by Patricia Houlihan and Phil Rockrohr
Published: June 7, 2008

C. Hoyt Bleakley; Atif Mian; Steven Davis

Image by Beth Rooney

Learning English Helps Youngest Immigrants

Many immigrants come to the United States to give their children advantages. But how much do poor English skills stand in the way of economic advancement? According to research by C. Hoyt Bleakley, assistant professor of economics, the age at which children immigrate makes a significant difference later on, both in terms of the salaries they earn and the level of education they attain. “Language is important in developing the rest of your human capital,” Bleakley said.

His research, coauthored with Aimee Chin, shows that three to five years can make a critical difference. “Bringing your child to the United States to be exposed to English first at age 7 versus age 10 results in a difference of 10 percent in that child’s future income,” he said.

Immigration, however, is not the key factor. Researchers say children who came to the United States from poor English-speaking countries don’t show the same disparities later in income and education—further evidence of the critical period of language acquisition. “We see marked differences,” Bleakley said. “People who are brought here three to five years earlier from non-English-speaking countries do much better than those brought later. It looks like English opened a lot of doors for these children.”

Securitization Fostered the Subprime Crisis

While securitization is not new, the practice fostered “moral hazard” among those who originate mortgages, leading them to make loans to uncreditworthy borrowers and fostering the subprime lending crisis, according to associate professor of finance Atif Mian and assistant professor of finance Amir Sufi. A February 7 story on their research in the Economist said, “Their findings confirm what many suspected: poor screening by mortgage originators intent on selling loans was a significant factor in the housing boom and bust.”

Mian and Sufi first identified areas with the highest level of mortgage rejections in 1996, the benchmark year; they were the same areas that saw a disproportionate hike in approvals from 2001 to 2005, the boom years. The neighborhoods “also saw declining income and employment growth compared with nearby districts,” the Economist said.

The researchers also found that “loans securitized by the originators, or sold to nonbank financial firms, probably for packaging, were far more likely to end up in default.” Mian and Sufi “acknowledge that their analysis might not constitute proof: other unseen factors could have affected the results,” the story said. “But a separate study also shows securitization has a lot to answer for." That paper, "Did Securitization Lead to Lax Screening?" was coauthored by Amit Seru, assistant professor of finance.

PE a Catalyst for Job Losses and Gains

Job losses at firms acquired by private equity groups are higher, in the wake of buyout transactions, than at otherwise comparable firms. However, buyout targets also create more new jobs at new facilities than comparable firms without ties to private equity, according to a study coauthored by Steven Davis, William H. Abbott Professor of International Business and Economics. On balance, accounting for job losses and job gains, the net employment change over a two-year period postbuyout is similar for acquired firms and firms without ties to private equity. Thus, private equity appears to act as a catalyst for creative destruction with, on average, little net impact on employment.

The authors studied 5,000 buyout transactions in the United States between 1980 and 2005, covering about 4,500 firms operating about 300,000 facilities, according to TheDeal. The New York Times called the research “perhaps the most extensive study conducted on the issue” of the economic impact of private equity.

Among the study’s “most interesting findings” was that two years before a buyout, a company cuts an average of 4 percent more of its work force than its peers, the Times said.


Last Updated 5/14/09