A parametric control function approach to estimating the returns to schooling in the absence of exclusion restrictions: an application to the NLSY

An innovation which bypasses the need for instruments when estimating endogenous treatment effects is identification via conditional second moments. The most general of these approaches is Klein and Vella (J Econom 154:154–164, 2010), which models the conditional variances semiparametrically. While this is attractive, as identification is not reliant on parametric assumptions for variances, the nonparametric aspect of the estimation may discourage practitioners from its use. This paper outlines how the estimator can be implemented parametrically. The use of parametric assumptions is accompanied by a large reduction in computational and programming demands. We illustrate the approach by estimating the return to education using a sample drawn from the National Longitudinal Survey of Youth 1979. Accounting for endogeneity increases the estimate of the return to education from 6.8 to 11.2%.     

What shapes player performance in soccer? Empirical findings from a panel analysis

In this article, we investigate the pay–performance relationship of soccer players using individual data from eight seasons of the German soccer league Bundesliga. We find a nonlinear pay–performance relationship, indicating that salary does indeed affect individual performance. The results further show that player performance is affected not only by absolute income level but also by relative income position. An additional analysis of the performance impact of team effects provides evidence of a direct impact of team-mate attributes on individual player performance.     

Purchasing power parity across Mexican cities: a panel data analysis

This article presents three different unit root tests for panel data, the main objective is to find the level of internal integration market through the purchasing power parity (PPP) evidence, based in the Balassa–Samuelson approach. Thus, eight kinds of markets, as tradable and nontradable goods for 16 main Mexican cities during a 21 year period have been contrasted. While two tests showed the PPP validity for seven markets, the other rejected it. The results obtained moreover feed the present controversy about which test is most appropriate to test the PPP, as soon as it is highlighted new elements emerge to explain the half-life analysis.     

Financial market and housing wealth effects on consumption: a permanent income approach

The objective of this study is to examine the financial market and housing wealth effects on consumption. Housing has the dual functions as both a commodity yielding a flow of housing services and an investment asset yielding a flow of capital income. With the construction of an empirical framework based on the vector autoregression approach, the findings from this study suggest that a rise in housing price has both a positive wealth effect and a negative price effect on consumption. While the positive wealth effect is caused by an increase in capital income, the negative price effect is caused by an increase in the cost of housing services. In addition, the housing market wealth effect increases, at the expense of the price effect, with the level of housing-market leverage. These findings imply that the government policy of land supply aiming to stimulate the economy should strike a balance between the possible wealth and price effects of the housing market.     

Disability insurance and unemployment insurance as substitute pathways

In this article, we estimate the degree of substitution between enrolment into Disability Insurance (DI) and Unemployment Insurance (UI) in the Netherlands. Starting in the 1990s many policy measures aimed at reducing DI enrolment, and increase labour force participation. We quantify whether these policy measures have led to a reduction in hidden unemployment in DI. A side effect of the reforms may be increased pressure on UI. Therefore, we simultaneously estimate reverse substitution, that is, hidden disability in UI. To this end, we employ a sample of firms in the Dutch AVO database from the period 1993 to 2002. Using instrumental variables in a bivariate Tobit specification, we identify the hidden components in both respective schemes. The estimation results indicate that about 3% of all dismissals took place through DI, which implies that about one quarter of the DI enrolments observed in our sample in fact consists of hidden unemployment. We find no evidence for reverse substitution of disabled persons ending up in UI.     

The time cost of food at home: general and food stamp participant profiles

Little is known about the cost of time in food preparation at home. Yet, this economic variable is a common thread running through recent concerns about obesity and the Food Stamp (FS) program. This article provides initial estimates of the time cost in food preparation at home for the United States. Two standard methods of estimation are implemented and three demographic profiles are considered: (i) the general population, (ii) the typical FS participant and (iii) the typical FS participant following the United States Department of Agriculture Thrifty Food Plan. For the general population and averaging across methods, the time cost share of total food cost is about 30% if the individual works in the market and at home, but it is about 49% if the individual does not work in the market. For the typical FS participant, especially one following the Thrifty Food plan, the time cost share of total food cost can be as much as 26% higher than the general population. These substantial percentages provide strong incentives to purchase food away from home and help undermine overall diet quality and the efficacy of the FS program, which ignores the time cost in food at home production.     

Four factors that explain both the rise and fall of US crime, 1970–2003

Previous research has failed to explain the rise and fall of US crime since 1970. This study uses cointegration, error correction and common long-memory components analyses to demonstrate that four basic crime factors explaining both the increases in US violent and property crime between 1970 and 1991 and the dramatic declines in crime after 1991. The four factors include arrest rates, income per capita, the proportion of criminal-justice resources devoted to drug crime and alcohol consumption. Error correction models and common long-memory factors show an especially close link between crime rates and the percentage of prison resources devoted to drug offenders. Similar factors result in cointegrated models for murder, rape, robbery, assault and larceny. Additional modelling shows that effective abortion rates computed along the lines of Donohue and Levitt (2001 Donohue, JJ and Levitt, SD. 2001. The impact of legalized abortion on crime. Quarterly Journal of Economics, 116: 379–420. [Crossref], [Web of Science ®] , [Google Scholar]) do not help in explaining the rise and fall of US crime.     

What explains long memory in futures price volatility?

Long memory in futures price volatility is a well-documented stylized fact with implications for market efficiency, risk management, forecasting and option pricing bias. The implications of long-memory differ, however, based on whether it is of a ‘fractional’ or of a ‘stochastic’ type. The aims of this article are to determine, in the case of agricultural commodity futures data, which type better describes price volatility and also to evaluate several competing explanations for findings of long memory. The evidence presented here finds little support for three out of four potential explanations, namely, excessive noise in the volatility measure, bias in the long-memory estimator and understated SEs of the long-memory parameter. For the data considered, price volatility appears to be most likely generated by a nonfractional long-memory process such as a stochastic break or stochastic unit root.