NBER announces 2006 nonprofit fellowships.

• Position: Bureau News

NBER Research Associate James M. Poterba has announced the recipients of NBER Fellowships for the Study of Nonprofit Institutions for the 20067 academic year. This NBER fellowship program is designed to encourage research on nonprofit institutions by NBER Research Associates and Faculty Research Fellows, and by graduate students in economics working closely with them through support of dissertation research on the same subject. A selection committee consisting of Charles Clotfelter, David Cutler, Steven Levitt, A. Mitchell Polinsky, and Poterba select ed the award recipients from a pool of 24 applicants.

The four graduate students who will receive fellowship support are: Jillian Berk, Brown University, who will analyze non-profit organizations that manage prisons; Brianna Briggs, University of California, Santa Barbara, who will study faith-based organizations providing welfare services in Los Angeles; Yee Wai Chong, Stanford University, who will investigate the business activities of non-profit organizations in the arts and other fields; and Marit Rehavi, University of California, Berkeley, who will examine the inter-year dynamics of household charitable giving.

Faculty grants will go to: Ginger Jin, University of Maryland, for work on "College and University Reactions to the Publication of School Rankings," a project on how colleges adapt their behavior in response to published data that ranks schools on various dimensions; and Sendhil Mullainathan, Harvard University, for "Psychological Drivers of Giving" a project on how marketing strategies, framing, and other factors affect the success of charitable fund-raising.

Many efforts to improve school quality by adding school resources have proven to be ineffectivc. Banerjee, Cole, Duflo, and Linden present the results of two experiments conducted in Mumbai and Vadodara, India, designed to evaluate ways to improve the quality of education in urban slums. A remedial education program hired young women from the community to teach basic literacy and numeracy skills to children lagging behind in government schools. The authors find the program to be very effective: it increased average test scores of all children in treatment schools by 0.14 standard deviations in the first year, and 0.28 in the second year, relative to comparison schools. A computer-assisted learning program provided each child in the fourth standard with two hours of shared computer time per week, in which students played educational games that reinforced mathematics skills. The program was also very effective, increasing math scores by 0.36 standard deviations the first year, and 0.54 the second year. These results were not limited to the period in which students received assistance, but persisted for at least one year after leaving the program. Two instrumental variable strategies suggest that while remedial education benefited the children who attended the remedial classes, their classmates, who did not attend the remedial courses but did experience smaller classes, did not post gains, confirming that resources alone may not be sufficient to improve outcomes.

In the rural areas of developing countries, teacher absence is a widespread problem. Duflo and Hanna test whether a simple incentive program based on teacher presence can reduce teacher absence, and whether it has the potential to lead to more teaching activities and better learning. In sixty informal one-teacher schools in rural India, randomly chosen out of 120 (the treatment schools), a financial incentive program was initiated to reduce absenteeism. Teachers were given a camera with a tamper-proof date and time function, along with instructions to have one of the children photograph the teacher and other students at the beginning and end of the school day. The time and date stamps on the photographs were used to track teacher attendance. A teacher's salary was a direct function of his attendance. The remaining sixty schools served as comparison schools. The introduction of the program resulted in an immediate decline in teacher absence. The absence rate (measured using unannounced visits both in treatment and comparison schools) changed from an average of 42 percent in the comparison schools to 22 percent in the treatment schools. When the schools were open, teachers were as likely to be teaching in both types of schools, and the number of students present was roughly the same. The program positively affected child achievement levels: a year after the start of the program, test scores in program schools were 0.17 standard deviations higher than in the comparison schools and children were 40 percent more likely to be admitted into regular schools.

Changes to the income tax law relating to wages and profits could provide incentives for shifting income from wages to profits (or vice versa), with important implications for measured wage inequality. Sivadasan and Slemrod use a large dataset covering all registered plants in the manufacturing sector in India (over the period 1986 to 1995) to examine the effects of an income tax law change (effective from 1992) that eliminated the double taxation of wages paid to partners in partnership firms. They find an immediate and pervasive response by partnership firms to the tax law change, reflected in a significant shifting of income from profits to managerial wages. This shift has important implications for measured wage inequality, since about half of registered manufacturing plants are incorporated in the form of partnerships (including most family-run businesses). They find a significant jump in the mean and median relative wage of skilled workers (which includes managers and partners) following the tax law change in 1992. This sudden increase in measured wage inequality follows major trade liberalization and deregulation reforms announced in July 1991. They also find that the income shifting induced by the tax law change explains almost all of the observed increase in measured wage inequality; this finding is robust to inclusion of controls for a number of other potential sources of post-liberalization increases in wage inequality. Once they control for income shifting, they find a much more moderate increase in wage inequality, in line with the pre-1991 trends. These results show that income shifting responds strongly to tax incentives, highlighting the need to control for the potential effects of tax incentives in studies of wage inequality.

India seems to have followed an idiosyncratic pattern of development, certainly compared to other fast-growing Asian economies. While the emphasis on services rather than manufacturing has been widely noted, within manufacturing India has emphasized skill-intensive rather than labor-intensive manufacturing, and industries with typically higher average scale. Kochhar, Kumar, Rajan, Subramanian, and Tokatlidis show that some of these distinctive patterns existed even prior to the beginning of economic reforms in the 1980s, and argue that they stem from the idiosyncratic policies adopted soon after India's independence. The authors then look to the future, using the growth of fast-moving Indian states as a guide. Despite recent reforms that have removed some of the policy impediments that might have sent India down its distinctive path, it appears unlikely that India will revert to the pattern followed by other countries.

Dastidar, Fisman, and Khanna examine the effect of regime change on privatization using the 2004 election surprise in India. In that election, the pro-reform BJP was unexpectedly defeated by a less reformist coalition. Government controlled companies that were being studied for complete privatization by the BJP dropped by 7.5 percent relative to private firms. By contrast, government controlled firms that were not being considered for privatization, or firms that had already been fully privatized, did not experience a significant drop relative to private firms. Firms that the BJP had slated for definite future privatization experienced intermediate declines of approximately 3.5 percent. The authors interpret this as evidence consistent with investor belief of policy irreversibility in privatization, where reforms may reach a "point of no return" beyond which future regimes have difficulty reversing those policies. Taking advantage of an "intermediate event" where policies were expected to be more heavily influenced by the communist party, the authors still find evidence consistent with policy irreversibility.

Dinc and Gupta investigate the role of political competition and patronage in the privatization of government-owned enterprises by using a unique firm-level dataset from India. They find that the government is reluctant to privatize firms located in regions where the ruling party faces more political competition from parties in opposition. They also find that no government-owned enterprise located in the home state of the politician in charge of that enterprise is ever privatized. These results are robust to firm-level characteristics such as profitability, size, and the influence of labor groups; to industry and time effects; and to state-level differences in income, education, and urbanization.

Few issues are more controversial in the contemporary globalization debate than the effects of trade liberalization on poverty and well-being in low-income countries. The question of how changes in trade policy affect child labor and schooling is particularly contentious. Edmonds, Pavcnik, and Topalova study the relationship between changes in trade policy and schooling and child labor using detailed household level data from the Indian National Sample Survey (NSS) spanning the period of trade liberalization initiated in 1991. They explore the causal link between liberalization and changes in child labor by relating child labor to district and intertemporal variation in exposure to tariff cuts. During the time period of this...