Knowledge that Transforms

We document the numerical challenges we experienced estimating random-coefficient demand models as in Berry, Levinsohn, and Pakes (1995) using two well-known data sets and a thorough optimization design. The optimization algorithms often converge at points where the first- and second-order optimality conditions fail. There are also cases of convergence at local optima. On convergence, the variation in the values of the parameter estimates translates into variation in the models' economic predictions. Price elasticities and changes in consumer and producer welfare following hypothetical merger exercises vary at least by a factor of 2 and up to a factor of 5.

We investigate the impacts of providing low-income Chilean adolescents with information about how to finance higher education and ask whether providing parents with the same information magnifies the effects on schooling outcomes. We randomly assigned eighth graders and some parents to receive information about aid for higher education. Exposure to information raised college preparatory high school enrollment, primary school attendance, and financial aid knowledge, with gains concentrated among medium- and high-grade students. Parental exposure to information did not significantly magnify these effects. Our results demonstrate that access to relevant information about financial aid affects important schooling choices long before tertiary education begins.

This paper examines the relationship between the minimum high school dropout age and juvenile arrest rates by exploiting state-level variation in dropout age laws. County-level arrest data for the period 1980 to 2008 and difference-in-difference-in-difference-type empirical strategy are used to compare the arrest rates over time of various age groups within counties that differ by their state's minimum dropout age. The evidence suggests that minimum dropout age requirements have a significant and negative effect on property and violent crime arrest rates for individuals 16 to 18 years old. The results are consistent with an incapacitation effect of schooling.

A large literature shows that the self-employed underreport their income to tax authorities. In this paper, we quantify the extent to which the self-employed also systematically underreport their income in U.S. household surveys. We use the Engel curve describing the relationship between income and expenditures of wage and salary workers to infer the actual income, and thus the reporting gap, of the self-employed based on their reported expenditures. On average, the self-employed underreport their income by about 25%. We show that failing to account for such income underreporting leads to biased conclusions in a variety of settings.

We test the hypothesis that information and communication technologies (ICT) polarize labor markets by increasing demand for the highly educated at the expense of the middle educated, with little effect on low-educated workers. Using data on the United States, Japan, and nine European countries from 1980 to 2004, we find that industries with faster ICT growth shifted demand from middle-educated workers to highly educated workers, consistent with ICT-based polarization. Trade openness is also associated with polarization, but this is not robust to controlling for R&D. Technologies account for up to a quarter of the growth in demand for highly educated workers.

This report is confined to those items likely

The committee held the third Conference on Teaching and Research in Economic Education (CTREE) at the Renaissance Hotel in Chicago, IL, May 29–31, 2013. The program committee of Tisha Emerson (Chair), KimMarie McGoldrick, and Steven Cobb performed substantial work and put together an exemplary program. The third conference continued successes of the first two CTREE conferences. Four plenary speakers addressed the conference: Derek Neal (Chicago), John List (Chicago), Spencer Krane (Federal Reserve Bank of Chicago), and Justin Wolfers (Michigan). The conference also held a special morning presentation by Myles Boylan of the National Science Foundation. The title of the presentation was “NSF Funding Opportunities for Economic Education Research and Improvement.” The special NSF and plenary sessions were all well attended and received. The Chicago Federal Reserve hosted a dinner and a plenary talk from Spencer Krane of the Chicago Federal Reserve Bank. The Chicago Fed also provided a tour of their money museum to interested conference attendees. Cindy IvanacLillig and other staff of the Chicago Fed provided their time and resources to make this possible. Gail Hoyt worked with AEA staff to coordinate the presence of publishers at the conference. In addition to plenary sessions, 64 papers were presented at 21 sessions, and 5 panel discussions and 2 “how-to-do-it” workshops were offered. Registration for the conference was 290, about a 12 percent increase from the year before. The fourth conference will be May 28–30, 2014 at the Washington, DC, Marriott at Metro Center. The conference will feature plenary talks from Cecilia Rouse (Princeton), Alan Blinder (Princeton), and Ken Elzinga (Virginia). The Board of Governors of the Federal Reserve has committed to providing a speaker, but the speaker has not yet been identified. The Journal of Economic Education remains a co-sponsor of the conference. Those presenting papers were again given the opportunity to submit their papers from the conference for possible Committee on Economic Education

This year marked the twenty-seventh volume of the Journal of Economic Perspectives. Throughout its history, the Journal has sought to contribute to the economics profession along multiple dimensions: introducing readers to state-of-the-art thinking on theoretical and empirical research topics; encouraging cross-fertilization of ideas among the fields of economics; providing analyses of public policy issues; providing readings for students; offering illustrations that are useful in lectures; sparking discussion among colleagues; suggesting directions for future research; and analyzing features of the economics profession itself