Knowledge that Transforms

Does international financial integration boost economic growth? The empirical literature has not yet established a robust link between openness to the international capital market and economic growth. In this paper, we turn to the economic history of the first era of financial globalization (1880–1914) for new insights. Using identical empirical models and techniques as contemporary studies, we find a significant growth effect in the historical period. A key difference between now and then is that opening up to the international market led to net capital movements and higher investment in the historical period, but it no longer does so today.

This paper examines matched point and density forecasts of inflation from the Survey of Professional Forecasters to analyze the relationships among expected inflation, disagreement, and uncertainty. We undertake the empirical analysis within a seemingly unrelated regression framework and derive measures of uncertainty using a decomposition proposed by Wallis (2004, 2005) and by drawing on the concept of entropy. The results offer little evidence that disagreement is a useful proxy for uncertainty and mixed evidence that increases in expected inflation are accompanied by heightened uncertainty. Conversely, we document a quantitatively and statistically significant positive association between disagreement and expected inflation.

This paper provides new evidence on how wealth shocks influence retirement behavior. Economic theory generally posits that leisure is a normal good, yet it is difficult to obtain reliable empirical estimates of the wealth effect because wealth is correlated with numerous unobservable characteristics that affect labor supply. We use inheritance receipt as a wealth shock and find that it is associated with a significant increase in the probability of retirement, especially when the inheritance is unexpected. This evidence has important implications for how public policies, such as pension or tax reform, may influence retirement behavior through the wealth effect.

Between 1972 and 1978 U.S. high schools rapidly increased their female athletic participation rates in order to comply with Title IX. This paper examines the causal implications of this expansion by using variation in the level of boys' athletic participation across states before Title IX to instrument for change in girls' athletic participation. Analysis of differences in outcomes across states in changes between pre- and postcohorts reveals that a 10 percentage point rise in state-level female sports participation generates a 1 percentage point increase in female college attendance and a 1 to 2 percentage point rise in female labor force participation.

Between 1863 and 1890, phylloxera destroyed 40% of French vineyards. Using the regional variation in the timing of this shock, we identify and examine the effects on adult height, health, and life expectancy of children born in the years and regions affected by the phylloxera. The shock decreased long-run height, but it did not affect other dimensions of health, including life expectancy. We find that those born in affected regions were about 1.8 millimeters shorter than others at age 20, a significant effect since average heights grew by only 2 centimeters in the entire nineteenth century.

Higher education has increasingly relied on part-time, adjunct instructors. Critics argue that adjuncts reduce educational quality because they often have less education than full-time professors. On the other hand, by specializing in teaching or being concurrently employed, adjuncts could enhance learning experiences. This paper quantifies how adjuncts affect subsequent student interest and course performance relative to full-time faculty using an instrumental variable strategy that exploits variation in the composition of a department's faculty over time. The results suggest that adjuncts often have a small, positive effect on enrollment patterns, especially in fields related to particular occupations.

This paper examines the relative benefits of general education and vocational training during Romania's transition to a market economy. We examine a 1973 educational reform that shifted a large proportion of students from vocational training to general education. Using census and household survey data, we analyze the effect of this policy with a regression discontinuity design. We find that men affected by the policy are significantly less likely to work in manual or craft-related occupations but have similar levels of labor market participation and earnings compared to their counterparts unaffected by the policy. We conclude that differences in labor market returns between graduates of vocational and general schools are largely driven by selection.

The Linder hypothesis has attracted substantial empirical research over decades. However, the evidence has failed to provide consistent support for it. This paper explains the failure. Building a theoretical framework in which, as in Linder's theory, product quality plays the central role, I show that the Linder hypothesis is formally derived but holds only when formulated as a sector-level prediction. This prediction is then estimated using a sample of 64 countries in 1995. The results support the sectoral Linder hypothesis: controlling for the effect of intersectoral determinants of trade, countries of similar income per capita trade more intensely with one another.

This study estimates the effect of economic conditions on redistributive conflict. We examine land invasions in Brazil using a panel data set with over 50,000 municipality-year observations. Adverse economic shocks, instrumented by rainfall, cause the rural poor to invade and occupy large landholdings. This effect exhibits substantial heterogeneity by land inequality and land tenure systems, but not by other observable variables. In highly unequal municipalities, negative income shocks cause twice as many land invasions as in municipalities with average land inequality. Cross-sectional estimates using fine within-region variation also suggest the importance of land inequality in explaining redistributive conflict.

We ask how export demand shocks associated with the Asian financial crisis affected Chinese exporters. We construct firm-specific exchange rate shocks based on the precrisis destinations of firms' exports. Because the shocks were unanticipated and large, they are a plausible instrument for identifying the impact of exporting on firm productivity and other outcomes. We find that firms whose export destinations experience greater currency depreciation have slower export growth and that export growth leads to increases in firm productivity and other firm performance measures. Consistent with “learning-by-exporting,” the productivity impact of export growth is greater when firms export to more developed countries.