Publications of Kézdi, G.

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 households’stock 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.

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.

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.

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.