policy relevant treatment effects accounting for individual level heterogeneity in the response to treatment is a major development in the econometric literature on program evaluation a substantial body of empirical evidence demonstrates that econometric models fit on individual level data manifest heterogeneity in treatment effects that is present even after conditioning on observables an important distinction is the one between evaluation models where participation in the program being evaluated is based at least in part on unobserved idiosyncratic responses to treatment and models where participation is not based on unobserved idiosyncratic responses this is the distinction between selection on unobservables and selection on observables the validity of entire classes of evaluation estimators hinges on whether or not they allow agents to act on unobserved idiosyncratic responses in a wide variety of applications the available evidence suggests that not only are ex post postenrollment responses heterogeneous but that ex ante decisions to participate in programs are based in part on these heterogeneous responses heckman and vytlacil 2000b 2001

can falling supply explain the rising return to college for younger men a cohort based analysis although the college high school wage gap for younger u s men has doubled over the past 30 years the gap for older men has remained nearly constant in the united kingdom and canada the college high school wage gap also increased for younger relative to older men using a model with imperfect substitution between similarly educated workers in different age groups we argue that these shifts reflect changes in the relative supply of highly educated workers across age groups the driving force behind these changes is the slowdown in the rate of growth of educational attainment that began with cohorts born in the early 1950s in all three countries

on the optimality of the nordic system of dual income taxation abstract in recent years the nordic countries have introduced a so called dual income tax which combines a proportional tax on capital income with progressive taxation of labour income the paper argues that this asymmetric treatment of the two types of income can be defended on pure efficiency grounds because the progressivity of the labour income tax serves to reduce the private return to human capital investment thereby offsetting the tendency of a proportional comprehensive income tax to discriminate in favour of such investment the analysis is based on an overlapping generations model of a small open economy where consumers face a trade off between investment in human capital and investment in non human capital extended versions of the model allow for liquidity constraints and an endogenous labour leisure choice

real rigidities and the non neutrality of money rigidities in real prices are not sufficient to create rigidities in nominal prices and real effects of nominal shocks and by themselves small frictions in nominal adjustment such as costs of changing prices create only small non neutralities but this paper shows that substantial nominal rigidity can arise from a combination of real rigidities and small nominal frictions the paper shows the connection between real and nominal rigidity given the presence of nominal frictions both in general and for two specific sources of real rigidity one arising from goods market imperfections and the other from labour market imperfections

social changes in impressionable years and adult political attitudes evidence from jewish expulsions in nazi germany this study provides evidence that individuals who grew up during the 1930 s jewish expulsions are less likely to show interest and participate in politics the estimates imply that at the mean individuals in their impressionable ages at the time of the expulsions are about 13 less likely to be interested in politics and 26 less likely to participate in politics these results are not found for individuals who were older at the time of the expulsions nor for those growing up during world war wwii results are robust to fixed region and birth year characteristics various definitions of impressionable ages and composition bias induced by differential migration and mortality rates across regions and cohorts the estimates are also not driven by other regional differences in 1930 s political participation party support catholic share exposure and destruction during wwii urbanization and other regional characteristics we provide evidence that the adverse effects on political attitudes we find are explained by a model of political participation emphasizing the role of civic skills and socioeconomic status acquired at younger ages exposure to the expulsions when young is associated with lower adult volunteerism trust church attendance and socioeconomic status

residential construction using the urban growth model to estimate housing supply abstract this article presents an empirical model of housing supply derived from urban growth theory this approach describes new housing construction as a function of changes in house prices and costs rather than as a function of the levels of those variables which previous studies have used empirical tests support this specification over the leading alternative models our estimates show that a 10 rise in real prices leads to an 0 8 increase in the housing stock which is accomplished by a temporary 60 increase in the annual number of starts spread over four quarters

the estimation of wage gains and welfare gains in self selection models the authors modify the basic self sele ction model for the effects ofeducation training unions and other activities on wages by including heterogeneity of rewards to the activity i e diffe rences across individuals in the rate of return to the activity the authors sho w that such heterogeneity creates a new form of selectionbias they provide tes ts for its presence and draw out its implications for the wage and welfare gains to the activity an empirical application provides strong support for such hete rogeneityin one particular training program copyright 1987 by mit press

the economics of urban sprawl theory and evidence on the spatial sizes of cities many commentators believe that the phenomenon of urban sprawl which is characterized by vigorous spatial expansion of urban areas is a symptom of an economic system gone awry by transforming pastoral farmland into often unattractive suburbs sprawl is thought to disrupt a natural balance between urban and non urban land uses leading to a deplorable degradation of the landscape this sentiment is often translated into policy through zoning restrictions designed to inhibit the conversion of land from agricultural to urban use see bryant and conklin 1975 the economist s view of urban expansion stands in stark contrast to this emotionally charged indictment of sprawl economists believe that urban spatial size is determined by an orderly market process which correctly allocates land between urban and agricultural uses the model underlying this view which was originally developed by muth 1969 and mills 1972 and more completely analyzed by wheaton 1974 suggests that urban spatial size is determined in a straightforward way by a number of exogenous variables by showing empirically that urban size is related to the given variables population income agricultural rent and commuting cost in the manner predicted by the model the present paper achieves two goals first the empirical results suggest that the economist s view of urban sprawl is justified rather than being determined by a process which indiscriminately consumes agricultural land urban sizes are the result of an orderly market equilibrium where competing claims to the land are appropriately balanced 2 second by confirming the urban size predictions of the underlying model the empirical results constitute yet another piece of evidence validating the basic framework of urban economic analysis 3 the plan of the paper is as follows section ii sketches the structure of the muth mills model and presents the main comparative static results relevant to urban sprawl with the model s predictions in focus section iii discusses the sample and the data and section iv presents the empirical results section v offers conclusions

long run carbon emission implications of energy intensive infrastructure investments with a retrofit option abstract investments in long lived fossil fuel intensive infrastructure can have large effects on carbon emissions over a long future period we simulate a 2 period model of infrastructure investment with subsequent retrofit to purge its carbon emissions under uncertainty about climate and retrofit costs the energy intensity chosen upon investment depends on current and expected future energy and environmental costs and on future retrofit cost simulations of a simplified but realistic model indicate that energy consumption and carbon emissions can be highly excessive when future energy and climate costs are not considered at the time infrastructure investments are made and charged at globally suboptimal rates when operated often by more than 50 when energy costs are undervalued at this rate both ex ante and ex post good anticipated retrofit options reduce ex post energy costs but lead to ex ante choice of more energy intensive infrastructure which could more than fully offset the energy reducing effect of the retrofit these results are of particular importance for emerging economies with large current and anticipated energy related investments where long term climate policy goals may be seriously jeopardized by policy makers facing too low energy prices now and in the future

the effect of cohort size on earnings growth a reexamination of the evidence this study reexamines the effect of cohort size on earnings growth finis welch finds that individuals in larger cohorts experience depressed earnings conditions on entry into the labor market but that their earnings grow at faster rates than in smaller cohorts thus a large portion of the cohort size effect on earnings dissipates after a few years however using data almost identical to those of welch but estimating less restrictive models it is found here that cohort size not only depresses earnings at entry but also seems to slow down early career earnings growth the evidence suggests that earnings ini larger cohorts do not approach normal levels after at brief period in the labor force rather the negative cohort size effect on earnings appears to worsen with experience

children of war the long run effects of large scale physical destruction and warfare on children this paper provides causal evidence on the long term consequences of large scale physical destruction on educational attainment health status and labor market outcomes of children i exploit the plausibly exogenous region by cohort variation in the intensity of world war two wwii destruction as a unique quasi experiment i find that exposure to destruction had long lasting detrimental effects on the human capital formation health and labor market outcomes of germans who were at school age during wwii an important channel for the effect of destruction on educational attainment is the destruction of schools whereas malnutrition is partly behind the estimated impact on health

returns to apprenticeship training in austria evidence from failed firms in the german speaking countries little is known about the payoffs to apprenticeship training for the participants ols estimates suggest that the returns are similar to those of other types of schooling however there is considerable heterogeneity in the quality of apprenticeships offered and institutional descriptions suggest that there might be an important element of selection in who obtains an apprenticeship and what type in order to overcome the resulting ability bias we estimate returns to apprenticeship training for apprentices in small austrian firms which cease to operate when a firm fails current apprentices cannot complete their training in this firm since apprentices will be at different stages in their apprenticeship at that time the failure of a firm will manipulate the length of the apprenticeship period completed for some apprentices the time to firm failure can therefore serve as an instrument for the length of the apprenticeship completed both at the original firm and at other firms we find instrumental variables returns which are similar or larger than the ols returns in our sample indicating relatively little selection

monotone instrumental variables with an application to the returns to schooling for fifty years econometric analyses of treatment response have made extensive use of instrumental variable iv assumptions holding that mean response is constant across specified subpopulations of a population of interest 2 yet the credibility of mean independence conditions and other iv assumptions has often been a matter of considerable disagreement with much debate about whether some covariate is or is not a valid instrument in an application of interest there is therefore good reason to consider weaker but more credible assumptions to this end we introduce monotone instlumental variable miv assumptions holding that mean response varies weakly monotonically across specified subpopulations we study the identifying power of these miv assumptions and give an empirical application the findings reported here add to the literature developing nonparametric bounds on treatment effects 3 this paper uses the same formal setup as manski 1997 there is a probability space j x2 p of individuals each member j of population j has observable covariates xi e x and a response function yj t y mapping the mutually exclusive and exhaustive treatments t e t into outcomes yj t e y person j has a realized treatment zj e t and a realized outcome y 1 y zi both of which are observable the latent outcomes yj t

marginal tax reform externalities and income distribution the paper examines welfare improving and revenue neutral directions marginal policy reforms for an economy with nonidentical individuals and an externality that has a feedback effect on the consumption of taxed goods it considers three types of policy instruments the indirect taxes the uniform poll transfer and public abatement this extends the framework set up by ahmad and stern 1984 bovenberg and de mooij 1994 and schob 1996 the theoretical model is illustrated for a specific externality namely congestion caused by peak car transport

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

are prices too sticky nominal price rigidity has a negative externality rigidity in one firm s price increases the variability of aggregate real spending which harms all firms this paper investigates whether this externality is large which would imply that stabilization policy can be highly beneficial even if the costs of making prices flexible are small there are three conclusions first both the private cost of price rigidity and the externality are second order in the size of fluctuations second the externality can nonetheless be arbitrarily large third in a simple model the externality is small for plausible parameter values

a war is forever the long run effects of early exposure to world war ii on trust abstract this paper examines the long term effect of conflict on trust by using changes in places and timing of combats during world war ii we focus on the pre school period an important life stage for the formation of trust and an age where war exposure may persist throughout life we find robust evidence that individuals exposed to combats in the first six years of life display lower trust and social engagement well into adulthood in light of the well known relationship between trust and collective action our results lend credence to the theory that violent conflict inhibits well functioning government in long run

democratizing access to higher education in russia the consequences of the unified state exam reform this is the first paper that evaluates the effects of a reform requiring russian universities to make admission decisions based on the results of a national high school exam we show the reform led to a threefold increase in geographic mobility rates among high school graduates from small cities and towns to start college this is robust to different techniques samples and specifications the reform was also accompanied by increases in students expectations to attend university parental transfers and educational expenditures there is no evidence the reform affected parental labor supply divorce and employment outcomes of graduates who did not move

evaluating education programs that have lotteried admission and selective attrition we study the effectiveness of magnet programs in an urban district that ration excess demand by admission lotteries differential attrition arises since students who lose the lottery are more likely to pursue options outside the school district than students who win the lottery when students leave the district important outcome variables are often not observed the treatment effects are not point identified we exploit known quantiles of the outcome distribution to construct informative bounds on treatment effects we find that magnet programs improve behavioral outcomes but have no significant effect on achievement

compact or spread out cities urban planning taxation and the vulnerability to transportation shocks this paper shows that cities made more compact by transportation taxation are more robust than spread out cities to shocks in transportation costs such a shock indeed entails negative transition effects that are caused by housing infrastructure inertia and are magnified in low density cities distortions due to a transportation tax however have in absence of shock detrimental consequences that need to be accounted for the range of beneficial tax levels can therefore be identified as a function of the possible magnitude of future shocks in transportation costs these taxation levels which can reach significant values reduce city vulnerability and prevent lock ins in under optimal situations

sticky prices as coordination failure this paper links the coordination failure and menu cost approaches to the microeconomic foundations of keynesian macroeconomics if a firm s desired price is increasing in others prices then the gain from price adjustment after a nominal shock is greater if others adjust this strategic complementarity leads to multiple equilibria in the degree of rigidity welfare may be much higher in the equilibria with less rigidity thus nominal rigidity arises from a failure to coordinate price changes jel e12 e30 keynesian macroeconomics waned in the 1970 s because economists grew disenchanted with its weak microeconomic foundations the central difficulty was that keynesian models were based on ad hoc rigidities in nominal wages and prices the 1980 s produced two approaches to reviving keynesian theory the menu cost literature n gregory mankiw 1985 george akerlof and janet yellen 1985 seeks to provide rigorous explanations for nominal rigidities these papers argue that small frictions in price setting are enough to produce large nominal rigidities in contrast the coordination failure literature russell cooper and andrew john 1988 abandons nominal rigidities and seeks alternative foundations for keynesian models the central idea is that many economic activities such as production e g john bryant 1983 trade e g peter diamond 1982 and investment e g nobuhiro kiyotaki 1988 exhibit synergism or strategic complementarity one agent s optimal level of activity depends positively on others activity strategic complementarity can lead to multiple equilibria with high activity equilibria superior to low activity equilibria thus an economy may be stuck in an underemployment equilibrium even though a superior equilibrium exists models with nominal rigidities and models with coordination failures are often presented as competing paradigms 1 this paper shows that this view is incorrect we take a step toward unifying the foundations of keynesian economics by showing that the two sets of ideas are highly complementary nominal rigidity arises from a failure to coordinate price changes this failure has the essential features of coordination failures in previous models flexibility in one firm s price increases the incentives for other firms to make their prices flexible this strategic complementarity leads to multiple equilibria in the degree of nominal rigidity equilibria with less rigidity more active price adjustment are often pareto superior to equilibria with more rigidity these results contribute to our understanding both of coordination failure and of nominal rigidity the range of keynesian phenomena explained by coordination failures is greatly expanded previous coordination failure models contain only real variables and thus ascribe no role to monetary policy or other determinants of nominal spending our results suggest that coordination failure is at the root of inefficient nonneutralities of money theories of nominal rigidities gain new empirical and policy im

two step estimation and inference with possibly many included covariates we study the implications of including many covariates in a first step estimate entering a two step estimation procedure we find that a first order bias emerges when the number of included covariates is large relative to the square root of sample size rendering standard inference procedures invalid we show that the jackknife is able to estimate this many covariates bias consistently thereby delivering a new automatic bias corrected two step point estimator the jackknife also consistently estimates the standard error of the original two step point estimator for inference we develop a valid post bias correction bootstrap approximation that accounts for the additional variability introduced by the jackknife bias correction we find that the jackknife bias corrected point estimator and the bootstrap post bias correction inference perform excellent in simulations offering important improvements over conventional two step point estimators and inference procedures which are not robust to including many covariates we apply our results to an array of distinct treatment effect policy evaluation and other applied microeconomics settings in particular we discuss production function and marginal treatment effect estimation in detail

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

schooling and citizenship in a young democracy evidence from postwar germany this paper examines whether schooling has a causal impact on individuals political interest voting turnout democratic values political involvement and political membership using two national representative samples between 1949 and 1969 the number of compulsory years of schooling was increased from eight to nine years in the federal republic of germany gradually over time and across federal states these legislative changes allow one to investigate the causal impact of years of schooling on citizenship in a young democracy years of schooling are found to be positively correlated with a broad range of citizenship outcomes however when exogenous increase in schooling through legislative changes is used there is little evidence of a causal efiect several potential explanations are examined 1 poor or apolitical teaching practices in the post war period 2 shortages of qualifled teachers and adequate teaching material 3 extra curricular civic education and 4 whether civic knowledge might have been acquired prior to the increase in schooling the estimates reject the flrst three explanations whereas ample historical evidence is in favour of the hypothesis that the fundamentals of democracy were learned already earlier in school

property tax and urban sprawl theory and implications for us cities this article attempts a formal analysis of the connection be tween property tax and urban sprawl in u s cities we develop a theoretical model that includes households who are also landlords and land developers in a regional land market we then test the model empirically based on a national sample of urbanized areas the results we obtained from both theoretical and empirical analyses indicate that increasing property tax rates reduces the size of urbanized areas j e l classification h3 h71 r14

behaviors and housing inertia are key factors in determining the consequences of a shock in transportation costs this paper investigates the consequences of a sudden increase in transportation costs when household behaviors and building inertia are accounted for a theoretical framework is proposed capturing the interactions between behaviors transportation costs and urban structure numerical simulations show that changes in households and landowners choices reduce significantly the long term adverse effects of a shock in transportation costs indeed the shock translates over the long run into a more concentrated housing that limits households utility losses and maintains landowners income but because of building inertia the shock leads first to a long transition during which the adjustment is constrained by a suboptimal housing supply structure then households support larger losses than in the final stage though lower than with no behavior adjustment and landowners experience a large decrease in their aggregate income and an important redistribution of wealth thus behaviors and building inertia are key factors in determining the vulnerability to transportation price variability and to the introduction of climate policies our policy conclusions are that i if a long term increase in transportation costs is unavoidable because of climate change or resource scarcity a smooth change prevents to some extent the negative transition effects and ii fast growing cities of the developing world can reduce their future vulnerability to shocks in transportation costs through the implementation of policies that limit urban sprawl

forecasting marketing mix responsiveness for new products abstract before a new product launch marketers need to infer how demand will respond to various levels of marketing mix variables to set an appropriate marketing plan a critical challenge in estimating marketing mix responsiveness from historical data is that the observed decisions were affected by private information possessed by managers about the heterogeneous effects of marketing mix variables on sales the authors refer to this as the slope endogeneity problem such endogeneity differs from the intercept endogeneity problem which has been widely acknowledged in the literature to correct for the slope endogeneity bias the authors develop a conceptually simple control function approach that is amenable to multiple endogenous variables and marketing mix carryover effects the method is applied to forecasting advertising responsiveness in the u s dvd market the results suggest that advertising responsiveness varies substantially across dvd titles and that estimated marketing mix elasticities w

eliciting and utilizing willingness to pay evidence from field trials in northern ghana we utilize the becker degroot marschak 1964 mechanism to estimate the willingness to pay for clean drinking water technology in northern ghana the bdm mechanism has attractive properties for empirical research allowing us to directly estimate demand compute heterogeneous treatment effects and study the screening and causal effects of prices with minor modifications to a standard field experiment setting we demonstrate the implementation of bdm along these three dimensions compare it to the standard take it or leave it method for eliciting willingness to pay and discuss practical issues for implementing the mechanism in true field settings jel classifications c93 d12 d82 l11 l31

civil conflict and human capital accumulation the long term effects of political violence in peru this paper provides empirical evidence of the persistent effect of exposure to political violence on human capital accumulation i exploit the variation in conflict location and birth cohorts to identify the long and short term effects of the civil war on educational attainment conditional on being exposed to violence the average person accumulates 0 31 less years of education as an adult in the short term the effects are stronger than in the long run these results hold when comparing children within the same household further exposure to violence during early childhood leads to permanent losses i also explore the potential causal mechanisms

a near rational model of the business cycle with wage and price inertia this paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects the individual loss to agents with inertial price wage behavior is second order in terms of the parameter describing the shock while the effect on real economic variables is first order thus significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses

marital status and earnings of young men a model with endogenous selection it is a matter of course in applied labor economics to presume that marital status is a predetermined contributor to earnings among young males we find no evidence to support that proposition we estimate a model of earnings determination that permits endogenous selection of marital status our estimates are based on a sample of young employed males from the michigan panel survey of income dynamics they indicate that marital status viewed in this manner does not significantly shift the mean earnings profile our sensitivity tests indicate that this conclusion is robust with respect to a variety of alternative specifications excerpt

the long run educational cost of world war ii an important component of the long run cost of a war is the loss of human capital suffered by school age children who receive less education austrian and german individuals who were 10 years old during the conflict or were more directly involved through their parents received less education than comparable individuals from nonwar countries such as switzerland and sweden we also show that these individuals experienced a sizable earnings loss some 40 years after the war which can be attributed to the educational loss caused by the conflict the implied consequences in terms of gross domestic product loss are calculated

child health and conflict in cote d ivoire we examine the impact of the 2002 07 civil conflict in cote d ivoire on children s health status measured by height for age we use pre and post war survey data coupled with information on the location of violent incidents to capture exposure to the conflict of children born during 1997 2007 our results indicate that children from regions more affected by the conflict suffered significant health setbacks compared with children from less affected regions further household level victimization such as war related economic stress health stress and displacement has a large and negative effect on child health in conflict affected regions

the long term educational cost of war evidence from landmine contamination in cambodia abstract the economic impact of war may be visible in the long run and particularly through its impact on human capital this paper uses unique district level data on landmine contamination intensity in cambodia combined with survey data on individuals to evaluate the long run impact of cambodia s 30 years of war 1970 1998 on education levels and earnings these effects are identified using difference in differences dd and instrumental variables iv estimators in the dd framework i exploit two sources of variation in an individual s exposure to the conflict age in 1970 and landmine contamination intensity in the district of residence the iv specification uses the distance to the thai border as an exogenous source of variation in landmine contamination intensity the most conservative result indicates that individuals who were too young to have attended school before the start of the war received on average 0 5 less years of education and immediately after the war there was no visible effect on e

evaluating the labor market effects of compulsory military service we identify the causal effect of compulsory military service on conscripts subsequent labormarket outcomes by exploiting the regression discontinuity design of the military draft in germany during the 1950s unbiased estimates of the effect of military service on lifetime earnings wages and employment are obtained by comparing men born before july 1 1937 the white cohort who were exempted from compulsory military service to men who were born on or shortly after this threshold date and hence faced a positive probability of being drafted we find that the putative earnings advantage and wage premium of those who served in the armed forces vanish when selection effects are taken into account

the use of nonlinear hedging strategies by us oil producers motivations and implications abstract this paper investigates the motivations and value effect of nonlinear hedges using a new dataset on the hedging activities of 150 u s oil producers we present empirical evidence that nonlinear hedging strategies are motivated by sensitivities of firm s investment expenditures and revenues to oil price fluctuations and quantity price correlation we also find a non monotonic relationship between the use of nonlinear hedges and financial constraints investment opportunities production uncertainty and changes in oil prices and volatilities also play a significant role in hedging strategy choice controlling for bias related to omitted variables and self selection in the estimation of marginal treatment effects of hedging strategy choice we find that oil producers with a higher propensity to use pure nonlinear hedging strategies tend to have higher marginal firm value

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

the significance of federal taxes as automatic stabilizers using the taxsim model for the period 1962 95 we consider the federal tax system s impact as an automatic stabilizer despite the many changes in the tax system there has been relatively little change in its role as an automatic stabilizer we estimate that individual federal taxes offset perhaps as much as 8 percent of initial shocks to gdp we also suggest that the progressive income tax may help to stabilize output via its effect on the supply of labor an additional effect that may even be of similar magnitude to the more traditional path of stabilization through aggregate demand

macroeconomic externalities are pigovian taxes the answer basic welfare economics tells us that many types of externalities can be remedied by proper use of corrective taxes and subsidies this paper shows that this notion also extends to the macroeconomi

long term fuel demand not only a matter of fuel price this paper analyzes the non energy determinants of transport related fuel consumption and in particular investigates the role of housing price trajectories in driving long run demand for motor fuel to this aim it develops a dynamic modeling framework and takes the next step of testing it for cointegration french data spanning fifty years up to 2009 are employed it is found that when facing an increase of dwellings real price fuel demand remains stable in the short term whereas it increases significantly in the long term our results reflect the role of spatial organization in the formation of energy demand through the trade off between housing prices and commuting costs the modeling framework is then extended to assess the potential interest of combining housing policies aiming to drive down housing prices with carbon taxes so as to achieve a wide range of fuel demand reduction targets it is shown that the relative contribution of housing policies increases with the degree of ambition of fuel consumption reduction targets

urban economic theory land use and city size this book examines the economic reasons why people choose to live where they live and develops through analysis of the bid rent function a unified theory of urban land use and city size the first part of the book explicates the basic theory of urban land use and optimal city size residential location behavior of households is examined in a microeconomic framework and equilibrium and optimal patterns of residential land use are discussed the corresponding equilibrium and optimal city sizes are studied in a variety of contexts part two extends the classical theories of von thunen and alonso with the addition of externality factors such as local public goods crowding and congestion and racial prejudice the rigorous mathematical approach and theoretical treatment of the material make urban economic theory of interest to researchers in urban economics location theory urban geography and urban planning

was weber wrong a human capital theory of protestant economic history max weber attributed the higher economic prosperity of protestant regions to a protestant work ethic we provide an alternative theory protestant economies prospered because instruction in reading the bible generated the human capital crucial to economic prosperity we test the theory using county level data from late nineteenth century prussia exploiting the initial concentric dispersion of the reformation to use distance to wittenberg as an instrument for protestantism we find that protestantism indeed led to higher economic prosperity but also to better education our results are consistent with protestants higher literacy accounting for most of the gap in economic prosperity

optimal fiscal policy in open economies with labour market distortions abstract we set up a general equilibrium model with unemployment owing to distortions in the labour market it is shown that a public expansion financed by a distortionary income tax may give rise to a decrease in unemployment even if public goods are pure waste such an expansion may give rise to an increase in welfare if it is associated with a decrease in unemployment since part of the gain from a fiscal expansion is achieved at the expense of welfare in other countries non cooperative policies tend to be too expansionary

news droughts news floods and u s disaster relief this paper studies the influence of mass media on u s government response to approximately 5 000 natural disasters occurring between 1968 and 2002 these disasters took nearly 63 000 lives and affected 125 million people per year we show that u s relief depends on whether the disaster occurs at the same time as other newsworthy events such as the olympic games which are obviously unrelated to need we argue that the only plausible explanation of this is that relief decisions are driven by news coverage of disasters and that the other newsworthy material crowds out this news coverage

location and history as determinants of urban residential density abstract dynamic models of urban residential location have been widely used in recent years to explain spatial patterns of urban development and residential density however there has been little empirical evidence of their superiority in accounting for observed density patterns compared with long run equilibrium location models or pure historical models that ignore the influence of location as a determinant of density the test developed and applied in this paper demonstrates the superior explanatory power of dynamic models and yields plausible estimates of changes over time in equilibrium densities

zero returns to compulsory schooling in germany evidence and interpretation abstract we estimate the impact of compulsory schooling on earnings using changes in compulsory schooling laws in west germany after world war ii most estimates in the literature indicate returns in the range of 10 to 15 while our research design is very similar to studies for various other countries we find a zero return we find no evidence that this is due to labor market institutions or the apprenticeship training system in germany the result might be due to the fact that the basic skills most relevant for the labor market are learned earlier in germany than in other countries

what is new keynesian economics this research was supported by the national science foundation i am grateful to george williams for help with the data and to steven allen laurence ball olivier j blanchard timothy bresnahan charles calomiris dennis carlton robert chirinko russell cooper stanley fischer herschel grossman r glenn hubbard david laidler john leahy assar lindbeck n gregory mankiw david romer julio rotemberg dennis snower john taylor andrew weiss and two anonymous referees for comments on one or more earlier drafts i am also indebted to michael parkin and edmund s phelps for helping to establish the etymology of the phrase new keynesian

small menu costs and large business cycles a macroeconomic model of monopoly i introduction the conflict between modern neoclassical and traditional keynesian theories of the business cycle centers upon the pricing mechanism in neoclassical models prices are fully flexible they represent the continuous optimization of economic agents and the continuous intersection of supply and demand in keynesian models prices are often assumed to be sticky they do not necessarily equilibrate all markets at all times one of the reasons for the resurgence of the equilibrium approach to macroeconomics has been the absence of a theoretical underpinning for this keynesian price stickiness this note shows that sticky prices can be both privately efficient and socially inefficient the business cycle results from the suboptimal adjustment of prices in response to a demand shock to the extent that policy can stabilize aggregate demand it can mitigate the social loss due to this suboptimal adjustment in some keynesian models prices are simply exogenously fixed 2 in others agents must set their prices in advance of the transaction date the act of altering a posted price is certainly costly these costs include such items as printing new catalogs and informing salesmen of the new price yet these menu costs are small and therefore generally perceived as providing only a weak foundation for these fixed price models however this inference is flawed small menu costs can cause large welfare losses the claim that price adjustment costs are small does not rebut the claim that they are central to understanding economic fluctuations

education and civil conflict in nepal between 1996 and 2006 nepal experienced violent civil conflict as a consequence of a maoist insurgency which many argue also brought about an increase in female empowerment this paper exploits variations in exposure to conflict by birth cohort survey date and district to estimate the impact of the insurgency on education outcomes overall conflict intensity measured by conflict casualties is associated with an increase in female educational attainment whereas abductions by maoists which often targeted school children have the reverse effect male schooling tended to increase more rapidly in areas where the fighting was more intense but the estimates are smaller in magnitude and more sensitive to specification than estimates for females similar results are obtained across different specifications and robustness checks indicate that these findings are not due to selective migration

the role of taxes as automatic destabilizers in new keynesian economics abstract this paper analyses the effects of taxation in new keynesian economics the results show that taxes contribute to price and wage stickiness and moreover that the resulting fluctuations in welfare are magnified by the presence of taxes these results are at odds with the old keynesian idea of automatic stabilizers

essays in social experimentation what experiments are needed for manpower policy experiments where prospective participants are randomly assigned into experimental and control groups are often regarded as the ideal approach to evaluation of manpower policies this examination shows that such experimental designs can yield misleading and incomplete information about program impacts in cases where program effects vary among individuals when individual heterogeneity is present such designs at best provide unbiased estimates of average program effects not of marginal effects the latter are often more important for policy than the former this paper proposes alternative experimental designs that permit estimation of the marginal as well as average program impacts

estimating the benefits of targeted r d subsidies we study the expected welfare effects of targeted r d subsi dies using project level data from finland we model the application and r d investment decisions of firms and the subsidy granting decision of the public agency in charge of the program our model and institutional environment allow us to identify different benefits and costs of the r d subsidy program we find that expected effects of subsidies are very het erogeneous and estimated application costs low on average the social rate of return on targeted subsidies is 30 to 50 but spillover effects of subsidies are smaller than effects on firm profits

evaluating marginal policy changes and the average effect of treatment for individuals at the margin this paper develops methods for evaluating marginal policy changes we characterize how the effects of marginal policy changes depend on the direction of the policy change and show that marginal policy effects are fundamentally easier to identify and to estimate than conventional treatment parameters we develop the connection between marginal policy effects and the average effect of treatment for persons on the margin of indifference between participation in treatment and nonparticipation and use this connection to analyze both parameters we apply our analysis to estimate the effect of marginal changes in tuition on the return to going to college

education earnings and the canadian g i bill canadian second world war veterans benefited from an extensive educational pro gram similar to the u s g i bill because of differences in military enlistment rates how ever a much lower fraction of quebec men were eligible for these benefits than men from other provinces building on this fact we analyse inter cohort patterns of education and earnings for english speaking men from ontario using french speaking men from quebec as a control group we find that the instrumental variables estimates of the return to school ing are typically as big or bigger than the corresponding ols estimates jel classification j24 i21

effect of secondary school fees on educational attainment in this study the heterogeneity of the fee abolition process in west german secondary schools is used to identify the effect of school fees on educational attainment and to obtain an estimate of the price elasticity of upper secondary education the analysis is based on representative individual level data from three annual surveys of the german mikrozensus while coefficients cannot be estimated precisely the results suggest that on average upper secondary school attainment increased by at least 8 percent in response to the fee abolition the educational attainment of females appears to be more price sensitive than that of males