Costas Meghir Publications

We specify an equilibrium model of car ownership with private information where individuals sell and purchase new and second-hand cars over their life-cycle. This private information introduces a transaction cost, distorts the market and reduces the value of a car as a savings instrument. We estimate the model using Danish linked registry data on car ownership, income and wealth. The transaction cost, which we term the lemons penalty, is estimated to be 18% of the price in the first year of ownership, declining with the length of ownership. It leads to large reductions in the turnover of cars and in the probability of downgrading in the event of an adverse income shock. The size of the lemons penalty declines when uncertainty in the economy increases, as in recessions: large income shocks induce individuals to sell their cars, even if of good quality, and this reduces the lemons problem.

Do new migration opportunities for rural households change the nature and extent of informal risk sharing? We experimentally document that randomly offering poor rural households subsidies to migrate leads to a 40% improvement in risk sharing in their villages. Our model of endogenous migration and risk sharing shows that risky and temporary migration opportunities can induce an improvement in risk sharing enabling profitable migration. Accounting for improved risk sharing, the migration experiment increased welfare by 12.9%. However, permanent declines in migration costs improve outside options for households and can lead to reductions in risk sharing. The short-run experimental results for migration subsidies can differ from the longer-run impacts of a policy that permanently subsidizes migration.

Do new migration opportunities for rural households change the nature and extent of informal risk sharing? We experimentally document that randomly offering poor rural households subsidies to migrate leads to a 40% improvement in risk sharing in their villages. We explain this finding using a model of endogenous migration and risk sharing. When migration is risky, the network can facilitate migration by insuring that risk, which in turn crowds-in risk sharing when new migration opportunities arise. We estimate the model and find that welfare gains from migration subsidies are 42% larger, compared with the welfare gains without spillovers, once we account for the changes in risk sharing. Our analysis illustrates that (a) ignoring the spillover effects on the network gives an incomplete picture of the welfare effects of migration, and (b) informal risk sharing may be an essential determinant of the takeup of new income-generating technologies.

We document that an experimental intervention offering transport subsidies for poor rural households to migrate seasonally in Bangladesh improved risk sharing. A theoretical model of endogenous migration and risk sharing shows that the effect of subsidizing migration depends on the underlying economic environment. If migration is risky, a temporary subsidy can induce an improvement in risk sharing and enable profitable migration. We estimate the model and find that the migration experiment increased welfare by 12.9%. Counterfactual analysis suggests that a permanent, rather than temporary, decline in migration costs in the same environment would result in a reduction in risk sharing.

We document that an experimental intervention offering transport subsidies for poor rural households to migrate seasonally in Bangladesh improved risk sharing. A theoretical model of endogenous migration and risk sharing shows that the effect of subsidizing migration depends on the underlying economic environment. If migration is risky, a temporary subsidy can induce an improvement in risk sharing and enable profitable migration. We estimate the model and find that the migration experiment increased welfare by 12.9%. Counterfactual analysis suggests that a permanent, rather than temporary, decline in migration costs in the same environment would result in a reduction in risk sharing.

Improving school quality with limited resources is a key issue of policy. It has been suggested that instructing teachers to follow specific practices together with tight monitoring of their activities may help improve outcomes in under-performing schools that usually serve poor populations. This paper uses an RCT to estimate the effectiveness of guided instruction methods as implemented in under-performing schools in Chile. The intervention improved performance substantially and by equal amounts for boys and girls. However, the effect is mainly accounted for by children from relatively higher income backgrounds and not for the most deprived. Based on the CLASS instrument we document that quality of teacher-student interactions is positively correlated with the performance of low income students; however, the intervention did not affect these interactions. Guided instruction can improve outcomes, but it is a challenge to reach the most deprived children.

We investigate the role of training in reducing the gender wage gap using the UK- BHPS which contains detailed records of training. Using policy changes over an 18 year period we identify the impact of training and work experience on wages, earnings and employment. Based on a lifecycle model and using reforms as a source of exogenous variation we evaluate the role of formal training and experience in defining the evolution of wages and employment careers, conditional on education. Training is potentially important in compensating for the effects of children, especially for women who left education after completing high school.

We investigate the role of training in reducing the gender wage gap using the UK-BHPS. Based on a lifecycle model and using tax and welfare bene t reforms as a source of exogenous variation we evaluate the role of formal training and experience in defining the evolution of wages and employment careers, conditional on education. Training is potentially important in compensating for the effects of children, especially for women who left education after completing high school, but does not fundamentally change the wage gap resulting from labor market interruptions following child birth.

We use matched employer-employee data from Sweden to study the role of the firm in affecting the stochastic properties of wages. Our model accounts for endogenous participation and mobility decisions. We find that firm-specific permanent productivity shocks transmit to individual wages, but the effect is mostly concentrated among the high-skilled workers; firm-specific temporary shocks mostly affect the low-skilled. The updates to worker-firm specific match effects over the life of a firm-worker relationship are small. Substantial growth in earnings variance over the life cycle for high-skilled workers is driven by firms accounting for 44% of cross-sectional variance by age 55.