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This paper analyzes the effect of firing costs on aggregate productivity growth. For this purpose, a model of endogenous growth through selection and imitation is developed. It is consistent with recent evidence on firm dynamics and on the importance of reallocation for productivity growth. In the model, growth is driven by selection among heterogeneous incumbent firms, and is sustained as entrants imitate the best incumbents. In this framework, firing costs not only induce misallocation of labor, but also affect growth by affecting firms' exit decisions. Importantly, charging firing costs only to continuing firms raises growth by promoting selection. Also charging them to exiting firms is akin to an exit tax, hampers selection, and reduces growth - by 0.1 percentage points in a calibrated version of the model. With job turnover very similar in the two settings, this implies that the treatment of exiting firms matters for welfare and growth. In addition, the impact on growth rates is larger in sectors where firms face larger idiosyncratic shocks, as in services. This fits evidence that recent EU-U.S. growth rate differences are largest in these sectors and implies that firing costs can play a role here. A brief empirical analysis of the impact of firing costs on the size of exiting firms supports the model's conclusions. -- Endogenous growth theory ; firm dynamics ; labor market regulation ; firing costs ; entry and exit ; firm selection

We document the recent phenomenon of "uphill" flows of capital from nonindustrial to industrial countries and analyze whether this pattern of capital flows has hurt growth in nonindustrial economies that export capital. Surprisingly, we find that there is a positive correlation between current account balances and growth among nonindustrial countries, implying that a reduced reliance on foreign capital is associated with higher growth. This result is weaker when we use panel data rather than cross-sectional averages over long periods of time, but in no case do we find any evidence that an increase in foreign capital inflows directly boosts growth. What explains these results, which are contrary to the predictions of conventional theoretical models? We provide some evidence that even successful developing countries have limited absorptive capacity for foreign resources, either because their financial markets are underdeveloped, or because their economies are prone to overvaluation caused by rapid capital inflows. -- North-South capital flows ; financial globalization

The aim of this paper is to estimate income advantages arising from publicly provided education and to analyse their impact on the income distribution in Germany. Using representative micro-data from the SOEP and considering regional and education-specific variation, from a cross-sectional perspective the overall result is the expected levelling effect. When estimating the effects of accumulated educational transfers over the life course within a regression framework, however, and controlling for selectivity of households with children as potential beneficiaries of educational transfers, we find evidence that social inequalities are increasing from an intergenerational perspective, reinforced in particular by public transfers for non-compulsory education, thus negating any social equalisation effects achieved within the compulsory education framework.

Bubbles in asset markets have been documented in numerous experimental studies. However, all experiments in which bubbles occur pay dividends after each trading day. In this paper we study whether bubbles can occur in markets without dividends. We investigate the role of two features that are present in real markets. (1) The mere possibility that some traders may have inside information, and (2) the option to communicate with other traders. We find that bubbles can indeed occur without dividends. Surprisingly, communication turns out to be counterproductive for bubble formation, whereas the possibility of inside information is, as expected, crucial.

When estimating the determinants of child care participation, the simultaneity in mothers' decision to work and in the decision to use child care is a major challenge. In this study, we provide evidence on the determinants of institutional child care use accounting for the endogeneity of mothers' labor supply by applying an instrumental variables approach. This endogeneity has been neglected in studies on this issue so far, even though the decision to use child care outside the home is strongly connected to mothers' decision to work after childbirth and vice versa. Based on the German Socio-economic Panel (GSOEP) from 1989{2006 we show that children living in Western Germany have a higher probability to attend institutional care if their mothers increase their actual weekly working time. Estimating the determining factors of child care participation without correcting for simultaneity underestimates the influence of maternal working time by more than a half.

If fertility reflects the choice of households, results of their choice (duration between successive births and health of the children) cannot be considered to be randomly determined. While most existing studies of child health tend to overlook the effects of fertility selection on child health, this paper argues that not accounting for this selection issue yields biased estimates. Additionally it is difficult to a priori predict the direction of this bias, thereby over or under estimating the effect of spacing on child survival. We find that the estimates of birth spacing on child mortality are different when we do not account for fertility selection. Additionally the correlated hazard estimates that we present here better fit our samples than the corresponding bivariate probit estimates used in the literature. A comparison of the fertility behaviour of households in the Indian and Pakistani Punjab highlights the differential nature of institutions on demographic transition in these neighbouring regions.

Given that previous findings on the social distribution of the effects of small classes have been mixed and inconclusive, in the present study I attempted to shed light on the mechanism through which small classes affect the achievement of low- and high-achieving students. I used data from a 4-year large-scale randomized experiment (project STAR) to examine the effects of small classes on the achievement gap. The sample consisted of nearly 11,000 elementary school students who participated in the experiment from kindergarten to grade 3. Meta-analysis and quantile regression methods were employed to examine the effects of small classes on the achievement gap in mathematics and reading SAT scores. The results consistently indicated that higher-achieving students benefited more from being in small classes in early grades than other students. The findings also indicated that although all types of students benefited from being in small classes, reductions in class size did not reduce the achievement gap between low and high achievers.

Using German firm-level data, an endogenous switching regression model within a production function framework is estimated in order to explore differences in labor productivity between IT outsourcing and non-IT outsourcing firms. This approach takes possible complementarities between IT outsourcing and production input factors into account and further allows IT outsourcing to affect any factor of the production function. Estimation results show that IT outsourcing firms produce more efficiently than non-IT outsourcing firms. Furthermore, they have a significantly larger output elasticity with respect to computer workers. Therefore computer workers and IT outsourcing can be interpreted as complementary factors positively affecting firms' labor productivity. An additional analysis indicates that IT outsourcing, in the medium-term, has a positive effect on firms' employment growth rate.

This survey is devoted to the statistical analysis of duration models and point processes. The first section introduces specific concepts and definitions for single-spell duration models. Section two is devoted to the presentation of conditional duration models which incorporate the effects of explanatory variables. Competing risks models are presented in the third section. The fourth section is concerned with statistical inference, with a special emphasis on non- and semi- parametric estimation of single-spell duration models. Section 5 sets forth the main definitions for point and counting processes. Section 6 presents important elementary examples of point processes, namely Poisson, Markov and semi-Markov processes. The last section presents a general semi-parametric framework for studying point processes with explanatory variables.

The World Health Organization (WHO) reports that malaria, a parasitic disease transmitted by mosquitoes, causes over 300 million episodes of "acute illness" and more than one million deaths annually. Most of the deaths occur in poor countries of the tropics, and especially sub-Saharan Africa. Some researchers have suggested that ecological differences associated with malaria prevalence are perhaps the most important reason why some countries today are rich and others poor. This paper explores the question in an explicit dynamic general equilibrium framework, using a calibrated model that incorporates epidemiological features into a standard general equilibrium framework.

Testing the tradeoff between child quantity and quality within a family is complicated by the endogeneity of family size. Using data from the Chinese Population Census, this paper examines the effect of family size on child educational attainment in China. We find a negative correlation between family size and child outcome, even after we control for the birth order effect. We then instrument family size by the exogenous variation that is induced by a twin birth, and find a negative effect of family size on children's education. We also find that the effect of family size is more evident in rural China, where the public education system is poor. Given that our estimates of the effect of twinning on non-twins at least provide the lower bound of the true effect of family size (Rosenzweig and Zhang, 2006), these findings suggest a quantity-quality tradeoff of children in developing countries. -- Quantity-quality tradeoff ; twins ; China

We use panel data on Mexican manufacturing plants to study the connection between plants' responses to changes in the economic environment and their contributions to aggregate productivity growth in the period following the implementation of the North American Trade Agreement (NAFTA). In all industries, an overwhelming share of aggregate productivity growth is accounted for by a small number of plants which were larger and more productive before the implementation of NAFTA and expanded and became more productive following the implementation of NAFTA. Plants that exported before NAFTA and export continuously through 2000 and some of the new exporters are more likely to be among the top-performing plants. Exporting activity and performance of plants with similar exporting experience, however, display remarkable heterogeneity. This heterogeneity implies that trade liberalization provided growth opportunity to larger and more productive plants irrespective of their export status and provides an explanation for the lackluster average productivity performance of exporting plants. -- NAFTA ; trade liberalization ; productivity ; heterogeneity of plant-level performance