Volume 14, Issue 3 -

We consider the “mismatch” hypothesis in the context of graduate management education. Both blacks and Hispanics, conditional on a rich set of human capital variables, prior earnings and work experience, and non-cognitive attributes, are favored in admission to top 50 Master of Business Administration (MBA) programs. To test for mismatch effects, we provide two comparisons: (1) comparable individuals (in terms of race, gender, and credentials) at different quality MBA programs and (2) individuals of differing race or gender (but with similar credentials) at comparable MBA programs. Despite admission preferences, blacks and Hispanics enjoy similar or even higher returns to selectivity than whites.

There are a number of instances when consumers have imperfect information regarding the quantity they consume. This paper has two objectives: (1) to formally describe how quantity uncertainty is likely to affect consumer behavior and (2) to describe how these changes in behavior are likely to differ depending on how the quantity uncertain good is priced. We develop a theoretical model of consumer behavior under quantity uncertainty which we use to illustrate how different price structures and different locations within price structures matter for how information impacts behavior. We test these hypotheses using a unique panel data set containing information on water consumption habits of more than 88,000 households in the City of Aurora, Colorado. In 2005, Aurora subsidized the purchase of electronic devices for households to monitor water use. These devices provide households with real-time information on their water use. We find that, consistent with the aims of the program, households with the device decreased their water use during periods when they faced a constant marginal price; however, contrary to the aims of the program, their consumption increased during periods when they faced an increasing block rate pricing structure. These results are consistent with the predictions of the theoretical model developed herein.

In July, 2009, when the US Federal minimum wage was increased from $6.55 to $7.25, individuals in nearly one-third of all states were unaffected, since the state minimum wage already exceeded $7.25. We use this variation to make comparisons of the employment of low-skill workers with their peers across states and with workers within states who were arguably unaffected by the increase, using DID and DIDID methods. Our data come from the 2009 Current Population Survey, 4 and 5 months before and after the increase. We find little evidence of negative employment effects for teens or less-educated adults. Further control for demographic characteristics and state fixed effects have relatively small effects on the size and significance of estimated effects.

The theoretical literature on the double-dividend concept is mainly focused on pre-existing distortionary taxes in the labour and capital markets; the relevance of interactions with other taxes is often neglected. Using an analytical model and a numerical general equilibrium model, we analyse the welfare effects of carbon taxes and their interaction with other taxes applied in Russia. We find that substituting carbon taxes for labour taxes in Russia can substantially reduce the cost of carbon taxation compared to returning carbon tax revenues to households in lump-sum form and can even result in welfare gains in Russia. In conclusion, introducing carbon taxes has an indirect corrective effect with respect to the distorting effect of export taxation on energy resources. Furthermore, welfare costs of carbon taxation can be significant under the assumption of perfect international mobility of capital. Nevertheless, the cost can be more than compensated in case of a high carbon trade price.

This study estimates parents’ valuations of small classes by examining the effects of randomly assigned class type on the decision to remove one’s child from the Tennessee Student Teacher Achievement Ratio experiment, using a new hedonic estimation strategy that estimates the cash payment that would be required to generate the same difference in attrition rates as was observed between treatment and control groups. In 2010 dollars, our preferred estimates indicate that parents on the margin of sending their children to private schools valued small classes at $2,000–$18,000 per year relative to a cost of $3,000 per student year.

With the end of National Prohibition in 1933, 30 states gave counties and municipalities the local option to continue alcohol restrictions. Currently, 10% of U.S. counties still maintain a ban on some or all alcohol. Since the Prohibition movement advanced on the association between alcohol use and criminal behavior, this research examines the impact of county-level alcohol restrictions on multiple types of crime across five U.S. states. Standard panel models show a positive relationship between local option policy changes to allow alcohol and crime. The novelty of this research involves comparing the impact of alcohol restrictions across crimes classified by the degree to which an offense is often committed under the influence of alcohol. Results highlight impacts across a number of crime categories with crimes commonly committed under the influence of alcohol as well as crimes involving drug use and even crimes associated with obtaining alcohol all increasing when counties allow the sale and consumption of alcohol.

This paper studies the effect of childcare subsidies on parental labour supply. I use variation arising from changes in the municipality-specific supplement to Finnish child homecare allowance to identify the causal effect of subsidies on the labour force participation of parents. The variation in labour supply incentives is plausibly exogenous, since eligibility depends on municipal-level rules, but not on family income. Robustness checks indicate that the results are not driven by policy endogeneity or residential sorting. I find a robust result that 100 euros higher supplement per month reduces the maternal labour supply by 3 percentage points.

What factors drive the length of a kidnapping experience? A theoretical model is developed to conduct comparative statics. A unique data set covering all kidnappings for ransom in Sardinia between 1960 and 2010 is analyzed. Factors related to the ability to pay and cost of abduction matter. Policies aimed at deterring kidnapping have mixed effects on its duration.

We propose a strategy for assessing how the inflow to the disability insurance program has been governed over time. Using ex-post mortality, we analyze the ex-ante health of individuals entering the program, compared to individuals not entering the program in the same year. Applying this strategy to Sweden, we find large variation in the relative health of new beneficiaries compared to non-beneficiaries over time. Some of the fluctuations correspond well to formal changes to screening stringency. However, we also find large variation in health during periods when no changes to formal eligibility criteria have been pursued.

We test the robustness of recent findings on the benefits of penalty contracts to the environments typical of B2B (and B2G) procurement, where buyers and sellers interact repeatedly, matching is endogenous and competitive, there are contractible and non-contractible tasks, and reputation-based relationships can emerge. Both bonuses and penalties boost efficiency, strongly increasing effort in the contractible task while only mildly crowding it out in the non-contractible one. However, sellers grab a higher fraction of surplus with bonuses, as buyers’ offers become more generous. Consequently, buyers prefer penalties, which may explain why they are so widespread in procurement.

The existence of gender peer effects has been well-documented, yet regarding estimates that are best-suited for policy formation, the literature finds somewhat mixed results. This article builds on the gender peer effects literature in a number of ways. First, we focus on early elementary school students, for which fewer studies exist. We also test whether effects in early elementary grades are subject-specific. Contrary to findings for older grade levels, we find that estimates by gender are subject-specific for the early elementary grades. Second, previous studies using similar estimation have focused on very different geographical areas, while this study makes use of nationally representative elementary school data for the United States. Third, we explore whether effects vary across grades, for which the existing literature finds mixed results. We find that the negative subject-specific effects of having a higher proportion of boys in the classroom increases in magnitude across grades, with insignificant effects in kindergarten, negative and significant by first grade, and larger negative and significant effects by third grade. Our findings suggest that a more balanced gender mix in the classroom is optimal for both reading and math comprehension for both boys and girls. However, regarding math performance, there is also suggestive evidence that a 100% separation of genders could improve girls’ math performance without consequences for boys’ math performance, motivating further research into single-gender subject-specific instruction.

This paper examines how the degree of competition affects incentives to innovate in product quality in a symmetric Cournot oligopolistic model. We model product quality in a quality-ladder framework and find an inverted-U shaped relationship between the number of firms in an industry and R&D efforts in innovation. We test this theoretical prediction using firm-level data for Eastern European and Central Asian countries from the Business Environment and Enterprise Performance Survey and find strong support for it.

Approximately half of the states in the United States have some form of high school exit exam. One purpose of the exit exams is to create a clear bar which students must pass in order to graduate. Effective exit exams may encourage marginal students to spend additional time on schooling in order to pass the exam. This study exploits state-level variations in timing of implementation to understand how students have responded to the state exit exams. This study uses the American Time Use Survey (ATUS). The ATUS captures, in detail, how individuals spend their day. We find that exit exams are associated with an increase in the amount of time that students spend on educational activities by almost 20 minutes per day in the months in which exams are typically given. The increase comes mainly from an increase in time spent in school and not time spent outside of school on education-related activities. The additional time for education appears to be a trade-off with time spent watching television, which shows a significant drop in exam months for students facing exams.

About 60 million children under the age of 18 are left behind by their parents in rural China. This paper studies the effect of migrant parents on the educational attainment of their left-behind children in rural China. A theoretical model of optimal schooling in the context of parental migration is proposed. Then, reduced-form equations are estimated using probit model, instrumental variables probit model, and linear instrumental variables model. Results show that parental migration has a negative effect on children’s school enrollment. This negative effect is significant and sizable on the school enrollment of boys, but insignificant on the school enrollment of girls. The most important source of this robust negative effect on boys is the absence of fathers. Results suggest that left-behind mothers or relatives cannot fulfill fathers’ role successfully in disciplining boys and help with their educational needs.

This article uses the U.S. National Longitudinal Survey of Youth 1979 (NLSY79) to examine the effect of parents’ social skills on their children’s sociability. Similar to many other national surveys, this survey lacks detailed information on parents. To remedy this deficiency, we construct a measure of parents’ sociability skills based on their occupational characteristics extracted from the Dictionary of Occupational Titles (DOT). Even after controlling for a variety of background characteristics, including cognitive skills, we find that the sociability relationships between fathers and sons and between mothers and daughters remain statistically significant. We find that the dollar value to the sons of a given increase in their fathers’ sociability is one-sixth of the value to the sons of the same standard-deviation increase in their fathers’ education.

While it is known that access to physical infrastructure enhances household welfare, there are very few micro-econometric studies that analyze its role in mitigating chronic and transient poverty. This paper aims to bridge this gap in the existing literature by evaluating the impact of a large-scale irrigation infrastructure project implemented in Sri Lanka. It identifies the treatment effect of irrigation access by exploiting a situation where the government used lotteries to distribute irrigated plots. Furthermore, in order to disentangle the channels through which the irrigation reduces poverty, we extend the seasonal consumption smoothing model of Paxson (1993; “Consumption and Income Seasonality in Thailand.” Journal of Political Economy 191(1):39–72) by introducing endogenous credit constraints. Using unique household level monthly panel data over a year, it is shown that with irrigation accessibility, not only the average income increases but also the patterns of income fluctuation changes and the probability of binding credit constraint declines through which transient poverty is mitigated. These empirical results suggest that irrigation infrastructure has a positive impact on reducing both chronic and transient poverty directly and indirectly by improving income and relaxing credit constraints.

This paper studies how the congestion of its editorial process affects an academic journal. In a publishing game played by researchers and editors, we assume that quality screening by editors depends on their ability to properly process the flow of submissions. When too many papers arrive, this ability declines and editors may reject good papers or accept papers with little contribution to scientific knowledge. In this game, a separating equilibrium always exists in which only good researchers submit their papers to the journal. Each paper is accepted and the quality of the journal reaches its highest level. However, when the researchers’ reward for each publication exceeds a given threshold, two hybrid equilibria are also feasible. In these equilibria, authors of low-quality papers submit their papers to the journal and, as the flow of papers exceeds the editors’ capacity of perfect assessment, the selection process becomes imperfect. This creates an opportunity for authors to submit poor quality papers, a behaviour which contributes to the congestion of the editorial process. The various strategies implemented by the editors to oppose congestion are then discussed.

We look at a concentrated market structure to determine the more likely merger when firms are initially asymmetric. A feature of the analysis is that a high cost firm participating in a merger can learn from the low cost participant. The determination of the equilibrium ownership structure (EOS) rests on the size of the cost asymmetries and learning abilities. Using an endogenous merger model, we find that the EOS always involves a merger between the two most efficient firms. This result holds whether firms adopt a decentralized or centralized structure post-merger and whether learning abilities are known or uncertain pre-merger. In most cases, welfare increases after the merger.

A recursive system is employed to investigate the indirect effect of out-migration on gross domestic product (GDP) through remittances in South Asia, namely Bangladesh, India, Nepal, Pakistan, and Sri Lanka. Out-migration is further disaggregated by skill level and country of destination (Middle East and other), and their effects on GDP through remittances are examined. The results suggest that migration and remittances have an important significant effect on the GDP of the countries under study. Of the skill categories, the unskilled category has the largest robust indirect effect on GDP. The effects of migration on GDP by country of destination suggest that migration to the Middle East has a robust and significant impact on GDP. There is some evidence of a combination between the altruistic and self-interested motives of migrants’ to remit.

Does crime respond to changes in the minimum wage? A growing body of empirical evidence indicates that increases in the minimum wage have a displacement effect on low-skilled workers. Economic reasoning provides the possibility that disemployment may cause youth to substitute from legal work to crime. However, there is also the countervailing effect of a higher wage raising the opportunity cost of crime for those who remain employed. We use the National Longitudinal Survey of Youth 1997 cohort to measure the effect of increases in the minimum wage on self-reported criminal activity and examine employment–crime substitution. Exploiting changes in state and federal minimum wage laws from 1997 to 2010, we find that workers who are affected by a change in the minimum wage are more likely to commit crime, become idle, and lose employment. Individuals experiencing a binding minimum wage change were more likely to commit crime and work only part time. Analyzing heterogeneity shows those with past criminal connections are especially likely to see decreased employment and increased crime following a policy change, suggesting that reduced employment effects dominate any wage effects. The findings have implications for policy regarding both the low-wage labor market and efforts to deter criminal activity.