Can Mentoring Alleviate Family Disadvantage in Adolescence? A Field Experiment to Improve Labor-Market Prospects
Sven Resnjanskij, Jens Ruhose, Simon Wiederhold, Ludger Woessmann
Abstract
We study a mentoring program that aims to improve the labor-market prospects of school-attending adolescents from disadvantaged families by offering them a university-student mentor. Our RCT investigates program effectiveness on three outcome dimensions that are highly predictive of adolescents later labor-market success: math grades, patience-social skills, and labor-market orientation. For low-SES adolescents, the one-to-one mentoring increases a combined index of the outcomes by half a standard deviation after one year, with significant increases in each dimension. Part of the treatment effect is mediated by establishing mentors as attachment figures who provide guidance for the future. The mentoring is not effective for higher-SES adolescents. The results show that substituting lacking family support by other adults can help disadvantaged children at adolescent age.
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Lack of Selection and Limits to Delegation: Firm Dynamics in Developing Countries
Ufuk Akcigit, Harun Alp, Michael Peters
American Economic Review,
No. 1,
2021
Abstract
Delegating managerial tasks is essential for firm growth. Most firms in developing countries, however, do not hire outside managers but instead rely on family members. In this paper, we ask if this lack of managerial delegation can explain why firms in poor countries are small and whether it has important aggregate consequences. We construct a model of firm growth where entrepreneurs have a fixed time endowment to run their daily operations. As firms grow large, the need to hire outside managers increases. Firms’ willingness to expand therefore depends on the ease with which delegation can take place. We calibrate the model to plant-level data from the U.S. and India. We identify the key parameters of our theory by targeting the experimental evidence on the effect of managerial practices on firm performance from Bloom et al. (2013). We find that inefficiencies in the delegation environment account for 11% of the income per capita difference between the U.S. and India. They also contribute to the small size of Indian producers, but would cause substantially more harm for U.S. firms. The reason is that U.S. firms are larger on average and managerial delegation is especially valuable for large firms, thus making delegation efficiency and other factors affecting firm growth complements.
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Switching to Good Policy? The Case of Central and Eastern European Inflation Targeters
Andrej Drygalla
Macroeconomic Dynamics,
No. 8,
2020
Abstract
The paper analyzes how actual monetary policy changed following the official adoption of inflation targeting in the Czech Republic, Hungary, and Poland and how it affected the volatilities of important macroeconomic variables in the years thereafter. To disentangle the effects of the policy shift from exogenous changes in the volatilities of these variables, a Markov-switching dynamic stochastic general equilibrium model is estimated that allows for regime switches in the policy parameters and the volatilities of shocks hitting the economies. Whereas estimation results reveal periods of high and low volatility for all three economies, the presence of different policy regimes is supported by the underlying data for the Czech Republic and Poland, only. In both economies, monetary policy switched from weak and unsystematic to strong and systematic responses to inflation dynamics. Simulation results suggest that the policy shifts of both central banks successfully reduced inflation volatility in the following years. The observed reduction in output volatility, on the other hand, is attributed more to a reduction in the size of external shocks.
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Drawing Conclusions from Structural Vector Autoregressions Identified on the Basis of Sign Restrictions
Christiane Baumeister, James D. Hamilton
Journal of International Money and Finance,
December
2020
Abstract
This paper discusses the problems associated with using information about the signs of certain magnitudes as a basis for drawing structural conclusions in vector autoregressions. We also review available tools to solve these problems. For illustration we use Dahlhaus and Vasishtha’s (2019) study of the effects of a U.S. monetary contraction on capital flows to emerging markets. We explain why sign restrictions alone are not enough to allow us to answer the question and suggest alternative approaches that could be used.
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Financial Technologies and the Effectiveness of Monetary Policy Transmission
Iftekhar Hasan, Boreum Kwak, Xiang Li
Abstract
This study investigates whether and how financial technologies (FinTech) influence the effectiveness of monetary policy transmission. We use an interacted panel vector autoregression model to explore how the effects of monetary policy shocks change with regional-level FinTech adoption. Results indicate that FinTech adoption generally mitigates the transmission of monetary policy to real GDP, consumer prices, bank loans, and housing prices, with the most significant impact observed in the weakened transmission to bank loan growth. The relaxed financial constraints, regulatory arbitrage, and intensified competition are the possible mechanisms underlying the mitigated transmission.
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Sovereign Default Risk, Macroeconomic Fluctuations and Monetary-Fiscal Stabilisation
Markus Kirchner, Malte Rieth
IWH Discussion Papers,
No. 22,
2020
Abstract
This paper examines the role of sovereign default beliefs for macroeconomic fluctuations and stabilisation policy in a small open economy where fiscal solvency is a critical problem. We set up and estimate a DSGE model on Turkish data and show that accounting for sovereign risk significantly improves the fit of the model through an endogenous amplication between default beliefs, exchange rate and inflation movements. We then use the estimated model to study the implications of sovereign risk for stability, fiscal and monetary policy, and their interaction. We find that a relatively strong fiscal feedback from deficits to taxes, some exchange rate targeting, or a monetary response to default premia are more effective and efficient stabilisation tools than hawkish inflation targeting.
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Executive Compensation, Macroeconomic Conditions, and Cash Flow Cyclicality
Stefano Colonnello
Finance Research Letters,
November
2020
Abstract
I model the joint effects of debt, macroeconomic conditions, and cash flow cyclicality on risk-shifting behavior and managerial wealth-for-performance sensitivity. The model shows that risk-shifting incentives rise during recessions and that the shareholders can eliminate such adverse incentives by reducing the equity-based compensation in managerial contracts. Moreover, this reduction should be larger in highly procyclical firms. These novel, testable predictions provide insights into optimal shareholder responses to agency costs of debt throughout the business cycle.
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Measuring the Indirect Effects of Adverse Employer Behaviour on Worker Productivity – A Field Experiment
Matthias Heinz, Sabrina Jeworrek, Vanessa Mertins, Heiner Schumacher, Matthias Sutter
Economic Journal,
No. 632,
2020
Abstract
We conduct a field experiment to study how worker productivity is affected if employers act adversely towards their co-workers. Our employees work for two shifts in a call centre. In our main treatment, we lay off some workers before the second shift. Compared to two control treatments, we find that the lay-off reduces the productivity of unaffected workers by 12%. We find suggestive evidence that this result is not driven by altered beliefs about the job or the management’s competence, but caused by the workers’ perception of unfair employer behaviour. The latter interpretation is confirmed in a prediction experiment with professional HR managers. Our results suggest that the price for adverse employer behaviour goes well beyond the potential tit for tat of directly affected workers.
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Wages and the Value of Nonemployment
Simon Jäger, Benjamin Schoefer, Samuel Young, Josef Zweimüller
Quarterly Journal of Economics,
No. 4,
2020
Abstract
Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers hired out of unemployment. The insensitivity of wages to the nonemployment value presents a puzzle to the widely used Nash bargaining model, which predicts a sensitivity of $0.24–$0.48. Our evidence supports wage-setting models that insulate wages from the value of nonemployment.
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Epidemics in the Neoclassical and New Keynesian Models
Martin S. Eichenbaum, Sergio Rebelo, Mathias Trabandt
Abstract
We analyze the effects of an epidemic in three standard macroeconomic models. We find that the neoclassical model does not rationalize the positive comovement of consumption and investment observed in recessions associated with an epidemic. Introducing monopolistic competition into the neoclassical model remedies this shortcoming even when prices are completely flexible. Finally, sticky prices lead to a larger recession but do not fundamentally alter the predictions of the monopolistic competition model.
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