tax policy asset prices and growth a general equilibrium analysis abstract this paper presents a computable general equilibrium tax policy model that combines a consideration of disaggregate industry effects with an integrated treatment of short and long run adjustments to policy initiatives the model s explicit consideration of forward looking investment decisions and adjustment dynamics permits assessments of short run effects of tax policy on asset values as well as long term impacts on capital accumulation simulations reveal that effects on asset values and investment depend critically on whether policies are oriented toward new or old capital investment tax credits yield significant increases in investment without conferring windfall gains to corporate shareholders corporate tax cuts with the same revenue cost on the other hand yield large windfalls to shareholders while providing only a modest investment stimulus incidence and growth effects differ considerably across sectors particularly between business and housing

environmental regulation and u s economic growth in this article we quantify the costs of pollution controls by reporting the results of simulations of the growth of the u s economy with and without regulation for this purpose we have constructed a detailed model of the economy that includes the determinants of long term growth we have also analyzed the interaction between industries in order to capture the full repercussions of environmental regulations however we have not attempted to assess the benefits resulting from a cleaner environment we find that pollution abatement has emerged as a major claimant on the resources of the u s economy the cost of emission controls is more than 10 of the total cost of government purchases of goods and services

employer initiated job terminations recent interest in pension reform and mandatory retirement has led to a considerable body of literature on job separation the analysis has however focused primarily on the employee s reasons for and reaction to job separation much less attention has been paid to the theoretical factors influencing the employer s decision to terminate a person s employment much of the debate centers on questions concerning the productivity of older workers representatives of the elderly not only argue that members of their constituency want to continue to work but that they are highly productive the implication is that if employers terminate older workers it must reflect employer discrimination against equally productive but older workers becker 1 however argues that the case for discrimination is weak competitive markets would lead to nondiscriminating firms driving out the discriminatory firms furthermore since employers will someday become old they are less likely to discriminate on the basis of age than other factors such as race or sex the implication is that if older workers are being terminated this must reflect that their productivities have dropped below their wages this paper explores the relationship between productivities and compensation paid by a nondiscriminatory employer who terminates older workers the analysis yields answers to the following questions at what point will a firm decide to terminate the employment of a person embodying the employer s investment in specific training if productivities vary with age how does the productivity of an older terminated worker compare with that of a younger worker have older workers passed their peak productivity years

optimal job assignment and investment in specific human capital an application to professional teachers the purpose of this paper is to analyse the impact of asymmetric information upon labour market decisions first in the face of uncertainty concerning person specific information self selection employment contracts develop which induce sorting within the labour market second we show the existence of a smaller share in investment in specific human capital for those who accept the self selection contract relative to those who refuse such contracts thus the earnings of those who accept such contracts are less responsive to changes in specific human capital than the earnings of those who refuse these contracts third we applied the model to the market for professional teachers in british columbia canada the results of the empirical tests were shown to be consistent with the hypotheses proposed in addition once we controlled for the level of and the distribution to human capital the public independent earnings differential fell from 64 3 to 23 9

teacher testing teacher education and teacher characteristics school officials and legislators have long been concerned with the possibility of declining teacher quality see e g sean corcoran et al 2002 beginning in the 1960 s states began testing prospective teachers in a direct effort to ensure that teachers meet minimum standards for basic skills and subject knowledge by 1999 41 states required applicants to pass some sort of standardized certification test as a theoretical matter however the impact of such testing is ambiguous test requirements may establish a minimum achievement standard as their proponents hope on the other hand testing and other certification requirements may deter some qualified applicants from teaching if these requirements are perceived as costly this is the barriers to entry story first noted in the occupational licensing context by milton f friedman and simon kuznets 1945 another concern with job applicant testing is the possibility of an adverse impact on minority candidates who usually do worse on tests see david autor and david scarborough 2003 for a recent study paralleling increased state involvement in teacher certification is the increase in teachers educational credentials especially in public schools for example in 1971 over two thirds of public school teachers had a b a while only 27 percent had a master s or education specialist s degree by 1991 however over half of public school teachers 52 6 percent had a master s or education specialist s degree in contrast the proportion of private school teachers

job change patterns and the wages of young men this study uses data from the national longitudinal survey of youth to distinguish empirically between mover stayer search good and experience good models of job mobility we estimate wage models in which the pattern of overall job mobility affects both the level and tenure slope of the log wage path after controlling for the correlation between mobility patterns and time constant person and job specific unobservables we find that workers who undergo persistent mobility have lower log wage paths than less mobile workers this finding is consistent with models in which job mobility is driven by time varying unobservables such as experience good models where changes in perceived match quality cause turnover

the energy efficiency paradox revisited through a partial observability approach the present paper examines the energy efficiency paradox demonstrated in greek manufacturing firms through a partial observability approach the data set used has resulted from a survey carried out among 161 energy saving technology firm adopters maximum likelihood estimates that arise from an incidental truncation model reveal that the adoption of the energy saving technologies is indeed strongly correlated to the returns of assets that are required in order to undertake the corresponding investments the source of the energy efficiency paradox lies within a wide range of factors policy schemes that aim to increase the adoption rate of energy saving technologies within the field of manufacturing are significantly affected by differences in the size of firms finally mixed policies seem to be more effective than policies that are only capital subsidy or regulation oriented

recruiting smarter teachers in recent years many states have raised teacher salaries to attract more capable teachers since teacher labor markets are typically in a state of excess supply success of such policies is contingent on containing perverse feedbacks which arise among exit decisions vacancy rates and the willingness of prospective teachers to invest in occupation specific human capital using sat scores as a measure of ability we find that an across the board raise produces modest improvements in the work force at best indeed under plausible parameter values it is possible for mean ability to decline

how vouchers could change the market for education small probability that vouchers will in the foreseeable future be adopted on a large scale in any school district or state at the moment only three states have adopted publicly funded voucher programs and all of these programs are limited in scale nonetheless in recent years over 40 state legislatures have considered proposals to provide some type of voucher program or tuition tax credit for at least some families in a given state or school district and the children s scholarship fund see http www scholarshipfund org has helped create or expand privately funded voucher programs in numerous cities as vouchers become a more significant part of education policy debates the time is right to consider what we know and do not know about the likely effects of adopting various voucher schemes in the balance of this paper i describe both empirical and theoretical work on education that speaks to this topic i argue that we cannot confidently predict the outcomes that would result from various voucher schemes and i also stress that debates over vouchers per se are not informative details concerning funding targeting and discretion in the use of vouchers should greatly affect the outcomes associated with any particular voucher program still empirical evidence on the performance of public versus private schools as well as numerical results from existing simulation models suggest that policymakers should be able to design voucher programs that would be helpful to minority students in large cities public schools in large cities often perform poorly in minority neighborhoods and this is especially true in economically disadvantaged areas

are the economic costs of stabilising the atmosphere prohibitive abstract macro economic studies of the costs of reducing co2 emissions generally estimate the global cost of stabilising the atmospheric concentrations of co2 in the range 350 550 ppm in trillions of usd this creates the impression that the cost of co2 reductions is so large that it threatens economic development but presented in another way a completely different picture emerges there is widespread agreement amongst the more pessimistic macro economic studies that stringent carbon controls are compatible with a significant increase in global and regional economic welfare even if the cost of co2 abatement rises to 5 of global income per year by the end of this century this reduction is minor compared with the tenfold increase in global income that is expected since income is assumed to grow by a couple of percent per year the trillion usd cost could also be expressed as a few years delay in achieving an order of magnitude higher income levels similar observations can also be made as regards near term abatement targets such as the kyoto protocol a more widespread recognition of the fact that carbon abatement policies will only marginally affect economic growth is likely to increase the willingness to introduce carbon abatement policies

adverse selection without single crossing monotone solutions abstract the single crossing assumption simplifies the analysis of screening models as local incentive compatibility becomes sufficient for global incentive compatibility if single crossing is violated global incentive compatibility constraints have to be taken into account this paper studies monotone solutions in a screening model that allows a one time violation of single crossing the results show that local and non local incentive constraints distort the solution in opposite directions therefore the optimal decision might involve distortions above as well as below the first best decision furthermore the well known no distortion at the top property does not necessarily hold the results show that the decision can even be distorted above first best for all types sufficient conditions for existence strict monotonicity and continuity of the solution are presented a new necessary condition satisfied by such solutions is found an algorithm based on this condition can calculate continuous and strictly monotone solutions

a note on the econometric use of constant dollar inventory series abstract one dollar of finished goods inventories does not represent the same amount of physical goods as one dollar of sales when department of commerce constant dollar series are used this can cause seriously biased regression estimates

production sales and the change in inventories an identity that doesn t add up we examine two measures of monthly manufacturing production the first is the index of industrial production the second is constructed from the accounting identity that output equals sales plus the change in inventories we show that the means variances and serial correlation coefficients of the log growth rates differ substantially between the two series and the cross correlations are in most cases less than 0 4 a model of classical measurement error indicates that in 15 of 20 two digit industries measurement error accounts for over 35 of the variation in the monthly growth rates of seasonally adjusted industrial production

an equilibrium analysis of wage productivity gaps we develop a model in which each firm chooses a hiring standard as well as a wage schedule and an application fee we then characterize the set of nash equilibria and establish necessary and sufficient conditions for the existence of equilibrium if the distribution of productivities within each ability type is gaussian workers who pass the test will be paid more than the value of their marginal product while workers who fail the test will receive a wage net of the application fee below the value of their marginal product

accounting for output fluctuations in manufacturing there is a substantial body of evidence to the effect that output is more volatile than sales among manufacturing industries numerous explanations have been advanced to account for this excess output volatility some examples are pro cyclical inventory movements induced by a stockout avoidance motive cost and technology shocks and decreasing marginal costs this article assesses the contribution of these different motives to output volatility for six different manufacturing industries linear quadratic models are estimated for each of the industries and then dynamic simulations are employed to determine the volatility of output when one or more of the factors are removed from the model technology shocks provide the most significant contribution to output volatility the stockout avoidance motive is also important cost shocks provide a very small contribution and marginal production costs are increasing at the margin and thus stabilize output it is also shown that output volatility declines when curre

specific human capital and sorting mechanisms in labor markets three major avenues of research on employment contracts which incorporate asymmetric information have been pursued first researchers have considered contracts in which the supply of employee effort is costly to monitor 3 8 9 12 second the allocation of labor has been examined when innate person specific characteristics are unobservable 4 5 14 15 third employment contracts have been designed when economic agents are uncertain about the state of nature concerning the worker s marginal product and the employee s reservation wage 6 7 this research agenda has provided an elaborate array of models which yield employment contracts that reduce the distortionary effects of asymmetric information however these models have two major short comings first under uncertainty concerning personspecific information employers have an incentive to screen employees the existing literature has analyzed two distinct screening mechanisms guasch and weiss 4 5 consider screening through wages while white 15 has considered screening through specific human capital however each mechanism has been analyzed in isolation the present paper combines these screening mechanisms and examines the impact of each upon the optimal employment contract second although the existing literature on employment contracts offers a general framework for analysis it is not directly amenable to empirical verification the present paper rectifies these short comings by developing a model which incorporates both screening mechanisms under asymmetric information and thereby provides a model conducive to empirical verification in our analysis three major simplifying assumptions are made first because we assume employees have no choice regarding the effort they supply we abstract from the agency problem discussed in the literature cited above second we assume employees differ in their innate person specific characteristics the latter is assumed to be observed by

would higher salaries keep teachers in high poverty schools evidence from a policy intervention in north carolina abstract for a three year time period beginning in 2001 north carolina awarded an annual bonus of 1800 to certified math science and special education teachers working in public secondary schools with either high poverty rates or low test scores using longitudinal data on teachers we estimate hazard models that identify the impact of this differential pay by comparing turnover patterns before and after the program s implementation across eligible and ineligible categories of teachers and across eligible and barely ineligible schools results suggest that this bonus payment was sufficient to reduce mean turnover rates of the targeted teachers by 17 experienced teachers exhibited the strongest response to the program finally the effect of the program may have been at least partly undermined by the state s failure to fully educate teachers regarding the eligibility criteria our estimates most likely underpredict the potential outcome of a program of permanent salary differentials operating under complete information

the efficiency paradox bureaucratic and organizational barriers to profitable energy saving investments abstract the paradox of why profitable energy saving investments are not undertaken continues to provoke debate the underlying phenomenon might be called the efficiency paradox because it represents a case in which business firms which are often presumed or taken axiomatically to be economically efficient make decisions that do not maximize profits new data from one of the us environmental protection agency s voluntary pollution prevention programs enables this paradox to be explored statistically the data show that both the level and variation in returns to lighting upgrade investments cannot be explained by standard economic models substantial gains in energy efficiency can be achieved without sacrificing profitability both economic and organizational factors account for some of the variation in observed returns to these investments but the results suggest a need for improved and more comprehensive theories of the investment behavior of firms and other organizations

what has been learned about labor supply in the past twenty years the main advance in the study of labor supply in the past 20 years has come in recognizing and interpreting the variety of different labor supply functions that coexist in the empirical literature a crucial theoretical distinction with important empirical payoff is that between labor supply choices at the extensive margin i e labor force participation and employment choices and choices at the intensive margin i e choices about hours of work or weeks of work for workers another important distinction is the one between a descriptive labor supply function and a structural supply function that can be the basis for out of sample policy investigations concerning responses to tax and welfare programs and evaluations of welfare losses a full understanding of the participation hours dichotomy leads to an appreciation of the importance of the problem of selection bias what is the wage to impute to a nonworking person these distinctions are a legacy of the research conducted on labor supply over the past 20 years many important empirical questions have been addressed i how strong are the effects of taxes welfare and transfer programs on labor supply ii how important is intertemporal substitution can life cycle labor supply models explain business cycle labor supply behavior iii has the consensus view of the 1960 s of high labor supply elasticities for married women and low labor supply elasticities for married men held up all of the empirical evidence assembled on labor supply must be called into question in the light of important research on the basic quality of the data conducted by analysts at the university of michigan i discuss this evidence in a concluding section except for my discussion of measurement issues i focus only on the major discoveries about which a general consensus has emerged

towards a disequilibrium theory of endogenous economic growth this paper discusses the need for a new approach to economic growth theory the standard theory of growth in equilibrium driven by exogenous uncaused productivity gains has an implication that is both unjustified and perverse from a policy perspective that government intervention of any kind can only introduce constraints and reduce option space thus decreasing potential growth it is argued that growth theory should 1 acknowledge the importance of natural resources especially fossil fuels as a driver of past and present economic growth 2 incorporate an explicit recognition that growth is a consequence of technological innovation especially radical innovation that often responds to natural resource scarcities or other societal needs and 3 explicitly reflect the fact that the important i e scarce factors of production in economics can and do change over time i e from a rural cowboy economy of the past to an urbanized spaceship economy of the future in short it should reflect the fact that necessity is the mother of invention the first and third of these modifications have been proposed before but not in combination the third seems to be new

the economics of teacher quality abstract concern is often voiced about the quality of american schoolteachers this paper suggests that while the relative quality of teachers is declining this decline may be the result of technological changes that have raised the price of skilled workers outside teaching without affecting the productivity of skilled teachers growth in the price of skilled workers can cause schools to lower the relative quality of teachers and raise teacher quantity instead evidence from the national longitudinal survey of youth demonstrates that wage and schooling are good measures of teacher quality analysis of u s census microdata then reveals that the relative schooling and experience adjusted relative wages of u s schoolteachers have fallen significantly from 1940 to 1990 moreover class sizes have also fallen substantially the declines in class size and in relative quality seem correlated over time and space with growth in the relative price of skilled workers

are preliminary announcements of the money stock rational forecasts abstract we develop a theoretical framework of analyzing preliminary announcements of economic data and then apply this framework to the money stock we find that preliminary announcements of the money stock are best characterized as measured with classical errors in variables that is the revision is not correlated with the true value of the series the revision is however forecastable using information available at the time of the preliminary announcement our ability to forecast the revision implies that preliminary announcements are not rational estimates of the true money stock

deferred compensation vs efficiency wages an experimental test of effort provision and self selection abstract we compare the ability of two common compensation structures efficiency wages ew and deferred compensation dc at inducing effort from workers we test predictions on effort provision and elicit preferences between the two wage structures the theoretical predictions on effort are generally well supported although we find over provision of effort with ew in consequence although the theoretical prediction that dc is more cost effective is supported the difference is small we also find a marked preference for ew that cannot be explained by risk aversion the two effects combine to largely dissipate any advantage that dc may have in inducing effort

using performance on the job to inform teacher tenure decisions the notion that some high stakes need to be attached to direct measures of teachers class room performance as a control for quality in the work force is an idea gaining traction in public education one such proposal prescribes low ering the barriers to entry into teaching while simultaneously being more selective about which teachers are retained when they become eligible for tenure robert gordon thomas j kane and douglas o staiger 2006 eric a hanushek 2009

explaining organizational diseconomies of scale in r d agency problems and the allocation of engineering talent ideas and effort by firm size the comparative efficiency and success of small firms in r d remains largely unexplained this paper empirically examines scale diseconomies in offering employment contracts as an explanation for diseconomies of scale in r d the paper argues that small firms more efficiently resolve the severe agency problems of hidden information and hidden behavior in r d small firms more efficiently offer contracts that reward performance than large firms and consequently small firms attract and retain engineers with higher ability and skill further small firms through these more performance contingent contracts induce higher levels of effort than large firms the study tests and generally confirms these hypotheses using data collected from 912 current and former engineering employees of two large high technology companies

information asymmetry and equilibrium monitoring in education abstract we develop a theoretical and computational model of school choice and achievement that embeds information asymmetries in the provision of education because school effort is unobservable to households and policymakers schools have an incentive to under provide effort this moral hazard affects both public and private schools although public schools are subject to an additional distortion because of limited competition and fixed funding household monitoring of schools can mitigate moral hazard but some households may free ride on the monitoring of others using our calibrated model we simulate two policies aimed at raising achievement public monitoring of public schools and private school vouchers our results indicate that in large scale settings no single tool may suffice the reason is twofold a no tool raises achievement or welfare for all households and b since the extent of moral hazard is endogenous the application of each tool has unintended consequences that limit its own effectiveness results also indicate that setting the policy parameters for public schools at the levels preferred by the majority of households may mitigate the distortions nonetheless the current actual values of these parameters seem to match more closely the preferences of public schools than the preferences of parents

joint production quasi fixed factors of production and investment in finished goods inventories inventory investment has long been an important area of inquiry for empirical work in macroeconomics this is due in large measure to the fact that inventory investment is a major source of fluctuations in aggregate output empirical work on inventories however has been dominated by the use of simple univariate flexible accelerators 1 the major objective of this paper is to propose and test a multivariate flexible accelerator model for inventory investment the model is tested with data on finished goods inventories from the manufacturing sector of the u s economy there are two reasons for undertaking such a task first at a theoretical level a univariate flexible accelerator model asserts that investment in say finished goods inventories is proportional to the gap between the desired and actual stocks of finished goods such a model presumes that decisions by firms on finished goods inventories are made independently of decisions on other stocks but theory suggests that when firms make simultaneous decisions on a variety of stocks which includes not only finished goods but also goods in process inventories the size of the work force etc decisions on finished goods will interact with decisions on

searching for effective teachers with imperfect information teaching may be the most scrutinized occupation in the economy over the eaching may be the most scrutinized occupation in the economy over the past four decades empirical researchers many of them economists have past four decades empirical researchers many of them economists have accumulated an impressive amount of evidence on teachers the heteroaccumulated an impressive amount of evidence on teachers the heterogeneity in teacher productivity the rise in productivity associated with teaching geneity in teacher productivity the rise in productivity associated with teaching credentials and on the job experience rates of turnover the costs of recruitment credentials and on the job experience rates of turnover the costs of recruitment the relationship between supply and quality the effect of class size and the monetary the relationship between supply and quality the effect of class size and the monetary value of academic achievement gains over a student s lifetime since the passage value of academic achievement gains over a student s lifetime since the passage of the no child left behind act along with a number of state level educational of the no child left behind act along with a number of state level educational initiatives the data needed to estimate individual teacher performance based on initiatives the data needed to estimate individual teacher performance based on student achievement gains have become more widely available however there have student achievement gains have become more widely available however there have been relatively few efforts to examine the implications of this voluminous literature been relatively few efforts to examine the implications of this voluminous literature on teacher performance in this paper we ask what the existing evidence implies on teacher performance in this paper we ask what the existing evidence implies for how school leaders might recruit evaluate and retain teachers for how school leaders might recruit evaluate and retain teachers we begin by summarizing the evidence on fi ve key points referring to existing we begin by summarizing the evidence on fi ve key points referring to existing work and to evidence we have accumulated from our research with the nation s work and to evidence we have accumulated from our research with the nation s two largest school districts los angeles and new york city first teachers display two largest school districts los angeles and new york city first teachers display considerable heterogeneity in their effects on student achievement gains the stanconsiderable heterogeneity in their effects on student achievement gains the standard deviation across teachers in their impact on student achievement gains is on dard deviation across teachers in their impact on student achievement gains is on the order of 0 1 to 0 2 student level standard deviations which would improve the the order of 0 1 to 0 2 student level standard deviations which would improve the

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

understanding the twentieth century growth in u s school spending persistent increases in spending on elementary and secondary schools have gone virtually undocumented real expenditure per student increased 3 percent per year over the period 1890 1990 decomposition of the spending growth shows that it resulted from a combination of falling pupil staff ratios increasing real wages to teachers and rising expenditure outside of the classroom although the expansion of education for the handicapped has had a disproportionate effect on spending most of the growth in expenditure during the 1980s came from other sources significant teacher salary increases particularly for females have failed to keep up with wages in other occupations

pulled away or pushed out explaining the decline of teacher aptitude in the united states logic suggests that a teacher s value added is related to her academic aptitude it is therefore troubling that teachers aptitude has declined significantly in the united states since 1960 as demonstrated by sean corcoran et al 2002 combining longitudinal surveys they find a marked fall in teachers propensity to be in the top achievement quartile there are two main hypotheses for the decline in teacher aptitude first greater pay parity with males in nonteaching occupations may have drawn able women out of teaching second unionization may have compressed pay benefits and nonmonetary returns to aptitude in teaching and thereby pushed out high aptitude people in short there is a pull hypothesis pay parity in alternative opportunities and a push hypothesis pay compression in teaching the hypotheses are not mutually exclusive we need not choose between them instead we try to apportion blame to do this we need variation in the timing and size of the pull and push factors fortunately such variation exists among u s states our econometric identification relies on variation in labor markets and unionization laws among states at a point in time and within each state over time

the resurgence of inventory research what have we learned abstract recent empirical and theoretical research on business inventories is surveyed and critically evaluated while most inventory research has had macroeconomic motivations we focus on its microtheoretic basis and on potential conflicts between theory and evidence the paper asks two principal questions first how can inventories which are allegedly used by firms to stabilize production nonetheless be a destabilizing factor at the macroeconomic level second why if firms are following the production smoothing model is production more variable than sales in many industries we suggest that the so called s s model may help answer both questions

investment in energy efficiency do the characteristics of firms matter the literature on energy efficiency provides numerous examples of apparently profitable technologies that are not universally adopted yet according to the standard neoclassical theory of investment profit maximizing firms should undertake all investments with a positive net present value the standard theory also holds that the discount rate for computing the present value of a project should be the return available on other projects in the same risk class and therefore should not depend on characteristics of the firm this model as applied to energy saving investments is tested by examining whether firms characteristics influence their decision to join the environmental protection agency s voluntary green lights program a discrete choice regression is estimated over a large sample of participating and nonparticipating firms missing values in the data matrix are replaced with multiple imputations from a distribution estimated using the expectation maximization algorithm the results show that 1 sub

general equilibrium effects of environmental policy a cge modeling approach estimation of emission control cost functions is often carried out in a partial equilibrium framework i e under the assumption that emission control measures have negligible effects on input and output prices in this paper a computable general equilibrium model is used for simulation of the impact on factor prices and resource allocation of reductions of so infx sup no infx su and co2 emissions thus the model includes markets for tradable emission permits and the equilibrium prices of permits reflect the marginal costs of emission control the results suggest that major emission reductions are likely to have general equilibrium effects and thus that emission control cost functions that fail to take these effects into account may give a distorted picture of the economic impact of emission control

do alternative opportunities matter the role of female labor markets in the decline of teacher quality abstract this paper documents the widely perceived but little investigated notion that teachers today are less qualified than they once were evidence of a marked decline in the quality of young women going into teaching between 1960 and 1990 is presented using standardized test scores undergraduate institution selectivity and positive assortative mating characteristics as indicators of quality in contrast the quality of young women becoming professionals increased the roy model of self selection highlights how occupational differences in the returns to skill determine teacher quality estimates suggest the significance of increasing professional opportunities for women in affecting the decline in teacher quality

rational expectations and the smoothing properties of inventories of finished goods abstract this paper formulates and estimates a dynamic rational expectations equilibrium model of inventories of finished goods and employment of labor the view that the primary role of inventories of finished goods is to act as a buffer stock in the face of fluctuating demand is examined both the model and estimation results indicate that this is the case because of differences in the costs involved for firms in changing their inventory stocks and labor force in addition to providing some new evidence on the behavior of inventories of finished goods and employment the paper illustrates a technology for maximum likelihood estimation of structural parameters under the hypothesis of rational expectations

minimum wage effects on employment substitution and the teenage labor supply evidence from personnel data using personnel data from a large us retail firm i examine the firm s response to the 1996 federal minimum wage increase compulsory increases in average wages had negative but statistically insignificant effects on overall employment however increases in the relative wages of teenagers led to significant increases in the relative employment of teenagers especially younger and more affluent teenagers further analysis suggests a pattern consistent with noncompetitive models where the legislation affected mainly the wages of teenagers and so was only moderately binding it led both to higher teenage labor market participation and to higher absolute employment of teenagers

inventories and the volatility of production a stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales this paper presents a model of production decisions with demand uncertainty that incorporates no nnegativity constraints on inventories even with no productivity shocks optimal behavior by the firm is consistent with this stylized fact either if demand exhibits positive serial correlation or if the firm can backlog excess demand the reason is that a demand shock affects both the actual inventory level given unchanged production and the desired level production must replenish the stock and adjust to the new desired level copyright 1987 by american economic association

an empirical look at franchising as an organizational form franchise contracts are identified as a hybrid form of economic organization motives for the dominance of franchise arrangements are identified by examining the theoretical literature on franchising and related literatures on the theory of the firm firm growth managerial and employee selection a nd brand name capital empirical tests are performed on the incidence of franchise contracts across states for three industries in which f ranchising is prominent and data are readily available the results s uggest that both principal agent incentives and informational incenti ves favor the use of franchise arrangements copyright 1988 by the university of chicago

optimal minimum wage legislation in this paper we present a model in which minimum wage legislation may be pareto optimal this arises because a higher wage would be preferred to the market clearing wage by demanders for and suppliers of labour even though unemployment is induced and minimum wage legislation is needed to support the preferred equilibrium consider a labour market where the quality of labour depends positively on the wage offered if labour quality is highly sensitive to wage increases effective unit labour cost will fall as the wage rises this would lead the representative firm to prefer paying an above market clearing wage and to ration job slots such an effect has been studied when quality depends on an individual firm s wage offer see for example weiss i980 or stiglitz i974 suppose however that labour quality depended not on any individual firm s wage offer but on the average market wage if firms were atomistic each invidual firm would have an incentive to undercut the optimal above marketclearing wage trying to get the quality benefits of high average wages while paying lower wages itself the high wage solution would not be viable legislation fixing minimum wages might be required to support the preferred equilibrium quality might depend on average market wages when workers must decide whether or not to enter a labour market before they can sample and obtain specific job offers migration into labour markets for example rural to urban migration in less developed countries provides one example as the decision to migrate and therefore the quality of the labour pool will depend on some average of expected wage offers the decision over which profession to enter at the beginning of the educational process provides another example of course imperfect information plays a key role here it is assumed that both firms and workers have imperfect information about the suitability of individual workers for jobs both before and to a lesser extent after employment has begun this lack of information will rule out both profitable selfselection mechanisms and wages strictly proportional to output so that firms will care about the quality of the labour pool the non optimality of market clearing prices which will be demonstrated makes this paper similar to a number of papers on the implications of adverse selection in labour and product markets one may mention two excellent papers on screening in labour markets by guasch and weiss i980 i98i this paper builds on some of the results in those papers stiglitz and weiss i98i show how credit rationing may arise from a similar type of argument wilson

if you pay peanuts do you get monkeys a cross country analysis of teacher pay and pupil performance why are teachers paid up to four times as much in some countries compared to others and does it matter specifically is the quality of teachers likely to be higher if they are paid higher up the income distribution in their own country and are pupil outcomes influenced by how well their teachers are paid this paper considers the determinants of teachers salaries across countries and examines the relationship between the real and relative level of teacher remuneration and the internationally comparable measured performance of secondary school pupils we use aggregate panel data on 39 countries published by the oecd to model this association our results suggest that recruiting higher ability individuals into teaching and permitting scope for quicker salary advancement will have a positive effect on pupil outcomes

theoretical foundations for sticky wages abstract the paper compares three different types of theoretical explanation of sticky wages they are implicit contracts efficiency wage models and insider outsider models it then reconsiders keynes rationale for sticky wages which focuses on relative wage issues finally the paper considers possible directions for future research

teacher accountability reforms and the supply and quality of new teachers abstract in recent years states have sought to increase accountability for public school teachers by implementing a package of reforms centered on high stakes evaluation systems we examine the effect of these reforms on the supply and quality of new teachers leveraging variation across states and time we find that accountability reforms reduced the number of newly licensed teacher candidates and increased the likelihood of unfilled teaching positions particularly in hard to staff schools evidence also suggests that reforms increased the quality of newly hired teachers by reducing the likelihood new teachers attended unselective undergraduate institutions decreases in job security satisfaction and autonomy are likely mechanisms for these effects

teacher pay and school productivity exploiting wage regulation abstract the impact of teacher pay on school productivity is a central concern for governments worldwide yet evidence is mixed in this paper we exploit a feature of teacher labour markets to determine the impact of teacher wages teacher wages are commonly set in a manner that results in flat wages across heterogeneous labour markets this creates an exogenous gap between the outside labour market and inside regulated wage for teachers we use the centralised wage regulation of teachers in england to examine the effect of pay on school performance we use data on over 3000 schools containing around 200 000 teachers who educate around half a million children per year we find that teachers respond to pay a ten percent shock to the wage gap between local labour market and teacher wages results in an average loss of around 2 in average school performance in the key exams taken at the end of compulsory schooling in england

a dynamic model of teacher labor supply the labor supply decisions of certified elementary and high school teachers are examined using data from a general longitudinal survey a significant decrease in the teaching participation rate tak

marriage markets and assortative mating with household public goods theoretical results and empirical implications this paper analyzes marriage market equilibria when the gains from marriage result from joint consumption of household public goods assuming transferable utility within marriage the paper proves that marriage markets will be characterized by positive assortative mating on wealth when spouses differ only in endowments and the gains to marriage result only from public goods when spouses differ in wages and household public goods are produced at home the results imply offsetting effects with public good economies creating an incentive for positive assortative mating on wages and gains from specialization creating an incentive for negative assortative mating on wages the results help explain the persistent lack of empirical support for becker s prediction of negative assortative mating on wages and have implications for empirical analysis of all joint living arrangement decisions

sustainability economics where do we stand abstract environmental economics which is a branch of resource economics the environment as a scarce resource is essentially about market failures the costs of pollution and pollution abatement and the economics of regulation sustainability economics includes the problem of maintaining economic growth while reducing pollution and or its impacts with special attention to the linked problems of energy supply not to mention the supply other exhaustible resources climate change and most urgently fossil fuel consumption there is a need for integration of resource and environmental economics under a new rubric sustainability economics

the dynamics of teacher quality abstract an extensive literature finds that while teachers vary considerably in initial quality there are limited teacher quality dynamics except for the first few years of teaching teacher quality does not improve over the course of a teacher s career this study evaluates the importance of various modeling restrictions to the key findings of this literature using data covering all 5th grade public school teachers from the state of north carolina i replicate the findings of the previous literature using their restrictive experience assumptions however using an unrestricted experience model i find that for mathematics achievement there are high returns to later career teaching experience about twice as much dispersion in initial teacher quality as previously estimated and a pattern of negative selection where high quality teachers are more likely to exit

on economic disequilibrium and free lunch there is a sharp disagreement between mainstream economists and advocates of energy efficiency as regards the potential for free lunches or no regrets policies to cut greenhouse gas emissions from an economics perspective the critical question is whether the economic system is or is not close to a pareto optimum equilibrium state if so it follows that most technological systems now in place are optimum or nearly so from an economic perspective if not there may be many sub optimal technologies in place with corresponding opportunities for very high returns on appropriate investments this paper presents some of the evidence supporting the latter thesis

migration selectivity and the effects of public programs abstract a model of the spatial distribution of mobile heterogeneous agents is formulated to assess how a price change or program subsidy that is location specific affects the composition of local residents via selective migration and thus biases evaluations of the effectiveness of the program based on its local consequences longitudinal data from colombia are used to test the implications of migration selectivity the findings confirm the existence of selective migration suggesting that local subsidies to human capital attract high income but within income groups low fertility households and those with low human capital endowments these migration patterns are shown to be consistent with the dominance of endowment over tastes heterogeneity in the population under plausible behavioral assumptions

the stylized facts about the behavior of manufacturers inventories and backorders over the business cycle 1959 1980 recent theoretical work has highlighted the role of inventories in propagating business cycles this paper attempts to provide an empirical foundation for current and future research on the role inventories play in business cycles the evidence presented here indicates that inventories and backorders are major variables in predicting output fluctuations further the evidence is that disaggregating inventories by stage of fabrication is important in predicting output in concert with previous findings our results suggest that disaggregated inventories ought to be a component of models of the business cycle

compensation policies and teacher decisions a dynamic discrete choice framework with a flexible structure for unobserved heterogeneity is used to model the occupational decisions of individuals who are certified to teach in elementary and secondary schools the model is estimated using data from the national longitudinal study of the high school class of 1972 and is used to examine the effects of possible changes in the compensation policy for teachers

international evidence on the persistence of economic fluctuations abstract this paper presents new evidence on the persistence of fluctuations in real gnp we estimate two measures of persistence nonparametrically using post war quarterly data from canada france germany italy japan the united kingdom and the united states we compare these estimates with monte carlo results from various ar 2 processes for six out of seven countries the point estimates indicate that a 1 shock to output should change the long run unvariate forecast of output by well over 1 low order arma models yield similar conclusions finally we examine the persistence in relative outputs of different countries

strategic promotion and compensation within a hierarchical firm structure this paper details how the composition of a worker s skills and the non observability of a worker s ability affect wage and promotion paths promotionbased compensation schemes derive naturally from the worker s asymmetrically observed ability promotion takes place over time and is inefficient since employers strategically exploit their knowledge of an able worker s ability conversely employers may be unable to efficiently demote and retain bad managers without paying bonuses employers are led to promote educated employees before their equally or more able but uneducated counterparts explanations for fast track promotions plans and other empirical regularities are provided

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

do public schools hire the best applicants despite a surplus of candidates for most teaching jobs a strong academic record does little for an applicants job prospects this does not appear to result from lukewarm interest on the part of such applicants or choosiness about the positions they accept administrators lack of interest in these candidates may reflect the weakness of competitive pressures in public education policies intended to improve teacher quality need to consider incentives on both the demand and supply sides of the market

information processing and organizational structure abstract standard economic theories of the firm and other organizations stress profit maximization as the foundation for derivation of predictable behavior yet statistical and case study evidence continues to accumulate that real firms do not act as required by the neoclassical framework instead of being represented by ever more elaborate maximization models the firm can be modeled simply as a network of information processing agents the actions of the firm are then a function only of the network structure and the information processing capabilities of the agents this approach can be used to explain a number of features of organizational behavior including the process of technological diffusion it also suggests that derivation of the optimal organizational structure may be computationally complex with a number of implications for economic theory and policy development

college selectivity and earnings this article shows that college performance and selectivity have significant effects on earnings it suggests that work that does not include college performance overstates the effect of college se