7 February 2013

Targeted Pre-K Programs and Academic Performance

During the 1985-6 academic year, Texas began offering a pre-kindergarten program to "at risk" children, and by 2011 the program provided services for 6 percent of 3-year old children and 52 percent of 4-year old children in the state. Rodney Andrews, Paul Jargowsky, and Kristin Kuhne find that participation in this program is associated with higher scores on the math and reading sections of the Texas Assessment of Academic Skills (TAAS) -- including increased mathematics scores for students who take the Spanish version of the TAAS tests. Pre-K is also associated with a reduced likelihood of being kept from advancing to the next grade and a lower probability of receiving special education services.

6 February 2013

Disagreement and Asset Prices

Bruce Carlin, Francis Longstaff, and Kyle Matoba analyze a time series of prepayment speed (PSA) forecasts issued by major Wall Street mortgage dealers to determine how disagreement in those forecasts affects expected returns, return volatility, and trading volume in the agency mortgage-backed security (MBS) market. Using PSA estimates from the period July 1993 to January 2012, they find that increased disagreement is associated with higher expected returns, higher return volatility, and larger trading volume. There appears to be a positive risk premium for disagreement in asset prices. They also find that sophisticated investors appear to update their beliefs through a rational expectations mechanism when disagreement arises.

5 February 2013

Importers, Exporters, and Exchange Rate Disconnect

Large movements in exchange rates have small effects on the prices of internationally traded goods -- a relationship known as the exchange rate disconnect. Analyzing data on Belgian exporters for the period 2000 to 2008, Mary Amiti, Oleg Itskhoki, and Jozef Konings find that in their sample of firms, import intensity and market share are the prime determinants of exchange rate pass-through. A small exporter with no imported inputs passes through over 90 percent of exchange rate variations, while a firm at the 95th percentile of import intensity and market share passes through only 56 percent of those changes. The more import-intensive exporters are also among the largest exporters, accounting for a major share of international trade. Import intensity and market share jointly predict exchange rate pass-through, even after controlling for other firm characteristics, such as productivity and employment size.

4 February 2013

Matching and Hiring Practices at Law Firms

Paul Oyer and Scott Schaefer analyze demographic information on lawyers -- including law school, year of law school graduation, rank (partner or associate), and office location -- drawn from a sample of 285 firms and more than 105,000 attorneys to study across-firm variation in hiring strategies. They find that large law firms tend to be concentrated in terms of the law schools they hire from, and individual offices within these firms are even more concentrated. Within law offices, law school concentration is determined by: 1) geography, in that most firms hire largely from local schools, and 2) school-based networks -- partners' law schools drive associates' law school composition, even after controlling for firm, school, and firm/school match characteristics.

1 February 2013

Did the Community Reinvestment Act Lead to Risky Lending?

Using loan-level data on mortgage originations and performance, and comparing the lending behavior of banks undergoing Community Reinvestment Act (CRA) exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams, Sumit Agarwal, Efraim Benmelech, Nittai Bergman, and Amit Seru find that the CRA induced riskier lending by banks. In the six quarters surrounding the CRA exams, lending is elevated by about 5 percent and loans in these quarters default about 15 percent more often. These effects are strongest in 2004-6, a period when the market for private securitization was booming.

31 January 2013

The Impact of Universal Preschool on the Childcare Sector

Daphna Bassok, Maria Fitzpatrick, and Susanna Loeb ask how universal preschool policies -- that is, government funded pre-K programs available free to all children regardless of family income -- introduced in Georgia and Oklahoma over the past 20 years affected childcare providers in those states. They find an increase in the amount of formal childcare in both states. In Georgia, where vouchers for private child care were an option, both private and public sector childcare expanded. In Oklahoma, where the preschools were public, only the public sector expanded.

30 January 2013

Human Capital and Development Accounting

David Lagakos, Benjamin Moll, Tommaso Porzio, and Nancy Qian analyze household survey data from 36 countries over the period 1960 to 2011, including countries with a wide range of income levels -- the United States, Canada, and Switzerland at the high end and Bangladesh, Vietnam, and Indonesia at the low end. They find that although "experience" -- defined as the number of years an individual could have been working -- is positively correlated with income, the experience-earnings profiles are flatter in poor countries than in rich countries. Using these age-experience profiles, they estimate that physical and human capital together can explain almost two-thirds of cross-country income differences.

29 January 2013

Transfer Risk from Sovereigns to Corporates

Jennie Bai and Shang-Jin Wei analyze data on spreads of credit default swaps (CDS) for governments in 30 countries and 2,745 corporations in those countries to determine whether there are "transfers" from sovereign to corporate default risks and how a country's institutions might mitigate the risks. They find that a 100 basis point (bps) increase in a sovereign CDS spread leads to an increase of 71 bps in the corporate CDS. The sovereign-corporate relation is stronger in state-owned companies in both the financial and non-financial sectors: the elasticity of state-owned companies is 47 bps higher on average than that of non-state-owned companies.

28 January 2013

Do Labor Market Policies Have Displacement Effects?

In the early 2000s, a large-scale job-seeker assistance program was initiated in France, targeted at young people with at least a two-year college degree who had been unemployed for at least six months. As part of the program, private agencies were contracted to provide intensive placement services to these young graduates. Bruno Crépon, Esther Duflo, Marc Gurgand, Roland Rathelot, and Philippe Zamora find that randomly assigned participants in this program were significantly more likely to have found a stable job after eight months than those who were not assigned to the program. But these gains did not last, and may have come at the expense of eligible workers who did not benefit from the program, particularly in weak labor markets and in markets where they were competing with other educated workers.

25 January 2013

Carbon Taxes and Technological Innovation

Using data from the European Patent Office's World Patent Statistical database, Philippe Aghion, Antoine Dechezleprêtre, David Hemous, Ralf Martin, and John Van Reenen examine the nature of patents in the auto industry across 80 countries over several decades. They find that higher tax-inclusive fuel prices induce firms to redirect technical change towards “clean” innovation (such as perfecting hybrid vehicle engines) and away from “dirty” innovation (such as producing better internal combustion engines). They also find that a firm's propensity to innovate in a particular technology is increased by its past exposure to that technology.
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