Knowledge that Transforms

This paper provides empirical evidence of the influence of adolescent marriage opportunities on female schooling attainment and gives predictions of the impact of imposing universal age-of-consent laws. Using data from rural Bangladesh, we explore the commonly cited hypotheses that women attain less schooling as a result of marrying young. We isolate the causal effect of marriage timing by exploiting variation in the timing of menarche as an instrumental variable for age of first marriage. Our results indicate that marriage age matters: Each additional year that marriage is delayed is associated with 0.30 additional years of schooling and 6.5% higher probability of literacy. Delayed marriage is also associated with a significant increase in use of preventive health care services, some of which appears to be independent of the change in schooling, indicating separate “age effects” of delaying marriage. In the context of competitive marriage markets we show that the above results can be used to obtain estimates of the change in equilibrium female education that would arise from introducing a minimum legal age of marriage. The resulting analysis implies that, under reasonable assumptions, enforcing universal age of consent laws would have a strong positive impact on female schooling. JEL Classification: I32, I12, J12, J13, J16, O12

Productivity risk is pervasive in underdeveloped countries. This paper highlights a way in which underdevelopment exacerbates productivity risk. Productivity shocks cause larger changes in the wage when workers are poorer, less able to migrate, and more credit‐constrained because of such workers’ inelastic labor supply. This equilibrium wage effect hurts workers. In contrast, it acts as insurance for landowners. Agricultural wage data for 257 districts in India for 1956–87 are used to test the predictions, with rainfall as an instrument for agricultural productivity. In districts with fewer banks or higher migration costs, the wage is much more responsive to fluctuations in productivity.

We present and estimate a model in which the choice between entrepreneurship and wage work may be influenced by financial market imperfections. The model allows for limited liability, moral hazard, and a combination of both constraints. The paper uses structural techniques to estimate the model and identify the source of financial market imperfections using data from rural and semiurban households in Thailand. Structural, nonparametric, and reduced‐form estimates provide independent evidence that the dominant source of credit market imperfections is moral hazard. We reject the hypothesis that limited liability alone can explain the data.

This study quantitatively assesses the effects of inflation through changes in the value of nominal assets. It documents nominal asset positions in the United States across sectors and groups of households and estimates the wealth redistribution caused by a moderate inflation episode. The main losers from inflation are rich, old households, the major bondholders in the economy. The main winners are young, middle‐class households with fixed‐rate mortgage debt. Besides transferring resources from the old to the young, inflation is a boon for the government and a tax on foreigners. Lately, the amount of U.S. nominal assets held by foreigners has grown dramatically, increasing the potential for a large inflation‐induced wealth transfer from foreigners to domestic households.

We analyze the optimal trading and ownership policy of a large shareholder who must trade off diversification and monitoring incentives. Without commitment, the problem is similar to durable goods monopoly: the share price today depends on expected future trades. We show that the large shareholder ultimately trades to the competitive price‐taking allocation, even though it entails inefficient monitoring. With continuous trading, the large shareholder trades immediately to this allocation if moral hazard is weak enough that her private valuation of a share is decreasing in her stake. Otherwise, the large shareholder adjusts her stake gradually. We consider implications for asset pricing, IPO underpricing, and lockup provisions.

Consider a heterogeneous agent matching model in which the payoff of each matched individual is a fixed function of both partners' types. In a 1973 article, Becker showed that assortative matching arises in a frictionless setting simply if everyone prefers higher partners. This paper shows that if finding partners requires time-consuming search and individuals are impatient, then productive interaction matters. Matching is positively assortative—higher types match with higher sets of types—when the proportionate gains from having better partners rise in one's type. With multiplicatively separable payoffs, these proportionate gains are constant in one's type, and "block segregation" arises, a common finding of the literature.