Do peer Groups Matter? Peer Groups versus Schooling Effects on Academic Attainment

In this paper we estimate an educational production function. Educational attainment is a function of three types of inputs: peer group, parental and schooling. We find that conventional measures of school quality are not good predictors for academic attainment, once we control for peer group effects. Parental qualities also have strong effects on academic atainment. This academic attainment is then a key determinant of subsequent labour market success, as measured by earnings.

A Model of Intervention in Childhood

This paper describes a model and resulting simulations to assess the appropriate age structure of intervention in childhood on the theme: should we intervene early or late? We use asset theory approaches to construct a general model of state investment whose aim is to reduce inequality in human capital. We set out the key parameters of such a model, clarifying the assumptions that must be made by state planners or economists in assessing the relative value of targeted investment at different ages in the presence of a range of elements of uncertainty. We simulate the model showing how the age-investment schedule will vary under different assumptions. Early investment is highly valued because of the likely decline with age in effectiveness but the trade-offs are strongly moderated by other important assumptions around which there is uncertainty or are choice variables of the state planner.

Factor Residuals in SUR Regressions: Estimating Panels Allowing for Cross Sectional Correlation

This paper describes a method for estimating panels by imposing a factor structure on the residuals. The method allows SUR estimation of panel models by providing a full-rank estimator of the system covariance matrix when the usual estimate is rank-deficient. We charactersie completely the circumstances when this is possible. When the usual estimator is of full rank, our procedure provides a more parsimonious representation of the covariance matrix, which can lead to efficiency gains in finite samples. Monte Carlo analysis of convergence regressions and PPP regressions in the Heston-Summers data-set indicates that the proposed estimator has better performance in terms of RMSE and bias than standard panel or SUR estimators (where available), as well as offering unbiased inference.Panel data, cross sectional correlation, factor analysis

Five Weeks in the Life of the Pound: Interest Rates

Yields to maturity of a set of nominal and index linked gilts are used to obtain estimates of the term structures of nominal and real interest rates. These allow calculation of the term structures of nominal and real interest rates. These also allow calculation of expected inflation. The estimation is performed for a period of five weeks including the date of sterling's exit from the ERM. We look at the macroeconomic consequences of the shift in the exchange rate regime as implied by the behaviour of financial markets, and how those markets incorporate new information.

Attainment in Secondary School

This paper studies attainment in secondary schools. We estimate an education production function in which attainment depends upon parental inputs, peer group inputs and schooling inputs. We find that the most powerful parental input is parental interest in children, as assessed by teachers. We find a strong peer group effect. The school pupil-teacher ratio does not enter significantly. The only strongly endogenous variable is initial attainment. We argue that this is due to measurement error. There is some evidence that parental interest is endogenous but we do not find peer group variables to be so.

Minimum wages and employment

This paper investigates the effect of minimum wages on employment using a panel of US state-based data. We estimate a minimalist dynamic version of the specification implied by neo-classical theory. We find statistically and economically significant effects of minimum wages on youth employment. Unlike many other studies we find also significant effects on aggregate state employment. These results re-establish the conventional wisdom as existing before the work of Card-Krueger-Katz. The paper meets the methodological criticisms of this sort of panel study made by CKK. An important econometric innovation in this paper is to produce estimates allowing for cross-sectional correlation, which offers unbiased inference and potential efficiency gains

Education and Italian Regional Development

Given recent emphasis on externality to education, macroeconomic studies have a role to play in the analysis of return to schooling. In this paper we study the connection between growth and human capital in a convergence regression for the panel of Italian regions. We include measures of average, primary, secondary and tertiary education. We find that increased education seems to contribute to growth only in the South. Decomposing total schooling into its three constituent parts, we find that only primary education in the South seems to be important. The results thus suggest that the Italian growth benefited from the elimination of illiteracy in the South, mainly in the 1960s, but not from the substantial increases in education at the other levels.Returns to education, regional Italian growth

IV Estimation of Panels with Factor Residuals

This paper considers panel data regression models with weakly exogenous or endogenous regressors and residuals generated by a multi-factor error structure. In this case, the standard dynamic panel estimators fail to provide consistent estimates of the parameters. We propose a new estimation approach, based on instrumental variables, which retains the traditional attractive features of method of moments estimators. One novelty of our approach is that we introduce new parameters to represent the unobserved covariances between the instruments and the factor component of the residual; these parameters are typically estimable when N is large. Some important estimation and identification issues are studied in detail. The finite-sample performance of the proposed estimators is investigated using simulated data. The results show that the method produces reliable estimates of the parameters over various parametrizations and is robust to large values of the autoregressive parameter and/or the variance of the factor loadings.Method of Moments, Dynamic Panel Data, Factor Residuals.

Pre-School Education and Attainment in the NCDS and BCS

This paper considers the effect of how children pass time before entrance to school on attainment in primary school. We find in NCDS data that children perform marginally better at seven and eleven if they spent time with their mother, or at a pre-school, rather than in informal care. This holds when one controls for parental education, social class, and assessed parental interest in the child's education, as well as the quality of the peer group. In the BCS, however, time spent in nurseries effected no improvement in maths at ten as compared to time in informal care and pre-school children were performing much worse in reading. This worse performance was traceable to reduced vocabulary at five. Pre-school children were more advanced in copying at five relative to children in informal care but, while copying is a good predictor of scores in both maths and reading at ten, this advancement had been offset by then.