the volcker rule and corporate bond market making in times of stress abstract focusing on downgrades as stress events that drive the selling of corporate bonds we show that the illiquidity of stressed bonds has increased after the volcker rule dealers regulated by the rule have curtailed their market making activities and non volcker affected dealers have not offset the decreased activities of volcker affected dealers furthermore even volcker affected dealers that are not constrained by basel iii and comprehensive capital analysis and review regulations change their behavior inconsistent with the effects being driven by these other regulations because volcker affected dealers have been the main liquidity providers bonds have become less liquid during times of stress due to the volcker rule

social class family background and intergenerational mobility abstract this research examines the various approaches taken by economists and sociologists for analyzing intergenerational mobility social mobility models based on social classes arising from an occupational classification scheme are analysed a test for the statistical validity of classification schemes is proposed and tested using danish sample survey data that was first collected in 1976 and augmented in 2000 this is referred to as a homogeneity test and is a likelihood ratio test of a set of linear restrictions which define social classes for denmark it is shown that this test fails for an erikson goldthorpe classification system raising doubts about the statistical validity of occupational classification systems in general we also estimate regression models of occupational earnings household earnings and educational attainment using family background variables as covariates controlling for unobservables measurement error and simultaneous equation bias in these models homogeneity tests are also rejected we conclude from these results that the individual s family background has a small but significant impact on lifetime chances which is not captured by the erikson goldthorpe classification scheme

intergenerational economic mobility in the united states 1940 to 2000 we estimate trends in intergenerational economic mobility by matching men in the census to synthetic parents in the prior generation we find that mobility increased from 1950 to 1980 but has declined sharply since 1980 while our estimator places greater weight on location effects than the standard intergenerational coefficient the size of the bias appears to be small our preferred results suggest that earnings are regressing to the mean more slowly now than at any time since world war ii causing economic differences between families to become more persistent however current rates of positional mobility appear historically normal

exploring the intergenerational persistence of mental health evidence from three generations this paper uses data from the 1970 british cohort study to quantify the intergenerational persistence of mental health and the long run economic costs associated with poor parental mental health we find a strong and significant intergenerational correlation that is robust to different covariate sets sample restrictions model specifications and potential endogeneity importantly the intergenerational persistence is economically relevant with maternal mental health associated with lasting effects on the child s educational attainment future household income and the probability of having criminal convictions these results do not disappear after controlling for children s own childhood and adulthood mental health

estimation of sons intergenerational earnings mobility in the presence of censoring based on intergenerational data from the panel study of income dynamics i provide estimates of income mobility across generations for men special attention is paid to issues of censoring caused by a son s unemployment employing non parametric bounds estimates i illustrate that previous income mobility estimates rely heavily on unjustified assumptions of exogenous selection assuming a son s potential income is instead a function of his reason for unemployment and work history i re estimate mobility allowing for sampling variability the range of feasible slopes consistent with these modified bounds restrictions is 0 27 to 0 55 copyright 2002 john wiley sons ltd

like grand parent like child multigenerational mobility across the eu abstract this study shows that the multigenerational transmission of inequality in most of the 28 eu countries is higher than what a parent to child paradigm would suggest while a strand of the literature claims that this is due to a direct grandparental effect economic historian gregory clark argues that multigenerational mobility follows a markovian process in his view not only are previous estimates severely attenuated by an errors in variables problem but persistence is also constant across time and space using a unique retrospective survey containing information on three generations of european citizens we provide suggestive evidence against such a universal law of mobility while estimates based on measurement error models show that persistence is indeed as strong as clark suggests there are cross country differences furthermore for a few eu countries we cannot reject the hypothesis of a direct grandparental effect overall there is no single data generating process to describe multigenerational persistence that fits all eu countries 2

stochastic olg models market structure and optimality for a general class of pure exchange olg economies under uncertainty we provide a complete characterization of the efficency properties of competitive equilibria when markets are only sequentially complete and the criterion of efficency is conditional pareto optimality we also consider a particular case in which markets fail to be even sequentially complete and provide a characterization when the criterion of efficency is weakened to ex post pareto optimality

merit approbation and the evolution of social structure in this paper we study a society in which individuals gain utility from income and from social approbation income is correlated with class approbation is given to an unobservable trait which must be signalled through the agent s social mobility i e class change mobility is driven by a simple mechanism involving inheritance effort and ability thus social structure class composition is affected by individuals quest for approbation and we study how that affects the emergence and multiplicity of long run social organizations including hybrid forms of dynasties and meritocracies specifically we observe that even though social mobility is driven purely by a meritocratic mechanism pure dynasties can emerge we then introduce a feedback between the size of the upper class and its income value so that effort levels and social structure are jointly endogenous we derive results on equilibrium effort levels and stationary when they exist social structures social organization can converge to a unique steady state multiple long run equilibria or cycles

dealer balance sheets and bond liquidity provision abstract do regulations decrease dealer ability to intermediate trades using a unique dataset of dealer bond level transactions we link changes in liquidity of individual u s corporate bonds to dealers transaction activity and balance sheet constraints we show that prior to the financial crisis bonds traded by more levered institutions and institutions with investment bank like characteristics were more liquid but this relationship reverses after the financial crisis in addition institutions that face more regulations after the crisis both reduce their overall volume of trade and have less ability to intermediate customer trades

the determinants of earnings a behavioral approach we survey the determinants of earnings and propose a framework for understanding labor market success we suggest that the advantages of the children of successful parents go considerably beyond the benefits of superior education the inheritance of wealth or the genetic inheritance of cognitive ability we suggest that noncognitive personality variables such as attitudes towards risk ability to adapt to new economic conditions hard work and the rate of time preference affect both earning and the transmission of economic status across generations

nonlinearities in intergenerational earnings mobility consequences for cross country comparisons we show that the patterns of intergenerational earnings mobility in denmark finland and norway unlike those for the us and the uk are highly nonlinear the nordic relationship between log earnings of sons and fathers is flat in the lower segments of the fathers earnings distribution sons growing up in the poorest households have the same adult earnings prospects as sons in moderately poor households and is increasingly positive in middle and upper segments this convex pattern contrasts sharply with our findings for the us and the uk where the relationship is much closer to being linear as a result cross country comparisons of intergenerational earnings elasticities may be misleading with respect to transmission mechanisms in the central parts of the earnings distribution and uninformative in the tails of the distribution it is now a stylised fact that intergenerational earnings mobility is higher in the nordic welfare state economies than in more market oriented economies such as the us see

a characterization of inefficiency in stochastic overlapping generations economies in this paper we provide a characterization of interim inefficiency in stochastic economies of overlapping generations under possibly sequentially incomplete markets with respect to the established body of results in the literature we remove the hypothesis of two period horizons by considering longer though uniformly bounded horizons for generations the characterization exploits a suitably modified cass criterion grounded on the long run behavior of compounded safe interest rates and independent of the length of horizons of generations thus the hypothesis of two period horizons is purely heuristic in establishing a criterion for inefficiency in addition for sequentially incomplete markets we adopt a suitable notion of unambiguous inefficiency separating the inefficient intertemporal allocation of resources from incomplete risk sharing unambiguous inefficiency reduces to inefficiency when markets are sequentially complete

a macroeconomic model with a financial sector this paper studies a macroeconomic model in which financial experts borrow from less productive agents we pursue four sets of results i the economy is prone to instability and occasionally enters volatile episodes as volatility spikes agents precautionary motive increases depressing prices even further log linear approximations fail to capture these non linear effects that can cause economies to be significantly depressed for long periods of time ii endogenous risk during volatile episodes increases asset price correlations iii financial experts impose a negative externality on each other and on the labor sector by not maintaining adequate capital cushion and funding structure iv while risk sharing within the financial sector through securitization and derivatives contracts reduces many inefficiencies it can also amlify systemic risks

a complete characterization of pareto optimality for general olg economies abstract in the context of general pure exchange olg economies where agents can have heterogeneous longevities we provide both sufficient and necessary conditions for pareto optimality of competitive equilibria for the case in which all agents live for the same number of periods we find that these conditions are equivalent we also find this equivalence when agents can have different lifetimes but in this case we need to impose particular restrictions on relative equilibrium prices moreover we show that without these conditions on prices the equivalence and hence a full characterization is not necessarily obtained

why the apple doesn t fall far understanding intergenerational transmission of human capital parents with higher education levels have children with higher education levels however is this because parental education actually changes the outcomes of children suggesting an important spillover of education policies or is it merely that more able individuals who have higher education also have more able children this paper proposes to answer this question with a unique dataset from norway using the reform of the education system that was implemented in different municipalities at different times in the 1960s as an instrument for parental education we find little evidence of a causal relationship between parents education and children s education despite significant ols relationships we find 2sls estimates that are consistently lower than the ols estimates with the only statistically significant effect being a positive relationship between mother s education and son s education these findings suggest that the high correlations between parents and children s education are due primarily to family characteristics and inherited ability and not education spillovers

markets transparency and the corporate bond market for decades corporate bonds primarily traded in an opaque environment quotations which indicate prices at which dealers are willing to transact were available only to market professionals most often by telephone prices at which bond transactions were completed were not made public the u s corporate bond market became much more transparent with the introduction of the transaction reporting and compliance engine trace in july 2002 beginning that date bond dealers were required to report all trades in publicly issued corporate bonds to the national association of security dealers which in turn made transaction data available to the public in this paper we describe trading protocols in the corporate bond market and assess the impact of the increase in transparency on the market we review how trace has affected the costs that corporate bond investors paid to bond dealers for their transactions we canvass the opinions of a variety of finance professionals and consider articles in the trade press to obtain a broader view of the impact of transparency on the corporate bond market

intergenerational occupational mobility in rural economy evidence from nepal and vietnam abstract this paper presents evidence on intergenerational occupational mobility from agriculture to the nonfarm sector using survey data from nepal and vietnam in the absence of credible instruments the degree of selection on observables is used as a guide to the degree of selection on unobservables a la altonji et al 2005 to address the unobserved genetic correlations the results show that intergenerational occupational mobility is lower among women in both countries and is lower in nepal compared with vietnam in the case of nepal strong evidence favors a causal role played by the mother s nonfarm participation in the daughter s occupation choice possibly because of cultural inheritance in a traditional society

the changing economic advantage from private schools private schooling is an important feature of education systems across the world despite its relatively small size the british private school sector has a long history and plays a prominent role in society we provide evidence showing that private schools have been successful in transforming their ability to generate the academic outputs that are most in demand in the modern economy the private state school wage differential has risen significantly over time and a significant factor has been faster rising educational attainment for privately educated individuals

accounting for intergenerational income persistence noncognitive skills ability and education we analyse in detail the factors that lead to intergenerational persistence among sons where this is measured as the association between childhood family income and later adult earnings we seek to account for the level of income persistence in the 1970 bcs cohort and also to explore the decline in mobility in the uk between the 1958 ncds cohort and the 1970 cohort the mediating factors considered are cognitive skills non cognitive traits educational attainment and labour market attachment changes in the relationships between these variables parental income and earnings are able to explain over 80 of the rise in intergenerational persistence across the cohorts

efficiency and prices in economies of overlapping generations abstract in a general economy of overlapping generations i introduce a notion of uniform inefficiency corresponding to the occurrence of a pareto improvement with a small uniform destruction of resources g debreu the coefficient of resource utilization econometrica 19 1951 273 292 i provide a necessary and sufficient condition for uniform inefficiency in terms of prices at a competitive equilibrium an allocation is uniformly inefficient if and only if the relative price of the aggregate endowment in a given period into the aggregate endowment up to that period does not vanish over periods of trade a sort of modified cass criterion d cass on capital overaccumulation in the aggregative neoclassical model of economic growth a complete characterization j econ theory 4 1972 200 223 minimal assumptions on fundamentals are needed for such a complete characterization furthermore proofs reduce to simple and short direct arguments finally i verify that uniform inefficiency is preserved under perturbations a property that might fail for the canonical notion of inefficiency remarkably an allocation is uniformly inefficient if and only if a non vanishing redistribution like a social security mechanism is welfare improving

the informational content of surnames the evolution of intergenerational mobility and assortative mating we propose a new methodology for measuring intergenerational mobility in economic well being our method is based on the joint distribution of surnames and economic outcomes it circumvents the need for intergenerational panel data a long standing stumbling block for understanding mobility it does so by using cross sectional data alongside a calibrated structural model to recover the traditional intergenerational elasticity measures our main idea is simple if inheritance is important for economic outcomes then rare surnames should predict economic outcomes in the cross section this is because rare surnames are indicative of familial linkages if the number of rare surnames is small this approach will not work however rare surnames are abundant in the highly skewed nature of surname distributions from most western societies we develop a model that articulates this idea and shows that the more important is inheritance the more informative will be surnames this result is robust to a variety of different assumptions about fertility and mating we apply our method using the 2001 census from catalonia a large region of spain we use educational attainment as a proxy for overall economic well being a calibration exercise results in an estimate of the intergenerational correlation of educational attainment of 0 60 we also find evidence suggesting that mobility has decreased among the different generations of the 20th century a complementary analysis based on sibling correlations confirms our results and provides a robustness check on our method our model and our data allow us to examine one possible explanation for the observed decrease in mobility we find that the degree of assortative mating has increased over time overall we argue that our method has promise because it can tap the vast mines of census data that are available in a heretofore unexploited manner

intermediary asset pricing abstract we model the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary intermediaries face an equity capital constraint risk premia r

intergenerational mobility in britain in this paper we use longitudinal data on children and their parents to assess the extent of intergenerational mobility in britain based on data from the national child development survey a cohort of all individuals born in a week of march 1958 we find that the extent of intergenerational mobility is limited we report an intergenerational correlation of the order 40 to 60 for fathers and sons and 45 to 70 for fathers and daughters in terms of labour market earnings and years of schooling an examination of quartile transition matrices between parental and child earnings outcomes reveals a similar pattern finally it seems on the basis of these transition matrices that there is an important asymmetry in intergenerational earnings mobility with upward mobility from the bottom of the earnings distribution being more likely than downward mobility from the top

intergenerational wealth mobility in england 1858 2012 surnames and social mobility this article uses a panel of 18 869 people with rare surnames whose wealth is observed at death in england and wales 1858 2012 to measure the intergenerational elasticity of wealth over five generations we show using rare surnames to track families that wealth is much more persistent than standard one generation estimates would suggest there is still a significant correlation between the wealth of families five generations apart we show that this finding can be reconciled with standard estimates of wealth mobility by positing an underlying first order markov process of wealth inheritance with an intergenerational elasticity of 0 70 0 75 throughout the years 1858 2012

stratification social networks in the labour market and intergenerational mobility young individuals taking the locational choices made by their altruistic parents as given decide whether or not to acquire skills the use of location specific word of mouth communication in the transmission of information about skilled job opportunities implies that the local social environment partly determines an individual s expected returns to education stratified equilibria when they exist are characterised by low intergenerational social mobility and inefficient use of talent in addition the equilibrium responses to factors that generally encourage education may in stratified outcomes be highly asymmetric across socio economic groups non stratified equilibria are likely to be destabilised by measures that encourage education

intergenerational mobility and marital sorting we use data from the german socio economic panel and the british household panel survey to estimate the extent of intergenerational economic mobility in a framework that highlights the role played by assortative mating we find that assortative mating plays an important role on average about 40 50 of the covariance between parents and own permanent family income can be attributed to the person to whom one is married this effect is driven by strong spouse correlations in human capital which are larger in germany than britain 2006 the authors journal compilation royal economic society 2006

capital regulation and bank risk taking a note abstract this paper examines theoretically the effects of more stringent capital regulation on bank asset portfolio risk the analysis shows that for a value maximizing bank incentives to increase asset risk decline as its capital increases thus as long as regulatory efforts to contain asset risk and size are not reduced more stringent capital regulation unambiguously reduces the expected liability of the deposit insurance system

intergenerational mobility and the process of development this paper offers an explanation for some evidence that intergenerational earnings mobility is higher in more developed economies and that mobility is positively correlated with wage equality in the model mobility promotes economic growth via its effect on the accumulation and allocation of human capital growth influences mobility via its effect on incentives to acquire education and its effect on liquidity constraints upon such acquisition in the process of development mobility increases and the distribution of education becomes better correlated with ability redistributive policy has a negative effect on growth in developed economies and a positive effect in developing economies

decomposing economic mobility transition matrices the intergenerational mobility literature has consistently found that the distribution of adult economic outcomes differ markedly depending on parental economic status yet much remains to be understood about the drivers or determinants of this relationship existing literature on potential drivers focuses primarily on mean effects to help provide a more complete picture of the potential forces driving economic persistence we propose a method to decompose transition matrices and related indices specifically we decompose differences between an estimated transition matrix and a benchmark transition matrix into portions attributable to differences in characteristics between individuals from different households a composition effect and portions attributable to differing returns to these characteristics between individuals from different households a structure effect we also incorporate a detailed decomposition based on copula theory that decomposes the composition effect into portions attributable to specific covariates and their interactions we illustrate our method using data on white men from the 1979 national longitudinal survey of youth estimation is based on an extended mincer equation that includes cognitive and non cognitive measures to address the potential endogeneity of education we implement an iv strategy that allows us to estimate causal effects and investigate the role of unobserved ability

stochastic monotonicity in intergenerational mobility tables summary the aim of this paper is to test for stochastic monotonicity in intergenerational socio economic mobility tables in other words we question whether having a parent from a high socio economic status is never worse than having one with a lower status using existing inferential procedures for testing unconditional stochastic monotonicity we first test a set of 149 intergenerational mobility tables in 35 different countries and find that monotonicity cannot be rejected in hardly any table in addition we propose new testing procedures for testing conditional stochastic monotonicity and investigate whether monotonicity still holds after conditioning on a number of covariates such as education cognitive and non cognitive skills based on the ncds cohort data from the uk our results provide evidence that monotonicity holds even conditionally moreover we do not find large differences in our results when comparing social class and wage class mobility copyright 2010 john wiley sons ltd

corporate bond market transaction costs and transparency using a complete record of u s over the counter otc secondary trades in corporate bonds we estimate average transaction costs as a function of trade size for each bond that traded more than nine times between january 2003 and january 2005 we find that transaction costs decrease significantly with trade size highly rated bonds recently issued bonds and bonds close to maturity have lower transaction costs than do other bonds costs are lower for bonds with transparent trade prices and they drop when the trace system starts to publicly disseminate their prices the results suggest that public traders benefit significantly from price transparency

evaluating stakeholder theory this paper is the third in a series of four that is directed at understanding and assessing stakeholder theory for the purposes of business ethics it addresses the suitability and viability of the theory rejecting objections of a moral and efficiency sort based respectively on claims about property rights and the economic superiority of the alternative stockholder approach but accepting that implementation problems require limiting both the number of groupings admitted to stakeholder status and the degree of responsibility towards them the conclusion looks forward to the construction of a suitably limited version of the stakeholder approach in a fourth paper drawing upon this one and the previous two