shadow banking and the financial side of financialisation this paper tries to shed some light on the nature and functioning of shadow banking with a special focus on its role in the evolution of financialization as well as in sharpening income and wealth inequality on the one hand it discusses how securitization has allowed traditional banks to expand their business providing the financial system with the raw materials for the manufacturing of complex structured financial products on the other hand it questions the view of traditional and shadow banks as two parallel and alternative systems claiming that financialization did not alter the role of commercial banks as money creators but rather diverted endogenously created money to the financial sphere feeding its expansion finally our work discusses some policy options for the de financialization of the economy through more progressive taxation of the financial sector as well as a stronger engagement to reduce income and wealth inequality

central bank design abstract starting with a blank slate how could one design the institutions of a central bank for the united states this paper explores the question of how to design a central bank drawing on the relevant economic literature and historical experiences while staying free from concerns about how the fed got to be what it is today or the short term political constraints it has faced at various times the goal is to provide an opinionated overview that puts forward the trade offs associated with different choices and identifies areas where there are clear messages about optimal central bank design

children s welfare exposure and subsequent development abstract we examine the extent to which children are exposed to the welfare system through their mother s receipt of benefits and its impact on several developmental outcomes using data from the matched mother child file from the national longitudinal survey of youth nlsy we find that children s welfare exposure is substantial by age 10 over one third of all children will have lived in a welfare household black non hispanic children face a much higher rate of exposure simple correlations suggest a strong negative relationship between maternal welfare receipt and children s outcomes in this paper we implement three alternative strategies instrumental variables sibling differences and child fixed effects models designed to identify whether this correlation can be attributed to the mother s welfare receipt directly or to other characteristics of mothers who receive welfare regardless of whether or not those characteristics are observable to the researcher based on the results of all three estimation strategies we find little evidence of any causal link between maternal welfare receipt and children s developmental outcomes

complexity in structured finance we study complexity in the market for securitized products a market at the heart of the financial crisis of 2007 9 the complexity of these products rose substantially in the years preceding the financial crisis we find that securities in more complex deals default more and have lower realized returns the worse performance is economically meaningful a one standard deviation increase in complexity represents an 18 increase in default on aaa securities however yields of more complex securities are not higher indicating that investors did not perceive them as riskier our results are consistent with complexity obfuscating security quality

theoretical approaches to monetary disinflation abstract during the 1980s many countries adopted tight monetary policies to reduce high inflation rates which were the legacy of the 1970s as inflation threatens to rise at the beginning of this decade this paper provides a survey of the 1980s literature which sought to provide theoretical understandings of how monetary disinflation is achieved four models are presented monetarist neo keynesian new classical and post keynesian each model s explanation of the recession which accompanies the monetary disinflation is outlined as well as possible policy measures to reduce the extent of the recession and to hasten the return to full employment

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

central bank independence economic behavior and optimal term lengths the authors parameterize central bank independence in terms of partisanship and term length focusing on the implications of alternative policy structures for real economic activity while long terms of office for the central banker can reduce the role of electoral surprises term lengths that are too long are costly if societal preferences are subject to permanent shifts the appointment of a conservative central banker increases the optimal term length and leads to lower average inflation but need not increase the volatility of output copyright 1996 by american economic association

the illusory effects of saving incentives on saving the authors evaluate research on how tax based saving incentives iras and 401 k s affect saving previous research overstates the impact of the incentives on saving by failing to account for several issues households with saving incentives have stronger tastes for saving than others saving incentives have interacted with debt nonfinancial assets financial markets and pensions and saving incentives represent pretax balances whereas taxable accounts represent posttax balances accounting for these issues essentially eliminates the impact of saving incentives on saving the authors conclude that little if any of the contributions to existing saving incentives have raised saving

central bankers in government appointed committees abstract i study the policy choices of members of a central bank committee who are appointed by the government central bankers balance their desire to protect the central bank s reputation against their interest to be reappointed committees can be more successful than single central bankers at reducing inflation and insulating policy from government pressures these gains are only achieved if the turnover rate of committee members is low and the committee is small the former is associated with a low risk of being replaced for not supporting the government s preferred policy the latter meanwhile implies high probability that a single vote affects policy making any individual member more weary of potentially affecting the central bank s reputation through his vote

wages and human capital in the u s financial industry 1909 2006 we study the allocation and compensation of human capital in the u s finance industry over the past century across time space and subsectors we find that financial deregulation is associated with skill intensity job complexity and high wages for finance employees all three measures are high before 1935 and after 1980 but not in the interim period workers in the finance industry earn the same education adjusted wages as other workers until 1990 and significantly more afterward by 2006 the premium is 40 on average and 200 for top earners and ceos earnings risk and firm size effects account for some of the premium but the majority does not appear to be sustainable

birth order schooling and earnings birth order effects are posited by many to affect earnings and schooling we show how such effects can be interpreted to shift either the earnings possibility frontier for siblings or parental preferences we find empirical evidence for birth order effects on age adjusted schooling and on earnings for young u s adults though the latter is not robust for all specifications the examination of intrahousehold allocations suggests that these birth order differences occur despite parental preferences or prices by birth order favoring later borns apparently because of stronger endowment effects that favor firstborns

the impact of parental income on early schooling transitions a re examination using data over three generations abstract this paper applies new semi parametric techniques to estimate the effects of parental income on the probability of being held back in elementary school in france we use information on grandparents past socioeconomic status and parents education level to separate the parental income effects from the effects of the unmeasured determinants of children s performance at school that are correlated with parental income when considering the probability of being held back in elementary school we find that the effects of parental poverty are much larger than the effects of a child s sex or age age within his her class or of the parents education level our findings suggest that policy decisions that increase income transfers to relatively poor families have a potentially very large impact on children s early performance at school

monetary policy committees and interest rate setting abstract this paper shows that it is preferable for monetary policy to be conducted by a committee instead of a single policy maker if there is uncertainty about potential output we examine three decision procedures an optimal procedure averaging and voting and find that the latter is the appropriate way to reach decisions if policy makers are not equally skilled finally we demonstrate that efficient decision procedures reduce the persistence of shocks

intra household gender disparity in school choice evidence from private schooling in india abstractthis paper explores gender inequality within households in the decision of private versus government school choice in india using a three period longitudinal dataset on rural households from uttar pradesh a northern state of india this paper estimates a household fixed effects model and finds that there is an intra household gender bias of 6 percentage points in private school enrolment among children aged 6 16 years contrary to the trend in overall enrolment the gender gap in private school choice is rising over time and is more pronounced in villages with a larger cost difference between private and government schooling this finding remains robust even after controlling for average school quality and considering potential endogeneity of the cost variables

using selection on observed variables to assess bias from unobservables when evaluating swan ganz catheterization distinguishing causal effects from correlations is a key objective of research regardless of field even in medicine controlled experiments are not always practical or ethical in economics and we suspect in most other fields identification strategies based upon observational data are rarely bulletproof in their landmark study a f connors et al 1996 use propensity score matching methods with an extremely rich set of demographic characteristics and health status measures to assess whether swan ganz catheterization 1c 2 a widely used device for monitoring intensive care unit icu patients raises or lowers mortality in their sample of icu patients they find that receiving c within the first 24 hours raises mortality rates casting serious doubt on the value of this procedure for critically ill patients jay bhattacharya azeem m shaikh and edward vytlacil 2007 2008 hereafter bsv observe that since c recipients are sicker on many observed dimensions propensity score matching which ignores selection on unobservables might overstate the negative consequences of c they apply a set of bounds estimators including an extension of shaikh and vytlacil 2004 that incorporates prior information that weekend applications of recent methodology in project evaluation

linking economic complexity institutions and income inequality summary a country s mix of products predicts its subsequent pattern of diversification and economic growth but does this product mix also predict income inequality here we combine methods from econometrics network science and economic complexity to show that countries exporting complex products as measured by the economic complexity index have lower levels of income inequality than countries exporting simpler products using multivariate regression analysis we show that economic complexity is a significant and negative predictor of income inequality and that this relationship is robust to controlling for aggregate measures of income institutions export concentration and human capital moreover we introduce a measure that associates a product to a level of income inequality equal to the average gini of the countries exporting that product weighted by the share the product represents in that country s export basket we use this measure together with the network of related products or product space to illustrate how the development of new products is associated with changes in income inequality these findings show that economic complexity captures information about an economy s level of development that is relevant to the ways an economy generates and distributes its income moreover these findings suggest that a country s productive structure may limit its range of income inequality finally we make our results available through an online resource that allows for its users to visualize the structural transformation of over 150 countries and their associated changes in income inequality during 1963 2008

trends in intergenerational income mobility previous studies of recent u s trends in intergenerational income mobility have produced widely varying results partly because of large sampling errors by making more efficient use of the available information in the panel study of income dynamics we generate more reliable estimates of the recent time series variation in intergenerational mobility our results which pertain to the cohorts born between 1952 and 1975 do not reveal major changes in intergenerational mobility

a long history of fomc voting behavior we devise and apply a method for estimating monetary policy reaction functions for individual members of the federal open market committee fomc of the federal reserve our method uses members votes on the monetary policy directive in fomc meetings as the key source of data on individual preferences the analysis provides a ranking by preference for ease for 84 fomc members who served during the 1966 1996 period

disproportional control rights and the governance role of debt we examine the governance role of debt in the context of u s based dual class ownership structures we hypothesize that the use of debt alleviates the conflict between shareholder classes by balancing the power of controlling insiders we document that dual class firms have higher leverage and a greater propensity to issue private debt they also more frequently use cash sweeps and performance based covenants dual class firms with greater agency conflicts and a greater need to access the capital market appear to rely more extensively on debt these findings are consistent with controlling insiders bonding against the agency costs associated with dual class ownership the governance role of debt is further corroborated by the valuation effect of debt for dual class companies private debt issuances trigger greater positive market reactions to the inferior dual class stock in relation to both the superior dual class stock and a matched sample of single class firms further leverage attenuates the previou

birth order family size and achievement family structure and wage determination do birth order and the size of one s childhood family influence environment thereby potentially affecting future achievement this article investigates the hypothesis that they do presenting two major empirical findings first neither birth order nor childhood family size significantly influences the level or growth rate of wages a result that is consistent with previous research second family size is both a statistically and economically significant determinant of women s employment status women from small families work less than women from large families when they are young and more than women from large families when they are more mature

birth order and risky adolescent behavior i introduction there is a widespread belief that birth order is an important determinant of personality intelligence and economic success this belief is supported by a number of recently published popular books each with its own approach to the topic leman 2001 16 18 for instance argues that firstborns are more highly motivated to achieve than later borns and as a consequence often fill positions of high authority or achievement in contrast wallace 1999 18 worries that firstborns go through life feeling like they cannot measure up to the high standards their parents expected lacking in confidence they might drop out and refuse to compete altogether 1 although there is an intuitive appeal to some of these theories the weight of evidence suggests that birth order effects of this nature either do not exist or are difficult to measure using the standard approaches of social scientists a large number of empirical studies have examined the effect of birth order on test scores education and earnings see olneck and bills 1979 blake 1981 hauser and sewell 1983 behrman and taubman 1986 kessler 1991 and hanushek 1992 taken together their results suggest that after properly controlling for family size birth order explains little variation in these conventional measures of success another more recent strand of research in this area examines whether the sex composition of an individual s siblings affects academic achievement as measured by years of education in a well known article butcher and case 1994 present evidence that females raised with brothers go on to receive more education on average than that of females raised with at least one sister however even this relatively modest albeit unexpected finding has been called into question by subsequent studies note kaestner 1997 and hauser and kuo 1998 using data on adolescents aged 12 through 17 we investigate the relationship between birth order and a number of behaviors that have been for the most part ignored in this literature these behaviors include the probability that an individual smoked cigarettes used substances such as marijuana or alcohol engaged in sexual activity or committed any one of a series of crimes in contrast to what most empirical studies have found we find strong evidence that birth order is related to many of the outcomes under study we also show that at least one birth order difference can last into early adulthood if not beyond although it is difficult to isolate the precise routes through which birth order affects the behavior of adolescents our results are consistent with the idea that peer influences play an important role ii why birth order effects might exist researchers working in this area have long speculated that birth order might be related to child outcomes through parental investments in their offspring becker and tomes 1976 posit a model in which parents devote more financial resources to children with lower innate ability 2 if as suggested by behrman and taubman 1986 and kessler 1991 genetic endowments favor earlier born children this model would predict offsetting financial investments in later borns under the assumption of imperfect capital markets birdsall 1991 predicts greater expenditures on later born children as family income rises and older siblings become financially independent but the author also notes that firstborns do not initially have to compete for their parents time and attention in a frequently cited piece in the psychology literature zajonc 1976 likewise emphasizes the early period in a firstborn s cognitive development when parental attention is undivided 3 in fact most researchers working on birth order issues have assumed that children are particularly sensitive to parental time investments and the home environment at young ages 4 however certain nonmonetary parental inputs such as monitoring and supervision may become increasingly important as a child matures especially in the determination of risky or delinquent behaviors

from the cradle to the labor market the effect of birth weight on adult outcomes lower birth weight babies have worse outcomes both short run in terms of one year mortality rates and longer run in terms of educational attainment and earnings however recent research has called into question whether birth weight itself is important or whether it simply reflects other hard to measure characteristics by applying within twin techniques using an unusually rich dataset from norway we examine the effects of birth weight on both short run and long run outcomes for the same cohorts we find that birth weight does matter despite short run twin fixed effects estimates that are much smaller than ols estimates the effects on longer run outcomes such as adult height iq earnings and education are significant and similar in magnitude to ols estimates

the effect of male migration on employment patterns of women in nepal what is the impact of male migration on the labor market behavior of women in nepal the instrumental variable full information maximum likelihood method is applied to data from the 2004 nepal household survey to account for unobserved factors that could simultaneously affect men s decision to migrate and women s decision to participate in the labor market the results indicate that male migration has a negative impact on the level of the labor market participation by women in the migrant sending household there is evidence of substantial heterogeneity based on both observable and unobservable characteristics in the impact of male migration the findings highlight the important gender dimension of the impact of predominantly male migration on the well being of sending households strategies for economic development in nepal should take into account such gender aspects of the migration dynamics

policy boards and policy smoothing partisan politics and random election outcomes generate policy uncertainty and partisan business cycles to reduce policy uncertainty society must design the policy making environment to overcome electoral uncertainty and partisanship i show that delegating policy to an independent policy board with discretionary powers will produce substantial policy smoothing and lower policy uncertainty relative to a simple model in which elected officials set policy board members are chosen in a partisan noncooperative environment yet in the benchmark model policy variability is eliminated and the cooperative bargaining solution is replicated

psychiatric disorders and labor market outcomes evidence from the national comorbidity survey replication this paper uses the national comorbidity survey replication to estimate effects of recent psychiatric disorder on employment hours worked and earnings we employ methods proposed in altonji et al 2005a which use selection on observable traits to provide information regarding selection along unobservable factors among males disorder is associated with reductions in labor force participation and employment when selection on observed characteristics is set equal to selection on unobserved characteristics the magnitudes of these effects for males are 9 and 14 percentage point reductions for participation and employment respectively among females we find negative associations between disorder and labor force participation and employment but these estimates are more sensitive to assumptions about selection there are no effects of disorder on earnings or hours worked among employed individuals

designing monetary policy committees we integrate monetary policy making by committee into a new keynesian model to assess the consequences of the committee s institutional characteristics for inflation output and welfare our analysis delivers the following results first we demonstrate that transparency about the committee s future composition is typically harmful second we show that short terms for central bankers lead to effective inflation stabilization at the expense of comparably high output variability third larger committees generally allow for more efficient stabilization of inflation but possibly for less efficient output stabilization fourth large committees and short terms are therefore socially desirable if the weight on output stabilization in the social loss function is low fifth we show that a central banker with random preferences may be preferable to a central banker who shares the preferences of society

the effect of sibling sex composition on women s education and earnings this paper documents the impact of siblings on the education of men and women born in the united states between 1920 and 1965 we examine the effect of the number and sex composition of a boy or girl s siblings on that child s educational attainment we find that throughout the century women s educational choices have been systematically affected by the sex composition of her siblings and that men s choices have not women raised only with brothers have received on average significantly more education than women raised with any sisters controlling for household size since sibling sex composition affects women s educational attainment and plausibly may be unrelated to other determinants of earnings it may provide a useful instrument for education in earnings functions for women our results suggest that standard estimates significantly underestimate the return to schooling for women

the economic consequences of unwed motherhood using twin births as a natural experiment social scientists have long concluded that premarital childbearing exacerbates problems of both poverty and family instability out of wedlock and adolescent childbearing may reduce a mothers educational attainment lower the probability of her eventual marriage increase her probability of welfare recipiency and decrease family income the authors use an exogenous fertility event the birth of twins to estimate the economic effects of unplanned births the approach compares the economic outcomes of women experiencing premarital twin first births to those experiencing premarital single first births in the attempt to identify the consequences of an unplanned birth upon womens future fertility and marital decisions education labor force participation labor earnings welfare receipt and poverty status 1970 and 1980 us census micro data are used to identify twin births to unmarried women analysis found large short term effects of unplanned births on labor force participation poverty and welfare recipiency among unwed mothers but not among married mothers furthermore most adverse economic effects of unplanned motherhood dissipate over time for whites but larger and more persistent negative effects weigh upon black unwed mothers

the benefits of central bank s political independence abstract we consider a two tier model of monetary policy where the central banker is both subject to the explicit influence of elected political principals through contracts and the implicit influence of interest groups willing to capture monetary policy we analyze the impact of granting independence to the central banker on the scope for capture and the agency costs of delegating the monetary policy to a central banker political independence increases those agency costs but significantly stabilizes the politically induced fluctuations of inflation and improves ex ante social welfare

fortunate sons new estimates of intergenerational mobility in the united states using social security earnings data previous studies relying on short term averages of fathers earnings have estimated the intergenerational elasticity ige in earnings to be approximately 0 4 due to persistent transitory fluctuations these estimates have been biased down by approximately 30 or more using administrative data containing the earnings histories of parents and children the ige is estimated to be around 0 6 this suggests that the united states is substantially less mobile than previous research indicated estimates of intergenerational mobility are significantly lower for families with little or no wealth offering empirical support for theoretical models that predict differences due to borrowing constraints

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

the trade off between child quantity and quality an empirical investigation of trade offs between number of children and their scholastic performance confirms that family size directly affects children s achievement though parents show no favori

an argument in favor of long terms for central bankers drawing on the canonical new keynesian model we assess the impact of central bankers term duration on governments appointment choices we show that longer terms induce the government to appoint more conservative central bankers which is socially desirable

inequality at birth some causes and consequences recent research shows that health at birth is affected by many factors including maternal education behaviors and participation in social programs in turn endowments at birth are predictive of adult outcomes and of the outcomes of future generations exposure to environmental pollution is one potential determinant of health at birth that has received increasing attention a large literature outside of economics advocates for environmental justice and argues that poor and minority families are disproportionately exposed to environmental hazards i provide new evidence on this question showing that children born to less educated and minority mothers are more likely to be exposed to pollution in utero and that white college educated mothers are particularly responsive to changes in environmental amenities i estimate that differences in exposure to toxic releases may explain 6 of the gap in incidence of low birth weight between infants of white college educated mothers and infants of black high school dropout mothers this abstract was borrowed from another version of this item

the intergenerational transmission of risk and trust attitudes recent theories endogenize the attitude endowments of individuals assuming that they are shaped by the attitudes of parents and other role models this paper tests empirically for the relevance of three aspects of the attitude transmission process highlighted in this theoretical literature 1 transmission of attitudes from parents to children 2 an impact of prevailing attitudes in the local environment on child attitudes and 3 positive assortative mating of parents which enhances the ability of a parent to pass on his or her attitudes to the child we focus on two fundamentally important attitudes willingness to take risks and willingness to trust others we find empirical support for all three aspects providing an empirical underpinning for the literature an investigation of underlying mechanisms shows that socialization is important in the transmission process various parental characteristics and aspects of family structure are found to strengthen the socialization process with implications for modeling the socialization production function and for policies focused on affecting children s non cognitive skills the paper also provides evidence that the transmission of risk and trust attitudes affects a wide variety of child outcomes implying a potentially large total effect on children s economic situation

estimates of the economic returns to schooling from a new sample of twins this paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling the data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent a higher estimate of the economic returns to schooling than has been previously found copyright 1994 by american economic association

youth depression and future criminal behavior while the contemporaneous association between mental health problems and criminal behavior has been explored in the literature the long term consequences of such problems depression in particular have received much less attention using data from the national longitudinal study of adolescent health add health we examine the effect of depression during adolescence on the probability of engaging in a number of criminal behaviors later in life in our analysis we control for a rich set of individual family and neighborhood level factors to account for conditions that may be correlated with both childhood depression and adult criminality one novelty in our approach is the estimation of school and sibling fixed effects models to account for unobserved heterogeneity at the neighborhood and family levels furthermore we exploit the longitudinal nature of our data set to account for baseline differences in criminal behavior the empirical estimates show that adolescents who suffer from depression face a substantially increased probability of engaging in property crime we find little evidence that adolescent depression predicts the likelihood of engaging in violent crime or the selling of illicit drugs our estimates imply that the lower bound economic cost of property crime associated with adolescent depression is approximately 227 million dollars per year jel i10 k42

bashing and coercion in monetary policy bashing and coercion in monetary policy i introduction we ve got excess plant capacity i don t think that growth is excessive i have not been overly concerned with inflation president bush in a february 14 1989 interview with the wall street journal p a8 with the economy running close to potential the risks seem to be on the side of a further strengthening of price pressure chairman greenspan in testimony before congress on february 21 1989 reprinted from the wall street journal february 22 1989 p a2 many investors appeared to be confused by conflicting statements by bush greenspan and other u s officials wall street journal february 22 1989 p a1 if the fed pushes interest rates significantly higher bush may go public with critism wall street journal march 24 1989 p a1 recent research in macroeconomic policy games by rogoff 1985 alesina 1988 tabellini 1987 and waller 1989a has concentrated on the importance of an independent central bank in a discretionary policymaking environment in the original work on policy games by barro and gordon 1983a 1983b no distinction was made between the monetary authority and the fiscal authority but these researchers argue that because the fiscal authority may have incentives to create excessive inflation giving the powers of money creation to an independent monetary authority whose inflation preferences differ from the current fiscal authority may enable society to reduce the equilibrium inflation rate this results holds even though monetary policy is still chosen in a discretionary fashion therefore backus and driffill 1985a 537 conclude autonomous central banks thus act as a precommitment device which may help to make noninflationary policies more credible and less costly implicit in the term independent is the belief that the central bank is free to choose monetary policy without interference from the fiscal authority administration however this is not generally the case the appointment of central bankers by the legislative or executive branch of the government governmental oversight of policy decisions or political pressure on the central bank by these branches will tend to influence the setting of monetary policy and subsequently the extent to which the central bank is truly independent 1 kane 1984 argues that even if it is not able to directly choose monetary policy the current administration still may be able to achieve its preferred monetary growth path by putting pressure on the monetary authority to do its bidding restricting the powers of the central bank public criticism of central bank performance here after referred to as bashing 2 exclusion from fiscal policy planning which hurts the egos of central bankers or undertaking actions which damage the post central bank income or opportunities of the central bankers are ways he suggests in which the administration can coerce cooperation from the central bank in creating excessive money growth such arguments have given rise to the view that the administration is engaged in a reputation building game with the central bank although the central bank has control of the money supply the administration can threaten to impose a welfare loss by bashing the central bank if it does not generate the monetary policy preferred by the administration the success of this strategy depends on the size of the bashing costs imposed on the central bank and also on the extent to which these threats are credible credibility in turn depends on the benefits and costs incurred by the administration in carrying out its threats as a result the administration may choose to bash the central bank if it does not produce the administration s preferred money inflation outcome by establishing a reputation for bashing the administration may be able to obtain its desired policy outcome in the future

life cycle schooling and dynamic selection bias models and evidence for five cohorts of american males this paper examines an empirical regularity found in many societies that family influences on the probability of transiting from one grade level to the next diminish at higher levels of education we examine the statistical model used to establish the empirical regularity and the intuitive behavioral interpretation often used to rationalize it we show that the implicit economic model assumes myopia the intuitive interpretive model is identified only by imposing arbitrary distributional assumptions onto the data we produce an alternative choice theoretic model with fewer parameters that rationalizes the same data and is not based on arbitrary distributional assumptions

heterogeneity in the intergenerational transmission of alcohol consumption a quantile regression approach abstract this paper addresses the question of whether the effect of parental drinking on children s later consumption of alcohol which is frequently found to be of positive sign exhibits a certain pattern of heterogeneity in particular if this effect is more prominent in the upper tail than elsewhere in the distribution of children s alcohol consumption conventional regression analyses that focus on the mean effect may substantially underrate parental drinking as a risk factor for children s later alcohol abuse in our empirical application we address this issue by applying censored quantile regression methods to german survey data the supposed pattern of heterogeneity is indeed found in the data at least for daily parental drinking in addition the intergenerational transmission of alcohol consumption exhibits gender specific heterogeneity

central bank design in general equilibrium we study the effects of alternative institutional arrangements for the determination of monetary policy in the context of a capital theoretic general equilibrium economy we consider three institutional arrangements for determining monetary policy the first unconditional majority voting always leads to a substantial inflation bias the second a simple form of bargaining which we interpret as a policy board generally improves on the unconditional majority voting outcome finally we consider a constitutional rule which always achieves the social optimum

gender agricultural production and the theory of the household virtually all models of the household assume that the allocation of resources is pareto efficient within many african households agricultural production occurs on many plots controlled by different members of the household pareto efficiency implies that factors should be allocated efficiently across these plots i find in contrast that plots controlled by women are farmed much less intensively than similar plots within the household controlled by men the estimates imply that about 6 percent of output is lost because of inefficient factor allocation within the household the paper suggests a new approach to modeling intrahousehold allocation consistent with the empirical results

the unemployment rate consequences of partisan monetary policies economists and political scientists have identified several ways in which political motivations and institutional arrangements can affect macroeconomic policymaking one way is described by the political business cycle model 42 37 in which vote seeking politicians manipulate the path of the economy to secure unsustainably favorable conditions at election times variants of this model have been widely tested with limited success a second channel for political impacts comes through partisan policy changes brought about by electoral turnover the pathbreaking work in this literature includes the contributions of hibbs 30 31 32 33 and beck 11 these works have focused on the empirical issue of how unemployment rates vary under democratic and republican presidents in the u s and have found strong support for the proposition that unemployment rates decline under democratic administrations a third phenomenon has been studied primarily by economists and concerns the credibility problem faced by a central bank selecting money growth rates models of the credibility problem 8 21 describe a setting in which the central bank and the public interact by respectively choosing actual and expected money growth rates in a variant of the prisoners dilemma this interaction can result in excessive inflation

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

a bargaining model of partisan appointments to the central bank abstract in this paper a bargaining model is developed to analyze the appointment of central bankers in a two party political system the major results of the paper are 1 the party in power will appoint partisans early on but later appointments will be increasingly moderate in their views concerning monetary policy 2 changing the timing of the appointment of the board chairman from the end of a president s term in office to the first period of the president s term will lead to more partisan monetary policy 3 in equilibrium nominations to the board are not rejected thus confirmation hearings appear to be nothing more than a rubber stamp process 4 lengthening the terms on the board relative to the electoral cycle will lead to more moderate appointments to the central bank and a reduction in partisan policymaking

taking chances the effect that growing up on welfare has on the risky behavior of young people in this paper we analyze the effect that growing up in a family with a history of welfare receipt has on young people s engagement in a variety of social and health risks unique administrative data matched to survey data for 18 year olds and their mothers allow us to evaluate the effect of welfare receipt over the course of a young person s childhood much of the apparent link between family welfare history and risk taking disappears once we control for the effects of family structure mothers own risk taking and mothers investments in their children we find no evidence that growing up on welfare causes young people to engage in risky behavior

the effects of child bearing on married women s labor supply and earnings using twin births as a natural experiment we use exogenous variations in fertility due to twin births to measure the impact of an unplanned child on married women s labor supply and earnings although the overall effects of an unplanned birth on labor supply are small we find significant effects in the years immediately following the unplanned birth especially in 1970 we estimate that declining fertility explains between 6 and 13 percent of the increase in married women s labor supply between 1970 and 1980 twin births are also associated with a substantial short run loss in earnings this effect persists longer than the labor supply effects though it does eventually disappear

does government ideology matter in monetary policy a panel data analysis for oecd countries this paper examines whether government ideology has influenced monetary policy in oecd countries we use quarterly data in the 1980 1 2005 4 period and exclude emu countries our taylor rule specification focuses on the interactions of a new time variant index of central bank independence with government ideology the results show that leftist governments have somewhat lower short term nominal interest rates than rightwing governments when central bank independence is low in contrast short term nominal interest rates are higher under leftist governments when central bank independence is high the effect is more pronounced when exchange rates are flexible our findings are compatible with the view that leftist governments in an attempt to deflect blame of their traditional constituencies have pushed market oriented policies by delegating monetary policy to conservative central bankers

political shocks and public debt the case for a conservative central bank revisited abstract we explore the dynamics of public debt and optimal institutions in the presence of political shocks arising from electoral uncertainty under commitment optimal stabilization is established by combining an inflation target with a debt target the inflation target should be contingent on the political shocks while the debt target forces the government to fully absorb the political shocks in the period in which it occurs in the absence of such inflation and debt targets but with monetary commitment a conservative central bank enhances stabilization an even more conservative central bank is optimal if monetary policy cannot commit

catering to investors through security design headline rate and complexity this study investigates how banks design financial products to cater to yield seeking investors we focus on a large market of investment products targeted exclusively at households retail structured products these products typically offer a high return under their best case scenario the headline rate that is nested in a complex payoff formula using a text analysis of the payoff formulas of the 55 000 products issued in europe from 2002 to 2010 we measure product headline rates complexity and risk over this period product headline rates depart from the prevailing interest rates as the latter decrease complexity increases and risky products become more common in the cross section the headline rate of a product is positively correlated with its level of complexity and risk higher headline rate more complex and riskier products appear more profitable to the banks distributing them our results suggest that financial complexity is a by product of banks catering to yield seeking investors

children and their parents labor supply evidence from exogenous variation in family size although theoretical models of labor supply and the family are well developed there are few credible estimates of key empirical relationships in the work family nexus this study uses a new instrumental variable the sex composition of the first two births in families with at least two children to estimate the effect of additional children on parents labor supply in the united states instrumental variables estimates using the sex mix are substantial but smaller than the corresponding ordinary least squares ols estimates moreover unlike the ols estimates the female labor supply effects estimated using sex mix instruments appear to be absent among more educated women and women with high wage husbands we also find that married women who have a third child reduce their labor supply by as much as women in the full sample while there is no relationship between wives child bearing and husbands labor supply excerpt

voting transparency in a monetary union we examine whether the monetary policy committee of a monetary union should publish its voting records when members are appointed by national politicians we show that the publication of voting records lowers overall welfare this finding also holds for arbitrary levels of private benefits from holding office and if governments incur costs when replacing committee members high private benefits of committee members always lower overall welfare as they induce nonpartisan members to care more about being reappointed than about beneficial policy outcomes nonrenewable but long terms for national committee members and delegating the appointment of all committee members to a union wide authority would be desirable

incentives and the supply of effective charter schools charter school funding is typically set by formulas that provide the same amount for all students regardless of advantage or need in this paper i present evidence that this policy skews the distribution of students served by charters towards low cost populations by influencing where charter schools decide to open and whether they survive i develop and estimate an empirical model of charter school supply and competition to evaluate the effects of funding policies that aim to correct these incentives to do this i recover estimates of cost differentials across student populations by linking charter school effectiveness at raising student achievement with unique records of charter school expenditures gathered from florida i then leverage revealed preference with the exit and location choices of charter schools in an entry game to uncover how charter schools respond to competitive and financial incentives the results indicate that a cost adjusted funding formula would significantly increase the share of charter schools serving disadvantaged students with little reduction in the aggregate effectiveness of the sector

when complexity meets finance a contribution to the study of the macroeconomic effects of complex financial systems in the last decade complexity economics has emerged as a powerful approach to the understanding of the most relevant factors influencing economic development the concept of economic complexity has been applied to the study of different economic issues such as economic growth technological change and inequality with this work we aim at extending the application of this concept to the study of the financial side of the economy and in particular of the macroeconomic effects of rising financial complexity in this paper we present an agent based model integrating an increasingly complex financial sector with a real side of the economy populated among other sectors by heterogeneous households we test the systemic impact that the increasing complexity of both the financial system and the financial products it manufactures bear on economic growth macroeconomic stability and inequality we find mixed results with respect to the positive economic implications the existing literature ascribes to products complexity and deepening production capabilities despite higher financial complexity may lead to faster growth our model suggests that this comes at the cost of heightened financial fragility a more crisis prone economic system and increasing levels of income and wealth inequality according to these findings and consistently with pioneering insights from minsky we claim that rising complexity does not always entail positive consequences for the well being of the economy this is particularly true when it comes to financial innovations and financial complexity

securitization of mortgage debt domestic lending and international risk sharing securitization makes mortgage related risks internationally tradeable and thus contributes considerably to the international diversification of macroeconomic risk in the years 2003 2008 the increase in international cross holdings of securitized mortgage debt has lowered industrialized countries conditional consumption volatility relative to the united states by about 10 15 percentage points we turn to the role of domestic credit in explaining this result domestic credit leads to better international risk sharing only if debt is securitized and traded internationally conversely the risk sharing benefits from securitization seem to evaporate if credit dries up as it did in the recent financial crisis la titrisation fait que les risques attaches aux hypotheques peuvent etre transiges internationalement voila qui contribue de maniere significative a la diversification internationale des risques macroeconomiques dans les annees 2003 2008 l accroissement dans la dette hypothecaire titrisee detenue dans d autres pays a reduit la volatilite de la consommation relative par rapport aux etats unis des pays industrialises de 10 15 points de pourcentage on examine le role du credit domestique dans l explication de ce resultat on montre que le credit domestique entraine un meilleur partage international du risque seulement si la dette est titrisee et negociee internationalement a contrario les avantages de la titrisation semblent s evaporer si le credit s asseche comme ce fut le cas dans la recente crise financiere

toward a new microfounded macroeconomics in the wake of the crisis the great recession that followed the financial crisis of 2007 is not only the largest economic crisis after the great depression of the 1930s it also signals a crisis of economics as a discipline this is not only the consequence of the inadequacy of mainstream macroeconomics and specifically the dynamic stochastic general equilibrium dsge workhorse model to forecast such a huge event or at least to detect the worrying tendencies towards it even more relevant is the choice to explicitly avoid the modeling of large crises that for someone is a motivation for not attacking pre crisis dsge models focused on the analysis of small deviations from the steady state so denying the intrinsic nature of capitalism a system that necessarily proceeds through cycles and extended crises the replies of the dsge approach to critics have led to extensions regarding for instance the role of financial frictions heterogeneous agents and bounded rationality though typically in the form of quasi rational expectations the alternative paradigm of agent based ab macroeconomics can take into account all these elements at once within an evolutionary modeling framework based on heterogeneity and interaction so capable to endogenously reproduce complex dynamics from small fluctuations to large crises due to innovation and industrial dynamics rising inequality and financial instability and so on the integration between ab macroeconomics and the post keynesian stock flow consistent approach represents a promising way for the future development of this research field

does the birth order affect the cognitive development of a child this article investigates the link between position in the birth order and early scholastic ability using matched mother child data from the national longitudinal survey of youth 1979 cohort nlsy79 i find that being the first born is beneficial even after controlling for nonlinear effects of family size and child characteristics the verbal ability of first borns is about one tenth of a sd higher than for children in the middle of the birth order there is no evidence that last borns fare better than intermediate children the first born advantage is confirmed by estimates from within family variation models and i argue that the findings are consistent with the resource dilution hypothesis

finishing high school and starting college do catholic schools make a difference in this paper we consider two measures of the relative effectiveness of public and catholic schools finishing high school and starting college these measures are potentially more important indicators of school quality than standardized test scores in light of the economic consequences of obtaining more education single equation estimates suggest that for the typical student attending a catholic high school raises the probability of finishing high school or entering a four year college by thirteen percentage points in bivariate probit models we find almost no evidence that our single equation estimates are subject to selection bias

intergenerational health mobility an empirical approach based on the echp despite the importance of the study of health mobility few attempts have been made to measure intergenerational mobility not only in the european union but also in other countries such as united states this article is focused on the study of intergenerational health mobility using data from the european community household panel echp in particular the relationships between self assessed health of parents and their sons are analysed the evidence obtained suggests that in spain sons reported health depends significantly on the self assessed health of their fathers

financial development and economic growth views and agenda this critique argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive first order relationship between financial development and economic growth the body of work would push even most skeptics toward the belief that the development of financial markets and institutions is a critical and inextricable part of the growth process and away from the view that the financial system is an inconsequential sideshow responding passively to economic growth many gaps remain however and the paper highlights areas in acute need of additional research