WELFARE REFORM, EARNINGS, AND INCOMES: NEW EVIDENCE FROM THE SURVEY OF PROGRAM DYNAMICS

The authors ask how welfare reform has affected the earnings and incomes of welfare recipients using a detailed longitudinal data set, the recently released Survey of Program Dynamics (SPD). They find pre-TANF waivers positively affected the earnings and incomes of both female high school graduates and nongraduates, but the effect is statistically significant only for nongraduates. In contrast, the effect of TANF policies is detrimental to nongraduates but improves economic outcomes for graduates. The findings indicate there are still families who are left behind by welfare programs. The results also warrant further use of longitudinal data sets such as the SPD. (JEL I38 , H53 )     

Strategic Transparency and Electoral Pressure

This paper investigates how an office‐motivated incumbent can use transparency enhancement on public spending to signal his budgetary management ability and win re‐election. We show that, when the incumbent faces a popular challenger, transparency policy can be an effective signaling device. It is also shown that electoral pressure can have a nonmonotonic effect on transparency, but a higher electoral pressure always increases the informativeness of signaling and the voter's utility.     

Information Immobility and the Home Bias Puzzle

Many argue that home bias arises because home investors can predict home asset payoffs more accurately than foreigners can. But why does global information access not eliminate this asymmetry? We model investors, endowed with a small home information advantage, who choose what information to learn before they invest. Surprisingly, even when home investors can learn what foreigners know, they choose not to: Investors profit more from knowing information others do not know. Learning amplifies information asymmetry. The model matches patterns of local and industry bias, foreign investments, portfolio outperformance, and asset prices. Finally, we propose new avenues for empirical research.     

HETEROGENEOUS DYNAMICS,AGGREGATION, AND THE PERSISTENCE OF ECONOMIC SHOCKS

Estimates of shock persistence based on disaggregate or on aggregate data are frequently very different. This article takes a step toward reconciling this apparent disconnect between micro‐ and macro‐based estimates of shock response. It is shown that, although the average of the individual impulse response functions (IRFs) is identical to the aggregate IRF, averages of other popular persistence measures, such as the sum of the autoregressive coefficients among others, tend to be larger the higher the aggregation level. The theoretical results are illustrated with two applications that use U.S. and European inflation data.     

Emerging Class Relations in the Mekong River Delta of Vietnam: A Network Analysis

Neoclassical theory has not succeeded in explaining the relationship between increasing landlessness and class differentiation in rural southern Vietnam. In this paper, we take a relational approach, using statistical techniques from social network theory, to examine the governance structure of markets in a commune of Tra Vinh province in the Mekong River Delta. We demonstrate that new opportunities provided by the process of market development are accessible only to those households controlling the right bundles of resources in the core agricultural production and trading system of the area. Further, industrial employment is available only to those who have, at some stage, controlled land, while those who have never participated in the land and rice markets are confined to casual agricultural labour. The governance structure, embedded informally in relatively stable market networks, therefore reproduces class divisions.     

Black-White Wage Differences among Young Women, 1977-86

Until the 1970s, wage rates converged for black and white women, especially young women. However, the pay gap between black and white women in their twenties rose. 074 log points between 1977 and 1986. This paper uses data from the 1977 National Longitudinal Survey of Young Women and the 1986 National Longitudinal Survey of Youth to explore reasons for the change. Changes in the relative level of work experience and in the rate of return to schooling are emphasized.     

Search Costs and Re-Employment Wage Gains for Displaced Workers

Involuntary job separation generally leads to lower re-employment wages. However, 20–30 percent of displaced workers experience re-employment wage gains. Theoretically, workers with higher search costs accept jobs when the marginal benefit of search is relatively high. When displaced, these workers experience wage gains because they are forced into additional search. Using data from the Displaced Worker Survey, we find that higher search costs (measured as the wage residual from the predisplacement job) are associated with higher re-employment wages.     

Information Markets and the Comovement of Asset Prices

Traditional asset pricing models predict that covariance between prices of different assets should be lower than what we observe in the data. This paper introduces markets for information that generate high price covariance within a rational expectations framework. When information is costly, rational investors only buy information about a subset of the assets. Because information production has high fixed costs, competitive producers charge more for low-demand information than for high-demand information. The low price of high-demand information makes investors want to purchase the same information that others are purchasing. When investors price assets using a common subset of information, news about one asset affects the other assets' prices; asset prices comove. The cross-sectional and time-series properties of comovement are consistent with this explanation.     

Social class: a multivariate analysis of its effect on expenditures for household services

Multivariate statistical techniques were used to explore two major conceptual issues in consumer behaviour research involving social class: (1) the importance of income, as compared to social class, in determining household behaviour, and (2) the effect of the status of wives on the behaviour of their households. A subsample of expenditure data, collected from 5,994 husband-wife families, as part of the 1973 Consumer Expenditure Survey, was used in the analysis. The dependent variable was expenditures for household services. The independent variables included total consumption expenditures (a proxy for income), the status of the wife, the status of the husband, family type, location, and characteristics of the dwelling. The results of an Ordinary Least Squares regression procedure demonstrated that total consumption expenditures were the most important variable in determining expenditures for household services. The size of the effect of the status of the wife was comparable to that of the status of the husband. In both cases, the effect was significant but small.