Knowledge that Transforms

Information about 586 individuals who matriculated into 27 economics Ph.D. programs in Fall 2002 is used to estimate first and second year attrition rates. After two years, 26.5 percent of the initial cohort had left, equally divided between the first and second years. Attrition varies widely across individual programs. It is lower among the most highly rated 15 programs, for students with higher verbal and quantitative GRE scores, and for those on a research assistantship. Poor academic performance is the most cited reason for withdrawal. About 15 percent transfer to other economics programs because they are dissatisfied with some aspect of the particular program where they first enrolled. (This abstract was borrowed from another version of this item.)

Labor supply theory predicts systematic heterogeneity in the impact of recent welfare reforms on earnings, transfers, and income.Yet most welfare reform research focuses on mean impacts.We investigate the importance of heterogeneity using random-assignment data from Connecticut's Jobs First waiver, which features key elements of post-1996 welfare programs.Estimated quantile treatment effects exhibit the substantial heterogeneity predicted by labor supply theory.Thus mean impacts miss a great deal.Looking separately at dropouts and other women does not improve the performance of mean impacts.Evaluating Jobs First relative to AFDC using a class of social welfare functions, we find that Jobs First's performance depends on the degree of inequality aversion, the relative valuation of earnings and transfers, and whether one accounts for Jobs First's greater costs.We conclude that welfare reform's effects are likely both more varied and more extensive than has been recognized.

Survey responses from Ph.D. graduates and thesis advisors are used to estimate the time required for the class of 2001-02 to earn a degree. Median time to earn the Ph.D. is 5.5 years, up from 5.25 years for the class of 1996-97. The time required to write a dissertation is a little longer than the time required to complete comprehensive examinations and coursework. Graduates who had their first child while in a Ph.D. program are estimated to finish almost one year later than others. Those with predominantly fellowship support finished about six months faster than those funded predominantly by a teaching assistantship, as did those whose dissertation was a set of essays rather than a single topic treatise. Americans who did their undergraduate work at either a Top-50 U.S. liberal arts or other U.S. college or university that does not offer a Ph.D. in economics finished faster than their counterparts who earned a bachelor’s degree from a U.S. university that offers a Ph.D. in economics. International students from predominantly English speaking countries finished faster than other students studying in the U.S. on temporary visas.

A common view in macroeconomics is that business cycles can be meaningfully decomposed into fluctuations driven by demand shocks - which are shocks that have no short- or long-run effects on productivity - and fluctuations driven by unexpected changes in technology. In this Paper we propose a means of evaluating this view and we show that it is strongly at odds with the data. In contrast, we show that the data favours a view of business cycles driven primarily by a shock that does not affect productivity in the short run - therefore it looks like a demand shock - but affects productivity in the long run. The structural interpretation we suggest for this shock is that it represents news about future technological opportunities. We show that this shock explains about 50% of business cycle fluctuations and therefore deserves to be acknowledged and further understood by macroeconomists.

School choice policies aim to improve school productivity by rewarding administrators of schools that parents prefer. Parental choice may not create incentives for effective administration if parents prefer schools with desirable peer groups to those with inferior peers but better policies and instruction. I examine families revealed preferences in Tiebout choice residential location markets for evidence on the importance of school effectiveness to parental choices. In a multicommunity-style model, wealthy parents cluster together in any Tiebout equilibrium, and cluster near effective schools if effectiveness is an important component of school desirability. Moreover, decentralization of educational governance choice among several local school districts facilitates this residential sorting. Thus, if parents strongly prefer effective schools, average income correlates with school effectiveness in high-choice-market equilibrium. I use a large sample of SAT-takers to examine the joint distribution of student background and outcomes across schools within metropolitan housing markets that differ in the structure of educational governance. I find strong evidence that choice facilitates residential sorting, but little evidence of the sorting that is predicted if parents choose neighborhoods for school characteristics other than peer groups. Moreover, average SAT scores are no higher in high-choice than in low-choice markets. These results suggest caution about the potential to induce improvements in educational productivity through expansions of parental choice.

The directed cognition model assumes that agents use partially myopic option-value calculations to select their next cognitive operation. The current paper tests this model by studying information acquisition in two experiments. In the first experiment, information acquisition has an explicit financial cost. In the second experiment, information acquisition is costly because time is scarce. The directed cognition model successfully predicts aggregate information acquisition patterns in these experiments. When the directed cognition model and the fully rational model make demonstrably different predictions, the directed cognition model better matches the laboratory evidence.

We demonstrate the existence of multiple dimensions of private information in the long-term care insurance market.Two types of people purchase insurance: individuals with private information that they are high risk and individuals with private information that they have strong taste for insurance.Ex post, the former are higher risk than insurance companies expect, while the latter are lower risk.In aggregate, those with more insurance are not higher risk.Our results demonstrate that insurance markets may suffer from asymmetric information even absent a positive correlation between insurance coverage and risk occurrence.The results also suggest a general test for asymmetric information.Theoretical research has long emphasized the potential importance of asymmetric information in impairing the efficient operation of insurance markets.Several recent studies in different insurance markets, however, have found no evidence to support the central prediction of many asymmetric information models that those with more insurance should be more likely to experience the insured risk. 1 In this paper, we use a new method to test for the presence of asymmetric information in the long-term care insurance market in the United States.We use individuals' subjective assessments of the chance they will enter a nursing home to show that, conditional on the insurance companies' own assessment of the individuals' risk type, individuals have residual private information that predicts their eventual risk.Moreover, this residual private information is also positively correlated with insurance coverage.Combined, these two findings provide direct evidence of asymmetric evidence in the long-term care insurance market.