Doctors without borders: The returns to an occupational license for Soviet immigrant physicians in Israel

Re-licensing requirements for professionals that move across borders arewidespread. In this paper, we measure the returns to an occupationallicense using novel data on Soviet trained physicians that immigrated toIsrael. An immigrant re-training assignment rule used by the IsraelMinistry of Health provides an exogenous source of variation inre-licensing outcomes. Instrumental variables and quantile treatmenteffects estimates of the returns to an occupational license indicate excesswages due to occupational entry restrictions and negative selectioninto licensing status. We develop a model of optimal license acquisitionwhich suggests that the wages of high-skilled immigrant physicians in thenonphysician sector outweigh the lower direct costs that these immigrantsface in acquiring a medical license. Licensing thus leads to lower averagequality of service. However, the positive earnings effect of entry restrictionsfar outweighs the lower practitioner quality earnings effect that licensinginduces.

On the distribution of income and worker assignment under intra-firm spillovers, with an application to ideas and networks

We study the earnings structure and the equilibrium assignment of workers when workers exert intra-firm spillovers on each other.We allow for arbitrary spillovers provided output depends on some aggregate index of workers' skill. Despite the possibility of increasing returns to skills, equilibrium typically exists. We show that equilibrium will typically be segregated; that the skill space can be partitioned into a set of segments and any firm hires from only one segment. Next, we apply the model to analyze the effect of information technology on segmentation and the distribution of income. There are two types of human capital, productivity and creativity, i.e. the ability to produce ideas that may be duplicated over a network. Under plausible assumptions, inequality rises and then falls when network size increases, and the poorest workers cannot lose. We also analyze the impact of an improvement in worker quality and of an increased international mobility of ideas.

Gender gaps in performance: Evidence from young lawyers

This paper documents and studies the gender gap in performance among associatelawyers in the United States. Unlike most high-skilled professions, the legal professionhas widely-used objective methods to measure and reward lawyers' productivity: thenumber of hours billed to clients and the amount of new-client revenue generated. Wefind clear evidence of a gender gap in annual performance with respect to bothmeasures. Male lawyers bill ten-percent more hours and bring in more than double thenew-client revenue. We show that the differential impact across genders in the presenceof young children and the differences in aspirations to become a law-firm partneraccount for a large part of the difference in performance. These performance gaps haveimportant consequences for gender gaps in earnings. While individual and firmcharacteristics explain up to 50 percent of earnings gap, the inclusion of performancemeasures explains most of the remainder.

Motivation, test scores and economic success

This paper argues that low-stakes test scores, available in surveys, may be partially determinedby test-taking motivation, which is associated with personality traits but not with cognitiveability. Therefore, such test score distributions may not be informative regarding cognitiveability distributions. Moreover, correlations, found in survey data, between high test scoresand economic success may be partially caused by favorable personality traits. To demonstratethese points, I use the coding speed test that was administered without incentives to NationalLongitudinal Survey of Youth 1979 (NLSY) participants. I suggest that due to its simplicityits scores may especially depend on individuals' test-taking motivation. I show that controllingfor conventional measures of cognitive skills, the coding speed scores are correlated with futureearnings of male NLSY participants. Moreover, the coding speed scores of highly motivated,though less educated, population (potential enlists to the armed forces) are higher than NLSYparticipants' scores. I then use controlled experiments to show that when no performance-basedincentives are provided, participants' characteristics, but not their cognitive skills, affect effortinvested in the coding speed test. Thus, participants with the same ability (measured by theirscores on an incentivized test) have significantly different scores on tests without performance-based incentives.

Social security and democracy

Many political economic theories use and emphasize the process of votingin their explanation of the growth of Social Security, governmentspending, and other public policies. But is there an empirical connectionbetween democracy and Social Security program size or design? Using somenew international data sets to produce both country-panel econometricestimates as well as case studies of South American and southern Europeancountries, we find that Social Security policy varies according toeconomic and demographic factors, but that very different politicalhistories can result in the same Social Security policy. We find littlepartial effect of democracy on the size of Social Security budgets, onhow those budgets are allocated, or how economic and demographic factorsaffect Social Security. If there is any observed difference, democraciesspend a little less of their GDP on Social Security, grow their budgetsa bit more slowly, and cap their payroll tax more often, than doeconomically and demographically similar nondemocracies. Democracies andnondemocracies are equally likely to have benefit formulas inducingretirement and, conditional on GDP per capita, equally likely to induceretirement with a retirement test vs. an earnings test.

Government spending and re-election: Quasi-experimental evidence from Brazilian municipalities

Does additional government spending improve the electoral chances of incumbent politicalparties? This paper provides the first quasi-experimental evidence on this question. Our researchdesign exploits discontinuities in federal funding to local governments in Brazil around severalpopulation cutoffs over the period 1982-1985. We show that extra fiscal transfers resulted in a20% increase in local government spending per capita, and an increase of about 10 percentagepoints in the re-election probability of local incumbent parties. In the context of an agency modelof electoral accountability, as well as existing results indicating that the revenue jumps studiedhere had positive impacts on education outcomes and earnings, these results suggest that expectedelectoral rewards encouraged incumbents to spend additional funds in ways that were valued byvoters.

The long term effects of legalizing divorce on children

We estimate the effect of divorce legalization on the long-term well-being ofchildren. Our identification strategy relies on exploiting the different timing of divorcelegalization across European countries. Using European Community Household Paneldata, we compare the adult outcomes of cohorts who were raised in an environmentwhere divorce was banned with cohorts raised after divorce was legalized in the samecountry. We also have control countries where all cohorts were exposed (or notexposed) to divorce as children, thus leading to a difference-in-differences approach. Wefind that women who grew up under legal divorce have lower earnings and income aswell as worse health as adults compared with women who grew up under illegal divorce.These effects are not found for men. We find no effects of divorce legalization onchildren s family formation or dissolution patterns.

Creative accounting: Some ethical issues of macro- and micro-manipulation

This paper examines two principal categories of manipulative behaviour. The term'macro-manipulation' is used to describe the lobbying of regulators to persuadethem to produce regulation that is more favourable to the interests of preparers.'Micro-manipulation' describes the management of accounting figures to produce abiased view at the entity level. Both categories of manipulation can be viewed asattempts at creativity by financial statement preparers. The paper analyses twocases of manipulation which are considered in an ethical context. The paperconcludes that the manipulations described in it can be regarded as morallyreprehensible. They are not fair to users, they involve an unjust exercise ofpower, and they tend to weaken the authority of accounting regulators.

How enforcement institutions affect markets

In an experiment we study market outcomes under alternative incentive structures for third-party enforcers. Our transactions resemble an anonymous credit market where lenders can give loans and borrowers can repay them. When borrowers default, judges are free to enforce repayment but are themselves paid differently in each of three treatments. First, paying judges according to lenders votes maximizes surplus and the equality of earnings. In contrast, paying judges according to borrowers votes triggers insufficient enforcement, destroying the market and producing the lowest surplus and the most unequal distribution of earnings. Lastly, judges paid the average earnings of borrowers and lenders achieve results close to those based on lender voting. We employ a steps-of-reasoning argument to interpret the performances of different institutions. When voting and enforcement rights are allocated to different classes of actors, the difficulty of their task changes, and arguably as a consequence they focus on high or low surplus equilibria.

Immigration, family responsibilities and the labor supply of skilled native women

This paper investigates the effects of Spain s large recent immigration wave on thelabor supply of highly skilled native women. We hypothesize that female immigration led to an increase in the supply of affordable household services, such as housekeeping and child or elderly care. As a result, i) native females with high earnings potential were able to increase their labor supply, and ii) the effects were larger on skilled women whose labor supply was heavily constrained by family responsibilities. Our evidence indicates that over the last decade immigration led to an important expansion in the size of the household services sector and to an increase in the labor supply of women in high-earning occupations (of about 2 hours per week). We also find that immigration allowed skilled native women to return to work sooner after childbirth, to stay in the workforce longer when having elderly dependents in the household, and to postpone retirement. Methodologically, we show that the availability of even limited Registry data makes it feasible to conduct the analysis using quarterly household survey data, as opposed to having to rely on the decennial Census.

The dog that did not bark: Insider trading and crashes

This paper documents that at the individual stock level insiders sales peak many months before a large drop in the stock price, while insiders purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. We test our hypothesis against competing stories such as patterns of insider trading driven by earnings announcement dates, or insiders timing their trades to evade prosecution. Finally we provide new evidence regarding crashes and the degree of information asymmetry.

The labor market effects of payroll taxes in a middle-income country: Evidence from Colombia

We use a panel of manufacturing plants from Colombia to analyze how the risein payroll tax rates over the 1980 s and 1990 s affected the labor market.Our estimates indicate that formal wages fall by between 1.4% and 2.3% as aresult of a 10% rise in payroll taxes. This 'less-than-full-shifting' islikely to be the result of weak linkages between benefits and taxes and thepresence of downward wage rigidities induced by a binding minimum wage inColombia. Because the costs of taxation are only partly shifted fromemployers to employees, employment should also fall. Our results indicatethat a 10% increase in payroll taxes lowered formal employment by between4% and 5%. In addition, we find less shifting and larger disemploymenteffects for production than non-production workers. These results suggestthat policies aimed at boosting the relative demand of low-skill workers byreducing social security taxes on those with low earnings may be effectivein a country like Colombia, especially if tax cuts are targeted to indirectbenefits.

Behavioral assumptions and management ability

The paper explores the consequences that relying on different behavioral assumptions intraining managers may have on their future performance. We argue that training with anemphasis on the standard assumptions used in economics (rationality and self-interest) is goodfor technical posts but may also lead future managers to rely excessively on rational and explicitsafeguarding, crowding out instinctive relational heuristics and signaling a bad human type topotential partners. In contrast, human assumptions used in management theories, because oftheir diverse, implicit and even contradictory nature, do not conflict with the innate set ofcooperative tools and may provide a good training ground for such tools. We present tentativeconfirmatory evidence by examining how the weight given to behavioral assumptions in the corecourses of the top 100 business schools influences the average salaries of their MBA graduates.Controlling for the self-selected average quality of their students and some other schools characteristics, average salaries are seen to be significantly greater for schools whose core MBAcourses contain a higher proportion of management courses as opposed to courses based oneconomics or technical disciplines.

The marginal propensity to spend on adult children

We examine how much of an extra dollar of parental lifetime resources willultimately be passed on to adult children in the form of inter vivostransfers and bequests. We infer bequests from the stock of wealth late inlife. We use mortality rates and age specific estimates of the response oftransfers and wealth to permanent income to compute the expected presentdiscounted values of these responses to permanent income. Our estimatesimply parents pass on between 2 and 3 cents out of an extra dollar ofexpected lifetime resources in bequests and about 2 cents in transfers.The estimates increase with parental income and are smaller for nonwhites.They imply that about 15 percent of the effect of parental income onlifetime resources of adult children is through transfers and bequestsand about 85 percent is through the intergenerational correlation inearnings, although these estimates are sensitive to assumptions about theintergenerational earnings correlation, taxes, and the number of children.We compare our estimates to the implications of alternative computablebenchmark models of savings behavior in order to assess the likelyimportance of intended bequests for the wealth/income relationship.

The determinants of the prevalence of single mothers: A cross-country analysis

This paper examines the effect of public assistance, labor market and marriage marketconditions on the prevalence of single mother families across countries and over time. Amultinomial logit derived from a random utility approach is estimated using individualleveldata for 14 countries. I find evidence that increases in the level of public support are significantly and positively associated with a higher incidence of both never marriedand divorced mothers. The results also suggest that single mothers are more prevalentwhen female wages are lower. Higher male earnings and employment opportunities in awoman s marriage market appear to lead to fewer never married mothers, but more divorced mothers. Higher child support or alimony payments are associated with a higher prevalence of divorced mothers.