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%.     

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.     

HIV/AIDS AND BANKING STABILITY IN DEVELOPING COUNTRIES

We argue that the recent large increase in deposits’ turnover in many developing countries with high HIV/AIDS prevalence is associated with the spread of the disease. The point is that the need to pay for individual treatments force large‐scale withdrawals of households’ deposits, and that those large withdrawals put the banking industry at risk. In a standard demand‐deposit model where the HIV/AIDS prevalence among depositors is random, we show that (1) the probability of a large‐scale banking failure without a bank run increases as the odds of any prevalence level increases, and (2) it is always optimal to deposit, and thus to accept the risk of banking failure, to maintain long‐term investments in place.     

Fractional cointegration analysis of EU convergence

Traditional cointegration tests do not provide strong evidence of convergence between EU countries. In this study, fractional cointegration analysis is used to test for convergence between EU members. Fractional cointegration between inflation and between long-term interest rates is found. The results indicate that there is nominal convergence, but that the equilibrium errors display long memory. Fractional cointegration analysis gives no evidence of real convergence in output.     

Impacts of meat product recalls on consumer demand in the USA

The impact of meat product recall events on consumer demand (beef, pork, poultry, and other consumption goods) in the USA is tested empirically. Beef, pork, and poultry recall indices are constructed from both the Food Safety Inspection Service's meat recall events and from newspaper reports over the period 1982–1998. Following previous product recall studies, recall indices are incorporated as shift variables in consumers’ demand functions. Estimating an absolute price version of the Rotterdam demand model, findings indicate that Food Safety Inspection Service's meat recall events significantly impact demand, and newspaper reports do not. Moreover, although elasticities related to recall events are significant they are small in magnitude relative to price and income effects. Any favourable effects on the demands of meat substitutes for a recall are offset by a more general negative effect on meat demand. The general negative effect indicates a shift out of meat to non-meat consumption goods.     

Evidence on the purchasing power parity in a panel of cities

Evidence is provided on the PPP hypothesis using a sample of 50 Spanish cities for a long time period through the application of panel data unit root tests. Although results suggest non-rejection of the PPP, short-run deviations – as measured by half-lives – indicate that real factors might be causing a slow rate of convergence to a common price index, even in highly integrated economies.     

Debt ownership structure and legal system: an international analysis

This paper is concerned with the ownership structure of corporate debt from an institutional perspective. An attempt is made to identify the factors affecting bank debt use from an international sample of companies from Austria, Germany, Japan, Belgium, France, Italy, Holland, Spain, Portugal, Finland, Sweden and the USA. The results show that bank debt depends both on factors specific to each company and on institutional features of each country. More exactly, it is found that bank loans are related to firm size, to the quality and risk of the projects, and to the collateral. It is also found that a number of legal-institutional factors are impacting on the source of firms’ debt, such as creditor protection, firm disclosure requirements and law enforcement.     

Bureaucracy and student performance in US public schools

This paper tests the hypothesis that monopoly power of school districts allows bureaucratic expansion and fosters poor academic performance in the public school system in California. Evidence indicates that monopoly power is positively associated with employment of administrators and teachers, and therefore supports the bureaucratic expansion hypothesis. While numbers of teachers do not influence performance measures, numbers of administrators are shown to positively affect performance - results that suggest that too many teachers, but too few administrators, are employed. While bureaucracy theory may explain the resource misallocation, other reasons might include rising public pressures on hiring teachers over administrators, spending equalization policies, and the weak California economy in the period under investigation.