This paper presents evidence showing that individuals' season of birth is related to their educational attainment because of the combined effects of school start age policy and compulsory school attendance laws. In most school districts, individuals born in the beginning of the year start schoo at a slightly older age, and therefore are eligible to drop out of school after completing fewer years of schooling than individuals born near the end of the year. Our estimates suggest that as many as 25 percent of potential dropouts remain in school because of compulsory schooling laws. We estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrumental variable for education in an earnings equation. This provides a valid identification strategy because date of birth is unlikely to be correlated with omitted earnings determinants. The instrumental variables estimate of the rate of return to education is remarkably close to the ordinary least squares estimate, suggesting that there is little ability bias in conventional estimates of the return to education. The results also imply that individuals who are compelled to attend school longer than they desire by compulsory schooling laws reap a substantial return for their extra schooling.

The sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics, the analysis of social security and pensions, and the study of life cycle patterns of work. This paper explores two approaches to the measurement of intertemporal substi- tution which have appeared in the literature. The first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation. The second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations. The results indicate that the intertemporal substitution elasticity for married men is positive but small. 1.

For nearly a century, investigators in the social sciences have used regression models to deduce cause-and-effect relationships from patterns of association. Path models and automated search procedures are more recent developments. In my view, this enterprise has not been successful. The models tend to neglect the difficulties in establishing causal relations, and the mathematical complexities tend to obscure rather than clarify the assumptions on which the analysis is based. Formal statistical inference is, by its nature, conditional. If maintained hypotheses A, B, C,... hold, then H can be tested against the data. However, if A, B, C,... remain in doubt, so must inferences about H. Careful scrutiny of maintained hypotheses should therefore be a critical part of empirical work-- a principle honored more often in the breach than the observance.

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† Also affiliated with the Centre for Research on Economic Fluctuations and Employment, Université du

The purpose of this paper is to smmarize a certain line of work on the interpretation of unemployment in the analysis of male labour supply behavior. Specifically, this work investigates whether the data support the null hypothesis that individuals experiencing unemployment are on a labour supply function, and if the data do not support this hypothesis, how might a researcher proceed in empirical work. The motivation for doing this is two fold. First, what unemployment represents is an intrinsically interesting question, and may have implications beyond labour supply analysis in terms of macroeconomic theory. Second, if unemployed workers are constrained in the sense that they are off their individual labour supply functions, standard labour supply estimation may involve a fundamental misspecification of the equation. However, it should be emphasized that the purpose of this paper is to survey one possible approach to this problem; the paper does not attempt to provide a general survey on labour supply estimation or on constraints in the labour market.

The objective of this study is to understand the public and private determinants of household investments in health, and how these health investments affect individual lifetime productivity, earnings, and income in Latin America and the Caribbean. The long run aim is to develop methods for using this information to improve the design of policy interventions that enhance health and increase labor productivity, especially among low-income and disadvantaged groups. Quantitative studies are sought that will require the merging of representative household survey data with administrative or community data that capture important variation in policies and institutions across the sample clusters in the survey (described in Appendix Table A-1). II. Background Latin America and the Caribbean display large differences in personal health status across countries, measured for example, by infant mortality. Given the greater than average income inequality in many of the region's countries, it might also be expected that variation in health investments and in health induced labor productivity are also relatively large within Latin American countries. The challenge to the policy makers is to identify interventions that hold the greatest promise of cost-effectively improving health, while equitably reducing the personal inequality of health and nutritional status that is directly related to adult

y is estimated to be approximately-10.1. If AT&T's prices were completely unregulated, this elasticity estimate implies that the upper-bound deadweight loss due to allowing AT&T to set prices in excess of marginal cost would be about 0.36% of total industry revenues in 1991, or $199 million in 1991. While direct estimates of the costs imposed by the current form of regulation are not available, this welfare loss estimate is well below previous estimates of the benefits that followed partial deregulation of the long distance market. Measurements of a firm's demand elasticity provide information on the extent of its market power. In a perfectly competitive industry, each firm has the same costs, price equals marginal cost, and each firm in the industry faces a horizontal demand curve at that price. In such an industry, a firm that attempted to raise prices above its marginal cost would lose all of its customers to rival suppliers. In other words, firm-specific demand curves in perfectly

This paper -- a product of the Public Economics Division, Policy Research Department -- is part of a larger effort in the department to analyze aid effectiveness. The study was funded by the Bank's Research Support Budget under the research project "Foreign Aid and the Composition of Public Spending" (RPO 679-76). Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Cynthia Bernardo, room N10-055, telephone 202-473-1148, fax 202-522-1154, Internet address prdpe@worldbank.org. May 1996. (42 pages) The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be used and cited accordingly. The findings, interpretations, and conclusions are the authors' own and should not be attributed to the World Bank, its Executive Board of Directors, or any of its member countries

Scholars in many fields have often noted that size and diversification raise the performance of firms in the most significant sectors of our economy. Using longitudinal network data on the personal computer industry, this paper identifies the main effects and complex interplay of two attributes of a fn'm's role in a system of competitive relations: (a) its size relative to that of its structurally equivalent rivals and (b) its level of diversification. The results show first that, net of absolute size, relative size raises sales growth; second, that the main effect of scope is positive; and third, that the effect of scope follows an inverted U-shaped pattern over the distribution of relative size. Diversification thus lowers growth when firms are relatively small, raises growth after a threshold before a maximum, but has a negative effect again for extreme levels of relative size. Theories of diversification, which have been disparate historically, are integrated and jointly find support in the analysis.