The Firm as a Means of Concealing Information

The aim of this paper is to demonstrate that a firm may owe its continued existence to its attempts to conceal information from its competitors about the unknown characteristics of a certain factor, not just to its savings on market transaction costs, its team‐working, risk‐sharing, or the encouragement of ex ante specific investment. This is because the existence of a firm contract severs the relationship between the factor market and the product market, thereby making it difficult for outsiders to observe the marginal contribution of the intermediate factor and make statistical inferences about the factor's unknown characteristics. Furthermore, an optimal contract is determined by a trade‐off not only between traditional risk‐sharing and incentive, but also between the incentive and information concealing. Finally, we show that this latter kind of trade‐off also affects the position of the optimal boundary of the firm.     

Inefficient Job Destructions and Training with Hold‐up

This paper develops an equilibrium search model with endogenous job destructions and where firms decide at the time of job entry how much to invest in match‐specific human capital. We first show that job destruction and training investment decisions are strongly complementary. It is possible that there are no firings at equilibrium. Further, training investments are confronted to a hold‐up problem making the decentralized equilibrium always inefficient. We show therefore that both training subsidies and firing taxes must be implemented to bring back efficiency.     

Personality traits,preferences and educational choices: A focus on STEM

Around the developed world, the need for graduates from Science, Technology, Engineering and Mathematics (STEM) fields is growing. Research on educational and occupational choice has traditionally focused on the cognitive skills of prospective students, and on how these determine the expected costs and benefits of study programs. Little work exists that analyzes the role of personality traits on study choice. This study investigates how personality traits relate to preferences of students for STEM studies and occupations, and to specialization choice in high school. We use a rich data set that combines administrative and survey data of Dutch secondary education students. We find that personality traits are related to both the preference that students have for STEM as the actual decision to specialize in STEM studies, but to different degrees. We identify significant relations with preference indicators for all Big Five traits, especially for Openness to Experience (positive), Extraversion and Agreeableness (both negative). The size of these relations is often larger than those between cognitive skills and STEM preferences. Personality traits are comparatively less important with respect to the actual specialization choice, for which we identify a robust (and sizable) negative relation with Extraversion, and for girls find a positive relation with Openness to Experience. The results suggest that once students have to make actual study choice decisions, they rely more on cognitive skills rather than personality traits, in contrast to their expressed preferences.     

Foreign Direct Investment,Trade, and Skilled Labour Demand in Eastern Europe

In this paper, we study the effects of inward foreign direct investment (FDI) and trade on relative skilled labour demand in Poland, Hungary, and the Czech Republic. Our estimates show significant heterogeneity in the FDI effect across the three economies: the effect is always significantly positive for Hungary, weakly negative for Poland, and negligible for the Czech Republic. As to trade, we find much more homogeneity in coefficient estimates, which are generally negative for all countries, although significant only in the case of Hungary.     

How the Risk of Displacement for Older Workers Has Changed

Using Blinder–Oaxaca decomposition and relying on the consistent design of the Displaced Worker Survey since 1996, this study analyses various factors contributing to the rising dislocation of older workers, such as changes in tenure, industry mix, educational attainment, and labor force participation. Although in the past older workers were less prone to displacement compared with prime‐age workers, this paper finds that older workers are now more likely to be displaced, conditional on education, manufacturing industry, and tenure. Declining tenure, a higher incidence of displacement in manufacturing, and a higher labor force participation among older workers largely explain the convergence of displacement rates among older and prime‐age workers.     

Income Pooling between Australian Young Adults and Their Parents

We test whether young adults who co‐reside with their parents derive influence over household‐level expenditure by earning income. We propose a new variant of the Engel curve consistent with the Quadratic Almost Ideal Demand System, which allows a simple test of income pooling. Our tests suggest that young adults and parents mostly pool their income — pooling is not rejected for 8 out of 12 expenditure categories. We are more likely to reject income pooling between young adults and their parents in those expenditure categories where the model fit is highest, so our results may be interpreted as an upper bound on income pooling. We also apply our tests to income pooling between husbands and wives and find that pooling holds for 9 out of 12 expenditure categories. We find the opposite relationship with fit — expenditure categories where fit is poor are those where we are most likely to reject income pooling.     

Occupational and Locational Substitution: Measuring the Effect of Occupational and Regional Mobility

The paper analyses the effects of occupational and regional mobility on the matching rate using monthly panel data disaggregated at the regional and occupational level. The main contribution of the paper is to measure the effect of substitutability between vacancies in different occupations, and vacancies in different regions on the matching rate. The estimates indicate higher regional mobility in West Germany but higher occupational mobility in East Germany. The results show that if occupations were perfect substitutes, then the number of matches could increase by 5–9 per cent. Perfect regional mobility would increase matchings by 5–15 per cent. It is also shown that partial aggregation causes a downward bias in substitutability estimates.     

Estimating the Return to College in Britain Using Regression and Propensity Score Matching

College graduates tend to earn more than non‐graduates but it is difficult to ascertain how much of this empirical association between wages and college degree is due to the causal effect of a college degree and how much is due to unobserved factors that influence both wages and education (e.g. ability). In this paper, I use the 1970 British Cohort Study to examine the college premium for people who have a similar ability level by using a restricted sample of people who are all college eligible but some never attend. Compared with using the full sample, restricting the sample to college‐eligible reduces the return to college significantly using both regression and propensity score matching estimates. The finding suggests the importance of comparing individuals of similar ability levels when estimating the return to college.     

CLASS SIZE AND CLASS HETEROGENEITY

We study how class size and class composition affect the academic and labor market performance of college students, two crucial policy questions given the secular increase in college enrollment. Our identification strategy relies on the random assignment of students to teaching classes. We find that a one standard deviation increase in class‐size results in a 0.1 standard deviation deterioration of the average grade. Further, the effect is heterogeneous as it is stronger for males and lower income students. Also, the effects of class composition in terms of gender and ability appear to be inverse U‐shaped. Finally, a reduction of 20 students (one standard deviation) in one’s class size has a positive effect on monthly wages of about €80 ($115) or 6% over the average.     

A Remedy for Kernel Estimation Under Random Design

Two common kernel-based methods for non-parametric regression estimation suffer from well-known drawbacks when the design is random. The Gasser-Müller estimator is inadmissible due to its high variance while the Nadaraya-Watson estimator has zero asymptotic efficiency because of poor bias behavior. Under asymptotic consideration, the local linear estimator avoids these two drawbacks of kernel estimators and achieves minimax optimality. However, when based on compact support kernels its finite sample behavior is disappointing because sudden kinks may show up in the estimate.

This paper proposes a modification of the kernel estimator, called the binned convolution estimator leading to a fast O(n) method. Provided the design density is continously differentiable and the conditional fourth moments exist the binned convolution estimator has asymptotic properties identical with those of the local linear estimator.