probability and timing of succession or closure in family firms a switching regression analysis of farm households in germany in a two step econometric approach that corrects for selectivity bias we analyse the determinants of the probability of succession and the timing of succession or closure in a unique sample of 233 north german family farms we set up the succession decision as an intertemporal optimization problem the empirical results show that larger and more profitable farms which are specialized in dairy production are significantly more likely to have an intra family successor we find that a nonagricultural education of the current manager or the successor delay succession when the family decided to stop farming operations nonagricultural education of the owner delays closure of the farm closure occurs earlier if the manager is able to lease out the land in the process of retirement although farm households react to incentives originating from tax and pension regulations many important determinants of succession are beyond the control of policymakers

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

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

commodity trade and international risk sharing how much do financial markets matter abstract this paper evaluates the social gains from international risk sharing in some simple general equilibrium models with output uncertainty a simulation model calibrated to selected moments of u s and japanese data estimates the incremental loss from a ban on international portfolio diversification to be on the order of 0 20 percent of output per year even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology the paper argues that the small magnitude of potential trade gains may help explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility

an experimental investigation of equilibria impacts of information the theoretical literature on pricing in a spatial setting where transportation costs exist and both buyers and sellers are geographically distributed has been expanding and developing at a rapid pace indeed it has been shown that the theoretical analysis of differential product markets is equivalent to the spatial framework 21 22 however empirical analysis of implications from these theoretical developments has only recently begun to appear one question that is frequently asked since spatial competition is modeled in an oligopoly framework is which price reaction is most likely 8 905 for f o b price setters in an interdependent spatial market also see 2 5 6 18 among others similarly one might ask which price reaction is most likely in a differentiated product market answers have been proposed on the basis of theoretical and or intuitive arguments but the issue has not been adequately explored empirically the purpose of the study described in the following presentation was to empirically evaluate the various arguments about pricing behavior in spatial or product variety competition perhaps the primary reason for the lack of empirical analysis in regard to pricing behavior when consumers differentiate between sellers for locational or other reasons is lack of a data set

earnings functions beyond human capital taking a short run view of the labour market where individuals with given levels of education have to be matched with jobs differing in level of complexity and difficulty wages are related to education and job levels in a sample of some 13 000 observations controlling for age experience and sex a model emphasizing both sides of the allocation process is favoured over the simple human capital view that ignores allocation once education is taken care of it is claimed that the long run human capital model can fruitfully be expanded with this short run allocation structure the empirical results measure the differences in earnings for individuals with given education working at different job levels and shows them to be substantial the relevance of adding job levels to the explanatory variables is illustrated with the case of female earnings discrimination and with differences in age earnings profiles between general and vocational education

the implications of first order risk aversion for asset market risk premiums abstract in an effort to explain simultaneously the excess return predictability observed in equity bond and foreign exchange markets we incorporate preferences exhibiting first order risk aversion into a general equilibrium two country monetary model when we calibrate the model to us and japanese data we find that first order risk aversion substantially increases excess return predictability however this increased predictability is insufficient to match the data we conclude that the observed patterns of excess return predictability are unlikely to be explained purely by time varying risk premiums generated by highly risk averse agents in a complete markets economy

iniquidade educacional no brasil uma avaliacao com dados do pisa 2000 this paper assesses the extent of educational inequality and inequity in brazil using data obtained from the international study pisa 2000 prepared by the oecd we provide some descriptive indices of inequality as well as a measure of inequity understood as inequality of educational opportunities based on a simple inferential analysis most indicators show that the levels of educational inequality and inequity in brazil are very high

import dynamics and demands for protection what kinds of changes in foreign competition lead domestic industries to seek import protection to address this question this paper uses detailed monthly u s import data to investigate changes in import composition during a 24 month window immediately preceding the filing of a petition for protection a decomposition methodology allows a comparison of imports from two groups of countries supplying the same product those that are named in the petition and those that are not the same decomposition can be applied to products quite similar to the imports in question but not subject to a petition the results suggest that industries typically seek protection when faced with a specific pattern of shocks first a persistent positive relative supply shock favors imports from named countries second a negative demand shock hits imports from all sources just prior to domestic industries petition for protection the relative supply shock is a broad one it applies both to named commodities and to the comparison product group the import demand shock by contrast is narrow hitting only named products the latter shock is also large import growth over the two year window is 15 percentage points lower in named products than in reference products with most of this gap arising in the final two quarters before the petition the negative import demand shock appears to be a key event in the run up to the filing of a petition it has been missed by previous studies using more aggregated data

asset pricing in open economies with incomplete markets implications for foreign currency returns abstract this paper extends the incomplete markets model in constantinides and duffie 1991 asset pricing with heterogenous consumers good news and bad news manuscript university of chicago to a two country two goods framework adding another dimension to heterogeneity viz cross country heterogeneity the paper combines the heterogenous agent economy specified in constantinides and duffie with cobb douglas preferences as in cole and obstfeld 1991 commodity trade and international risk sharing how much do financial markets matter journal of monetary economics the combination of iso elastic preferences with an income process that incorporates permanent shocks that are heteroscedastic results in an equilibrium where agents do not trade both within and across countries the results on asset prices are similar to the one country one good model as in constantinides and duffie 1991 despite heterogeneity asset prices depend on aggregate endowments prices differ from those in the representative agent case on account of differences in the effective risk aversion and time preference rates effective risk aversion could be higher and the effective time preference lower compared to the complete markets case the results on portfolio choice are similar to cole and obstfeld 1991 in that agents do not trade assets across countries

cyclical fluctuations and coordination in the us steel industry the model developed uses a measure of the discrepancy between price and marginal cost to estimate the effects of domestic demand fluctuations on the degree of oligopoly coordination in the us steel industry due to the importance of imports however domestic demand fluctuations occur whenever market demand and or import supply shift consistent with several recent game theoretic models our results show that coordination among us steel producers tends to be weakest when market demand is high and import supply is low

earnings functions testing for the demand side abstract to analyze labor market phenomena one may simultaneously grade workers by education and jobs by level of difficulty and complexity human capital theory predicts earnings based on only worker quality thurow s version of a segmented labor market theory predicts that only the job level is relevant and the assignment theory predicts that both variables are relevant using three different data sets for the netherlands testing demonstrates convincingly the superiority of the assignment theory

an empirical study of re enrolement behaviour for male high school dropouts to understand further the behaviour of high school dropouts during their periods away from school this paper studied empirically the decisions of male dropouts on whether to return to school we applied the bivariate probit multinomial logit and waiting time models to analyse this issue the estimation results from all three models indicate that the armed forces qualification test score age experience of using drugs local labour market situation and the duration of the period out of school had significant effects on a male dropout s return decision family background variables contrary to what we expected had little effect on this decision

asset pricing puzzles and incomplete markets the representative agent theory of asset pricing is modified to incorporate heterogeneous agents and incomplete markets the model features two types of agents who differ up to a nontradable idiosyncratic component in their endowment processes numerical solutions indicate that individuals are able to diversify a substantial portion of their idiosyncratic income risk through riskless borrowing and lending alone restrictions on the variability of intertemporal marginal rates of substitution hansen and jagannathan 1991 are used to argue that incomplete markets as modeled here cannot account for the properties of asset returns that are anomalous from the perspective of representative agent theory a large literature in financial economics has investigated the extent to which variants of the lucas 1978 general equilibrium theory of asset pricing can account for the joint behavior of aggregate u s consumption and asset returns by and large this literature has concluded that a theory based upon frictionless arrow debreu markets and or a representative agent makes strongly counterfactual predictions regarding even the simple unconditional properties of this relationship mehra and prescott 1985 for instance show that the theory drastically underpredicts the average excess rate of return on u s stocks the so called equity premium puzzle weil 1989 points out as did mehra and prescott that the magnitude of the average risk free rate is far below that predicted by the theory this has been dubbed the risk free rate puzzle numerous authors including grossman melino and shiller 1987 and backus gregory and zin 1989 show that the theory cannot account for term premia inherent in the yield curve hodrick 1987 surveys a large literature which documents the theory s shortcomings in accounting for excess expected returns in foreign exchange markets the notion that the representative agent model cannot account for excess returns across a wide array of asset markets can be made more precise by using tools developed by hansen and jagannathan 1991 and shiller 1982

exchange rate volatility and deviations from unbiasedness in a cash in advance model abstract this paper examines time series properties of exchange rate changes the forward premium and the forward bias in the context of a variant of svensson s cash in advance model the model is solved and simulated using realistic forcing processes whose law of motion is estimated from u s japan data and then approximated by a markov chain although method of moments estimation shows that the over identifying restrictions implied by the model are not rejected it fails dramatically in producing a sufficiently variable risk premium on forward market speculation this result is robust to various pertubations to the model s parameters forcing processes and preference structure the model also fails to match exchange rate and forward premium volatility simultaneously

equilibrium asset prices with undiversifiable labor income risk abstract in a two period lucas tree economy in which ex ante identical but ex post dissimilar agents face undiversifiable labor income risk calibrating a wrong representative agent model results in overstating the equilibrium riskfree rate and in understating the equilibrium equity premium if the utility function exhibits decreasing absolute risk aversion and decreasing absolute prudence these behavioral assumptions provide as a consequence a theoretical rationale for the often advanced conjecture that nontraded risk contributes to the solution of the riskfree rate and equity premium puzzles

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

sales at risk a test of the mutual forbearance theory of conglomerate behavior in seeking to understand the implications of the large amount of diversification and conglomeration that has occurred in the united states since the mid 1960s some economists have revived the mutual forbearance hypothesis first presented by edwards 1955 several papers have attempted to formalize or test this hypothesis which states that multimarket contacts mmcs among firms have the potential for facilitating collusion in one or more of the markets where these contacts occur using 1976 data from the federal trade commission s line of business study an earlier paper feinberg 1982 developed a framework for evaluating mmcs and inthis paper tests the mutual forbearance theory of conglomerate behavior at both company and industry levels using 1976 data from the federal trade commission s line of business program this theory states that companies meeting rivals in more than one market will be able to facilitate collusion in one or all of those markets at the company level the evidence supports the theory showing salesat risk a measure of the importance of multimarket contacts to increase price cost margins in the moderate range of concentration where collusion is feasible but difficult to achieve without mutual forbearance the industry level results are weaker casting some doubt on the hypothesis associate professor of economics pennsylvania state university this paper was begun while i was a consultant to the line of business program at the federal trade commission the manager of the line of business program has certified that he has reviewed and approved the disclosure avoidance procedures used by the staff of the line of business program to insure that the data included in this paper do not identify individual company line of business data views expressed here are my own and not necessarily those of the federal trade commission i would like to thank william long george pascoe david ravenscraft melvin reder and an anonymous referee for their help on this project 1 these studies often refer to terms other than mutual forbearance e g spheres of influence extended interdependence they include adams 1974 reynolds 1976 heggestad and rhoades 1978 areeda and turner 1979 strickland 1980 feinberg 1982 1984 scott 1982 and feinberg and sherman 1985

extended stay at university an application of multinomial logit and duration models in brazil few studies have been devoted to proving the existence of and evaluating the internal inefficiencies of state universities such work however is highly important because state higher learning is free and a great amount of resources is involved in its maintenance the objective of this study is to develop empirical models to permit an evaluation of the factors related to the decision to complete or abandon the course and to verify whether the duration of the connection to the university is also related to the same factors among the results obtained the most important is that the prolonged stay at a state university favours students whose families could afford their schooling

imports as a threat to cartel stability abstract it is an old story that increased imports may have competitive effects on a domestic market the usual effect is felt through a reduction in demand for the products of the domestic industry what is more subtle is the effect that imports in particular an unexpected surge in imports from a new source country may have on the stability of a domestic cartel and more generally on the conduct of a domestic oligopoly implying a further competitive influence of international trade this paper discusses the issue in the context of several models and presents some relevant evidence from a recent case brought before the u s international trade commission

the demand for and return to education when education outcomes are uncertain this article treats education as a sequential choice that is made under uncertainty a simple model is used to explore the effects of ability high school preparation preferences for schooling the borrowing rate and ex post payoffs to college on the probability of various post secondary college outcomes and the ex ante return to starting college the model motivates an empirical method of accounting for uncertainty about educational outcomes and for nonlinearity in the relationship between years of education and earnings when estimating the expected return to the first year of college

market incompleteness and the equity premium puzzle evidence from state level data abstract this paper investigates the importance of market incompleteness by comparing the rates of risk aversion estimated from complete and incomplete markets environments for the incomplete markets case we use consumption data for the 50 us states we find that the rate of risk aversion under the incomplete markets setup is much lower furthermore including the second and third moments of the cross sectional distribution of consumption growth in the pricing kernel lowers the estimate of risk aversion these findings suggest that market incompleteness ought to be seen as an important component of solutions to the equity premium puzzle