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Persistent link: https://www.econbiz.de/10011812016
Motivated by the large differences in labor market outcomes across college majors, we survey the literature on the demand for and return to high school and postsecondary education by field of study. We combine elements from several papers to provide a dynamic model of education and occupation...
Persistent link: https://www.econbiz.de/10010604269
This paper develops and applies a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college (heterogeneity) and components that are unforecastable. About 60% of variability in returns to schooling is...
Persistent link: https://www.econbiz.de/10005579906
There is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations. The news view of business cycles offers a formalization of this perspective. In this paper we discuss mechanisms by which changes in agents' information, due to the arrival...
Persistent link: https://www.econbiz.de/10011096996
This paper analyzes how asset prices in a binary market react to information when traders have heterogeneous prior beliefs. We show that the competitive equilibrium price underreacts to information when there is a bound to the amount of money traders are allowed to invest. Underreaction is more...
Persistent link: https://www.econbiz.de/10011107209
In this article, we investigate the possibility of sunspot equilibria to emerge from a process of learning and adaptation on agents’ beliefs. We consider both finite state Markov sunspots and sunspots in autoregressive form, and derive conditions for the existence of an heterogeneous...
Persistent link: https://www.econbiz.de/10011263927
We study a model where some investors (“hedgers”) are bad at information processing, while others (“speculators”) have superior information-processing ability and trade purely to exploit it. The disclosure of financial information induces a trade externality: if speculators refrain from...
Persistent link: https://www.econbiz.de/10011083365
New evidence suggests that individuals "learn from experience," meaning they learn from events occurring during their own lifetimes as opposed to the entire history of events. Moreover, they weigh more heavily the more recent events compared to events occurring in the more distant past. This...
Persistent link: https://www.econbiz.de/10011083418
Under rational expectations monetary policy is generally highly effective in stabilizing the economy. Aggregate demand management operates through the expectations hypothesis of the term structure --- anticipated movements in future short-term interest rates control current demand. This paper...
Persistent link: https://www.econbiz.de/10011083648
Agents have two forecasting models, one consistent with the unique rational expectations equilibrium, another that assumes a time-varying parameter structure. When agents use Bayesian updating to choose between models in a self-referential system, we find that learning dynamics lead to selection...
Persistent link: https://www.econbiz.de/10011083791