning class as averse to work unwilling to save ill disposed tocommercialactivity andunabletoconsidermoneyassomething

anticipated versus unanticipated terms of trade shocks and the j curve phenomenon abstract using a dynamic stochastic general equilibrium dsge model we examine the impact of anticipated and unanticipated terms of trade tot shocks on aggregate output inflation and the trade balance tb this allows us to offer an alternative explanation of the j curve phenomenon we find that an unanticipated tot shock increases real output as well as inflation but the j curve phenomenon may not exist under a certain condition however under the same condition an anticipated tot shock leads to the j curve effect we find that our main result concerning the j curve phenomenon continues to hold even if the assumption of rational expectations about the tot is relaxed further analysis reveals that the presence of a cost channel of monetary policy increases the intensity of the j curve effect assuming plausible parameter values while using a more general model calibration results support our theoretical predictions

news disaster risk and time varying uncertainty abstract standard real business cycle models are often unable to replicate three empirical facts positive output in response to good news stochastic volatility of macro variables and asymmetric business cycles this paper proposes a unified basis for understanding these facts in a tractable dynamic stochastic general equilibrium dsge model in which the key is the interaction of information flows and disaster risk information flows fluctuate between two regimes with different precision levels for signals regarding future economic fundamentals a shift in forecast precision changes the probability of entering an economic disaster high disaster risk leads to low expected capital returns and a decline in hours investment and output changing information structures results in different volatility and skewness over the business cycle simple theory makes the two expectation effects through information flows and disaster risk transparent quantitatively the model suggests that the interaction of the two expectation effects plays a significant role in accounting for the higher order moments of the business cycle

understanding expectation driven fluctuations a labor market approach this paper presents a uni ed analysis of neoclassical models that can generate expectation driven business cycles under anticipated future technology shocks or news shocks it shows that the ability or inability of various rbc models to generate positive comovement of aggregate variables hinges crucially on the structure of the labor market equilibrium the analysis provides a simple and intuitive guide to understanding the existing literature and to searching for new models that can explain the data under news shocks

the medium term effects of scholarships in a low income country despite progress in recent decades a substantial fraction of children in developing countries attain little schooling and many adults lack skills that are valued in the labor market we evaluate the medium term effects of a program that provided scholarships for three years to poor children upon graduation from elementary school in cambodia a low income country to do this we use a sharp regression discontinuity design we show that scholarships have substantial effects on school attainment by the time children would have been in grade 11 had they remained in school two years after they stopped being eligible for scholarships those who were offered scholarships have attained 0 6 more grades of completed schooling nevertheless we find no evidence that scholarships had significant effects on test scores employment earnings or the probability of getting married or having a child in adolescence

negotiating a better future how interpersonal skills facilitate intergenerational investment using a randomized controlled trial we study whether a negotiation skills training can improve girls educational outcomes in a low resource environment we find that a negotiation training given to eighth grade zambian girls significantly improved educational outcomes over the next three years and these effects did not fade out to better understand mechanisms we estimate the effects of two alternative treatments negotiation had much stronger effects than an informational treatment which had no effect a treatment designed to have more traditional girls empowerment effects had directionally positive but insignificant educational effects relative to this treatment negotiation increased enrollment in higher quality schooling and had larger effects for high ability girls these findings are consistent with a model in which negotiation allows girls to resolve incomplete contracting problems with their parents yielding increased educational investment for those who experience sufficiently high returns we provide evidence for this channel through a lab in the field game and follow up survey with girls and their guardians jel codes d13 i24 j16 o15

the scandinavian fantasy the sources of intergenerational mobility in denmark and the us this paper examines the sources of differences in social mobility between the us and denmark measured by income mobility denmark is a more mobile society but not when measured by educational mobility there are pronounced non linearities in income and educational mobility in both countries greater danish income mobility is largely a consequence of redistributional tax transfer and wage compression policies while danish social policies for children produce more favorable cognitive test scores for disadvantaged children they do not translate into more favorable educational outcomes partly because of disincentives to acquire education arising from the redistributional policies that increase income mobility

the impact of income components on the distribution of family incomes attempts have recently been made to assign inequality contributions to various components of income this paper discusses the issues involved in such assignments and highlights the problems that follow from having a number of possible decomposition rules u s data on the distribution of family incomes are used to examine the relative influence of these income components and to evaluate empirically the performance of different decomposition rules a wide range of inequality contributions can be obtained even when restricted to only naturally derived decomposition rules some of the results are plainly absurd and serve to warn against the indiscriminate use of decomposition formulae without first investigating their properties

schools skills and synapses american society is polarizing proportionately more american youth are graduating from college than ever before at the same time american born youth are graduating from high school at lower rates than 40 years ago this paper reviews and interprets these trends the origins of inequality are examined and policies to alleviate it are analyzed families play a powerful role in shaping adult outcomes the accident of birth is a major source of inequality recent research by cunha and heckman 2007a 2008b shows that about half of the inequality in the present value of lifetime earnings is due to factors determined by age 18 compared to 50 years ago relatively more american children are being born into disadvantaged families where investments in children are smaller than in advantaged families policies that supplement the child rearing resources available to disadvantaged families reduce inequality and raise productivity

obesity weight loss and employment prospects evidence from a randomized trial this study presents credible estimates for the causal effect of bmi growth on employment among the obese by exploring random assignment of a weight loss intervention based on monetary rewards i provide convincing evidence that weight loss positively affects the employment prospects of obese women but not of obese men consistent with this significant effects of weight loss on proxy variables for labor productivity are found only for obese women

economic behavior of children and adolescents a first survey of experimental economics results abstract about 15 years ago economic experiments with children and adolescents were considered as an extravagant niche of economic research since then this type of research has exploded in scope and depth it has become clear that studying the development of economic behavior and its determinants is important to understand economic behavior of adults and to provide a basis for potential policy interventions with respect to economic behavior in childhood and adolescence given the huge increase of papers we provide the first overview of economic experiments with children and adolescents we focus on the following aspects rationality of choices risk preferences time preferences social preferences cooperation and competitiveness all of these aspects are analyzed with respect to the influence of age and gender and we also consider the role of socio economic status or interventions

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

heterogeneous sports participation and labour market outcomes in england based on a unique composite dataset measuring heterogeneous sports participation labour market outcomes and local facilities provision this article examines for the first time the association between different types of sports participation and employment and earnings in england clear associations between labour market outcomes and sports participation are established through matching estimation while controlling for some important confounding factors the results which are supplemented and supported by a formal sensitivity analysis suggest a link between different types of sports participation to initial access to employment and then higher income opportunities with ageing however these vary between the genders and across sports specifically the results suggest that team sports contribute most to employability but that this varies by age across genders and that outdoor activities contribute most towards higher incomes

personality traits and performance contracts evidence from a field experiment among maternity care providers in india we study how agents respond to performance incentives according to key personality traits conscientiousness and neuroticism through a field experiment offering financial incentives for improving maternal and neonatal health outcomes to rural indian doctors more conscientious providers performed better but improved less under performance incentives the effect of the performance incentives was also smaller for providers with higher levels of neuroticism our results contribute to a growing body of empirical research on heterogeneous responses to incentives and have implications for worker selection

sectoral shocks learning and aggregate fluctuations we present a model in which sectoral shocks have aggregate consequences the model relies on irreversible investment and imperfect information to slow the adjustment of expanding industries we show that this gradual expansion is sub optimal

when can changes in expectations cause business cycle fluctuations in neo classical settings abstract it is often argued that changes in expectation are an important driving force of the business cycle however it is well known that changes in expectations cannot generate positive co movement between consumption investment and employment in the most standard neo classical business cycle models this gives rise to the question of whether changes in expectation can cause business cycle fluctuations in any neo classical setting or whether such a phenomenon is inherently related to market imperfections this paper offers a systematic exploration of this issue our finding is that expectation driven business cycle fluctuations can arise in neo classical models when one allows for a sufficiently rich description of the production technology however such a structure is rarely allowed or explored in macro models in particular we identify a multi sector setting and a setting with a costly distribution system in which expectation driven business cycles can arise

growth expectations undue optimism and short run fluctuations this paper proposes a two step procedure in order to identify belief shocks shocks to expectations about the current state of the economy first we use the survey of professional forecasters to me

fiscal policy in an unemployment crisis this paper shows that large scal multipliers arise naturally from equilibrium unemployment dynamics in response to a shock that brings the economy into a liquidity trap an expansion in government spending increases output and causes a fall in the unemployment rate since movements in unemployment are persistent the eects of current spending linger into the future leading to an enduring rise in income as an enduring rise in income boosts private demand even a temporary increase in government spending sets in motion a virtuous employment spending spiral with a large associated multiplier this transmission mechanism contrasts with the conventional view in which scal policy may be ecacious only under a prolonged and committed rise in government spending which engineers a spiral of increasing ination

mood swings and business cycles evidence from sign restrictions this paper provides new evidence that bouts of optimism and pessimism are an important source of u s business cycles using the identification schemes based on sign restrictions we document that identified optimism and pessimism shocks account for about 30 of u s business cycle fluctuations in hours and output in addition our empirical findings are consistent with the intensive and extensive margin adjustments in the u s labor market over business cycles providing further support to optimism shocks being an important source of u s business cycles the identified optimism shocks are at least partially rational as total factor productivity is found to rise 8 12 quarters after an initial bout of optimism while this later finding is consistent with some previous findings in the news shock literature we cannot rule out that such episodes reflect self fulfilling beliefs

expectation driven business cycles with limited enforcement we explore shocks to expected future productivity in a model with limited enforcement of financial contracts a microfounded collateral constraint implies that good news about future productivity yield an increase in stock prices available credit and a general economic expansion

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

noncognitive abilities and financial distress evidence from a representative household panel this paper provides evidence of how noncognitive abilities affect financial distress in a representative panel of households we find that people in the bottom quintile of noncognitive abilities are 10 times more likely to experience financial distress than those in the top quintile we provide evidence that this relation largely arises from worse financial choices and lack of financial insight by low ability individuals and reflects differential exposure to income shocks only to a lesser degree we mitigate endogeneity concerns using an iv approach and an extensive set of controls implications for policy and finance research are discussed received september 24 2017 editorial decision september 26 2018 by editor stijn van nieuwerburgh authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

the intergenerational transmission of risk and trust attitudes recent theories endogenize the attitude endowments of individuals assuming that they are shaped by the attitudes of parents and other role models this paper tests empirically for the relevance of three aspects of the attitude transmission process highlighted in this theoretical literature 1 transmission of attitudes from parents to children 2 an impact of prevailing attitudes in the local environment on child attitudes and 3 positive assortative mating of parents which enhances the ability of a parent to pass on his or her attitudes to the child we focus on two fundamentally important attitudes willingness to take risks and willingness to trust others we find empirical support for all three aspects providing an empirical underpinning for the literature an investigation of underlying mechanisms shows that socialization is important in the transmission process various parental characteristics and aspects of family structure are found to strengthen the socialization process with implications for modeling the socialization production function and for policies focused on affecting children s non cognitive skills the paper also provides evidence that the transmission of risk and trust attitudes affects a wide variety of child outcomes implying a potentially large total effect on children s economic situation

the spirit of capitalism and expectation driven business cycles abstract while news shocks are believed to be instrumental in explaining business cycles many existing models fail to predict a boom in consumption investment employment output and asset prices in response to good news about future productivity a model with the intrinsic desire for wealth is shown to generate the aforementioned responses a news driven boom is explained predominantly by an expansion of labor supply and is characterized by the falling real wage the simulated model not only captures well conventional business cycle statistics but also reproduces countercyclical real returns and hump shaped responses of hours and output to an unexpected technology shock

behind this structural boom the role of asset valuations we are in the midst of a structural boom the force of which has not been seen in this country since the 1920 s after the u s unemployment rate hit 6 percent in late 1994 following its two year recovery many experts assumed that unemployment had regained its naturalrate path the natural unemployment rate in the second half of the 1980 s had been put at around 6 5 percent in several estimates and if the trend reduction in the natural rate brought about by the continuing relative decline of high school dropouts in the labor force and those whose education stopped at the diploma is placed at 0 07 per annum it would have declined on that account to around 6 percent by 1995 phelps and gylfi zoega 1997 furthermore we saw in 1995 the end of

animal spirits as an engine of boom busts and throttle of productivity growth abstract the news shock literature interprets empirical news shock identifications as signals about future productivity under this view changes in productivity cause changes in expectations i investigate an alternative interpretation whereby changes in expectations cause changes in productivity i present a model where firms adopt the technology of a deterministic frontier and where self fulfilling expectational shocks unleash a frenzy of adoption through which firms increase productivity consistent with the news evidence stock prices and aggregate activity boom yet tfp increases with a lag simulations using i i d expectational shocks yield moments consistent with the data and qualitatively capture both high frequency boom busts and lower frequency fluctuations finally estimating a beaudry portier style vecm on the simulated model output to identify a news shock recovers impulse response functions largely consistent with the beaudry and portier 2006 results

consumer misperceptions uncertain fundamentals and the business cycle abstract this paper estimates the importance of shocks to consumer misperceptions noise shocks for u s business cycle fluctuations i embed imperfect information as in lorenzoni 2009 into a smets and wouters 2007 type dsge model agents only observe aggregate productivity and a signal about the permanent component contaminated with noise based on this information agents form beliefs about the temporary and the permanent component of productivity shocks to the signal noise shocks trigger aggregate fluctuations unrelated to changes in productivity bayesian estimation shows that noise shocks explain up to 14 percent of output and up to 25 percent of consumption fluctuations nominal rigidities and the specification of the monetary policy rule are crucial for the importance of noise shocks these features help to resolve conflicting results in the previous literature

news shocks and labour market dynamics in matching models we enrich a baseline real business cycle rbc model with search and matching frictions on the labour market and real frictions that are helpful in accounting for the response of macroeconomic aggregates to shocks the analysis allows shocks to have an unanticipated and a news i e anticipated component the bayesian estimation of the model reveals that the model that includes news shocks on macroeconomic aggregates produces a remarkable fit of the data news shocks in stationary and non stationary tfp investment specific productivity and preference shocks significantly affect labour market variables and explain a sizeable fraction of macroeconomic fluctuations at medium and long run horizons historically news shocks have played a relevant role for output but they have had a limited influence on unemployment

an examination of personality in occupational outcomes antagonistic managers careless workers and extraverted salespeople abstractthis article investigates the role of personality in the sorting of individuals between a number of occupations allowing for an extensive array of conditioning variables the focus is an examination of the relationship between occupational outcomes and personality using the five factor model we estimate a multinomial logit model using a panel data set from the household income and labour dynamics in australia hilda survey human capital variables are found to exhibit strong credentialism effects and there is evidence for some small dynasty hysteresis personality effects are found to be significant relatively large and persistent across all occupations the personality effects are strong enough to rival that of various education credentials these personality effects include but are not limited to managers being less agreeable and more antagonistic labourers being less conscientiousness and salespeople being more extraverted

monetary policy and asset prices with belief driven fluctuations abstract we present a heterogeneous agents new keynesian model subject to a cost channel of monetary policy transmission constant turnover between long time traders and newcomers in market activities combined with restricted trading opportunities introduces a feedback from the stock market to real activity making stock prices non redundant for the business cycle we show that strict inflation targeting can lead to equilibrium indeterminacy even if the policy rule satisfies the taylor principle a belief driven shock to stock price generates relative volatilities of key financial variables which are very close to what is observed in u s data this result hints to the possibility that the financial instability witnessed since the mid to late 1990s was the result of waves of rational exuberance and pessimism in financial markets our analysis suggests that a mild response to stock prices in the central bank s policy rule can restore equilibrium determinacy and therefore rule out non fundamental volatility

like godfather like son exploring the intergenerational nature of crime sons daughters with criminal fathers have 2 06 2 66 times higher odds of having a criminal conviction than those with noncriminal fathers one additional paternal sentence increases sons daug

why construction industry productivity is declining according to unpublished data compiled by bls productivity in the construction industry reached a peak in 1968 and except for a brief and small upturn between 1974 and 1976 has been falling ever since this paper examines the sources of this productivity decline between 1968 and 1978 by estimating a production function to assign weights to various factors responsible for productivity change and deriving a new price deflator for construction which does not rely on labor or material cost indexes thus eliminating a systematic bias toward overstating the rate of growth of prices the production function analysis indicates that productivity should have declined by 8 8 percent between 1968 and 1978 representing 41 percent of the observed decline the biggest factor in this decline was the reduction in skilled labor intensity resulting from a shift in the mix of output from largescale commercial industrial and institutional projects to single family houses other important factors include declines in the average number of employees per establishment capital labor ratio percent union and the average age of workers the difference between the official deflator and the new deflator proposed here accounts for an additional 51 percent of the reported productivity decline leaving only 8 percent of the decline unexplained this abstract was borrowed from another version of this item

an exploration into pigou s theory of cycles abstract this paper explores a theory of business cycles in which recessions and booms arise due to difficulties encountered by agents in properly forecasting the economy s future needs in terms of capital the idea has a long history in the macroeconomic literature as reflected by the work of pigou industrial fluctuation macmillan london 1926 the contribution of this paper is twofold first we illustrate the type of general equilibrium structure that can give rise to such phenomena second we examine the extent to which such a model can explain the observed pattern of u s recessions frequency depth without relying on technological regress we argue that such a model offer a framework for understanding elements of both the recent u s recession and of the asia downturns of the late 1990s

creativity and incentives creativity is a complex and multidimensional phenomenon with tremendous economic importance a crucial question for economists and for firms is the interplay of incentives and creativity we present experiments where subjects face creativity tasks where in one case ex ante goals and constraints are imposed on their answers closed tasks and in the other case no restrictions apply open tasks the effect of tournament incentives on creativity is then tested our experimental findings provide striking evidence that financial incentives in the form of tournament competition affect creativity in closed constrained tasks but do not facilitate creativity in open unconstrained tasks whereas being ranked relative to one s peers is an effective nonmonetary incentive with both types of tasks we develop a structural model that allows for subjects heterogeneity in being affected by the openness of the task and then use the structural model to not only estimate creative output in tournaments but also to predict creative output in two counterfactual incentive schemes piece rate and target bonus

time to implement and aggregate fluctuations in this paper we slightly modify the canonical rbc model by adding an implementation lag in the technology to reproduce the fact that consumption is a leading indicator of output indeed we assume that agents have today some information on the realization of the technology shock that will occur tomorrow today inventions are known and give information on the innovations which will be implemented tomorrow the model is estimated and tested on us data by a simulated method of moments using some suitable reconstructed data that are compatible with that model the results are in favor of this implementation lag hypothesis the model is not rejected by us post war data

an assessment of causal inference in smoking initiation research and a framework for future research i introduction the causal factors underlying youth smoking initiation are central to the challenge of developing effective smoking prevention programs and the shaping of many other types of smoking related policies these causal factors specifically the ones that potentially may be influenced by the conduct of cigarette manufacturers also have been a central issue in much of the recent smoking related litigation these high profile legal cases have focused on the claim that tobacco company conduct significantly influenced youth smoking initiation rates in particular cigarette advertising and tobacco company public reluctance to acknowledge the health risks of smoking have been purported to be key factors influencing youth smoking decisions 1 in this paper we examine the basic principles of empirical scientific investigation that have been adopted to establish causal relationships and apply these principles to evaluate the evidence underlying the link between cigarette advertising and youth smoking initiation the causal link between tobacco company marketing and youth smoking generally has been accepted as empirically established outside the economics literature despite the fact that the underlying evidence fails to meet commonly applied econometric standards we review some of these papers in the public health literature that have been cited as evidence supporting the causal link between cigarette advertising and youth smoking and explain why these papers fail to support this causal link further we also review the economics literature that provides evidence for a multicausal model for youth risky behaviors including smoking we identify studies in which researchers have found that many characteristics affecting choices to participate in risky behaviors are formed at very early ages empirical demonstration of causation is fundamental to guiding effective development of interventions in many areas of social life scientific principles are especially important for developing smoking related policies as enormous resources currently are being devoted to develop programs that attempt to reduce youth smoking propensities however many of these policies and suggested policies focus on causal factors that have not been scientifically established but rather merely assumed to affect smoking initiation more effective policies potentially could be developed by distinguishing causal factors through more reliable empirical methodologies without identifying factors that lead to smoking initiation through sound estimation techniques current prevention efforts may turn out to have little or muted benefits 2 ii causal factors of smoking initiation and the scientific model an important goal of policy analysis is to identify and measure causal relationships as many confounding correlations exist which do not reflect structural relations underlying actual outcomes understanding these underlying structural relations allows empirical versions of estimated models to more accurately forecast the effects of interventions as is well recognized in the econometrics literature precise identification and measurement of causal effects is a difficult task in the area of human choice since input parameters of investigated relationships may reflect unobserved individual characteristics and choices thus correlations between endogenous input parameters and observed outcomes may simply represent individual sorting on latent characteristics rather than structural relations between input and output variables many times in other disciplines biases associated with endogeneity do not hinder estimation of structural models because observed variables are not affected by individual choice for example to evaluate the effect of a particular drug on a particular disease researchers may be able to perfectly control factors such as the presence of other diseases dosage regimens alternative drug usage and diet

heterogeneous beliefs and housing market boom bust cycles abstract this paper presents a business cycle model capturing the stylized features of housing market boom bust cycles in developed countries the model implies that over optimism of mortgage borrowers generates housing market boom bust cycles if mortgage borrowers are credit constrained and savers do not share their optimism this result holds without price stickiness if price stickiness is introduced into the model then the model replicates a low policy interest rate during a housing boom as an endogenous reaction to a low inflation rate given a taylor rule thus monetary easing observed during housing booms are consistent with the presence of over optimism causing boom bust cycles

the payoff to skill in the third industrial revolution1 is the third industrial revolution indeed driven by rising payoffs to skill this simple but important question has gone unanswered because conventional models of earnings inequality are based on exceedingly weak measurements of skill by attaching occupational skill measurements to the 1979 2010 current population surveys it becomes possible to adjudicate competing accounts of the changing returns to cognitive creative technical and social skill the well known increase in between occupation inequality is fully explained when such skills are taken into account while returns to schooling prove to be quite stable once correlated changes in workplace skills are parsed out the most important trend however is a precipitous increase in the wage payoff to synthesis critical thinking and related analytic skills the payoff to technical and creative skills often touted in discussions of the third industrial revolution is shown to be less substantial

no news in business cycles this paper uses a structural large dimensional factor model to evaluate the role of news shocks shocks with a delayed eect on productivity in generating the business cycle

a theory of demand shocks this paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity agents are hit by heterogeneous productivity shocks they observe their own productivity and a noisy public signal regarding aggregate productivity the public signal gives rise to noise shocks which have the features of aggregate demand shocks they increase output employment and inflation in the short run and have no effects in the long run numerical examples suggest that the model can generate sizable equilibrium dsge models of the business cycle include a large number of shocks to technol ogy monetary policy preferences etc but typically do not include expectational shocks as independent drivers of short run fluctuations 1 this paper explores the idea of expectation driven cycles looking at a model where technology determines equilibrium output in the long run and consumers receive noisy signals about technology in the short run the presence of noisy signals produces expectational errors this paper studies the role of these expectational errors in gener ating volatility at business cycle frequencies the model is based on two ingredients first consumers take time to recognize permanent changes in aggregate fundamentals although they may have good information on the current state of the individual firm or sector where they operate they have only limited information regarding the long run determinants of aggregate activity second consumers have access to public information that is relevant to estimate long run productivity this includes news about technological innovations publicly released macroeconomic and sectoral statistics financial market prices and public statements by policy makers however these signals provide only a noisy forecast of the long run effects of technological innovations this opens the door to noise shocks which induce consumers to temporarily overestimate or underestimate the productive capacity of the economy

seeking a comprehensive measure of economic well being annuitisation versus capitalisation abstract biases in inequality measures arise when components of comprehensive measures of economic well being are estimated using cross section data biases under annuitisation are small and bounded unlike biases under capitalisation this recommends the annuity over the capitalisation approach

news and financial intermediation in aggregate fluctuations an important disconnect in the news view of fluctuations is the lack of consistent evidence suggestive of significant macroeconomic effects of news shocks findings from estimated dsge models that in theory allow news shocks to matter quantitatively suggest that they do not this disconnect can be resolved once we augment a dsge model with a financial channel that provides amplification to news shocks our results suggest that news shocks to the future growth prospects of the economy are significant drivers of u s fluctuations explaining as much as 50 and 37 of the variance in hours worked and output respectively in cyclical frequencies

personality traits technology adoption and technical efficiency evidence from smallholder rice farms in ghana although a large literature highlights the impact of personality traits on key labor market outcomes evidence of their impact on agricultural production decisions remains limited data from 1 200 ghanaian rice farmers suggest that noncognitive skills polychronicity work centrality and optimism significantly affect simple adoption decisions returns from adoption and technical efficiency in rice production and that the size of the estimated impacts exceeds that of traditional human capital measures greater focus on personality traits relative to cognitive skills may help accelerate innovation diffusion in the short term and help farmers to respond flexibly to new opportunities and risks in the longer term

news and business cycles in open economies we study the effects of news about future total factor productivity tfp in a small open economy we show that an open economy version of the neoclassical model produces a recession in response to good news about future tfp we propose an open economy model that generates comovement in response to tfp news the key elements of our model are a weak short run wealth effect on the labor supply and adjustment costs to labor and investment we show that our model also generates comovement in response to news about future investment specific technical change and to sudden stops

international income mobility abstract we perform a novel analysis of the international mobility of per capita gnp we find general but not unambiguous support for the notion that world income mobility increased between 1972 and 1992 counterpointing the increased inequality over this period

height and earnings the role of cognitive and noncognitive skills we use large scale register data on 450 000 swedish males who underwent mandatory military enlistment at age 18 and a subsample of 150 000 siblings to examine why tall people earn more we show the importance of both cognitive and noncognitive skills as well as family background and muscular strength for the height earnings relationship in addition we show that a substantial height premium remains after these factors have been accounted for which originates from very short people having low earnings this is mostly explained by the sorting of short people into low paid occupations which may indicate discrimination by stature

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

information revelation and strategic delay in a model of investment we model investment as an n player game with a pure informational externality each player s payoff depends only on his own action and the state of nature however because a player s action reveals his private information players wait to see what other players will do equilibrium is inefficient because delay is costly and information is imperfectly revealed we characterize the unique symmetric perfect bayesian equilibrium and study the robustness of delay which turns out to be sensitive to the reaction speed and the number of players we establish the following results i when the period length is very short the game ends very quickly and there is a form of herding or informational cascade which results in a collapse of investment ii as the period length increases the possibility of herding disappears iii as the number of players increases the rate of investment and the information flow are eventually independent of the number of players adding more players simply increases the number who delay iv in the limit the time profile of investment is extreme a period of low investment followed either by an investment surge or a collapse

what can we learn about news shocks from the late 1990s and early 2000s boom bust period this is a substantially revised version of the paper previously circulated as a new var based approach to identifying news shocks

the inheritance of inequality how level is the intergenerational playing field what are the causal mechanisms that underlie the intergenerational transmission of economic status are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair these are the questions we will try to answer

the role of noncognitive skills in explaining cognitive test scores this paper examines whether noncognitive skills measured both by personality traits and economic preference parameters influence cognitive tests performance the basic idea is that noncognitive skills might affect the effort people put into a test to obtain good results we experimentally varied the rewards for questions in a cognitive test to measure to what extent people are sensitive to financial incentives to distinguish increased mental effort from extra time investments we also varied the questions time constraints subjects with favorable personality traits such as high performance motivation and an internal locus of control perform relatively well in the absence of rewards consistent with a model in which trying as hard as you can is the best strategy in contrast favorable economic preference parameters low discount rate low risk aversion are associated with increases in time investments when incentives are introduced consistent with a rational economic model in which people only invest when there are monetary returns the main conclusion is that individual behavior at cognitive tests depends on noncognitive skills

cooperation and norm enforcement the individual level perspective abstract we explore the relationship between individuals disposition to cooperate and their inclination to engage in peer punishment as well as their relative importance for mitigating social dilemmas using a modified strategy method approach we identify individual punishment patterns and link them with individual cooperation patterns classifying n 628 subjects along these two dimensions documents that cooperation and punishment patterns are aligned for most individuals however the data also reveal a sizable share of free riders that punish pro socially and conditional cooperators that do not engage in punishment analyzing the interplay between types in an additional experiment we show that pro social punishers are important for achieving cooperation incorporating information on punishment types explains large amounts of the between and within group variation in cooperation

psychological traits and earnings differentials among men a study of second generation immigrants in sweden the purpose of this study is to analyse the impact of psychological traits on earnings differentials between second generation immigrants and individuals with native born parents the study is base

the use of cross section microdata in life cycle models an application to inequality theory in nonstationary economies this paper examines the appropriate use of cross section microdata in life cycle models drawing upon recent empirical work based upon panel data we illustrate how these results can be used as priors to generate a distribution of life cycle earnings such a surrogate distribution can be shown to possess the same properties as actual distributions we focus attention particularly upon the treatment of economic growth and the unobservable components of earnings in the final section of the paper we show how such distributions might be used in inequality analysis

patience self control and the demand for commitment evidence from a large scale field experiment patience and self control are important non cognitive skills that are associated with favorable educational economic and social outcomes this paper provides empirical evidence to inform discussions on possible educational interventions to make children more forward looking or less present biased by putting forward a way to identify self control problems in children and exploring the role of commitment devices in mitigating such problems we report results from an experiment that measures planned allocations the demand for a commitment device and actual choices in the context of chocolate consumption over two days the experiment is conducted as part of a large field study on children s preferences which allows us to correlate behavior with variables related to the subjects socio economic background and educational environment as well as preference parameters elicited through other tasks and surveys we find a large demand for commitment among children in addition we identify important correlations between patience commitment demand and time inconsistency as well as student specific personality traits and outcomes such as school success