9 Ekim 2013 Çarşamba
Do child laborers learn less?
Child labor is frowned upon because going to school is deemed essential to the development of every child, especially in terms of giving her the essential tools to do well as an adult. It is generally recognized that parents do not want to keep their child away from school (excluding those who insist on home schooling), but that sometimes economic hardship forces them to have children help with current expenses to the detriment of their future earnings. But child labor is not a black and white outcome. It may happen that children work and go to school. To what extend does this have an impact of academic outcomes?
Patrick Emerson, Vladimir Ponczek and André Portela Souza got their hands on excellent data from the municipal schools in São Paulo, where they can track students across several years, know whether they work outside the home, what their study habits are as well as a few socio-economic characteristics of the family. They find that transitioning into child labor leads to a decline in test scores for mathematics and Portuguese in the order of 6% to 10% of a standard deviation. That may not look like much, but this adds up to a quarter to a full year of education by the time they are done with school. However, one may argue that they also learn some useful skills for the labor market while working, so one can wonder how it look like in terms of adult outcomes.
Patrick Emerson, Vladimir Ponczek and André Portela Souza got their hands on excellent data from the municipal schools in São Paulo, where they can track students across several years, know whether they work outside the home, what their study habits are as well as a few socio-economic characteristics of the family. They find that transitioning into child labor leads to a decline in test scores for mathematics and Portuguese in the order of 6% to 10% of a standard deviation. That may not look like much, but this adds up to a quarter to a full year of education by the time they are done with school. However, one may argue that they also learn some useful skills for the labor market while working, so one can wonder how it look like in terms of adult outcomes.
Puerto Rico...Uncle Sam's Next Bailout Victim?
 |
| They could use more tourists right about now |
The post title may strike you as unusual: How can someone be a "bailout victim" when a bailout is some sort of "rescue" from financial calamity? Well, read on. Recently I have been on a tear classifying episodes of economic stagnation combined with depopulation as "Detroitification." Unbeknownst to many, the American protectorate of Puerto Rico is in a major financial bind a la Detroit with increasingly unpayable debt and a declining population:
Puerto Rico, with 3.7 million residents, has about $87 billion of debt, counting pensions, or $23,000 for every man woman and child. That compares with about $18 billion of debt for Detroit, with a little more than 700,000 people, or about $25,000 for every person in the city. Detroit and Puerto Rico have been rapidly losing population, leaving a smaller, and poorer, group behind to shoulder the burden.
Detroit, at least, was able to seek relief in bankruptcy court, but Puerto Rico is in a legal twilight zone. Territories, like states, have no ability to declare bankruptcy. Another territory, the Northern Mariana Islands, tried in 2012, but its case was rejected.Now, to the part about being a "bailout victim." The United States has been roiling the world economy at an increased rate with its myriad dysfunctions and financial chicanery since 2007. When all the (premature) talk about tapering introduced panic into global capital markets midyear, it was the United States' collateral damage that dealt Puerto Rico the knockout blow. As bond investors chased yield in a low-to-no yield environment, Puerto Rico abused its peculiar attractiveness to engage in high-risk borrowing. The worst symptom, as you would expect, is borrowing to pay off previous borrowing:
Until a few months ago, Puerto Rico was the belle of the bond markets. As a territory, it can sell bonds that pay tax-exempt interest in all 50 states, a rare and desirable trait. Puerto Rico’s bonds also pay higher interest than many others because its credit rating is relatively low — but not low enough to scare off investors. Some of its bonds were insured against default; others have special legal structures that make them seem bulletproof. The territory’s constitution explicitly states that general bond obligations have first call on all available resources.So Puerto Rico was pyramid scheming its debt. Let it pay the price, you say. Once more, it's not that easy. Last I checked, the US (federal) government was closed and could not reach agreement on anything dealing with fiscal matters. With Puerto Rico's credit rating set to be downgraded to junk status, things could get even worse. Uncle Sam is aware of the impending catastrophe, but can he get the legislators on board to execute a rescue? It's certainly an open question:
Because Puerto Rico’s bonds have these unusual advantages, investors snapped them up year after year, even as the territory’s overall debt load started to snowball. In each of the last six years, Puerto Rico sold hundreds of millions of dollars of new bonds just to meet payments on its older, outstanding bonds — a red flag. It also sold $2.5 billion worth of bonds to raise cash for its troubled pension system — a risky practice — and it sold still more long-term bonds to cover its yearly budget deficits.
As a result, officials at the White House, Treasury Department and Federal Reserve have been meeting to discuss the matter and to assess the potential consequences for the overall municipal-bond market, people familiar with the discussions said [...]In a manner of speaking it's partly the American's fault by worrying capital markets for no good reason whatsoever with vapid taper talk. However, a larger part is due to Puerto Rican financial mismanagement plain and simple. Sammy may have delivered the coup de grace, but PR leaders had already done the bulk of the damage to set it teetering. From where I come from, $87 billion is still a lot of money. Nevertheless, just as jurisidiction over working out the debt issues of an insolvent protectorate is uncertain, so is the culpability of the US government.
A Treasury spokeswoman said: "Given the potential for Puerto Rico's financial challenges to impact U.S. markets, including the municipal market, Treasury continues to closely monitor developments." The Federal Reserve Bank of New York and Fed officials in Washington declined to comment. The New York Fed has regulatory jurisdiction over Puerto Rico. The White House advisory group is coordinating with other federal agencies "to make sure that federal resources are fully utilized for maximum impact for the people of Puerto Rico," one senior Obama administration official said.
At any rate, here's another headache for the Brokebank Yanks when it least needs another one. That, dear friends, is the beat.
Congratulations, Janet
Click on graphic to enlarge.
President Obama has made a great decision in choosing Janet Yellen to chair the Federal Reserve.
The image above, by the way, is one of the illustrations in the next edition of my favorite textbook (which is now in production). When supervising the artist, I had to guess who the next Fed chair would be. As you can see, I guessed right.Addendum: Someone asks whether the helicopter in the picture is a reference to the current chairman's somewhat pejorative nickname "Helicopter Ben." The answer is no, not at all. I used a helicopter in this interior illustration since the third edition, which predates Bernanke's becoming Fed chair. Ben has used the helicopter metaphor for monetary policy, but the metaphor is not original to him (or to me). I would guess it started with Milton Friedman, but I am not entirely sure.
8 Ekim 2013 Salı
The Top of My To-read Pile
I am a friend and fan of the University of Chicago's John List. (I had the pleasure of working with John about a decade ago at the Council of Economic Advisers.) So at the very top of my pile of books to read is John's new one, with Uri Gneezy, called The Why Axis.Can we measure smoking behavior?
In any survey, we must consider the issue of imperfect recall or misrepresentation in self-reported assessments. People do not remember precisely how much they spent on this or that, and they they may not recall how long they have been unemployed. For some questions, social pressure may also be a factor. For example, one may not concede on using illegal drugs or one may misreport smoking behavior. The extend of such biases can be measured though, if one has access to administrative data or some other objective measure. The results are often disappointing (Examples discussed here: 1, 2).
Vidhura Tennekoon and Robert Rosenman criticize the fact that the measures against which surveys responses are compared are taken as perfect gold standards. Specifically they look at the biochemical assessment of smoking status, whose results the literature never doubts and which makes self-reported smoking status look really unreliable. Once you use statistical methods that concede that the biochemical assessment may also include some measurement error, they realize that it may be just as bad as the self-assessment. One can thus not exclude that the self-assessment may actually be a better indicator that an independently recorded measure.
Vidhura Tennekoon and Robert Rosenman criticize the fact that the measures against which surveys responses are compared are taken as perfect gold standards. Specifically they look at the biochemical assessment of smoking status, whose results the literature never doubts and which makes self-reported smoking status look really unreliable. Once you use statistical methods that concede that the biochemical assessment may also include some measurement error, they realize that it may be just as bad as the self-assessment. One can thus not exclude that the self-assessment may actually be a better indicator that an independently recorded measure.
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9 Ekim 2013 Çarşamba
Do child laborers learn less?
Child labor is frowned upon because going to school is deemed essential to the development of every child, especially in terms of giving her the essential tools to do well as an adult. It is generally recognized that parents do not want to keep their child away from school (excluding those who insist on home schooling), but that sometimes economic hardship forces them to have children help with current expenses to the detriment of their future earnings. But child labor is not a black and white outcome. It may happen that children work and go to school. To what extend does this have an impact of academic outcomes?
Patrick Emerson, Vladimir Ponczek and André Portela Souza got their hands on excellent data from the municipal schools in São Paulo, where they can track students across several years, know whether they work outside the home, what their study habits are as well as a few socio-economic characteristics of the family. They find that transitioning into child labor leads to a decline in test scores for mathematics and Portuguese in the order of 6% to 10% of a standard deviation. That may not look like much, but this adds up to a quarter to a full year of education by the time they are done with school. However, one may argue that they also learn some useful skills for the labor market while working, so one can wonder how it look like in terms of adult outcomes.
Patrick Emerson, Vladimir Ponczek and André Portela Souza got their hands on excellent data from the municipal schools in São Paulo, where they can track students across several years, know whether they work outside the home, what their study habits are as well as a few socio-economic characteristics of the family. They find that transitioning into child labor leads to a decline in test scores for mathematics and Portuguese in the order of 6% to 10% of a standard deviation. That may not look like much, but this adds up to a quarter to a full year of education by the time they are done with school. However, one may argue that they also learn some useful skills for the labor market while working, so one can wonder how it look like in terms of adult outcomes.
Puerto Rico...Uncle Sam's Next Bailout Victim?
|
| They could use more tourists right about now |
The post title may strike you as unusual: How can someone be a "bailout victim" when a bailout is some sort of "rescue" from financial calamity? Well, read on. Recently I have been on a tear classifying episodes of economic stagnation combined with depopulation as "Detroitification." Unbeknownst to many, the American protectorate of Puerto Rico is in a major financial bind a la Detroit with increasingly unpayable debt and a declining population:
Puerto Rico, with 3.7 million residents, has about $87 billion of debt, counting pensions, or $23,000 for every man woman and child. That compares with about $18 billion of debt for Detroit, with a little more than 700,000 people, or about $25,000 for every person in the city. Detroit and Puerto Rico have been rapidly losing population, leaving a smaller, and poorer, group behind to shoulder the burden.
Detroit, at least, was able to seek relief in bankruptcy court, but Puerto Rico is in a legal twilight zone. Territories, like states, have no ability to declare bankruptcy. Another territory, the Northern Mariana Islands, tried in 2012, but its case was rejected.Now, to the part about being a "bailout victim." The United States has been roiling the world economy at an increased rate with its myriad dysfunctions and financial chicanery since 2007. When all the (premature) talk about tapering introduced panic into global capital markets midyear, it was the United States' collateral damage that dealt Puerto Rico the knockout blow. As bond investors chased yield in a low-to-no yield environment, Puerto Rico abused its peculiar attractiveness to engage in high-risk borrowing. The worst symptom, as you would expect, is borrowing to pay off previous borrowing:
Until a few months ago, Puerto Rico was the belle of the bond markets. As a territory, it can sell bonds that pay tax-exempt interest in all 50 states, a rare and desirable trait. Puerto Rico’s bonds also pay higher interest than many others because its credit rating is relatively low — but not low enough to scare off investors. Some of its bonds were insured against default; others have special legal structures that make them seem bulletproof. The territory’s constitution explicitly states that general bond obligations have first call on all available resources.So Puerto Rico was pyramid scheming its debt. Let it pay the price, you say. Once more, it's not that easy. Last I checked, the US (federal) government was closed and could not reach agreement on anything dealing with fiscal matters. With Puerto Rico's credit rating set to be downgraded to junk status, things could get even worse. Uncle Sam is aware of the impending catastrophe, but can he get the legislators on board to execute a rescue? It's certainly an open question:
Because Puerto Rico’s bonds have these unusual advantages, investors snapped them up year after year, even as the territory’s overall debt load started to snowball. In each of the last six years, Puerto Rico sold hundreds of millions of dollars of new bonds just to meet payments on its older, outstanding bonds — a red flag. It also sold $2.5 billion worth of bonds to raise cash for its troubled pension system — a risky practice — and it sold still more long-term bonds to cover its yearly budget deficits.
As a result, officials at the White House, Treasury Department and Federal Reserve have been meeting to discuss the matter and to assess the potential consequences for the overall municipal-bond market, people familiar with the discussions said [...]In a manner of speaking it's partly the American's fault by worrying capital markets for no good reason whatsoever with vapid taper talk. However, a larger part is due to Puerto Rican financial mismanagement plain and simple. Sammy may have delivered the coup de grace, but PR leaders had already done the bulk of the damage to set it teetering. From where I come from, $87 billion is still a lot of money. Nevertheless, just as jurisidiction over working out the debt issues of an insolvent protectorate is uncertain, so is the culpability of the US government.
A Treasury spokeswoman said: "Given the potential for Puerto Rico's financial challenges to impact U.S. markets, including the municipal market, Treasury continues to closely monitor developments." The Federal Reserve Bank of New York and Fed officials in Washington declined to comment. The New York Fed has regulatory jurisdiction over Puerto Rico. The White House advisory group is coordinating with other federal agencies "to make sure that federal resources are fully utilized for maximum impact for the people of Puerto Rico," one senior Obama administration official said.
At any rate, here's another headache for the Brokebank Yanks when it least needs another one. That, dear friends, is the beat.
Congratulations, Janet
Click on graphic to enlarge.
President Obama has made a great decision in choosing Janet Yellen to chair the Federal Reserve.
The image above, by the way, is one of the illustrations in the next edition of my favorite textbook (which is now in production). When supervising the artist, I had to guess who the next Fed chair would be. As you can see, I guessed right.Addendum: Someone asks whether the helicopter in the picture is a reference to the current chairman's somewhat pejorative nickname "Helicopter Ben." The answer is no, not at all. I used a helicopter in this interior illustration since the third edition, which predates Bernanke's becoming Fed chair. Ben has used the helicopter metaphor for monetary policy, but the metaphor is not original to him (or to me). I would guess it started with Milton Friedman, but I am not entirely sure.
8 Ekim 2013 Salı
The Top of My To-read Pile
I am a friend and fan of the University of Chicago's John List. (I had the pleasure of working with John about a decade ago at the Council of Economic Advisers.) So at the very top of my pile of books to read is John's new one, with Uri Gneezy, called The Why Axis.Can we measure smoking behavior?
In any survey, we must consider the issue of imperfect recall or misrepresentation in self-reported assessments. People do not remember precisely how much they spent on this or that, and they they may not recall how long they have been unemployed. For some questions, social pressure may also be a factor. For example, one may not concede on using illegal drugs or one may misreport smoking behavior. The extend of such biases can be measured though, if one has access to administrative data or some other objective measure. The results are often disappointing (Examples discussed here: 1, 2).
Vidhura Tennekoon and Robert Rosenman criticize the fact that the measures against which surveys responses are compared are taken as perfect gold standards. Specifically they look at the biochemical assessment of smoking status, whose results the literature never doubts and which makes self-reported smoking status look really unreliable. Once you use statistical methods that concede that the biochemical assessment may also include some measurement error, they realize that it may be just as bad as the self-assessment. One can thus not exclude that the self-assessment may actually be a better indicator that an independently recorded measure.
Vidhura Tennekoon and Robert Rosenman criticize the fact that the measures against which surveys responses are compared are taken as perfect gold standards. Specifically they look at the biochemical assessment of smoking status, whose results the literature never doubts and which makes self-reported smoking status look really unreliable. Once you use statistical methods that concede that the biochemical assessment may also include some measurement error, they realize that it may be just as bad as the self-assessment. One can thus not exclude that the self-assessment may actually be a better indicator that an independently recorded measure.
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