We study the interaction between the optimal immigration policy of a host country and education policy of a source country in a model of international migration of skilled workers. Acquisition of human capital is driven by the academic and career opportunities at home and abroad. Greater opportunities to migrate are found to increase the source country's net stock of human capital only under very stringent conditions concerning the shape of the utility function and of the production function for human capital, the country's emigration rate, and the international wage differential. We use the model to examine the effects of technological improvements in the educational sector, changes in the academic curricula in the source country, and attitudes to immigration in the host country. Of key interest are the implications for the optimal spending on education in the source country and the optimal immigration quota of the host country.
Guest-worker programs have been providing rapidly growing economies with millions of temporary foreign workers over the last couple of decades. With the duration of stay strictly limited by program rules in most of the host countries and wages paid to guest workers often set at sub-market levels, many of the migrants choose to overstay and seek employment in the underground economy. This paper develops a general-equilibrium model that relates the flow of guest workers transiting to the underground economy to the rules of the program, enforcement measures of the host country and market conditions facing migrants at home and abroad.
We examine the effect of the introduction of uniform water-charging for aquifer management and provide evidence using a survey-based choice experiment of agricultural water users in rural Tunisia. Theoretically, we show that the implementation of the proposed second-best regulation would result both in efficiency gains and in distributional effects in favour of small landholders. Empirically, we find that resistance to the introduction of an effective water-charging regime is greatest amongst the largest landholders. Resistance to the regulation of common resources may be rooted in the manner in which heterogeneity might determine the distributional impact of different management regimes.
IMF forecasts and the EU’s Fiscal Compact foresee Europe’s heavily indebted countries running primary budget surpluses of as much as 5 percent of GDP for as long as 10 years in order to maintain debt sustainability and bring their debt/GDP ratios down to the Compact’s 60 percent target. We show that primary surpluses this large and persistent are rare. In an extensive sample of high- and middle-income countries there are just 3 (nonoverlapping) episodes where countries ran primary surpluses of at least 5 per cent of GDP for 10 years. Analyzing a less restrictive definition of persistent surplus episodes (primary surpluses averaging at least 3 percent of GDP for 5 years), we find that surplus episodes are more likely when growth is strong, when the current account of the balance of payments is in surplus (savings rates are high), when the debt-to-GDP ratio is high (heightening the urgency of fiscal adjustment), and when the governing party controls all houses of parliament or congress (its bargaining position is strong). Left wing governments, strikingly, are more likely to run large, persistent primary surpluses. In advanced countries, proportional representation electoral systems that give rise to encompassing coalitions are associated with surplus episodes. The point estimates do not provide much encouragement for the view that a country like Italy will be able to run a primary budget surplus as large and persistent as officially projected.
Improvement of educational attainment in schools in urban, disadvantaged areas is an important priority for policy – particularly in countries like England which have a long tail at the bottom of the educational distribution and where there is much concern about low social mobility. An anomaly in the spatial dimension of school funding policy in England allows us to examine the effect of increasing school expenditure for schools in urban areas. This anomaly arises because an ‘area cost adjustment’ is made in how central government allocates funds to Local Authorities (school districts) whereas, in reality, teachers are drawn from the same labour market and are paid according to national pay scales. This is one of the features that give rise to neighbouring schools on either side of a Local Authority boundary being allocated very different resources, even if they have very similar characteristics. We find that these funding disparities give rise to sizeable differences in pupil attainment in national tests at the end of primary school. This finding lends adds to the evidence that school resources have an important role to play in improving educational attainment and has direct policy implications for the current ‘pupil premium’ policy in England.
While microfinance institutions (MFIs) are increasingly important as employers in the developing world, there is little micro-level evidence on gender differences among MFI employees and MFIs' relation to economic development. We use a unique panel dataset of employees from Latin America's largest MFI to show that gender gaps favouring men for promotion exist primarily in the sales division, while there is a significant gender wage gap in the administrative division. Among loan officers in the sales division, the gender gap in promotion and wages reverses. Finally, female employees tend to work with clients with better loan terms and a history of loans with the institution.
This paper reviews the empirical literature on the links between finance and growth with a special focus on the empirical literature that has shown that the marginal contribution of financial depth to economic growth becomes negative in countries with large financial sectors (the "too much finance result"). It then assesses the empirical and theoretical validity of recent criticisms to this literature and concludes by discussing avenues for future research aimed at identifying the channels through which a very large financial sector can slow down economic growth.
The US financial crisis and the later eurozone crisis have substantially impacted capital flows into and out of financial centers like Switzerland. We focus on the pattern of capital flows involving the Swiss banking industry. We first rely on balance-of-payment statistics and show that net banking inflows rose during the acute phases of the crises, albeit with a contrasting pattern. In the wake of the collapse of Lehman Brothers, net inflows were driven by a substantial retrenchment into the domestic market by Swiss banks. By contrast, net inflows from mid-2011 to mid-2012 were driven by large flows into Switzerland by foreign banks. We then use more detailed data from Swiss banking statistics which allow us to differentiate the situation across different banks and currencies. We show that, during the US financial crisis, the bank flows cycle was driven strongly by exposures in US dollars, and to a large extent by Swiss-owned banks. During the eurozone crisis, by contrast, the flight to the Swiss franc and move away from the euro was also driven by banks that are located in Switzerland, yet are foreign-owned. In addition, while the demand for the Swiss franc was driven by both foreign and domestic customers from mid-2011 to early 2013, domestic demand took a prominent role thereafter.
Expressive law is said to induce compliance with stated principles without a price on non-compliance. We empirically assess this proposition, by attempting to dis-entangle the impacts of a legal change (a 5p charge on use of plastic bags), on individual choices. We do so by measuring both behaviours and attitudes across the first two months of the legal change, and by comparing the impacts across neighboring jurisdictions both with and without the change. Using mediation analysis, we find that the self-reported change in internal motivation explains only about 10% of the change in behaviour. Interestingly, we find that the scale of the sanction (charge) is both irrelevant (because jurisdictions without sanctions still exhibit changed behaviour) and important (because the size of the sanction signals the reasonableness of the law).
