Spatial separation of racial and ethnic groups may theoretically have positive or negative effects on the economic performance of those groups. We examine the effects of segregation on outcomes for blacks in schooling, employment, and single parenthood. We find that blacks in more segregated areas have significantly worse outcomes than blacks in less segregated areas. We control for the endogeneity of location choice using instruments based on political factors, topographical features, and residence before adulthood. A one standard deviation decrease in segregation would eliminate one-third of the black-white differences in most of our outcomes.

Ever since Nelson and Plosser (1982) found evidence in favor of the unit-root hypothesis for 13 long-term annual macro series, observed unit - root behavior has been equated with persistence in the economy. Perron (1989) questioned this interpretation, arguing instead that the "observed" behavior may indicate failure to account for structural change. Zivot and Andrews (1992) restored confidence in the unit-root hypothesis by incorporating an endogenous break point into the specification. By allowing for the possibility of two endogenous break points, we find more evidence against the unit-root hypothesis than Zivot and Andrews, but less than Perron.

Equality and efficiency are key issues in educational reform. Here the authors analyze the efficiency and equality consequences of various school finance reforms using a cost-indirect output distance function. This function readily models multiple-output production under conditions of budgetary constraint, and provides a natural measure of performance that is closely related to Farrell-type measures of efficiency. The analysis suggests that despite school district inefficiency, finance reforms can affect student achievement. However, any potential gains in output from redistribution are dwarfed by the potential gains from increased efficiency. More strikingly, the analysis demonstrates that budgetary reforms designed to equalize expenditures could actually increase the inequality of student achievement.

When income levels of some group in the economy fall behind those of others, the blame frequently is cast on the nature of international trading relationships. Such has been the case recently in the United States with the struggle to maintain real wages for relatively lessskilled workers. Much of the debate has asked how changes in world prices or in technology at home or abroad have altered wage rates (see e.g., Susan Collins, 1996; Jones and Engerman, 1996). In this note we focus on another potential culprit, immigration, and probe more widely into past historical experience in the United States and other countries when inflows of labor from abroad disturb wage rates for nationals. Such international labor flows could serve to enhance rather than to depress the earnings of the country's own laborers. If the question addressed concerns the effects of immigration on the welfare of the original inhabitants of a country, a disarmingly simple answer was provided some years ago by Harry Johnson (1967): as long as immigrants bring an accumulated bundle of labor and physical or human capital that is different from that possessed by local residents, the latter must gain from immigration. This is the basic gains-from-trade argument, appropriate only if the country originally did not engage in any other form of trade and if all residents held balanced portfolios of capital and labor. As well, it ignores the social costs incurred and extra taxes collected when migrants flow into a country. In this note we focus not on aggregate welfare effects, but on the effect of immigration on the return to some homogeneous national group of laborers. This question is the one that most sharply divides the views of labor economists from those of trade economists. On the one hand, increases in the supply of labor would seem naturally to depress the return to labor, but in the basic Heckscher-Ohlin trade model with two factors and two produced commodities, an inflow of labor can be absorbed with absolutely no change in wage rates as long as the terms of trade remain undisturbed. We begin by asking what some basic theoretical models tell us about this issue, before turning to the historical record. Simple theory reveals that there are two basic attributes of immigration that affect income distribution: relatively how substitutable immigrant labor is for the national labor force, and the occupations in which immigrants are allowed to work.

Economists working in developing countries often advise the governments that policy reform is a necessary condition for realization of potential growth. The governments generally agree but often argue that must be introduced slowly, and one or a few at a time rather than comprehensively within a short period as in a stand-by arrangement with the IMF. Yet, as Robert J. Barro and Xavier Sala-i-Martin (1995 p. 8) have noted, there is surprisingly little empirical evidence on the relationships between specific policy reforms and growth. The research underlying this paper seeks to join this issue by identifying empirical regularities in the movements of real per capita GDP growth and five measures of economic policy. The proposition examined is that periods of stagnation or decay of per capita GDP will be longer and more severe, the greater the departure of policy from norms such as those outlined in John Williamson's now famous Washington consensus. We focus specifically on Western Hemisphere Developing Countries (IMF classification) over the period 1961-1993, and we rely on IMF International Financial Statistics and World Bank Indicators CD-ROMs for the data. We have been influenced by the nonparametric approach taken in Michael Bruno and William Easterly's (1995) study of relationships worldwide, between price inflation and growth before, during, and after episodes of exceptional price inflation. Their results include a generally robust pattern in which growth of real per capita GDP falls substantially during the episodes of high inflation and then rises to rates above even the pre-episode rates. These findings conflict with those of cross-section studies that have found no robust relationship between growth rates and rates of price inflation. Bruno and Easterly's interpretation of the difference is that parametric cross-section and linear time-series regressions are unsuitable for detecting the relationship between high inflation and growth. Similar reasoning seems to argue for nonparametric tests of the relationship between good policy and good growth performance. Arguably, monetary expansion rates (or fiscal deficits, foreign-exchange flows, or investment/GDP rates) can be very different among countries with similar growth rates. Historical patterns and regularity of these variables may be as important as their magnitudes.

Von Neumann-Morgenstern preferences over terminal consumption can be inferred from wealth on a single sample path when markets are complete and returns follow a known law in a neo-classical investment problem in either a discrete-time i.i.d. binomial model or a continuous-time diffusion model with a Gaussian state variable. Numerical results suggest that useful information about preferences can be obtained from even a single noisy sample of monthly observations of a portfolio over 5 years.

The authors compare initial offer prices in privatizations to initial prices in public offerings of private companies. The evidence indicates that government officials in the United Kingdom underprice initial public offerenings (IPOs) significantly more than their private company counterparts. In Canada and Malaysia, however, the opposite is true. There does not appear to be a general tendency for privatizations to be underpriced to a greater degree than private company IPOs. The authors provide additional evidence on the determinants of privatization initial returns. Their findings indicate that initial returns are significantly higher in relatively primitive capital markets and for privatized companies in regulated industries.