For whom the reductions count: A quantile regression analysis of class size and peer effects on scholastic achievement

In this paper the controversial educational topic of class size reduction is addressed. Controlling for a large number of observable characteristics and potential endogeneity in the class size variable, an educational production function is estimated using a quantile regression technique. The “conventional wisdom” that class size reduction is a viable means to increase scholastic achievement is discounted. Rather, the results point towards a far stronger peer effect through which class size reduction may play an important role. Due to heterogeneity in the newly identified peer effect, class size reduction is shown to be a potentially regressive policy measure.     

“The people want the fall of the regime”: Schooling,political protest,and the economy

We provide evidence that economic circumstances are a key intermediating variable for understanding the relationship between schooling and political protest. Using the World Values Survey, we find that individuals with higher levels of schooling, but whose income outcomes fall short of that predicted by their biographical characteristics, in turn display a greater propensity to engage in protest activities. We discuss a number of interpretations that are consistent with this finding, including the idea that economic conditions can affect how individuals trade off the use of their human capital between production and political activities. Our results could also reflect a link between education, “grievance”, and political protest, although we argue that this is unlikely to be the sole explanation. Separately, we show that the interaction between schooling and economic conditions matters too at the country level: Rising education levels coupled with macroeconomic weakness are associated with increased incumbent turnover, as well as subsequent pressures toward democratization.     

The Distributive and Labor Supply Impact of the Minimum Insertion Income: The Case of Italy

This paper analyzes the redistributive and labor supply effects of extending at national level the Minimum Insertion Income, introduced experimentally in 1999 in some Italian municipalities. We develop a behavioral microsimulation tax-benefit model that allows for simultaneous labor supply decisions by household members, endogenous choice between dependent employment and self-employment, complete representation of the current Italian tax-benefit system. The results show a positive impact on both inequality and poverty, while overall labor supply reduces. On average magnitude of labor supply disincentive is small for married individuals, relatively larger for single persons and, within this category, for women than men.     

Nonlinear effects of government debt on private consumption: Evidence from OECD countries

This paper investigates nonlinear effects of government debt on private consumption. The estimated consumption function shows smooth regime switching depending on the debt-to-GDP ratio, and a higher level of government debt crowds out private consumption to a greater extent.     

Research Productivity in Business Economics: The Case of Marketing

Abstract. The German Economic Review ( GER ) recently published a paper by Fabel, Hein and Hofmeister about research productivity in Austrian, German and Swiss universities. The authors derive the rankings of institutions and subject areas by analyzing an impressive and comprehensive dataset, which captures the research output of business administration departments. While these rankings might hold at an aggregate level, they lack face validity at a subject-specific level. This lack of validity is demonstrated in the case of marketing by analyzing the research output of the top-ranked institutions in top-ranked journals. A number of proposals to overcome these kinds of problems are provided.     

Poverty,undernutrition and vulnerability in rural India: role of rural public works and food for work programmes

This paper analyses the effects of access to Rural Public Works (RPW) or Food for Work programme (FFW) on consumption poverty, vulnerability and undernutrition in India using the large household data sets constructed by the National Sample Survey for 1993 and 2004. The treatment-effects model is used to take account of sample selection bias in evaluating the effects of RPW in 1993 or FFW in 2004 on poverty. We have found significant and negative effects of participation in RPW and the Food for Work Programme on poverty, undernutrition (e.g. protein) and vulnerability in 1993 and 2004.     

The environmental performance of firms: The role of foreign ownership, training, and experience

In this paper we extend the debate on the environmental implications of foreign direct investment in developing countries by examining a new mechanism through which foreign influence can affect the environmental performance of firms. We focus on the extent to which key workers who have had previous training or experience in a foreign owned firm transfer and utilise their knowledge gained to the benefit of the local environment. To this end we use detailed firm-level data on manufacturing firms in Ghana. Our econometric results suggest that the foreign training of a firm's decision maker does reduce fuel use, particularly so in foreign owned firms. Foreign ownership per se does not influence fuel use or total energy use but is found to increase electricity use, perhaps the cleanest form of energy used by Ghanaian firms.     

Not by growth alone: The role of the distribution of income in regional diversity in poverty reduction

This study examines the role of the distribution of income in determining the responsiveness of poverty to income growth and changes in income inequality using panel data of 58 developing countries for the period 1980-1998. We show that the large cross-regional variation in the capacity of income growth to reduce poverty, i.e. the income elasticity, is largely explained by differences in the initial distribution of income and present region and time specific estimates of the income and Gini elasticities of poverty. We find that the income elasticity of poverty in the mid-1990s equals −1.31 on average and ranges from −0.71 for Sub-Saharan Africa to −2.27 for the Middle East and North Africa, and that the Gini elasticity of poverty equals 0.80 on average and ranges from 0.01 in South Asia to 1.73 in Latin America. Furthermore we show that while differing income growth rates account for most of the regional diversity in poverty trends, the additional impact of differences across regions in rates of inequality change and income and inequality elasticities of poverty is almost always significant and far too large to be ignored, most notably so in Eastern Europe and Central Asia.     

Switching the lights off: The impact of energy tariff increases on households in the Kyrgyz Republic

This paper describes an analysis of the impact that higher energy tariffs would have on households in the Kyrgyz Republic using micro-data from the 2009 Kyrgyz Integrated Household Survey. This analysis was conducted to determine which households would be most affected by higher energy tariffs and to what extent mitigation measures, such as lifeline tariffs or direct cash transfers, might lessen the impact for poor and vulnerable households. The analysis focused on first-order effects and used benefit incidence analysis and static micro-simulation to estimate the expected costs and benefits of higher energy prices and the corresponding mitigation measures. The results suggest that both the type of energy and the level of connectedness matter. Increasing tariffs for thermal power used for central heating and hot water mainly affects richer households in urban areas. Reducing implicit electricity subsidies affects the entire population due to nearly complete country coverage with electricity connections. Both lifeline tariffs and direct cash transfers could mitigate the effect of higher electricity tariffs at lower costs than universal subsidies.     

The (hidden) costs of political instability: Evidence from Kenya's 2007 election crisis

This paper studies the microeconomic impacts of the political crisis and civil conflict that immediately followed the December 2007 presidential election in Kenya. Income, expenditures, and consumption dramatically declined for a broad segment of the rural population for the duration of the conflict. To make up for the income shortfall, women who supply transactional sex engaged in higher risk sex both during and after the crisis. While this particular crisis was likely too short for these behavioral responses to seriously increase the risk of HIV or other STIs for these women, such responses could have long-term repercussions for health in countries with longer or more frequent crises. Overall, our results suggest that social unrest can be an important channel through which political instability can affect long-term outcomes such as health.     

Viewpoint: An extended class of instrumental variables for the estimation of causal effects

Abstract We examine how structural systems can yield observed variables instrumental in identifying and estimating causal effects. We provide an exhaustive characterization of potentially identifying conditional exogeneity relationships and demonstrate how structural relations determine exogeneity and exclusion restrictions that yield moment conditions supporting identification. This provides a comprehensive framework for constructing instruments and covariates. We introduce notions of conditioning and conditional extended instrumental variables (XIVs). These permit identification but need not be traditional instruments, as they may be endogenous. We distinguish between observed XIVs and proxies for unobserved XIVs. A main message is the importance of sufficiently specifying causal relations governing the unobservables.     

The effect of working time and labor force participation on unemployment: A new argument in an old debate

This paper introduces a new argument into the theoretical literature on labor market effects of changes in working hours and labor force participation. We advance a general equilibrium model in which increased labor supply reduces unskilled unemployment via consumer demand: longer work hours and higher labor force participation imply higher incomes and less (leisure) time. In consequence, home production is reduced in favor of outsourcing domestic tasks to the market, shifting consumer demand toward unskill-intensive goods. Relative demand for unskilled labor rises and unemployment falls.     

The effects of human capital composition on technological convergence

This paper empirically investigates whether the contribution of human capital to productivity growth depends on the composition of human capital and proximity to the technology frontier in a panel of 87 sample countries over the period 1970–2004. It tests the hypothesis that primary and secondary education is more suitable for imitation whereas tertiary education is more appropriate for innovation. The results show that the growth enhancing effects of higher education increase with proximity to the technology frontier only for high and medium income countries.     

The impact of endogenous tax treaties on foreign direct investment: theory and evidence

Abstract .  This paper investigates the effect of tax treaties on bilateral stocks of outward FDI. For this purpose we employ a numerically solvable general equilibrium model of trade and multinational firms to study the impact of tax treaties on both welfare and outward FDI. The model indicates under which factor endowment configurations countries gain in welfare when implementing a tax treaty. This motivates an empirical specification of the endogenous selection into implementing new tax treaties. Using data of bilateral OECD outward FDI between 1985 and 2000, we find a significant negative impact of newly implemented tax treaties on outward FDI stocks.     

Reshaping the schooling system: The role of immigration

This paper studies how the schooling system may be impacted by the number and skill type of immigrants. When the number of low-skilled immigrants is large, the education regime tends to become segregated. Wealthy locals are more likely to choose private schools and vote for a lower tax rate to finance public education. In contrast, high-skilled immigrants tend to reinforce the public system. The optimal immigration policy is highly skill-biased. The admission of high-skilled immigrants expedites redistribution toward the less-skilled local households through both a stronger fiscal support for public education and a reduction in the skill wage premium.     

Consumer expectation and output growth: The case of China

This study shows that China’s Consumer Expectation Index contains useful information about pure expectation shocks, which are unrelated to economic fundamentals. It turns out that such shocks are likely to be an important independent driver of industrial output growth.     

With a little help from our friends: The effect of USAID assistance on SME growth in a transition economy

Using survey data on Macedonian firms that participated in USAID programs providing technical and financial assistance for small and medium-sized enterprises (SMEs) and on firms that did not, we estimate the effectiveness of such assistance in increasing the growth of employment in the assisted firms. We control for selection bias in program participation and use both kernel and caliper propensity score matching to estimate the excess growth of employment in assisted firms. We find that assistance programs raised employment growth by 16-20 percentage points in the first year after assistance and by 26-30 points by the third year.     

Stunting and selection effects of famine: A case study of the Great Chinese Famine

Many developing countries experience famine. If survival is related to height, the increasingly common practice of using height as a measure of well-being may be misleading. We devise a novel method for disentangling the stunting from the selection effects of famine. Using data from the 1959-1961 Great Chinese Famine, we find that taller children were more likely to survive the famine. Controlling for selection, we estimate that children under the age of five who survived the famine grew up to be 1 to 2 cm shorter. Our results suggest that if a country experiences a shock such as famine, average height is potentially a biased measure of economic conditions during childhood.     

The human capital consequences of civil war: Evidence from Guatemala

We combine data from the 2002 National Population Census and the distribution of the number of human rights violations and victims across 22 departments to examine how Guatemala's 36-year-long civil war affected human capital accumulation. The year of birth and the department of birth jointly determine an individual's exposure during school age to three different periods of the civil war, namely the initial period (1960-1978), the worst period (1979-1984), and the final period (1985-1996). We find a strong negative impact of the civil war on the education of the two most disadvantaged groups, namely rural Mayan males and females. Among rural Mayan males, those who were school age during the three periods of the civil war in departments where more human rights violations were committed completed 0.27, 0.71, and 1.09 years less of schooling respectively whereas rural Mayan females exposed to the three periods of the war completed 0.12, 0.47, and 1.17 years less of schooling respectively. Given an average of 4.66 and 3.83 years of schooling for males and females, these represent declines of 6, 15, and 23% for males and 3, 12, and 30% for females. Our results are robust to the inclusion of indicators for department of residence, year of birth, and controls for different trends in education and human development in war-affected and peaceful departments of Guatemala and suggest that the country's civil war may have deepened gender, regional, sectoral, and ethnic disparities in schooling.     

The effects of welfare vehicle asset rules on vehicle assets

Before 1996, households were typically ineligible for welfare if they had assets worth more than $1000, where $1500 from each vehicle's value was excluded from this determination. However, the 1996 welfare reform act began allowing states to increase their asset limits and vehicle exclusions. This may prompt low-income households to reallocate resources to or from vehicles. We examine the effects of state vehicle asset rules on vehicle assets. Results show that liberalizing asset rules increases vehicle assets and that this increase is driven largely by eligible individuals increasing vehicle assets, with no evidence indicating that ineligible individuals reduce vehicle assets to become eligible.