Institute for the Study of Labor

About: Institute for the Study of Labor is a nonprofit organization based out in Bonn, Germany. It is known for research contribution in the topics: Wage & Unemployment. The organization has 2039 authors who have published 13475 publications receiving 439376 citations.

What Can Survey Forecasts Tell Us About Informational Rigidities

Abstract: This paper assesses both the support for and the properties of informational rigidities faced by agents. Specifically, we track the impulse responses of mean forecast errors and disagreement among agents after exogenous structural shocks. Our key contribution is to document that in response to structural shocks, mean forecasts fail to completely adjust on impact, leading to statistically and economically significant deviations from the null of full information: the half life of forecast errors is roughly between 6 months and a year. Importantly, the dynamic process followed by forecast errors following structural shocks is consistent with the predictions of models of informational rigidities. We interpret this finding as providing support for the recent expansion of research into models of informational rigidities. In addition, we document several stylized facts about the conditional responses of forecast errors and disagreement among agents that can be used to differentiate between some of the models of informational rigidities recently proposed. We use a variety of structural shocks, expectation surveys, and robustness checks to establish these facts about informational rigidities.

Reputation and Reciprocity: Consequences for the Labour Relation

Abstract: Recent evidence highlights the importance of social norms in many economic relations. However, many of these relationships are long-term and provide repeated game incentives for performance. We experimentally investigate interaction effects of reciprocity and repeated game incentives in two treatments (one-shot and repeated) of a gift-exchange game. In both treatments we observe reciprocity, which is strengthened in the repeated game. A detailed analysis shows that in the repeated game some subjects imitate reciprocity. Thus, reciprocity and repeated game incentives reinforce each other. Observed behaviour is robust against experience. We conclude that a long-term interaction is a "reciprocity-compatible" contract enforcement device.

Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia

Abstract: Natural and agricultural resources for which there is a substantial black market, such as coca, opium, and diamonds, appear especially likely to be exploited by the parties to a civil conflict. Even legally traded commodities such as oil and timber have been linked to civil war. On the other hand, these resources may also provide one of the few reliable sources of income in the countryside. In this paper, we study the economic and social consequences of a major exogenous shift in the production of one such resource - coca paste - into Colombia, where most coca leaf is now harvested. Our analysis shows that this shift generated only modest economic gains in rural areas, primarily in the form of increased self-employment earnings and increased labor supply by teenage boys. The results also suggest that the rural areas which saw accelerated coca production subsequently became more violent, while urban areas were affected little. The acceleration in violence is greater in departments (provinces) where there was a pre-coca guerilla presence. Taken together, these findings are consistent with the view that the Colombian civil conflict is fueled by the financial opportunities that coca provides, and that the consequent rent-seeking activity by combatants limits the economic gains from coca cultivation.

Linguistic Distance: A Quantitative Measure of the Distance Between English and Other Languages

Abstract: This paper develops a scalar or quantitative measure of the "distance" between English and a myriad of other (non-native American) languages. This measure is based on the difficulty Americans have learning other languages. The linguistic distance measure is then used in an analysis of the determinants of English language proficiency among adult immigrants in the United States and Canada. It is shown that, when other determinants of English language proficiency are the same, the greater the measure of linguistic distance, the poorer is the respondent's English language proficiency. This measure can be used in research, evaluation and practitioner analyses, and for diagnostic purposes regarding linguistic minorities in English-speaking countries. The methodology can also be applied to develop linguistic distance measures for other languages.

Forecasting with Panel Data

Abstract: This paper gives a brief survey of forecasting with panel data. Starting with a simple error component regression model and surveying best linear unbiased prediction under various assumptions of the disturbance term. This includes various ARMA models as well as spatial auto-regressive models. The paper also surveys how these forecasts have been used in panel data applications, running horse races between heterogeneous and homogeneous panel data models using out of sample forecasts.