an empirical analysis of wage dispersion and efficiency wages the main purpose of this study is to examine inter industry wage differentials in sweden after controlling for individual and job characteristics the results indicate that these differentials are substantial the ranking of the differentials was stable over time while the dispersion of wage premiums fell by 50 per cent during the period 1968 81 a period of strong efforts to reduce wage dispersion in sweden the relation between industry wage premiums and a number of industry characteristics is also examined along with new evidence which is in line with the shirking model hypothesis on the relation between wages and worker control

time to share the load gender differences in household responsibilities and business profitability this paper uses data from 2408 micro and small businesses in ecuador to study business profit differentials by gender the results point to unpaid work time devoted to household chores child care and care for the elderly as the largest single factor explaining 33 of the difference in profits observed between male and female run businesses when comparing male and female business owners with similar business and personal characteristics the difference in business profits disappears the results point to initial endowments rather than returns on those endowments as the reason why female run businesses are less profitable also they indicate that male and female entrepreneurs are equally effective as managers provided they have access to the same resources including time

where are all the self employed women push and pull factors influencing female labor market decisions previous research focuses on factors that influence self employment participation in part because entrepreneurship has been associated with economic growth this literature has tended to focus only on men or the comparison of women to men while ignoring substantial heterogeneity in employment decisions among women by investigating the impact of individual household and local economic and cultural characteristics on the labor market outcomes of different groups of women we get a more comprehensive picture of their self employment decision recognizing self employment as one of multiple labor market choices we use multinomial logit and two confidential geocoded micro level datasets to study women s career choices in urban areas we find that the effects of various push and pull factors differ between married and unmarried women in particular more progressive gender attitudes pull married women into self employment while household burdens associated with children push them into self employment for unmarried women the local business climate and individual characteristics have the strongest influence in both cases the motivations for women are quite different than men

gender as a determinant of small business performance insights from a british study the performance of small businesses that is the ability of small firms to contribute to job and wealth creation through business start up survival and growth has been an important area of policy and academic debate in the 1980s surprisingly little has been written about gender and small business performance our literature search revealed only a small number of studies of any substance on this subject though over forty made some mention of it most studies shied away from direct examination of quantitative performance measures such as jobs created sales turnover annual growth tending to concentrate on qualitative measures of success or failure the paper examines small business performance and gender using data obtained from a survey of 600 300 women 300 men scottish and english small business ownermanagers part of a three year study on the impact of gender on small business management analyses suggest that the relationship between gender and small business performance is complex but that gender still appears to be a significant determinant even after other key factors are controlled for

stock returns over the fomc cycle we document that since 1994 the equity premium is earned entirely in weeks 0 2 4 and 6 in federal open market committee fomc cycle time that is even weeks starting from the last fomc meeting we causally tie this fact to the fed by studying intermeeting target changes fed funds futures and internal board of governors meetings the fed has affected the stock market via unexpectedly accommodating policy leading to large reductions in the equity premium evidence suggests systematic informal communication of fed officials with the media and financial sector as a channel through which news about monetary policy has reached the market

the fed and short term rates is it open market operations open mouth operations or interest rate smoothing abstract it is widely believed that the fed controls the federal funds rate by altering the degree of pressure in the reserve market through open market operations when it changes its target for the funds rate recently however several analysts have suggested that the fed need not conduct open market operations to change the funds rate rather they argue it is sufficient that the fed indicate its desire for the funds rate this paper notes that there is yet a third alternative the interest rate smoothing hypothesis that suggests that the fed does not move rates per se but rather smooths the transition of rates to the new equilibrium required by economic shocks this paper tests the open market and open mouth alternatives using a methodology first used by cook and hahn journal of monetary economics 1989a 331 finding no evidence that either open market operations or open mouth operations can account for the close relationship between the funds rate and the funds rate target a variety of evidence consistent with the interest rate smoothing hypothesis is considered the results suggest that many changes in the fed s funds rate target are an endogenous response to economic events and suggest that an alternative way to identify exogenous changes in policy is to identify exogenous changes in the fed s funds rate target

density dependence of entrepreneurial dynamics competition opportunity cost or minimum efficient scale this paper reports on a new examination of the well established negative effect of localized density on survival in established industries we attempt to discriminate between three competing but not necessarily mutually exclusive explanations resource competition variations in the opportunity costs of entrepreneurship and geographic variations in minimum efficient scale mes we construct a model of firm growth and survival in which each of these potential causes of density dependence has a transparent parametric effect and we derive six predictions that collectively allow for discriminating empirical tests empirical results using confidential geocoded data from the national longitudinal survey of youth consistently favor the opportunity cost mechanism this paper was accepted by toby stuart entrepreneurship and innovation

do entrepreneurs create jobs many countries support the creation of new firms such policy is based on the presumption that the total number of jobs increases when a person moves from unemployment or regular employment to self employment in this paper the link between self employment and overall employment is analyzed the empirical analysis based on panel data of swedish counties from 1976 1995 pays particular attention to simultaneity issues the results suggest that self employment may have a significant positive effect on overall employment

does schooling cause growth a number of economists find that growth and schooling are highly correlated across countries a model is examined in which the ability to build on the human capital of one s elders plays an important role in linking growth to schooling the model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on mincerian returns to education the upshot is that the impact of schooling on growth explains less than one third of the empirical cross country relationship the ability of reverse causality to explain this empirical relationship is also investigated

genetic distance trade and the diffusion of development the determinants of countries long term income differences feature prominently in the literature spolaore and wacziarg the diffusion of development quarterly journal of economics 2009 124 469 529 argue that cultural differences measured by countries genetic distance are an important barrier to the diffusion of development from the world s technological frontier we revisit their findings in three ways first we successfully reproduce their results and confirm the robustness of their baseline findings second we estimate their models for different time periods and find that the impact of genetic distance on income differences did not significantly change over time finally we explore one of the underlying mechanisms of technology adoption and show that bilateral trade is one channel through which cultural differences retard the diffusion of development less

rough and lonely road to prosperity a reexamination of the sources of growth in africa using bayesian model averaging this paper takes a fresh look at africa s growth experience by using the bayesian model averaging bma methodology bma enables us to consider a large number of potential explanatory variables and sort out which of these variable can effectively explain africa s growth experience posterior coefficient estimates reveal that key engines of growth in africa are substantially different from those in the rest of the world more precisely it is shown that mining primary exports and initial primary education exerted differential effect on african growth these results are examined in relation to the existing literature copyright 2008 john wiley sons ltd

socioeconomic background and the returns to schooling in two low income economies in the united kingdom the increment to income yielded by an additional year of schooling declines as the occupational status of the worker s father rises in this note the relationship between family background and the returns to schooling is measured in kenya and tanzania in contrast to the united kingdom a positive relationship is documented several explanations for this marked difference between a high income economy and two low income economies are suggested copyright 1987 by the review of economic studies limited

economic development and the return to human capital a smooth coefficient semiparametric approach this paper investigates the impact of human capital on the process of economic growth by allowing the contribution of traditional inputs capital and labour as well as that of human capital to vary both across countries and time the former is accomplished by constructing an index of tfp growth for traditional inputs while the latter through semiparametric methods we derive estimates of the output elasticity and social return to human capital for 51 countries at various stages of economic development copyright 2005 john wiley sons ltd

which sectors make poor countries so unproductive which sectors are most responsible for the low total factor productivities of developing countries to answer this question we develop a new framework for sectoral development accounting applying this framework to the penn world table we find that in equipment construction and food the sectoral tfp differences between developing countries and the united states are much larger than in the aggregate however in manufactured consumption the sectoral tfp differences are about equal to the aggregate tfp differences and in services they are much smaller we show that our level of disaggregation allows us to reconcile the results of existing studies of sectoral productivity differences which have focused on noncomparable two sector decompositions of the aggregate data we also show that our results help shed light on existing theories of aggregate tfp differences

changes in labor force participation in the united states the labor force participation rate in the united states increased almost continuously for two and a half decades after the mid 1960s pausing only briefly during economic downturns the pace of growth slowed considerably during the 1990s however and after reaching a record high of 67 3 percent in the first quarter of 2000 participation had declined by 1 5 percentage points by 2005 this paper reviews the social and demographic trends that contributed to the movements in the labor force participation rate in the second half of the twentieth century it also examines the manner in which developments in the 2000s reflect a break from past trends and considers implications for the future

education s role in china s structural transformation abstract we explore education s role in improving the allocation of labor between china s agricultural and nonagricultural sectors and measure the portion of china s recent growth attributable to this channel using detailed micro level data and an empirical model that allows for the endogenous selection of education and sector of employment we estimate the relationship between an individual s educational attainment sector and income we find that about 11 of aggregate growth in output per worker from 1978 to 2004 is accounted for by increased education with 9 coming through the labor reallocation channel and 2 attributable to increased within sector human capital

human capital and growth abstract this paper describes a growth model with the property that human capital accumulation can account for all observed growth the model is shown to be consistent with evidence on individual productivities as measured by census earnings data the central hypothesis is that we learn more when we interact with more productive people

economic growth and the structure of long term development this volume collects some of the papers presented at the 82nd round table conference of the international economic association that was organised in collaboration with fondazione eni enrico mattei the book considers different approaches to the analysis of economic growth and it is organised in five parts par i is devoted to empirical evidence part ii contains six papers which present a series of models based on different approaches but with special emphasis on endogenous growth and on schumpeterian models of growth and fluctuations part iii of the book is devoted to the impact of international trade on economic development part iv examines the effects of economic development on the natural environment the final part of the book part v contains the concluding evaluations contributors p aghion r aversi d ben david g bertola o castellino f donati g dosi w easterly s fabiani c freeman r goodwin j helliwell e helpman p howitt r king m landesmann r levine s lombardini k g maler w d nordhaus l l pasinetti s rebelo a sen l soete r m solow m syrquin b verspagen s zervos

iq in the production function evidence from immigrant earnings the cross country growth literature especially sala i martin 1997 sala i martin doppelhofer and miller 2004 has found that traditional education measures rarely have a robust relationship with growth and productivity elementary education being a rare exception by contrast a new empirical growth literature jones and schneider 2006 lynn and vanhanen 2002 ram 2007 weede 2004 weede and kampf 2002 has shown that a nation s average iq has a remarkably robust relationship with its productivity figure 1 that a test designed by psychologists should have such a robust relationship with economic variables is a puzzle that demands explanation for instance jones and schneider showed that national average iq was more robust than other human capital variables and was statistically significant at the 1 level in all 455 growth regressions that controlled for all 18 factors that passed sala i martin doppelhofer and miller s 2004 robustness tests of course as with all the growth regression literature a key difficulty is disentangling cause and effect thus in this article we run no growth regressions whatsoever instead we perform a simple calibration of the iq productivity relationship based on widely agreed upon microeconomic parameters that means we can directly estimate one causal channel running from cognitive ability to productivity in the process we learn the following 1 if one knows the average iq of a nation s citizens as estimated by lynn and vanhanen 2002 2006 one can predict the average wages that immigrants from that country will earn upon their arrival in the united states whether or not one controls for immigrant education and even if the test is completely visual rather than verbal in other words national average iq predicts part of what hendricks 2002 calls unmeasured worker skill 2 we find that a 1 point increase in national average iq predicts 1 higher immigrant wages precisely the value found repeatedly in microeconometric studies note that by construction 1 iq point approximately equal to 1 15th of a standard deviation within any large national population together points 1 and 2 provide further evidence that cross country iq tests are valid predictors of worker productivity 3 when iq is added to the production function in the form implied by traditional externality free human capital theory differences in national average iq are quantitatively significant in explaining cross country income differences that said our productivity accounting exercise does not resolve the puzzle of why high iq countries are 15 times richer than low iq countries in a related vein hanushek and kimko 2000 use national math and science test scores to verify that cognitive skills appear to matter more for groups than for individuals like us they use immigrants to the united states as a way to test whether immigrants bring their home country productivity levels along with them when they immigrate to the united states when they interpret their results within a solow type framework they conclude that the cross country growth equation results are much larger than the corresponding results for individual earnings in sum our article rigorously explores the quantitative magnitude of the puzzle uncovered by hanushek and kimko 2000 and hanushek and woessman 2007 but by using iq tests rather than other widely used math and science test scores we can often double our sample size while simultaneously using the most widely analyzed best understood form of cognitive test we begin with an overview of the recent psychological literature on the validity of iq tests and then proceed to our discussion of the link between iq and immigrant wages the discussion of iq and immigrant wages yields a key parameter gamma the iq semi elasticity of wages which we use in our development accounting exercise we then discuss the questions of reverse causality and trends in the iq productivity relationship over the past 40 yr and conclude by discussing how our results fit into the growth literature

central bank communication and monetary policy a survey of theory and evidence over the last two decades communication has become an increasingly important aspect of monetary policy these real world developments have spawned a huge new scholarly literature on central bank communication mostly empirical and almost all of it written in this decade we survey this ever growing literature the evidence suggests that communication can be an important and powerful part of the central bank s toolkit since it has the ability to move financial markets to enhance the predictability of monetary policy decisions and potentially to help achieve central banks macroeconomic objectives however the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy

local labor force education new business characteristics and firm performance it is often asserted that a highly educated workforce is vital to improving the competitive position of american businesses especially by boosting entrepreneurship to examine this contention we use population census data and a new panel data of startup firms to examine how the education and skill level of the local labor force are related to the creation and success of new businesses this paper studies relationship between education entrepreneurship and businesses outcomes and considers simultaneously both the education of the entrepreneur and of the workforce where the entrepreneurs operate their businesses consistent with this simultaneous focus our initial results indicate that more educated entrepreneurs tend to be located in metropolitan areas with more educated workforces moreover highly educated areas have above average entrepreneurship rates finally the level of education of entrepreneurs is strongly related to positive business outcomes especially for college graduates compared to those with less than a four year degree

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

regional influences on fomc voting patterns this paper looks at the monetary policy decisions of the u s federal reserve and asks whether observed voting patterns have been driven entirely by national concerns or whether regional factors have also played a role we find that fed policymakers take into account developments in regional unemployment when casting votes on monetary policy these results are robust to different specifications of the voting equation this research is relevant for the fed and it may also be relevant for europe s fledgling central bank in frankfurt in light of regional differences within the euro area

the impact of education on subjective discount rate in ugandan villages abstract heterogeneity in time discounting may reinforce the existing barriers to save and invest faced by rural populations in developing countries we elicit a subjective discount rate for a varied sample of ugandan villagers in accordance with other studies we have found the discount rate to decrease with education we examine this correlation further by testing the causal effect of education and exploit two different sources of its variation school frequency across villages and the number of the respondents school going years that overlap with the era of the dictator idi amin s rule for men we find that education has a significant impact on their discount rate similar in magnitude for both types of instruments and robust to observable characteristics this finding highlights the importance of education in development

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

how important is human capital a quantitative theory assessment of world income inequality we develop a quantitative theory of human capital investment in order to evaluate the magnitude of cross country dierences in total factor productivity tfp that explains the variation in per capita incomes across countries we build a heterogeneousagent economy with cross sectional variation in ability schooling and expenditures on schooling quality in our theory the parameters governing human capital production and random ability process have important implications for a set of cross sectional statistics mincer return variance of earnings variance of schooling and intergenerational correlation of earnings these restrictions of the theory and u s household data are used to pin down the key parameters driving the quantitative implications of the theory our main finding is that human capital accumulation strongly amplifies tfp dierences across countries in particular we find an elasticity of output per worker with respect to tfp of 2 8 a 3 fold dierence in tfp explains a 20 fold dierence in output per worker we argue that the cross country dierences in human capital implied by the theory are consistent with a wide array of evidence including earnings of immigrants in the united states average mincer returns across countries and the relationship between average years of schooling and per capita income across countries the theory implies that using mincer returns to measure human capital understates dierences across countries by a factor of 2

reserve banks the discount rate recommendation and fomc policy in the united states private citizens play little direct role in policymaking the directors of the boards of the regional federal reserve banks are an apparent exception to this rule these directors recommend changes in the discount rate although the board of governors decides whether to act on the recommendations these directors would have greater influence if they affected the fomc votes of their district bank presidents this paper shows that the fomc votes of the regional bank presidents are strongly correlated with the discount rate recommendation of their bank s board several alternative explanations for the correlation are then examined

where has all the education gone cross national data show no association between increases in human capital attributable to the rising educational attainment of the labor force and the rate of growth of output per worker this implies that the association of educational capital growth with conventional measures of total factor production is large strongly statistically significant and negative these are on average results derived from imposing a constant coefficient however the development impact of education varied widely across countries and has fallen short of expectations for three possible reasons first the institutional governance environment could have been sufficiently perverse that the accumulation of educational capital lowered economic growth second marginal returns to education could have fallen rapidly as the supply of educated labor expanded while demand remained stagnant third educational quality could have been so low that years of schooling created no human capital the extent and mix of these three phenomena vary from country to country in explaining the actual economic impact of education or the lack thereof

human capital and industrialization evidence from the age of enlightenment while human capital is a strong predictor of economic development today its importance for the industrial revolution is typically assessed as minor to resolve this puzzling contrast we differentiate average human capital worker skills from upper tail knowledge both theoretically and empirically we build a simple two sector model where worker skills raise the productivity in both agriculture and manufacturing and scientific knowledge affects the entrepreneurial ability to keep up with a rapidly advancing technological frontier the model predicts that the local presence of knowledge elites is unimportant in the pre industrial era but drives growth thereafter worker skills in contrast are not crucial for growth to measure the historical presence of knowledge elites we use city level subscriptions to the famous encyclopedie in mid 18th century france we show that subscriber density is a strong predictor of city growth after 1750 but not before the onset of french industrialization alternative measures of development confirm this pattern soldier height and industrial activity are strongly associated with subscriber density after but not before 1750 literacy on the other hand does not predict growth finally by joining data on british patents with a large french firm survey from 1837 we provide evidence for the mechanism upper tail knowledge raised the productivity in innovative industrial technology

the fed the bond market and gradualism in monetary policy we develop a model of monetary policy with two key features i the central bank has some private information about its long run target for the policy rate and ii the central bank is averse to bond market volatility in this setting discretionary monetary policy is gradualist the central bank only adjusts the policy rate slowly in response to changes in its target such gradualism represents an attempt to not spook the bond market however this effort is unsuccessful in equilibrium as long term rates rationally react more to a given move in short rates when the central bank moves more gradually the same desire to mitigate bond market volatility can lead the central bank to lower short rates sharply when publicly observed term premiums rise in both cases there is a time consistency problem and society would be better off with a central banker who cares less about the bond market

the contribution of education to economic growth a review of the evidence with special attention and an application to sub saharan africa summary this paper examines recent studies that estimate the impact of education on economic growth it explains why cross country regressions face formidable econometric problems recent studies are reviewed some show strong impacts of education on economic growth others show little effect all have multiple estimation problems which may explain their divergent results evidence shows that education quality in sub saharan africa is much lower than in other developing countries estimates from three influential studies are extended the results suggest that the impact of education on economic growth in sub saharan africa is lower than in other countries likely due to lower school quality

high frequency identification of monetary non neutrality the information effect we present estimates of monetary non neutrality based on evidence from high frequency responses of real interest rates expected inflation and expected output growth our identifying assumption is that unexpected changes in interest rates in a 30 minute window surrounding scheduled federal reserve announcements arise from news about monetary policy in response to an interest rate hike nominal and real interest rates increase roughly one for one several years out into the term structure while the response of expected inflation is small at the same time forecasts about output growth also increase the opposite of what standard models imply about a monetary tightening to explain these facts we build a model in which fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output

latin america in the rearview mirror abstract latin american countries are the only western countries that are poor and that are not gaining ground on the u s this paper evaluates why latin america has not replicated western economic success we find that this failure is primarily due to tfp differences latin america s tfp gap is not plausibly accounted for by human capital differences but rather reflects inefficient production we argue that competitive barriers are a promising channel for understanding low latin tfp we document that latin america has many more international and domestic competitive barriers than do western and successful east asian countries we also document a number of microeconomic cases in latin america in which large reductions in competitive barriers increase latin american productivity to western levels

self employment differentials among foreign born stem and non stem workers abstract this paper uses the american community survey to examine the previously overlooked fact that foreign stem science technology engineering and mathematics graduates have much lower self employment rates than their non stem counterparts with an unconditional difference of 3 3 percentage points we find empirical support for differing earnings opportunities as a partial explanation for this self employment gap high wages in stem paid employment combined with reduced earnings in self employment make self employment less desirable for stem graduates high self employment rates among other foreign born workers partially reflect weak paid employment opportunities public policy should encourage efficient use of worker skills rather than low value business venture creation

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

the effect of a first child on female labor supply evidence from women seeking fertility services estimating the causal effect of a first child on female labor supply is complicated by the endogeneity of fertility this paper addresses this problem by focusing on a sample of women from the national survey of family growth nsfg who sought help to become pregnant after a certain period only some of these women gave birth results using this strategy show that having a first child younger than one year old reduces female employment by 26 percentage points these estimates are close to ols estimates from census data and to those from ols and fixed effects models on nsfg data

the effect of fomc votes on financial markets this paper shows that since votes of members of the federal open market committee have been included in press statements stock prices increase after the announcement when votes are unanimous but f

political uncertainty market anomalies and presidential honeymoons the first 100 days of a newly elected president s administration are often a period of substantial and concentrated policy change this paper shows that measures of uncertainty and risk aversion rise sharply during presidential honeymoons consistent with theoretical models that suggest that investors demand compensation for bearing heightened political risk we document striking spread returns to value investment and profitability anomalies during honeymoons for example the book to market value premium averages 3 51 per month during presidential honeymoons yet only 0 27 per month at other times these findings survive numerous robustness checks nonetheless establishing a direct link between escalating political risk and equity returns proves challenging

why women work closer to home this paper analyzes the extent to which differences in labor force status in household composition and in household roles account for sex differences in workplace residence separation modelling work trip length as the outcome of the choice of household residential and individual job locations equilibrium work trip length is estimated empirically as a function of labor market housing and household characteristics for male and female employees in seven different household categories data from the 1976 panel survey of income dynamics are used the study concludes that while sex differences in job tenure work hours and wages are in themselves sufficient to fully account for observed sex differences in workplace residence separation sex differences in household roles i e responses to spouses characteristics are of even greater importance in influencing women to work closer to home

does the federal reserve possess an exploitable informational advantage abstract this paper provides evidence that the federal reserve has an informational advantage over the public that can be exploited to improve activist monetary policy the informational superiority does not result from the fed having earlier access to publicly released financial data instead this advantage is generated by confidential supervisory knowledge about troubled non publicly traded institutions as a result this information can remain confidential for an extended period since these banks have neither the desire to fully disclose the extent of their financial troubles nor the requirement to do so the informational advantage is both statistically significant and economically important providing a potential justification for activist monetary policy

a new database on human capital stock in developing and industrial countries sources methodology and results abstract the paper describes the techniques and data adopted for the construction of a new series of estimates of the stock of education in 85 countries over 28 years 1960 1987 the series are built from enrollment data using the perpetual inventory method adjusted for mortality estimates are corrected for grade repetition among school goers and country specific drop out rates for primary and secondary students enrollment data series used start as far back as 1930 for most countries and even earlier for others this reduces the need for backward extrapolation of enrollments to provide the initial estimates of the investment inventory

economic demographic and institutional determinants of life insurance consumption across countries life insurance has become an increasingly important part of the financial sector over the past 40 years providing a range of financial services for consumers and becoming a major source of investment in the capital market but what drives the large variation in life insurance consumption across countries remains unclear using a panel with data aggregated at different frequencies for 68 economies in 1961 2000 this article finds that economic indicators such as inflation income per capita and banking sector development and religious and institutional indicators are the most robust predictors of the use of life insurance education life expectancy the young dependency ratio and the size of the social security system appear to have no robust association with life insurance consumption the results highlight the importance of price stability and banking sector development in fully realizing the savings and investment functions of life insurance in an economy

entrepreneurial women and men two different species the ability of the self employed to create additional job opportunities is a fundamental concern given the huge increases in public resources targeted at new venture creation in the u k and other countries since 1979 this study initially concentrates on identifying differences in the personal and demographic characteristics of women and men in four potential labour market states namely unemployment waged employment single self employment and job creating self employment it then goes on to consider labour market transitions over a four year period between 1991 and 1995 the key findings are firstly that women entrepreneurs are better educated than their male counterparts and secondly that flows into self employment were considerably higher for men than women furthermore proportionately three times as many male self employed in 1991 had gone on to become job creating self employed by 1995

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

education lifetime labor supply and longevity improvements this paper presents an analysis of the differential role of mortality for the optimal schooling and retirement age when the accumulation of human capital follows the so called ben porath mechanism we set up a life cycle model of consumption and labor supply at the extensive margin that allows for endogenous human capital formation this paper makes two important contributions first we provide the conditions under which a decrease in mortality leads to a longer education period and an earlier retirement age second those conditions are decomposed into a ben porath mechanism and a lifetime human wealth effect vs the years to consume effect finally using us and swedish data for cohorts born between 1890 and 2000 we show that our model can match the empirical evidence

self employment wealth and job creation the roles of gender non pecuniary motivation and entrepreneurial ability this paper uses national child development study data for a large cohort of british individuals to explore the influence of education inheritance and other background characteristics on the propensity to become self employed and also on subsequent success as measured by job and wealth creation for the first time we study the effects of our regressor variables on our success measures via disaggregation of our sample by gender and in this way reveal striking differences between the determinants of male and female entrepreneurial performance

cultural constraints on innovation based growth to what extent does the cultural composition of a society impose a constraint on its long run growth potential we study this question in the context of an innovation based model of growth where cultural attitudes are endogenously transmitted from one generation to the next focusing on attitudes regarding patience we analyze the two way interaction between economic growth and the intergenerational transmission of patience exploiting this interaction we compare the long run growth performance of a culturally heterogeneous society where patience is initially underrepresented in the population with a culturally homogeneous society where all agents are perfectly patient our main result is that in the absence of any intrinsic preferences of patient parents to transmit their attitudes to their children the development paths of the two societies are bound to diverge with the culturally heterogeneous society experiencing lower growth rates yet if patient parents ceteris paribus prefer their children to be patient like them we show that the two societies can in the long run grow at the same rate jel d91 e24 o30 o40 z10

consumer discrimination and self employment self employment rates and incomes differ significantly by race we show that these differentials arise in markets with consumer discrimination and incomplete information about the price of the good and the race of the seller equilibrium income distributions have two properties mean black incomes are lower than mean white incomes and the returns to ability are lower for black than for white sellers able blacks therefore are less likely to self select into the self employment sector than able whites using the 1980 census data we find that observed racial differences in the self employment income distributions are consistent with the theoretical predictions

education growth and income inequality estimates of the effect of education on gdp the social return have been hard to reconcile with micro evidence on the private return to schooling we present a simple explanation combining two ideas imperfect substitution and endogenous skill biased technological progress and use cross country panel data on inequality and gdp to test these ideas a one year increase in the level of education reduces the private return by 2 percentage points consistent with katz murphy s 1992 elasticity of substitution we find no evidence for reversal of this initial effect as in acemoglu 2002 in the short run the social return equals the private return

the medium run effects of educational expansion evidence from a large school construction program in indonesia this paper studies the medium run consequences of an increase in the rate of accumulation of human capital in a developing country from 1974 to 1978 the indonesian government built over 61 000 primary schools the school construction program led to an increase in education among individuals who were young enough to attend primary school after 1974 but not among the older cohorts 2sls estimates suggest that an increase of 10 percentage points in the proportion of primary school graduates in the labor force reduced the wages of the older cohorts by 3 8 10 and increased their formal labor force participation by 4 7 i propose a two sector model as a framework to interpret these findings the results suggest that physical capital did not adjust to the faster increase in human capital

bond yields and the federal reserve bond yields respond to policy decisions by the federal reserve and vice versa to learn about these responses i model a high frequency policy rule based on yield curve information and an arbitrage free bond market in continuous time the fed s target is a pure jump process jump intensities depend on the state of the economy and the meeting calendar of the federal open market committee the model has closed form solutions for yields as functions of a few state variables introducing monetary policy helps to match the whole yield curve because the target is an observable state variable that pins down its short end and introduces important seasonalities around fomc meetings the volatility of yields is snake shaped which the model explains with policy inertia the policy rule crucially depends on the two year yield and describes fed policy better than taylor rules

open mouth operations abstract this paper explains how central bank statements rather than open market operations can be used to implement monetary policy in the extreme policy instruments can be held constant and yet interest rates will evolve along the path desired by the central bank we show how the recent implementation of monetary policy in new zealand works in this way using announcement data from new zealand we find that open mouth operations lead to large changes in interest rates across all maturities and these changes cannot be explained by open market operations implications are drawn for monetary policy in other jurisdictions

an ampirical assessment of the contribution of small business employment to u s state economic performance small business proponents regularly couple their arguments for favorable government policies and reduced tax and regulatory burdens to the presumed benefits of increased proportions of small versus large sector employment though regularly espoused at both the state and national level these presumptions regarding the benefits of small business employment remain an empirical issue are the presumed benefits a reality a panel analysis of 48 u s states for a ten year period was used to evaluate the contribution of small businesses to growth in productivity growth in gross state product gsp unemployment and wage inflation at the state level the system of simultaneous equations revealed that states with higher proportions of very small business employment do indeed experience higher levels of productivity growth and gross state product growth while having less wage inflation and lower unemployment rates

growth or stagnation the role of public education abstract this paper presents a political economic theory of growth and human capital accumulation where individuals of different ages disagree over the resource commitment to public education in the context of an overlapping generations model with two period lived agents population growth implies that the equilibrium quantity of public education reflects the preferences of youth and is therefore forward looking despite forward looking behavior it is shown that sufficiently rapid population growth can trigger economic stagnation in the political economic equilibrium the model therefore offers a novel explanation for observed negative correlations between population growth measures and economic growth

swimming upstream trends in the gender wage differential in the 1980s using michigan panel study of income dynamics data for 1979 and 1988 we analyze how a falling gender wage gap occurred despite changes in wage structure unfavorable to low wage workers the decrease is traced to gender specific factors which more than counterbalanced changes in measured and unmeasured prices working against women supply shifts net of demand were unfavorable for women generally and hurt high skilled more than middle and low skilled women by analyzing wages we find support for the notion of a gender twist in supply and demand having its largest negative effect on high skilled women

employer discrimination evidence from self employed workers during the last two decades the issue of equality according to sex and race has become one of increasing importance to economists an extant literature on the economics of discrimination began with the pioneering work of becker 1957 this paper is an attempt to shed further light on the extent of employer discrimination by sex and race by comparing the earnings of self employed workers to their wage and salary counterparts in short if employer discrimination is a principal source of discrimination against blacks and women then we would expect the black white and female male earnings ratios to be higher for the self employed compared to their wage and salary counterparts no discrimination of this type is applicable to self employed workers in addition blacks and women should be relatively overrepresented among the self employed compared to wage and salary workers in the economy section ii of this paper further elaborates on this indirect method to estimate the extent of employer discrimination in the labor market for blacks and women in section iii the results of this method are presented using the 1978 current population survey as the data source results indicate the black white and female male earnings ratios are no larger for the self employed compared to their wage and salary counterparts even after making various attempts to adjust for differences in other variables that affect earnings and to limit the influence of consumer discrimination on the results

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded