Economic growth and the riskiness of investment in firm-specific skills

This paper develops a simple growth model in which workers face risks to their firm specific skills, such as far-reaching changes in business and transaction styles or drastic technological innovations, and invest in general skills to prepare for these risks. This model demonstrates that, in the presence of the economy-wide positive externality of general skills, workers’ investment in general skills exhibits a strategic complement, and thus, a low-growth trap may arise. Since a lower risk to firm-specific skills decreases workers’ incentive to invest in general skills, multiple equilibria possibilities and the amount of government subsidies for general skill investment that are required to remove the bad equilibrium increase.     

Learning the master's trade: Apprenticeship and human capital in Ghana

This paper explores the institution of apprenticeship in Ghana. A model is presented where apprenticeship training is idiosyncratic, increasing an individual's productivity in the current firm, but not in any other firm. Still, individuals are willing to fund apprenticeships as they can reap the returns to the specific training of apprenticeship if they manage to acquire the capital required to start their own firms, and replicate the technology and business practice of the apprenticeship firm. Predictions of the model for the productivity and remuneration of different workers are developed and tested using both a linked employer–employee survey of manufacturing firms and a national household survey.     

Social Affiliation and the Demand for Health Services: Caste and Child Health in South India

This paper assesses the role of social affiliation, measured by caste, in shaping investments in child health. The special setting that we have chosen for the analysis - tea estates in the South Indian High Range - allows us to control nonparametrically for differences in income, access to health services, and patterns of morbidity across low caste and high caste households. In this controlled setting, low caste households spend more on their children's health than high caste households, reversing the pattern we would expect to find elsewhere in India. Moreover, health expenditures do not vary by gender within either caste group, in contrast once again with the male preference documented throughout the country. A simple explanation, based on differences in the returns to human capital across castes in the tea estates is proposed to explain these striking results.     

Testing the ‘brain gain’ hypothesis: Micro evidence from Cape Verde

Does emigration really drain human capital accumulation in origin countries? This paper explores a unique household survey designed and conducted to answer this research question. We analyze the case of Cape Verde, a country with allegedly the highest ‘brain drain’ in Africa, despite a marked record of income and human capital growth in recent decades. We propose the first explicit test of ‘brain drain’ arguments, according to which the prospects of own future migration can positively impact educational attainment. Our most conservative estimates using individual specific variation in economic conditions at the destination indicate that a 10 pp increase in the probability of own future migration improves the probability of completing intermediate secondary schooling by nearly 4 pp for individuals who do not migrate before age 16. These findings are robust to the choice of instruments and econometric specification. Counterfactual simulations point to significant human capital gains from lowering migration barriers.     

Women as agents of change: Female income and mobility in India

Economic globalization will give many women in developing countries access to steady and relatively remunerative employment for the first time, potentially shifting bargaining power within their households and changing the choices that are made for their children. This paper exploits a unique setting — a group of tea plantations in South India where women are employed in permanent wage labor and where incomes do not vary by caste — to anticipate the impact of globalization on mobility across social groups in the future. The main result of the paper is that a relative increase in female income weakens the family's ties to the ancestral community and the traditional economy, but these mobility enhancing effects are obtained for certain historically disadvantaged castes alone. Although the paper provides a context-specific explanation for why the women from these castes emerge as agents of change, the first general implication of the analysis is that the incentive and the ability of women to use their earnings to influence household decisions depends importantly on their social background. The second implication is that historically disadvantaged groups may, in fact, be especially responsive to new opportunities precisely because they have fewer ties to the traditional economy to hold them back.     

Geography,health, and the pace of demo-economic development

This paper investigates the impact of subsistence consumption and extrinsic and intrinsic causes of child mortality on fertility and child expenditure. It offers a theory for why mankind multiplies at higher rates at geographically unfavorable, tropical locations. Placed into a macroeconomic framework this behavior creates an indirect channel through which geography shapes economic performance. It is explained why it are countries of low absolute latitude where we observe exceedingly slow (if not stalled) economic development and demographic transition.     

Social learning,neighborhood effects,and investment in human capital: Evidence from Green-Revolution India

This paper empirically identifies social learning and neighborhood effects in schooling investments in a new technology regime. Social learning implies that learning is most efficient when observed heterogeneity in schooling is greatest. The estimates of learning-investment rule, from farm household panel data at the onset of the Green Revolution in India, show that (i) agents learn about schooling returns from income realizations of their neighbors, and (ii) the speed of learning is high when the variation of schooling is large. Thus, schooling distribution of the parents' generation in a community has externalities to schooling investments in children. Simulations show that the variations in schooling within and across communities generate variations in child enrollment rate and average household income.     

Experiencing change and the evolution of adaptive skills: Implications for economic growth

We distinguish learning in a static environment from that in a dynamic environment to show the existence of an important interaction between the development of new technologies and human capital accumulation. Because technological progress creates a more dynamic environment, it complements education in the production of human capital by enhancing adaptive skills. Higher levels of adaptability and human capital in turn determine the profitability of new inventions and the incentive to invest in new R&D. Differences in the history of technological progress produce different levels of adaptability and our results suggest why countries that have comparable levels of education and per capita incomes may differ significantly in their growth performance.     

Happiness in the arts—International evidence on artists’ job satisfaction

Many artists are prone to high unemployment and low incomes suggesting low job satisfaction. Our analysis including 49 countries paints a different picture. On average artists enjoy higher job satisfaction than other employees, mainly due to more autonomy.     

GROWTH AND BUBBLES WITH CONSUMPTION EXTERNALITIES*

This paper explores the role of consumption externalities in an overlapping generations economy with capital accumulation. If consumers in each generation are concerned with other agents’ consumption behaviours, there exist intergenerational as well as intragenerational consumption externalities. It is the presence of intergenreational consumption externalities that may produce fundamental effects both on equilibrium dynamics and on steady‐state characterization of the economy. This paper demonstrates this fact in the context of a simple model of endogenously growing, overlapping‐generations economy with or without asset bubbles.     

Fertility choice under child mortality and social norms

In most demographic transitions, declines in child mortality precede declines in net fertility rates. Variants of the Barro-Becker model of fertility fail to deliver this link. A simple extension, the inclusion of social norms regarding fertility, generates the desired effect.     

AIDS mortality and its effect on the labor market: Evidence from South Africa

This paper investigates how HIV/AIDS has impacted the labor market in South Africa, focusing on its effect on wages and employment. This is done by matching individual level data with group specific cumulative AIDS mortality rates. Exploiting the panel nature of the data, I remove individuals whose productivity is most likely impacted by HIV/AIDS, and find evidence that cumulative AIDS mortality has led to reductions in wages of between 3 and 6% for the African population group (Black South Africans). Furthermore, I also find evidence that the epidemic has lowered employment in South Africa. This result is concentrated among those with the lowest levels of education and employment. Although not large in magnitude, these effects are widespread across a significant portion of the population, contributing to a substantial loss of income throughout the South African economy.     

Testing the growth effects of structural change

Against the backdrop of Baumol's model of ‘unbalanced growth’, a recent strand of literature has presented models that manage to reconcile structural change with Kaldor's ‘stylized fact’ of the relative constancy of per-capita real GDP growth. Another strand of literature goes beyond this, arguing that the expenditure shifts toward Baumol's ‘stagnant’ sector stimulate rather than dampen long-term economic growth because of the human capital-accumulating nature of major ‘stagnant’ services (like health care and education). This paper tests the relationship between structural change and economic growth empirically by means of a Granger-causality analysis of a panel of 18 OECD countries.     

The “V-factor”: Distribution,timing and correlates of the great Indian growth turnaround

We analyze a panel of output series for India, disaggregated by 15 states and 14 broad industry groups. Using principal components (Bai, 2004; Bai and Ng, 2004) we find that a single common “V-factor” captures well the significant shift in the cross-sectional distribution of state-sectoral output growth rates since the 2nd half of the 1980s. The timing of the turnaround implied by the V-factor is more closely related to the pattern of policy reforms than has been found in previous research. Regression-based analysis also provides some insights into the uneven distribution of the turnaround across Indian states.     

Differences by mother’s education in the effect of childcare on child obesity

Previous studies have found adverse effects of maternal employment on child obesity for higher educated mothers. Using a quasi-structural model, we find additionally a lower risk of obesity for children of less educated mothers with increased time in non-parental childcare.     

Economic growth, labor market and demographic patterns

This study addresses the dynamic interaction between income growth, patterns of demographic variables, and characteristics of the labor market. We attempt to provide an endogenous explanation for the origin and nature of long-run sustained oscillations in the population and in economic variables. First, we develop an economic growth model containing unemployment. The resulting dynamics reveal that the emergence of irregular sustained oscillations is related to the lack of sensitivity in wage growth to changes in the employment rate. Next, labor force growth is endogenized in the basic model through micro-founded fertility choices of individuals. By introducing the endogenous fertility rate into the basic model, we generate a demographic transition. Next, consistent with Malthusian cycle literature, the inevitable time lag between individual reproductive decisions and subsequent market needs, in conjunction with a highly specialized labor force, appear to be the primary source of such long-run oscillations. Finally, the model predicts that raising the age of entry into the labor force increases economic growth.     

Efficiency in a search and matching model with training costs

This paper studies the efficiency of the search and matching model with training costs. I incorporate productivity enhancing firm-specific skill training into the search and matching model of Pissarides (2000). I demonstrate that while the decentralized economy can be efficient if training costs are not sunk at the time of wage determination, the decentralized economy is not efficient due to a hold-up problem if training costs are sunk.     

Fatal fluctuations? Cyclicality in infant mortality in India

This paper investigates the impact of aggregate income shocks on infant mortality in India and investigates likely mechanisms. A recent OECD-dominated literature reports the provocative finding that mortality at most ages is pro-cyclical. Similar analyses for poorer countries are scarce, and both income risk and mortality risk are greater in poor countries. This paper uses data and methods designed to avoid some of the specification problems in previous studies and it explores mechanisms and extensions that have not been previously considered. It uses individual data on infant mortality for about 150,000 children born in 1970-1997, merged by cohort and state of birth with a state panel containing information on aggregate income. Identification rests upon comparing the effects of annual deviations in income from trend on the mortality risks of children born at different times to the same mother, conditional upon a number of state-time varying covariates including rainshocks and state social expenditure. Rural infant mortality is counter-cyclical, the elasticity being about − 0.33. This is despite the finding that relatively high-risk women avert birth or suffer fetal loss in recessions. It seems in part related to recessions stimulating distress labor amongst mothers, in contrast to the case in richer countries, where they discourage labor market participation. Health-care seeking declines in recessions, and this appears to be related to the opportunity cost of maternal time. Disaggregation reveals that the average results are driven by rural households in which the mother is uneducated or had her first birth in teenage, and that it is only girls that are at risk; boys are protected from income shocks. Exposure to poor conditions in the fetal and neonatal period appears to have a larger effect on infant mortality than similar exposure in the postneonatal period.     

International migration and “educated unemployment”

This paper provides a novel explanation of “educated unemployment”, which is a salient feature of the labor markets in a number of developing countries. In a simple job-search framework we show that “educated unemployment” is caused by the prospect of international migration, that is, by the possibility of a “brain drain”. In addition, the analysis shows that a developing country may end up with more educated workers despite the brain drain and educated unemployment.     

NON‐SCALE EFFECTS OF INTERNATIONAL TECHNOLOGICAL‐KNOWLEDGE DIFFUSION ON SOUTHERN GROWTH AND WAGES

We develop a dynamic, general equilibrium non‐scale endogenous growth model of North–South technological‐knowledge diffusion by imitation. Countries differ in levels of exogenous productivity, human‐capital levels and R&D capacity. Growth is driven by Northern innovative R&D and the South converges towards the North. Growth is also driven by human‐capital accumulation, scale effects are removed, imitation is only feasible once a threshold distance to the frontier has been attained and is dependent on the South's relative level of employed human capital and on domestic policies promoting R&D. Imitation promotes partial convergence of inter‐country wages and governs the path of intra‐South wage inequality.