Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation

We develop a new metric for the distribution of educational achievement across countries that can further track the cognitive skill distribution within countries and over time. Cross-country growth regressions generate a close relationship between educational achievement and GDP growth that is remarkably stable across extensive sensitivity analyses of specification, time period, and country samples. In a series of now-common microeconometric approaches for addressing causality, we narrow the range of plausible interpretations of this strong cognitive skills-growth relationship. These alternative estimation approaches, including instrumental variables, difference-in-differences among immigrants on the U.S. labor market, and longitudinal analysis of changes in cognitive skills and in growth rates, leave the stylized fact of a strong impact of cognitive skills unchanged. Moreover, the results indicate that school policy can be an important instrument to spur growth. The shares of basic literates and high performers have independent relationships with growth, the latter being larger in poorer countries.     

The Layoff Rat Race*

We investigate how discretionary investments in general and specific human capital are affected by the possibility of layoffs. After investments are made, firms may have to lay off workers, and will do so in inverse order of the profit that each worker generates. Greater skill investments, especially in specific human capital, contribute more to a firm's bottom line, so that workers who make those investments will be laid off last. We show that as long as workers' bargaining positions are not too weak, workers invest in specific human capital in order to reduce layoff probabilities. Indeed, workers over‐invest in skill acquisition from a social perspective whenever their bargaining power is strong enough, even though they only receive a share of any investment. More generally, we characterize how equilibrium skill investments are affected by the distribution of worker abilities within firms, the probability that a firm will downsize, and the distribution of employment opportunities in the economy.     

Measuring Achievement and Shortfall Improvements in a Consistent Way

In measuring improvements over time of bounded variables, one can focus on achievements or shortfalls. However, rankings of alternative social states in terms of achievements and shortfalls do not necessarily mirror one another. We characterize axiomatically different families of achievement and shortfall improvement indices, and present the necessary and sufficient conditions under which they rank social states in a consistent way. Empirical illustrations using child mortality data from South Africa suggest that consistency between achievement and shortfall improvements in standards of living is not only a matter of theoretical import but is also a problem that can be encountered in practice to a large extent.     

The formation and evolution of childhood skill acquisition: Evidence from India

Building on recent advances in the literature and using a rich data set for two cohorts of children aged between one and twelve for Andhra Pradesh, India, we investigate the determinants of children's cognitive as well as non-cognitive skills. We find evidence of self-productivity for cognitive skills and cross-productivity effects from cognitive on non-cognitive skills. Moreover, we demonstrate that parental investment has contemporaneously positive effects on skill levels for all age groups. Investigating other determinants of these skills, we find child health at age one to influence cognitive abilities at age five, whilst child health at age one is influenced by parental care already during pregnancy and earliest childhood. Understanding the determinants which account explicitly for the effect of a large number of child, caregiver and household characteristics provides insights with regard to possible policy interventions to improve the chances of children in poor environments of developing cognitive and non-cognitive skills crucial for success in many spheres of life.     

Does one size fit all? The impact of cognitive skills on economic growth

This paper tests for heterogeneous effects of cognitive skills on economic growth across countries. Using a new extended dataset on cognitive skills and controlling for potential endogeneity, we find that the magnitude of the effect is about 60% higher for low-income countries compared to high-income countries, and it more than doubles when low TFP countries are compared to high TFP countries. There are also marked differences across geographic regions. Using data on the share of the population with advanced and minimum skill levels, our results also indicate that high-income countries should focus on increasing the number of high skilled human capital, while countries from Sub-Saharan Africa would benefit more by investing in the development of basic skills.     

Industrial de-licensing, trade liberalization, and skill upgrading in India

We investigate the relationship between industrial de-licensing, trade liberalization, and skill upgrading during the 1980s and 1990s among manufacturing plants in India. We use a unique dataset on India's industrial licensing regime to test whether industrial de-licensing during the 1980s and 1990s played a role in skill upgrading, as measured by the employment and wagebill shares of white-collar workers. In addition, we assess the relative contribution of industrial de-licensing and trade liberalization to skill upgrading. We identify two main channels through which industrial de-licensing affects skill upgrading: capital- and output-skill complementarities. Using both difference-in-differences as well as regression discontinuity techniques, we find two important results. First, after controlling for the size-based exemption rule that determined whether or not a plant faced licensing restrictions, industrial de-licensing during the 1980s appears to have increased the relative demand for skilled workers via capital- and output-skill complementarities. Capital- and output-skill complementarities exist for plants in both licensed and de-licensed industries but were stronger in de-licensed industries during the 1980s, prior to India's massive trade liberalization reforms in 1991. Second, regardless of de-licensing, capital- and output-skill complementarities are generally weaker after trade was liberalized during the early 1990s. Together, capital- and output-skill complementarities contributed 75% (57%) and 31% (29%), respectively, of the growth in the employment and wagebill shares of white-collar workers in de-licensed (licensed) industries before trade was liberalized. After trade liberalization, these contributions were smaller. This suggests that trade liberalization may not have played a major role in raising the relative demand for skilled labor during the early 1990s.     

Returns to cognitive and non-cognitive skills: evidence for Mexico

This study examines how cognitive and non-cognitive skills are valued in the labour market in Mexico. It uses a novel dataset which includes a wide array of cognitive and non-cognitive skill measures. Non-cognitive skills are rewarded in the market even after controlling for family background and educational attainment. Returns to non-cognitive skills are similar between men and women. However, controlling for educational attainment and family background, only men are rewarded for their cognitive skills.     

ARE COGNITIVE SKILLS RELEVANT IN GENDER EARNINGS DECOMPOSITIONS?

While cognitive skills are known to play an important role in labour market success, empirical evidence is mainly concentrated in its effect on returns to schooling. Evidence on the role of cognitive skills in gender earnings gap decompositions is virtually absent. I use two approaches to investigate the potential for cognitive skills to affect the size and pattern of the unexplained component of the earnings gap (‘relative discrimination’) across the wage distribution, using data from the International Adult Literacy Survey (IALS). It has been shown that when the raw cognitive score is used to control for cognitive skills, the return to schooling cognitive skills is generally underestimated. Once a distinction is made about the origins of cognitive skills (acquired in school versus outside the school), the returns to cognitive skills can vary depending on their origin. I find that using the raw score to control for cognitive skills does not result in any significantly different estimates of the unexplained component of the gap compared to when cognitive skills are not controlled for. However, once cognitive skills by origin of skill are used in place of total cognitive skills, the results change substantially for three of the five countries examined.     

Trade shocks from BRIC to South Africa: A global VAR analysis

This paper studies the trade linkages between South Africa and the BRIC (Brazil, Russia, India and China) countries. We apply a global vector autoregressive model (global VAR) to investigate the degree of trade linkages and shock transmission between South Africa and the BRIC countries over the period 1995Q1–2009Q4. The model contains 32 countries and has two different estimations: the first one consists of 24 countries and one region, with the 8 countries in the euro area treated as a single economy; and the second estimation contains 20 countries and two regions, with the BRIC and the euro area countries respectively treated as a single economy. The results suggest that trade linkages exist between our focus economies; however the magnitude differs between countries. Shocks from each BRIC country are shown to have considerable impact on South African real imports and output.     

印度软件业优势分析

印度计算机软件出口规模、产品质量和产品成本三项综合指标居世界第一位,印度是全球仅次于美国的第二大计算机软件出口国,全世界已有102个国家进口印度的计算机软件,其中28个国家完全依靠进口印度计算机软件和服务支撑.近年来印度软件业飞速发展,成为世界上软件业增长最快的国家,优势非常明显,它不仅具有英语优势,而且具有人才优势,更为重要的是质量的优势.     

Why did wage inequality increase? Evidence from urban India 1983–99

Since the start of the economic reform in 1991, there have been serious concerns regarding the increasing income inequality in India. However, no studies have analyzed how and why the inequality has been accelerated. This study aims to fill these knowledge gaps. The main findings are: (1) The wage inequality in urban India started increasing before 1991; (2) The increase in the wage inequality was mainly attributable to increases in the returns to skills; (3) The accelerating skill premium was due to increases in the demand for skilled labor. The demand shift is attributed to skill-biased technological changes within industries.     

Long-run costs of piecemeal reform: Wage inequality and returns to education in Vietnam

In this paper, we examine changes in wage structure and wage premia during Vietnam’s transition from command to market economy. Relative to other work in this literature, our paper is unique in that we identify the policies that lead to such changes. By examining skill premium trends along the two dimensions of particular importance to the transition—state or non-state firms, and traded or non-traded industries—we are able to separate the contribution of external liberalization to wage growth and rising skill premia from that of domestic labor market reforms, and to examine potential interactions between the two types of reform. The results point to the high cost of incomplete reform in Vietnam. Capital market segmentation creates a two-track market for skills, in which state sector workers earn high salaries while non-state workers face lower demand and lower compensation. Growth is reduced directly by diminished allocative efficiency and reduced incentives to acquire education, and indirectly by higher wage inequality and rents for workers with access to state jobs.     

Short-memory equilibrium in stochastic overlapping generations economies

In stochastic OLG exchange economies, we show that short-memory equilibria—the natural extension from deterministic economies of steady states, low-order cycles, or finite state-space stationary sunspots equilibria—fail to exist generically in utilities. As a result, even with independent and identically distributed exogenous shocks there is serial correlation in endogenous economic variables in equilibrium. This arises even if utilities are time-separable, some goods inferior, and there are no technological lags. Hence, the origins of economic fluctuations can be traced only to the demographic structure of a heterogeneous agent, multiple-good economy.     

Business cycle co-movements between South Africa and the BRIC countries

This article examines the relationships between South African economy and the economies of the BRIC (Brazil, Russia, India and China). In particular, it identifies the nature and key features of the co-movement of South African business cycles with cycles of the BRIC countries. It uses the dynamic factor model to a set of 307 macroeconomic series during the period 1995Q2 to 2009Q4. We found significant evidence of synchronization between South Africa and the BRIC countries over the business cycle, although the magnitude of co-movement differs with each country. India portrays strong ties with South Africa over time. Moreover, Brazil, China and Russia lead South Africa in the long run, while India is contemporaneous. Further, the findings imply that the first two factors are BRICS factors while the third one is a US factor.     

Eurozone crisis and BRIICKS stock markets: Contagion or market interdependence?

This paper examines the financial contagion in an emerging market setting by investigating the contagion effects of GIPSI (Greece, Ireland, Portugal, Spain and Italy), USA, UK and Japan markets on BRIICKS (Brazil, Russia, India, Indonesia, China, South Korea and South Africa) stock markets. During Euro-zone crisis period (October 19, 2009–January 31, 2012), the empirical results indicate that among GIPSI countries, Ireland, Italy and Spain appear to be most contagious for BRIICKS markets compared to Greece. The study reports that Brazil, India, Russia, China and South Africa are strongly hit by the contagion shock during the Eurozone crisis period. However, Indonesia and South Korea report only interdependence and not contagion. From policy perspective, the findings provide useful implications for possible decoupling strategies to insulate the economy from contagious effects. For multilateral organizations like International Monetary Fund (IMF) and World Bank, the study will provide an important direction in undertaking coordinated rescue measures for the vulnerable as well as contagious countries.     

A threshold in inflation dynamics: evidence from emerging countries

Using monthly data over the period January 1976–November 2002, the present paper detects significant threshold non-linearities in the inflation rates of three emerging countries, namely India, Singapore and South Africa. A two-regime self-exciting threshold autoregressive (SETAR) model of inflation, constituting a significant improvement over the corresponding linear AR model, is estimated for these countries. Singapore is shown to have a much lower implied equilibrium inflation rate than India, while there is a possibility of seasonal inflation equilibria for South Africa.     

Why has unemployment risen in the New South Africa?1

We document the rise in unemployment in South Africa since the transition in 1994. We describe how changes in labour supply interacted with stagnant labour demand to produce unemployment rates that peaked between 2001 and 2003. Meanwhile, compositional changes in employment at the sectoral level widened the gap between the skill‐level of the employed and the unemployed. Using nationally representative panel data, we show that stable unemployment rates mask high individual‐level transition rates in labour market status. Our analysis highlights several key constraints to addressing unemployment in South Africa. We conclude that unemployment is near equilibrium levels and is unlikely to self‐correct without policy intervention.     

Accountability,incentives and behavior: the impact of high-stakes testing in the Chicago Public Schools

The recent federal education bill, No Child Left Behind, requires states to test students in grades 3 to 8 each year and to judge school performance on the basis of these test scores. While intended to maximize student learning, there is little empirical evidence about the effectiveness of such policies. This study examines the impact of an accountability policy implemented in the Chicago Public Schools in 1996–1997. Using a panel of student-level, administrative data, I find that math and reading achievement increased sharply following the introduction of the accountability policy, in comparison to both prior achievement trends in the district and to changes experienced by other large, urban districts in the mid-west. However, for younger students, the policy did not increase performance on a state-administered, low-stakes exam. An item-level analysis suggests that the observed achievement gains were driven by increases in test-specific skills and student effort. I also find that teachers responded strategically to the incentives along a variety of dimensions—by increasing special education placements, preemptively retaining students and substituting away from low-stakes subjects like science and social studies.     

The College Wage Premium and the Expansion of Higher Education in the UK*

This paper reports estimates of the UK “college premium” for young graduates across successive cohorts from large cross‐section datasets for the UK pooled from 1994 to 2006—a period when the higher education participation rate increased dramatically. The growth in relative labour demand suggests that graduate supply considerably outstripped demand which ought to imply a fall in the premium. We find no significant fall for men and even a large, but insignificant, rise for women. Quantile regression results reveal a fall in the premium only for men in the bottom quartile of the distribution of unobserved skills.     

A New Approach to Human Development Index

Human development Index (HDI) was introduced by the United Nations Development Programme (UNDP) in 1990. For the first four years UNDP used the maximum and the minimum values of the data series to standardize the variables. In 1994 the procedure of standardization was modified with the introduction of arbitrary fixed minimum and maximum values for each variable. Both methods have merits and demerits. The present study proposes an alternative measure of estimating HDI which bridges the gap between the methods of computing HDI proposed by the UNDP in 1990 and 1994. This study also incorporates unadjusted per capita real gross domestic product (PCRGDP) instead of adjusted PCRGDP used by the UNDP. The data from the Human Development Report (HDR) 2000 for 174 countries are used to test the robustness of the suggested index and the results are compared to those of the HDI. Also average values for full sample as well as top 20 percent and bottom 20 percent are offered to show the superiority of our method to that of the UNDP's HDI.