Swedish economic growth and education since 1800

Abstract.  The contribution of this paper is twofold. First, it builds and makes use of long-run data from Sweden on formal education that have never been used to date. Second, it provides a quantitative application of recent theoretical work on the link between demographic changes and economic growth through their effect on education. It concludes that changes in longevity may account for as much as 20% of the observed rise in education over the period from 1800–2000 via a horizon effect, but have little impact on income growth over the period. On the contrary, changes in population density and composition are central, mainly thanks to their effect on productivity. Most income growth over this period would not have materialized if demographic variables had stayed constant since 1800.     

Measuring the cost of liquidity in agricultural futures markets: Conventional and Bayesian approaches

Estimating the cost of liquidity in agricultural futures markets is challenging because bid‐ask spreads are usually not observed. Based on an ability to reflect simulated data from Roll's spread model, we assess the effectiveness of conventional and Bayesian bid‐ask spread estimators under different market conditions. Conventional serial covariance and absolute price change spread estimators appear to be biased. Hasbrouck's Bayesian estimator generates small costs of liquidity whose values depend on the correlation and noise in the data. The absolute value Bayesian estimator is precise and works well under conditions of high levels of noise and correlation usually found in agricultural futures markets. Using data from live cattle (LC) and lean hog (LH) contracts, we find similar patterns of performance that produce economically meaningful cost of liquidity differences.     

Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?

Abstract. This paper explores how the introduction of an experience-rated system of unemployment insurance affects employment and welfare in a model where implicit contracts between firms and workers give rise to wage rigidities and unemployment. In the literature, it has been argued that experience-rated systems of unemployment insurance may reduce long-term employment as firms anticipate the higher costs of layoffs implied by experience rating. Our analysis shows that the introduction of experience rating may increase or decrease long-term employment but it unambiguously raises welfare.     

Growth effects of government expenditure and taxation in rich countries: A comment

Fölster and Henrekson (European Economic Review 45 (2001), 1501-1520) argue that “...the more the econometric problems that are addressed, the more robust the relationship between government size and economic growth appears”. But in failing to control for simultaneity and in ignoring issues of sample-selection bias, the regressions reported by Fölster/Henrekson are flawed. Using theoretically valid instruments, we find that the estimated partial correlation between size of the public sector and economic growth is statistically insignificant and highly unstable across specifications. Moreover, since instruments are weak, all hypothesis tests are unreliable. We conclude that cross-country growth regressions are unlikely to come up with a reliable answer to the question of the growth effects of government spending and taxation.     

Stochastic stability in networks with decay

This paper considers a stylized model of network formation in which relations among agents are subject to frictions, as described in Bala and Goyal [A non cooperative model of network formation, Econometrica 68 (2000) 1181-1231]. We analyze the process of network formation in a dynamic framework where self-interested individuals can form or delete links and, occasionally, make mistakes. Then, using stochastic stability, we identify the network structures to which the formation process will converge.     

Enhanced Special Drawing Rights: How China Could Contribute to a Reformed International Monetary Architecture

Since the end of the Bretton Woods era, the world has operated on a de facto system of free‐floating exchange rates, with the US dollar as the dominant international currency. The system, characterized by large pro‐cyclical capital flows and chronic imbalances, is inherently unstable, and has contributed to repeated crises, recessions and geopolitical tensions. One potentially “least‐difficult” line of reform would be to allow the evolution of a multi‐currency system, underpinned by an expanded role for Special Drawing Rights (SDRs). Attempts to promote wider use of the SDR have foundered on the liquidity premium. However, for Chinese corporations and institutions, at present restricted in their capital account activities, the SDR liquidity premium would appear less daunting. The Chinese authorities could provide policy encouragement for the use of SDRs by their institutions. This initiative, supported by China's Special Administrative Region Hong Kong, would kick‐start an international SDR ecosystem, and encourage even broader use of SDRs, to the benefit of international monetary stability.     

Effect of Parental Migration on the Academic Performance of Left‐behind Middle School Students in Rural China

China's rapid development and urbanization over the past 30 years have caused large numbers of rural residents to migrate to urban areas in search of work. This has created a generation of children who remain behind in rural areas when their parents migrate for work. Previous research has found mixed impacts of parental migration on the educational achievement of left‐behind children (LBC), perhaps because of methodological deficiencies and lack of recognition of the heterogeneity of this population of children. Our study attempts to examine the impact of six types of parental migration on the academic achievement of a rural junior high school sample. Our study uses a panel of 7148 junior high school students to implement a difference‐in‐difference analysis and finds that parental migration has a negative and significant impact on the academic achievement of junior high school students. Our study suggests that the Chinese Government should implement measures to dismantle barriers to the human capital accumulation of LBC to ensure sustainable economic growth and human capital development in China.     

Cultural determinants of human capital accumulation: Evidence from the European Social Survey

Although economists commonly view the accumulation of human capital as a key driver of economic development, what drives cross-country differences in human capital accumulation remains poorly understood. I use an epidemiological approach involving second-generation migrants to test for a possible cultural gradient in individuals’ propensity towards human capital accumulation. Results indicate a strong relationship between country-of-origin culture and human capital accumulation and are robust to using years of education instead of individuals’ engagement in human capital accumulation as the dependent variable. Drawing on dimensions of cultural differences identified in culture frameworks developed by cross-cultural researchers, results further suggest that cultural emphasis on intellectual autonomy helps explain part of the observed differences in human capital accumulation. However, further work is needed to complete our understanding of the cultural roots of individuals’ propensity towards human capital accumulation.