Showing papers in "The Economic Journal in 2015"

Untangling Trade and Technology: Evidence from Local Labour Markets

Abstract: We juxtapose the eects of trade and technology on employment in US local labour markets between 1980 and 2007 Labour markets whose initial industry composition exposes them to rising Chinese import competition experience significant falls in employment, particularly in manufacturing and among non-college workers Labour markets susceptible to computerisation due to specialisation in routine task-intensive activities instead experience occupational polarisation within manufacturing and non-manufacturing but no net employment decline Trade impacts rise in the 2000s as imports accelerate, while the eect of technology appears to shift from automation of production activities in manufacturing towards computerisation of informationprocessing tasks in non-manufacturing

Curbing the Credit Cycle

Abstract: Credit cycles have been a characteristic of advanced economies for over 100 years On average, a sustained pick-up in the ratio of credit to GDP has been highly correlated with banking crises The boom phases of the cycle are characterised by large deviations in credit from trend A range of mechanisms can generate these effects, each of which has strategic complementarity between banks at its core Macro-prudential policy could curb these credit cycles, both through raising the cost of maintaining risky portfolios and through an expectations channel that operates via banks' perceptions of other banks' actions

Processing Trade, Tariff Reductions and Firm Productivity: Evidence from Chinese Firms

Abstract: This paper explores how reductions in taris on imported inputs and …nal goods aect …rm productivity by exploiting the special taritreatment that processing …rms apply on imported inputs as opposed to those of non-processing …rms. Highly disaggregated Chinese transaction-level trade data and …rm-level production data from 2000 to 2006 are used to construct …rm-level input and output taris. Careful examination of the extent of …rm engagement in processing trade and in controlling for various sources of endogeneity reveal that less productive …rms choose to engage in processing trade. More importantly, unlike previous …ndings, reductions in output taris have a greater eect on productivity improvement compared with reductions in input taris due, in large part, to the fact that processing trade in China enjoys zero taris on imported inputs. JEL: F1, L1, O1, O2

What parents want: school preferences and school choice

Abstract: We investigate parents' preferences for school attributes in a unique data set of survey, administrative, census and spatial data. Using a conditional logit, incorporating characteristics of households, schools and home–school distance, we show that most families have strong preferences for schools' academic performance. Parents also value schools' socio-economic composition and distance, which may limit the potential of school choice to improve academic standards. Most of the variation in preferences for school quality across socio-economic groups arises from differences in the quality of accessible schools rather than differences in parents' preferences, although more advantaged parents have stronger preferences for academic performance.

Do Differences in Schools' Instruction Time Explain International Achievement Gaps? Evidence from Developed and Developing Countries

Abstract: The time that children spend in school varies across countries. Do these differences explain international gaps in pupils' academic achievements? In this article I estimate the effects of instructional time on students' achievement using PISA 2006 data, which include data samples from over 50 countries. I find that instructional time has a positive and significant effect on test scores, and that the effect is much lower in developing countries. Evidence also suggests that the productivity of instructional time is higher in countries which implemented school accountability measures or that gave schools autonomy in budgetary decisions and in hiring/firing teachers.

Convergence and Modernisation

Abstract: In a country panel since 1960, the estimated annual convergence rate for GDP is 1.7%, conditional on time-varying explanatory variables. With country fixed effects, the estimated convergence rate is misleadingly high. With data starting in 1870, country fixed effects are reasonable and the estimated convergence rate is 2.6%. Combining the two estimates suggests conditional convergence close to the ‘iron-law’ rate of 2%. With post-1960 data, estimation without country fixed effects reveals positive effects of GDP and schooling on law and order and democracy – consistent with the modernisation hypothesis. With post-1870 data, estimation without or with country fixed effects indicates modernisation.

Knowledge Spillovers, Innovation and Growth

Abstract: Cohen and Levinthal (1989) introduced the notion of absorptive capacity and demonstrated that knowledge spillovers can induce complementarities in R&D efforts. We show that this idea has rich implications when analysing important aspects of the growth process such as cross-country convergence and divergence, the international co-ordination of climate change policies, and the role of openness in the production of ideas. We also show that the notion of absorptive capacity sets an agenda for new empirical and theoretical analyses of the role of R&D spillovers in innovation and growth.

Endogenous Growth, Convexity of Damage and Climate Risk: How Nordhaus' Framework Supports Deep Cuts in Carbon Emissions

Abstract: ‘To slow or not to slow’ (Nordhaus, 1991) was the first economic appraisal of greenhouse gas emissions abatement and founded a large literature on a topic of worldwide importance. We offer our assessment of the original article and trace its legacy, in particular Nordhaus's later series of ‘DICE’ models. From this work, many have drawn the conclusion that an efficient global emissions abatement policy comprises modest and modestly increasing controls. We use DICE itself to provide an initial illustration that, if the analysis is extended to take more strongly into account three essential elements of the climate problem – the endogeneity of growth, the convexity of damage and climate risk – optimal policy comprises strong controls.

The role of language in shaping international migration.

Abstract: This paper examines the importance of language in international migration from multiple angles by studying the role of linguistic proximity, widely spoken languages, linguistic enclaves and language-based immigration policy requirements. To this aim we collect a unique dataset on immigration flows and stocks in 30 OECD destinations from all world countries over the period 1980-2010, and construct a set of linguistic proximity measures. Migration rates increase with linguistic proximity and with English at destination. Softer linguistic requirements for naturalization and larger linguistic communities at destination encourage more migrants to move. Linguistic proximity matters less when local linguistic network are larger.

Peer effects in charitable giving: Evidence from the (running) field

Abstract: There is a widespread belief that peer effects are important in charitable giving but little evidence on how donors respond to their peers. Analysing a unique data set of donations to online fund-raising pages, we find positive and sizeable peer effects: a £10 increase in the mean of past donations increases giving by £2.50, on average. Donations respond to both very large and very small amounts and to changes in the mode. We find little evidence that donations signal charity quality – our preferred explanation is that donors use information on earlier donations to decide what is appropriate for them to give.

The Effect of Education on Criminal Convictions and Incarceration: Causal Evidence from Micro‐data

Abstract: This article studies the causal effect of educational attainment on conviction and incarceration using Sweden's compulsory schooling reform as an instrument for years of schooling and a 70% sample from Sweden's Multigenerational Register matched with more than 30 years of administrative crime records. We find a significant negative effect of schooling on male convictions and incarceration; one additional year of schooling decreases the likelihood of conviction by 6.7% and incarceration by 15.5%. Though OLS estimates for females are of a similar magnitude to those for males, we find no evidence of a significant causal effect for women.

Immigration and House Prices in the UK

Abstract: This article studies the effect of immigration on house prices in the UK. It finds that immigration has a negative effect on house prices and presents evidence that this negative effect is due to the mobility response of the native population. Natives respond to immigration by moving to different areas and those who leave are at the top of the wage distribution. This generates a negative income effect on housing demand and pushes down house prices. The negative effect of immigration on house prices is driven by local areas where immigrants have lower education

The Economic Costs of Organised Crime: Evidence from Southern Italy

Abstract: I examine the post-war economic development of two regions in southern Italy exposed to maa activity after the 1970s and apply synthetic control methods to estimate their counterfactual economic performance in the absence of organized crime. The synthetic control is a weighted average of other regions less aected by maa activity that mimics the economic structure and outcomes of the regions of interest several years before the advent of organized crime. The comparison of actual and counterfactual development shows that the presence of maa lowers GDP per capita by 16%, at the same time as murders increase sharply relative to the synthetic control. Evidence from electricity consumption and growth accounting suggests that lower GDP reects a net loss of economic activity, due to the substitution of private capital with less productive public investment, rather than a mere reallocation from the ocial to the unocial sector.

Financial Flows and the International Monetary System

Abstract: We review the findings of the literature on the benefits of international financial flows and find that they are quantitatively elusive. We then present evidence on the existence of a global cycle in gross cross-border flows, asset prices and leverage and discuss its impact on monetary policy autonomy across different exchange rate regimes. We focus in particular on the effect of US monetary policy shocks on the UK's financial conditions.

Does Management Matter in schools

Abstract: We collect data on management practices in over 1,800 high schools in eight countries. We show that higher management quality is strongly associated with better educational outcomes. The UK, Sweden, Canada and the US obtain the highest management scores, followed by Germany, with a gap before Italy, Brazil and India. We also show that autonomous government schools (government funded but with substantial independence like UK academies and US charters) have higher management scores than regular government or private schools. Almost half of the difference between the management scores of autonomous and regular government schools is accounted for principal leadership and governance. There are major disparities in the quality of education within and between countries (OECD, 2012). School managerial practices may be an important reason for such differences. Unfortunately, understanding the role of management in schools within and across countries has been held back by a lack of robust and comparable instruments to systematically measure management practices and, thus, a lack of good data. The key purpose of this article is to develop an international management index for schools and present descriptive evidence on management quality and education outcomes across schools of different types within and across countries. We used double-blind telephone interviews with school principals to collect information on management practices for over 1,800 schools across eight countries. To construct our management index, we average across 20 basic management practice measures in four areas of management: operations, monitoring, target setting and people. Each question is evaluated against a scoring grid that ranges from one (‘worst practice’) to five (‘best practice’). Our management index for each school represents the average of these scores. We also constructed measures of school-level pupil outcomes for these schools (when data were available) from examination results across regions and countries, creating a matched management-pupil outcome international data set at the school level. These data allow us to document some stylised facts. First, we show that the adoption of basic managerial practices varies significantly across and within countries. The UK, Sweden, Canada and the US obtain the highest average scores, followed by Germany, Italy and Brazil, while India has the lowest scores. About half of the variance in school management is at the country-level. This share is larger in education than we have

Poor Institutions, Rich Mines: Resource Curse in the Origins of the Sicilian Mafia

Abstract: With weak law-enforcement institutions, a positive shock to the value of natural resources may increase demand for private protection and opportunities for rent appropriation through extortion, favouring the emergence of mafia-type organisations. We test this hypothesis by investigating the emergence of the mafia in twentieth century Sicily, where a severe lack of state property-rights enforcement coincided with a steep rise in international demand for sulphur, Sicily's most valuable export commodity. Using historical data on the early incidence of mafia activity and on the distribution of sulphur reserves, we document that the mafia was more present in municipalities with greater sulphur availability.

Instruction time, Classroom Quality, and Academic Achievement

Abstract: It seems likely the magnitude of any causal link between achievement and instruction time depends upon the quality of instruction, the classroom environment and the rate that students translate classroom time into added knowledge. In this article, we use panel data methods to investigate instruction time effects in the 2009 Programme for International Student Assessment data. The empirical analysis shows that achievement increases with instruction time and that the increase varies by both the amount of time and the classroom environment. The results indicate that school circumstances are important determinants of the benefits and desirability of increased instruction time

Intergenerational Wealth Mobility in England, 1858–2012: Surnames and Social Mobility

Abstract: This article uses a panel of 18,869 people with rare surnames whose wealth is observed at death in England and Wales 1858–2012 to measure the intergenerational elasticity of wealth over five generations. We show, using rare surnames to track families, that wealth is much more persistent than standard one generation estimates would suggest. There is still a significant correlation between the wealth of families five generations apart. We show that this finding can be reconciled with standard estimates of wealth mobility by positing an underlying first order Markov process of wealth inheritance with an intergenerational elasticity of 0.70–0.75 throughout the years 1858–2012.

The Productivity of Working Hours

Abstract: Observations on munition workers, most of them women, are organised to examine the relationship between their output and their working hours. The relationship is non-linear: below an hour's threshold, output is proportional to hours; above a threshold, output rises at a decreasing rate as hours increase. Implications of this finding for the estimation of labour supply functions are considered. The findings also link up with the current research on the effects of long working hours on accidents and injuries.

Early health shocks, intra-household resource allocation and child outcomes

Abstract: An open question in the literature is whether families compensate or reinforce the impact of child health shocks. Discussions usually focus on one dimension of child investment. This paper examines multiple dimensions using household survey data on Chinese child twins whose average age is 11. We find that, compared with a twin sibling who did not suffer from negative early health shocks at ages 0-3, the other twin sibling who did suffer negative health shocks received RMB 305 more in terms of health investments, but received RMB 182 less in terms of educational investments in the 12 months prior to the survey. In terms of financial transfers over all dimensions of investment, the family acts as a net equalizer in response to early health shocks for children. We estimate a human capital production function and establish that, for this sample, early health shocks negatively affect child human capital, including health, education, and socioemotional skills. Compensating investments in health as measured by BMI reduce the adverse effects of health shocks by 50%, but exacerbate the adverse impact of shocks on educational attainment by 30%.

The Effects of Surveillance Cameras on Crime: Evidence from the Stockholm Subway

Abstract: I study the effects of surveillance cameras on crime in the Stockholm subway system. Beginning in 2006, surveillance cameras were installed in subway stations at different points in time. Difference-in-difference analysis reveals that introduction of the cameras reduced crime by approximately 25% at stations in the city centre. The types of crimes deterred by cameras are planned crime, that is, pickpocketing and robbery. It is also shown that some of the crimes were displaced to surrounding areas. The cost of preventing one crime by the use of surveillance cameras is approximately US$ 2,000.

In Utero Ramadan Exposure and Children's Academic Performance

Abstract: A large literature has linked the in utero environment to health in adulthood. We consider how prenatal nutrition may shape human capital acquisition in childhood, utilising the month-long Ramadan fast as a natural experiment. In student register data for Pakistani and Bangladeshi families in England, we examine whether Ramadan's overlap with pregnancy affects subsequent academic outcomes at age 7. We find that test scores are 0.05-0.08 standard deviations lower for students exposed to Ramadan in early pregnancy. Our results suggest that brief prenatal investments may be more cost effective than traditional educational interventions in improving academic performance.

Estimating Fiscal Multipliers: News From A Non‐linear World

Abstract: We estimate non-linear VARs to assess to what extent fiscal spending multipliers are countercyclical in the US. We deal with the issue of non-fundamentalness due to fiscal foresight by appealing to sums of revisions of expectations of fiscal expenditures. This measure of anticipated fiscal shocks is shown to carry valuable information about future dynamics of public spending. Results based on generalised impulse responses suggest that fiscal spending multipliers in recessions are greater than one, but not statistically larger than those in expansions. However, non-linearities arise when focusing on ‘extreme’ events, that is, deep recessions versus strong expansionary periods.

The Causal Impact of Common Native Language on International Trade: Evidence from a Spatial Regression Discontinuity Design

Abstract: This paper studies the effect of sharing a common native language on inter- national trade. Switzerland hosts three major native language groups which adjoin countries sharing the same native majority languages. In regions close to the internal language border the alternate major language is taught early on in school and not only understood but spoken by the residents. This setting allows for an assessment of the impact of common native rather than spoken language on transaction-level imports from neighbouring countries. Our findings point to an effect of common native language on extensive rather than on intensive margins of trade.

Organised Crime, Institutions and Political Quality: Empirical Evidence from Italian Municipalities

Abstract: This article assesses how legal institutions affect the influence of politically active criminal organisations on the human capital of elected politicians using data from over 1,500 Southern Italian municipalities in the period 1985–2011. It exploits municipal government dissolutions imposed by the national government for (presumed) mafia infiltration as a source of exogenous variation in the presence of politically active criminal organisations. The results support theoretical predictions that the average education level of local politicians significantly increases when active mafia infiltration of local politics is remedied through the implementation of a stricter legal-institutional framework.

Regret Theory: A Bold Alternative to the Alternatives

Abstract: In their famous 1982 paper in this Journal, Loomes and Sugden introduced regret theory. Now, more than 30 years later, the case for the historical importance of this contribution can be made.

Optimal Public Sector Wages

Abstract: I build a dynamic stochastic general equilibrium model with search and matching frictions to determine the optimal public sector wage policy. Public sector wages are crucial in achieving efficient allocation of jobs. High wages induce too many unemployed to queue for public sector jobs, in turn raising unemployment. The optimal wage depends on the frictions in the two sectors. Following technology shocks, public sector wages should be pro-cyclical and deviations from the optimal policy significantly increase the volatility of unemployment

Impatience, Incentives and Obesity

Abstract: This paper explores the relationship between time preferences, economic incentives, and body mass index (BMI). Using data from the 2006 National Longitudinal Survey of Youth, we …rst show that greater impatience increases BMI and the likelihood of obesity even after controlling for demographic, human capital, occupational, and …nancial characteristics as well as risk preference. Next, we provide evidence of an interaction

Belief Elicitation: A Horse Race among Truth Serums

Abstract: We pit non-incentivised introspection against five revealed preference mechanisms (‘truth serums’) in the elicitation of beliefs in a simple two-player game. We measure the additivity, the predictive power for own behaviour and the accuracy of each method. Beliefs from incentivised methods are better predictors of participants' own behaviour compared to introspection. However, introspection performs equally well as the truth serums in terms of accuracy and additivity. We also find that correction for risk aversion improves the additivity of scoring rule belief reports.

HIV Testing and Risky Sexual Behaviour

Abstract: Using a study that randomly assigns HIV testing in two sites in sub-Saharan Africa, I examine the effects of testing on sexual behaviour. Using sexually transmitted infections as markers of risky sex, I find behavioural responses to HIV tests when tests provide unexpected information. Individuals surprised by an HIV-positive (HIV-negative) test increase (decrease) their risky sexual behaviour. I simulate the effects of testing and find under certain conditions, new HIV infections increase when people are tested. The provision of anti-retrovirals for HIV-positive individuals immediately after testing mitigates these effects and leads to decreases in HIV infections in all cases.