Copyright (c) 2009 Berkeley Electronic Press All rights reserved. http://www.bepress.com/bejeap Recent documents in The B.E. Journal of Economic Analysis & Policy en-us Fri, 20 Nov 2009 13:22:11 PST 3600 http://www.bepress.com/bejeap/vol9/iss1/art51 http://www.bepress.com/bejeap/vol9/iss1/art51 Fri, 20 Nov 2009 13:19:11 PST This paper evaluates the consequences of minimum wage (MW) and earned income tax credit (EITC) in a model with heterogeneous costs of investment in human capital. Our model studies the effects of a MW and an EITC on employment, productivity, and total output for two types of groups: those with a low cost of acquiring human capital and a long horizon of earnings (Type Ys); and those with a high cost of acquiring human capital and a short horizon of earnings (Type Os). We assume that Type Ys consider investing in human capital while Type Os have a certain predetermined level of human capital and do not consider changing it. Our model suggests that a government might consider imposing a MW exclusively for Type Y individuals and an EITC exclusively for Type O individuals. Some of the best effects of each policy would therefore be obtained and some of the worst consequences would be avoided. Miki Malul J14 J18 J24 http://www.bepress.com/bejeap/vol9/iss1/art50 http://www.bepress.com/bejeap/vol9/iss1/art50 Tue, 17 Nov 2009 18:43:37 PST Using a unique sample of Russian immigrants and native Israelis, we examine the return to English knowledge. Panel and cross-section estimates of the return to English are substantial for highly educated immigrants and natives. Hebrew and English language acquisition contribute to immigrant/native earnings convergence, but most convergence is explained by other factors. While immigrants with low levels of education do not benefit from knowing English, native Israelis may. Conditional on occupation, English and Hebrew acquisition are largely orthogonal. Therefore earlier work on the importance of knowledge of the host-country language (Hebrew) is not significantly biased by unmeasured English knowledge. Kevin Lang J31 J24 http://www.bepress.com/bejeap/vol9/iss1/art49 http://www.bepress.com/bejeap/vol9/iss1/art49 Tue, 10 Nov 2009 08:36:58 PST This paper develops a novel model of optimal education, migration and return by heterogeneous, forward-looking agents. The model is parameterized and simulated to analyze the effects of immigration policies, identifying the brain-drain, brain-gain and brain-return effects when barriers to migration are reduced. We use parameters from the literature to inform our model and simulate migration and return from middle-income to industrialized countries. In particular, we apply the model to study migration and return between Eastern and Western Europe. We find that, for plausible degrees of openness, the possibility of return migration combined with the education incentive channel turns the brain drain into a brain gain for Eastern Europe. Karin Mayr F22 J61 O15 http://www.bepress.com/bejeap/vol9/iss1/art48 http://www.bepress.com/bejeap/vol9/iss1/art48 Tue, 10 Nov 2009 08:36:54 PST Single-date school entry systems create large age differences between children in the same grade. Older students have been shown in the literature to outperform younger students along many elementary school outcomes, and some post-schooling outcomes. Little evidence exists about the size of these advantages in high school. Data from British Columbia, Canada are used to estimate the effect of age on test scores in grades 4, 7, and 10. I estimate that older students still have a sizable skill advantage in grade 10 across numeracy, reading, and writing tests. The advantage is strongest for girls and low-income students. The results suggest a certain degree of permanence to age related skill differences, which may spill over and affect adult outcomes. Justin Smith I20 http://www.bepress.com/bejeap/vol9/iss1/art47 http://www.bepress.com/bejeap/vol9/iss1/art47 Thu, 05 Nov 2009 14:34:02 PST Emerging evidence from neuroscience and clinical research suggests a novel hypothesis about tobacco use: consumers may choose to smoke, in part, as a "self-medicating" response to the presence of economic insecurity. To test this hypothesis, we examine the effect of economic insecurity (roughly, the risk of catastrophic income loss) on the smoking behavior of a sample of male working-age smokers from the 1979 National Longitudinal Survey of Youth (NLSY79). Using instrumental variables to control for unobserved heterogeneity, we find that economic insecurity has a large and statistically significant positive effect on the decision to continue or resume smoking. Our results indicate, for example, that a 1 percent increase in the probability of becoming unemployed causes an individual to be 2.4 percent more likely to continue smoking. We find that the explanatory power of economic insecurity in predicting tobacco use is comparable to (but distinct from) household income, a more commonly used metric. Michael G. Barnes D12 D87 I12 I18 I38 http://www.bepress.com/bejeap/vol9/iss1/art46 http://www.bepress.com/bejeap/vol9/iss1/art46 Thu, 29 Oct 2009 13:26:41 PDT Olympic athlete selection procedures are different among countries and events, and famous athletes are often reported to have lost their selection races. This paper analyzes what kind of procedure is more likely to select high-ability athletes while preventing low-ability athletes from being selected by chance. Our game-theoretic model shows that the answer depends on how sharply high-ability athletes' race results fluctuate relative to those of low-ability athletes. Athletes' strategic choice of participation in races turns out to be crucial in addressing this question, and there are cases in which having only one race is desirable, even if the selection can involve multiple races. Yoichi Hizen D81 M51 http://www.bepress.com/bejeap/vol9/iss1/art45 http://www.bepress.com/bejeap/vol9/iss1/art45 Wed, 28 Oct 2009 07:45:24 PDT Consider a bottleneck monopoly whose access charge is regulated above marginal cost and produces an essential input used by an oligopoly of downstream firms. Should the monopolist be allowed to vertically integrate into the downstream market? Policy makers often argue that the vertically integrated subsidiary enjoys an undue advantage, because it receives access at marginal cost. We show that there is no undue advantage.With perfect competition downstream vertical integration is irrelevant because the subsidiary substitutes downstream output one-to-one and faces a per-unit opportunity cost equal to the access charge.With an oligopoly consumers and the bottleneck monopoly gain with vertical integration. By contrast, competitors lose oligopolistic rents. Social welfare increases, unless output is redistributed towards a very inefficient vertically integrated firm. Alexander Galetovic L12 L22 L51 http://www.bepress.com/bejeap/vol9/iss1/art44 http://www.bepress.com/bejeap/vol9/iss1/art44 Thu, 15 Oct 2009 18:21:19 PDT This paper documents how the structure of extended family networks in rural Mexico relates to the poverty and inequality of the village of residence. Using the Hispanic naming convention, we construct within-village extended family networks in 504 poor rural villages. Family networks are larger (both in the number of members and as a share of the village population) and out-migration is lower the poorer and the less unequal the village of residence. Our results are consistent with the extended family being a source of informal insurance to its members. Manuela Angelucci J12 O12 O17 http://www.bepress.com/bejeap/vol9/iss1/art43 http://www.bepress.com/bejeap/vol9/iss1/art43 Thu, 15 Oct 2009 18:21:16 PDT A rational, efficiency-based view of acquisitions implies that larger transactions generate greater gains for the acquirer and the seller. We test this prediction and find a positive relationship between acquirer abnormal returns and transaction size scaled by the acquirer size. This relationship holds for many classes of acquisitions, including asset purchases and mergers that target private firms. We find a similar relationship between total abnormal returns and relative transaction size. The results suggest that, in general, acquisitions help shift capital to more productive owners. Furthermore, we present evidence demonstrating that the average acquirer captures a significant portion of the total gains generated from an acquisition. Sugata Ray G34 E22 http://www.bepress.com/bejeap/vol9/iss2/art6 http://www.bepress.com/bejeap/vol9/iss2/art6 Fri, 25 Sep 2009 15:49:36 PDT Ecosystem services are public goods that frequently constitute the only source of capital for the poor, who lack political voice. As a result, provision of ecosystem services is sub-optimal and estimation of their values is complicated. We examine how econometric estimation can feed computable general equilibrium (CGE) modeling to estimate health-related ecosystem values. Against a back drop of climate change, we analyze the Brazilian policy to expand National Forests (FLONAS) by 50 million hectares. Because these major environmental changes can generate spillovers in other sectors, we develop and use a CGE model that focuses on land and labor markets. Compared to climate change and deforestation in the baseline, the FLONAS scenario suggests relatively small declines in GDP, output (including agriculture) and other macro indicators. Urban households will experience declines in their welfare because they own most of the capital and land, which allows them to capture most of the deforestation benefits. In contrast, even though rural households have fewer opportunities for subsistence agriculture and face additional competition with other rural agricultural workers for more limited employment, their welfare improves due to health benefits from conservation of nearby forests. The efficiency vs. equity tradeoffs implied by the FLONAS scenario suggests that health-related ecosystem services will be underprovided if the rural poor are politically weaker than the urban rich. In conclusion, we briefly discuss the pros and cons of the CGE strategy for valuing ecosystem-mediated health benefits and evaluating contemporary policies on climate change mitigation. Subhrendu K. Pattanayak Environmental Economics Computational General Equilibrium Modeling