Finance and sources of growth: evidence from the U.S. states

How does financial development affect economic growth: through its impact on accumulation of physical and human capital or by boosting total factor productivity (TFP) growth? We use a new data set on output, inputs, and total factor productivity for the US states to study this question. Unlike previous cross-country research that tries to disentangle the channels through which financial development impacts growth, we use a plausibly exogenous measure of financial development: the timing of banking deregulation across states during the period 1970–2000. At the same time our new data set allows us to go beyond what was previously done in the state banking deregulation literature and identify whether finance impacts states’ input accumulation or TFP growth. We find, in line with existing cross-country studies, that deregulation boosts growth by accelerating both TFP growth and the accumulation of physical capital without having any impact on human capital. In contrast to the cross-country studies, we also find that the effects of deregulation are largely independent of states’ initial level of development; both rich and poor states grow faster after deregulation. Additionally, since our data set breaks down aggregate output into three sectors: agriculture, manufacturing, and the remaining industries, we are able to show that deregulation accelerates the growth of productivity in manufacturing. This last finding answers an important critique of the banking deregulation studies which asserts that observed growth effects may be coming from the growth of financial industry itself and not from the beneficial effect of finance on other industries, such as manufacturing.     

The Impact of Maternity Minimum Stay Mandates on Hospitalizations: An Extension

Due to concerns about the health impacts of deliveries with short postpartum hospital stays, many states—and later the federal government—passed mandates regulating the minimum length of hospitalizations insurance policies had to cover. We use the Healthcare Cost and Utilization Project-National Inpatient Sample to analyze whether these mandates have differential impacts on various groups of patients. We find that mandates do have a differential impact based on race and hospital size. These differential effects, however, are not equally present in all analyzed discharge groups.     

Have food and financial markets integrated?

This article analyses comovements and discusses possibly greater market integration between aggregate food commodity and stock prices in the period 1990 to 2012. Return correlations, price return distributions, cointegration and Granger-causalities are tested in subsamples on monthly FAO Food Price Index and MSCI World Stock Market Index. Empirical results suggest that while there is only weak indication of greater comovements concurrent with structural changes such as changed agricultural policies, new demand due to growth in emerging markets and energy mandates and the financialization of food markets since the early 2000s, they did start to increase substantially in particular during the financial stress of the Lehman crisis and the Great Recession. While structural changes may have amplified price linkages across markets, results do not suggest that they are the key factors for greater price comovements. Instead, the effects of the late-2000s recession as a time of great economic weakness and uncertainty may have changed concurrently the behaviour of both food and financial market participants, such that different market prices exhibit large comovements.     

HOW DO STATE INFERTILITY INSURANCE MANDATES AFFECT DIVORCE?

The technological developments in infertility treatments have increased the success of childbearing among women with impaired fertility. Fifteen U.S. states have mandated insurance coverage of assisted reproductive technology, thus subsidizing and increasing the use of the technology. We exploit the variation of mandates across states and over time to examine the relationship between state mandates and the likelihood of divorce. Using individual‐level data from the 1984–2008 Survey of Income and Program Participation, we find that women are less likely to divorce after the state adopts infertility insurance mandates. We find the effect is larger among women in their 40s, covered by private insurance, with a college degree, and without children. (JEL J12, J13, J18, I13, I18)     

Religiosity and the adoption of formal financial services

Recent studies have suggested that institutional and economic factors are important drivers of financial inclusion. However, the effects of culture on the usage and adoption of formal financial services are not as widely understood. This paper explores the impact of religiosity on financial inclusiveness, utilizing aggregated data from individuals’ religious preferences and financial behaviors. The results suggest that higher levels of religiosity are negatively associated with the usage and adoption of formal financial services, both across U.S. states and across different countries. To explore possible causal implications, we exploit spatial variations in historical pathogen prevalence as the main instrument of our study.     

Central school exit exams and labor-market outcomes

Many countries use centralized exit exams as a governance devise of the school system. While abundant evidence suggests positive effects of central exams on achievement tests, previous research on university-bound students shows no effects on subsequent earnings. We suggest that labor-market effects may be more imminent for students leaving school directly for the labor market and, on rigid labor markets, for unemployment. Exploiting variation in exit-exam systems across German states, we find that central exams are indeed associated with higher earnings for students from the school type directly bound for the labor market, as well as with lower unemployment.     

Economic reforms,growth and well-being: evidence from India

This study examined economic well-being of sub-national units in India since the economic reforms. For this purpose, the study constructed well-being index for 17 major states of India for the period 1981–2011 based on five broad dimensions. Our results showed that the economic well-being of states has declined since the reforms. The interstate disparities have increased and the states (except Punjab and West Bengal) which performed well prior to the reforms continued to perform well in the post-reform years too. In addition, our regression results for the high well-being and low well-being states revealed that the reforms have benefited more developed high well-being states, rather than low well-being states. While human capital was found significantly and positively related to per capita incomes in both groups of the states, financial development was positively related in high well-being states, but a negative association was visible in the low well-being states.     

New Evidence on the Effects of the Shortened School Duration in the German States: An Evaluation of Post‐secondary Education Decisions

Most German states have recently reduced the duration of university preparatory schooling from 13 to 12 years without changing the graduation requirements. We use nationwide data on high school graduates and the different timing of reform introduction in the federal states to identify the effects on post‐secondary education decisions and to evaluate potential effect mechanisms. The results show that university enrolment of female students decreased in the first year after graduation in all analyzed states, whereas participation in voluntary service or staying abroad increased. Furthermore, students from non‐academic families are more affected than students from an academic family background.     

The effect of public financial aid on dropout from and completion of university education: evidence from a student grant reform

There is limited and uncertain evidence on how financial aid affects dropout from or the completion of higher education. A large-scale reform of the Danish student grant and loan system that among others increased student grants by up to $3,000 per year (57 %) was used to identify causal effects of financial aid on outcomes for university students. Estimates were obtained from year-of-study specific models for students observed just before and after the reform, controlling for student, parental and labour-market characteristics. The estimates indicate that the reform lowered dropout rates, but had no overall effect on completion rates, although with substantial variation across population subgroups. The impact on dropout rates was found to be higher for students from a lower socio-economic background and the impact on completion rates was found to be higher three years after the designated study time to completion. The reform seems to have performed as intended by increasing the take-up of student grants and lowering work hours while studying.     

EMPLOYMENT VERIFICATION MANDATES AND THE LABOR MARKET OUTCOMES OF LIKELY UNAUTHORIZED AND NATIVE WORKERS

As recent efforts to reform immigration policy at the federal level have failed, states have started to take immigration matters into their own hands and researchers have been paying closer attention to state dynamics surrounding immigration policy. Yet, to this date, there is not a clear understanding of the consequences of enforcing E‐Verify on likely unauthorized immigrants or on natives across the United States. This study aims to fill in that gap by analyzing the impact that the enactment of various types of E‐Verify mandates may have on the employment and wages of these groups. We find that the enactment of employment verification mandates reduces the employment likelihood of likely unauthorized workers. Additionally, it raises the hourly wages of likely unauthorized women. None of these impacts are observed among a similarly skilled sample of naturalized Hispanic immigrants. Finally, the enactment of E‐Verify mandates appears to raise the employment likelihood of alike non‐Hispanic natives, while raising the hourly wage of native‐born male employees, alluding to the potential substitutability of unauthorized immigrants and non‐Hispanic natives. (JEL J2, J3, J6)     

Remittances, Financial Market Development, and Economic Growth: The Case of Latin America and the Caribbean

Within a theoretical framework, the author analyzes the effects that both workers' remittances and financial intermediation have on economic growth. It is found, among other things, that remittances can have significant positive long-run effects on growth. The author confronts the implications of the theoretical model proposed with panel data for countries in Latin America and the Caribbean. After considering the effect of long-run investment and demographic variables, and controlling for fixed time and country effects, the empirical analysis indicates that financial intermediation tends to increase the responsiveness of growth to remittances. The overall conclusion is that making financial services more generally available should lead to even better use of remittances, thus boosting growth in these countries.     

THE EFFECTS OF YOUNG ADULT‐DEPENDENT COVERAGE AND CONTRACEPTION MANDATES ON YOUNG WOMEN

This research investigates two features of the Affordable Care Act that especially affect young adults, the young adult‐dependent coverage (YAD) mandate and the requirement to cover contraception (CM). Both mandates were first enacted at the state level but have been studied only in isolation. We estimate a wide range of models allowing these mandates to have joint effects on insurance coverage, health‐care access, health outcomes and fertility. We provide new evidence that helps settle the mixed findings from past state‐level YAD and CM research and suggests the two mandates may combine to improve the well‐being of young adults. (JEL I18, I12, H75)     

The Good,the Poor and the Wealthy: who Responds Most to College Financial Aid?

Financial aid programmes for students in the United States focus increasingly on academic merit, rather than financial need. There is little empirical evidence, however, on the distributional effects of merit–based aid – who benefits or responds most. We develop a bivariate probit model of the enrolment process estimated using data for a large public university over several years. Results show that merit–based aid increases enrolment for all students, but that financially–able students respond disproportionately, even with academic merit held constant. Thus, increased emphasis on merit in financial aid may exacerbate the trend toward greater income inequality in the US, even among students of equal academic merit.     

Preschool for all? Enrollment and maternal labour supply implications of a bilingual preschool policy

ABSTRACT

Previous research supports the effectiveness of preschool in various contexts, yet there is limited evidence whether universal-type preschool policies induce changes in enrollment. While certain states have enacted universal preschool policies, some have also considered bilingual preschool mandates, either as a supplementary or stand-alone policy, requiring schools to open up bilingual classrooms for children from non-English speaking families. The question of whether bilingual preschool policies can induce enrollment and close achievement gaps between English learners and English speakers is particularly important today for urban cities and states with large immigrant populations. In this study, I exploit exogenous variation from the first bilingual prekindergarten mandate in Illinois to estimate the causal effects on preschool enrollment and maternal labour supply of recently immigrated and Hispanic families. Utilizing a difference-in-differences strategy, estimates suggest significant effects on preschool enrollment between 18% and 20% and no effects of increasing maternal labour supply in Illinois. Estimates are robust to various specifications, control groups, and timeframes. I use the analysis to further discuss whether universal preschool policies are designed sufficiently for access and inclusion of various student types, and contribute to our understanding on the effectiveness of using childcare subsidies to increase the welfare of low-income families.     

Path dependence and transitions from tyranny to democracy: evidence from ancient Greece

For empirical research on the effects of institutions, an important question is whether a given institutional type will generate different outcomes depending on the circumstances that give rise to that institution. In this paper, we examine a unique historical episode in which a specific type of institution—rule by a tyrant—arose in similar states yet differed in terms of whether the impetus came from local support or external influences. Over the course of the sixth century BCE, a substantial subset of Greek poleis (city–states) experienced a period of tyranny. In some cases, the tyrant came to power with the support of local elites, yet in other cases, the tyrant was imposed by a conquering power, Persia. Although it is likely that the tyrants’ proponents—whether local elites or Persian rulers—sought to increase stability and maintain policies necessary for wealth creation, the long run effects of tyranny differed: In poleis where the rise of a tyrant would have depended on local support, a record of tyranny predicts a greater propensity for subsequent development of democracy. By contrast, in poleis where the rise of a tyrant would have depended on Persian support, a record of tyranny has a weak (and perhaps negative) association with subsequent development of democracy. These findings illustrate both the long-run importance of institutional paths and the difficulty in transplanting institutions.     

Globalization and income inequality: A panel data econometric approach for the EU27 countries

This paper investigates the relationship between income inequality and globalization, measured with both trade and financial variables. We estimate an econometric model using appropriate panel data techniques for the EU-27 countries over the period 1995–2009. The analysis is also performed at subgroups of countries within the EU27, such as the Core, Periphery, High Technology, and the New EU Member countries. Overall, the results suggest that trade openness exerts an equalizing effect, while financial globalization through FDI, capital account openness and stock market capitalization has been the driving force of inequality in the EU-27 since 1995. The highest contribution to inequality stems from FDI. Although the trade impact remained robust, disparities were observed in the financial globalization effects within a certain group or among country groups. The recent financial crisis led to a significant rise in inequality only in the EU-periphery and the New Member states. The impact from the other control variables was either minor or insignificant.     

The effect of state health insurance benefit mandates on premiums and employee contributions

The average US state has 40 benefit mandates, laws requiring health insurance to cover particular conditions, treatments, providers or people. We investigate the extent to which these mandates increase the health insurance premiums paid by employers, and the extent to which these higher premiums are passed on to employees in the form of higher employee contributions. We use state-level data on premiums and employee contributions to health insurance from the insurance component of the 1996–2011 Medical Expenditure Panel Survey. Our main analysis is a fixed effects regression that controls for age, race, income, union membership and the presence of state mandate waivers. We find robust evidence that the average mandate increases premiums by approximately 0.6%, and that mandates lead to similar increases in employee contributions for single-coverage health insurance plans. Alternative specifications using an AR(1) error structure estimate a larger effect of mandates, while those using generalized estimating equations estimate smaller effects. We find that mandates requiring insurers to cover a specific benefit, as opposed to a specific type of provider or person, lead to the largest increases in employee contributions.     

Targeting public goods to the poor in a segregated economy: An empirical analysis of central mandates in rural India

While local governments are increasingly being vested with control over funds for public goods, concern over the capture of decentralized funds by local elites has led decentralization to be combined with central mandates which require a certain proportion of funds to directly benefit the poor. If local capture is pervasive, however, central mandates may not be effective. Despite the popularity of this combination of decentralization and centralized control, there is little empirical evidence which separately identifies their effect on investment in public goods, and hence assesses the effectiveness of central mandates. This paper provides such evidence, using data collected by the authors for the North Indian state of Punjab, an economy where economic conditions facilitate such an analysis. We find that central mandates are effective, enhancing intra-village equality in expenditure on public goods. This finding informs the debate on the equity effects of centralized versus decentralized programs.     

Program duplication in higher education is not necessarily bad

Public systems of higher education have recently attempted to cut costs by providing financial incentives to cut duplicated programs, i.e. programs that are offered at different institutions. We study the profit and welfare effects of reducing program duplication, against the background of a funding system reform in Flanders (Belgium). We find that dropping duplicated programs at individual institutions tends to be socially undesirable, due to the students’ low willingness to travel to other institutions and to the limited fixed cost and variable cost savings. Furthermore, we find that the financial incentives offered to drop programs may be very ineffective, leading to both undesirable reform and undesirable status quo. These findings emphasize the complexities in regulating product diversity in higher education, and serve as a word of caution towards the various decentralized financial incentive schemes that have recently been introduced.