a simple estimator for simultaneous models with censored endogenous reggressors this paper presents a simple two step estimator for models with censored endogenous regressors and sample selection bias the approach unifies the literature on censored endogenous regressors and sample selection bias and provides extensions the procedure employs generalized residuals to adjust for the inconsistency caused by the endogeneity of the censored regressors the paper also provides two new tests of weak exogeneity an empirical example examining the trade off between fringe benefits and wages indicates that the estimation procedure works well a monte carlo experiment suggests that the proposed tests have good power properties copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth abstract this study examines the effects of foreign direct investment fdi and equity foreign portfolio investment efpi on economic growth using data on 80 countries from 1979 through 1998 the results largely suggest that lagged fdi and efpi do not have direct unmitigated positive effects on growth but some data are consistent with the view that the effects of fdi and efpi are contingent on the absorptive capacity of host countries with particular respect to financial or institutional development moreover extreme bound analysis eba of significant results indicates that the estimates are robust compared to other empirical studies on growth

a test of the rational expectations hypothesis using data from a natural experiment data on contestants choices in italian game show affari tuoi are analysed in a way that separates the effect of risk attitude preferences from that of beliefs concerning the amount of money that will be offered to contestants in future rounds this separate identification is possible by virtue of the fact that at a certain stage of the game beliefs are not relevant and risk attitude is the sole determinant of choice the rational expectations hypothesis is tested by comparing the estimated belief function with the true offer function which is estimated extraneously using data on offers actually made to contestants we find a close correspondence leading us to accept the rational expectations hypothesis the importance of belief formation is confirmed by the estimation of a mixture model which establishes that the vast majority of contestants are forward looking as opposed to myopic

the use of quantile regressions in estimating gender wage differentials a case study of the philippines quantile regressions are used to analyse the size components and nature of the gender earnings differentials as well as the returns to education by gender in the philippines over the entire conditional distribution of earnings using data from the 1999 apis survey this approach allows more focused conclusions about the nature of gender earnings differentials incorporating the quantile regression approach to the oaxaca blinder decomposition allows the localization of gender discrimination to particular quantiles of the earnings distribution and permits more targeted policy intervention

game shows and economic behavior risk taking on card sharks this paper studies individual risk taking behavior with a unique data set risky decisions of contestants during the threeyear history of the television game show card sharks in the bonus round of the game individuals choose how much to wager on positive expected value gambles with known and varying probabilities and large possible payouts since no special skills or knowledge are involved empirical analysis is not complicated by a contestant s superior information about her own abilities stakes can reach 16 000 and average 3 200 few experimental budgets permit even one observation of this magnitude first i simply estimate how risk averse contestants behave under the assumption of expected utility maximization i estimate a lower bound for the coefficient of absolute risk aversion of 0 00031 which when multiplied by per capita u s personal income gives an estimate of relative risk aversion of 4 8 this estimate is higher than most econometric estimates of risk aversion contestants however do not act in a manner consistent with expected utility maximization so this number should not be given a structural interpretation rather it is simply a useful way to summarize average willingness to bear risk of individuals on the show second i explore how individual behavior is inconsistent with expected utility theory the amount a contestant wishes to wager depends critically on the amount of wealth she has accumulated in the bonus round and therefore on the size of the stakes this is at odds with expected utility theory since the size of the stakes although far from insignificant is small relative to a person s wealth contestants should then have close to constant absolute risk aversion with respect to accumulated winnings in the game a more striking result deals with contestants who had previ

sources of intra industry wage dispersion how much do employers matter observed human capital explains less than half of wage variation in bls industry wage surveys establishment based wage differentials controlling for occupation account for 20 70 percent of intra industry wage variation this corresponds to a standard deviation in wages of 14 percent of the mean almost as large as interindustry wage variation investigation suggests that establishment wage differentials are not random variations or returns to usual measures of human capital

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

a new method of estimating risk aversion i show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model i derive a formula for the coefficient of relative risk aversion in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor i bound the degree of complementarity using data on consumption choices when labor supply varies across states using labor supply elasticity estimates i find a mean estimate of 1 then show generating 2 requires that wage increases cause sharper labor supply reductions jel d81 j22

assessing individual risk attitudes using field data from lottery games we use information from the television game show with the highest guaranteed average payoff in the united states hoosier millionaire to analyze risktaking in a high stakes experiment we characterize gambling decisions under alternative assumptions about contestant behavior and preferences and derive testable restrictions on individual risk attitudes based on this characterization we then use an extensive sample of gambling decisions to estimate distributions of risk aversion parameters consistent with the theoretical restrictions and revealed preferences we find that although most contestants display risk averse preferences the extent of the risk aversion implied by our estimates varies substantially with the stakes involved in the different decisions

the 1990s rise in swedish earnings inequality persistent or transitory this article decomposes the rise in the cross sectional variance of male annual earnings in sweden between 1991 and 1999 into its persistent and transitory components the results show that the persistent component accounts for basically all of the increase in earnings dispersion this implies that the answer to the 1990s trend reversal in swedish earnings inequality is to be found in explanations that focus on persistent changes in the labour market such as changes in the price of skills

consistency of risk preference measures an artefactual field experiment from rural china a variety of measures have been developed to elicit individual risk preferences how these measures perform in the field in particular in developing countries with non student subjects is still a

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

on decomposing the wage gap a critical comment on blinder s method many studies have found that the impact of schooling on earnings is greater for females than for males despite the fact that females tend to earn less both absolutely and controlling for personal characteristics this study investigates possible

a dynamic mincer equation with an application to portuguese data this article argues in favour of a dynamic specification of the mincer equation where the past observed earnings play the role of additional explanatory variable for current observed earnings a dynamic approach offers an explanation why the return to schooling in terms of observed earnings is not independent of labour market experience as suggested by some recent empirical evidence for the united states

incentives in principal agent relationships this article identifies some of the major issues that have been examined in the literature on incentives the article begins by discussing the frictions that lie at the heart of incentive problems next the principal s optimal response to these frictions is explored taking as given the characteristics of the agents with whom the principal interacts in a nonrepeated setting the design of individualized contracts contests and tournaments is analyzed then the principal s task of selecting the best agent is addressed and repeated agency relationships are considered

human capital and regional wage gaps lopez bazo e and motellon e human capital and regional wage gaps regional studies this paper uses micro level data to analyse the effect of human capital on regional wage differentials the results for the set of spanish regions confirm that they differ in the endowment of human capital but also that the return that individuals obtain from it varies sharply across regions regional heterogeneity in returns is especially intense in the case of education particularly when considering its effect on the employability of individuals these differences in endowment and especially in returns to human capital account for a significant proportion of regional wage gaps lopez bazo e and motellon e lopez bazo e et motellon e le capital humain et les ecarts des salaires regionaux regional studies cet article emploie des m

what factors drive individual misperceptions of the returns to schooling in tanzania some lessons for education policy evidence on educational returns and the factors that determine the demand for schooling in developing countries is extremely scarce building on previous studies that show individuals underestimati

returns to education and wage equations the paper shows why considering a number of education dependent covariates in a wage equation decreases the coefficient of education in that equation this result is illustrated empirically with a meta analysis for portugal the education coefficient decreases when covariates are used that can be considered post education decisions on the other hand it is independent of sample size tenure and whether hourly or monthly wages are used these results support the use of a simple specification of the mincer equation for the study of the total returns to education

to what extent can foreign direct investment help achieve international development goals for fdi to help alleviate absolute poverty and stimulate economic growth in developing countries two conditions have to be met first developing countries need to be attractive to foreign investors second the host country environment in which foreign investors operate must be conducive to favourable fdi effects with regard to overall investment economic spillovers and income growth this paper argues that it is more difficult to benefit from fdi than to attract fdi the widely perceived concentration of fdi in few developing countries tends to obscure that in relative terms various small and poor countries are fairly attractive to fdi yet the mobilisation of domestic resources remains by far more important than attracting fdi for financing investment and stimulating economic growth furthermore high inward fdi is no guarantee for poverty alleviation and positive growth effects in particular the empirical evidence suggests that host country conditions typically prevailing in poor countries including weak institutions and an insufficient endowment of complementary factors of production constrain the growth enhancing and poverty alleviating effects of fdi the crux is that creating an environment in which fdi may deliver social returns will take considerable time exactly where development needs are most pressing

returns to endogenous education the case of honduras the rapid expansion of the education sector in developing countries and the scarcity of public funds have increased the need for an accurate evaluation of educational policies estimates of rates of return to education have often been used as an integral part of cost benefit studies and programme evaluation efforts this study uses household survey data from honduras for 1990 to estimate returns to education that allow for worker heterogeneity and individual self selection in the education process a sequential estimation procedure is used that enables study of the interaction between educational attainment and earnings determination it is found that accounting for endogenous educational attainment leads to substantially higher estimated returns to education compared to traditional least squares estimates the possible magnitude of the bias underscores the importance of recognizing the role of self selection and comparative advantage in the education process

how much of a threat to economic growth is a mature aids epidemic the article models the impact on economic growth of hiv aids when the epidemic is in a mature phase in contrast with previous studies focused on periods of expansion as it is typically the case in african countries simulations for honduras the epicentre of the epidemic in central america show that aids is not likely to threaten economic growth neither through labour nor capital accumulation channels impacts are estimated between 0 007 and 0 27 points of gross domestic product gdp growth annually for the period 2001 to 2010 increasing spending on prevention higher public treatment subsidies and increasing treatment access will not jeopardize economic growth prospects critical factors that slash economic growth in africa such as human capital reductions and shifts in relative skills are not strong in honduras

schooling and the distribution of wages in the european private and public sectors international research has shown that schooling enhances within groups wage dispersion this assessment is typically based on private sector data and up to date the inequality implications of schooling have not been documented for the public sector this article uses recent data from eight european countries to explicitly take into account differences between the private and public sectors using quantile regression the article describes the effects of schooling on the location and shape of the conditional wage distribution in each sector while the average impact of schooling on wages is similar across sectors the impact of schooling on within groups dispersion is found to be substantially larger in the private sector than in the public sector this finding warns that the effects of the european educational expansion on overall within groups dispersion may be lower than previously thought

lower and upper bounds of returns to schooling an exercise in iv estimation with different instruments abstract several recent studies based on exogenous sources of variation in educational outcomes show iv estimates of returns to schooling that are substantially higher than the corresponding ols estimates card 1995a earnings schooling and ability revisited research in labor economics 14 23 48 suggests that these results are explained by the existence of heterogenity in individual returns and by the fact that these studies are based on instruments that influence only the educational decision of individuals with high marginal returns due to either liquidity constraints or to high ability this conclusion is consistent with the local average treatment effect late interpretation of iv imbens and angrist 1994 identification and estimation of local average treatment effects econometrica 62 467 475 according to which iv identifies only the average returns of those who comply with the assignment to treatment mechanism implied by the instrument we show evidence for germany suggesting that returns to schooling are heterogeneous instruments matter and the late interpretation of iv makes sense with an appropriate choice of instruments we also show how iv can be used to approximate the range of variations of returns to schooling in germany

decision making under uncertainty when the stakes are high evidence from a lottery game show illinois instant riches a televised set of three different games of chance provides a natural experiment for assessing the risk taking behavior of individuals recently there have been a limited number of other studies that have also used game shows as natural experiments including card sharks 6 jeopardy 11 and the price is right 1 an advantage of using game shows over most laboratory experiments is the ability to see how individuals respond to wagers involving relatively large sums instant riches is particularly interesting in this regard because it involves very high stakes across the three games played the potential winnings from wagers offered to contestants ranged from 2000 to 100 000 losses from 3000 to 35 000 and expected values from 10 938 to 15 000 given our data our primary research objective is to provide additional evidence on the degree of risk aversion under high stakes wagering to date that evidence is mixed gertner concludes that card sharks contestants are on average risk averse metrick could not reject the hypothesis that jeopardy contestants are risk neutral in respective experimental studies using indian peasant farmers and chinese university students binswanger 2 3 and kachelmeier and shehata 9 employed small nominal stakes that were nonetheless large relative to their subjects monthly incomes e g 20 percent to just over 100 percent of income both reported a shift toward risk aversion as stakes were increased but in the kachelmeier study the subjects remained largely risk neutral in another experimental study this time involving modest stakes e g hundreds of dollars goodman et al 7 found expected value to be the best predictor of las vegas casino patrons certainty equivalents a result implying risk neutrality in all these studies the stakes were lower than for instant riches

empirical age earnings profiles the human capital earnings function in which earnings are expressed as a quadratic in potential experience is probably the most widely accepted empirical specification in economics in spite of its widespread acceptance the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience the standard formulation understates early career earnings growth by about 30 50 and overstates midcareer growth by 20 50 however simple alternative specifications that fit the data are available

utility of a quarter million this paper presents a new method how to elicit the bernoulli utility function over a wide range of monetary outcomes using approximation through taylor expansion the new method is applied to the natural experiment provided by the swiss version of the television show deal or no deal

parental childcare and children s educational attainment evidence from china this paper examines the determinants of child educational attainment in addition to those examined in previous studies it is found that maternal childcare is another important determinant of child educational attainment the results are robust after controlling for endogeneity the iv estimates show that once childcare time is controlled for child health does not have an effect on school enrolment age this finding suggests that omitting the childcare time may have biased the estimated effect of child health on school enrolment in previous studies

far away from a skill biased change falling educational wage premia in italy in this article we apply quantile regressions to investigate the evolution of educational wage premia ewp in italy from 1993 to 2004 using the survey of the household income and wealth shiw bank of italy and different classifications for educational attainments we show that in the private sector ewp have generally decreased over time considering both continuous and categorical specifications for education at all quantiles of the wage distribution different patterns are observed in the public sector where ewp remain basically stable over time a number of robustness checks and various econometric specifications are also applied in order to address sample selection issues our findings provide additional evidence in favour of the thesis that the increasing patterns in inequality and ewp and the related interpretations concerning skill biased changes are much less pronounced in continental europe than in anglo saxon countries

an experimental investigation of moral hazard in costly investments frequently parties make sequential decisions regarding investments for which the probability of success or failure is dependent on the amount of total investment this paper reports a series of experiments involving a costly investment game that is derived from the catalytic finance model of morris and shin global games theory and applications in advances in economics and econometrics proceedings of the eighth world congress of the econometric society edited by m dewatripont l hansen and s turnovsky cambridge ma cambridge university press pp 56 114 the sequential nature of investments is such that the second investment could function as a complement to the initial investment or simply serve as a substitute to it thereby creating moral hazard the features of this game are similar to those of the ultimatum game however there are several key differences between the games that may account for the high frequency of materially self interested behavior that we observe particularly among second movers

exploring higher order risk effects higher order risk effects play an important role in examining economic behavior under uncertainty a precautionary demand for saving has been linked to the property of prudence and the property of temperance has been used to show how the presence of an unavoidable risk affects one s behavior towards a second risk these two properties also play key roles in aversion to negative skewness and to kurtosis respectively both properties recently have been characterized by preferences over lottery pairs in simple 50 50 gambles the simplicity of this characterization is ideal for experimental investigation this article reports the results of such experiments and concludes that there is behavioral evidence for prudence but not for temperance implications of these results for both expected utility and non expected utility models are examined

educational attainment and earnings determination in colombia the expansion of the education sector in developing countries since the mid 1950s is certainly impressive between 1950 and 1980 primary and secondary enrollment ratios in many of these countries tripled or quadrupled and the educational gap with respect to developed countries narrowed although most social planners and politicians would argue that there is still a long way to go before socially optimal levels of education are attained it is also commonly acknowledged that there is an increasing need for a more careful and systematic evaluation of educational policies and by implication public funding priorities 2 although there is the question of whether all types of education should be considered equally much of the work in the evaluation process has been devoted to the production of estimates of the social and private rates of return to schooling 3 most of the early research in this area ignored the effects of educational quality heterogeneous individual abilities and other types of selection bias issues these so called first generation models produced relatively high rates of return to additional years of education from 15 to 30 depending on the country and statistical methodology employed 4 these estimates led to a form of consensus that education was a high priority item in government budget planning there is only limited evidence of how rates of return have fared subsequent to the growth of the education sector in the case of colombia however g psacharopoulos noted that the rate of return to education fell from about 20 in the early sixties to below 10 by 1979 5 during the eighties a number of second generation studies

why do diplomas pay an expanded mincerian framework applied to mexico we compare four explanations for the value of diplomas each of which has implications for unemployment and wage variation amongst graduates most of which have not previously been tested for when seeking to explain the effects of diplomas we test for these implications using a refined econometric framework exploiting idiosyncrasies in mexican labour market and educational institutions premiums in mexico appear to result from diplomas tied to jobs with downwards rigid wages an uncommon but simple explanation the standard explanations including screening are not suggested by mexican data our results illuminate how labour markets segmented by diplomas clear this depends upon the nature of the labour market rigidities exactly as predicted by neoclassical theory

risk attitudes in large stake gambles evidence from a game show this article estimates the degree of risk aversion of contestants appearing on vas o no vas the mexican version of deal or no deal we consider both dynamic agents who fully backward induct and myopic agents that only look forward one period further we vary the level of forecasting sophistication by the agents we find substantial evidence of risk aversion the degree of which is more modest than what is typically reported in the literature

the returns to education in africa some new estimates abstractwe estimate the rate of return to education for 12 african countries using recent data and a range of methodologies which we apply consistently across all countries our findings confirm that the return to basic education is the lowest 7 10 the returns to upper secondary and tertiary education are similar to one another 25 30 accounting for the risk of joblessness increases these rates of return particularly for basic education and for women at tertiary level our results at the country level suggest that great care should be taken in choosing the appropriate methodology to estimate rates of return

changes in the rate of return to education in sweden 1968 1991 this paper estimates changes in the rate of return to education in sweden between 1968 and 1991 both the quantity years of schooling completed and quality highest qualification obtained dimensions of education are considered adopting a human capital approach the rate of return is measured in terms of differences in wage rates associated with differences in education both quadratic wage and cubic spline wage functions are estimated the data used are from the 1968 1981 and 1991 swedish level of living surveys

the pattern of direct foreign investment and economic growth abstract this paper examines the relationship between the sectoral pattern of direct foreign investment dfi and growth using theoretical and empirical analysis the theoretical analysis suggests that different patterns of dfi because of their differential effects on the north south terms of trade and on southern technological development can be expected to affect growth in host countries differently the empirical analysis using crosscountry growth equations however is unable to detect any effects of the pattern of dfi on growth it is argued that detailed case studies of particular countries would be valuable for exploring the empirical issues involved

foreign direct investment regulations and growth this paper explores the linkage between income growth rates and foreign direct investment fdi inflows so far the evidence is rather mixed as no robust relationship between fdi and income growth has been established the authors argue that countries need a sound business environment in the form of good government regulations to be able to benefit from fdi using a comprehensive data set for regulations they test this hypothesis and find evidence that excessive regulations restrict growth through fdi only in the most regulated economies this result holds true for different specifications of the econometric model including instrumental variable regressions

risky choice in the limelight this paper examines how risk behavior in the limelight differs from that in anonymity in two separate experiments we find that subjects are more risk averse in the limelight however risky choices are similarly path dependent in the different treatments under both limelight and anonymous laboratory conditions a simple prospect theory model with a path dependent reference point provides a better explanation for subjects behavior than a flexible specification of expected utility theory additionally our findings suggest that ambiguity aversion depends on being in the limelight that passive experience has little effect on risk taking and that reference points are determined by imperfectly updated expectations

economic reform and mortality in the former soviet union a study of the suicide epidemic in the 1990s abstract male suicide rates in russia belarus ukraine and the baltic countries increased substantially in the early 1990s and are now the highest in the world to what extent is this suicide epidemic explained by the macroeconomic instability experienced by these countries in that period fixed effects regressions across 22 transition economies indicate that male suicide rates are highly sensitive to the state of the macroeconomy suggesting that the steep and prolonged declines in gdp in the western countries of the former soviet union may have been partly to blame for the suicide epidemic evidence also indicates that the general adult male mortality crisis in the region had a feedback effect on suicide rates with the loss of a spouse or friend or declining life expectancy itself contributing to rising suicide rates female suicide rates in contrast are insensitive to the state of the macroeconomy and are more strongly related to alcohol consumption

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

deal or no deal decision making under risk in a large payoff game show we examine the risky choices of contestants in the popular tv game show deal or no deal and related classroom experiments contrary to the traditional view of expected utility theory the choices can be explained in large part by previous outcomes experienced during the game risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes our results point to reference dependent choice theories such as prospect theory and suggest that path dependence is relevant even when the choice problems are simple and well defined and when large real monetary amounts are at stake

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

decision making under risk in deal or no deal we analyse the choices of 399 contestants in the australian version of the television game show deal or no deal we calculate risk aversion bounds for each contestant revealing considerable heterogeneity we then estimate a structural stochastic choice model that captures the dynamic decision problem faced by contestants to address individual heterogeneity we nest the dynamic problem within the settings of both a random effects and a random coefficients probit model our structural model produces plausible estimates of risk aversion confirms the role of individual heterogeneity and suggests that a model of stochastic choice is indeed appropriate we find mixed evidence of greater risk aversion by females we also examine generalizations to expected utility theory finding that the rank dependent utility model adds non negligible explanatory power and indicates optimism in probability weighting finally we test but are unable to confirm the existence of an endowment effect for lotteries copyright 2009 john wiley sons ltd

economic volatility and returns to education in venezuela 1992 2002 preliminary evidence suggests that the rates of return to education in venezuela have been declining since the 1970s this study rigorously estimates the returns to education in venezuela for the period 1992 to 2002 and links them to earlier available estimates from the 1980s consistent cross sections from the encuesta de hogares por muestro are used to document falling returns to schooling and educational levels until the mid 1990s followed by increasing returns thereafter quantile regression analysis is used to provide further insight into the within skill group changes in returns over time

schooling and labor market consequences of school construction in indonesia evidence from an unusual policy experiment between 1973 and 1978 the indonesian government engaged in one of the largest school construction programs on record combining differences across regions in the number of schools constructed with differences across cohorts induced by the timing of the program suggests that each primary school constructed per 1 000 children led to an average increase of 0 12 to 0 19 years of education as well as a 1 5 to 2 7 percent increase in wages this implies estimates of economic returns to education ranging from 6 8 to 10 6 percent

on the decomposition of wage differentials the often used method for decomposing wage differentials into human capital and discrimination components is reformulated so that both t he disadvantage or cost discrimination it imposes on a black or minority wage earner and the advantage or benefit it bestows on a white or majority wage earner can be estimated copyright 1988 by mit press

education policy reform local average treatment effect and returns to schooling from instrumental variables in the philippines a nationally representative dataset from the philippines is used to derive returns to schooling estimates from instrumental variables utilizing a supply side intervention in the education market capable of generating significant changes in schooling these estimates apply to a subgroup of mainly liquidity constrained individuals in the spirit of the local average treatment effect late literature returns to schooling estimates which apply to a subgroup of individuals affected by policy intervention may be more interesting from a policy perspective than the return to the average individual the findings are consistent with other recent evidence suggesting that the causal effect of education at least for certain subgroups of individuals is as big or bigger than what is suggested by ols estimates

capital mobility and growth in a north south model abstract the paper introduces international equalization of profit rates into a north south model of growth a la findlay 1980 it examines the effects on north south income and employment differentials of the introduction of international capital mobility and given such mobility of shifts in regional technology savings and demand parameters the postulated structural asymmetries between the north and the south are shown to act in such a way as to pervasively bias against the south the functioning of the world economy

the global economy as instituted process the case of central and eastern europe i argue that economic globalization indicated by the tremendous rise in world foreign direct investment fdi in recent decades is not driven simply by investor considerations of economic risk and return but is significantly shaped by the construction of demand for foreign capital by receiving states states signal this demand through the levels of formal and substantive legitimacy they grant to fdi they institutionalize globalization in formal rule as a normatively desirable development strategy states substantiate this commitment by providing domestic and foreign actors with ideational and organizational resources to facilitate fdi to illustrate this argument i use the case of central and eastern europe which was largely closed to global capital before the collapse of communism analyses of quantitative and qualitative data show that substantive legitimacy granted to fdi by host states more than formal regulations determined the size of foreign capital flows into postsocialist countries in the

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

earnings schooling ability and cognitive skills conventional estimates now available for a large number of countries generally indicate that the social returns to education are positive large and competitive with returns to investment in physical capital that such estimates are good guides for public resource allocation has however been questioned the heart of the problem lies in the interpretation of the positive relationship between the education and the earnings of workers whether as the conventional estimates assume the coefficient of the education variable in the earnings function measures the effect on the productivity of workers of human capital acquired in school it has been hypothesized that education in part or instead represents screening for native ability and motivation or credentialism and that as a consequence conventional measures of the social benefit of education are substantially upward biased 2 in this paper we attempt to distinguish the influence on earnings of cognitive achievement native ability and years of education as a means of adjudicating the human capital screening and credentialist hypotheses our econometric analysis is based on two rigorously comparable micro data sets from kenya and tanzania generated by surveys of the urban wage labor force specifically for this study these data sets contain the usual variables found in earnings function estimates of the benefits of schooling individual earnings years of education and years of employment experience in addition they contain two variables measures of the worker s cognitive skills and of his or her reasoning ability not previously found in studies of developing countries and only rarely found in studies of the education earnings relationship in developed countries 3 with these variables we can estimate the direct effects on earnings of cognitive skills ability and years of schooling by using them to estimate educational production functions and educational attainment functions and linking these functions with the earnings function in a recursive framework we can also assess the various indirect effects on earnings of ability and years of schooling having data sets from two countries very similar with respect to size resource endowments structure of production and employment and level of development means that not only can we subject our results to the usual statistical tests but we can also assess their replicability both kenya and tanzania have nearly achieved the objective of universal primary education while university enrollments remain at less than 1 percent of the relevant age group the important policy issues re boissiere development research department the world bank 1818 h street washington d c 20433 knight institute of economics and statistics oxford university sabot williams college williamstown ma 01267 we are grateful to the educational testing service of princeton for the design of tests used in this study and to j armitage j behrman j hausman d hendry d jamison and an anonymous referee for their insights and advice helpful comments were also received from participants in seminars at oxford and yale universities the views presented here are our own they should not be interpreted as reflecting those of the world bank george psacharopoulos 1973 1981 contains a listing of 44 countries in which rate of return studies had been conducted and of the estimates obtained 2for instance kenneth arrow 1973 mark blaug 1976 samuel bowles and herbert gintis 1976 john riley 1979 michael spence 1976 and lester thurow 1975 3for attempts to control for ability and or for cognitive achievement in studies for the united states see jere behrman et al 1980 gary chamberlain and zvi griliches 1977 griliches and william mason 1972 michael olneck 1977 paul taubman and terence wales 1974 taubman 1975 and david wise 1975 see also the survey articles by griliches 1977 1979 in most instances the data refer to special subgroups in the population and clear distinction cannot be made between natural ability and cognitive skills acquired in school

within groups wage inequality and schooling further evidence for portugal this article provides further evidence on the positive impact of schooling on within groups wage dispersion in portugal using data on male workers from the 2001 wave of the european community household panel the issue of schooling endogeneity is taken into account by using the latest available instrumental variable technique for quantile regression i e the control function estimator due to lee 2007 the findings are compared with earlier results based on different techniques i e the instrumental variable estimator due to arias et al 2001 and the standard exogeneity based estimator due to koenker and bassett 1978

measuring risk attitudes in a natural experiment data from the television game show lingo we use data from a television game show involving elementary lotteries as a natural experiment to measure risk attitudes unique features of our data set are the substantial monetary stakes and the large sample size crra and cara utility specifications perform approximately equally well we find robust evidence of substantial risk aversion extensions of the basic model which allow for a separate utility flow purely from playing the game or for decisions based on decision weights instead of actual probabilities raise the estimated degree of risk aversion

a natural experiment in jeopardy this paper uses the television game show jeopardy as a natural experiment to analyze behavior under uncertainty and the ability of players to choose strategic best responses the results suggest that while most players bet in a rational manner the failure rate for choosing best responses increases as the betting problem grows more complex and that players choices are affected by the frame of the problem however suboptimal betting tends to decrease as inferior players are driven from the game the data also allow for estimation of the extent of risk aversion the results imply near risk neutrality jel c72 c93