The Long-Term Effect on Children of Increasing the Length of Parents' Birth-Related Leave

The length of parents’ birth-related leave varies across countries and has been subject of some debate. In this paper, I will focus on some potential bene…ts of leave. I investigate the long-term e¤ects on children of increasing the length of parents’birth-related leave using a natural experiment from 1984 in Denmark when the leave length was increased quite suddenly by almost 50% from 14 to 20 weeks. Regression discontinuity design is used to identify the causal e¤ect of the leave reform and to estimate whether there is a measurable, persistent e¤ect on children’s cognitive and educational outcomes at ages 15 and 21. A population sample of Danish children born in the months around implementation of the reform and a dataset with Danish PISA-2000 scores are used for the analysis. Results indicate that increasing parents’ access to birth-related leave has no measurable e¤ect on children’s long-term cognitive outcomes.Maternity leave; parental leave; child outcomes

A comprehensive model on the euro overnight rate

This paper presents a comprehensive model on the spread between the euro overnight rate and the key policy rate of the ECB. It is shown that the most important variables driving the level and the volatility of this spread are expectations about changes of the key policy rate and the projected liquidity conditions at the end of the reserve maintenance period. The model allows for an assessment of how these variables impact differently on the spread according to the different open market operating procedures and the liquidity management policy of the ECB. It is found that a fixed rate tender procedure effectively limits the downward potential of the spread, while, however, no evidence is identified that it should be more effective than a variable rate tender procedure in keeping overall the overnight rate close to the key policy rate. JEL Classification: C32, E43, E52

Family Structure Changes and Children´s Health, Behavior, and Educational Outcomes

More and more children do not grow up in traditional nuclear fam- ilies. Instead, they grow up in single-parent households or in fami- lies with a step-parent. Hence, it is important to improve our under- standing of the impact of "shocks" in family structure due to parental relationship dissolution on children. In this study I empirically test whether children are traumatized both in the short and the long run by shocks in the family structure during childhood. I focus on edu- cational, behavioral, and health outcomes. A population sample of Danish children born in January to May 1985 is used for the analysis. The empirical cross-sectional analysis indicates a negative relation be- tween the number of family structure changes and children’s health, behavior, and educational outcomes. These results are con…rmed by a di¤erences-in-di¤erences analysis of health outcomes. This suggests that there is not only a selection e¤ect, but also a causal e¤ect on children of shocks in the family structure.Family structure; child outcomes; health; crime; education

Testing a Parametric Function Against a Nonparametric Alternative in IV and GMM Settings

This paper develops a specification test for functional form for models identified by moment restrictions, including IV and GMM settings. The general framework is one where the moment restrictions are specified as functions of data, a finite-dimensional parameter vector, and a nonparametric real function (an infinite-dimensional parameter vector). The null hypothesis is that the real function is parametric. The test is relatively easy to implement and its asymptotic distribution is known. The test performs well in simulation experiments.Generalized method of moments, specification test, nonparametric alternative, LM statistic, generalized arc-sine distribution

The Ill-Posed Problem in Growth Empirics

A problem encountered in growth empirics is that the number of explanatory variables is large compared to the number of observations. This makes it impossible to condition on all regressors when determining if a variable is important. We investigate methods used to resolve this problem: Extreme bounds, Sala-i-Martin’s test, BACE, general-to-specific, minimum t-statistics, BIC and AIC. We prove that the problem in general is ill-posed and that the existing methods are inconsistent. We propose a test and apply it to determine if "good policy" increases the effectiveness of foreign aid on growth. The test rejects inference regarding good policy.AIC; BACE; BIC; extreme bounds; general-to-specific; ill-posed inverse problem; robustness

Growth, Income and Regulation: a Non-Linear Approach

This paper analyzes the effect on GDP growth of income (GDP per capita) and economic regulation. A simple theoretical framework presents two opposing views. We analyze the empirical relation using a non-linear dynamic panel data model with fixed effects. The result shows that the effect of regulation on growth depends on income. For low-income countries, there is little effect of changing regulation. For highly regulated middle-income countries, deregulation can increase growth. For high-income countries, deregulation leads to higher growth. Holding regulation constant, there is catch-up growth with a maximum at an intermediate income level.catch-up growth; economic freedom; fixed effects; GMM; specification tests