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.

When to carry eccentric products? Optimal retail assortment under consumer returns

To understand whether retailers should consider consumer returns when merchandising, we study howthe optimal assortment of a price-taking retailer is influenced by its return policy. The retailer selects itsassortment from an exogenous set of horizontally differentiated products. Consumers make purchase andkeep/return decisions in nested multinomial logit fashion. Our main finding is that the optimal assortmenthas a counterintuitive structure for relatively strict return policies: It is optimal to offer a mix of the mostpopular and most eccentric products when the refund amount is sufficiently low, which can be viewed asa form of risk sharing between the retailer and consumers. In contrast, if the refund is sufficiently high, orwhen returns are disallowed, optimal assortment is composed of only the most popular products (a commonfinding in the literature). We provide preliminary empirical evidence for one of the key drivers of our results:more eccentric products have higher probability of return conditional on purchase. In light of our analyticalfindings and managerial insights, we conclude that retailers should take their return policies into accountwhen merchandising.

The persistence of abnormal returns at industry and firm levels

The present paper proposes a model for the persistence of abnormal returnsboth at firm and industry levels, when longitudinal data for the profitsof firms classiffied as industries are available. The model produces a two-way variance decomposition of abnormal returns: (a) at firm versus industrylevels, and (b) for permanent versus transitory components. This variancedecomposition supplies information on the relative importance of thefundamental components of abnormal returns that have been discussed in theliterature. The model is applied to a Spanish sample of firms, obtainingresults such as: (a) there are significant and permanent differences betweenprofit rates both at industry and firm levels; (b) variation of abnormal returnsat firm level is greater than at industry level; and (c) firm and industry levelsdo not differ significantly regarding rates of convergence of abnormal returns.

On the throughput-WIP trade-off in queueing systems, diminishing returns and the threshold property: A linear programming approach

We present a new unifying framework for investigating throughput-WIP(Work-in-Process) optimal control problems in queueing systems,based on reformulating them as linear programming (LP) problems withspecial structure: We show that if a throughput-WIP performance pairin a stochastic system satisfies the Threshold Property we introducein this paper, then we can reformulate the problem of optimizing alinear objective of throughput-WIP performance as a (semi-infinite)LP problem over a polygon with special structure (a thresholdpolygon). The strong structural properties of such polygones explainthe optimality of threshold policies for optimizing linearperformance objectives: their vertices correspond to the performancepairs of threshold policies. We analyze in this framework theversatile input-output queueing intensity control model introduced byChen and Yao (1990), obtaining a variety of new results, including (a)an exact reformulation of the control problem as an LP problem over athreshold polygon; (b) an analytical characterization of the Min WIPfunction (giving the minimum WIP level required to attain a targetthroughput level); (c) an LP Value Decomposition Theorem that relatesthe objective value under an arbitrary policy with that of a giventhreshold policy (thus revealing the LP interpretation of Chen andYao's optimality conditions); (d) diminishing returns and invarianceproperties of throughput-WIP performance, which underlie thresholdoptimality; (e) a unified treatment of the time-discounted andtime-average cases.

Stock returns, term structure, inflation and real activity: An international perspective

This paper analyses the empirical interdependences among assetreturns, real activity and inflation from a multicountry and internationalpoint of view. We find that nominal stock returns are significantly relatedto inflation only in the US, that the US term structure of interest ratespredicts both domestic and foreign inflation rates while foreign termstructures do not have this predictive power and that innovations in inflationand exchange rates induce insignificant responses of real and financialvariables. An interpretation of the dynamics and some policy implicationsof the results are provided.

Improved estimation of the covariance matrix of stock returns with an application to portofolio selection

This paper proposes to estimate the covariance matrix of stock returnsby an optimally weighted average of two existing estimators: the samplecovariance matrix and single-index covariance matrix. This method isgenerally known as shrinkage, and it is standard in decision theory andin empirical Bayesian statistics. Our shrinkage estimator can be seenas a way to account for extra-market covariance without having to specifyan arbitrary multi-factor structure. For NYSE and AMEX stock returns from1972 to 1995, it can be used to select portfolios with significantly lowerout-of-sample variance than a set of existing estimators, includingmulti-factor models.

Nonparametric bounds on the returns to language skills

This paper applies the theoretical literature on nonparametric bounds ontreatment effects to the estimation of how limited English proficiency (LEP)affects wages and employment opportunities for Hispanic workers in theUnited States. I analyze the identifying power of several weak assumptionson treatment response and selection, and stress the interactions between LEPand education, occupation and immigration status. I show that thecombination of two weak but credible assumptions provides informative upperbounds on the returns to language skills for certain subgroups of thepopulation. Adding age at arrival as a monotone instrumental variable alsoprovides informative lower bounds.

How different are returns to education? Evidence from German school choices

This study presents estimates of returns to post-secondary educationand wage differentials among graduates fromdifferent secondary schoolsin Germany. I use an empirical model that captures the basic features ofthe German education system. It controls for selection into post-secondaryeducation and treats latter as endogenous in the wage equation. Myresults show that OLS estimates are severely biased. The direction ofthe bias depends on the secondary school type. Annual returns topost-secondary education differ significantly: they are eight timeshigher for graduates from the highest secondary school than for graduatesfrom the lowest secondary school.

Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600

Philip II of Spain accumulated debts equivalent to 60% of GDP. He also defaulted four times onhis short-term loans, thus becoming the first serial defaulter in history. Contrary to a commonview in the literature, we show that lending to the king was profitable even under worst-casescenario assumptions. Lenders maintained long-term relationships with the crown. Lossessustained during defaults were more than compensated by profits in normal times. Defaultswere not catastrophic events. In effect, short-term lending acted as an insurance mechanism,allowing the king to reduce his payments in harsh times in exchange for paying a premium intranquil periods. © 2010 Elsevier Inc. All rights reserved.

Increasing returns, imperfect competition and factor prices

We show how, in general equilibrium models featuring increasing returns, imperfectcompetition and endogenous markups, changes in the scale of economic activity affectincome distribution across factors. Whenever final goods are gross-substitutes (gross-complements), a scale expansion raises (lowers) the relative reward of the scarce factoror the factor used intensively in the sector characterized by a higher degree of product differentiation and higher fixed costs. Under very reasonable hypothesis, our theory suggests that scale is skill-biased. This result provides a microfoundation for the secular increase in the relative demand for skilled labor. Moreover, it constitutes an important link among major explanations for the rise in wage inequality: skill-biased technical change, capital-skill complementarities and international trade. We provide new evidence on the mechanism underlying the skill bias of scale.

Increasing political returns and rural-urban migrations

This paper analyzes the different equilibria in rural-urban migrationsand political redistribution that result from the interaction betweenincreasing political returns, the distribution of land, and creditmarket imperfections. Governments that put a special weight on thewelfare of urban workers when setting agricultural prices generate apolitical externality in the urban sector, giving peasants anincentive to migrate in anticipation of policy determination. Ifcredit markets are imperfect, land ownership confers higherproductivity to peasants, who require large price changes to migrate.In this context, land inequality would lead to large migrations and tolarge policy change, while an egalitarian land distribution would leadto no migration and to a small policy change. This interaction shedslight on the contrasting experience of Latin America and East Asia atthe outset of World War II.

Spaced training facilitates long-term retention of place navigation in adult but not in adolescent rats

Young and adult Long Evans rats were tested in the water maze according to two different procedures: half of the subjects were given one session of four trials a day for 6 days, whereas the other subjects had the same amount of training massed in 1 day. For both conditions, a 14-day retention interval was then introduced to test long-term memory. This was followed by a four-trial reversal session. All groups showed a significant learning curve, but escape latencies were shorter for the adult than for the young rats, without differential effect of the training procedure. A first probe trial (PT1) confirmed similar accurate short-term retention in all the groups. But unimpaired long-term memory was only seen in the adult rats trained with the spaced procedure. The young rats trained over 1 day also showed some retention of the platform location after 14 days, but not the other two groups. Reversal acquisition of the new platform location was rapid in the four groups. These results indicate that although accurate short-term spatial memory in the water maze is seen after a 1-day massed training in both age groups, unimpaired long-term retention is only observed in adult rats trained with 24-h inter-session intervals.

Returns to Foreign Language Skills in a Developing Country: The Case of Turkey

Foreign language skills represent a form of human capital that can be rewarded in the labor market. Drawing on data from the Adult Education Survey of 2007, this is the first study estimating returns to foreign language skills in Turkey. We contribute to the literature on the economic value of language knowledge, with a special focus on a country characterized by fast economic and social development. Although English is the most widely spoken foreign language in Turkey, we initially consider the economic value of different foreign languages among the employed males aged 25 to 65. We find positive and significant returns to proficiency in English and Russian, which increase with the level of competence. Knowledge of French and German also appears to be positively rewarded in the Turkish labor market, although their economic value seems mostly linked to an increased likelihood to hold specific occupations rather than increased earnings within occupations. Focusing on English, we also explore the heterogeneity in returns to different levels of proficiency by frequency of English use at work, birth-cohort, education, occupation and rural/urban location. The results are also robust to the endogenous specification of English language skills.

Parents’ Investments and Education Returns

[cat] Aquest article analitza la relació entre els ingressos dels pares i l’educació dels seus fills. En un context d’altruïsme perfecte, el model descriu les decisions dels pares sobre quant consumir i quant invertir en l’educació dels seus fills. El model prediu que els rendiments de l’educació en termes de sous haurien de ser lineals. Usant aquest model en una economia competitiva, es mostra com el resultat depèn dels subsidis o impostos del govern sobre l’educació. El compromís habitual igualtat-eficiència apareix en aquest context. Finalment, el model dóna intuïcions sobre la relació entre educació i productivitat.