21 November 2012

Insurance Markets and Agricultural Choices in Ghana

Dean Karlan, Robert Darko Osei, Isaac Osei-Akoto, and Christopher Udry analyze the results of an experiment in northern Ghana in which farmers were randomly assigned to one group that received a cash grant, another that received free rainfall-index insurance or the opportunity to purchase it, and a third group that received a combination of the two. They find that the demand for rainfall insurance is strong, and that having such insurance leads farmers to invest more in their land and to choose production methods that on average yield more crops, but are more rain-sensitive. For farmers, the constraint to investing in agriculture appears to be uninsured rainfall risk.

20 November 2012

Do Women Avoid Salary Negotiations?

To study gender differences in wage negotiation and related issues, Andreas Leibbrandt and John List posted job advertisements for administrative assistant positions in nine major US cities, to which nearly 2,500 job-seekers responded. They find that when there is no explicit initial statement that wages are negotiable, men are more likely to negotiate than women. The researchers also find that men are relatively more likely to apply to jobs where negotiation of initial wages is ambiguous, while women prefer job environments where the "rules of wage determination" are concrete.

19 November 2012

Improving the Targeting of Treatment in Higher Education

Judith Scott-Clayton, Peter Crosta, and Clive Belfield analyze administrative data -- including high school transcripts, remedial test scores, and college grades -- for tens of thousands of students in two community college systems to evaluate the efficacy of existing remedial course assignments. They find that roughly one in four test-takers in math, and one in three test-takers in English, are improperly assigned to remedial courses under the current test-based policies. They conclude that using high school transcript information -- either instead of or in addition to test scores -- could significantly reduce the number of assignment errors. They also find that if institutions took account of students’ high school performance, they could remediate substantially fewer students without lowering success rates in college-level courses.

16 November 2012

Popularity Pays Off

Gabriella Conti, Andrea Galeotti, Gerrit Mueller, and Stephen Pudney analyze data collected from seniors in Wisconsin high schools in 1957 to evaluate the relationship between youthful popularity and success in later life. These students and their family members were surveyed periodically up to the year 2005. Using data on the number of friendship nominations received from schoolmates as a measure of popularity, the researchers estimate that moving from the 20th to the 80th percentile of the high-school popularity distribution yields a 10 percent wage premium nearly 40 years later.

15 November 2012

Dynamic Aspects of Family Transfers

Using data from the Health and Retirement Study covering the time period 1992-2008, Kathleen McGarry finds considerable variation over time in monetary transfers from parents to adult children. The data suggest that in a typical year, approximately 14 percent of children receive a transfer from their parents, but only 6 percent of the sample receives a transfer in any two consecutive survey years. Furthermore, 46 percent of the adult children in this sample receive a transfer at least once, but less than 1 percent receive a transfer in each of the nine waves of data. Changes over time in transfers are negatively related to changes in the adult child’s income.

14 November 2012

Time Off between Cognitive Tasks Affects Performance

The dates of Advanced Placement (AP) exams taken by high school students change from year to year, so students who take two subject exams in one year may have a different number of days between those exams than students who take the same tests in a different year. Ian Fillmore and Devin Pope find that having less time between exams is associated with lower scores, particularly on the second of the two. The researchers estimate that students who take exams ten days apart are 8 percent more likely to pass both of them than students who take the same two exams one day apart.

13 November 2012

Housing Dynamics over the Business Cycle

Over the course of the business cycle, fluctuations in residential investment precede fluctuations in GDP in the United States and Canada, while these two economic variables move together in other developed economies. Fluctuations in nonresidential investment are the opposite, either following changes in GDP or occurring simultaneously with them. Finn Kydland, Peter Rupert, and Roman Sustek conclude that changes in interest rates in general and mortgage rates in particular help to explain these differences.

12 November 2012

Recent Tax Rate Changes by Skill and Marital Status

Casey Mulligan analyzes the labor market effects over time of recent changes in safety net programs. Because people from the middle and above-middle parts of the skill distribution can become eligible overnight for safety net programs such as unemployment insurance and SNAP (formerly known as food stamps) merely by becoming unemployed for a period of time, these safety net program rules even affect the incentives for skilled people to seek and retain work. Mulligan finds that wide swaths of the skill distribution saw their marginal tax rates increase by more than 5 percentage points between 2007 and 2009, and this increase was most dramatic for unmarried household heads.

9 November 2012

Uncertainty Shocks and Effective Demand

Using the Chicago Board Options Exchange Volatility Index (VIX) -- a forward-looking indicator of the expected volatility of the Standard and Poor's 500 Stock Index -- as a measure of aggregate uncertainty, Susanto Basu and Brent Bundick study how uncertainty affects aggregate economic activity. They conclude that increased uncertainty about the future may have played a role in worsening the Great Recession. The dramatic increase in uncertainty during the autumn of 2008 was one of the factors that contributed to the large and persistent decline in output starting at that time.

8 November 2012

Self-Help Groups and Peer Pressure as Savings Commitment Devices

Felipe Kast, Stephan Meier, and Dina Pomeranz conducted an experiment in Chile with 2,700 micro-entrepreneurs who were given the opportunity to open a formal savings account and then randomly assigned to one of three groups. In the control group, individuals received only the basic savings account; the "Self-Help Peer Group Treatment" gave participants the option to announce their savings commitment publicly, and then to be monitored in weekly meetings; a "High Interest Rate" group was offered a 5 percent real interest rate (instead of the 0.3 percent in the basic account). The researchers find that participants assigned to the Peer Group Treatment make deposits into their savings account 3.5 times more often, and their average savings balance is almost twice that of the control group. In a second related experiment in which participants were assigned to one of two types of weekly feedback text messages or to a control group, the results show that holding people accountable through the weekly feedback messages increases savings almost as much as self-help peer groups, even without any physical meetings.
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