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Showing papers in "The Review of Economics and Statistics in 2006"


Journal ArticleDOI
TL;DR: In this paper, the gravity equation for trade was used to provide new estimates of this equation, and significant differences between the estimated estimator and those obtained with the traditional method were found.
Abstract: Although economists have long been aware of Jensen's inequality, many econometric applications have neglected an important implication of it: the standard practice of interpreting the parameters of log-linearized models estimated by ordinary least squares as elasticities can be highly misleading in the presence of heteroskedasticity. This paper explains why this problem arises and proposes an appropriate estimator. Our criticism to conventional practices and the solution we propose extends to a broad range of economic applications where the equation under study is log-linearized. We develop the argument using one particular illustration, the gravity equation for trade, and apply the proposed technique to provide new estimates of this equation. We find significant differences between estimates obtained with the proposed estimator and those obtained with the traditional method. These discrepancies persist even when the gravity equation takes into account multilateral resistance terms or fixed effects

4,492 citations


Journal ArticleDOI
TL;DR: The authors empirically analyzes economic and noneconomic determinants of individual attitudes toward immigrants, within and across countries, and finds that the correlation between pro-immigration attitudes and individual skill should be related to the skill composition of natives relative to immigrants in the destination country.
Abstract: This paper empirically analyzes economic and noneconomic determinants of individual attitudes toward immigrants, within and across countries. The two survey data sets used, covering a wide range of developed and developing countries, make it possible to test for interactive effects between individual characteristics and country-level attributes. In particular, theory predicts that the correlation between pro-immigration attitudes and individual skill should be related to the skill composition of natives relative to immigrants in the destination country. Skilled individuals should favor immigration in countries where natives are more skilled than immigrants and oppose it otherwise. Results based on direct and indirect measures of the relative skill composition are consistent with these predictions. Noneconomic variables also are correlated with immigration attitudes, but they don't alter significantly the labor-market results.

924 citations


Journal ArticleDOI
TL;DR: In this paper, the authors investigate the implications of changes in the structure of the U.S. economy for monetary policy effectiveness and find that by responding more strongly to inflation expectations, monetary policy has stabilized the economy more effectively in the post-1980 period.
Abstract: We investigate the implications of changes in the structure of the U.S. economy for monetary policy effectiveness. Estimating a vector autoregression over the pre- and post-1980 periods, we provide evidence of a reduced effect of monetary policy shocks in the latter period. We estimate a structural model that replicates well the economy's response in both periods, and perform counterfactual experiments to determine the source of the change in the monetary transmission mechanism and in the economy's volatility. We find that by responding more strongly to inflation expectations, monetary policy has stabilized the economy more effectively in the post-1980 period.

909 citations


Journal ArticleDOI
TL;DR: The authors found that roughly 60% of the employment growth effect of college graduates is due to enhanced productivity growth, the rest being caused by growth in the quality of life, which contrasts with the common argument that human capital generates employment growth in urban areas solely through changes in productivity.
Abstract: From 1940 to 1990, a 10% increase in a metropolitan area's concentration of college-educated residents was associated with a 0.8% increase in subsequent employment growth. Instrumental variables esti- mates support a causal relationship between college graduates and em- ployment growth, but show no evidence of an effect of high school graduates. Using data on growth in wages, rents, and house values, I calibrate a neoclassical city growth model and find that roughly 60% of the employment growth effect of college graduates is due to enhanced productivity growth, the rest being caused by growth in the quality of life. This finding contrasts with the common argument that human capital generates employment growth in urban areas solely through changes in productivity.

759 citations


Journal ArticleDOI
TL;DR: Analysis of patent citations with respect to self-citation, distance, technology overlap, and vintage indicates that inferences about inventor knowledge using pooled citations may suffer from bias or overinflated significance levels.
Abstract: Analysis of patent citations is a core methodology in the study of knowledge diffusion. However, citations made by patent examiners have not been separately reported, adding unknown noise to the data. We leverage a recent change in the reporting of patent data showing citations added by examiners. The magnitude is high: two-thirds of citations on the average patent are inserted by examiners. Furthermore, 40% of all patents have all citations added by examiners. We analyze the distribution of examiner and inventor citations with respect to self-citation, distance, technology overlap, and vintage. Results indicate that inferences about inventor knowledge using pooled citations may suffer from bias or overinflated significance levels.

723 citations


Journal ArticleDOI
TL;DR: In this article, the authors examined the properties of instrumental variables applied to models with essential heterogeneity, that is, models where responses to interventions are heterogeneous and agents adopt treatments (participate in programs) with at least partial knowledge of their idiosyncratic response.
Abstract: This paper examines the properties of instrumental variables (IV) applied to models with essential heterogeneity, that is, models where responses to interventions are heterogeneous and agents adopt treatments (participate in programs) with at least partial knowledge of their idiosyncratic response. We analyze two-outcome and multiple-outcome models, including ordered and unordered choice models. We allow for transition-specific and general instruments. We generalize previous analyses by developing weights for treatment effects for general instruments. We develop a simple test for the presence of essential heterogeneity. We note the asymmetry of the model of essential heterogeneity: outcomes of choices are heterogeneous in a general way; choices are not. When both choices and outcomes are permitted to be symmetrically heterogeneous, the method of IV breaks down for estimating treatment parameters.

654 citations


Journal ArticleDOI
TL;DR: In this paper, the authors quantify and explore the relationship between restructuring and reallocation and labor productivity dynamics in the U.S. retail trade sector and find that virtually all of the labor productivity growth in the retail sector is accounted for by more productive entering establishments displacing much less productive exiting establishments.
Abstract: The U.S. retail trade sector underwent a massive restructuring and reallocation of activity in the 1990s with accompanying technological advances. Using a data set of establishments in that sector, we quantify and explore the relationship between this restructuring and reallocation and labor productivity dynamics. We find that virtually all of the labor productivity growth in the retail trade sector is accounted for by more productive entering establishments displacing much less productive exiting establishments. The productivity gap between low-productivity exiting single-unit establishments and entering high-productivity establishments from large, national chains plays a disproportionate role in these dynamics.

540 citations


Journal ArticleDOI
TL;DR: In this paper, the authors determine how time delays affect international trade using newly collected World Bank data on the days it takes to move standard cargo from the factory gate to the ship in 126 countries.
Abstract: The authors determine how time delays affect international trade using newly collected World Bank data on the days it takes to move standard cargo from the factory gate to the ship in 126 countries. They estimate a modified gravity equation, controlling for endogeneity and remoteness. On average, each additional day that a product is delayed prior to being shipped reduces trade by at least 1 percent. Put differently, each day is equivalent to a country distancing itself from its trade partners by 70 kilometers on average. Delays have an even greater impact on developing country exports and exports of time-sensitive goods, such as perishable agricultural products. In particular, a day's delay reduces a country's relative exports of time-sensitive to time-insensitive agricultural goods by 6 percent.

459 citations


Journal ArticleDOI
TL;DR: In this paper, the authors link farmland values to climatic, soil, and socioeconomic variables for U.S. counties east of the 100th meridian, the historical boundary of agriculture not primarily dependent on irrigation.
Abstract: We link farmland values to climatic, soil, and socioeconomic variables for U.S. counties east of the 100th meridian, the historical boundary of agriculture not primarily dependent on irrigation. Degree days, a nonlinear transformation of the climatic variables suggested by agronomic experiments as more relevant to crop yield, gives an improved fit and increased robustness. Estimated coefficients are consistent with the experimental results. The model is employed to estimate the potential impacts on farmland values for a range of recent warming scenarios. The predictions are very robust, and more than 75% of the counties in our sample show a statistically significant effect, ranging from moderate gains to large losses, with losses in the aggregate that can become quite large under scenarios involving sustained heavy use of fossil fuels.

451 citations


Journal ArticleDOI
TL;DR: In this paper, a detailed database of managerial job descriptions, reporting relationships, and compensation structures in over 300 large U.S. firms was used to find that the number of positions reporting directly to the CEO has gone up significantly over time.
Abstract: Using a detailed database of managerial job descriptions, reporting relationships, and compensation structures in over 300 large U.S. firms we find that the number of positions reporting directly to the CEO has gone up significantly over time. We also find that the number of levels between the lowest managers with profit center responsibility (division heads) and the CEO has decreased and more of these managers are reporting directly to the CEO. Moreover, more of these managers are being appointed officers of the company. It does not seem that divisional heads are handling larger tasks making them important enough to report directly. Instead, our findings suggest that layers of intervening management are being eliminated and the CEO is coming into direct contact with more managers in the organization, even while managerial responsibility is being extended downwards. Consistent with this, we find that the elimination of the intermediate position of Chief Operating Officer accounts for a significant part (but certainly not all) of the increase in CEO reports. It is also accompanied with greater authority being given to divisional managers. The structure of pay is also different in flatter organizations. Pay and long term incentives are becoming more like that in a partnership. Salary and bonus at lower levels are lower than in comparable positions in a tall organization, but the pay differential is steeper to the top. At the same time, employees in flatter organizations seem to have more long term pay incentives like stock and stock options offered to them. We offer some conjectures to explain these patterns.

380 citations


Journal ArticleDOI
TL;DR: In this paper, the authors report new evidence for localized knowledge spillovers identified by within-patent variations in the geographic matching rates of citations added by inventors and citations added in examiners Evaluated at the mean citation lag, inventor citations are 20% more likely than examiner citations to match the country of origin of their citing patent.
Abstract: I report new evidence for localized knowledge spillovers identified by within-patent variations in the geographic matching rates of citations added by inventors and citations added by examiners Evaluated at the mean citation lag, inventor citations are 20% more likely than examiner citations to match the country of origin of their citing patent, whereas US inventor citations are 25% more likely to match the state or metropolitan area of their citing patent The localization of intranational knowledge spillovers declines with the passage of time, but international borders present a persistent barrier to spillovers

Journal ArticleDOI
TL;DR: The authors examined the effect of defaulter-friendly foreclosure laws on equilibrium loan size and found that these laws are correlated with a four percent to six percent decrease in the loan size.
Abstract: Foreclosure laws govern the rights of borrowers and lenders when borrowers default on mortgages. Many states protect borrowers by imposing restrictions on the foreclosure process; these restrictions, in turn, impose large costs on lenders. Lenders may respond to these higher costs by reducing loan supply; borrowers may respond to the protections imbedded in these laws by demanding larger mortgages. I examine empirically the effect of the laws on equilibrium loan size. I exploit the rich geographic information available in the 1994 and 1995 Home Mortgage Disclosure Act data to compare mortgage applications for properties located in census tracts that border each other, yet are located in different states. Using semiparametric estimation methods, I find that defaulter-friendly foreclosure laws are correlated with a four percent to six percent decrease in loan size. This result suggests that defaulter-friendly foreclosure laws impose costs on borrowers at the time of loan origination.

Journal ArticleDOI
TL;DR: In this article, the authors study the effects of employment protec- tion in the United States and find that the initial impact is largest for female and less-educated workers (those who change jobs frequently), while the longer-term effect is greater for older and more educated workers.
Abstract: We estimate the effects on employment and wages of wrongful- discharge protections adopted by U.S. state courts during the last three decades. We find robust evidence that one wrongful-discharge doctrine, the implied-contract exception, reduced state employment rates by 0.8% to 1.7%. The initial impact is largest for female and less-educated workers (those who change jobs frequently), while the longer-term effect is greater for older and more-educated workers (those most likely to litigate). By contrast, we find no robust employment or wage effects of two other widely recognized wrongful-discharge laws: the public-policy and good- faith exceptions. I. Introduction W HAT is the price of protection? This paper estimates the social costs, in possibly lower employment and wages, of common-law protections designed to protect American workers from wrongful discharge. Economic the- ory suggests that employment protection is a double-edged sword. It provides employment security to incumbent work- ers but makes employers reluctant to hire, leading to a less flexible labor market with potentially lower employment and wages. It is frequently argued that the stagnant employment performance of many European economies during the 1980s and 1990s—"Eurosclerosis"—can be attributed in part to the significant employment protection given European workers (see Lazear (1990) and Blanchard and Wolfers (1999); Krueger and Pischke (1998) provide a contrasting view). Among the obstacles to testing this hypothesis is the difficulty of making reliable inferences using cross-country comparisons. In this paper, we study the effects of employment protec- tion in the United States. Numerous scholars have examined the effects of American federal employment laws on em- ployment and unemployment. Acemoglu and Angrist (2001), DeLeire (2000), and Jolls and Prescott (2004) present evidence that the Americans with Disabilities Act (ADA) decreased employment of disabled persons. Oyer and Schaefer (2000, 2002) conclude that the federal Civil Rights Act of 1991 increased the frequency of mass layoffs and raised the returns to experience for workers who have a downward-sloping age-litigation profile. Hahn, Todd, and van der Klaauw (2001) also evaluate the costs of federal antidiscrimination laws. A major hurdle for each of these studies is that these federal statutes apply all at once to the entire country. This makes it difficult to separate the effects of the statute from all other changes occurring simulta- neously (cf. Donohue, 1998; Donohue and Heckman,

Journal ArticleDOI
TL;DR: The authors found no relationship between corporate governance practices and globalization in a battery of estimations at the country, industry, and firm levels and concluded that globalization may have induced the adoption of some common corporate governance standards but these standards may not have been implemented.
Abstract: Some scholars have argued that globalization should pressure firms to adopt the most efficient form of corporate governance; others maintain that such convergence will not occur because of path dependence. We find robust evidence that economically interdependent countries have similar corporate governance laws protecting stakeholders. In contrast, we find virtually no relationship between corporate governance practices and globalization in a battery of estimations at the country, industry, and firm levels. We conclude that globalization may have induced the adoption of some common corporate governance standards but these standards may not have been implemented.

Journal ArticleDOI
TL;DR: This paper examined the causal implications of this expansion by using variation in the level of boys' athletic participation across states before and after Title IX to instrument for change in girls' sports participation and found that a 10 percentage point rise in state-level female sports participation generates a 1 percentage point increase in female college attendance and a 1 to 2 percentage point jump in female labor force participation.
Abstract: Between 1972 and 1978 U.S. high schools rapidly increased their female athletic participation rates in order to comply with Title IX. This paper examines the causal implications of this expansion by using variation in the level of boys' athletic participation across states before Title IX to instrument for change in girls' athletic participation. Analysis of differences in outcomes across states in changes between pre- and postcohorts reveals that a 10 percentage point rise in state-level female sports participation generates a 1 percentage point increase in female college attendance and a 1 to 2 percentage point rise in female labor force participation.

Journal ArticleDOI
TL;DR: Using restricted-use versions of the National Mortality Detail File combined with Census data, this article used this quasi experiment to examine the income mortality link in an elderly population, finding that the higher-income group has a statistically significantly higher mortality rate.
Abstract: Legislation in the 1970s created a Notch in social security payments, with those born after January 1, 1917, receiving sharply lower benefits. Using restricted-use versions of the National Mortality Detail File combined with Census data, we use this quasi experiment to examine the income mortality link in an elderly population. Estimates from difference-in-difference and regression discontinuity models show the higher-income group has a statistically significantly higher mortality rate, contradicting the previous literature. We also found that younger cohorts responded to lower incomes by increasing postretirement work effort, suggesting that moderate employment has beneficial health effects for the elderly.

Journal ArticleDOI
TL;DR: In this paper, the authors argue that both exporter and importer institutions affect international as well as domestic transaction costs in complex and simple product markets, and find ample empirical evidence for these predictions: countries that have good institutions tend to...
Abstract: How does the quality of national institutions that enforce the rule of law influence international trade? Anderson and Marcouiller argue that bad institutions located in the importer's country deter international trade because they enable economic predators to steal and extort rents at the importer's border. We complement this research and show how good institutions located in the exporter's country enhance international trade, in particular, trade in complex products whose characteristics are difficult to fully specify in a contract. We argue that both exporter and importer institutions affect international as well as domestic transaction costs in complex and simple product markets. International transaction costs are a part of the costs of trade. Domestic transaction costs affect complex and simple products differently, thereby changing a country's comparative advantage in producing such goods.We find ample empirical evidence for these predictions: countries that have good institutions tend to ...

Journal ArticleDOI
TL;DR: Using patent citations as a proxy for the influence of foreign technology on French firms' patents, the authors found that the inventions of importers are significantly more likely to be influenced by foreign technology.
Abstract: Using patent citations as a proxy for the influence of foreign technology on French firms' patents, this paper finds that the inventions of importers are significantly more likely to be influenced ...

Journal ArticleDOI
TL;DR: This article studied the effect of immigrants on the bilateral export performance of the 50 American states and the District of Columbia with respect to 87 foreign countries and found that the immigrant effect is greater when the origin country's political system is more corrupt and less important when Spanish or English is the language of the origin countries.
Abstract: The protrade effect of immigrants on the bilateral export performance of the 50 American states and the District of Columbia with respect to 87 foreign countries is studied. This effect, which posits that a greater number of immigrants in a host location leads to increased trade between the host and the immigrants' origin country, has been supported in a number of studies. Here, we extend this approach and find that the immigrant effect is greater when the origin country's political system is more corrupt and less important when Spanish or English is the language of the origin country. State-level export data averaged over the 1990–1992 period are used.

Journal ArticleDOI
TL;DR: In this article, the authors investigate the effect of violence on trade flows and show that the presence of terrorism together with internal and external conflict is equivalent to as much as a 30% tariff on trade.
Abstract: We investigate the empirical effect of violence, as compared to other trade impediments, on trade flows. Our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999, which brings together information from the Rose data set, the iterate data set for terrorist events, and data sets of external and internal conflict. We explore these data with traditional and theoretical gravity models. We calculate that, for a given country year, the presence of terrorism together with internal and external conflict is equivalent to as much as a 30% tariff on trade. This is larger than estimated tariff-equivalent costs of border and language barriers and tariff-equivalent reduction through generalized systems of preference and WTO participation.

Journal ArticleDOI
Dean Yang1
TL;DR: In this article, the authors distinguish between target-earnings and life cycle motivations for return migration by examining how migrants' return decisions respond to major, unexpected exchange rate changes in their overseas locations (due to the Asian financial crisis).
Abstract: This paper distinguishes between target-earnings and life cycle motivations for return migration by examining how Philippine migrants' return decisions respond to major, unexpected exchange rate changes in their overseas locations (due to the Asian financial crisis). Overall, the evidence favors the life cycle explanation: more favorable exchange rate shocks lead to fewer migrant returns.A10% improvement in the exchange rate reduces the 12-month return rate by 1.4 percentage points. However, some migrants appear motivated by target-earnings considerations: in households with intermediate foreign earnings, favorable exchange rate shocks have the least effect on return migration, but lead to increases in household investment.

Journal ArticleDOI
TL;DR: In this paper, the authors apply the recently developed econometric methods of panel unit root tests and nonlinear mean reversion to investigate price convergence in China, the largest transitional economy in the world.
Abstract: This paper applies the recently developed econometric methods of panel unit root tests and nonlinear mean reversion to investigate price convergence in China—the largest transitional economy in the world. We find that prices did converge to the law of one price in China for an overwhelming majority of goods and services, based on a large panel data set. The finding sheds light on the extent of the market economy in China, and casts doubt on Young's proposition that the economic reform has led to the fragmentation of Chinese domestic markets.

Journal ArticleDOI
TL;DR: In this article, the authors evaluate the effect of the E-Rate subsidy on Internet investment in California public schools and find that the subsidy did succeed in significantly increasing Internet investment, and that the implied first-dollar price elasticity of demand for Internet investment is between −0.4 and −1.1.
Abstract: In an effort to alleviate the perceived growth of a digital divide, the U.S. government enacted a major subsidy for Internet and communications investment in schools starting in 1998. In this paper, we evaluate the effect of the subsidy—known as the E-Rate—on Internet investment in California public schools. The program subsidized spending by 20%–90%, depending on school characteristics. Using new data on school technology usage in every school in California from 1996 to 2000 as well as application data from the E-Rate program, the results indicate that the subsidy did succeed in significantly increasing Internet investment. The implied first-dollar price elasticity of demand for Internet investment is between −0.4 and −1.1 and the greatest sensitivity is seen among urban schools and schools with large black and Hispanic student populations. Rural and predominantly white and Asian schools show much less sensitivity. Overall, by the final year of the sample, there were approximately 68% more Inter...

Journal ArticleDOI
TL;DR: In this paper, the divergence trends in volatility of the growth rate of sales at the aggregate and firm levels at the micro and macro levels of sales were investigated and it was shown that the upward trend in firm volatility is not simply driven by a compositional bias in the sample studied.
Abstract: This note documents the diverging trends in volatility of the growth rate of sales at the aggregate and firm levels. We establish that the upward trend in firm volatility is not simply driven by a compositional bias in the sample studied.We argue that this new fact brings into question the proposed explanations for the decline in aggregate volatility and that, given the symmetry of the diverging trends at the micro and macro levels, a common explanation is likely. We conclude by describing one such theory.

Journal ArticleDOI
TL;DR: In this paper, two research designs that attempt to isolate the effect of class size on achievement have been implemented, focusing on variation in class size in rural schools with fewer than 30 students, and hence only one classroom, per grade.
Abstract: This note implements two research designs that attempt to isolate the effect of class size on achievement. A first strategy focuses on variation in class size in rural schools with fewer than 30 students, and hence only one classroom, per grade. Second, an approach similar to Angrist and Lavy's exploits regulations that allow schools with more than 30 students in a given grade to obtain an additional teacher. Both designs suggest class size negatively affects test scores.

Journal ArticleDOI
TL;DR: This article showed that individuals who face particularly depressed local labor markets when they graduate from secondary education, are subject to relatively high rates of non-employment during their whole prime-age work career.
Abstract: Labor market conditions at the time and place of potential entry into the labor market are shown to have a substantial and persistent effect on adult employment prospects. Individuals who face particularly depressed local labor markets when they graduate from secondary education, are—other things equal—subject to relatively high rates of nonemployment during their whole prime-age work career. Building on a unique combination of micro and macro data from Norway, we show that these effects are robust with respect to model specification and conditioning variables, and that they are not limited to individuals with a particularly disadvantaged background.

Journal ArticleDOI
TL;DR: This article examined the relationship between casinos and crime using county-level data for the United States between 1977 and 1996, and found that the effect on crime is low shortly after a casino opens, and grows over time.
Abstract: We examine the relationship between casinos and crime using county-level data for the United States between 1977 and 1996. Casinos were nonexistent outside Nevada before 1978, and expanded to many other states during our sample period. Most factors that reduce crime occur before or shortly after a casino opens, whereas those that increase crime, including problem and pathological gambling, occur over time. The results suggest that the effect on crime is low shortly after a casino opens, and grows over time. Roughly 8% of crime in casino counties in 1996 was attributable to casinos, costing the average adult $75 per year.

Journal ArticleDOI
TL;DR: In this article, the authors used U.S. county data (3,058 observations) and 41 conditioning variables to study growth and convergence, using OLS and 3SLS-IV.
Abstract: We use U.S. county data (3,058 observations) and 41 conditioning variables to study growth and convergence. Using ordinary least squares (OLS) and three-stage least squares with instrumental variables (3SLS-IV), we report on the full sample and metro, nonmetro, and and regional samples: (1) OLS yields convergence rates around 2%; 3SLS yields 6%–8%; (2) convergence rates vary (for example, the Southern rate is 2.5 times the Northeastern rate); (3) federal, state, and local government negatively correlates with growth; (4) the relationship between educational attainment and growth is nonlinear; and (5) the finance, insurance, and real estate industry and the entertainment industry correlate positively with growth, whereas education employment correlates negatively.

Journal ArticleDOI
TL;DR: In this article, the authors estimate the effect of capital gains on saving by asset type, controlling for observable and unobservable household-specific fixed effects, and suggest that the decline in the personal saving rate since 1984 is largely due to the significant capital gains in corporate equities experienced over this period.
Abstract: Using a unique set of household-level panel data, we estimate the effect of capital gains on saving by asset type, controlling for observable and unobservable household-specific fixed effects. The results suggest that the decline in the personal saving rate since 1984 is largely due to the significant capital gains in corporate equities experienced over this period. Over 5-year periods, the effect of capital gains in corporate equities on saving is substantially larger than the effect of capital gains in housing or other assets. Failure to differentiate wealth effects across asset types results in a significant understatement of their size.

Journal ArticleDOI
TL;DR: A procedure by which the coefficient of interest can be extracted "post hoc" from a multiple regression in which all the proxies are used simultaneously, which is strictly superior in large samples to coefficients derived using any index or linear combination of the proxies that is created prior to the regression.
Abstract: Multiple proxy variables are typically available for an unobserved explanatory variable in a regression. We provide a procedure by which the coefficient of interest can be estimated from a regression in which all the proxies are included simultaneously. This estimator is superior in large samples to the common practice of creating a summary measure of the proxy variables. We examine the relationship between parents' income and children's reading test scores in the United States, and between parents' assets and children's school enrollment in India, and demonstrate that the reduction in attenuation bias from a better use of proxy variables can be significant.