James Symons

THE OCCUPATIONAL CHOICE OF BRITISH CHILDREN

This paper estimates the probabilities of occupational choices for a panel of British children as a function of earnings and socioeconomic background variables. Copyright 1990 by Royal Economic Society.

Bias in Regressions With a Lagged Dependent Variable

We give an expression to order O( T -1 ), where T is the sample size, for bias to the estimated coefficient on a lagged dependent variable when all other regressors are exogenous. The general expression is a nonlinear function of the coefficient on the lagged dependent variable, the autoregressive structure of the exogenous variables, and the coefficients on the exogenous variables. The maximum bias that can arise is a linear function of the number of exogenous regressors in the estimating equation.

Relative Prices and the Demand for Labour in British Manufacturing

The existence of an aggregate demand for labour schedule, derived from profit maximization of the individual firm and giving a negative relationship between the labour-capital ratio and the real wage, is central to most traditional theoretical macroeconomics, even though such a relationship is typically not embodied in macroeconomic models. But beginning with the work of Dunlop (1938) and Tarshis (1939), the negative relationship could not be found in the data: a more modern reference is Bodkin (1969). This evidence led naturally to disequilibrium analysis, notably that of Barro and Grossman (1971). More recently Sargent (1978) has attempted, with some success, to rehabilitate the demand for labour schedule by showing that costly adjustment of the workforce obscures the current relationship between the wage and labour demand, while leaving it essentially intact. That paper (and the related one by Neftci, 1978) was criticized by Geary and Kennan (1979) because it had used retail prices to represent output prices, and they showed that for a number of countries employment could not be explained satisfactorily by the real product wage. However, Geary and Kennan failed to allow for the simultaneous effect of the real prices of raw materials and capital services. In this paper we shall see that, allowing for the effects of other relative prices, notably the price of inputs relative to output and the real interest rate, the real wage has a powerful but slow-acting negative effect on the demand for labour: the long-run elasticity is about 2 and the mean lag is over 18 months. We also find that the price of inputs has a long-run elasticity of about -2, and that high values of the real interest rate have a powerful depressant effect on the level of employment in manufacturing. The most striking implication for policy of our analysis is that measures of demand (output, money, government spending) do not have a significant influence on manufacturing employment, controlling for the effects of relative prices. Thus, government macroeconomic policy can affect the level of employment in manufacturing if and only if it can affect relative prices.

An Analysis of Canadian Unemployment

The paepr reviews different reasons for the emergence in the 1980s of an unemployment gap between Canada and the U.S. We develop a small equilibrium model ofthe Canadian labor market to quantify and evaluate these reasons. We conclude that the gap is essentially due to the liberalization of the benefits system in 1971, the effects of which have often been masked by raw-material booms. The huge increase in unemployment in 1981-82 appears to have been due to a sharp monetary squeeze, exacerbated by a fall in the price of exports.

Pre-school Education and Attainment in the National Child Developement Study and British Cohort Study

This paper considers the effect of how children pass time before entrance to school on attainment in primary school. We find in National Child Developement Study data that Children perform marginally better at 7 and 11 if they spent time with their mother, or at a prre-school, rather than in informal care. This holds when one controls for parental education, social class and assessed parental interest in the childs education, as well as the quality of the peer group. In the British Cohort Study, however, time spent in nurseries effected no improvement in mathematics at 10 as compared with time in informal care, and pre-school children were performing much worse in reading. This worse performance was traceable to reduced vocabulary at 5. Pre-school children were more advanced in copying at 5 relative to children in informal care, but, while copying is a good predictor of scores in both mathematics and reading at 10, this advancement had been offset by then.

Some Econometric Issues in Convergence Regressions

Despite the abundance of different econometric techniques introduced in the empirical literature on convergence, it is usually assumed that shocks are uncorrelated across countries. This is surely unlikely for most of the datasets considered and we investigate a possibility so far ignored, namely the annual panel estimator where shocks are allowed to be correlated across countries. Our analysis is restricted to the case of more time periods than countries (T>N) which allows us to estimate by Maximum Likelihood with an unrestricted variance-covariance matrix of cross-country shocks. The paper examines by Monte Carlo robustness against certain possible mis-specifications, namely measurement error and heterogeneity of the convergence coefficients. Our analysis indicates that ML estimators are robust to plausible measurement error and variation of convergence rates across countries and are more efficient than conventional estimators for plausible values of cross-country error correlation. We consider in detail the relationship between the distribution of the ML estimator and the initial conditions. Applying our findings to a panel of OECD countries for the post-war period, we show that ML is effectively unbiased and more efficient than or conventional panel estimators OLS on a cross-section of countries. We argue the reason this estimators is so well behaved is that many OECD countries were far from their equilibrium values at the beginning of the period.

Self-Selection in the State School System.

With diminishing returns to the peer group, it is optimal social policy to mix children in schools. We consider what happens when, contrary to the outcome being determined by a social planner, schools and children are free to seek each other out: with some caveats, this leads to perfect segregation by child quality. It is shown that this is the worst possible outcome. We show also that a competitive system produces the optimal allocation of children to schools.

An Economic Approach to Fertility in Britain since 1860

This paper utilises a dynamic economic approach to examine movements in fertility in Britain since 1860. The analysis and results indicate that fertility has responded positively to changes in incomes. However, this positive effect has been more than offset by the increase in the opportunity cost of female time which has followed closely the education attainment of women.

The Macroeconomics of the Interwar Years: International Comparisons

This paper is a study of the interwar years for fourteen countries, which we shall collectively describe as the world. Our major aim is to give an account of the Great Depression. Neither of us is an economic historian, as may become apparent, and our primary motivation in undertaking this work is to see if models we have developed to explain the last thirty years or so can explain the interwar years.

Univariate Regressions of Employment on Minimum Wages in the Panel of U.S. States

The paper finds a strong negative correlation between youth employment and minimum wages for the panel of U.S. states, 1976-2007. Such a correlation is not observed in earlier panels. The source of the new results is traced to the greater variance of minimum wages across states emerging after about 2000.