wages experience and seniority in this paper we study the sources of wage growth we identify the contribution to such growth of general sector specific and firm specific human capital our results are interpretable within the context of a model where the returns to human capital may be heterogeneous and where firms may offer different combinations of entry level wages and firm specific human capital development we allow for the possibility that wages are match specific and that workers move jobs as a result of identifying a better match to estimate the average returns to experience sector tenure and firm specific tenure within this context we develop an identification strategy which relies on the use of firm closures our data source is a new and unique administrative data set for germany that includes complete work histories as well as individual characteristics we find positive returns to experience and firm tenure for skilled workers the returns to experience for unskilled workers are small and insignificant after 2 years of experience their returns to sector tenure are also zero however their returns to firm tenure are substantial in this paper we study the growth of wages of young workers in germany knowing the extent and reasons for individual wage growth over the life cycle is important for a number of areas in economics just to mention two examples first it is a key element to understanding and designing active labour market programmes many such programmes offer temporary and often subsidized work opportunities examples are the new deal in the u k and the swedish programmes as well as a number of programmes in germany these programmes are based on the assumption that general skills are sufficiently enhanced while working so as to render the workers employable without a wage subsidy thus the success of these programmes depends on how skills improve on the job for the target population and whether this skill enhancement is transferable across jobs second it is a key to understanding the benefits and costs of job mobility this in turn matters for a number of policy issues including the design of pension policies relating for example to final salary schemes as a result of this widespread interest a large body of empirical research has focused on obtaining estimates for the returns of experience and seniority 1 our study uses a new and unique administrative data set with a number of features that are important for our analysis and allow us to avoid many problems encountered in earlier work in this field in our model wages grow due to learning by doing which may be heterogeneous across individuals moreover since firms offer different career profiles and because we allow for match specific effects on wages investments take the form of searching for the firm with the most desirable learning by doing characteristics career structure 2

knowledge accumulation within an organization in this article we consider a knowledge accumulation problem within an organization that cannot prevent the worker from quitting and using the knowledge outside the organization we show that knowledge accumulation is delayed the fraction of working time allocated to knowledge creation is highest at the early career stage falls gradually then rises again before falling finally toward zero we determine the effect of a change in the severity of the enforcement problem or the specificity of knowledge we also discuss the form of the optimal life cycle wage profiles the role of the initial knowledge level and the role of discounting

estimating the effects of family background on the return to schooling this article examines the causal link between family background characteristics parental education and family size and returns to schooling i implement a model of schooling and earnings with heterogeneous returns to education using data from the occupational change in a generation survey i find that men raised in larger families have substantially lower returns to education whereas the combined effects of parental education are more modest in addition like other supply side instrumental variables studies of the causal effect of education i find two stage least squares estimates that are larger than the corresponding ordinary least squares estimates the results suggest an alternative explanation for this phenomenon constant marginal return to schooling combined with a negative absolute ability bias and a positive comparative advantage bias

the law of small numbers investigating the benefits of restricted auctions for public procurement abstracta commonly accepted view in the academic literature is that dispensing with competition may only be beneficial when tendering complex contracts however restricted auctions are frequently used among eu member states to procure small contracts in this article we investigate this paradox using an original data set of 180 contracts used by a local public buyer of social housing between 2006 and 2009 we show that limiting competition may enable economies to be made on transaction costs while the most efficient bidders still come forward and that abuses such as corruption or favouritism do not result to our knowledge this article is the first to shed light on the advantages of using restricted auctions when tendering small simple contracts

fertilizer subsidies and private market participation the case of kano state nigeria this article estimates the effect of a fertilizer voucher program on farmer participation in the private fertilizer market in nigeria using a double hurdle model to address corner solution challenges with estimating input demand and a control function approach to account for the endogeneity of subsidized fertilizer acquired the study finds evidence that receiving subsidized fertilizer in kano nigeria increased both the probability and extent of participation in the private fertilizer market findings demonstrate that under certain circumstances e g where input dealers links to farmer are weak there could be significant gains from the temporary use of voucher programs to strengthen such links

the returns to schooling a selectivity bias approach with a continuous choice variable the essence of selection bias is that we do not observe nonoptimal choices this applies whether the choice variable is discrete or continuous this paper extends the selection bias methodology to the case where the choice variable is continuous and the choice set is ordered the leading practical application of this analysis is the schooling choice problem schooling is treated as a continuous choice variable and selectivity corrected rates of return are estimated the findings suggest selectivity is of considerable importance and support the comparative advantage hypothesis of willis and rosen 18

schooling and seat belt use in the health production literature schooling has distinguished itself as the most important correlate of good health according to fuchs 11 economists have been so persuasive in their demonstration of the importance of schooling that medical researchers are increasingly drawing attention to lack of schooling as a risk factor in a variety of diseases 24 while there is little doubt among health economists about the empirical strength of the relation between schooling and health there is considerable controversy surrounding explanations for the empirical association grossman 15 16 maintains that schooling directly enhances health for example by increasing knowledge pertaining to healthy habits fuchs 11 12 on the other hand maintains that schooling serves as an empirical proxy for some unobserved third variable which also happens to be associated with health the third variable most frequently mentioned is time preference fuchs rejects the grossman idea that education plays a direct role in promoting health the debate has relevance for policy if schooling promotes health it could be argued that expenditures on schooling could be compared to for example expenditures on medical care as an alternative for increasing average life spans but if fuchs is right any expenditure comparisons would be futile

unemployment with observable aggregate shocks a general equilibrium model of optimal employment contracts is developed where firms have better information about labor s marginal product than workers it is optimal for the wage to be tied to the level of employment to prevent the firm from falsely stating that the marginal product is low and cutting the wage it is shown that an observed aggregate shock that leads to an interindustry shift in labor demand and that would have no effect on total employment under symmetric information leads to a reduction in employment when firms and workers have asymmetric information

adjustment costs durables and aggregate consumption abstract previous tests of the permanent income hypothesis pih have focused on either non durables or durables expenditures in isolation this paper studies consumer purchases of non durables and durables as the outcome of a single optimization problem it is shown that with non separability in utility the presence of adjustment costs of changing durables stocks may affect the time series properties of both components of expenditure an econometric test of the pih based on the model developed in the paper is both more efficient and less prone to bias than those in some previous studies however this test confirms earlier rejections of the pih in aggregate quarterly data

winner s curse in toll road concessions we empirically assess the effect of the winner s curse in auctions for toll road concessions taking into account to our knowledge for the first time problems of commitment and enforcement using a unique dataset of 49 worldwide road concessions

are small firms less efficient this paper compares the technical efficiency of small and medium sized enterprises smes with that of large firms and studies the factors influencing technical efficiency for taiwan s electronics industry unlike conventional studies we use two alternative approaches to control for the influence of size effect one is the two stage switching regression to correct for endogenous size effect on technical efficiency and the other is a metafrontier production function for firms in different groups the main results are as follows first the average technical efficiency for large firms is higher than that of smes without considering the size effect and lower when considering the endogenous choice on firm size this study cannot therefore conclude that there is a negative size technical efficiency relationship it however sheds light on the importance of size effect on the size technical efficiency nexus second the estimates on the determinants of technical efficiency show that being a subcontractor has a statistically significant positive influence on smes technical efficiency but the effect decreases with firm size

the estimation of human capital by administrative archives in a static and longitudinal perspective the case of milan this paper focuses on the estimation of the latent variable human capital hc at disaggregated level worker by available routinely institutional data flows in particular we utilize the lombardy region administrative archive employment centers of the province of milan collecting information about careers of workers in the private sector of the milan area and administrative flows collecting mandatory workers individual income tax returns filed with the national internal revenue service first we propose and empirically estimate hc scores in a static referred to 2004 framework by means of a realistic measurement model within causal relationships among endogenous and exogenous investment hc indicators furthermore the model also specifies a set of concomitant indicators that not belonging to hc investment indicators have causal impact on endogenous variables and on hc scores too second we propose a longitudinal analysis period 2000 2004 aimed to investigate how workers earned income growth rates vary over workers educational levels and other personal characteristics the empirical results of both analyses confirm the characteristics of the italian job market denoted by marked inequalities and knowledge regarding the process of school to work transition characterized by a weak incidence of education on longitudinal trajectories of earned income

monotone instrumental variables with an application to the returns to schooling for fifty years econometric analyses of treatment response have made extensive use of instrumental variable iv assumptions holding that mean response is constant across specified subpopulations of a population of interest 2 yet the credibility of mean independence conditions and other iv assumptions has often been a matter of considerable disagreement with much debate about whether some covariate is or is not a valid instrument in an application of interest there is therefore good reason to consider weaker but more credible assumptions to this end we introduce monotone instlumental variable miv assumptions holding that mean response varies weakly monotonically across specified subpopulations we study the identifying power of these miv assumptions and give an empirical application the findings reported here add to the literature developing nonparametric bounds on treatment effects 3 this paper uses the same formal setup as manski 1997 there is a probability space j x2 p of individuals each member j of population j has observable covariates xi e x and a response function yj t y mapping the mutually exclusive and exhaustive treatments t e t into outcomes yj t e y person j has a realized treatment zj e t and a realized outcome y 1 y zi both of which are observable the latent outcomes yj t

observed choice and optimism in estimating the effects of government policies a policy will be used more heavily in a time and place where its cost is lower the analyst who treats times and places as identical will overestimate the policy s net benefit especially for policy intensities greater than exist in his sample in regression analysis the problem can be solved by instrumental variables using state level data the technique substantially increases the estimated responsiveness of illegitimacy to transfers

the role of site and job characteristics in hedonic wage models recent economic analyses of wage rate differentials have generally used some form of hedonic framework in explaining the observed wage structure while these studies have adopted this common theoretical justification the models have been used to serve two distinct objectives the first of these is an empirical test of the theory of equalizing differences originally introduced by adam smith in such applications see brown 7 lucas 26 olson 28 thaler and rosen 36 and viscusi 40 as examples specific job characteristics measured with technical information or with worker perceptions have been used to explain differences in wage rates across individuals and jobs while there are a number of these studies there has not been a consistent pattern of support for the theory indeed with the exception of job risks many characteristics that a priori would be expected to lead to equalizing differences have often exhibited incorrect and or statistically insignificant measured effects on wages the second use for wage models has been as the basis for an index of the quality of life in urban areas in this framework households are assumed to select residential locations so as to maximize their individual welfare migration between cities provides the mechanism for an equilibrium household assignment under ideal conditions the pattern of equilibrium wage rates reflects the attributes of the cities involved see hoch 20 izraeli 23 cropper lo cropper and arriaga salinas 111 and rosen 31 as examples the purpose of this paper is to develop a model for wage rate differentials that includes both job and site characteristics and to estimate the model with a large micro data set our wage models provide estimates of a market clearing envelope which includes each of two types of past analyses as a

the earnings impact of training duration in a developing country an ordered probit selection model of colombia s servicio nacional de aprendizaje sena this study estimates the earnings impact of one of the most extensive in service training programs in the developing world colombia s sena through a comparison of nongraduates and graduates earnings profiles the possible influence of selection is corrected through the use of an ordered probit model to determine participation in short and long courses the correction causes a significant decline in sena s earnings effect the results are robust with respect to alternative specifications of the selection model

the existence of self enforcing implicit contracts implicit contracts are nontrivial nash equilibria to the post hiring trading game between a worker and the employer these are supported by intrafirm rather than labor market reputations the existence of an implicit contract that supports efficient trade is proved in a simple model

measuring heterogeneity in the returns to education using an education reform abstract in this paper we explore the impact of a mandatory education reform as well as pre reform availability of schools above the mandatory level on educational attainment and returns to education in norway we contribute to the existing literature by focusing on the heterogeneity of the impact of reforms our results indicate that increased compulsory education from seven to nine years increased the general level of education beyond the compulsory education we also find that the effect of family background on educational attainment was weaker after the reform the average treatment effect on returns to education is surprisingly high for education of intermediate duration this means that increasing the general level of education potentially generates high returns in the form of wages we also find that the effect of treatment on the treated on the returns to education is 1 4 percentage points higher than the average treatment effect

estimating the returns to schooling a likelihood approach based on normal mixtures published with subsequent amendments in journal of applied econometrics volume 26 issue 4 june july 2011 pages 613 640 john k dagsvik torbjorn haegeland and arvid raknerud http dx doi org 10 1002 jae 1172

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

should the personal computer be considered a technological revolution evidence from u s metropolitan areas the introduction and diffusion of personal computers are widely viewed as a technological revolution using u s metropolitan area level panel data this paper asks whether links between pc adoption educational attainment and the return to skill conform to a model of technological revolutions in which the speed and extent of adoption are endogenous the model implies that cities will adjust differently to the arrival of a more skill intensive means of production with the returns to skill increasing most where skill is abundant and its return is low we show that the cross city data fit many of the predictions of the model during the period 1980 2000 the pc diffusion era

returns to endogenous education the case of honduras the rapid expansion of the education sector in developing countries and the scarcity of public funds have increased the need for an accurate evaluation of educational policies estimates of rates of return to education have often been used as an integral part of cost benefit studies and programme evaluation efforts this study uses household survey data from honduras for 1990 to estimate returns to education that allow for worker heterogeneity and individual self selection in the education process a sequential estimation procedure is used that enables study of the interaction between educational attainment and earnings determination it is found that accounting for endogenous educational attainment leads to substantially higher estimated returns to education compared to traditional least squares estimates the possible magnitude of the bias underscores the importance of recognizing the role of self selection and comparative advantage in the education process

your money or your life green growth policies and welfare in 2050 this paper proposes a simple index of economic progress that weighs in the monetary cost induced by climate change mitigation policies as well as the health benefits arising from the reduction in local air pollution the shadow price of pollution is calculated indirectly through its impact on life expectancy taking into account the health benefits of mitigation policies significantly reduces their monetary cost in china and india as well as in countries with large fossil based energy producing sectors australia canada and the united states

forecasting marketing mix responsiveness for new products abstract before a new product launch marketers need to infer how demand will respond to various levels of marketing mix variables to set an appropriate marketing plan a critical challenge in estimating marketing mix responsiveness from historical data is that the observed decisions were affected by private information possessed by managers about the heterogeneous effects of marketing mix variables on sales the authors refer to this as the slope endogeneity problem such endogeneity differs from the intercept endogeneity problem which has been widely acknowledged in the literature to correct for the slope endogeneity bias the authors develop a conceptually simple control function approach that is amenable to multiple endogenous variables and marketing mix carryover effects the method is applied to forecasting advertising responsiveness in the u s dvd market the results suggest that advertising responsiveness varies substantially across dvd titles and that estimated marketing mix elasticities w

the implicit valuation of risks to life a comparative analysis abstract this paper reports estimates of the implicit valuation of risk reductions for different sources of risk on the job accidents and exposure to air pollutants a hedonic wage model estimated using the may 1978 current population survey for individuals in 44 smsa s provides the basis for the estimates of implicit values of risk the findings suggest quite different valuations of comparable risk changes

compensating wage differentials and the duration of wage loss a formal model of occupational choice is developed that shows the extent to which the compensation for increased duration exceeds that for increased risk using the panel study of income dynamics linked to industry data on injuries and unemployment we find nearly all the compensating wage differential for losses due to workplace injuries is for increases in the duration of loss and similarly for losses due to cyclical unemployment the compensating differentials for risk of injury are larger for union than for nonunion workers while those for cyclical unemployment are smaller for union workers

a new theory of aggregate supply macroeconomic theory contains two competing explanations of business cycle fluctuations according to the intertemporal substitution mechanism its observed variations in employment represent the optimal response of labor supply to misperceived variations in the expected real rate of interest a competing theory is offered by the literature on overlapping contracts that attributes employment variations to contracted nominal wage rigidities such rigidities prevent prices from adjusting in a way that would allow quantities to mimic the theoretical predictions of the walrasian marketclearing model both of these theories incorporate the property that employment converges in the long run to a natural rate of employment this paper develops an alternative theory it presents a model of an economy in which agents are rational utility maximizers with perfect foresight of future prices nevertheless the competitive equilibrium is pareto inefficient this situation arises because the economy does not contain a complete set of markets perfect capital markets do not exist because of asymmetric information ai a complete set of futures markets does not exist because agents have finite lives and trades cannot be negotiated with the unborn these two sources of market failure are modeled by embedding a theory of ai contracts into an overlapping generations model olg in which a critical role is played by the additional assumption that in some states of nature bankruptcy may be a binding constraint the nonexistence of futures markets generates a model with the property that government debt is real wealth which implies that fiscal policy can have a permanent effect on the real rate of interest the bankruptcy constraint translates changes in the rate of interest into changes in the frequency of contract default simply stated a high interest rate increases the probability that a firm will go bankrupt or that it will layoff workers in sharp contrast to either the new classical or the sticky price contract explanations of business cycle fluctuations this theory is not a natural rate theory even in the long run it predicts that the steady state employment level is an endogenous variable which varies systematically with fiscal policy

child labor and schooling responses to access to microcredit in rural bangladesh microcredit has been shown to be effective in reducing poverty in many developing countries however less is known about its effect on human capital formation in this paper we develop a model examining the relation between microcredit and child labour we then empirically examine the impact of access to microcredit on children s education and child labour using a new and large data set from rural bangladesh we address the selection bias using the instrumental variable method where the instrument relies on an exogenous variation in treatment intensity among households in different villages the results show that household participation in a microcredit program may increase child labour and reduce school enrolment the adverse effects are more pronounced for girls than boys younger children are more adversely affected than their older siblings and the children of poorer and less educated households are affected most adversely our findings remain robust to different specifications and methods and when corrected for various sources of selection bias

returns to schooling implicit discount rates and black white wage differentials a simple econometric model of investment in schooling is developed and estimated the measure of individual discount rates implicit in their educational investment decisions suggests no difference between individuals from different socioeconomic backgrounds differences in individual speeds of educational attainment which do vary with background explain most of the variation in levels of attainment that is attributable to family background

the effect of liquidity constraints on consumption a cross sectional analysis this paper examines the effect of liquidity constraints on consumption expenditures using a single year cross section data set a reduced form equation for consumption is estimated on high saving households by the tobit procedure to account for the selectivity bias since high saving households are not likely to be liquidity constrained the estimated equation is an appropriate description of how desired consumption that would be forthcoming without liquidity constraints is related to the variables available in the cross section data when the reduced form equation is used to predict desired consumption the gap between desired consumption and measured consumption is most evident for young households

retornos privados da escolaridade no parana the present studys goal is to estimate the returns of parana state private sectors labor schooling by means of heckman method in other words we carry through an analysis of schooling effects on wage return in parana state and evaluate which level of education primary secondary or tertiary is more important on income generation and therefore on labor productivity additionally we attempt to identify other factors that determine parana states labor income and we compare the results of the present analysis with other studies results for the brazilian and parana economies carried out by other authors

work environment and opt out rates at motherhood across high education career paths observing a sample of harvard alumnae in their late thirties the authors study the relationship between workplace flexibility and the labor force participation of mothers they first document a large variation in labor force participation rates across higher education fields mindful of the possibility of systematic patterns in the types of women who complete various graduate degrees they use the rich information available for the sample supplemented by the longitudinal nature of a subset of these data to assess the extent to which these labor supply patterns may reflect variation in the difficulty of combining work with family although ruling out systematic sorting entirely is not possible their evidence suggests that inflexible work environments push women out of the labor force at motherhood

a selectivity model of employer size wage differentials this article investigates wage differentials for employees of different size firms utilizing an econometric methodology that allows the size of employer to be treated as endogenous in the context of discrete ordered employer size data as a result we are able to estimate i employer size wage gaps which are corrected for selectivity bias and ii the magnitude and direction of the selection bias decompositions of the resulting wage differentials are computed with comparisons of the conditional on sorting across employer size and unconditional wage gaps

income schooling and ability evidence from a new sample of identical twins we develop a model of optimal schooling investments and estimate it using new data on approximately 700 identical twins we estimate an average return to schooling of 9 percent for identical twins but estimated returns appear to be slightly higher for less able individuals simple cross section estimates are marginally upward biased these empirical results imply that abler individuals attain more schooling because they face lower marginal costs of schooling not because of higher marginal benefits

housing prices health effects and valuing reductions in risk of death abstract by combining estimates of the effect of air pollution on both property values and human health risks it may be possible to draw inferences about individuals valuations of risk although valuations thus derived must be interpreted carefully they may be of use in determining the welfare effects of environmental and other regulatory policies

does competition among public schools benefit students and taxpayers comment school choice policies promise to align the incentives of school administrators with the demands of parents and may therefore lead to more efficient educational production milton friedman 1962 geoffrey brennan and james buchanan 1980 john chubb and terry m moe 1990 absent a large scale school voucher program in the united states however this prediction has been difficult to test several authors e g melvin v borland and roy m howsen 1992 clive r belfield and henry m levin 2002 have suggested studying the effects of tiebout choice the use of the residential location decision to select among local monopoly education providers the idea here is that fragmented governance induces competition among school districts analogous to that which would occur among schools with nonresidential choice in an influential paper caroline m hoxby 2000 points out that current governance structures are potentially endogenous to school productivity and proposes that variation in topography which may have influenced optimal jurisdiction size before modern transportation technologies provides a source of exogenous variation she estimates instrumental variables regressions of individual test scores and school spending on a metropolitan level tiebout choice index defined as one minus a herfindahl concentration index with districts enrollments as their market shares using as excluded instruments the number of larger and smaller streams in the area she reports substantial positive effects of district fragmentation on student test scores and negative effects on spending this comment presents a reanalysis of hoxby s test score results which form the core of her empirical analysis these results turn out to be quite sensitive to plausible alterations to hoxby s specification in particular the large significant effect of choice on achievement obtains

ethnic enclaves and the economic success of immigrants evidence from a natural experiment recent immigrants tend to locate in ethnic enclaves within metropolitan areas the economic consequence of living in such enclaves is still an unresolved issue we use an immigrant policy initiative in sweden when government authorities distributed refugee immigrants across locales in a way that may be considered exogenous this policy initiative provides a unique natural experiment which allows us to estimate the causal effect on labor market outcomes of living in enclaves we find substantive evidence of sorting across locations when sorting is taken into account living in enclaves improves labor market outcomes for instance the earnings gain associated with a standard deviation increase in ethnic concentration is in the order of four to five percent

the effectiveness of private versus public schools the case of indonesia abstract in most developing countries education is largely publicly provided however the scarcity of public funds and recent evidence of public school inefficiency calls for an examination of the dominant role of the state in this paper we use data from indonesia to examine the effectiveness of public versus private schools we use labor market earnings as our measure of effectiveness controlling for observable personal characteristics and school selection we find that graduates of private secondary schools perform better in the labor market this is contrary to the widely held belief in indonesia that public secondary schools are superior our findings coupled with the existing literature on private school cognitive and cost advantages suggest the need for greater private participation in the education sector

the effect on black white wage differences of differences in the quantity and quality of education using data from the national longitudinal survey of youth for the years 1979 88 the author examines the extent to which black white differences in educational attainment educational quality and unmeasured individual ability can explain black white wage differences an analysis that corrects for both selectivity and ability biases inherent in estimating the education wage relationship shows that the main source of the black white wage differential is the racial difference in the quality rather than quantity of schooling in fact the author concludes closing the racial gap in the basic skills learned in school could reduce the wage differential by two thirds

incomplete insurance contracts and seniority layoff rules many firms have wage and layoff policies that are independent of worker specific traits instead layoff and wage policies depend upon the length of time that a worker has been associated with the firm in this paper i offer a new explanation for this phenomenon based on the fact that workers are unable fully to insure variations in their incomes over their lifetimes by appropriately designing a labour contract a worker and his firm can overcome some of the deadweight costs associated with the worker being excluded from insurance markets it turns out under conditions that are not particularly restrictive that the preferred labour contract is one that is characterized by a last hired first fired layoff rule with an increasing wage profile over a worker s lifetime many firms adopt layoff and wage policies that are independent of worker productivity and depend solely upon the length of time that a worker has been employed by the firm that is labour contracts typically specify that workers wages increase with their seniority status and that they be laid off on a last hired first fired basis in this paper i offer a new explanation for these phenomena based on the observation that workers are unable fully to insure against variations in their incomes over their lifetimes the basic intuition that underlies my analysis is as follows

the observed choice problem in estimating the cost of policies abstract a policy will be used more heavily when its marginal cost is lower in a regression setting this can mean that the equation to be estimated is actually y i i x i the analyst who treats times and places as identical will underestimate the policy s average cost ols is biased towards small coefficients and instrumental variables should be used

non graduation and the earnings function an inquiry on self selection abstract we model schooling careers in the dutch educational systems including the decision to drop out as a discrete sequential choice in which expected earnings play an important role selectivity biasd from correlation between the errors in the decision function and the earnings function appears empirically relevant and we correct for it by applying a proper maximum likelihood estimation procedure the results indicate that drop outs behave differently from graduates in the decision functions on schooling careers expected earnings based on estimated earnings functions in mid career are never significant yet the educational choices appear ex post consistent with choices according to comparative earnings advantage

educational choice families and young people s earnings this paper presents two optimizing models of educational choice discusses issues of identification estimates earnings equations in the context of these models and presents conditions under which we can test one against the other the estimates indicate that education is endogenous for young people s earnings creating a downward bias in estimated returns from education that assume exogeneity identification and estimation relies on family background information from a special sample from the british household panel study 1991 95 which matches mothers and their young adult children our estimates favor a family model over an individual model and they suggest that parents allocate resources to education to compensate for differences in their children s earnings endowments

job search unemployment and savings abstract this paper examines optimal search policies on the basis of two alternative assumptions first that individuals consume income as it is received and second that individuals can save and subsequently draw from their savings in this model workers search for heterogeneousjobs which are characterized by fixed wages and random duration of employment spells workers choose jobs which will maximize the total expected lifetime utility of consumption the optimal steady state job acceptance policy in both cases takes the form of a fixed partition of the set of all job offers into acceptable and unacceptable ones in the absence of a capital market employment duration appears to be irrelevant for the marginal job offer and all jobs offering wages which exceed the marginal one are also acceptable independent of the distribution functions of employment duration nevertheless the dispersion of employment duration at inframarginal acceptable jobs affects job choice it is shown that when individuals can save and if current utility and probability density functions are exponential then steady state rates of saving during periods of employment and of dissaving during periods of unemployment are independent of wealth and constant the model developed is then used to examine the determinants of unemployment and the properties of optimal savings rates and to obtain a number of testable hypotheses about savings behavior and job security

accounting for heterogeneity in multicrop micro econometric models implications for variable input demand modeling this article aims to show that if the farm sample under consideration is characterized by significant heterogeneity recovering output specific input uses or modeling farm level input uses may be more complicated than previously recognized the article theoretically investigates the problems implied by farm heterogeneity in input allocation equations and multicrop econometric models proposes an empirically tractable solution for overcoming these problems and assesses the empirical relevance of the theoretically identified problems the results demonstrate that heterogeneity matters but that the revealed heterogeneity bias has a limited impact on the empirical results copyright 2012 oxford university press

human capital and self enforcing contracts this essay analyzes labor contracts as a device for rearranging factor incomes over time under conditions of extreme adverse selection in particular the lack of verifiable public information about future compensation prevents finitely lived workers from borrowing against their earnings specific human capital is used as an incentive to implement intertemporal self enforcing contracts between workers and firms after proposing a necessary and sufficient condition for the existence of such contracts the resulting equilibrium earnings profiles are explored along with the effects of imperfections in the credit market on the way workers choose jobs and allocate time between current production and training copyright 1988 by the editors of the scandinavian journal of economics

borrowing constraints occupational choice and labor supply we introduce borrowing constraints into the life cycle theory of labor supply and show that they account for observed profiles in consumption earnings and hours worked they can also account for differences in occupational choice across individuals who differ in initial wealth marital status or ability this formalizes several aspects of observed differences in the labor force behavior of men and women

study duration and earnings a test in relation to the human capital versus screening debate in this paper we propose a simple test in relation to the human capital versus screening debate it is argued that these theories lead to different predictions with respect to the earnings effects of deviations between actual and nominal durations of a study earnings and study duration equations are estimated to test these predictions the results support the human capital theory

increasing competition and the winner s curse evidence from procurement we assess empirically the effects of the winner s curse which in common value auctions counsels more conservative bidding as the number of competitors increases first we construct an econometric model of an auction in which bidders preferences have both common and private value components and propose a new monotone quantile approach which facilitates estimation of this model second we estimate the model using bids from procurement auctions held by the state of new jersey for a large subset of these auctions we find that median procurement costs rise as competition intensifies in this setting then asymmetric information overturns the common economic wisdom that more competition is always desirable

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

education and earnings in the netherlands an empirical analysis abstract in this paper three models which describe the relation between earnings and education are estimated using one single data set one model is a simple dummy regression model in which the educational variables are exogenous both other models take account of the fact that individuals choose their optimal amount of education and is therefore endogenous in all three models i try to specify the equations in the same way as others have done with other data sets it turns out that in each model important conclusions reached in earlier research are not supported by the empirical findings reported here

implicit contracts a survey 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms incomplete contracts are required to yield involuntary layoffs in contract markets otherwise contracts are efficient and pareto optimal by construction there is a close relation between contract theory and neoclassical labor market theory contracts smooth consumption but increase the volatility of labor supply and labor utilization to demand disturbances because contractural insurance eliminates the income effects of socially diversifiable risks this result is similar to the intertemporal substitution hypothesis however the price mechanism in a contract is substantially different contracts embody a nonlinear two part pricing scheme the lump sum part allocates the income consumption consequences of risks and the marginal pricing part allocates production and labor utilization this implicit pricing mechanism is in all respects flexible though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity furthermore the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation indivisibilities appear necessary to account for the split between work sharing and layoffs contracts with private information are also considered in the nonlinear pricing context this abstract was borrowed from another version of this item

human capital vs signalling explanations of wages increases wages by directly increasing the worker s productivity this learning explanation is usually associated with human capital theory however it seems unlikely that learning explains all the wage differences associated with schooling and work history better educated workers are not a random sample of workers they have lower propensities to quit or to be absent are less likely to smoke drink or use illicit drugs and are generally healthier it is unlikely that employers make full use of differences in propensities to quit or to be absent or sick when hiring workers these characteristics are often not directly observed and the americans with disabilities act precludes firms from using either poor health or the likelihood of future sickness as a hiring criterion unless it is directly related to job performance however if low levels of education are associated with these unfavorable employee characteristics and employers are allowed to take education into account when hiring workers we would expect employers to favor better educated workers as a means of reducing their costs of sickness and job turnover in turn students will take these hiring criteria into account when deciding how long to stay in school students will choose a length of schooling to signal their ability to employers and employers will demand a minimum level of schooling

self selectivity bias with a continuous variable potential pitfall in a common procedure when the choice variable is continuous selectivity bias can in principle be dealt with by a procedure first suggested by garen 1984 however work reported in this paper on the estimation of hedonic wage equations with compensation for dangerous jobs where selectivity bias could arise through the endogenous choice of jobs according to their riskiness suggests that the garen technique may not be robust the lack of robustness comes from collinearity which is a result of the common situation where the empirical fit of the choice equation is moderately successful but not outstanding

valuing risk in the workplace market price willingness to pay and the optimal provision of safety the theory of compensating wage differentials attributable to adam smith suggests that jobs with disagreeable characteristics will command high wages ceteris paribus most empirical tests of this theory with hedonic wage equations implicitly assume that workers willingness to pay for risk reduction safety in the workplace through diminished wages and market valuations of the price of these reductions are equivalent it is shown that this is not the case within the manufacturing sector where willingness to pay exceeds the price cost of risk reduction at current levels of risk exposure implications for implied value of life estimates are also examined copyright 1990 by mit press

valuing changes in health risks a comparison of alternative measures essential to efficient provision of health safety and the environment is correct valuation of risks to human health in a world of scarcity difficult decisions concerning tradeoffs between health and other desirables are unavoidable in this paper we develop a model of health investment under uncertainty which yields a general expression for values of changes in risks to human health the preference based values of morbidity risks and mortality risks are ex ante dollar equivalents of changes in expected utility associated with risk changes the preference based values are related to two alternative measures costs of illness and preventive expenditures which are thought to be lower bounds on the value of risk reductions we demonstrate that these alternative measures are not even special cases of the more general measure and that the size relationships among the three measures are complex also we derive the relationship between the willingness to pay for risk changes and the consumer surpluses associated with health changes which occur with certainty the next section contains a brief review of the approaches to valuing changes in health

racial segregation and the black white test score gap abstract racial segregation is often blamed for some of the achievement gap between blacks and whites we study the effects of school and neighborhood segregation on the relative sat scores of black students across different metropolitan areas using large microdata samples for the 1998 2001 test cohorts our models include detailed controls for the family background of individual test takers school level controls for selective participation in the test and city level controls for racial composition income and region we find robust evidence that the black white test score gap is higher in more segregated cities holding constant family background and other factors a shift from a highly segregated city to a nearly integrated city closes about one quarter of the raw black white gap in sat scores specifications that distinguish between school and neighborhood segregation suggest that neighborhood segregation has a consistently negative impact while school segregation has no independent effect though we cannot reject equality of the two effects additional tests indicate that much of the effect of neighborhood segregation operates through neighbors incomes not through race per se data on enrollment in honors courses suggest that within school segregation increases when schools are more highly integrated potentially offsetting the benefits of school desegregation and accounting for our findings

auctions versus negotiations which is the more profitable way to sell a company an auction with no reserve price or an optimally structured negotiation with one less bidder we show under reasonable assumptions that the auction is always preferable when bidders signals are independent for affiliated signals the result holds under certain restrictions on the seller s choice of negotiating mechanism the result suggests that the value of negotiating skill is small relative to the value of additional competition the paper also shows how the analogies between monopoly theory and auction theory can help derive new results in auction theory jel d44 g34 there are close analogies between standard price theory and the theory of auctions in an absolute english auction in which the price rises continuously until only one bidder remains and the seller is required to accept the final bid the sale price equals the lowest competitive price at which supply equals demand in the theory of optimal auctions the seller is treated as a monopolist who can choose any

observed choice estimation and optimism about policy changes a policy will be used more heavily in a time and place where its cost is lower the analyst who treats times and places as identical will overestimate the policy s net bene t especially for policy intensities greater than exist in his sample in regression analysis the problem can be solved by weighted instrumental variables using state level data the technique substantially increases the estimated responsiveness of illegitimacy to transfers indiana university school of business rm 456 1309 e 10th street bloomington indiana 47405 1701 o ce 812 855 9219 fax 812 855 3354 email erasmuse indiana edu jel numbers and

employment vulnerability and earnings in urban west africa this article develops indicators of vulnerability in employment in seven economic capitals of west africa and studies their links with individual incomes quantitative distributional and qualitative analyses show that vulnerability compensating mechanism is mainly seen in the informal sector in the upper tail of the earnings distribution and particularly in the circumstance of visible underemployment employment vulnerability is not compensated for the poorest workers in the private sector long job queues and weak institutional protection of workers may have reduced bargaining power in the formal sector

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

the returns to vocational training and academic education evidence from tanzania in this paper we ask what can account for the continuing strong preference for academic education in africa where the level of development is so low and there are few wage jobs and which form of educational investment the academic or vocational is most profitable we argue that the answers to these questions are linked through the shape of the earnings function and the importance of firm effects high levels of academic education have far higher returns than those available either from vocational or lower levels of academic however at lower levels the vocational return can exceed the academic

gender firm size industry and estimates of the value of life two national probability samples are used to investigate four empirical questions associated with estimating the value of life using coefficients from wage regressions the four questions pertain to whether wage regression coefficients on fatality rate variables are sensitive to 1 including or excluding women from the sample 2 definitions of the fatality rate which include estimates of either male only or female only deaths 3 removing the influence of firm size from the fatality rate or the wage rate 4 respondents inaccuracies in reporting their three digit industry problems associated with 3 and 4 are found to be minimal problems associated with 1 and 2 also appear to be small if the goal is to estimate the value of life for men