nonparametric bounds on the returns to language skills this paper applies the theoretical literature on nonparametric bounds on treatment effects to the estimation of how limited english proficiency lep affects wages and employment opportunities for hispanic workers in the united states i analyse the identifying power of several weak assumptions on treatment response and selection and stress the interactions between lep and education occupation and immigration status i show that the combination of two weak but credible assumptions provides informative upper bounds on the returns to language skills for certain subgroups of the population adding age at arrival as a monotone instrumental variable also provides informative lower bounds copyright 2005 john wiley sons ltd

of a controversial passage in hume david hume s 1955 analysis of how a change in the quantity of money can have a temporary effect on real income has been variously interpreted and misinterpreted for over two hundred years a possible reason for some misinterpretation is hume s archaic use of the term labor with the correct interpretation which is consistent with hume s other theories and in particular his theory ofthe interest rate the reason for the temporary effect on real income is that prices lag behind money wages and a rise in real wages leads to an increased supply of effort copyright 1987 by university of chicago press

identification issues in the public private wage gap with an application to italy this paper reviews some of the standard assumptions that are imposed in order to estimate the average public private wage gap and that are mainly related to the possible selection of the sector there are two contributions to the existing public private wage gap literature one is a better understanding of the identified parameters standard estimators identify a local effect late which in general cannot be generalized to the entire population as instead is almost always done the other is the partial identification of the population average treatment effect with an instrumental variable to the best of my knowledge this is the first paper in this literature that employs bounds the technique is applied to male workers in italy for compliers late estimates a wage advantage from working in the public sector greater than 30 this return is within the narrowest bounds on the population average treatment effect that are consistent even with a much smaller gap about 15 or more

multivariate tests of the zero beta capm abstract a cross sectional regression test csrt of the capm is developed and its connection to the hotelling t2 test of multivariate statistical analysis is explored algebraic relations between the csrt the likehood ratio test and the langrange multiplier test are derived and a useful small sample bound on the distribution function of the csrt is obtained an application of the csrt suggests that the crsp equally weighted index is inefficient but that the inefficiency is not explained by a firm size effect from february to december

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

a note on the geometry of shanken s csr t2 test for mean variance efficiency abstract shanken 1985 derives a test for the zero beta capital asset pricing model capm which as he points out is equivalent to a test of the mean variance efficiency of the market portfolio this note illustrates the geometry of shanken s test in the mean variance space

small sample tests of portfolio efficiency abstract this paper presents an eigenvalue test of the efficiency of a portfolio when there is no riskless asset complementing the test of gibbons ross and shanken 1989 besides optimal upper and lower bounds an easily implented numerical method is provided for computing the exact p value our approach makes it possible to draw statistical inferences on the efficiency of a given portfolio both in the context of the zero beta capm and with respect to other linear pricing models as an application using monthly data for every consecutive five year period from 1926 to 1986 we reject the efficiency of the crsp value weighted index for most periods

the likelihood ratio test statistic of mean variance efficiency without a riskless asset abstract the question whether a given porfolio is mean variance efficient is a basic problem of investment analysis mean variance efficiency is also the basis of the capital asset pricing model this paper presents the explicit form of the likelihood ratio test of the hypothesis that a given portfolio or a particular market index is ex ante mean variance efficient in the case where there is no riskless asset geometric relations are illustrated to provide intuition about the constrained maximum likelihood estimators and the test statistic and two simple economic interpretations of the test are given

potential performance and tests of portfolio efficiency abstract the potential performance of an asset set may be obtained by choosing the portfolio proportions to maximize the sharpe 1966 performance measure if a portfolio has a sharpe measure equivalent to the potential performance of the underlying set of assets then it is efficient multivariate statistical procedures for comparing potential performance and testing portfolio efficiency are developed and then evaluated using simulations two likelihood ratio statistics are then used to compare stock and bond indices against sets of 20 and 40 portfolios the procedures are also compared to the gibbons 1982 methodology for testing financial models

henry thornton and the development of classical monetary economics students of nineteenth century economics have held henry thornton in high esteem since his rediscovery by jacob viner and friedrich hayek in the 1920s thornton has been praised for the sophistication of his macroeconomic thinking a for the extent to which he developed ideas later associated with giants such as knut wicksell and j m keynes however the consensus has been that he had little effect on the development of british classical monetary economics i show that the consensus is wrong by demonstrating that thornton affected the course of classical thinking in important ways particularly through his influence on members of the banking school thornton was not simply a precursor of modern thought but was one of the dominant figures of classical monetary economics

a reinterpretation of classical monetary theory relevance to current policy issues is usually not the motivation for studying the history of economic theory however questions about the practicality of conducting monetary policy in a deregulated financial system by controlling the monetary aggregates are stimulating interest in convertibility as an alternative to our present monetary arrangements 3 6 66 since classical writers were mainly concerned with monetary theory and policy under a gold standard it is to be expected that renewed attention will be devoted to classical monetary theory my aim in this paper is to show that contrary to received views about classical monetary theory it was not based on the quantity theory of money on the contrary it was based on a theory of a convertible competitively produced money supply that was fundamentally different from the quantity theory using the modern theory of a competitive money supply we can now rigorously derive many of the basic propositions of classical monetary theory that have been denied or misunderstood by modern theorists operating within the framework of the quantity theory received views about classical monetary theory can be summarized by the following propositions

estimating the effects of unions on wage inequality in a panel data model with comparative advantage and nonrandom selection this article considers the estimation of the structure of wages in union and nonunion sectors it proposes an estimator that extends standard panel data techniques to the case in which the return to the permanent component of the error term is differently rewarded in the two sectors the econometric model is used to estimate the effect of unions on both the level and the variance of wages in canada the findings indicate that unions increase the average wage of workers and compress the returns to observable measures of skill and to a time invariant unobservable measure of skill

bargaining effect and membership effect in public sector unions the vast majority of the literature on public sector unionism focuses on union wage effects and the extent of unionization in this paper we investigate some additional aspects of public sector unionism that have been discussed recently with respect to the private sector the first is an analysis of the wage effects attributable to the legal status of the worker union specifically we investigate the difference between an individual s membership in a union and an individual s employment in a collective bargaining unit second we examine the return to human capital and seniority in unionized versus non unionized public sector employment the two issues under scrutiny here are not unrelated for each measures in its own way the ability of the union to deliver benefits to and elicit the support of its membership in other words both are issues of union security for the most part the literature on union wage effects makes no distinction between union membership and collective bargaining coverage as an exception christensen and maki use a cross section of three digit industries to investigate both an industry coverage variable and an industry membership variable 3 they conclude that membership in the union is the key status in the collective bargaining process in two other papers jones 15 and blakemore hunt and kiker 1 use panel data that allow the worker s union status to be identified according to union membership and collective bargaining coverage both find that nonunion workers employed in a collective bargaining unit receive a wage premium over workers who are not covered and that union members receive an extra bonus

union nonunion differentials membership or coverage economists have long suggested that labor unions suffer a free rider problem the argument is that since union set wages are available to all workers covered by unions irrespective of their union status and union membership entails costs workers will

the riksbank emergency finance policy experimentation and sweden s reversal of fortune abstract at the beginning of the 18th century sweden was an imperial power that had just sustained a century of modest economic growth in 1800 sweden s empire was gone after a series of military defeats real gdp per capita had fallen to the same level as the early 1600s in other words the 18th century witnessed the end of the swedish empire and a startling reversal of economic progress in this paper i propose a possible explanation for both of these outcomes first i argue that sweden s limited fiscal capacity played an important role the creation of the riksbank should have facilitated government borrowing and military spending as the bank of england did for the british however the riksbank was not designed or equipped for this role i document the constraints on financing national defense through the riksbank and argue that the bank was ill equipped to finance an adequate national defense this explains the reversal of the empire second when the hats took power in the riksdag in 1739 they used the riksbank to give loans to firms which were financed through the issuance of bank notes the objective was to increase investment and economic activity i find no evidence that these loans had any effect on real gdp per capita however the resulting inflation has a negative and significant effect on output during the period of inconvertible paper money the combined evidence suggests that hat policy contributed to the decline in economic activity during the reversal of fortune

monopsony power in migrant labor markets evidence from the united arab emirates by exploiting a reform in the united arab emirates that relaxed restrictions on employer transitions we provide new estimates of the monopsony power of firms over migrant workers our results show that the reform increased incumbent migrants earnings and firm retention this occurs despite an increase in employer transitions and is driven by a fall in country exits while the outcomes of incumbents improved the reform decreased demand for new migrants and lowered their earnings these results are consistent with a model of monopsony in which firms face upward sloping labor supply curves for both new recruits in source countries and incumbent migrants

on the exclusion of assets from tests of the mean variance efficiency of the market portfolio this paper presents an analysis of the testability of the mean variance efficiency of a market index when the returns on some components of the index itself are not perfectly observable the results are basically not supportive of the notion that mean variance efficiency is testable on a subset of the assets bounding the market share of the missing asset and its expected return is not sufficient to produce a valid test when the variance of the missing asset is bounded and the amount of wealth that might be missing is small it is possible in principle to reject correctly the mean variance efficiency of a market index in his famous critique of the asset pricing theory tests roll 7 concludes that the only testable hypothesis associated with the generalized two parameter asset pricing model of black 1 is that the market portfolio is mean variance efficient it has been emphasized by ross 10 and roll 7 that the mean variance efficiency of the market portfolio is mathematically equivalent to a positive linear relation between expected returns and the betas calculated against such a portfolio roll 7 deduces that the theory capm is not testable unless the exact composition of the market portfolio is known and used in the tests this implies that the theory is not testable unless all individual assets are included in the sample errors of type one or two might occur when a market proxy is used instead of the true market portfolio even if the ex ante true expected returns and the covariance variance matrix of the returns on all the assets are used these errors are the result of the choice of the portfolio and as roll puts it even a small misspecification of the proxy s composition can lead to the wrong conclusion the market proxy might be mean variance efficient while the true market portfolio is not and vice versa in principle however there are cases in which the above two conditions are not both necessary to reject the theory one such exception presented by roll 7 is the case in which no totally positive portfolio is efficient if any totally positive market proxy is used a large sample would reject the null hypothesis unambiguously while the market portfolio identification problem constitutes a severe limitation to the testability of the theory the question of the mean variance efficiency of a particular market index with respect to a subset of assets is a typical problem of statistical inference the mean variance efficiency can be tested directly or by

head start and the distribution of long term education and labor market outcomes we investigate the effect of head start on education and wage income for individuals in their 30s in the nlsy79 we contribute to the existing literature by examining effects across outcome distrib

market line deviations and market anomalies with reference to small and large firms previous anomaly research may have misinterpreted corrected for the market index mean returns on small firms assuming mean variance preferences it is shown theoretically that corrected mean returns i e market line deviations are not indicative of the relative desirability of increasing the proportional investment in small firms the correct improvement criterion is derived and estimated tests indicate that the value weighted market index is not significantly improved with greater weight on small firms in the aver age month when seasonality is considered the observed performance improvements due to small or large firms are significant in some months but the required portfolio position is unclear if a case exists for a small firm anomaly in january it probably exists in other months and it also exists for large firms it is doubtful whether such an anomalous stock market exists

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

partial identification of counterfactual choice probabilities this article shows how to predict counterfactual discrete choice behavior when the presumed behavioral model partially identifies choice probabilities the simple general approach uses observable choice probabilities to partially infer the distribution of types in the population and then applies the results to predict behavior in unrealized choice settings two illustrative applications are given one assumes only that persons have strict preferences the other assumes strict preferences and utility functions that are linear in attribute bundles with no restrictions on the shape of the distribution of preference parameters

set identification in models with multiple equilibria we propose a computationally feasible way of deriving the identified features of models with multiple equilibria in pure or mixed strategies it is shown that in the case of shapley regular normal form games the identified set is characterized by the inclusion of the true data distribution within the core of a choquet capacity which is interpreted as the generalized likelihood of the model in turn this inclusion is characterized by a finite set of inequalities and efficient and easily implementable combinatorial methods are described to check them in all normal form games the identified set is characterized in terms of the value of a submodular or convex optimization program efficient algorithms are then given and compared to check inclusion of a parameter in this identified set the latter are illustrated with family bargaining games and oligopoly entry games copyright 2011 oxford university press

is currency hedging necessary for emerging market equity investment abstract when a developed market investor buys emerging market stocks this investor may be justified not to hedge currency risk our analysis indicates that completely unhedged portfolios often perform better than fully hedged portfolios and are not significantly inferior to optimally hedged portfolios we provide a carry profit based explanation of this finding

recent two stage sample selection procedures with an application to the gender wage gap recently developed two stage estimation methods of sample selection models are used in the context of data from the 1989 labor market activity survey to examine labor supply decisions and wage outcomes for employed men and women recent hypothesis test procedures are used to test for no sample selection and to test for a parametric against a semiparametric selection correction procedure we conclude that selection is indeed an issue for the sample at hand and that the semiparametric specification is appropriate we also present the standard decomposition of the gender wage gap into its explained and unexplained portions

mobile phone coverage and producer markets evidence from west africa mobile phone coverage has expanded considerably throughout the developing world particularly within sub saharan africa existing evidence suggests that increased access to information technology has improved agricultural market efficiency for consumer markets and certain commodities but there is less evidence of its impact on producer markets building on the work of aker 2010 this paper estimates the impact of mobile phone coverage on producer price dispersion for three commodities in niger the results suggest that mobile phone coverage reduces spatial producer price dispersion by 6 percent for cowpea a semi perishable commodity these effects are strongest for remote markets and during certain periods of the year the introduction of mobile phone coverage has no effect on producer price dispersion for millet and sorghum two staple grains that are less perishable and are commonly stored by farmers there are no impacts of mobile phone coverage on traders gross margins or producer price levels but mobile phone coverage is associated with a reduction in the intra annual price variation for cowpea these results are potentially explained by the fact that farmers engage in greater storage for storable commodities such as millet and sorghum

can higher cigarette taxes improve birth outcomes abstract this study examines whether higher state cigarette taxes can be used to improve birth outcomes data on the outcomes of interest are taken from the 1989 1992 natality detail files generating a sample of roughly 10 5 million births the results suggest that smoking participation among pregnant women declines and average birth weights rise when excise taxes are increased these results can be used to form an instrumental variables estimate of the impact of smoking on birth weight this estimate is remarkably close to numbers from a random assignment clinical trial the smoking participation price elasticity is estimated to be 0 5

identification and asymptotic approximations three examples of progress in econometric theory in empirical economics the size and quality of datasets and computational power has grown substantially along with the size and complexity of the econometric models and the population parameters of interest with more and better data it is natural to expect to be able to answer more subtle questions about population relationships and to pay more attention to the consequences of misspecification of the model for the empirical conclusions much of the recent work in econometrics has emphasized two themes the first is the fragility of statistical identification the other related theme involves the way economists make large sample approximations to the distributions of estimators and test statistics i will discuss how these issues of identification and alternative asymptotic approximations have been studied in three research areas analysis of linear endogenous regressor models with many and or weak instruments nonparametric models with endogenous regressors and estimation of partially identified parameters these areas offer good examples of the progress that has been made in econometrics

the rand health insurance experiment three decades later we re present and re examine the analysis from the famous rand health insurance experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending we begin by summarizing the experiment and its core findings in a manner that would be standard in the current age we then examine potential threats to the validity of a causal interpretation of the experimental treatment effects stemming from different study participation and differential reporting of outcomes across treatment arms finally we re consider the famous rand estimate that the elasticity of medical spending with respect to its out of pocket price is 0 2 emphasizing the challenges associated with summarizing the experimental treatment effects from non linear health insurance contracts using a single price elasticity

right to work laws and free riding i introduction section 14 b of the taft hartley act permits state right to work right to work laws which prohibit compulsory payment of union dues by allowing employees to enjoy the benefits of a union contract without the costs of union membership right to work laws can reduce not only the demand for memberships but also the supply as unions lose incentives to organize and maintain bargaining units the significance of right to work laws as a deterrent to membership however is open to dispute olson 1971 88 reasons that right to work laws must be ineffective because the incentive to free ride is so great that large unions could not survive if workers were free not to join olson considers the continued existence of large unions in states with right to work laws as evidence that these laws are not being enforced farber s 1984 finding that the supply of union jobs relative to demand is comparable in right to work and non right to work states also suggests non enforcement hirsh 1980 finds that while right to work laws do not affect coverage they do affect membership he infers that free riders account for the slippage that is right to work laws do not deter unions from organizing firms but they do interfere with unions signing up individual members freeman and medoff 1984 243 bloom and northrup 1981 227 and others point to membership figures indicating that right to work laws create serious free rider problems for unions some 15 5 percent of employees covered by collective bargaining contracts free ride in states with right to work laws about 2 4 times the 6 4 percent who free ride in other states 1 the literature on union membership however makes it clear that such bivariate comparisons neglect other factors that could affect free riding jones 1982 research using the national longitudinal survey reveals that nonmembers covered by union contracts are more likely to be younger to live in the south and to work in white collar jobs than members are moore dunlevy and newman 1986 contend that the same attitudes that give rise to right to work laws also affect union membership when these attitudes are properly controlled for right to work laws have no significant effect on membership moore and newman 1985 provide a good review of the literature on union membership although these studies and others have examined the effects of right to work laws on union membership of all workers the impact on only those workers covered by union contracts has not been as thoroughly explored previous analysis of free riding has been extensive but largely theoretical this study fills a gap in the literature by developing an empirical model of free riding having created a statistical model of free riding we can test the marginal impact of right to work laws we find that after taking into account other factors that affect the decision to free ride right to work laws remain statistically significant although of a smaller magnitude than bivariate analysis would suggest ii causes of free riding the theoretical model used to explain free riding is abstracted from the standard model of the demand for and supply of union membership that moore and newman 1985 describe in detail one of the advantages of focusing on workers covered by union contracts is that we avoid the simultaneity problem inherent in modeling the supply as well as the demand for union services we limit our analysis to the demand for membership because the union as a rule must supply membership to all covered workers 2 the key variables that influence the demand for membership by covered workers include price dues and fees the union wage premium job security and pressures from peers and community as in other studies of union membership data limitations do not allow us to gauge the effect of dues and fees where membership is not compulsory free riders do not face immediate loss of the union wage because by law the union must negotiate the same wages and benefits for nonmembers as for members

optimal food price stabilization in a small open developing country in poor countries most governments implement policies aiming to stabilize the prices of staple foods which often include storage and trade measures insulating their domestic market from the world market it is of crucial importance to understand the precise motivations and efficiency of those interventions because they can have consequences worldwide this paper addresses those issues by analyzing the case of a small open developing country confronted by shocks to both the crop yield and foreign price in this model government interventions may be justified by the lack of an insurance market for food prices considering this market imperfection the authors design optimal public interventions through trade and storage policies they show that an optimal trade policy largely consists of subsidizing imports and taxing exports which benefits consumers at the expense of producers import subsidies alleviate the non negativity of food storage in other words when stocks are exhausted subsidizing imports prevents domestic price spikes one striking result an optimal storage policy on its own is detrimental to consumers since its stabilizing benefits leak into the world market and it raises the average domestic price by contrast an optimal combination of storage and trade policies results in a powerful stabilizing effect for domestic food prices

rediscounting under aggregate risk abstract this paper compares three institutions that offer an elastic currency open market operations a discount window and a private banknote issuing clearinghouse in an economy with financial markets otherwise hampered by a lack of liquidity when this economy is subject to aggregate financial shocks these alternative forms of central banking are shown to differ in their implications for risk sharing interesting implications include i central bank losses and monetary innovations that are part of an efficient equilibrium and ii desirable quantity restrictions at the discount window

david hume on canadian paper money an overlooked contribution the philosopher david hume is renowned in international monetary economics for his 1752 analysis of the specie flow mechanism of international adjustment he has been viewed in the literature as an abstract theorist writing without direct practical experience of public policy or monetary affairs this paper shows hume in the unfamiliar role of a british diplomat negotiating the settlement of the outstanding paper money of new france after the british conquest of canada

does membership payoff for covered workers a distributional analysis of the free rider problem this paper examines the union membership wage premium among private sector employees covered by collective bargaining agreements using current population survey data for 2000 2003 the author not only estimates the conditional mean wage premium the metric on which most previous research has focused but also employs recently developed instrumental quantile regression techniques to estimate the wage effect of membership across the wage distribution members enjoyed on average a wage premium of 9 over comparable covered nonmembers further analyses find no evidence that this mean premium is explained either by unobserved differences or by measurement error the author also finds that a narrow focus on the mean impact partially masks heterogeneity in the impact across the distribution notably membership wage effects were considerably more pronounced for low wage earners than for high wage earners

estimating the effect of financial aid offers on college enrollment a regression discontinuity approach an important problem faced by colleges and universities that of evaluating the effect of their financial aid offers on student enrollment decisions is complicated by the likely endogeneity of the aid offer variable in a student enrollment equation this article shows how discontinuities in an east coast college s aid assignment rule can be exploited to obtain credible estimates of the aid effect without having to rely on arbitrary exclusion restrictions and functional form assumptions semiparametric estimates based on a regression discontinuity rd approach affirm the importance of financial aid as an effective instrument in competing with other colleges for students

the payments system liquidity and rediscounting in an economy where fiat money serves both as a medium of exchange and the means by which debts are cleared it is shown that nonoptimal equilibria of constrained liquidity may arise optimality may be restored by temporary expansions of the monetary base e g an active central bank discount window copyright 1996 by american economic association

nonparametric bounds on treatment effects assume that each member of a population is characterized by values for the variables ya yb z x here x is a vector describing a person and z is a binary variable indicating which of two treatments this person receives the treatments are labelled a and b the variables ya and yb are scalar measures of the outcomes of the two treatments for example a cancer patient might be treated by a drug therapy or b surgery the relevant outcome y might be life span following treatment an unemployed worker might be given a vocational training or b job search assistance here the relevant outcome might be labor force status following treatment assume that a random sample is drawn and that one observes the realizations of z x and of the outcome under the treatment received thus ya is observed if treatment a is received but is a latent variable if treatment b is received similarly yb is either observed or latent suppose that one wants to learn the difference in expected outcome if all persons with attributes x were assigned to treatment a or b this treatment effect is

what do instrumental variable models deliver with discrete dependent variables we study models with discrete endogenous variables and compare the use of two stage least squares 2sls in a linear probability model with bounds analysis using a nonparametric instrumental variable model 2sls has the advantage of providing an easy to compute point estimator of a slope coefficient which can be interpreted as a local average treatment effect late however the 2sls estimator does not measure the value of other useful treatment effect parameters without invoking untenable restrictions the nonparametric instrumental variable iv model has the advantage of being weakly restrictive so more generally applicable but it usually delivers set identification nonetheless it can be used to consistently estimate bounds on many parameters of interest including for example average treatment effects we illustrate using data from angrist evans 1998 and study the effect of family size on female employment

financial aid debt management and socioeconomic outcomes post college effects of merit based aid abstract prior research has demonstrated that financial aid can influence both college enrollments and completions but less is known about its post college consequences this study is the first to link college and financial aid information to credit bureau data later in life enabling us to examine the impacts of grant aid on homeownership neighborhood characteristics and credit outcomes we use a regression discontinuity rd strategy to identify causal effects of the wv promise scholarship a broad based state merit aid program up to 10 years after college entry the rd is imperfect because our sample is limited to college students and the scholarship program increased enrollment but there is little evidence of selection on observables at the threshold we find that scholarship recipients near the test score cutoff for eligibility are more likely to earn a graduate degree are more likely to own a home and live in higher income neighborhoods effects on annual earnings and credit outcomes are similarly positive but imprecise these positive effects are primarily due to substantial reductions in time to degree rather than to reduced student debt upon graduation

micro data heterogeneity and the evaluation of public policy nobel lecture this paper summarizes the contributions of microeconometrics to economic knowledge four main themes are developed 1 microeconometricians developed new tools to respond to econometric problems raised by the analysis of the new sources of micro data produced after the second world war 2 microeconometrics improved on aggregate time series methods by building models that linked economic models for individuals to data on individual behavior 3 an important empirical regularity detected by the field is the diversity and heterogeneity of behavior this heterogeneity has profound consequences for economic theory and for econometric practice 4 microeconometrics has contributed substantially to the scientific evaluation of public policy

on multivariate tests of the capm abstract this paper evaluates the power of multivariate tests of the capital asset pricing model the results indicate that when employing an unspecified alternative hypothesis the ability of the tests to distinguish between the capm and other pricing models is poor an upper bound is derived for the distance the alternative distribution of the test statistic can be from the null distribution when the deviations from the capm are due to missing factors this upper bound explains the low power of the tests

information mobile telephony and traders search behavior in niger information and communications technologies have spread rapidly in developing countries we investigate the impact of mobile phones on traders search behavior in niger by constructing a theoretical model of search in which traders engage in sequential search for the optimal sales price using a trader panel dataset spanning 2005 2007 we find empirical support for the model in that the duration of mobile phone coverage is associated with increased search activity this effect evolves dynamically over time and is stronger for larger traders who engage in arbitrage over longer distances results provide empirical evidence for the observed linkages between mobile telephony and price dispersion

the union membership wage premium for employees covered by collective bargaining agreements using current population survey data for 1983 93 this article analyzes whether there is a union membership wage premium among full time private sector employees covered by union contracts ordinary least squares estimates of the membership wage premium are 12 14 and allowing membership to be endogenous yields larger estimates differences in job tenure unobservable characteristics and measurement error cannot fully explain the estimated premium significant differences in this premium as well as in membership rates conditional upon coverage across various demographic subgroups are also documented in general free riders do not appear to be free riding

the bullionist controversy theory and new evidence the bullionist controversy in the united kingdom is one of the first debates about the determination of the price level and the exchange rate under a paper money standard despite the importance of the debate in the development of monetary theory there remains little empirical evidence that uses modern multivariate time series techniques the evidence that does exist provides support for the anti bullionist position the purpose of this paper is to review the debate and develop a dynamic general equilibrium model that is capable of capturing key features of the 19th century british financial system the model is estimated using bayesian procedures to test the competing hypotheses the paper provides support for the bullionist position

the union membership wage premium puzzle is there a free rider problem economists have long suggested that labor unions suffer a free rider problem the argument is that since union set wages are available to all workers covered by unions irrespective of their union status and union membership entails costs workers will only join if they are coerced or are offered non wage goods that they value above membership costs yet u s and british empirical research has found a substantial union membership wage premium among private sector union covered workers implying that there is no free rider problem the authors of this study hypothesize that these findings arise due to selectivity problems associated with identifying the union membership effect their analysis which uses rich data from a new linked employer employee survey for britain and exploits the within establishment variation in wages as a function of individual union membership status demonstrates that the apparent wage premium for members is illusory hence a potential free rider problem remains author s abstract free full text download available at http digitalcommons ilr cornell edu ilrreview

measuring investment performance in a rational expectations equilibrium model much research has been concerned with evaluating the performance of managed portfolios e g mutual funds and examining whether portfolio managers display in some sense superior performance superior performance would seemingly turn on the possession of superior information that is utilized in managing portfolios in general a fund s asset holdings or portfolio weights might not be observable to an outsider whether they are or not however they are likely to change over time this happens especially when better performance is a result of superior information since managers will change their portfolio composition on obtaining private information since such changes must be taken into account the problem of measuring performance of managed portfolios is inherently different from that of evaluating the performance of individual assets groups of assets or generally portfolios with constant and known composition

retrospectives hume on money commerce and the science of economics david hume 1711 1776 is arguably the most esteemed philosopher to have written in the english language during his lifetime however hume was as well if not better known for his contributions to political economy particularly for the essays published as the political discourses 1752 hume left his mark on the economic thought of the physiocrats the classical economists and the american federalists adam smith who met hume circa 1750 was his closest friend and interlocutor for some 25 years among modern economists hume s essays on money and trade have informed theorists of both keynesian and monetarist persuasions in this essay we begin by discussing hume s monetary economics and then spell out his theory of economic development noting his qualified enthusiasm for the modern commercial system we end with an assessment of his views on the scientific standing of economics specifically his counterintuitive argument that economics could be epistemologically superior to physics

drought of opportunities contemporaneous and long term impacts of rainfall shocks on human capital higher wages are generally thought to increase human capital production particularly in the developing world we introduce a simple model of human capital production in which investments and time allocation differ by age using data on test scores and schooling from rural india we show that higher wages increase human capital investment in early life in utero to age 2 but decrease human capital from age 5 to 16 children switch out of school into productive work when rainfall is higher the opportunity cost of schooling even for fairly young children is an important factor in determining overall human capital investment

sensitivity to exogeneity assumptions in program evaluation in many empirical studies of the effect of social programs researchers assume that conditional on a set of observed covariates assignment to the treatment is exogenous or unconfounded aka selection on observables often this assumption is not realistic and researchers are concerned about the robustness of their results to departures from it one approach e g charles manski 1990 is to entirely drop the exogeneity assumption and investigate what can be learned about treatment effects without it with unbounded outcomes and in the absence of alternative identifying assumptions there are no restrictions on the set of possible values for average treatment effects this does not mean however that all evaluations are equally sensitive to departures from the exogeneity assumption in this paper i explore an alternative approach developed by paul rosenbaum and donald rubin 1983 where the assumption of exogeneity is explicitly relaxed by allowing for a limited amount of correlation between treatment and unobserved components of the outcomes the starting point of the sensitivity analysis is the assumption that the exogeneity assumption is satisfied only conditional on an additional unobserved covariate making assumptions about the effect of the unobserved covariate on the outcome and its correlation with the treatment i trace out the set of possible values for the treatment effect of interest by considering a sufficiently large set of possible correlations with outcomes and treatment one can recover the bounds on the treatment effect derived by manski 1990 the approach here in the spirit of rosenbaum and rubin 1983 and rosenbaum 1995 is to allow only a limited amount of correlation and to judge the sensitivity of average treatment effect estimates to such correlations there are two novel features of the proposed analysis first rather than formulate the sensitivity in terms of coefficients on the unobserved covariate the sensitivity results are presented in terms of partial r values which may be easier to interpret second the partial r values of the unobserved covariates are compared to those for the observed covariates in order to facilitate judgments regarding the plausibility of values necessary to substantially change results obtained under exogeneity the proposed sensitivity analysis is conceptually related to the practice of assessing sensitivity of estimates by comparisons with results obtained by discarding one or more observed covariates james heckman and v joseph hotz 1989 rajeev dehejia and sadek wahba 1999 jeffrey smith and petra todd 2001 the attraction of the sensitivity analysis is that it is more directly relevant one is not interested in what would have happened in the absence of covariates actually observed but in biases that are the result from not observing all relevant covariates

collective bargaining and union membership effects on the wages of male youths the objective of this paper is to demonstrate that the nonunion wage differential consists of two effects the first represents the differential between the wage of a nonunion worker in a collective bargaining unit and the wage paid to a comparable worker not covered by a bargaining agreement this effect arises from the monopoly power of organized labor the second is the wage differential between union and nonunion workers in collective bargaining units this latter effect is attributed to economic benefits that unionism brings to its members empirical evidence is presented in support of both effects

research needs and challenges in the few system coupling economic models with agronomic hydrologic and bioenergy models for sustainable food energy and water systems on october 12 13 a workshop funded by the national science foundation was held at iowa state university in ames iowa with a goal of identifying research needs related to coupled economic and biophysical models within the few system approximately 80 people attended the workshop with about half representing the social sciences primarily economics and the rest from the physical and natural sciences the focus and attendees were chosen so that findings would be particularly relevant to sbe research needs while taking into account the critical connectivity needed between social sciences and other disciplines we have identified several major gaps in existing scientific knowledge that present substantial impediments to understanding the few system we especially recommend research in these areas as a priority for future funding 1 economic models of decision making in coupled systems deliberate human activity has been the dominant factor driving environmental and land use changes for hundreds of years while economists have made great strides in modeling and understanding these choices the coupled systems modeling literature with some important exceptions has not reflected these contributions several paths forward seem fruitful first baseline economic models that assume rationality can be used much more widely than they are currently moreover the current generation of iams that include rational agents have emphasized partial equilibrium studies appropriate for smaller systems to allow this approach to be used to study larger systems the potential for and consequences of general equilibrium effects should be studied as well second it is important to address shortcomings in these models of economic decision making valuable improvements could be gained from developing coupled models that draw insights from behavioral economics many decision makers deviate systematically from actions that would be predicted by strict rationality but very few iams incorporate this behavior potentially leading to inaccurate predictions about the effects of policies and regulations improved models of human adaptation and induced technological change can also be incorporated into coupled models particularly for medium to long run models decisions about adaptation and technological change will have substantial effects on the conclusions and policy implications but more compelling methods for incorporating these changes into modeling are sorely needed in addition some economic decisions are intrinsically dynamic yet few coupled models explicitly incorporate dynamic models economic models that address uncertainty in decision making are also underutilized in coupled models of the few system 2 coupling models across disciplines despite much recent progress established models for one component of the few system often cannot currently produce outcomes that can be used as inputs for models of other components this misalignment makes integrated modeling difficult and is especially apparent in linking models of natural phenomena with models of economic decision making economic agents typically act to maximize a form of utility or welfare that is not directly linked to physical processes and they typically require probabilistic forecasts as an input to their decision making that many models in the natural sciences cannot directly produce we believe that an especially promising approach is the development of bridge models that convert outputs from one model into inputs for another such models can be viewed as application specific reduced form distillations of a richer and more realistic underlying model ideally these bridge models would be developed in collaborative research projects involving economists statisticians and disciplinary specialists and would contribute to improved understanding in the scientific discipline as well 3 model validation and comparison there is little clarity on how models should be evaluated and compared to each other both within individual disciplines and as components of larger iams this challenge makes larger integrated modeling exercises extremely difficult some potential ways to advance are by developing statistical criteria that measure model performance along the dimensions suitable for inclusion in an iam as well as infrastructure and procedures to facilitate model comparisons focusing on the models out of sample distributional forecasting performance as well as that of the iam overall is especially promising and of particular importance moreover applications of iams tend to estimate the effect of hypothetical future policy actions but there have been very few studies that have used these models to estimate the effect of past policy actions these exercises should be encouraged they offer a well understood test bed for the iams and also contribute to fundamental scientific knowledge through better understanding of the episode in question the retrospective nature of this form of analysis also presents the opportunity to combine reduced form estimation strategies with the iams as an additional method of validation

a monte carlo investigation of the accuracy of multivariate capm tests abstract in a multivariate regression model relating individual returns to the market return capm implies non linear restrictions on the parameters several asymptotically valid tests of these restrictions have been suggested the existing monte carlo evidence shows that some of these tests are unreliable for reasonable sample sizes but does not indicate well which tests are reliable this paper reports the results of an extensive monte carlo experiment shanken s csr test and jobson and korkie s corrected likelihood ratio test are quite accurate in all cases we consider

on correlations and inferences about mean variance efficiency a framework is presented for investigating the mean variance efficiency of an unobservable portfolio based on its correlation with a proxy portfolio a sensitivity analysis derives the highest correlation between the proxy and a portfolio that reverses the inference of a test of sharpe lintner tangency for example the maximum correlation between the value weighted nyse amex portfolio and a portfolio inferred tangent ranges from 0 76 to 0 48 we also test whether the correlation between the proxy and the tangent portfolio exceeds a given level this hypothesis is often rejected for the nyse amex proxy at a correlation of 0 7

bounding causal effects using data from a contaminated natural experiment analysing the effects of teenage childbearing in this paper we consider what can be learned about causal effects when one uses a contaminated instrumental variable in particular we consider what inferences can be made about the causal effect of teenage childbearing on a teen mother s subsequent outcomes when we use the natural experiment of miscarriages to form an instrumental variable for teen births miscarriages might not meet all of the conditions required for an instrumental variable to identify such causal effects for all of the observations in our sample however it is an appropriate instrumental variable for some women namely those pregnant women who experience a random miscarriage although information from typical data sources does not allow one to identify these women we show that one can adapt results from horowitz and manski 1995 on identification with data from contaminated samples to construct informative bounds on the causal effect of teenage childbearing we use these bounds to re examine the effects of early chilbearing on the teen mother s subsequent educational and labour market attainment as considered in hotz mcelroy and sanders 1995a 1995b consistent with their study these bounds indicate that women who have births as teens have higher labour market earnings and hours worked compared to what they would have attained if their childbearing had been delayed

orthogonal frontiers and alternative mean variance efficiency tests this paper catalogues properties of minimum norm orthogonal portfolios portfolios which minimize a quadratic objective function and have returns uncorrelated with those of a candidate portfolio that is not mean variance efficient the analysis shows that the dollar versions of these portfolios correspond to estimators of zero beta rates based on alternative statistical criteria and grouping procedures while costless orthogonal portfolios represent candidate mean variance efficiency tests it also develops inference procedures for zero and unit net investment portfolios of individual securities instead of grouped portfolios that have zero expected betas the resulting mean variance efficiency tests are reasonably insensitive to the underlying statistical assumptions i introduction most mean variance efficiency tests follow from the following simple intuition if a given portfolio p is mean variance efficient all portfolios that cost a dollar and have returns uncorrelated with those of p i e zero beta portfolios have identical expected returns hence all costless zero beta portfolios have expected returns of zero when p is mean variance efficient however the situation is altered considerably when p is not a mean variance efficient portfolio in this case roll 1980 has shown that there are portfolios that cost a dollar and have returns uncorrelated with those ofp at all levels of mean return as a consequence there are costless zero beta portfolios at all levels of expected return as well when p is inefficient mean variance efficiency tests typically involve asking whether particular costless zero beta portfolios have zero expected returns the translation of this intuition into operational test statistics is a problem in sampling theory for example when tests are based on costless portfolios with zero sample betas appropriate allowance must be made for the impact of sampling error in the sample betas on the distribution of its mean return such analysis is extremely complicated when the number of assets included in such portfolios exceeds the number of time series observations on asset returns hence previous investigations have restricted their attention to the special case where the number of assets is taken to be smaller than the number of time series observations an enormous amount has been learned about both the statistical properties and economic interpretation of two such tests in these circumstances shanken s 1985 csr test and the related likelihood ratio test of kandel 1984 a partial list of relevant papers includes roll 1979 1985 gibbons 1982 stambaugh

david hume s monetary theory revisited was he really a quantity theorist and an inflationist david hume s monetary theory has been controversial since its formulation lately the focus has been on hume s alleged misapplication of the quantity theory of money while he appears to subscribe to a simple quantity theory with money neutrality in a famously contested passage in the essay of money he violates the neutrality condition by claiming that an increase in the money stock has favorable output effects while most commentators argue about the persistence of the output effect this paper suggests that we can derive an alternative understanding of hume s monetary thinking by recognizing that he made an analytical distinction between endogenous and exogenous money realization that only the former has a favorable output effect forces us to overturn the long standing consensus that hume instructed the government to use monetary or trade policy to engineer a gradually increasing money stock

response error and the union wage differential broad variation in estimates of the union wage gap has perplexed labor economists one specification error that is consistent with the observed variation is measurement error in reported union status this article applies results of bollinger 1996 to estimate a range for the union wage gap both a cross sectional model and a fixed effects model are estimated in order for the true coefficient in the fixed effects model to be bounded below the true coefficient in the cross sectional estimates measurement error would have to be less than 0 8 the difference between the fixed effects estimates and the cross sectional estimates is primarily due to measurement error rather than to unobserved heterogeneity an examination of differences in returns to union membership by industry occupation and educational level shows that these differences are largely robust to measurement error many of these differences would be found even if error rates were as high as 10 or more an array of empirical estimates for the union wage differential has resulted from the variety of approaches to estimation lewis 1986 reviews the vast literature that attempts to estimate the union wage effect two extremes are represented by mincer 1983 who estimates the wage differential to be 0 01 while farber 1990 reports an estimate of 0 26 clearly specification error is the root cause of these differences the literature has focused upon unobserved heterogeneity in worker status as the main specification error frequently estimation approaches based on within estimators applied to fixed effects models using panel data are used to account for the possibility of unobserved heterogeneity as would be predicted by unobserved heterogeneity lewis 1986 p 94 reports that the panel wage gap estimates surveyed in the chapter on the average are roughly half as large as the corresponding cross section estimates this is often taken as evidence for bias in the cross section estimates due to the presence of fixed effects however these results are also consistent with measurement error in the report of the union status indeed chapter 5 in lewis 1986 focuses upon this possibility the difference might be the result of union status measurement error p 94 this article applies results of bollinger 1996 to compare the effect of measurement error on cross sectional estimates and panel estimates of the union wage differential bollinger 1996 establishes bounds for the slope coefficients of a linear regression when a binary regressor is thought to have measurement error the results here do not identify a point estimate of the union wage differential they relax many of the assumptions that are required to obtain the point estimates these bounds serve the purpose of sensitivity analysis as called for by leamer 1985

hume s specie flow mechanism and classical monetary theory an alternative interpretation abstract hume s celebrated essay on the international distribution of money has always been criticized for ignoring the law of one price contrary to the traditional interpretation however hume actually maintains that law and argues for the stability of long run equilibrium putting money market equilibrium in the foreground his analysis is essentially founded on the same hypothesis as the modern monetary approach albeit focusing on the supply rather than on the demand side of the money market

clearinghouse banks and banknote over issue abstract the paper presents a model of banks as clearinghouses of private debt where money is used as the means of payment implications of the model include i the private provision of banknotes or a discount window may be needed to avoid the insufficient debt clearing that results from an inflexible currency stock and ii an uncontrolled total money stock may result in a multiplicity of equilibria including an inflationary banknote over issue

what explains wage differences between union members and covered nonmembers an individual covered by a collective bargaining agreement but who is not a union member is estimated to earn about 13 lower wages than a union member sectors with relatively few covered nonmembers are associated with a large coverage differential while sectors with high proportions of covered nonmembers are associated with small differentials this suggests freeriders either weaken the bargaining position of the union or weak bargaining positions increase the incentive to freeride only a modest amount of this differential is accounted for by unmeasured ability the probationary period associated with newly hired union workers or union status misclassification

generating skilled self employment in developing countries experimental evidence from uganda we study a government program in uganda designed to help the poor and unemployed become self employed artisans increase incomes and thus promote social stability young adults in uganda s conflict affected north were invited to form groups and submit grant proposals for vocational training and business start up funding was randomly assigned among screened and eligible groups treatment groups received unsupervised grants of 382 per member grant recipients invest some in skills training but most in tools and materials after four years half practice a skilled trade relative to the control group the program increases business assets by 57 work hours by 17 and earnings by 38 many also formalize their enterprises and hire labor we see no effect however on social cohesion antisocial behavior or protest effects are similar by gender but are qualitatively different for women because they begin poorer meaning the impact is larger relative to their starting point and because women s work and earnings stagnate without the program but take off with it the patterns we observe are consistent with credit constraints

sharp iv bounds on average treatment effects on the treated and other populations under endogeneity and noncompliance in the presence of an endogenous binary treatment and a valid binary instrument causal effects are point identified only for the subpopulation of compliers given that the treatment is monotone in the instrument with the exception of the entire population causal inference for further subpopulations has been widely ignored in econometrics we invoke treatment monotonicity and or dominance assumptions to derive sharp bounds on the average treatment effects on the treated as well as on other groups furthermore we use our methods to assess the educational impact of a school voucher program in colombia and discuss testable implications of our assumptions

misreported schooling and returns to education evidence from the uk this paper aims to provide a number of contributions of policy practical and methodological interest to the study of the returns to educational qualifications first we derive estimates of the returns to different qualifications for the uk that allow for the possibility of misreported attainment using data from the british national child development survey to date any major empirical evidence on the importance of this issue is restricted to the us where it was shown that errors might indeed play a non negligible role second we aim to provide the academic and policy community with estimates of the accuracy of commonly used types of data on educational attainment administrative files self reported information close to the date of completion of the qualification and recall information ten years after completion third by using the unique nature of our data we assess how the biases from measurement error and from omitted ability and family background variables interact in the estimation of returns we intend to produce simple calibration rules to allow policymakers to use nationally representative data such as the labour force survey that totally rely on self reported information on qualifications and contain little or no information on individual ability and family background we rely throughout on a unified framework of general applicability to study the impact of misreported treatment status on the estimation of causal treatment effects jel codes c10 i20 j31

anonymity or distance job search and labour market exclusion in a growing african city we show that helping young job seekers signal their skills to employers generates large and persistent improvements in their labour market outcomes we do this by comparing an intervention that improves the ability to signal skills the job application workshop to a transport subsidy treatment designed to reduce the cost of job search in the short run both interventions have large positive effects on the probability of finding a formal job the workshop also increases the probability of having a stable job with an open ended contract four years later the workshop significantly increases earnings job satisfaction and employment duration but the effects of the transport subsidy have dissipated gains are concentrated on individuals who generally have worse labour market outcomes overall our findings highlight that young people possess valuable skills that are unobservable to employers making these skills observable generates earnings gains that are far greater than the cost of the intervention

the joint determination of union status and union wage effects some tests of alternative models the problems of estimation and interpretation of union wage differentials are examined the properties of cross section and longitudinal estimators are compared estimates are presented and those in the literature summarized conflicting results are obtained longitudinal estimators typically produce results smaller than those of ols while cross section methods instrumental variables or inverse mills ratio raise the estimate the paper offers a reconciliation of these results it supports a more optimistic conclusion than that reached in reviews by freeman and lewis who argued that little has been learned from attempts to deal with the endogeneity issue comparisons between estimators are used to throw light on the process governing union status and to suggest interpretations of union differentials consistent with the current evidence

making the most out of programme evaluations and social experiments accounting for heterogeneity in programme impacts the conventional approach to social programme evaluation focuses on estimating mean impacts of programmes yet many interesting questions regarding the political economy of programmes the distribution of programme benefits and the option values conferred on programme participants require knowledge of the distribution of impacts or features of it this paper presents evidence that heterogeneity in response to programmes is empirically important and that classical probability inequalities are not very informative in producing estimates or bounds on the distribution of programme impacts we explore two methods for supplementing the information in these inequalities based on assumptions about participant decision making processes and about the strength in dependence between outcomes in the participation and non participation states dependence is produced as a consequence of rational choice by participants we test for stochastic rationality among programme participants and present and implement methods for estimating the option values of social programmes

adult outcomes for children of teenage mothers using data from the british household panel survey this study examines the relationship between several outcomes in early adulthood e g education inactivity earnings and health and being born to a teenage mother besides standard cross sectional multivariate regression estimates we also present evidence from non parametric estimates and from estimates that account for unmeasured family background heterogeneity by comparing siblings born to the same mother who timed their births at different ages regardless of the econometric technique being born to a teenage mother is usually associated with worse outcomes an important channel of transmission of this adverse effect is childhood family structure which plays a more powerful role than childhood family poverty albeit smaller some of the detrimental effects are also found for children of mothers who gave birth in their early 20s

some aspects of the monetary economics of richard cantillon abstract this article examines several key aspects of the monetary economics in richard cantillon s essai sur la nature du commerce en general 1755 viewed from a modern monetarist perspective with special focus on monetary dynamics after establishing the quantity theory framework of cantillon s analysis the article reviews the following aspects of his work his theory of monetary disequilibrium his analysis of the open economy his treatment of the interest rate his treatment of expectations and information and his analysis of monetary induced business fluctuations and the use of monetary policy

government spending interest rates prices and budget deficits in the united kingdom 1701 1918 abstract the british data from the early 1700s through wwi provide an unmatched opportunity for studying temporary changes in government purchases temporary increases which appeared mainly as wartime spending raised long term interest rates but significantly increased the growth rates of money and prices only during suspensions of the gold standard 1797 1821 and 1914 1918 temporary changes in military spending accounted for the bulk of budget deficits over the sample of more than 200 years i found only two major non war deficits one associated with compensation payments to slaveowners in 1835 1936 and the other with a dispute over the income tax in 1909 1910 interest rates did not react much to these exogenous deficits

the present relevance of hume s open economy monetary dynamics david hume s monetary economics has remained a source of sustained controversy rival interpretations situate his work at the fountainhead of the quantity theory of money the monetary approach to the balance of payments and the post keynesian analysis of inflation recent contributions to the literature have explicitly modeled several aspects of his monetary writings but have not placed his controversial discussion of output and monetary dynamics within all open economy analysis this paper does so and contrasts rival specifications and interpretations of humean open economy output dynamics copyright 1995 by royal economic society

cantillon and hume on money and banking the foundations of two theoretical traditions the distinction between the classical monetary theory and quantity theory has been proposed in literature on money and banking the overall feature of the classical theory of money is that it holds one principle of regulation for each kind of issue metallic money bank issues and paper money whereas the quantity theory applied the causality and proportionality postulates for all kinds of monies without claiming to adjudicate the validity of such a distinction the paper investigates the foundation of each tradition in this respect this paper respectively examines and provides a survey of the secondary literature on cantillon s essai and the hume s discourses

classical monetary theory new and old the distinctive features of so called new classical monetary theory may be listed as 1 rational expectations 2 quantity th eory of money 3 interest policy indeterminancy 4 market clearin g 5 neutral money and 6 monetary policy ineffectiveness this p aper investigates whether these features actually represent the tradi tion of classical and neoclassical economics since richard cantillon the result is largely negative new classical economics is a mis nomer keynes however with all his effort to create a revolution r emained actually quite close to the tradition copyright 1987 by ohio state university press

an empirical assessment of the swedish bullionist controversy in the eighteenth century a fierce political debate broke out in sweden about the causes of an extraordinary depreciation of the currency more specifically the deteriorating value of the swedish currency was discretionarily blamed on monetary causes e g the overissuing of banknotes or nonmonetary causes such as balance of payments deficits this paper provides a comprehensive empirical assessment of this so called swedish bullionist controversy the results of vector autoregressions suggest that increasing amounts of paper money did give rise to inflation and a depreciation of the exchange rate conversely nonmonetary factors were probably less important for these developments

estimating the effect of smoking on birth outcomes using a matched panel data approach estimating the casual effect of smoking on birth outcomes is difficult since omitted unobserved variables are likely to be correlated with a mother s decision to smoke while some previous work has dealt with this endogeneity problem by using instrumental variables this paper instead attempts to estimate the smoking effect from panel data i e data on mothers with multiple births panel data sets are constructed with matching algorithms applied to federal natality data the fixed effects regressions which control for individual heterogeneity yield significantly different results from ordinary least squares and previous instrumental variable approaches the potential inconsistency caused by false matches and other violations of the fixed effects strict exogeneity assumption are considered copyright 2006 john wiley sons ltd

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

treatment effects with unobserved heterogeneity a set identification approach we propose the sharp identifiable bounds of the potential outcome distributions using panel data we allow for the possibility that statistical randomization of treatment assignments is not achieved until unobserved heterogeneity is properly controlled for we use certain stationarity assumptions to obtain the sharp bounds our approach allows for dynamic treatment decisions where the current treatment decisions may depend on the past treatments or the past observed outcomes as an empirical illustration we study the effect of smoking during pregnancy on infant birthweight we find that for the group of switchers the infant birthweight of a smoking mother is first order stochastically dominated by that of a nonsmoking mother

market structure and multiple equilibria in airline markets we provide a practical method to estimate the payoff functions of players in complete information static discrete games with respect to the empirical literature on entry games originated by bresnahan and reiss 1990 and berry 1992 the main novelty of our framework is to allow for general forms of heterogeneity across players without making equilibrium selection assumptions we allow the effects that the entry of each individual airline has on the profits of its competitors its competitive effects to differ across airlines the identified features of the model are sets of parameters partial identification such that the choice probabilities predicted by the econometric model are consistent with the empirical choice probabilities estimated from the data we apply this methodology to investigate the empirical importance of firm heterogeneity as a determinant of market structure in the u s airline industry we find evidence of heterogeneity across airlines in their profit functions the competitive effects of large airlines american delta united are different from those of low cost carriers and southwest also the competitive effect of an airline is increasing in its airport presence which is an important measure of observable heterogeneity in the airline industry then we develop a policy experiment to estimate the effect of repealing the wright amendment on competition in markets out of the dallas airports we find that repealing thewright amendment would increase the number of markets served out of dallas love

nonparametric continuous discrete choice models modeling choices that are both discrete and continuous is important in several settings the purpose of this article is to explore formulation and identification of such models when indirect utility functions are specified nonparametrically here we consider general nonseparable disturbances we give identification results for nonseparable sample selection models and use these to analyze identification of discrete continuous choice models

substitution and dropout bias in social experiments a study of an influential social experiment this paper considers the interpretation of evidence from social experiments when persons randomized out of a program being evaluated have good substitutes for it and when persons randomized into a program drop out to pursue better alternatives using data from an experimental evaluation of a classroom training program we document the empirical importance of control group substitution and treatment group dropping out evidence that one program is ineffective relative to close substitutes is not evidence that the type of service provided by all of the programs is ineffective although that is the way experimental evidence is often interpreted