FISCAL POLICY, EXPECTATION TRAPS, AND CHILD LABOR

This paper develops a dynamic model with overlapping generations where there are two possible equilibria: one without child labor, and one with it. It is shown that intergenerational transfers can eliminate the child labor equilibrium and that this intervention is Pareto improving. However, if society does not believe that the government will implement the transfer program, it won't, reinforcing society's expectations. This is true even if the transfer program would have been implemented in the absence of uncertainty. Thus a government may be powerless to prevent the child labor equilibrium if it does not command the confidence of their populace, leaving the country in an expectations trap. ( JEL D91, E60, J20, O20)     

TAX POLICY AND CONSUMER FORESIGHT: A GENERAL EQUILIBRIUM SIMULATION STUDY

This paper presents a dynamic computational general equilibrium model in which expectations regarding future prices can be varied systematically. The model is employed to evaluate how expectations influence the effect of long-run tax policy changes. Under policies (like a consumption tax) that reduce rates of return over time, individuals with perfect foresight save less than individuals with myopic beliefs. This is because consumers with foresight are better able to anticipate the lower returns. Lower saving means that existing distortions due to capital taxes are not offset as much, so that welfare gains are smaller under perfect foresight.     

THE CONSEQUENCES OF COSTLY DEFAULT

This paper investigates the consequences of assuming that default on loans or corporate debt is costly; that is, the act of default imposes a deadweight cost on the economy. The analysis deals with two simple capital market models. Conditions for capital market equilibrium nominal interest rates and probability of default to exist are given and the comparative statics of these equilibrium variables with respect to changes in expectations, productivity of investment, cost of default and riskless interest rates are examined. In many cases these comparative static results are unambiguous in sign.     

COLLUSION AND OVERLENDING

This study provides a theoretical background for collusion-induced overlending being the main cause of the 1997 Korean financial crisis. Our model consists of a lending institution, a borrowing chaebol of an unknown type, and an informed politician who can influence lending decision. We show that collusion can be formed between a low-type chaebol and the politician, and it may not be the lending institution's best interest to deter such collusion. This equilibrium, however, is possible only when the economic environment is favorable. When the economy deteriorates, the expectations of the fall of the collusion equilibrium can trigger financial crisis. (JEL G30, D82, O16)     

RATIONAL EXPECTATIONS IN THE AGGREGATE

This paper investigates the relationship between the way rational expectations is employed in practice and the argument initially put forth to justify its use. In practice rational expectations has meant that the expectations of each agent taken separately is consistent with the predictions of the theory. This is different than the argument frequently used by proponents of rational expectations that on an aggregate level expectations should be consistent with the theory. The primary findings are that standard and aggregate rational expectations typically yield systematically different equilibria and that the size of the difference depends positively on the degree of synergism.     

Real Balance Effects and Monetary Policy

This article presents a dynamic stochastic new Keynesian model with real balance effects. I find a number of results that would not appear in the traditional framework. It is shown that the real balance effect makes the so-called Taylor principle not necessary for determinacy of rational expectations equilibrium and that "passive" monetary rules may be feasible. In addition, within a class of policy rules constrained to be a linear function of state variables, "active" interest rate rules are more likely to be optimal under commitment rather than under discretion. (JEL E52 , E58 )     

TESTING FOR EFFICIENCY IN LOTTO MARKETS

State-sponsored lotto games, because they are pari-mutuel and because jackpots with no winner are rolled over into the next drawing, present an excellent opportunity to test for market efficiency. Using data from Massachusetts, Kentucky, and Ohio, we investigate bettors' responses and test for weak-form efficiency. Lotto bets do not have positive net expected returns, thus weak-form efficiency exists. To evaluate strong-form efficiency we utilize the concept of a rational expectations equilibrium. We find that in general lotto bettors' decisions to play generate a level of sales that conform to their original forecasts of expected value.     

COMPETITIVE INDUSTRY EQUILIBRIUM UNDER UNCERTAINTY AND FREE ENTRY

This paper investigates the properties of industry equilibrium under price uncertainty given free entry and exit. For any form of risk-averse behavior, it is shown that an increase in demand uncertainty (as measured by a mean-preserving spread) increases mean output price and reduces output of firms in long-run equilibrium.     

ANIMAL SPIRITS,HETEROGENEOUS EXPECTATIONS,AND THE AMPLIFICATION AND DURATION OF CRISES

We introduce a simple equilibrium model of a market for loans, where households lend to firms based on heterogeneous expectations about their loan default probability. Agents select endogenously among heterogeneous expectation rules, based upon their relative performance. Due to strong nonlinearities, a small fraction of pessimistic traders already has a large aggregate effect, leading to a crisis characterized by high interest rates for loans and low output. Our stylized model illustrates how animal spirits and heterogeneous expectations and, in particular, how coordination on pessimistic expectations amplifies crises and slows down recovery. (JEL E32, D83, D84)     

ON GENDER GAPS AND SELF‐FULFILLING EXPECTATIONS: ALTERNATIVE IMPLICATIONS OF PAID‐FOR TRAINING

This paper presents a model of self‐fulfilling expectations by firms and households which generates multiplicity of equilibria in pay and housework time allocation for ex‐ante identical spouses. Multiplicity arises from statistical discrimination exerted by firms in the provision of paid‐for training to workers, rather than from incentive problems in the labor market. Employers' beliefs about differences in spouses' reactions to housework shocks lead to symmetric (ungendered) and asymmetric (gendered) equilibria. We find that: (1) the ungendered equilibrium tends to prevail as aggregate productivity in the economy increases (regardless of the generosity of family aid policies), (2) the ungendered equilibrium could yield higher welfare under some scenarios, and (3) gender‐neutral job subsidies are more effective that gender‐targeted ones in removing the gendered equilibrium. (JEL J16, J70, J71)     

From Economic Gains to Social Losses

This paper analyzes how stories shaped treasurers’ expectations in municipal swap activities and contributes to the sociological debate on the mechanisms of expectation formation. Employing a deductive variant of process tracing, it synthesizes the literature on expectations in economic decision making with the literature on the diffusion of “ideas,” “myths,” and “fashions” in organization theory and management studies. The swap story has spread since the mid-1990s among German municipalities. At the heart of this story is the replacement of traditional borrowing with active portfolio optimization; financial instruments known as swaps play a leading role. This paper examines how stories shape expectations. Specifically, it delves into how the swap story, as a solution to the financial woes of local governments, shaped these governments’ expectations despite the uncertainty resulting from the instruments’ complexity. We argue that the effect of stories on expectations depends on timing. Expectations at an early stage are shaped by economic analyses to reduce uncertainty, while expectations at a later stage are primarily shaped by societal pressures and an established trend. These two distinct mechanisms produce expectations related to economic and social consequences, respectively. Selecting four typical cases, our analysis confirms that stories affected the formation of treasurers’ expectations regarding the use of swaps through these different mechanisms.     

The Immigrant Advantage in Adolescent Educational Expectations

Previous research has shown uniquely high expectations among children of immigrants. However, existing studies have not focused on why children of immigrants have an expectations advantage over their native‐born counterparts or if this has changed over time. This study shows that an immigrant advantage in graduate school expectations persists among adolescent children of immigrants today. Regression analyses reveal that this advantage is largely explained by higher parental expectations, greater interest in school, and foreign language use in early childhood. We argue that these factors can be conceptualized as forms of cultural capital stemming from unique aspects of the immigrant experience that are common across immigrant families.     

THE EQUILIBRIUM FED FUNDS RATE AND THE INDICATOR PROPERTIES OF TERM-STRUCTURE SPREADS

This paper introduces a model-based measure of the equilibrium federal funds rate and examines the indicator properties of the spread between observed and equilibrium rates. The results are compared to those of existing studies, which implicitly use long-term interest rates to proxy the equilibrium funds rate. Granger-causality tests suggest that different measures of the term-structure spread are dominated by the funds-rate spread as a forecaster of a wide range of macroeconomic variables. These results are supported by variance-decomposition analysis. The paper also estimates simple VARs to discuss how the policy stance responds to macroeconomic shocks     

Child Development Accounts,parental savings,and parental educational expectations: A path model

Parents' expectations for their children's education, and efforts to foster suitably positive expectations, are worthy of policy attention. Previous research indicates that early saving for a child's postsecondary education can foster and sustain high parental expectations, yet little is known about the operative mechanisms. This study presents analyses from a randomized experiment with Child Development Accounts (CDAs), a policy to encourage early financial investments for education and to shape parents' expectations concerning their young children's educational goals. Our research provides key evidence on whether parental account holding for children's college (a) has a positive impact on parents' expectations for their children's educational attainment and (b) mediates the CDA's effect on their educational expectations at an early stage in their child's development. We employ data from the SEED for Oklahoma Kids (SEED OK) experiment, the first randomized social experiment to test universal and progressive CDAs. We conduct a path analysis and a supplemental analysis with marginal structural models (n = 2160). We find that holding a college-savings account has a significant effect on parents' educational expectations for their children and that whether one holds an account mediates the effect of CDAs on such expectations. Findings suggest that CDAs may promote early parental financial investment and high expectations. Research and policy implications are discussed.     

Social Class and Expectations of Rural Adolescents: The Role of Parental Expectations

This study investigated mechanisms involved in the intergenerational transmission of social class, specifically addressing the prediction of career expectations. The results indicated that among rural high school students (N= 200) in Grades 10–12, there was no direct effect of socioeconomic status (SES; as measured by parent education and occupation) on career expectations. However, there was a direct effect of educational expectations on occupational expectations. Building on the importance of educational expectations in the prediction of occupational expectations, the results suggested that perceived parental expectations explain variance in educational expectations. Overall, it seems that the effect of SES on occupational expectations was mediated by educational expectations; therefore, individuals of lower SES who have increased educational expectations are more likely to have occupational expectations similar to those of their higher SES peers. Moreover, increased parental expectations were positively associated with educational expectations among individuals of various SES levels.     

Theorizing issue-driven public attention and expectations in audience responses to corporate sociopolitical activism: A mixed-method analysis

This study develops an issue-driven framework to theorize the role of public attention, support, and expectations in audience responses to corporations’ engagement in contested issues. Based on a mixed-method study using an online survey (N = 817), we investigate how two forms of expectations—normative and predictive—are associated with motivating cognitions, attitudes toward the social impacts of corporate sociopolitical activism (CSA), and buying intentions. Thematic analysis reveals a four-quadrant typology characterized by varying degrees of public attention and support: legitimate engagement, identify alignment, emergent norm, and obscure practice. The structural equation modeling results demonstrate that predictive expectations are a consistent antecedent to the perceived company–issue fit, perceived issue salience, and issue position. In contrast, the associations between normative expectations, the perceived company–issue congruence, and cognitive involvement are contingent on issue types. Perceived advocacy fit and cognitive involvement positively predict attitudes toward the social impacts of CSA. Buycotting intentions, however, are only determined by individuals’ issue position.     

Expectations,Aspirations, and Achievement Among Latino Students of Immigrant Families

ABSTRACT

This study examines the relationship between various measures of parental and student expectations and aspirations and math achievement among Latino 12th graders of immigrant parents in the Educational Longitudinal Study (ELS): 2002 database. Findings indicate parental expectations and aspirations were not significant predictors of student achievement after controlling for an index of covariates. Moreover, neither were student expectations, agreement between student and parent expectations, nor student perceptions of parental aspirations. The analyses of the secondary questions likewise indicated only one strong relationship between aspirations, expectations, and parents' time in the United States – parental aspirations and expectations.     

It is not just escalation: The one dollar game revisited

This paper examines the one-dollar auction game ruling out escalation. The aim of the paper is to understand if players’ expectations about competitors’ moves are strong enough to induce at least one player to bid more than the auctioned euro. Any other bid represents an expected loss for the bidder, so he maximises his own payoff by choosing a bid, which produces a null expected payoff. The empirical results and the analysis based on them support theoretical findings. It is possible that the winner pays more than €1 to get €1 because of his expectations about competitors’ bids and because of his indifference over a certain interval. The results are symptoms of some risk aversion. In an English auction escalation leads to this result, but when escalation is ruled out, expectations and indifference of preferences can lead to the same result.     

Moving Ahead in Madrid: Aspirations and Expectations in the Spanish Second Generation

This paper examines determinants of aspirations and expectations among children of immigrants based on a statistically representative sample of 3,375 second generation youths interviewed in 101 public and private secondary schools in metropolitan Madrid. We review the past literature on status attainment in general and aspirations and expectations, in particular, and draw from it a set of six hypotheses to guide the analysis. Most theoretical statements in this field have been developed on the basis of U.S. data; studies in other immigrant-receiving countries, especially outside the Anglophone world, have been scarce. The study thus provides an opportunity to test and refine existing hypotheses in a different national context. We present breakdowns of educational and occupational aspirations and expectations by gender, parental education and type of school attended. This is followed by multivariate regressions of all four dependent variables on these three plus other predictors suggested by the research literature. This analysis ends with structural equation models - recursive and non-recursive - that provide an integrated theoretical statement of the causal structure of ambition in the Spanish context. Implications of our findings for theory and policy are examined. Suggestions for future research in this field are discussed.     

Broadening the Concept of Expectations in Public Relations

Expectations have been connected to many central concepts of public relations research, yet definitions of what is meant by expectations are lacking. This article aims to broaden the understanding of expectations by taking into account their multidimensional nature, suggesting that there are several explanations to expectations depending on what the expectation is based on. We suggest that, in organizational context, expectations are two-fold assessments of what is considered good or desirable (expectation tone ranging from positive to negative) and the confidence placed in the organization (organization-specific context ranging from high to low confidence). As a result of the conceptual review with theoretical input from areas outside the scope of public relations, the article presents the Expectation Grid, where expectations are acknowledged as continuums of tone and context.