The kindergarten attendance allowance in Hungary: an evaluation of a conditional cash transfer program

This paper evaluates the kindergarten attendance allowance program in Hungary, a conditional cash transfer (CTT) program introduced in 2009 that aimed to increase kindergarten enrollment of disadvantaged children aged 3 and 4. Administration of the program was decentralized, and we make use of the substantial regional variation in program take-up across municipalities to estimate the program's effect on enrollment rates. We show modest but non-negligible effects, despite problems related to the manner of the program's implementation. We also show that the effects were significantly stronger in areas characterized by an excess supply of kindergarten slots. The results testify to the potential of CCT programs to create demand for child-care services among disadvantaged families; however, the results also highlight the importance of creating an adequate supply of kindergarten facilities where needed

The achievement gap between Roma and non-Roma students in East Central Europe and its potential causes

This study quantifies the achievement gap between Roma and non-Roma students in East Central Europe and assesses the potential causes of the gap. Using the UNDP survey of 2011, the only comparable data on the Roma spanning many countries, we show that the gap in the chances to get secondary education is substantial in all countries. When comparing young adults living with parents of comparable income and educational attainment, the gap drops by more than a half in most countries. Using unique data from Hungary, we assess the gap in standardized test scores and show that it is comparable to the size of the Black-White test score gap in the U.S.A. in the 1980’s. The test score gap in Hungary is almost entirely explained by social differences in income, wealth and parental education, and ethnic factors do not play a significant role. We identify two major mechanisms by which the social disadvantages of Roma students lead to lower skills. Their home environment is less favorable for their cognitive development, and their schools are characterized by a lower quality educational environment. Ethnic differences in the home environment are, again, explained by social differences, and ethnicity seems to play no additional role. On the other hand, while access to higher quality schools is strongly related to social differences, Roma students seem to face additional disadvantages. The results suggest that besides policies that aim at alleviating poverty, well-designed interventions influencing the mechanisms can also improve the skill development of Roma and other disadvantaged children

School segregation, school choice and educational policies in 100 Hungarian towns

The distribution of Romani and non-Romani students across schools has become considerably more unequal in Hungary since the 1980s. This paper analyzes the effect of school choice and local educational policies on that inequality, known as school segregation, in 100 Hungarian towns.We combine administrative data with data from a survey that we collected from municipality administrations with respect to local educational policies and the ethnic composition of neighborhoods. Our results indicate that in Hungarian towns, free school choice diminishes the role of residential distribution because many students commute to schools of their choice. Towns where such commuting is more pronounced are characterized by stronger inter-school inequalities.We also find that local educational policies have, on average, somewhat segregationist tendencies, though there is substantial heterogeneity across towns. The more segregationist the local policies are, the higher the segregation in the town, thus suggesting that local policies have room to influence school segregation in this system. However, the impact of local educational policies is weaker than the role of school choice

Wage setting in Hungary: evidence from a firm survey

This paper presents new evidence on the flexibility of the Hungarian labor market, with special emphasis on wages. The results are based on a new survey on wage setting among Hungarian firms. The survey is part of the Eurosystem Wage Dynamics Network (WDN), and it is a harmonized questionnaire administered in 17 countries in Europe, including almost all Euro Area countries as well as five Central and Eastern European countries. The survey results show that the Hungarian labor market, while institutionally flexible, appears to be surprisingly rigid. The survey evidence points to low turnover and possibly more rigid wages than previously thought. JEL Classification: C83, J01, J30Hungary, survey, wage dynamics network, Wage setting

Household Stock Market Beliefs and Learning

This paper characterizes heterogeneity of the beliefs of American households about future stock market returns, provides an explanation for that heterogeneity and establishes its relationship to stock holding behavior. We find substantial belief heterogeneity that is puzzling since households can observe the same publicly available information about the stock market. We propose a simple learning model where agents can invest in the acquisition of financial knowledge. Differential incentives to learn about the returns process can explain heterogeneity in beliefs. We check this explanation by using data on beliefs elicited as subjective probabilities and a rich set of other variables from the Health and Retirement Study. Both descriptive statistics and estimated relevant heterogeneity of the structural parameters provide support for our explanation. People with higher lifetime earnings, higher education, higher cognitive abilities, defined contribution as opposed to defined benefit pension plans, for example, possess beliefs that are considerably closer to what historical time series would imply. Our results also suggest that a substantial part of the reduced form relationship between stock holding and household characteristics is due to differences in beliefs. Our methodological contribution is estimating relevant heterogeneity of structural belief parameters from noisy survey answers to probability questions.

Wage setting in Hungary: evidence from a firm survey

We document results from a survey of wage setting in Hungarian enterprises. The survey was developed and coordinated by the Eurosystem Wage Dynamics Network, and it was administered in 17 European countries; this allows us to put the Hungarian findings in context. The main conclusion from the survey is that while Hungarian firms operate in a quite flexible institutional environment, their wage setting practices are relatively rigid. In its wage setting outcomes, Hungary shares more similarities with Western European countries than with countries in the Central and Eastern European region. The survey provides strong evidence that the observed wage setting behaviour can be explained by internal factors related to employee motivation, perceived fairness, and firms’ desire to maintain a desired wage distribution.wage setting, survey, Hungary, Wage Dynamics Network.

Who Becomes a Stockholder? Expectations, SUbjective Uncertainty, and Asset Allocation

We develop a model of portfolio selection with subjective uncertainty and learning in order to explain why some people hold stocks while others don’t. We model heterogeneity in information directly, which is an alternative to the existing explanations that emphasized heterogeneity in transaction costs of investment. We plan to calibrate the model to survey data (when available) on people’s perception about the distribution of stock market returns. Our approach also leads to a model of learning with new implications such as zero optimal risky assets, or ex post correlation of uncorrelated labor income and optimal portfolio composition. It also points to two factors in probabilistic thinking that should have a major impact on stock ownership. These are the level and the precision of expectations. We construct proxy measures for the two parameters from the 1992-2000 waves of the Health and Retirement Study (HRS). We use a large battery of the subjective probability questions administered in each wave of HRS to construct an overall “index of optimism” (the correlated factor between all subjective probabilities) and “index of precision” (the fraction of nonfocal probability answers, following Lillard and Willis, 2001). We also construct measures for how people forecast the weather, their cognitive capacity, wealth, and basic demographics. Our results indicate that stock ownership and the probability of becoming a stockholder are strongly positively correlated with the indices of the level and precision of expectations. Interpretation of the former is quite challenging and further research is needed to understand its full content.

EXPERIENCE OF EXPERT ACTIVITY (Analysis of complex problems assuming various diagnostic means)

Difficulties in expert activity are introduced in the first section of the paper. The second section gives examples of expert activity, which integrates the knowledge of several professional fields. As an illustration, the aspects of preparing expert opinions on buildings with damage caused by water and on pavements of small elements in large-surface parking roofs are discussed. The paper concludes with thoughts on the development of expert activity and its arising interdisciplinary features

Expected long-term budgetary benefits to Roma education in Hungary

This study estimates the expected long-term budgetary benefits to investing into Roma education in Hungary. By budgetary benefits we mean the direct financial benefits to the national budget. The main idea is that investing extra public money into Roma education would pay off even in fiscal terms. In order to be successful, investments should take place in early childhood. Successful investments are also expensive. But if it is done the right way, such investments more than recoup their costs in terms of extra tax benefits in the future. This study looks at the expected budgetary benefits of a successful investment. It does no deal with how to achieve success. The motivating idea behind our analysis is the notion that investing into somebody's education will lead to benefits not only to the person in question but also to the whole society. We consider these social benefits in a very narrow sense: we make use the fact that in a typical modern society, more education makes people contribute more to the national budget and/or receive less transfers from it. The increased contributions and decreased transfers make up the net budgetary benefits. Net budgetary benefits measure a return on investments into education, very much like returns on any other financial investment. If expected returns more than compensate for such investments, it is in the very narrow interest of the government to invest into Roma education, even setting aside other consideration. We estimate the net benefit of an extra investment (on top of existing pre-school and primary school financing) that enables a young Roma to successfully complete secondary school. We consider an investment that takes place (starts at) at age 4, i.e. we calculate the long-term benefits discounted to age 4. We estimate returns to an investment that makes Roma children complete the maturity examination ("erettsegi") and opens the road to college, instead of stopping at 8 grades of primary school (or dropping out of secondary school). We consider seven channels: personal income tax on income earned from registered fulltime employment, social security contributions paid by employers and employees on earned income, unemployment benefits, means-tested welfare benefits, earning from public employment projects, value added and excise tax on consumption, and incarceration costs. We adjust our estimates by the extra costs of increased secondary and college education. We use large sample surveys, aggregate administrative data, and tax and contribution rules to estimate the necessary parameters. The analysis is nonexperimental and is based on national estimates adjusted for Roma differences. The lack of detailed Roma data and lack of experimental evidence makes interpretation somewhat problematic. We therefore carry out extensive robustness checks for analyzing alternative assumptions. One should keep in mind that, for lack of appropriate data, we leave out important channels such as old-age pensions, disability pensions, childcare benefits, and health care costs. Including most of these channels would most likely increase the estimated benefits to educational investments. Our estimates are therefore most likely lower bounds for the expected budgetary benefits. The results indicate that an investment that makes one young Roma successfully complete secondary school would yield significant direct long-term benefits to the national budget. According to our benchmark estimate, discounted to age 4 (a possible starting age for such an investment), the present value of the future benefits is about HUF 19M (EUR 70,000) relative to the value the government would collect on the representative person in case if she had not continued her studies after the primary school. The benefits are somewhat smaller if (without the suggested early childhood educational investment), the young Roma person finished vocational training school (HUF 15M, EUR 55,000). The estimated returns are sensitive to the discount rate, the assumed wage growth, the college completion rate after secondary school, and the race specific employment and wage differentials (to some extent due to labor market discrimination). But even our most conservative estimates suggest that benefits are least HUF 7M - 9M. We formulate all results in terms of the benefits of an investment that makes one child successfully complete secondary school, for methodological convenience. Naturally, no investment is certain to bring such a result. When comparing benefits to costs, one has to factor in the success probabilities. For example, if an investment increases the chance of secondary school completion by 20 percentage points, i.e. one child out of five gets there as a result of the investment, benchmark benefits relative to 8 grades are HUF 3.8M (19M/5). In other words, 3.8M per child investment would therefore break even with a 20% success rate. Even by looking at our most conservative estimates, any investment with such a success rate is almost sure to yield a positive return if costs are HUF 1.8M or less per child. Overwhelmingly, the benefits would come from increased government revenues, from personal income tax and employer/employee contributions after earned income. Savings on unemployment insurance, welfare benefits and public employment projects are negligible, and savings on incarceration costs are also small. Larger value added tax benefits on consumption are also sizable

Iskolai szegregáció, szabad iskolaválasztás és helyi oktatáspolitika 100 magyar városban

A roma és nem roma tanulók iskolai elkülönülése igen nagy mértékben megnövekedett a nyolcvanas évek eleje óta a magyar iskolarendszerben. Jelen tanulmány 100 város adatain vizsgálja a szabad iskolaválasztás és a helyi oktatáspolitika szerepét ebben a folyamatban. Adminisztratív adatokat kombinálunk egy általunk tervezett kérdőíves felmérés adataival, melyet az érintett városok oktatáspolitikájának és lakóhelyi szegregációjának a feltárása érdekében folytattunk. Eredményeink azt mutatják, hogy a szabad iskolaválasztás csökkenti a lakóhelyi elkülönülés szerepét az iskolák közötti szegregációban azáltal, hogy a magasabb társadalmi státusú tanulók közül sokan járnak lakóhelyüktől távolabbi iskolákba. Azokban a városokban, ahol több tanuló jár lakóhelyétől távolabbi iskolákba, az iskolák közötti szegregáció is erősebb. A helyi oktatáspolitikai gyakorlat szintén növeli az iskolai szegregációt, e tekintetben jelentős különbségek vannak az egyes városok között. Azokban a városokban, ahol inkább szegregációs irányultságú a helyi oktatáspolitika, az iskolák közötti etnikai elkülönülés is nagyobb. A szabad iskolaválasztás hatása azonban jóval erősebb, mint a helyi oktatáspolitikáé