Abstract not found

JEL No. C10 The major contributions of twentieth century econometrics to knowledge were the definition of causal parameters when agents are constrained by resources and markets and causes are interrelated, the analysis of what is required to recover causal parameters from data (the identification problem), and clarification of the role of causal parameters in policy evaluation and in forecasting the effects of policies never previously experienced. This paper summarizes the development of those ideas by the Cowles Commission, the response to their work by structural econometricians and VAR econometricians, and the response to structural and VAR econometrics by calibrators, advocates of natural and social experiments, and by nonparametric econometricians and statisticians.

At the end of 1997, the foreign companies listed in the U.S. have a Tobin’s q ratio that exceeds by 16.5 % the q ratio of firms from the same country that are not listed in the U.S. The valuation difference is statistically significant and largest for exchange-listed firms, where it reaches 37%. The difference persists even after controlling for a number of firm and country characteristics. We propose a theory that explains this valuation difference. We hypothesize that controlling shareholders of firms listed in the U.S. cannot extract as many private benefits from control compared to controlling shareholders of firms not listed in the U.S., but that their firms are better able to take advantage of growth opportunities. Consequently, the cross-listed firms should be those firms where the interests of the controlling shareholder are better aligned with the interests of other shareholders. The growth opportunities of cross-listed firms will be more highly valued than those of firms not listed in the U.S. both because cross-listed firms are better able to take advantage of these opportunities and because a smaller fraction of the cash flow of these firms is expropriated by controlling shareholders. We find that our theory explains the greater valuation of cross-listed firms. In particular, we find expected sales growth is valued more highly for firms listed in the U.S. and that this effect is greater for firms from countries with poorer investor rights. 1.

Abstract not found

Self-selected migration presents one potential explanation for why observed returns to a college education in local labor markets vary widely even though U.S. workers are highly mobile. To assess the impact of self-selection on estimated returns, this paper first develops a Roy model of mobility and earnings where workers choose in which of the 50 states (plus the District of Columbia) to live and work. Available estimation methods are either infeasible for a selection model with so many alternatives or place potentially severe restrictions on earnings and the selection process. This paper develops an alternative econometric methodology which combines Lee's (1983) parametric maximum order statistic approach to reduce the dimensionality of the error terms with more recent work on semiparametric estimation of selection models (e.g., Ahn and Powell, 1993). The resulting semiparametric correction is easy to implement and can be adapted to a variety of other polychotomous choice problems. The empirical work, which uses 1990 U.S. Census data, confirms the role of comparative advantage in mobility decisions. The results suggest that self-selection of higher educated individuals to states with higher returns to education generally leads to upward biases in OLS estimates of the returns to education in state-specific labor markets. While the estimated returns to a college education are significantly biased, correcting for the bias does not narrow the range of returns across states. Consistent with the finding that the corrected return to a college education differs across the U.S., the relative state-to-state migration flows of college- versus high school-educated individuals respond strongly to differences in the return to education and amenities across states.

Abstract not found

I argue for thinking of program evaluation as a decision problem. There are two steps. First, a counselor determines which program (treatment or control) each individual joins, based for example on maximizing the probability of employment or expected earnings. Second, the policymaker decides whether: to assign all individuals to treatment or to control, or to allow the counselor to choose. This framework has two advantages. Individualized assignment rules (known as profiling) can raise the average impact, improving cost effectiveness by exploiting treatment-impact heterogeneity. Second, it accounts systematically for inequality and uncertainty, and the policymaker’s attitude toward these, in the evaluation.

This paper reviews design features by which safety nets might do more with less. It reviews the current evidence on their success in practice--including three brief reviews of southern Africa experience--and suggests a role for future policy research in furthering the goal of designing safety nets that reduce poverty in a cost-effective way. In doing so, the paper highlights a tension between the large gaps in our knowledge about the design of safety nets and the demand for short-run answers in this area. CONTENTS ACKNOWLEDGMENTS.............................................iv 1. INTRODUCTION.................................................1 1.1 What Is a Safety Net?.........................................2 1.2 Making Choices in Safety Net Design.............................6 1.3 Outline of the Paper...........................................8 2. SAFETY NET DESIGN--COSTS AND BENEFITS.......................9 2.1 Costs......................................................9 2.2 Gross Be...

This paper examines the relationship between two alternative ap- proaches, namely instrumental variables and control function proce- dures, for estimating the impact of endogenous treatment effects. While it is well known that the two approaches generate comparable estimates the relationship between the estimators, and their accompanying en- dogeneity tests, appears to not be well understood. We show that the two procedures are closely related. We also examine the implications of the two procedures for the underlying economic sorting behavior.

We find clear demographic and ability effects on bidding in common value auction experiments as inexperienced subjects with higher (lower) SAT/ACT scores are less (more) likely to bankrupt than those with middle level scores, inexperienced women suffer far more from the winner’s curse than do men, and economics and business majors substantially overbid relative to other majors. There are strong selection effects in bid estimates for both inexperienced and experienced subjects which, although they are not identified using standard econometric techniques, are identified through our experimental treatment effects. Ignoring these selection effects is most misleading for inexperienced bidders, as the biased estimates indicate much slower learning and adjustment to the winner’s curse for individual bidders than do the unbiased estimates. JEL classification: C9, D44, C24, J16. Key words: common value auction experiments, selection effects, econometric methods, gender and ability effects.