Dress for Success — Does Primping Pay?

A unique survey of Shanghai residents in 1996 that combined labor-market information, appraisals of respondents' beauty, and household expenditures allows us to examine the relative magnitudes of the investment and consumption components of women's spending on beauty-enhancing goods and services. We find that beauty raises women's earnings (and to a lesser extent, men's) adjusted for a wide range of controls. Additional spending on clothing and cosmetics has a generally positive but decreasing marginal impact on a woman's perceived beauty. The relative sizes of these effects demonstrate that such purchases pay back at most 10 percent of each unit of expenditure in the form of higher earnings. Most such spending represents consumption.

A Portfolio Approach to Mortality Shocks and Fertility Choice: Theory and Evidence from Africa

Abstract: The effects of the HIV/AIDS epidemic on fertility in Africa remains ill understood. To align the contrasting findings of recent empirical research, we develop a portfolio model that captures the potential trade-off between "quantity" and "quality" of offspring. According to this theoretical model, the overall impact of mortality shocks on fertility is heterogeneous, and involves changes in human capital investment strategies. A key prediction is that investment switching and fertility impacts are conditional on income levels. We use African panel data to test the implications of the model, and find strong support for key model predictions. In particular, the impact of HIV prevalence on both fertility and human capital investments varies with income in a manner that is consistent with model predictions.