real option valuation of power transmission investments by stochastic simulation abstract network expansions in power markets usually lead to investment decisions subject to substantial irreversibility and uncertainty hence investors need valuing the flexibility to change decisions as uncertainty unfolds progressively real option analysis is an advanced valuation technique that enables planners to take advantage of market opportunities while preventing or mitigating losses if future conditions evolve unfavorably in the past many approaches for valuing real options have been developed however applying these methods to value transmission projects is often inappropriate as revenue cash flows are path dependent and affected by a myriad of uncertain variables in this work a valuation technique based on stochastic simulation and recursive dynamic programming called least square monte carlo is applied to properly value the deferral option in a transmission investment the effect of option s maturity the initial outlay and the capital cost upon the value of the postponement option is investigated finally sensitivity analysis determines optimal decision regions to execute postpone or reject the investment projects

the demographic transition and the position of women a marriage market perspective we present international evidence on the marriage market implications of cohort size growth and set out a theoretical model of how marriage markets adjust to imbalances since men marry younger women secular growth in cohort size in the second phase of the demographic transition worsens the position of women this e ect has been substantial in many asian countries earlier and continues to be true in sub saharan africa with fertility decline cohort are now shrinking in east asia improves the position of women these demographic trends can explain the increase and spread in dowries in south asia and the persistence of polygyny in sub saharan africa we show that the age gap at marriage will not adjust in order to equilibrate the marriage market in response to persistent imbalances even though it accommodates transitory shocks jel categories j12 j13 j16

heterogeneity in informal salaried employment evidence from the egyptian labor market survey summary this paper contributes to the continuing debates on the mechanisms driving labor market informality in developing countries by proposing an innovative way to discriminate between segmented and competitive markets an empirical analysis is applied to egyptian paid employment in the highly dynamic context of 1998 2006 the study is based on recent nonparametric methods applied to estimate the model with essential heterogeneity the model is extended to decomposing the treatment effects into unobserved and observed components the results show triple heterogeneity of workers on the egyptian labor market offering support to both segmented and competitive views on informal labor

household survey data and pricing policies in developing countries in recent years household survey data from developing countries have increasingly become available and have been increasingly used to cast light on important questions of policy the reform of prices whether agricultural prices consumer taxes subsidies or tariffs has consequences for individual welfare and for government revenues and these can be investigated empirically with household survey data the gainers and losers from price changes can be identified and the magnitudes of their gains and losses measured nonparametric estimation techniques provide a straightforward and convenient way of displaying this information the procedure is illustrated for the effects of rice pricing in thailand using data from more than five thousand rural households estimates of the revenue effects of price reforms are harder to obtain because they require estimates of supply and demand elasticities estimates that are not easily obtained for many developing countries a procedure is presented for estimating price elasticities of demand from spatial price variation as recorded in household survey data the main innovations lie in the appropriate treatment of quality variations and measurement error applications of the procedure in cote d ivoire indonesia and morocco are reviewed

effects of family background on earnings and returns to schooling evidence from brazil we investigate whether omitted family background variables are responsible for high returns to schooling estimated in brazil returns to schooling fall by about one third when parental schooling is added to wage equations surprisingly the schooling of fathers in law has larger effects on wages than the schooling of fathers on the basis of a model of assortative mating we interpret this as evidence that parental characteristics represent unobservable worker attributes rather than nepotism in the labor market we conclude that the family background bias in returns to schooling is modest and need not imply returns to family connections

son preference children s gender and parents time allocation evidence from china this article investigates the effect of children s gender on parents time allocation in developing countries due to the long existing tradition of son preference a collective model generates pred

terror as a bargaining instrument a case study of dowry violence in rural india this ethnographic study examined the sociocultural context of domestic violence and dowry in india and describes a theoretical model and econometric methodology the model was tested with survey data collected from a sub caste of 149 potter families from 3 villages in karnataka state in south india interviews were conducted among 139 adult married women and 130 married men the case studies demonstrate that violence can be used as a way to redistribute resources bargaining over dowry amounts occurs twice once before the marriage and renegotiations after the wife had moved to the husbands family domestic violence may be a weapon in order to obtain higher transfers at the renegotiation stage the model assumes that the level of dowry and the occurrence of violence are determined simultaneously hypotheses tested whether increases in husbands family wealth in the dowry paid and husbands cost of violent behavior reduces the incidence of violence tests determined whether increases in wifes familys wealth and increases in wifes human capital husbands human capital or wifes cost of violence increase violence 23 reported wife beating at some time a 10000 rupee increase in the wifes parents income increased the risk of violence by 4 a 10000 rupee increase in the husbands parents income reduced the risk of violence by 10 a 10000 rupee increase in dowry reduced the risk by 5 an additional male child reduced the risk by 11 female sterilization increased the risk by 16 findings suggest that husbands beat wives when the wifes family is rich and when dowries are small

prepayment and the valuation of mortgage backed securities this paper puts forward a valuation framework for mortgage backed securities rather than imposing an optimal value minimizing call condition we assume that at each point in time there exists a probability of prepaying this conditional probability depends upon the prevailing state of the economy to implement our valuation procedure we use maximum likelihood techniques to estimate a prepayment function in light of recent aggregate gnma prepayment experience by integrating this empirical prepayment function into our valuation framework we provide a complete model to value mortgagebacked securities given an optimal value minimizing call policy a mortgage should never be called when its market value is less than its call price similarly a mortgage should be called if it is worth more than its call price however mortgagors often call their loans when the prevailing refinancing rate exceeds the contract rate on the loan dunn and mcconnell 1981 in addition some mortgagors do not call their loans when the loan s contract rate exceeds the prevailing refinancing rate the purpose of this paper is to put forward a valuation framework for mortgagebacked securities consistent with these stylized facts associated with mortgage prepayments the mortgagor s prepayment decision is integral to our valuation framework however we do not impose an optimal value minimizing call condition to price these securities rather we assume that at each point in time there exists a probability of prepaying this conditional probability depending upon the prevailing state of the economy by integrating this prepayment function into our valuation framework we provide a complete model to value mortgage backed securities to implement our valuation procedures we estimate a prepayment function given recent gnma prepayment experience we follow green and shoven 1986 by using a proportional hazards model to estimate the influence of various explanatory variables or covariates on the mortgagor s prepayment decision distinct from green and shoven we explicitly model the effects of seasoning as well as investigating the influence of interest cost savings from refinancing in addition we also consider the effects of lagged refinancing rates heterogeneity

missing women age and disease relative to developed countries and some parts of the developing world most notably sub saharan africa there are far fewer women than men in india and china it has been argued that as many as a 100 million women could be missing the possibility of gender bias at birth and the mistreatment of young girls are widely regarded as key explanations we provide a decomposition of these missing women by age and cause of death while we do not dispute the existence of severe gender bias at young ages our computations yield some striking new findings 1 the vast majority of missing women in india and a significant proportion of those in china are of adult age 2 as a proportion of the total female population the number of missing women is largest in sub saharan africa and the absolute numbers are comparable to those for india and china 3 almost all the missing women stem from disease by disease comparisons and not from the changing composition of disease as described by the epidemiological transition finally using historical data we argue that a comparable proportion of women was missing at the start of the 20th century in the united states just as they are in india china and sub saharan africa today

bond pricing and the term structure of interest rates a new methodology for contingent claims valuation this paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates the methodology based on the equivalent martingale measure technique takes as given an initial forward rate curve and a family of potential stochastic processee for its subsequent movements a no arbitrage condition restricts this family of processes yielding valuation formulae for interest rate sensitive contingent claims which do not explicitly depend on the market prices of risk examples are provided to illustrate the key results in relation to the term structure of interest rates arbitrage pricing theory has two purposes the first is to price all zero coupon default free bonds of varying maturities from a finite number of economic fundamentals called state variables the second is to price all interest rate sensitive contingent claims taking as given the prices of the zero coupon bonds this paper presents a general theory and a unifying framework for understanding arbitrage pricing theory in this context of which all existing arbitrage pricing models are special cases in particular vasicek 1977 brennan and schwartz 1979 langetieg 1980 ball and torous 1983 ho and lee 1986 schaefer and schwartz 1987 and artzner and delbaen 1988 the primary contribution of this paper however is a new methodology for solving the second problem i e the pricing of interest rate sensitive contingent claims given the prices of all zero coupon bonds the methodology is new because i it imposes its stochastic structure directly on the evolution of the forward rate curve ii it does not require an inversion of the term structure to eliminate the market prices of risk from contingent claim values and iii it has a stochastic spot rate process with multiple stochastic factors influencing the term structure the model can be used to consistently price and hedge all contingent claims american or european on the term structure and it is derived from necessary and more importantly sufficient conditions for the absence of arbitrage the arbitrage pricing models of vasicek 1977 brennan and schwartz 1979 langetieg 1980 and artzner and delbaen 1988 all require an iformerly titled bond pricing and the term structure of interest rates a new methodology

the price of gold dowry and death in india abstract we provide evidence that dowry costs motivate son preferring behaviors in india since gold is an integral part of dowry we study parental responses to shocks in the world gold price exploiting monthly variation in gold prices across 35 years we find that monthly changes in gold prices lead to an increase in girl relative to boy neonatal mortality and that surviving girls are shorter after the introduction of prenatal sex determination technology we find that gold price shocks during pregnancy increase female foeticide

the american put option valued analytically an analytic solution to the american put problem is derived herein the hedge ratio and other derivatives of the solution are presented the formula derived implies an exact duplicating portfolio for the american put consisting of discount bonds and stock sold short the formula is extended to consider put options on stocks paying cash dividends a polynomial expression is developed for evaluating these formulae values and hedge ratios for puts on both dividend and nondividend paying stocks are calculated tabulated and compared with values derived by numerical integration and binomial approximation as with european options evaluating an analytic formula is more efficient than approximating the stock price process or the partial differential equation by binomial or finite difference methods finally applications of this american put solution are discussed

a dynamic programming approach for pricing options embedded in bonds abstract we propose a dynamic programming dp approach for pricing options embedded in bonds the focus being on call and put options with advance notice an efficient procedure is developed for the cases where the interest rate process follows the vasicek cox ingersoll ross cir or generalized vasicek models our dp methodology uses the exact joint distribution of the interest rate and integrated interest rate at a future date conditional on the current value of the interest rate we provide numerical illustrations for the vasicek and cir models comparing our dp method with finite difference methods our procedure compares quite favorably in terms of both efficiency and accuracy an important advantage of the our dp approach is that it can be applied to more general models calibrated to capture the term structure of interest rates e g the generalized vasicek model

a dynamic programming procedure for pricing american style asian options pricing european style asian options based on the arithmetic average under the black and scholes model involves estimating an integral a mathematical expectation for which no easily computable analytical solution is available pricing their american style counterparts which provide early exercise opportunities poses the additional difficulty of solving a dynamic optimization problem to determine the optimal exercise strategy a procedure for pricing american style asian options of the bermudan flavor based on dynamic programming combined with finite element piecewise polynomial approximation of the value function is developed here a convergence proof is provided numerical experiments illustrate the consistency and efficiency of the procedure theoretical properties of the value function and of the optimal exercise strategy are also established

monte carlo methods for security pricing the monte carlo approach has proved to be a valuable and flexible computational tool in modern finance this paper discusses some of the recent applications of the monte carlo method to security pricing problems with emphasis on improvements in efficiency we first review some variance reduction methods that have proved useful in finance then we describe the use of deterministic low discrepancy sequences also known as quasi monte carlo methods for the valuation of complex derivative securities we summarize some recent applications of the monte carlo method to the estimation of partial derivatives or risk sensitivities and to the valuation of american options we conclude by mentioning other applications

monetary incentives on inter caste marriages in india theory and evidence abstract we study the effect of a policy in india that offers monetary incentives to inter caste marriages in which one of the spouses is of historically disadvantaged castes i e scheduled castes and the other is not we show that in theory the monetary incentives increase the incidence of exogamy but may reduce the welfare of certain caste or gender building on our theoretical analysis we estimate the effect of the monetary incentives on the incidence of exogamy the welfare and inter spousal transfers using national family and health survey data we find that a 10 000 rupee increase in the incentive raises the exogamy between scheduled caste men and non scheduled caste women by 4 percent in rural india however we also find that the same increase reduces the welfare of women in rural areas

job queues and the union status of workers this paper develops a model of the determination of the union status of workers that allows for the possibility of queuing for union jobs the empirical results derived using a sample from the university of michigan panel study of income dynamics are supportive of the queuing hypothesis the no queue model can be rejected using a likelihood ratio test this suggests that a simple probit or logit model for union status is misspecified because it is not based on any consistent behavioral theory an important implication of the model is that because most new entrants to the labor market prefer union jobs but cannot get them and because accrual of nonunion seniority makes workers progressively less likely to desire union jobs the union status of workers is largely determined by their success in being selected from the queue early in their working life

does sample selection bias affect the effect of family background on the returns to schooling evidence from korea this article examines the effect of family background on the returns to schooling in korea in doing so sample selection bias is controlled as the probability of being employed is affected by the schooling of family members the results of this study are different from previous studies which did not consider sample selection bias while the effect of family background on the returns to schooling was obvious in previous studies it is weakened with the control of sample selection bias this phenomenon is particularly strong for the wife moreover controlling sample selection bias increases the downward bias due to measurement error thus it is concluded from these findings that sample selection bias should be controlled to accurately estimate the effect of family background on the returns to schooling

disease and development the effect of life expectancy on economic growth we exploit the major international health improvements from the 1940s to estimate the effect of life expectancy on economic performance we construct predicted mortality using preintervention mortality rates from various diseases and dates of global interventions predicted mortality has a large impact on changes in life expectancy starting in 1940 but no effect before 1940 using predicted mortality as an instrument we find that a 1 percent increase in life expectancy leads to a 1 7 2 percent increase in population life expectancy has a much smaller effect on total gdp however consequently there is no evidence that the large increase in life expectancy raised income per capita

a note on marriage market clearing abstract we provide a formula for marriage sex ratios based on birth sex ratios and dynamic factors like the marriage age gap and gender specific mortality we show that ignoring dynamic considerations can lead to faulty conclusions about scarcity in marriage markets

pricing american style securities using simulation abstract we develop a simulation algorithm for estimating the prices of american style securities i e securities with opportunities for early exercise our algorithm provides both point estimates and error bounds for the true security price it generates two estimates one biased high and one biased low both asymptotically unbiased and converging to the true price combining the two estimators yields a confidence interval for the true price the proposed algorithm is especially attractive compared with lattice and finite difference methods when there are multiple state variables and a small number of exercise opportunities preliminary computational evidence is given

options on the minimum or the maximum of two risky assets analysis and applications this paper provides analytical formulas for european put and call options on the minimum or the maximum of two risky assets the properties of these formulas are discussed in detail options on the minimum or the maximum of two risky assets are useful to price a wide variety of contingent claims of interest to financial economists applications discussed in this paper include the valuation of foreign currency debt option bonds compensation plans risk sharing contracts secured debt and growth opportunities involving mutually exclusive investments

productive government expenditures and long run growth the purpose of this paper is to review some of the recent developments in endogenous growth models specifically our focus is on the growth effects of productive government spending in dynamic general equilibrium models we use a simple overlapping generations model as our basic framework and illustrate the role of taxes and spending we then examine several related issues nonrivalry in publicly provided goods existence and uniqueness of competitive equilibrium endogenous public policy ways of financing public expenditures composition of publicly provided goods and services and private alternatives finally we review some empirical results related to output elasticity of public capital and educational expenditures

brothers household financial markets and savings rate in china abstract this study analyzes the effect of the number of brothers an individual has on that individual s household savings rate under the current underdeveloped household financial market in urban china i show that having an additional brother reduces an individual s household savings rate by at least 5 percentage points brothers help households 1 by sharing risks providing a source of informal borrowing and 2 by sharing the cost of supporting parents sisters play a minor role in affecting a household s savings rate mainly because of cultural norms the decline in the average number of brothers in households induced by population policies explained at least one third of the increased aggregate household savings rate in urban china

labour market segmentation a local labour market analysis using alternative approaches earlier studies have generally attempted to establish the presence or otherwise of labour market segmentation using a single technique using data drawn form the british social and economic life initiative sceli for six local labour markets this paper tests for segmentation using four different methods of analysis a simple career non career model cluster analysis and switching regressions the results in general suggest that explanatory power is not improved by analysing the labour market in different segments but this simple career model points to higher rewards for given characteristics in the career sector and the results of the switching regression model are consistent with duality in one of the six markets

employment relations in dual labor markets it s nice work if you can get it jobs in big firms command higher wages i examine four theories that could explain this relation first large firms incur higher fixed employment costs including more specific training second monitoring costs are greater in big firms and can be spread by hiring more productive workers third large firms may choose to pay efficiency wages to deter shirking finally large employers organize production around teams and pay higher wages to get workers who comply with the discipline of team production the dispersion of wages and working conditions in the u s labor market reflect the heterogeneity of jobs employment relations and individuals

monte carlo valuation of american options through computation of the optimal exercise frontier this paper introduces a monte carlo simulation method for pricing multidimensional american options based on the computation of the optimal exercise frontier we consider bermudan options that can be exercised at a finite number of times and compute the optimal exercise frontier recursively we show that for every date of possible exercise any single point of the optimal exercise frontier is a fixed point of a simple algorithm once the frontier is computed we use plain vanilla monte carlo simulation to price the option and obtain a low biased estimator we illustrate the method with applications to several types of options

looking for boy girl discrimination in household expenditure data the ability to test for discrimination in the allocation of goods between boys and girls is hampered by a lack of data on intrahousehold distribution the analysis presented here allows inferences about intrahousehold allocation to be made from householdlevel expenditure data for a given level of income families with children will spend less on adult goods in order to purchase children s goods if household purchasing favors boys over girls smaller expenditures on adult goods would be made by families with boys as compared with those with girls a method for determining adult goods is described and the procedure for detecting gender bias is applied to data from c6te d lvoire and thailand the data show no evidence of discriminatio n between boys and girls in c6te d lvoire and a small and statistically insignificant bias in favor of boys in thailand how commodities are allocated among the members of a household has recently occasioned a good deal of interest assessments of poverty and income distribution based on household incomes or expenditures will be misleading if allocation within the household is unequal the position of women and girls has been of particular concern and there is a considerable amount of empirical evidence much of it from the indian subcontinent that documents discrimination against females see in particular bhagwati 1973 sen 1984 sen and sengupta 1983 miller 1981 bardhan 1982 and kynch and sen 1983 as well as survey papers by behrman 1987 and harriss 1987 much of the evidence is concerned with measurements of nutritional outcomes mortality and health status rather than with the direct allocation of goods by gender the difficulty in trying to determine the intrahousehold allocation of goods is that household budget surveys the obvious source of data record consumption not of individuals but of households and while attempts can be made to the author is a professor of public affairs and of economics and international affairs at princeton university and is a consultant to the population and human resources department of the world bank the author thanks dwayne benjamin who provided for excellent research assistance he is grateful to him and to members of the economic growth center at yale university for helpful comments this is a revised and shortened version of living standards measurement study working paper 39 the allocation of goods within the household adults children and gender june 1987 the results from thailand were not included in the working paper 1989 the international bank for reconstruction and development the world bank

pension design with a large informal labor market evidence from chile this article investigates the fiscal and welfare trade offs involved in designing a pension system when workers can avoid contributing by working informally using a life cycle model of labor supply and saving decisions i structurally estimate preferences and earnings opportunities in the formal and informal sectors using data on chilean households i find limited support for formal jobs rationing instead mandatory pension contributions significantly encourage informality policy experiments show that chile could lower minimum pension spending by 23 while guaranteeing the same income to retirees if the minimum pension s implicit tax rate was increased to 60

returns to education a further international update and implications this paper updates evidence on the returns to investment in education by adding estimates for new countries and refining existing estimates to bring the total number of country cases to over 60 the new cross country evidence confirms and reinforces earlier patterns namely that returns are highest for primary education the general curricula the education of women and countries with the lowest per capita income the findings have important implications for directing future investment in education which for efficiency and equity purposes should concentrate on these priority areas

real option value and random jumps application of a simulation model this article studies how sensitive real option valuations are to incorrect assumptions about the stochastic process followed by the state variables we design a valuation model which combines monte carlo simulation and dynamic programming and provides an appropriate framework to evaluate the effect of estimation errors on both the value of real options and their critical frontier although the model is flexible enough to value american type options contingent on a wide range of stochastic processes we focus on the analysis of the effect of stochastic jumps we apply our model to the valuation of an investment in the car parts industry documented in previous literature our results clearly show that underestimating this type of jumps might lead to substantial misjudgements in a firm s decision making processes for instance it may lead to profitable projects being rejected when jump diffusion is low or negative expanded net present value projects being accepted

the structure of disadvantage individual and occupational determinants of the black white wage gap this study is motivated by the idea that the racial gap in earnings is generated not only by individual differences but also by systematic variation in the occupational structure that attenuates or exacerbates the effects of race using data from the 1990 census and the dictionary of occupational titles a hierarchical linear modeling approach is employed that allows the simultaneous exploration of the mechanisms of income inequality operating both within and between occupations among private sector employees striking evidence shows that racial disparities increase in both absolute and percentage terms as one moves up the occupational earnings hierarchy the association between average occupational earnings and within occupation racial disadvantage reveals an overlooked source of racial earnings inequality which constrains the opportunities available to upwardly mobile black men in the private sector this association cannot be explained by measured individual characteristics or by the status demographic composition or skill demands of occupations in the public sector on the other hand racial inequality in earnings is not systematically associated with average occupational earnings and is instead more closely tied to individual human capital and occupational placement the implications of these results are considered and directions for future research are suggested

labor market integration in urban ethiopia 1994 2004 abstractan analysis of panel data on individuals in a random selection of urban households in ethiopia reveals large sustained and unexplained earnings gaps between public and private and formal and informal sectors over 1994 2004 at the same time we find first that the rate of mobility increased in the two pairs of sectors sample transitions rates grew across survey waves while state dependence in sector choice decreased second the correlation between sector choice and earnings gaps increased over the same period in particular the correlation between comparative earnings and selection into the informal sector was high throughout the survey decade and increased in magnitude over the second half of the period these results suggest that ethiopia s urban labor markets might be integrating

no toilet no bride intrahousehold bargaining in male skewed marriage markets in india abstract haryana state in india is characterized by widespread discrimination against women including a severe population level sex imbalance in this context an innovative social marketing campaign which targeted pro sanitation messages to households active in local marriage markets was implemented with the goal of increasing toilet ownership this paper estimates the impact of this program known colloquially as no toilet no bride on household level latrine ownership private sanitation coverage in haryana increased by 21 specifically among households with boys active on the marriage market this effect is larger and concentrated in marriage markets where women are relatively scarce and absent when women are relatively abundant which together suggest the program operated by successfully linking sanitation outcomes with marriage market competition induced by local scarcities of women due to male biased sex ratios

human capital accumulation and endogenous public expenditures in this paper we present an overlapping generations model where individuals accu mulate human capital through formal schooling we model the role of the public sector in schooling as one of collecting taxes from households and providing inputs to the learning technology public expenditures on schools are determined endogenously under plausible restrictions our model s predictions qualitatively match the observations on schooling pub lic expenditures on education and student teacher ratios jel classification el 3 e62 accumulation de capital humain et depenses publiques endogenes dans ce memoire les auteurs presentent un modele de generations qui se chevauchent ofu les individus accumulent du capital humain via l education formelle le r6le du secteur public dans l education est defini comme celui de collecteur d imp6ts aupres des menages et de fournisseur d intrants dans la technologie d apprentissage les depenses publiques en education sont determinees de maniere endogene a partir de restrictions plausibles les predictions du modele s arriment qualitativement aux observations sur le monde scolaire aux depenses publiques en educa tion et aux ratios 6leves enseignants

inequality and attainment in a dual labor market models of wage determination and sector attainment are estimated for a cohort of young men in a dual labor market neoclassical economic vs dual labor market views on market equilibrium are contrasted although schooling is rewarded similarly in the primary and secondary sectors other results support the dual labor market view that employment in the primary sector is rationed via a queuing mechanism

convergence and biases of monte carlo estimates of american option prices using a parametric exercise rule abstract this paper presents an algorithm for pricing american options using monte carlo simulation the method is based on using a parametric representation of the early exercise decision it is shown that as long as this parametric representation subsumes all relevant stopping times error bounds can be constructed using two different estimates one which is biased low and one which is biased high both are consistent and asymptotically unbiased estimators of the true option value results for high dimensional american options confirm the viability of the numerical procedure the convergence results of the paper shed light into the biases present in other algorithms proposed in the literature

informal employment in developing countries opportunity or last resort there is an ongoing debate among researchers and policy makers whether informal sector employment is a result of competitive market forces or labor market segmentation more recently it has been argued that none of the two theories sufficiently explains informal employment but that the informal sector shows a heterogenous structure for some workers the informal sector is an attractive employment opportunity whereas for others rationed out of the formal sector the informal sector is a strategy of last resort to test the empirical relevance of this hypothesis we formulate an econometric model which allows for several unobserved segments within the informal sector and apply it to the urban labor market in cote d ivoire

strategic choices in polygamous households theory and evidence from senegal this paper proposes a strategic framework to account for fertility choices in polygamous households a theoretical model specifies the main drivers of fertility in the african context and describes how the fertility of one wife might impact the behavior of her co wives it generates predictions to test for strategic interactions exploiting original data from a household survey and the demographic and health surveys in senegal empirical tests show that children are strategic complements one wife raises her fertility in response to an increase by the other wife because children are the best claim to resources controlled by the husband this result is the first quantitative evidence of a reproductive rivalry between co wives it suggests that the sustained high level of fertility in africa does not merely reect women s lack of control over births as is often argued but also their incentives to have many children this paper also contributes to the literature on household behavior as one of the few attempts to open the black box of non nuclear families

getting paid wage arrears and stratification in russia1 wage arrears have played an important yet unappreciated role in the stratification of contemporary russian society delays in wage payments became rampant and persistent during the 1990s because of the particular structural institutional and policy context that accompanied russia s market reforms recent improvements in russia s economy have reduced but not eliminated wage arrears an innovative practice that has become institutionalized in some but not all postsocialist societies analyses of survey data collected in early 1998 confirm the independent stratifying role of arrears inequality in getting paid is socially structured in a different manner than inequality in contracted wages and the former proves equally or more decisive in shaping inequality in actual wages arrears occur with some regularity in other national and historical contexts this study of russia shows that where arrears are rampant researchers should incorporate them into conceptual and empirical models of earnings inequalit

education hiv and early fertility experimental evidence from kenya a seven year randomized evaluation suggests education subsidies reduce adolescent girls dropout pregnancy and marriage but not sexually transmitted infection sti the government s hiv curriculum which stresses abstinence until marriage does not reduce pregnancy or sti both programs combined reduce sti more but cut dropout and pregnancy less than education subsidies alone these results are inconsistent with a model of schooling and sexual behavior in which both pregnancy and sti are determined by one factor unprotected sex but consistent with a two factor model in which choices between committed and casual relationships also affect these outcomes

the socioeconomic determinants of ill gotten gains within person changes in drug use and illegal earnings generalizing from the sociology of earnings attainment we develop a conceptual model of social embeddedness in conventional and criminal activities to explain illegal earnings among criminal offenders to isolate the effects of time varying factors such as legal earnings drug use and criminal opportunities we use data from the national supported work demonstration project to estimate fixed effects models predicting month to month changes in illegal earnings we find that criminal earnings are sensitive to embeddedness in conforming work and family relationships criminal experience and the perceived risks and rewards of crime moreover heroin and cocaine use creates a strong earnings imperative that is difficult to satisfy in the low wage labor market and offenders earn far more money illegally when they are using these drugs than during periods of abstinence

the economics of organization the transaction cost approach the transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations applications of this approach require that transactions be dimensionalized and that alternative governance structures be described economizing is accomplished by assigning transactions to governance structures in a discriminating way the approach applies both to the determination of efficient boundaries as between firms and markets and to the organization of internal transactions including the design of employment relations the approach is compared and contrasted with selected parts of the organization theory literature

segmented labour markets theory and evidence this paper examines the possibility of accepting the labour market segmentation approach as a valid alternative to the classical and neo classical analysis of labour markets it consists of three main parts the urst part contains a historical analysis of both the distant and recent origins of the labour market segmentation hypothesis part two outlines the central ideas of both segmentationalists and radical theorists who attempted to explain the fragmented nature of labour markets and the importance of institutional and social inuuences upon pay employment and mobility of individual workers between different labour market sectors the third part examines the case for labour market segmentation using four alternative techniques and discusses the issue of mobility among different labour market segments it is thereby concluded that the lack of agreement among the segmented labour market theorists on both theoretical and methodological issues has prevented them from developing a consistent and convincing argument based on veriuable empirical evidence to validate their thesis

evaluating natural resource projects with embedded options and limited reserves this study proposes a dynamic option simulation dos approach to evaluate natural resource investment projects that contain several embedded options and limited reserves to construct a practical pricing model dos combines simulation and dynamic programming techniques that can value natural resource investments with multi variable early exercise various embedded options and finite reserve properties a copper mine project offers a demonstration the mine holder may temporarily close reopen and abandon the mine at specific times before the expiration date the mine holder may also accelerate mining speed to be optimal referred to as the acceleration option numerical analyses of the copper price and interest rate effects on the copper mine value suggest that dos can efficiently assess complex multiple variable american style real options problems

family ties and labor markets in the united states and brazil we use comparable surveys from brazil and the united states to examine vertical and horizontal connections between families motivated by a model of assortative mating and intergenerational transmission of schooling and earnings we include the schooling of relatives in male wage equations we find that the effect offather in law s schooling is larger than the effect offather s schooling in brazil while the opposite is observed in the united states we interpret these effects as indicators of unobservable worker characteristics with differences in assortative mating and female labor market activity explaining the differences in the apparent effect of fathers and fathers in law in the two countries

racial wage inequality job segregation and devaluation across u s labor markets1 despite decades of research showing greater black white inequality in local areas where the black population is relatively large little is known about the mechanisms for this effect using a unique data set of individuals nested within jobs across labor markets this article tests two possible mechanisms for the black concentration effect on wage inequality job segregation and devaluation results show that black population size is associated with greater segregation of black workers into black dominated jobs on the other hand no evidence is found that the penalty for working in a black dominated job the devaluation effect increases as a function of black population size the article concludes that discrimination against workers especially exclusion from better paying jobs is an important mechanism for the effect of black population size on the racial wage gap

economic dualism a critical review in this paper we examine the model underlying the dual economy approach to labor market segmentation we provide a specification of the components of the model as well as the linkages between components this construction of the underlying model allows us to evaluate it systematically as a model to consider and to evaluate each component and linkage separately while we conclude that there are several important contributions to retain from the dual approach including the insight that capital structure conditions labor market outcomes we argue that it is inadequate for sustaining theoretical and empirical development as a new starting point for the study of economic and labor market segmentation we suggest a resource perspective which retains insights from the dual approach but avoids its overly restrictive assumptions

informal employment in developing economies multiple heterogeneity abstractthis paper contributes to the literature on the nature of informal employment in developing economies drawing on the model with essential heterogeneity it offers a list of scenarios describing the behavioural patterns which informal workers follow the list nests not only classical patterns of a rationed formal sector versus an integrated labour market but also different patterns of rationing using non parametric techniques and data from a few african economies with different levels of development the paper proposes empirical case studies fitting various informality schemes developing economies show disparate patterns of allocation of workers and various patterns of rationing

caste discrimination and transaction costs in the labor market evidence from rural north india abstract this paper is an empirical attempt to quantify caste based discrimination in the labor market using household data taken from rural north india in the regression analysis transaction costs associated with entry into the labor market and reservation wages are estimated simultaneously along with market wages the estimation results provide evidence of the existence of transaction costs in the labor market and discrimination against backward classes with regard to access to regular employment in line with previous studies the results suggest that the achievements of india s reservation policy so far have at best been limited in addition a comparison between the estimates from the model employed in this paper and conventional reduced form approaches shows that discrimination in labor market entry is likely to be underestimated in the conventional reduced form approaches

human capital and earnings distribution in a developing country the case of prerevolutionary nicaragua this article examines how different patterns of human capital investments affect household earning and its major components in rural and urban areas of developing countries 1865 women aged 15 45 in the following 3 areas of prerevolutionary nicaragua supply data the central metropolis other urban areas and rural areas other urban area households have the highest average total income central metropolis households have the next highest and rural areas have the lowest urbanization is positively associated with both mean level of total earnings and with total income the authors examine 5 human capital variables womens schooling mens schooling womens health mens health and average household nutrition another variable cumulative work experience became apparent during modeling for women schooling increases labor force participation probability in urban but not rural areas nutrition has a positive impact in all 3 regions and past work experience has a significant impact health status has no effect standard human capital variables do not differ significantly between the central metropolis and other areas but sharply contrast between urban and rural areas for men there is less potential for increasing labor force participation through human capital investment although past work experience schooling and nutrition show significant effects the authors test 10 simulations of hypothetical changes in human capital distributions which involve increasing education improving nutritional status and improving health 4 conclusions are drawn 1 since changes from human capital variables on regional earnings distributions cannot be discerned from individual relations simulation is a useful tool for investigation 2 estimates of the gains toward distributional goals are needed compared to other investments 3 directing policies toward the target group is more cost effective than general measures and 4 policies should be targeted for households low in the overall distribution not just the poorest households

further evidence on returns to schooling by establishment size stolzenberg 1978 has argued thatfor white male employees the effect of schooling on logearnings is greater in larger establishments we replicate stolzenberg s study using the 1979 current population survey this survey includes information on establishment size and provides a much larger sample size to work with our results do not indicate a positive establishment size schooling interaction to the contrary when stolzenberg s 1978 model specification is used ourfindings suggest that the interaction may be negative we explore the sources of this discrepancy and are skeptical of the conventional wisdom that returns to schooling increase with establishment size

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

demand side and supply side explanations for barriers to labor market mobility in developing countries the case of guatemala the hypothesis of labor market segmentation is based on the existence of barriers to mobility between jobs because of these barriers wages of workers with similar characteristics are different from wages that would result from competition though the labor market segmentation hypothesis concerns mobility and access there have been few direct tests of the existence of restricted mobility in the labor market rather tests of labor market segmentation have focused on the presumed effects of restricted mobility in particular the presence of different reward structures across sectors is viewed as support for the segmentation hypothesis as a result much of the literature has concentrated on the appropriate comparison of the wages of workers by including controls for observable and unobservable characteristics

literacy sharing assortative mating or what labour market advantages and proximate illiteracy revisited abstract this paper explores the relationship between household literacy and the labour market outcomes of illiterate household members which basu narayan and ravallion 2002 report using household income and expenditure data from bangladesh bnr attribute a considerable wage premium for proximate illiterate women in off farm employment to labour productivity gains from intra household literacy sharing this wage premium also suggests that women may be more efficient recipients of literacy externalities than men we propose that any such relationship might not be due to higher labour productivity but may have other explanations such as systematically different and unobserved attributes of illiterate females married into literate households we also pay attention to the negative selection of illiterate females into non farm wage employment which contrary to received wisdom suggests that household literacy may not be unambiguously progressive for females we propose that the widely reported finding that

option pricing in a multi asset complete market economy this paper extends the seminal cox ross rubinstein 1979 crr hereafter binomial model to multiple assets it differs from previous models in that it is derived under the complete market environment specified by duffie and huang 1985 and he 1990 the complete market assumption requires the number of states to grow linearly with the number of assets however the number of correlations grows at a faster rate causing the crr model to be indirectly extendable we solve such a problem by recognizing that the fast growing correlation number is matched by the number of the angles of the edges of a hypercube spanned by the risky assets as a result we derive a solution that allows the number of equations to equal the number of risky assets and the riskless bond the resulting tree structure hence provides the same intuition of pricing and hedging contingent claims as that provided by the crr model finally the proposed model is not only as easy to implement as the one dimensional crr model but also it is more memory efficient than the existing multi factor lattice models

evaluating familial support for the elderly the intrahousehold allocation of medical expenditures in rural pakistan introduction in this article i examine the determinants of medical expenditures on the elderly in rural pakistani households analyzing in particular the dependence of such expenditures on the economic contribution of the elderly to household income the results for older males are contrasted with those for younger males improved life expectancies in the south asian economies as in other developing economies have generated new policy interest in the economic status of the elderly there is however little empirical evidence on this topic while the scant research on the elderly in south asia undoubtedly reflects the fact that they represent one of the smallest demographic groups in these economies it also reflects the widespread belief that they are well provided for by the intergenerational households where the vast majority of them reside with their adult children however this assumption has been questioned by a number of scholars who find that medical expenditures on the elderly are closely correlated with the elderly s individual incomes and wealth household data from pakistan support such claims data on individual medical expenditures and days of illness are available from two household surveys a panel data set collected by the international food policy research institute ifpri and from the pakistan living standards measurement survey lsms both data sets reveal a strong correlation between the number of days of illness reported by adult males and age leading one to expect a similarly strong correlation between medical expenditures and age instead the ifpri data yield a correlation that is less than one would expect given the relationship between illness and age the lsms data set which provides information on many more

a test of dual labor market theory despite substantial differences in their views of the appropriate policy response to the existence of poverty neither the proponents of dual market theory nor its critics have proposed potentially conclusive tests of the dual market hypothesis this paper presents a test of the two central propositions of dual market theory 1 the existence of two distinct labor markets with different wage setting mechanisms and 2 the existence of barriers to mobility between the labor markets we find considerable support for both hypothesis estimation of a switching model of wage determination with unknown regimes yields two distinct wage equations the one which most workers are associated with closely resembles the standard human capital regression with significant returns to education and experience the other equation is flat with no returns to human capital these two equations resemble the predictions of dual market theory for the primary and secondary markets respectively further we present evidence that at least some non white workers are involuntarily confined to the secondary market this crowding of minority workers into the low wage labor market accounts for a substantial portion of white non white wage differences we interpret these results as providing empirical support for the dual market hypothesis and for recent theoretical work on efficiency wagemodels in addition combining the efficiency wage argument with the observation that much of the white non white wage difference is explained by the exclusion of non whites from the primary sector suggests an explanation for the persistance of wage differences this abstract was borrowed from another version of this item

primal dual simulation algorithm for pricing multidimensional american options this paper describes a practical algorithm based on monte carlo simulation for the pricing of multidimensional american i e continuously exercisable and bermudan i e discretely exercisable

numerical valuation of high dimensional multivariate european securities we consider the problem of pricing a contingent claim whose payoff depends on several sources of uncertainty using classical assumptions from the arbitrage pricing theory the theoretical price can be computed as the discounted expected value of future cash flows under the modified risk neutral information process although analytical solutions have been developed elsewhere for a few particular option pricing problems computing the arbitrage prices of securities under several sources of uncertainty is still an open problem in many instances in this paper we present efficient numerical techniques based upon monte carlo simulation for pricing european contingent claims depending on an arbitrary number of risk sources we introduce in particular the method of quadratic resampling qr a new powerful error reduction technique for monte carlo simulation quadratic resampling can be efficiently combined with classical variance reduction methods such as importance sampling our numerical experiments show th

options on the maximum or the minimum of several assets using an intuitive approach that also provides new intuition concerning the black and scholes equation this paper extends the results of johnson and stulz to the pricing of options on the minimum or the maximum of several risky assets

legal origins and female hiv more than one half of all people living with hiv are women and 80 percent of all hiv positive women in the world live in sub saharan africa this paper demonstrates that the legal origins of these formerly colonized countries significantly determine current day female hiv rates in particular female hiv rates are significantly higher in common law sub saharan african countries compared to civil law ones this paper explains this relationship by focusing on differences in female property rights under the two codes of law in sub saharan africa common law is associated with weaker female marital property laws as a result women in these common law countries have lower bargaining power within the household and are less able to negotiate safe sex practices and are thus more vulnerable to hiv compared to their civil law counterparts exploiting the fact that some ethnic groups in sub saharan africa cross country borders with different legal systems we are able to include ethnicity fixed effects into a regression discontinuity approach this allows us to control for a large set of cultural geographical and environmental factors that could be confounding the estimates the results of this paper are consistent with gender inequality the feminization of aids explaining much of its prevalence in sub saharan africa

first peoples lost determining the state of status first nations mortality in canada using administrative data we present the most comprehensive set of estimates to date for status first nations mortality in canada we use administrative data from indigenous and northern affairs canada to establish a set of stylized facts regarding status first nations mortality rates from 1974 to 2013 between 2010 to 2013 the mortality rates of status first nations men and boys are highest in nearly all age groups considered with the exception of status girls between the ages of 10 to 14 on reserve status boys between the ages of 15 to 19 have mortality rates nearly four times that in the general population while status girls between the ages of 15 to 19 have mortality rates five times that in the general population we demonstrate substantial regional variation in mortality rates which are correlated with economic factors we document that there has been no improvement in mortality among status women and girls living on reserve in the last 30 years and relative mortality rates for all status people on reserve has not changed in 40 years mortality rates may be worsening among some age groups jel classification j15 j16 i15 i14

the reemergence of segmented labor market theory according to dual labor market theory the labor market can be usefully described as consisting of two sectors a high wage primary sector with good working conditions stable employment and substantial returns to human capital variables such as education and experience and a low wage secondary sector with the opposite characteristics moreover primary jobs are rationed that is not all workers who are qualified for primary sector jobs and desire one can obtain one finally the sector of the labor market in which an individual is employed directly influences his or her tastes behavior patterns and cognitive abilities thus the dual labor market model or more generally segmented labor market models is simultaneously a description of the income distribution a claim about the absence of market clearing and a radical departure from the standard neoclassical assumption of fully rational actors and exogenously determined preferences while this last element is potentially the most interesting even its proponents fail to give it the attention it deserves and related work has not been incorporated into the segmented labor market model in this paper we therefore concentrate on the first two elements of the model segmented labor market theory was sufficiently popular in the late 1960 s and early 1970 s to be taken seriously by prominent mainstream labor economists however two influential and largely negative reviews glenn cain 1976 michael wachter 1974 portrayed the segmented labor market hypothesis as largely atheoretical and based at best on questionable statistical analysis it seems fair to say that even sympathetic mainstream critics felt that key insights from the segmented labor model could be incorporated into neoclassical analysis and that the remaining elements of the model did not form a sufficiently coherent theory to pose a challenge to the neoclassical model whatever the merits of this perception it is clear that advocates of the segmented labor market approach did not develop a formal theory which conformed to the standards of mainstream economists with some notable exceptions michael piore 1975 david gordon 1972 the work was atheoretical moreover the empirical methods used tended to fall outside the norm for example interviews observational studies and historical and institutional analysis advocates of the segmented labor market perspective mostly radical political economists chose instead to develop their own research program outside the mainstream the reemergence of segmented labor market theory is linked with the reversal of these two tendencies the theory has been pursued by economists using modern tools of imperfect information theory and state of the art econometrics as a result the approach has again attracted the attention of the mainstream even a few years ago it would have been a clairvoyant observer who predicted that lawrence summers would be working on a theoretical model of labor market duality with jeremy bulow 1986 that robert solow would count among his recent work a dual market model with ian mcdonald 1985 and that james heckman would publish an article in which he undertook an empirical test of a dual market model failed to reject the model and then devoted much of the rest of the article to attacking his and other tests of the dual labor market view see his article with v joseph hotz 1986 since the theoretical developments are largely associated with efficiency wage and departments of economics university of california berkeley ca 94720 and nber and boston university 270 bay state road boston ma 02215 and nber respectively this study was supported in part by nsf grant no ses 8606139 lang acknowledges support from a sloan faculty research fellowship dickens acknowledges support from the institute of industrial relations at berkeley

an investigation of the labor market earnings of panamanian males evaluating sources of inequality this paper presents empirical evidence on the determinants of labor market earnings and inequality for males in panama using newly available microdata we estimate earnings equations based on the measurement framework of mincer 1974 and compare them with those for other countries at various stages of economic development we present evidence on two aspects of inequality in less developed economies labor market segmentation and social stratification we present tests of the segmentation hypothesis including several of the dual labor market hypotheses and discuss their inherent ambiguity we also present evidence on the importance of family background for earnings determination and educational attainment

the performance of industrial sector voluntary climate programs climate wise and 1605 b abstract corporate voluntary climate programs have had limited evaluation the self selection of participants an essential element of such initiatives poses challenges to researchers because the decision to participate may not be random and may be correlated with outcomes this study aims to gage the environmental effectiveness of the industrial sector elements of two early voluntary climate change programs with established track records the u s environmental protection agency s climate wise and the u s department of energy s voluntary reporting of greenhouse gases program 1605 b particular attention is paid to the participation decision and how various assumptions affect estimates of program outcomes using propensity score matching methods applied to plant level census data overall the effects are modest reductions in fuel and electricity expenditures are no more than 10 percent and probably less than 5 percent virtually no evidence suggests either program has a statistically significant effect on fuel costs some evidence indicates that participation in climate wise led to a 3 5 percent increase in electricity costs that vanished after two years stronger evidence suggests that participation in 1605 b led to a 4 8 percent decrease in electricity costs that persisted for at least three years these results suggest that while voluntary programs can play some role in addressing climate change they are unlikely to bring about the kinds of steep reductions called for in the current debate

path dependent options extending the monte carlo simulation approach monte carlo simulation has been used to value options since boyle s seminal paper monte carlo simulation however has not been used to its fullest extent for option valuation because of the belief that the method is not feasible for american style options this paper demonstrates how to incorporate optimal early exercise in the monte carlo method of valuing options by linking forward moving simulation and the backward moving recursion of dynamic programming through an iterative search process to demonstrate the potential of this method we use it to value american style options on the average price or asian options the computational experience reveals a flexible valuation technique with potential for application to a range of securities and financial decision problems

american option pricing under garch by a markov chain approximation abstract we propose a numerical method for valuing american options in general and for the garch option pricing model in particular the method is based on approximating the underlying asset price process by a finite state time homogeneous markov chain since the markov transition probability matrix can be derived analytically the price of an american option can be computed by simple matrix operations the markov transition probability matrix is typically sparse the use of a sparse matrix representation can substantially increase the dimension of the markov chain to obtain better numerical results the markov chain method works well for the garch option pricing framework and it serves as an alternative to the existing numerical methods for the valuation of american options in other pricing settings we provide a convergence proof for the markov chain method and analyze its numerical performance for the black scholes 1973 and garch option pricing models

what determines success examining the human financial and social capital of jamaican microentrepreneurs abstract this research examines the performance of 215 informal microenterprises in jamaica studying the influence of human capital social capital and financial capital of the owners on their business profitability understanding the importance of particular relationships that result in successful micro businesses is important for a number of reasons first among many developing countries the growth of microenterprise provides the most visibly vibrant and growing economic activity although considerable effort and resources are being directed toward microenterprise promotion schemes empirical research on the subject is quite limited second economies in developing countries mirror many of the social and institutional problems existent in urban economically disadvantaged areas of the united states and other developed countries for these areas microenterprise may be an essential component of urban renewal and community development this study helps in identifying important characteristics of social and individual attributes that may be relevant to those attempting to strengthen this subsector finally this study seeks to provide insight into a dimension of microbusiness research for which there are limited data specifically the role that social capital plays among practicing entrepreneurs and owners this research found that different structural environments even within a singular and small economy may considerably alter the rates of return to human social and financial capital as a result the analysis of enterprises includes segmentation according to both the usage or not of employees and the sophistication of the technologies used several factors were determined to enhance the profitability of the businesses in all categories vocational training for example demonstrated consistently strong and positive effects mother s high occupational status a proxy for socioeconomic status and years of experience in the business were also consistently positive and strongly associated with increasing profits although additional starting capital played an important role for both the businesses with and without employees increasing amounts failed to differentiate the success of those firms that were already operating in the higher technological tier obtaining a small business loan acted in a similar manner enhancing the profitability of all firms except those segmented into a high technological tier one interpretation of this finding is that the role of technological choice is extremely important and appears to dwarf that of varying amounts of starting capital social capital as operationalized by frequent church attendance and marital status of the owner was found generally to increase the profitability of the business the data demonstrate that social networks play an important role in the success of these businesses and that conditions in the highest tier utilize social capital in a somewhat unique manner

an algorithm for computing values of options on the maximum or minimum of several assets an approximate method is developed for computing the values of european options on the maximum or the minimum of several assets the method is very fast and is accurate for parameter ranges that are often of the most interest the approach casts the problem in terms of order statistics and can be used to handle situations where the initial asset prices the asset variances and the covariances are all unequal numerical values are given to illustrate the accuracy of the method

numerical evaluation of multivariate contingent claims we develop a numerical approximation method for valuing multivariate contingent claims the approach is based on an n dimensional extension of the lattice binomial method closed form solutions for the jump probabilities and the jump amplitudes are obtained the accuracy of the method is illustrated in the case of european options when there are three underlying assets article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the quality of schooling quantity alone is misleading although much research discusses the quantity of schooling as an effective impact on productivity and earnings most such research leaves out the idea of the quality of schooling which may cause biases in the estimated returns to schooling this paper consequently attempts to extend the standard mincerian approach to incorporate school quality as well as quantity it demonstrates how exclusion of quality in the standard procedure may cause biases in the estimated returns to years of schooling probably in the upward direction the paper explores the implications of this extension of the standard model for the case of young brazilian males it shows that the estimate of the private return to years of schooling using the preferred quality inclusive specification is only one half the estimate using the standard procedure indicating substantial upward bias in the standard estimates it further outlines a method for estimating a social return to quality and finds that it exceeds substantially the social return to quantity the paper then shows why this in turn suggests there may be an equity productivity trade off in schooling investments

what is a good job a new measure of labor market success no currently available index allows investigators to estimate the overall desirabitlity of specific jobs with data collected in the 1980 survey of job charactersitics an index of job desirability ijd can be constructed to fill this gap the ijd incorporates 13 nonmonetary job characteristics along with measures of earnings and weights all job characteristics according to their effects on workers judgments about how good their current jobs are compared with an average job while earnings are the most important single determinant of a job s desirability the 13 nonmonetary job characteristics together are twice as important as earnings unlike occupational status and earnings the proposed index explains almost the entire effect of race sex educational attainment and experience on job ratings it also explains almost all the variation in job ratings provided by workers in different occupations furthermore taking account of nonmonetary job characteristics more than doubles the estimated level of

numerical valuation of high dimensional multivariate american securities we consider the problem of pricing an american contingent claim whose payoff depends on several sources of uncertainty several efficient numerical lattice based techniques exist for pricing american securities depending on one or few up to three risk sources however these methods cannot be used for high dimensional problems since their memory requirement is exponential in the number of risk sources we present an efficient numerical technique that combines monte carlo simulation with a particular partitioning method of the underlying assets space which we call stratified state aggregation ssa using this technique we can compute accurate approximations of prices of american securities with an arbitrary number of underlying assets our numerical experiments show that the method is practical for pricing american claims depending on up to 400 risk sources