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Longrun effects of public sector sponsored training
, 2004
"... Between 1991 and 1997 West Germany spent on average about 3.6 bn Euro per year on public sector sponsored training programmes for the unemployed. We base our empirical analysis on a new administrative data base that plausibly allows for selectivity correction by microeconometric matching methods. We ..."
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Cited by 126 (31 self)
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Between 1991 and 1997 West Germany spent on average about 3.6 bn Euro per year on public sector sponsored training programmes for the unemployed. We base our empirical analysis on a new administrative data base that plausibly allows for selectivity correction by microeconometric matching methods. We identify the effects of different types of training programmes over a horizon of more than seven years. Using bias corrected weighted multiple neighbours matching we find that all programmes have negative effects in the short run and positive effects over a horizon of about four years. However, for substantive training programmes with duration of about two years gains in employment probabilities of more than 10 % points appear to be sustainable, but come at the price of large negative lockin effects.
Bequest Behavior and the Effect of Heirs’ Earnings: Testing the Altruistic
 Model of Bequests,” American Economic Review
, 1996
"... That parents transfer resources to children because of altruistic concern is a reasonable a priori assumption. However, economic theories of altruistic transfers have produced many counterintuitive conclusions, and, consequently, much debate. When applied to bequests, these theories predict that in ..."
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Cited by 90 (0 self)
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That parents transfer resources to children because of altruistic concern is a reasonable a priori assumption. However, economic theories of altruistic transfers have produced many counterintuitive conclusions, and, consequently, much debate. When applied to bequests, these theories predict that inheritances will compensate for eamings differences between siblings as well as between parents and children. This paper tests these implications. Using a new data set centered on federal estate tax retums, little support can be found for an altruistic theory of bequests. This finding has implications for macroeconomic policy, govemment transfer programs, and inequality. {JEL D19) Hundreds of billions of dollars per year are bequeathed by people in the United States,' and about two thirds of this passes from parents to children. ^ Among several economic
Correcting for endogeneity in strategic management research”.
 Strategic Organization,
, 2003
"... The field of strategic management is predicated fundamentally on the idea that managements' decisions are endogenous to their expected performance implications. Yet, based on a review of more than a decade of empirical research in the SMJ, we find that few papers econometrically correct for su ..."
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Cited by 49 (0 self)
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The field of strategic management is predicated fundamentally on the idea that managements' decisions are endogenous to their expected performance implications. Yet, based on a review of more than a decade of empirical research in the SMJ, we find that few papers econometrically correct for such endogeneity. In response, we now describe the endogeneity problem for crosssectional and panel data, referring specifically to management's choice among discrete strategies with continuous performance outcomes. We then present readily implementable econometric methods to correct for endogeneity and, when feasible, provide STATA code to ease implementation. We also discuss extensions and nuances of these models that are sometimes difficult to decipher in more standard treatments. These extensions are not typically discussed in the strategy literature, but they are, in fact, highly pertinent to empirical strategic management research. Introduction The underlying presumption of the field of strategic management is that managers can make choices to generate sustainable competitive advantage, thereby achieving superior performance outcomes for their organizations. Thus, strategic management researchers are frequently interested in understanding those decisions that influence performance. For instance, we generally think that managers' desire to achieve high levels of performance influences their decisions about whether to make or buy, to acquire or invest, to join a network or not, to choose an alliance or a joint venture, to centralize or decentralize, etc. If this presumption is correct, then managers make strategic organizational decisions not randomly, but based on expectations of how their choices affect future performance. Put more precisely, the field of strategic management is fundamentally predicated on the idea that management's decisions are endogenous to their expected performance outcomesif not, managerial decisionmaking is not strategic; it is superfluous. Endogeneity has important implications for the statistical analysis of such decisions. As we more fully illuminate below, statistical analysis that does not take into account management's expectation of performance outcomes with respect to the strategy chosen can suffer from biased coefficient estimates. These biases result from omitted variables that affect both strategy choice and performance. Thus, estimating unbiased coefficients for these problems requires econometric methods that account for omitted variables. Such methods statistically correct for management's selfselection of a particular strategy. Failure to account for endogeneity can have important consequences. For instance, 1 Endogeneity problems are particularly vexing to researchers because both the direction and the size of bias are difficult to predict ex ante. Econometric techniques to correct for endogeneity when both strategy choice and performance are continuous long have been available; instrumental variable and two and three stage methods are both well known and readily implemented. This is not the case, however, for strategy choices that are discrete yet yield performance outcomes that are continuous. Since 1974, 1 Such erroneous results can greatly contaminate the empirical progress in a field. Consider Masten's discussion (1996, 52) of Capon et al's (1990) review of 320 financial performance studies. Capon et al. reported that "vertical integration was found to have positive influence on performance in 69 studies and a negative influence in 35; horizontal integration or diversification a positive effect in 107 studies and a negative effect in 174; and owner (as opposed to manager) control a positive effect in 65 and negative impact in 56. Viewed collectively, these studies cannot sustain generalization about the direction, much less the magnitude, of the effects of organizational form." Masten concludes that the "the sorry state of this research is at least partly the result of serious specification problems" in which endogeneity is not considered. 2 econometric techniques to correct for endogeneity arising from discrete strategy choices have been available Many of these econometric estimators were developed in the context of labor economics. Nonetheless, the econometric problems in that field are structurally similar to problems of strategic management. For instance, the classic illustration in labor economics Heckman and Lee's technique for econometrically analyzing this choice is based on the assumption that individuals will selfselect into the profession that provides a better match with their abilities and hence a greater return. But without modeling this selfselection, a regression of income on profession choice may lead to erroneous estimates for the returns to each profession. For instance, a regression analysis that does not correct for selfselection might imply that income is independent of profession choice, whether hunting or fishing. Yet a more appropriate econometric analysis, one that incorporates the possibility of selfselection, might instead find that those individuals who chose the hunting profession earned a substantially higher income than if they had instead chosen to fish and viceversa. An individual choosing between these two professions is the structural equivalent of a manager choosing between two alternative strategies. For instance, an analysis that regresses profitability on make versus buy will likely lead to biased coefficient estimates of the impact of this strategic choice on performance unless we control for selfselection. The fundamental question for assessing the impact of choosing to buy (or to fish, in Roy's context) is this: What profit would the manager's organization earn if he had chosen to make (or to hunt) instead? We are not likely to provide an accurate answer this question by comparing the profits of firms choosing to make 3 with the profits of those choosing to buy, since the observed outcomes may not correspond to the counterfactual performance levels of interest. For example, firms choosing to make may have particular production capabilities that make this a highly profitable choice. On the other hand, firms choosing to buy may not have these production capabilities. Consequently, had the "buy" firms instead chosen to make, they would have been much less profitable than those firms who actually chose to make. As a result, a regression of performance on the make versus buy choice that does not allow for endogeneity of the choice may not answer the strategy effect question of interest. Although the presumption that managers make decisions with respect to expected performance benefits is a foundation of strategic management, it is surprising how few empirical papers consider and econometrically correct for such endogeneity. For example, consider empirical papers published in the Strategic Management Journal (SMJ). Whether or not SMJ represents strategy research in general, SMJ is nonetheless the core journal and a key source of knowledge for the strategy field and thus is an appropriate journal to scrutinize. Of the 426 empirical papers published in the SMJ (out of 601) between January, 1990, and December, 2001, we identify only 27 papers that explicitly econometrically correct for potential endogeneity concerns. Of course, not all research involves such endogeneity concernsan econometric model in which potential omitted variables are uncorrelated with right hand side covariates may not suffer from endogeneity bias. However, at a minimum, empirical strategy research that investigates some type of performance outcome should carefully consider correcting for endogeneity. 2 2 A conservative estimate of the number of papers that should have considered correcting for endogeneity might be all those empirical studies that directly study performance (e.g., profits, mortality, satisfaction, etc.). A total of 169 of the 196 performancerelated papers (86%) do not control for endogeneity. Thus, while a variety of econometric 4 We believe that the low number of papers in SMJ that account for endogeneity may indicate a failure of empirical research in strategic management. An empirical analysis that models performance as a function of righthandside decision variables without correcting for the presumption that managers make decisions to achieve some level of expected performance is implicitly assuming that these decision variables are exogenous to performance and thus ignores the endogeneity of these decisions. Yet, ignoring endogeneity is perilous; as the Our paper provides value to strategic management researchers in four ways. First, we assess the diffusion of econometric methods used in empirical research published in the SMJ over the past decade. In doing so, we find a sea change over the past decade in the type of econometric techniques used to test hypotheses in the field of strategic management. Second, we identify the methodological issues associated with endogeneity specifically for strategic management phenomena for both crosssectional and panel data. Third, we review econometrics methods for dealing with these issues and explain when different types of models are appropriately used. Unlike standard econometric treatments, our presentation and discussions are developed specifically for application to strategic management phenomena. We also discuss extensions and nuances of these models that are sometimes difficult to decipher or not readily accessible in more methods to correct for endogeneity have been introduced since the 1970s, it was not until this past decade that the early methods began to diffuse into strategic management research. This lag suggests that while strategic management research is beginning to more directly focus empirical work on correcting for endogeneity, research may not be benefiting from more recent econometric advances. 5 standard treatments and describe additional information provided by theses models about relative and absolute comparative advantages that, ironically, are typically ignored in strategic management applications. Fourth, we focus on methods that are readily implementable using standard software packages that require little in the way of programming. 3 To highlight this, we provide relevant STATA code, when feasible, in an Appendix to make it easier for researchers to implement these techniques not only in STATA but also other statistical software packages. We believe that the information provided herein goes far in bridging the gap between the state of the art in econometric theory (which is sometimes difficult to access) and empirical strategic management research practice (which presents challenges when coding econometric software packages to estimate models).
Smoothly mixing regressions
 Journal of Econometrics
, 2006
"... This paper extends the conventional Bayesian mixture of normals model by permitting state probabilities to depend on observed covariates. The dependence is captured by a simple multinomial probit model. A conventional and rapidly mixing MCMC algorithm provides access to the posterior distribution at ..."
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Cited by 44 (4 self)
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This paper extends the conventional Bayesian mixture of normals model by permitting state probabilities to depend on observed covariates. The dependence is captured by a simple multinomial probit model. A conventional and rapidly mixing MCMC algorithm provides access to the posterior distribution at modest computational cost. This model is competitive with existing econometric models, as documented in the paper’s illustrations. The first illustration studies quantiles of the distribution of earnings of men conditional on age and education, and shows that smoothly mixing regressions are an attractive alternative to nonBaeysian quantile regression. The second illustration models serial dependence in the S&P 500 return, and shows that the model compares favorably with ARCH models using out of sample likelihood criteria.
Multinomial probit and multinomial logit: a comparison of choice models for voting research.
 Electoral Studies
, 2004
"... ..."
AN EMPIRICAL MODEL OF HETEROGENEOUS CONSUMER SEARCH FOR RETAIL PRESCRIPTION DRUGS
, 2001
"... This paper uses detailed data on retail pharmacy transactions to make inferences about the nature and intensity of consumer search for prescription drugs. Prescription prices exhibit patterns that should, in principle, induce search: in particular, prices vary widely across stores, and stores’ price ..."
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Cited by 21 (0 self)
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This paper uses detailed data on retail pharmacy transactions to make inferences about the nature and intensity of consumer search for prescription drugs. Prescription prices exhibit patterns that should, in principle, induce search: in particular, prices vary widely across stores, and stores’ price rankings are inconsistent across drugs (so the lowprice pharmacy is different for one prescription vs. another). Estimates from a model of pharmacy choice suggest that search intensities are generally low: I estimate that for a typical prescription, the fraction of consumers that priceshops is approximately 510 percent. However, variation in this estimated search intensity across drugs is substantial and appears to be consistent with explanations based on rational search; for instance, priceshopping is more prevalent for maintenance medications than for onetime purchases, presumably because the benefits of finding a low price are magnified for prescriptions that are purchased repeatedly. Under some relatively strong assumptions imposed by the empirical model, the data also identify parameters of a search cost
JOINT DECISIONS ON HOUSEHOLD MEMBERSHIP AND HUMAN CAPITAL ACCUMULATION OF YOUTHS: The role of expected earnings and labour market rationing
, 2000
"... This paper focuses on the youth’s decisions on household formation and human capital investment in further education or work experience and the factors influencing these choices. While previous studies limited their analyses to decisions concerning the living arrangements and the labour market, th ..."
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Cited by 16 (0 self)
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This paper focuses on the youth’s decisions on household formation and human capital investment in further education or work experience and the factors influencing these choices. While previous studies limited their analyses to decisions concerning the living arrangements and the labour market, the choice set is extended here to take into account other alternatives. The decisions of either remaining in the parental household or going to live with a partner are modelled jointly with those of either entering the labour market (i.e. investing in work experience) or investing in higher (university) education. Using the Bank of Italy 1995 Sample Survey on Italian Households, a multinomial probit model estimates the probabilities of the different pairs of outcomes. The results highlight the crucial role of economic variables in shaping young adults ’ decisions. Among these, expected lifetime earnings from attending university have the most important impact on the choice of studying and coresiding. Implications for policy stem from the estimated impact of housing and labour market performance variables on young adults ’ decisions. In particular, a sizeable discouraged worker effect, inducing young people to study when the local unemployment rate is high, is detected.
Exact Hamiltonian Monte Carlo for Truncated Multivariate Gaussians
"... We present a Hamiltonian Monte Carlo algorithm to sample from multivariate Gaussian distributions in which the target space is constrained by linear and quadratic inequalities or products thereof. The Hamiltonian equations of motion can be integrated exactly and there are no parameters to tune. The ..."
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Cited by 16 (2 self)
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We present a Hamiltonian Monte Carlo algorithm to sample from multivariate Gaussian distributions in which the target space is constrained by linear and quadratic inequalities or products thereof. The Hamiltonian equations of motion can be integrated exactly and there are no parameters to tune. The algorithm mixes faster and is more efficient than Gibbs sampling. The runtime depends on the number and shape of the constraints but the algorithm is highly parallelizable. In many cases, we can exploit special structure in the covariance matrices of the untruncated Gaussian to further speed up the runtime. A simple extension of the algorithm permits sampling from distributions whose logdensity is piecewise quadratic, as in the “Bayesian Lasso ” model.
Convenient Estimators for the Panel Probit Model: Further Results
, 2002
"... Bertschek and Lechner (1998) propose several variants of a GMM estimator based on the period specific regression functions for the panel probit model. The analysis is motivated by the complexity of maximum likelihood estimation and the possibly excessive amount of time involved in maximum simulated ..."
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Cited by 15 (0 self)
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Bertschek and Lechner (1998) propose several variants of a GMM estimator based on the period specific regression functions for the panel probit model. The analysis is motivated by the complexity of maximum likelihood estimation and the possibly excessive amount of time involved in maximum simulated likelihood estimation. But, for applications of the size considered in their study, full likelihood estimation is actually straightforward, and resort to GMM estimation for convenience is unnecessary. In this note, we reconsider maximum likelihood based estimation of their panel probit model then examine some extensions which can exploit the heterogeneity contained in their panel data set. Empirical results are obtained using the data set employed in the earlier study.
Bayesian Analysis of a Dynamic Stochastic Model of Labor Supply and Saving
 Journal of Econometrics
, 1999
"... This paper empirically implements a dynamic, stochastic model of lifecycle labor supply and human capital investment. The model allows agents to be forward looking. But, in contrast to prior literature in this area, it does not require that expectations be formed "rationally." By avoiding ..."
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Cited by 12 (2 self)
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This paper empirically implements a dynamic, stochastic model of lifecycle labor supply and human capital investment. The model allows agents to be forward looking. But, in contrast to prior literature in this area, it does not require that expectations be formed "rationally." By avoiding strong assumptions about the way people form expectations I avoid sources of bias stemming from misspecification of the expectation process. The analysis focuses on the agehours profile of young men and uses data drawn from the National Longitudinal Survey of Youth. An econometric method suggested by Geweke and Keane (1999) is used to relax assumptions over expectations. The results of this study are consistent with previous results reported in the human capital and labor supply literature. In particular, I find no evidence that the rational expectations assumption has distorted our understanding of the labor supply process of young men. KEYWORDS: Lifecycle, labor supply, human capital, expectations