Publications of Kézdi, G.
Roma Employment in Hungary After the Post-Communist Transition
We analyse the magnitude and the causes of the low formal employment rate of the Roma in Hungary between 1993 and 2007. The employment rate of the Roma dropped dramatically around 1990. The ethnic employment gap has been around 40 percentage points for both men and women and has remained remarkably stable. Differences in education are the most important factor behind the gap, the number of children is important for female employment and geographic differences play little role once education is controlled for. Conditional on employment, the gap in log earnings is 0.3, and half of it is explained by educational differences.
Roma employment in Hungary after the post-communist transition
We analyze the extent and some causes of the low formal employment rate of the Roma in Hungary, using the most reliable survey data. Roma employment dropped dramatically in the first years of the post-communist transition, widened further a little afterwards, and it stayed largely unaffected by macroeconomic conditions after the transition. The absolute employment gap is roughly the same for men and women, more than third of the gap is explained by lower education of the Roma, and geographic location, while different from non-Romanies, explains little once education is controlled for. We also show indirect evidence for labor market discrimination.
Stock Market Expectations and Portfolio Choice of American Households
This paper measures heterogeneity in householdsstock market expectations using survey answers to probability questions. Our main contribution is in addressing survey measurement error in an explicit way. We develop a joint model of the e¤ect of stock market expectations on portfolio choice on the one hand and survey answers on the other hand. The model acknowledges that survey response is a result of individual behavior under circumstances that di¤er from circumstances when making an actual investment decision. The model is also consistent with features of measurement error that we document in the descriptive part of the paper.Our results show substantial heterogeneity, and they imply that heterogeneity in expectations is a strong predictor of heterogeneity in stockholding. We show that a general tendency to be optimistic is strongly related to optimism about stock returns and in turn increases stockholding, while a general tendency to be uncertain about future events is strongly related to un-certainty about stock market returns and in turn decreases stockholding. We estimate the level of risk tolerance that links subjective beliefs to stockholding to be moderate and nd it to be mild. Our results also imply that a signi cant part of stockholding di¤erences among demographic groups is explained by di¤erences in expectations.
Why are extraverted young men less likely to receive higher education? Evidence from Hungary
Using a unique longitudinal survey from Budapest, Hungary, this paper analyzes the role of extraversion in studying towards higher education and working. Extraversion is found to have no effect on higher education for young women but a significant negative effect for young men. Results from a more structural model suggest that, conditional on IQ and various measures of other personality traits, as well as past schooling experience and past behavioral problems, more extraverted men expect lower returns to higher education. These results are new in the literature and are unlikely to be caused by the specificity of the survey.
Children of the post-communist transition: Age at the time of the parents' job loss and dropping out of secondary school
Using data on children whose parents lost their jobs during the post-communist transition of Hungary, we address the causal effect of unexpected long-term unemployment of parents on their children's educational achievement. We estimate the effect of the children's age at the time of their parents' job loss on their probability of dropping out of secondary school (an event that follows the parents' job loss by many years). The treatment is an additional year reared in a family with regularly employed parents, which can be interpreted as additional human capital investment. We provide bounding estimates to the causal effect. The estimated bounds are tight, they show a substantial effect, and the effect is significantly stronger for preschool age children than for older ones.
Roma children in the transformational recession – Widening ethnic schooling gap and Roma poverty in post-communist Hungary
The Roma or “Gypsies” are Europe’s largest and poorest ethnic minority. Nearly 80 per cent of them live in the former communist countries of Central and Eastern Europe. The Roma – Non-Roma educational gap, always substantial but slowly closing in the communist years, widened again after the collapse of the communist system in Hungary. Using Hungarian Roma data from the mid-1990’s and a comparable national sample, we estimate multinomial probability models for dropping out after primary school (8th grade), continuing in vocational training school, or continuing in a secondary school with a maturity examination (necessary for college entrance). Our results indicate that long-term poverty of the Roma is strongly associated with their high drop-out rate after 8th grade. Roma poverty has increased considerably with the massive layoffs of unskilled workers since the mid-1980’s. We find that the younger a child is when his/her father is laid off the more likely he/she is to discontinue schooling after 8th grade. We conclude that the collapse of Roma employment has been in part responsible for the widening ethnic gap in education. Equal opportunities for the next Roma generation are therefore jeopardized unless policy helps overcoming the adverse effects of long-term poverty on schooling outcomes.
Trade in university training: cross-state variation in the production and stock of college-educated labor
The question of this analysis is how the production of college graduates at the state level affects the stock of college-educated workers in the state. The potential mobility of skilled workers implies that the number of college students graduating in an area need not affect the number of college graduates living in the area. However, the production of relatively large numbers of college graduates in a state may lead to increases in the employment of university-trained manpower if industries expand production of goods and services that use college-educated workers intensively. We find at best only a modest link between the production and stock of baccalaureate degree recipients. (C) 2003 Published by Elsevier B.V.
Economic adjustment of recent retirees to adverse wealth shocks
Since the mid-nineties, the stock market has had an unprecedented impact on the wealth of current and future retirees. Using data from the Current Population Survey and the Health and Retirement Study, this report estimates consumption and labor supply responses of individuals in their 50s and 60s to the recent stock market downturn. We estimate an elasticity of consumption with respect to wealth changes ranging from five to seven percent. This implies that households respond to a decline in wealth by reducing their consumption by 5 to 7 percent of the wealth decline. For example, if a household's wealth declined by $100,000, this estimate suggests they would reduce their annual consumption by $5,000 to $7,000. Among retirees, we do not observe any re-entry into the labor force in response to wealth losses due to stock market declines. This suggests that retirement is more or less an absorbing state, for either supply or demand reasons: once an individual retires, it is very difficult to become employed once again.
Robust standard error estimation in fixed-effects panel models
This paper focuses on standard error estimation in FE models if there is serial correlation in the error process. Applied researchers have often ignored the problem, probably because major statistical packages do not estimate robust standard errors in FE models. Not surprisingly, this can lead to severe bias in the standard error estimates, both in hypothetical and real-life situations. The paper gives a systematic overview of the differnt standard error estimators and the assumptions under which they are consistent (in the usual large N, small T asymptotics). One of the possible reasons why the robust estimators are not used often is a fear of their bad finite sample properties. The most important results of the paper, based on an extensive Monte Carlo study, show that those fears are in general unwarranted. I also present evidence that it is the abolute size of the cross-sectional sample that primarily affects the finite-sample behavior, not the relaitve size compared to the time-series dimension. That indicates good small-sample behavior even when N ≈ T. I introduce a simple direct test analogous to that of White (1980) for the restrictive assumptions behind the estimators. Its finite sample properties are fine except for low power in very small samples.
Who becomes A stockholder? Expectations, subjective uncertainty, and asset allocation
We develop a model of portfolio selection with subjective uncertainty and learning in order to explain why some people hold stocks while others don’t. We model heterogeneity in information directly, which is an alternative to the existing explanations that emphasized heterogeneity in transaction costs of investment. We plan to calibrate the model to survey data (when available) on people’s perception about the distribution of stock market returns. Our approach also leads to a model of learning with new implications such as zero optimal risky assets, or ex post correlation of uncorrelated labor income and optimal portfolio composition. It also points to two factors in probabilistic thinking that should have a major impact on stock ownership. These are the level and the precision of expectations. We construct proxy measures for the two parameters from the 1992-2000 waves of the Health and Retirement Study (HRS). We use a large battery of the subjective probability questions administered in each wave of HRS to construct an overall “index of optimism” (the correlated factor between all subjective probabilities) and “index of precision” (the fraction of nonfocal probability answers, following Lillard and Willis, 2001). We also construct measures for how people forecast the weather, their cognitive capacity, wealth, and basic demographics. Our results indicate that stock ownership and the probability of becoming a stockholder are strongly positively correlated with the indices of the level and precision of expectations. Interpretation of the former is quite challenging and further research is needed to understand its full content.
Jackknife minimum distance estimation
We propose a jackknife minimum distance estimator designed to reduce the finite-sample bias of the optimal minimum distance estimator. Monte Carlo results indicate that our jackknife minimum distance estimator is a promising alternative to existing minimum distance procedures. (C) 2002 Elsevier Science B.V. All rights reserved.
Two phases of labor market transition in Hungary: inter-sectoral reallocation and skill-biased technological change
Hungary has been a front-runner in the transition to capitalism. It has also experienced exceptionally radical changes in employment and relative wages. One main feature of these changes is an enormous increase in the returns to skill. This paper argues that it is instructive to divide the process into two periods, divided by around the year 1995. The first period experienced major destruction of low-skilled jobs and large inter-sectoral reallocation, partly toward skill-intensive industries. Employment started to rebound in the second period, which has also seen a pervasive skill upgrade in all sectors. The skill premium in earnings started to grow even faster in the second stage because increasing demand for skill met a more and more inelastic supply in the short run. Long-run supply effects have been, however, strong as college enrollment rates soared. Introduction of new (foreign) capital seems to be a major factor behind increasing demand for skill. Foreign direct investment into Hungary was by far the largest among the transition countries until the late 1990's, but other Central-Eastern European countries started to catch up since. This suggests that the Hungarian experience might be helpful to predict labor market trends in other transition economies, especially those that attract significant foreign capital.