OCTOBER 14 2011

Juan José Cruces, Christoph Trebesch, VoxEU: What are the financial costs of a sovereign default? This column presents new data on investor losses – haircuts – in all sovereign debt restructurings between 1970 and 2010. Countries imposing high haircuts take significantly longer to reaccess capital markets after the event and subsequently pay higher interest rates.

Ezra Kleins Wonkblog: Could this time have been different? Christina Romer had traveled to Chicago to perform an unpleasant task: she needed to scare her new boss. David Axelrod, Barack Obama’s top political adviser, had been very clear about that. He thought the president-elect needed to know exactly what he would be walking into when he took the oath of office in January. But it fell to Romer to deliver the bad news. So Romer, a preternaturally cheerful economist whose expertise on the Great Depression made her an obvious choice to head the Council of Economic Advisers, gathered her tables and her charts and, on a snowy day in mid-December, sat down to explain to the next President of the United States of America exactly what sort of mess he was inheriting. Axelrod had warned her against pulling her punches, and so she didn’t. It was not a pleasant presentation to sit through. Afterward, Austan Goolsbee, Obama’s friend from Chicago and Romer’s successor, remarked that “that must be the worst briefing any president-elect has ever had.”

Nezih Guner, Remzi Kaygusuz, Gustavo Ventura, IZA: Taxing Women: A Macroeconomic Analysis. Based on well-known evidence on labor supply elasticities, several authors have concluded that women should be taxed at lower rates than men. We evaluate the quantitative implications of taxing women at a lower rate than men. Relative to the current system of taxation, setting a proportional tax rate on married females equal to 4% (8%) increases output and married female labor force participation by about 3.9% (3.4%) and 6.9% (4.0%), respectively. Gender-based taxes improve welfare and are preferred by a majority of households. Nevertheless, welfare gains are higher when the U.S. tax system is replaced by a proportional, gender-neutral income tax.

René Böheim, Thomas Leoni, Johannes Kepler University Linz: Firms’ moral hazard in sickness absences. We investigate firms’ moral hazard problems in sickness absences by analyzing a legislative change that took place in Austria in 2000. In September 2000, an insurance fund that refunded firms for the costs of their blue-collar workers’ sickness absences was abolished (firms did not receive a similar refund for their white-collar workers’ sickness absences). Before that time, small firms were fully refunded for the wage costs of blue- collar workers’ sickness absences. Large firms, by contrast, were refunded only 70% of the wages paid to sick blue-collar workers. Using a difference-in-differences-in-differences approach, we estimate the causal impact of refunding firms for their workers’ sickness absences. Our results indicate that the incidences of blue-collar workers’ sicknesses dropped by approximately 8% and sickness absences were almost 11% shorter following the removal of the refund.

Gerald Eisenkopf, Zohal Hessami, Urs Fischbacher, And Heinrich, W. Ursprung, University of Konstanz:  Academic Performance and Single-Sex Schooling: Evidence from a Natural Experiment in Switzerland. We study the effects of random assignment to coeducational and single-sex classes on the academic performance of female high school students. Our estimation results show that single-sex

schooling improves the performance of female students in mathematics. This positive effect increases if the single-sex class is taught by a male teacher. An accompanying survey reveals that single-sex schooling also strengthens female students’ selfconfidence and renders the self-assessment of their mathematics skills more level-headed. Single-sex schooling thus has profound implications for human capital formation and the mind-set of female students.

Roland G. Fryer, Jr:  Creating "No Excuses" (Traditional) Public Schools: Preliminary Evidence from an Experiment in Houston. The racial achievement gap in education is an important social problem to which decades of research have yielded no scalable solutions.  Recent evidence from "No Excuses" charter schools – which demonstrates that some combination of school inputs can educate the poorest minority children - offers a guiding light.  In the 2010-2011 school year, we implemented five strategies gleaned from best practices in "No Excuses" charter schools - increased instructional time, a more rigorous approach to building human capital, more student-level differentiation, frequent use of data to inform instruction, and a culture of high expectations - in nine of the lowest performing middle and high schools in Houston, Texas.  We show that the average impact of these changes on student achievement is 0.276 standard deviations in math and 0.059 standard deviations in reading, which is strikingly similar to reported impacts of attending the Harlem Children's Zone and Knowledge is Power Program schools - two strict "No Excuses" adherents.  The paper concludes with a speculative discussion of the scalability of the experiment.

OECD: How’s Life? It is wide a range of elements that comprise a good life. While income is a prime contributor, there are other factors that matter even more. Well-being is intrinsically linked to good health, a clean environment, a strong sense of community and civic engagement, a home in good shape and a safe neighbourhood. High income alone does not ensure a good life. People in the richest countries are not necessarily the happiest, particularly when they suffer from low levels of social contact, trust in others or low personal safety. 

Robert Frank, The American Interest: Charles Darwin, Economist. I was born in 1945. When someone my age forecasts something that will happen fifty or a hundred years from now, he needn’t worry about being teased by friends if it doesn’t pan out. Without trepidation, then, I offer the following prediction: One century hence, if a roster of professional economists is asked to identify the intellectual father of their discipline, a majority will name Charles Darwin.