Does Increasing Parents’ Schooling Raise the Schooling of the Next Generation? Evidence Based on Conditional Second Moments*

This article investigates the degree of intergenerational transmission of education for individuals from the National Longitudinal Survey of Youth 1979. Rather than identifying the causal effect of parental education via instrumental variables we exploit the feature of the transmission mechanism responsible for its endogeneity. More explicitly, we assume the intergenerational transfer of unobserved ability is invariant to the economic environment. This, combined with the heteroskedasticity resulting from the interaction of unobserved ability with socioeconomic factors, identifies the causal effect. We conclude that the observed intergenerational educational correlation reflects both a causal parental educational effect and a transfer of unobserved ability.     

The financial transaction tax — Boon or bane?

Against the backdrop of the debate over the introduction of a financial transaction tax (FTT) in the European Union, this Forum is dedicated to the discussion of issues concerning the implementation and impact of such a tax on the financial sectors of the member states. Dorothea Sch?fer regards as the main policy goal of an FTT to be the prospect of slowing down the mutually reinforcing and growing trends of an increasing number of derivative products and shorter holding periods. The FTT can therefore make an important contribution to preventing the decoupling of financial markets from the real economy. The paper by Stephan Schulmeister discusses the essential features of a general FTT that will ensure that the more short-term oriented and riskier a transaction is, the greater the effect of the FTT on transaction costs. John Vella identifies some commonly made claims about an FTT which are of questionable foundation and compares the FTT with some alternative taxes on the financial sector. Donato Masciandaro and Francesco Passarelli focus on how an FTT measure aimed at reducing financial systemic risk can cause political distortions, leading to inefficient and ineffective policies. Finally, the paper by Ross Buckley analyses common myths, inaccuracies and untruths about the EU’s proposed FTT.     

Estimating a class of triangular simultaneous equations models without exclusion restrictions

This paper provides a control function estimator to adjust for endogeneity in the triangular simultaneous equations model where there are no available exclusion restrictions to generate suitable instruments. Our approach is to exploit the dependence of the errors on exogenous variables (e.g. heteroscedasticity) to adjust the conventional control function estimator. The form of the error dependence on the exogenous variables is subject to restrictions, but is not parametrically specified. In addition to providing the estimator and deriving its large-sample properties, we present simulation evidence which indicates the estimator works well.     

Perceived performance,equity sensitivity and organisational commitment among bank managers

This study looks at equity sensitivity and organisational commitment and considers the possible moderation role that managers’ perception of organisational performance may have. Using an equity theory perspective, the constructs of equity sensitivity and organisational commitment, as well as the effect of perceived firm performance, are considered. A research model linking their interaction is proposed. Data are collected from managers of a commercial bank and moderated regression is used to test the hypotheses. Results support a positive effect of equity sensitivity on organisational commitment whereas high or low perceived firm performance is found to have a determining effect on this relationship.     

Estimating the returns to education for Australian youth via rank-order instrumental variables

This paper employs the rank-order instrumental variable (IV) procedure of Vella and Verbeek [Vella, F., Verbeek, M., 1997. Using rank order as an instrumental variable: an application to the return to schooling, CES Discussion Paper 97.10, K.U. Leuven.] to estimate the returns to education for Australian youth. The attraction of this approach is that it can account for the endogeneity of schooling in the wage equation via the use of instrumental variables without the use of exclusion restrictions. We find, after accounting for the endogeneity of schooling, that an additional year of schooling is associated with an increase in wages of approximately 8%. Furthermore, we find that the rank-order IV approach is able to identify the presence of endogeneity in this particular empirical example. However, despite this, the adjusted estimate of how schooling affects wage is close to the ordinary least squares (OLS) estimate.     

Borrowing Constraints and Credit Demand in a Developing Economy

This paper investigates the determinants of credit demand in the presence of borrowing constraints in a developing economy. We model the determinants of observed debt for Chilean households while accounting for selection bias and the endogeneity of their income and specific household assets. Using a novel Chilean dataset, we estimate the relationship between household characteristics and consumer and mortgage debt. We find substantial differences in the nature of these relationships across the types of debt. For example, we find that the income elasticity for consumer debt is greater than 1 whereas for mortgage debt it is not. The results suggest the increased availability of credit, combined with the aging of the Chilean population, is likely to drastically change the distribution and level of Chilean debt. These findings are particularly relevant for other developing economies currently experiencing rapid income and debt growth. Copyright © 2015 John Wiley & Sons, Ltd.     

Collaborative Resource Solutions

Collaborative Resources Solutions (CRS) is based on a real situation outlining the issues related to buying a service organization. This instructional case requires students to provide advice to a client who is considering purchasing a 50 percent ownership of a similar consulting business with the vision of blending the two companies together and increasing the knowledge base of her current company; therefore improving the ability to target more to clients. The case requires the students to evaluate the strategic, valuation, and financial issues in considering the acquisition of the existing business. In order to do so, students are required to analyze the financial information provided, both historical and forecasted, as well as analyzing key internal operations issues that may impact the future success of the business. This case is suitable for use in upper‐level undergraduate business strategy courses and accounting courses, as well as in master‐level accounting courses. Assessment rubrics and teaching notes accompany the case for use by instructors.     

Reviews

PLACE PROMOTION.

Gold, J.R. and Ward, S.V. (eds) 1994: Place Promotion; The Use of Publicity and Marketing to Sell Towns and Regions. Chichester: John Wiley & Sons Ltd, £35, cased.

INWARD INVESTMENT.

Hill, S. and Munday, M. 1994: The Regional Distribution of Foreign Manufacturing Investment in the UK. London: Macmillan Press Ltd. £35, cased.

COMMUNITIES AND CARING.

Mayo, M. 1994: Communities and Caring: The Mixed Economy of Welfare. Macmillan (UK), and St Martin's Press (USA), £10.99, paper.

COMMUNITY PROFILING.

Hawtin, M., Hughes, G. and Percy-Smith, J. 1994: Community Profiling: Auditing Social Needs. Buckingham: Open University Press, £12.99, paper.

SUSTAINABILITY.

Hams, T., Jacobs, M., Levett, R., Lusser, H., Morphet, J. and Taylor, D. 1994: Greening Your Local Authority. Harlow: Longman, £25, paper.

URBAN POLICY.

1994: Urban Policy: The Challenge and the Opportunity. London: Association of Metropolitan Authorities in conjunction with the Association of County Councils and the Association of District Councils, £10 (£8 to the voluntary sector), paper.

POLICY ON INDUSTRIAL PROPERTY.

Ball, R. and Pratt, A.C. (eds) 1994: Industrial Property: Policy and economic development London: Routledge.     

TRANSFORMING ENRON: THE VALUE OF ACTIVE MANAGEMENT

Soon after Enron was formed as a regulated gas pipeline company in 1985, economic events forced a dramatic reorganization of the company. The result was the creation of an unregulated energy trading operation whose mission was to capitalize on opportunities arising from the deregulation of the natural gas market The initial form of the new business was that of a "gas bank" in which Enron became an intermediary between buyers and sellers of gas, locking in the spread as profit. Since there was no source of liquidity to the market, Enron had to develop its own risk management system.
Furthermore, the need to respond quickly to rapidly changing market conditions required that Enron flatten its organizational structure and hire new people whose skills were better suited to the new decentralized organization. The focus of the new Enron accordingly became human and intellectual capital, not physical assets. Employees were encouraged to move about the firm to staff new business ventures. And in what may well be a unique feature in corporate America, Enron's top management today uses its human capital flows to guide its allocations of financial capital. Other aspects of the Enron model include attempts to capitalize on the option (as opposed to current DCF) value of assets, recognition of the value of networks in adding value to trading platforms, and the use of mark-to-market accounting for business transactions as a means of ensuring transparency and promoting timely decision-making.