UNDERSTANDING MEASURES OF NONMARITAL FERTILITY: THE ROLES OF MARRIAGE AND ACCESS TO HUMAN CAPITAL

This paper proposes an explanation for several decades of rising U.S. nonmarital birth rates and shares, and for cross‐sectional differences in black‐white fertility. Significantly, the explanation does not rely on changes over time or differences across races in individual fertility behavior. It is consistent with the rising nonmarital fertility measures observed in the United States since the mid‐1970s, higher measured fertility for unmarried blacks than whites, and differences across races in the timing of childbearing, despite nearly constant total fertility rates and increasingly similar target family sizes for blacks and whites. The explanation relies on a selection effect associated with changes in the marriage rate and on racial differences in access to human capital investment opportunities. We find strong support for the explanation using U.S. data over the period 1957–2002. Our findings suggest caution in interpreting the results of empirical studies of childbearing that examine marital and nonmarital fertility rates separately, as these studies typically ignore the selection effect of marriage. (JEL J12, J13, I38)     

Capital Constraints,Asymmetric Information,and Internal Capital Markets in Banking: New Evidence

A growing literature investigates the role of internal capital markets in mitigating financial constraints faced by the subsidiaries of a conglomerate. Most studies have relied on indirect tests based on correlations between the cash flows and the investment of the subsidiaries. In contrast, we avoid the widespread criticisms of such specifications by providing direct tests that focus on the mechanisms through which internal reallocations of funds occur. We find that internal capital markets are used by multibank holding companies to mitigate capital constraints faced by individual bank subsidiaries. In addition, we show that internal capital management within a multibank holding company involves not only the movement of capital to those subsidiaries with a relatively greater need for capital but also the movement of assets (loans) from less well capitalized to better capitalized subsidiaries by means of loan sales and purchases among the subsidiaries. Furthermore, net loan sales are used to allow efficiency‐enhancing specialization among bank subsidiaries, insofar as those subsidiaries with the best loan origination opportunities are able to focus on loan originations even if they do not have sufficient capital to hold the loans. Our evidence is consistent with banks affiliated with holding companies more actively participating in loan sales and purchases because, by using their internal secondary loan market, they are able to avoid the “lemons” problem faced by stand‐alone banks.     

POTENTIALS FOR AND BARRIERS TO BUILDING ENERGY CONSERVATION IN CHINA

China is distinct among developing countries in that it has significant heating loads over much of the country. Because nearly half of the urban residential buildings are located in climates colder than that of Washington state, the already large demand for space heating will skyrocket if the current building boom continues. Space heating energy use, excluding that for hotels and offices catering to foreigners, is constrained by mandated coal allocations resulting in partially heated buildings with indoor temperatures significantly below design conditions.
This underheating, to a significant extent, masks the energy savings obtained from more energy-efficient boilers and building designs. Even so, computer simulations show that such conservation strategies can reduce current energy use by 40 percent, while dramatically raising indoor temperatures. Economic calculations comparing energy savings with increased construction costs are skewed by the unmet heating loads as well as by government-subsidized coal prices that are below actual costs. From the perspective of building owners and managers, building energy conservation still is economically attractive in the cold Northeast– where the cost of conserved coal is half that of the subsidized coal price – but is difficult to justify in terms of economic payback in Beijing or Shanghai.     

WHY DID ECONOMIC MODELS FALSELY PREDICT A BUSH LANDSLIDE IN 1992?

Most economic models falsely predicted a landslide victory for former President Bush in 1992. Rather than winning by the predicted margin of eight to 12 percentage points, Bush lost by a margin of about four. Exit polls tend to eliminate the unique candidacy of Ross Perot as an explanation for the turnabout. This paper examines three factors: (i) changes in the proportion of the population in the military (a proxy for national security concerns), (ii) the number of consecutive terms of incumbency, and (iii) nonlinear interactions between the military variable and standard economic variables. Including these factors in an economic model of the 1992 presidential race avoids predictions of a landslide victory for Bush and also improves the model's overall power and stability.     

SYSTEMATIC INFLUENCES ON TEACHING EVALUATIONS: THE CASE FOR CAUTION*

In this paper, we examine eight years of Quality of Teaching (QOT) responses from an Economics Department in an Australian University. This is done to determine what factors, besides the instructor, have an impact on the raw average student evaluation scores. Most of the previous research on student ratings has been conducted in the US. One significant difference between US and Australian tertiary education is that, on average, the number of foreign undergraduate students in Australia is ten times the number in US institutions. We find that cultural background significantly affects student evaluations. Other factors that have an influence on the average QOT score include: year level; enrolment size; the quantitative nature of the subject; the gender of the student; fee‐paying status by gender; course of study; the differences between the course mark and previous marks; the quality of workbooks; the quality of textbooks; and the QOT score relative to those in other subjects taught at the same time. In addition, average QOT scores for instructors who have taught in a mix of subjects are similar to those based on scores adjusted to account for subject and student characteristics.