Showing papers in "LSE Research Online Documents on Economics in 2000"

Child development and success or failure in the youth labor market

Abstract: Book description: The economic status of young people has declined significantly over the past two decades, despite a variety of programs designed to aid new workers in the transition from the classroom to the job market. This ongoing problem has proved difficult to explain. Drawing on comparative data from Canada, Germany, France, Sweden, and the United Kingdom, these papers go beyond examining only employment and wages and explore the effects of family background, education and training, social expectations, and crime on youth employment. This volume brings together key studies, providing detailed analyses of the difficult economic situation plaguing young workers. Why have demographic changes and additional schooling failed to resolve youth unemployment? How effective have those economic policies been which aimed to improve the labor skills and marketability of young people? And how have youths themselves responded to the deteriorating job market confronting them? These questions form the empirical and organizational bases upon which these studies are founded.

Conditional minimum volume predictive regions for stochastic processes

Abstract: Motivated by interval/region prediction in nonlinear time series, we propose a minimum volume predictor (MV-predictor) for a strictly stationary process. The MV-predictor varies with respect to the current position in the state space and has the minimum Lebesgue measure among all regions with the nominal coverage probability. We have established consistency, convergence rates, and asymptotic normality for both coverage probability and Lebesgue measure of the estimated MV-predictor under the assumption that the observations are taken from a strong mixing process. Applications with both real and simulated data sets illustrate the proposed methods.

Employment patterns in OECD countries

Abstract: This paper studies the dynamics of labour demand and the determinants of employment rates across the OECD. We find: (i) labour demand adjusts less rapidly when employment protection is more strict and union density is higher; (ii) there is no evidence that overall job turnover is influenced by employment protection; (iii) union density and coverage are negatively related to employment/population ratios, although this effect can be entirely offset by coordination; (iv) strict employment protection laws are strongly associated with lower employment rates for women and young people but have no impact on the rates for prime age men.

Trust and voluntary organisations: three theoretical approaches

Abstract: The notion of trust is one of the most topical issues in current social science theorising covering such diverse approaches as transaction costs economics, social capital, and cognitive sociology. In different ways and for different purposes, these approaches address the role of voluntary and nonprofit organisations, although, as this paper argues, much of this thinking remains sketchy and underdeveloped. At the same time, the notion of trust has long played a central role in the economics of non-profit organisations, yet these developments have not been fully linked with the wider effort mentioned above. The purpose of this paper is to explore what non-profit approaches can offer trust theories, and vice versa. We first set out to explicate major approaches to trust in economics, sociology and political science, using the non-profit or voluntary organisation as a focal point. We then assess the various approaches in terms of their strengths and weaknesses, and, finally, identify key areas for theoretical advancement in an effort to enrich current theorising. In particular, we point to the social movement literature, the social psychology of trust, and recent thinking about civil society as fruitful avenues for theoretical advancement in our understanding this phenomenon.

Factor residuals in SUR regressions: estimating panels allowing for cross sectional correlation

Abstract: This paper describes a method for estimating panels by imposing a factor structure on the residuals. The method allows SUR estimation of panel models by providing a full-rank estimator of the system covariance matrix when the usual estimate is rank-deficient. We charactersie completely the circumstances when this is possible. When the usual estimator is of full rank, our procedure provides a more parsimonious representation of the covariance matrix, which can lead to efficiency gains in finite samples. Monte Carlo analysis of convergence regressions and PPP regressions in the Heston-Summers data-set indicates that the proposed estimator has better performance in terms of RMSE and bias than standard panel or SUR estimators (where available), as well as offering unbiased inference.

A critical survey of recent research in Chinese economic history

Abstract: China is a resilient dinosaur. In contrast with so many other great empires in Eurasia – the Egyptian, Roman, Byzantine, Arabian, Ottoman and Tsarist-Soviet – China has the longest history. The Empire kept expanding until the mid-nineteenth century when it practically reached the physical limits for a predominantly agrarian economy. The size and wealth of the Chinese economy, the variety of its produce and the degree of commercialisation and urbanisation made China one of the most popular international trading destinations from Roman times. With the rise of the opium trade in the early nineteenth century, however, the Chinese economy has been severely impoverished at least in relative terms. In response, since the 1870s, the Chinese sought to rescue their civilisation by adopting a wide range of foreign examples in social engineering for social experiments and reforms. Nevertheless, China's per capita GDP is still very low despite its political influence in the world since the 1970s. It is justifiable to view China as a case of growth failure in the recent centuries. The study of Chinese economic history has the same age as China's modern history itself. The field has been led and dominated by the West. Scholarly attempts have been made since the turn of this century to explain China's premodern success and its downfall after the Opium War. Two approaches can be identified: the 'Sinological approach' which refers to China only and the 'comparative method' which compares China with the West. The former tries to find out what achievements China managed to make and when and how it made them and the latter seeks to understand why premodern China was not industrialised.

Nonparametric estimation of ratios of noise to signal in stochastic regression

Abstract: In this paper, we study three different types of estimates for the noise-to signal ratios in a general stochastic regression setup. The locally linear and locally quadratic regression estimators serve as the building blocks in our approach. Under the assumption that the observations are strictly stationary and absolutely regular, we establish the asymptotic normality of the estimates, which indicates that the residual-based estimates are to be preferred. Further, the locally quadratic regression reduces the bias when compared with the locally linear (or locally constant) regression without the concomitant increase in the asymptotic variance, if the same bandwidth is used. The asymptotic theory also paves the way for a fully data-driven under smoothing scheme to reduce the biases in estimation. Numerical examples with both simulated and real data sets are used as illustration.

Private investment and political uncertainty

Abstract: Recent theoretical and empirical work has demonstrated a clear negative link between macroeconomic and political uncertainty and levels of private investment across countries. This result raises the question what institutions might help reduce this uncertainty, in particular by allowing host governments to limit their own possibilities to act opportunistically with respect to investors. Some have argued that governments might benefit from joining a multilateral investment agreement, but there remain doubts both about the enforceability and the desirability of such an accord. An alternative possibility, proposed in a seminal article by North and Weingast (1989), is that political institutions characterized by checks and balances can allow governments to credibly commit not to engage in ex post opportunism with respect to investors. In this paper I propose a modified version of this hypothesis and test it using new cross-country data on political institutions. I also use a quantile regression technique which allows the estimated effect of political institutions to vary across countries and over time.

The mainstreaming of the third sector into public policy in England in the late 1990s: whys and wherefores

Abstract: The voluntary or third sector in England is now receiving more sustained attention from policy makers than ever before. This paper claims that this situation, particularly as given tangible expression through the development of a Compact between the Government and representatives of the third sector, amounts to the mainstreaming of the third sector onto the public policy agenda. It seeks to explain why this has happened in the late 1990s, framed by the “multiple streams” approach of US political scientist John W. Kingdon. The paper draws upon a review of relevant policy and political literature, and interviews with stakeholders in the Government and the third sector, to examine the respective contributions of individual and collective actors in the policy, problem and politics streams.

The right to know: disclosure of information for collective bargaining and joint consultation

Abstract: The legal obligation on employers to provide information to employees has grown since the early 1970s. At that time, the emphasis was on disclosure for collective bargaining. In the 1980s and 1990s, the emphasis shifted more to disclosure for joint consultation. In the context of new legislation, the possibility of further interventions from Europe, and a greater commitment to openness in other areas of company and public life, disclosure of information for collective bargaining and joint consultation at work is again on the agenda. This article focuses on disclosure for both of these processes. Disclosure for collective bargaining is the most developed and potentially significant area of the law from an industrial relations perspective. Disclosure for joint consultation, however, has been the most dynamic area in recent years. Voluntary information provision by firms has also been a significant part of developing human resource management practice. The paper therefore provides a broad examination of the law on disclosure. The UK provisions are conceptualised as constituting an agenda-driven disclosure model; i.e. the trigger for their use lies within the bargaining agenda. By contrast, the provisions stemming from European initiatives are event-driven; i.e. they are triggered by specific employer initiated events that affect employment contracts in other ways irrespective of the representative context. In the final sections, we attempt a broader evaluation of the intent and impact of the legislation and assess the pros and cons of the different approaches.

The third sector and social care for older people in England: towards an explanation of its contrasting contributions in residential care, domiciliary care and day care

Abstract: This paper reviews the historical and recent development of the third sector in social care services for older people, and uses this as a springboard to develop a typology to capture in stylised form the diversity of providers within the sector. After reviewing a range of evidence concerning the nature of the third sector’s relative contribution, three propositions are developed to explain why this balance varies so significantly between residential care, domiciliary care and day care. First, differences in the character of the regulatory regime, reflecting both the historical legacy of market development and different attributes of the services and their users; second, the nature of the demand for, and supply of, volunteers; and third, variations in the internal composition of the third sector. The last proposition underscores the importance of attending to internal variety within the third sector in understanding its contribution to the broader mixed economy of care.

A simple model of the transformational recession under a limited mobility constraint

Abstract: This paper considers the impact on sectoral outputs and employments of rapid and large changes in relative prices, such as those which occurred in transition economies during the 1990s. A simple general equilibrium model is developed in which price changes are induced by a tax reform and resource mobility is restricted. The reform is designed to improve the quality of the price system, but is shown to cause a recession the size of which is proportional to the initial tax distortion. It is also demonstrated that a wage flexibility would moderate the magnitude of the recession, but this gain would be obtained at a cost in longer term efficiency, and would be, in any case, unsustainable.

Cross-country growth comparison : theory to empirics

Abstract: This paper reviews the cross-country record of economic growth, using as organizing framework how economic theory has guided that empirical analysis. The paper argues that recent studies of economic growth—both empirical and theoretical—distinguish from previous work in three distinct ways:1. An explicit focus on cross-country growth and development experiences; 2. Improved, more extensive cross-country data; 3. A heightened need, driven by real-world topicality, for understanding the role of knowledge and technology in economic growth.

The influence of neighbourhood effects on education decisions in a nationally funded education system : the case of Australia

Abstract: Empirical papers studying the effects of neighbourhood characteristics on socio-economic variables have predominantly used US data. We argue that the local nature of the US schooling system means that neighbourhood effects on education decisions may act through fiscal or social channels. We use data for a nationally funded public schooling system to identify neighbourhood effects in an environment where the level of school funding is independent of neighbourhood composition. We identify two different types of neighbourhood effects on school dropout. First, teenagers are more likely to dropout if the average dropout rate in the neighbourhood is high. Second, teenagers are more likely to dropout if they live in neighbourhoods with a high percentage of adults with vocational qualifications.

Growth, Productivity and Employment

Abstract: Productivity comparisons need to be based on a careful definition of the objectives. Labour productivity per hour worked is the best measure of prosperity per effort at any time, but can sometimes be achieved at the expense of unemployment or low capital productivity. Total factory productivity is the nearest measure we have to absolute efficiency, but that does not mean that it is an appropriate policy maximand. Performance can, therefore only be compared by looking at several different measures. Using this conceptual background to compare American, French, German, and UK productivity, the author concludes that between the US and continental economies social choices and trade-offs are the key drivers of observed differences, but that the UK is still behind both the Continent and the US on absolute efficiency. The policy choices implied for the UK are explored.

Valuation and evaluation: measuring the quality of life and evaluating policy

Abstract: This paper is about measuring social well-being and evaluating policy Part I is concerned with the links between the two, while Parts II and III, respectively, are devoted to the development of appropriate methods of measuring and evaluating In Part II (Sections 4-7) I identify a minimal set of indices for spanning a general conception of social well-being The analysis is motivated by the frequent need to make welfare comparisons across time and communities A distinction is drawn between current well-being and sustainable well-being Measuring current well-being is the subject of discussion in Sections 5-6 It is argued that a set of five indices, consisting of private consumption per head, life expectancy at birth, literacy, and indices of civil and political liberties, taken together, are a reasonable approximation for the purpose in hand Indices of the quality of life currently in use, such as UNDP's Human Development Index, are cardinal measures Since indices of civil and political liberties are only ordinal, aggregate measures of social well-being should be required to be ordinal In this connection, the Borda index suggests itself In Section 6 the Borda index is put to work on data on what were 46 of the poorest countries in the early 1980s Interestingly, of the component indices, the ranking of countries in the sample in terms of life expectancy at birth is found to be the most highly correlated with the countries' Borda ranking Even more interestingly, the ranking of countries in terms of gross national product (GNP) per head is almost as highly correlated There can be little doubt that this finding is an empirical happenstance But it may not be an uncommon happenstance If this were so, GNP per head could reasonably continue to be used as a summary measure of social well-being, even though it has no theoretical claims to be one It is widely thought that net national product (NNP) per head measures the economic component of sustainable wel

Fixed-term contracts and unemployment: an efficiency wage analysis

Abstract: During the 1980s, many European countries introduced fixed-term contracts to fight high and persistent levels of unemployment. Although these contracts have been widely used, unemployment has remained about the same after fifteen years. This paper builds a theoretical model to reconcile these facts. We analyse the labour market effect of the introduction of fixed-term contracts and the firm''s choice of contracts are studied. Permanent contracts are the standard way to offer incentives, but fixed-term contracts are cheaper. This generates an externality, which can make employment higher in the system with only permanent contracts. As a consequence, from a social point of view, the share of fixed-term contracts is too large. Increases in the renewal rate of fixed-term contracts into permanent contracts lead to higher employment levels. Finally, the model highlights the interactions between different rigidities in the labour market. Aggregate employment and the share of temporary contracts are affected in the same way by the firing costs and the flexibility of wages.

On the cutting edge, or otherwise, of media and communication research

Abstract: Research at the forefront, new fields for research, the cutting edge? Given this rather ambitious and possibly grandiose brief, I began by asking around among my colleagues for their views, I kept my ears open at the recent ICA in San Francisco, so as to listen out for the new ideas in the air before they reached the always-delayed publication stage, and I scanned recent issues of the media and communication journals. But while the ICA was full of interesting ideas and people, I did not detect any major new orientations. Similarly, my colleagues looked rather blank when asked for the cutting edge in media research. And the journals are, by and large, publishing the same kinds of articles on the same kinds of subjects as they always do. In this brief paper, I offer some general remarks about the state of media and communications research, using audience research as my example. These remarks focus on the disciplinary status and ambitions of media and communications research, and are certainly not intended as any kind of attack media and communications research or researchers: there is a huge amount of interesting, valuable, productive and thoughtprovoking research going on across many fronts, though in the main, I see it as contributing more to the task of consolidation rather than of innovation. By contrast, if we consider how the study of media and communications fits into the rest of social and cultural debate, there are, I suggest, two widely acknowledged cutting edges, both of which have a strong interface with media and communications. One states that social theory is where the action is: obvious and important examples include the theory of late modernity, globalisation, the public sphere, individualisation, network society, post-Colonial theory and ethnic or cultural diaspora. Primarily but not entirely arising from the engagement between continental philosophy and sociological theory, this interdisciplinary enterprise is generating a new set of concepts for thinking about the importance of media and communications, among other things, in a globalised world (Giddens, 1991; Thompson, 1995). The other states that new technological developments in media, information and communication technologies now lead social research: hence the return of medium theory, the shift towards studies of users rather than of audiences, research on interactivity at the interface between interpersonal and mass PLENARY SESSION I

Attitudes towards risk and inequality : a questionnaire-experimental approach

Abstract: Orderings of income distribution in terms of inequality should be closely related to orderings in terms of risk. Using a novel mult-country questgionnaire experiment we examine the basis for this claim in terms of respondents' distributional perceptions. We show that in terms of both inequality and risk individuals consistently reject one of the standard axioms of distributional comparison. Moreover, there are significant differences in the 'maps' of inequality and risk comparisons. Rejection of the orthodox approach is less likely to occur when distributional comparisons involve extremes of the distributions.We show that certain key background variables are overwhelmingly important in predisposing individuals toward acceptance or rejection of the orthodox basis for distributional comparisons. This paper forms part of the research programme of the TMR network Living Standards, Inequality and Taxation [Contract No. ERBFMRXCT 980248] of the European Communities whose financial support is gratefully acknowledged.

The third sector and welfare state modernisation: inputs, activities and comparative performance

Abstract: This paper charts the economic contribution of the third sector in the UK, noting its significant presence in core welfare state fields, and setting it in comparative international context. It then offers a conceptual framework, the “production of welfare” approach, for analysing how the third sector “performs” in welfare states in terms of inputs and outputs. Efficiency, effectiveness, equity, advocacy, choice and participation are discussed in this context. Social and political pressures which make it imperative to examine efficiency in the particular case of social care for older people in Europe are then identified, and the third sector’s “performance” in terms of economy, efficiency and effectiveness is explored.

Semi-Parametric Indirect Inference

Abstract: We develop in this paper a generalization of the Indirect Inference (II) to semi-parametric settings and termed Semi-parametric Indirect Inference (SII). We introduce a new notion of Partial Encompassing which lays the emphasis on Pseudo True Values of Interest. The main difference with the older notion of encompassing is that some components of the pseudo-true value of interest associated with the structural parameters do correspond to true unknown values. This enables us to produce a theory of robust estimation despite mis-specifications in the structural model being used as a simulator. We also provide the asymptotic probability distributions of our SII estimators as well as Wald Encompassing Tests (WET) and advocate the use of Hausman type tests on the required assumptions for the consistency of the SII estimators. We illustrate our theory with examples based on semi-parametric stochastic volatility models.

Common structure in panels of short time series

Abstract: Typically, in many studies in ecology, epidemiology, biomedicine and others, we are confronted with panels of short time–series of which we are interested in obtaining a biologically meaningful grouping. Here, we propose a bootstrap approach to test whether the regression functions or the variances of the error terms in a family of stochastic regression models are the same. Our general setting includes panels of time–series models as a special case. We rigorously justify the use of the test by investigating its asymptotic properties, both theoretically and through simulations. The latter confirm that for finite sample size, bootstrap provides a better approximation than classical asymptotic theory.We then apply the proposed tests to the mink–muskrat data across 81 trapping regions in Canada. Ecologically interpretable groupings are obtained, which serve as a necessary first step before a fuller biological and statistical analysis of the food chain interaction.

Galtonian Regression of Intergenerational Income Linkages: Biased Procedures, a New Estimator and Mean-Square Error Comparisons

Abstract: Because the permanent incomes of parents and children are typically unobserved, the estimation of the intergenerational correlation via the use of proxy variables entails an errors-in-variables bias. By solving a system of moment equations for income observed at a given year, and a T-period average of this variable, we derive an analytical form for the signal to total variance ratio. In turn, we propose a simple estimator of the intergenerational elasticity via division of the OLS estimator of this quantity. Estimates of the intergenerational elasticity derived from a PSID sample range between 0.34 and 0.69. The averaging estimator provides intermediary values between OLS and the proposed estimator. Persistence is higher for family income measures than labor market outcomes. Estimates generally increase for moving average specifications in comparison to the assumption that measurement errors are uncorrelated. The three estimators are further examined in the light of their mean-square errors (square bias plus variance).

Efficiency Properties of Rational Expectations Equilibria with Asymmetric Information

Abstract: We analyze the welfare properties of rational expectations equilibria (REE) in economies with asymmetrically informed agents and incomplete markets We ask whether a planner can improve upon an equilibrium allocation, using an individually rational and incentive compatible mechanism, and subject to the same asset constraints as agents For an REE that reveals any information at all, the planner can generically bring about an interim Pareto improvement even conditional on the information that is available to agents in equilibrium He can do so by altering prices while keeping their informational content fixed Furthermore, for any partially revealing equilibrium, the planner can generically effect an ex post Pareto improvement by providing more information to agents, while controlling for price effects

On Intercept Estimation in the Sample Selection Model

Abstract: We provide a proof of the consistency and asymptotic normality of the estimator suggested by Heckman (1990) for the intercept of a semiparametrically estimated sample selection model. The estimator is based on 'identification at infinity' which leads to non-standard convergence rate. Andrews and Schafgans (1998) derived asymptotic results for a smoothed version of the estimator. We examine the optimal bandwidth selection for the estimators and derive asymptotic MSE rates under a wide class of distributional assumptions. We also provide some comparisons of the estimators and practical guidelines.

Defining the non-profit sector: some lessons from history

Abstract: This paper seeks to establish whether the structural-operational definition of the sector, used by the John Hopkins Comparative Non-profit Sector Project (JHCNSP), is universal in its applicability. Historical case studies of primary health care and social housing provision in nineteenth-century England demonstrate that the definition cannot accommodate the institutional diversity of earlier periods and does not produce meaningful sectoral distinctions. The structural-operational definition rules out of the sector a significant proportion of non-statutory, non-profit maximising providers. In particular, it excludes the mutual aid organisations which are widely recognised as important for the development of civil society and which have historically been considered to be key components of the sector. These case studies suggest that the structural-operational definition limits the capacity of the JHCNSP to fulfil its aim of establishing “the factors that promote or retard the sector’s development” due to potential measurement errors and because of the pattern of development which the project implicitly assumes for the non-profit sector.

Child farm labour: theory and evidence

Abstract: This paper presents a dynamic model of child labour supply in a farming household. The model clarifies the roles of land, income and household size, allowing labour and credit market imperfections. If labour markets are imperfect, child labour is increasing in farm size and decreasing in household size. The effect of income is shown to depend upon whether the effective choice is between work and school or whether leisure is involved. Credit market constraints tend to dilute the positive impact of farm size and reinforce the negative effect of income. The model is estimated for rural Ghana and Pakistan. A striking finding of the paper is that the effect of farm size at given levels of household income is significantly positive for girls in both countries, but not for boys. This is consistent with the finding, in other contexts, that females exhibit larger substitution effects in labour supply. Increases in household income have a negative impact on work for boys in Pakistan and for girls in Ghana but there is no income effect for the other two groups of children. We find interesting effects of household size and composition, female headship, and mothers' post-secondary education.

Decomposing Inequality in Greece: Results and Policy Implications

Abstract: This paper investigates the extent to which certain social characteristics and personal attributes could help explain income inequality in Greece. This analysis is quite revealing for understanding and explaining income idfferences among certain population subgroups with apparent policy implications. The degree to which overall inequality is attributable to inequality between these sub groups or to inequality within them is investigated, employing a decomposition analysis by population subgroups. The results show that there are significant differences in the average household income, in its structure and in inequality between the subgroups. However, despite these differences, in all groups used the between-group inequality accounts only for a small sigment of the overall inequality.