This paper develops a public education scheme that takes uncertainty aspects of private educational investments explicitly into account. In the author’s framework, the social merits of public education schemes are related to the lack of markets in which students can insure against educational...

This paper examines the extent to which conclusions of cross-country studies of private savings are robust to allowing for the possible heterogeneity of savings behavior across countries and the inclusion of dynamics. It shows that neglecting heterogeneity and dynamics can lead to misleading...

This paper uses a simple model to analyze the forces that determine the size of the public sector and the quality of workers employed in that sector. Workers are heterogeneous, and the public sector chooses an employment strategy that maximizes a social welfare function U(s, Y) that depends on...

Several transition countries have experienced strong real exchange rate appreciations. This paper tests the hypothesis that these appreciations reflect underlying productivity gains in the tradable sector. Using panel data over the period 1993-98, the results show clear evidence of...

This paper assesses Estonia’s flexibility from two angles. The paper focuses on one aspect of that performance—the ability to sustain competitiveness. Then, a more forward-looking angle is the flexibility of Estonia’s labor and product markets. Estonia has made great progress in achieving...

This Selected Issues paper on the Republic of Estonia highlights its growth performance relative to other countries in the European Union (EU). Estonia has experienced a period of unprecedented growth since the mid-1990s. Between 1995 and 2005, Estonia’s real GDP per capita rose by an average...

This Selected Issues paper examines developments in Estonia’s expanding net external obligations, as well as in domestic income flows and balance sheets. The paper discusses external current account and net international investment positions. Domestic investment and saving and balance sheet...

This Selected Issues paper focuses on financing constraints and productivity in Estonia. The paper examines two questions: (1) is there evidence of financing constraints among Estonian firms; and (2) have financing constraints reduced firm-level total factor productivity (TFP)? These questions...

This Selected Issues paper on the Republic of Estonia underlies gross and net international investment positions. Capital gains have been exceptionally beneficial to Malta’s external position, but have significantly worsened Estonia’s NIIP, and to a lesser degree, positions in Hungary and...

Forward-looking behavior on the part of the monetary authority leads least squares estimates to understate the true growth consequences of monetary policy interventions. We present instrumental variables estimates of the impact of interest rates on real output growth for several European...