Knowledge that Transforms

This study focuses on how college students form expectations about various major-specific outcomes. For this purpose, I collect a panel data set of Northwestern University undergraduates that contains their subjective expectations about major-specific outcomes. Although students tend to be overconfident about their future academic performance, they revise their expectations in expected ways. The updating process is found to be consistent with a Bayesian learning model. I show that learning plays a role in the decision to switch majors and that major switchers respond to information from their own major. I also present evidence that learning is general and not entirely major specific.

Gibbons and Katz’s asymmetric information model of the labor market predicts that wage losses following displacement should be larger for layoffs than for plant closings. This was borne out in their empirical work. In this article, we examine how the difference in wage losses across plant closing and layoff varies with race and gender. We find that the basic prediction by Gibbons and Katz holds only for white males. We augment their asymmetric information model with heterogeneous human capital and show that this augmented model can match the data.

We investigate whether selective intermarriage and endogenous ethnic identification interact to hide some of the intergenerational progress achieved by the Mexican-origin population in the United States. In part, we do this by comparing an “objective” indicator of Mexican descent (based on the countries of birth of the respondent and his parents and grandparents) with the standard “subjective” measure of Mexican self-identification (based on the respondent’s answer to the Hispanic-origin question). For third-generation Mexican American youth, we show that ethnic attrition is substantial and could produce significant downward bias in standard measures of attainment that rely on ethnic self-identification.

This article investigates the sequential college attendance decision of young women and quantifies the effect of marriage expectations on their decision to attend and graduate from college. A dynamic choice model of college attendance, labor supply, and marriage is formulated and structurally estimated using panel data from the NLSY79. The model is used to simulate the effects of no marriage benefits and finds that the predicted college enrollment rate will drop from 58.0% to 50.5%. Using the estimated model, the college attendance behavior for a younger cohort from the NLSY97 is predicted and used to validate the behavioral model.

Using the 2003 National Survey of College Graduates, I examine how immigrants perform in activities likely to increase U.S. productivity, according to the type of visa on which they first entered the United States. Immigrants who entered on a student/trainee visa or a temporary work visa have a large advantage over natives in wages, patenting, and publishing. Much of the advantage is explained by immigrants' higher education and field of study. Immigrants who entered with legal permanent residence do not outperform natives for any of the outcomes considered. Immigrants are more likely to start companies than similar natives.

This article establishes the cyclical properties of a novel measure of worker reallocation: long-distance migration rates within the United States. Combining evidence from a number of data sets spanning the entire postwar era, we find that internal migration within the United States is procyclical. This result cannot be explained by cyclical variation in relative local economic conditions, suggesting that the net benefit of moving rises during booms. Migration is most procyclical for younger labor-force participants. Therefore, cyclical fluctuations in the net benefit of moving appear to be related to conditions in the labor market and the spatial reallocation of labor.

The effect of oral administration of iron on haematological, biochemical and immunological parameters in neonatal calves was studied. Ten calves from a private farm in Gharbia Governorate were used. Calves were separated from their dams immediately after birth and received colostrum during the first hours after calving and twice daily for 48 h. Thereafter, they received whole milk. Calves were divided into two equal groups. The first group was kept as controls. Calves of the second group were given ferrous sulphate at a dose of 250 mg/calf daily, beginning at one day of age; this was continued for 28 days. Three blood samples were collected from each calf in all groups at 14, 21, 28 and 35 days of age. Iron administration produced a significant increase in red blood cell count, haemoglobin, packed cell volume and blood indices, in addition to non-significant changes in total and differential leukocyte counts. The administration of iron resulted in a significant increase in serum iron, total proteins, globulins, thyroid hormones, lymphocyte stimulation index, phagocytosis, body weight and body gain. The administration of iron is suggested as routine practice in calf-producing farms due to its advantageous effects on the parameters tested.

In this review, I describe how economists have moved beyond the firm as a black box to incorporate incentives, internal organization, and firm boundaries. I then turn to the way that the theory of the firm is treated in Daniel Spulber's book The Theory of the Firm: Microeconomics with Endogenous Entrepreneurs, Firms, Markets, and Organizations. Spulber's goal is to explain why firms exist, how they are established, and what they contribute to the economy. To accomplish this, Spulber defines a firm to be a transaction institution whose objectives differ from those of its owners. For Spulber, this separation is the key difference between the firm and direct exchange between consumers. I raise questions about whether this is a useful basis for a theory of the firm.

The recent crisis was characterized by massive illiquidity. This paper reviews what we know and don't know about illiquidity and all its friends: market freezes, fire sales, contagion, and ultimately insolvencies and bailouts. It first explains why liquidity cannot easily be apprehended through a single statistic, and asks whether liquidity should be regulated given that a capital adequacy requirement is already in place. The paper then analyzes market breakdowns due to either adverse selection or shortages of financial muscle, and explains why such breakdowns are endogenous to balance sheet choices and to information acquisition. It then looks at what economics can contribute to the debate on systemic risk and its containment. Finally, the paper takes a macroeconomic perspective, discusses shortages of aggregate liquidity, and analyzes how market value accounting and capital adequacy should react to asset prices. It concludes with a topical form of liquidity provision, monetary bailouts and recapitalizations, and analyzes optimal combinations thereof; it stresses the need for macro-prudential policies.