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Template-Type: ReDIF-Paper 1.0
Title: Risk Management, Capital Budgeting and Capital Structure Policy for Financial Institutions: An Integrated Approach
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: AP CF
Number: 5403
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5403
File-URL: http://www.nber.org/papers/w5403.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Economics (1998).
Abstract: We develop a framework for analyzing the capital allocation and capital structure decisions facing financial institutions such as banks. Our model incorporates two key features: i) value-maximizing banks have a well-founded concern with risk management; and ii) not all the risks they face can be frictionlessly hedged in the capital market. This approach allows us to show how bank-level risk management considerations should factor into the pricing of those risks that cannot be easily hedged. We examine several applications, including the evaluation of proprietary trading operations, and the pricing of unhedgeable derivatives positions.
Handle: RePEc:nbr:nberwo:5403
Template-Type: ReDIF-Paper 1.0
Title: Reforms in Eastern Europe and the Former Soviet Union in Light of the East Asian Experiences
Classification-JEL: P5; F02
Author-Name: Jeffrey D. Sachs
Note: EFG IFM
Number: 5404
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5404
File-URL: http://www.nber.org/papers/w5404.pdf
File-Format: application/pdf
Publication-Status: published as Jeffrey Sachs, 1995. "Reforms in Eastern Europe and the Former Soviet Union in Light of the East Asian Experience," Journal of the Japanese and International Economies, vol 9(4), pages 454-485.
Abstract: During the past five years, there has been an important debate over the differing styles of market reforms in the formerly planned economies in East Asia versus Eastern Europe and the former Soviet Union (EEFSU). This paper puts forward three related propositions. First, the rapid growth of East Asia, compared with economic contraction in EEFSU, reflects differences in economic structure and initial conditions, rather than differences in economic policymaking. Second, East Asian gradualism could not, and did not, work in EEFSU. Third, EEFSU continues to face serious problems with an overextended welfare state inherited from the socialist period.
Handle: RePEc:nbr:nberwo:5404
Template-Type: ReDIF-Paper 1.0
Title: The Determinants and Impact of Property Rights: Land Titles on the Brazilian Frontier
Classification-JEL: D23; K11
Author-Name: Lee J. Alston
Author-Person: pal162
Author-Name: Gary D. Libecap
Author-Person: pli409
Author-Name: Robert Schneider
Note: DAE
Number: 5405
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5405
File-URL: http://www.nber.org/papers/w5405.pdf
File-Format: application/pdf
Publication-Status: published as Alston, Lee J., Gary D. Libecap and Robert Schneider. "The Determinants And Impact Of Property Rights: Land Titles On The Brazilian Frontier," Journal of Law, Economics and Organization, 1996, v12(1,Apr), 25-61.
Abstract: This paper provides new empirical results regarding the demand and supply of title, its impact on land value, and its effects on agricultural investment on Brazilian frontiers. We use survey data from 1992 and 1993 from the state of Par with data on the characteristics of the settlers, land tenure, land agencies involved, land values, and investment. We then turn to census data from the Brazilian agricultural census from 1940 through 1985, with observations at the municipio (county) level to examine the development of property rights to land in the southern state of Paran during the agricultural boom between 1940 and 1970 and in the Amazon state of Par during the period of rapid migration to the region after 1970. By examining frontiers we can follow the rise in land values, the increase in the demand for title, and the response of government. The empirical findings support the predictions of the theory regarding the effects of title and investment on land value, the role of expected change in value on demand for title, and the contribution of title in promoting investment. Governments, however, have not exactly followed the predictions of the analytical framework in supplying title. Political and bureaucratic factors play an important role in the government response to demands for title. This result suggests that researchers must pay special attention to the complex political process by which property rights are assigned in studying the emergence of tenure institutions.
Handle: RePEc:nbr:nberwo:5405
Template-Type: ReDIF-Paper 1.0
Title: Schooling and Labor Market Consequences of the 1970 State Abortion Reforms
Classification-JEL: J12; J13
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: William N. Evans
Author-Person: pev28
Note: LS
Number: 5406
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5406
File-URL: http://www.nber.org/papers/w5406.pdf
File-Format: application/pdf
Publication-Status: published as Research in Labor Economics, Vol. 18 (1999).
Abstract: This study uses the 1970 state abortion reforms to estimate the effect of teen and out-of-wedlock childbearing on the schooling and labor market outcomes of mothers observed in 1980 and 1990 Census microdata. Reduced-form estimates suggest that state abortion reforms had a negative impact on teen marriage, teen fertility, and teen out- of-wedlock childbearing. The teen marriage effects are largest and most precisely estimated for white women while the teen fertility and out-of-wedlock childbearing effects are largest and most precisely estimated for black women. The relatively modest fertility and marriage consequences of abortion reform for white women do not appear to have changed schooling or labor market outcomes. In contrast, black women who were exposed to abortion reforms experienced large reductions in teen fertility and teen out-of-wedlock fertility that appear to have led to increased schooling and employment rates. Instrumental variables estimates of the effects of teen and out-of- wedlock childbearing on the schooling and employment status of black women, using measures of exposure to abortion reform as instruments, are marginally significant and larger than the corresponding OLS estimates.
Handle: RePEc:nbr:nberwo:5406
Template-Type: ReDIF-Paper 1.0
Title: Public Sector Deficits and Macroeconomic Stability in Developing Countries
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 5407
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5407
File-URL: http://www.nber.org/papers/w5407.pdf
File-Format: application/pdf
Publication-Status: published as Budget Deficits and Debt: Issues and Options, Jackson Hole: Federal Reserve Bank of Kansas City, 1995.
Abstract: This paper analyzes Latin America's experience with fiscal adjustment during the last decade. The paper discusses in detail how some countries -- most notably Argentina, Chile and Mexico -- were successfully able to eliminate their fiscal deficits in a relatively short period of time. Their experiences with tax reform and expenditure reduction are analyzed, and some political economy angles of the fiscal adjustment process are emphasized. The paper also discusses the interaction between privatization and fiscal adjustment. An analysis of the relationship between social security systems and fiscal imbalances is provided. In particular, the Chilean pension system reform -- which replaced an insolvent and inefficient pay-as- you-go system with a fully funded one administered by private companies -- is analyzed in some detail. The paper concludes with a discussion of the main lessons from the Latin American reforms for the transitional economies and other reforming countries.
Handle: RePEc:nbr:nberwo:5407
Template-Type: ReDIF-Paper 1.0
Title: High Yields: The Spread on German Interest Rates
Author-Name: Carlo Favero
Author-Person: pfa12
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Luigi Spaventa
Note: IFM
Number: 5408
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5408
File-URL: http://www.nber.org/papers/w5408.pdf
File-Format: application/pdf
Publication-Status: published as Economic Journal, Vol. 107, no. 663 (July 1997).
Abstract: This paper is a first attempt at evaluating the determinants of the total interest rate differentials on government bonds between high yielders, namely Italy, Spain, Sweden and Germany. In particular we address the question of the relative importance of local and global factors in the determination of such spreads. We identify and measure two components of total yield differentials: one due to expectations of exchange rate depreciation -- which we call the exchange rate factor -- another which reflects the market assessment of default risk. We propose and discuss a measure of the exchange rate factors and of the default risk premium based on interest rate swaps. Overall our investigation provides strong evidence in favor of the existence of a common trend for the Italian and Spanish spreads on Bunds, which is not shared by the Swedish spread. Such a trend is driven by international factors and is independent from country- specific shocks. Country-specific shocks are only relevant in explaining short term cycles around the common stochastic trend.
Handle: RePEc:nbr:nberwo:5408
Template-Type: ReDIF-Paper 1.0
Title: Cause-Specific Mortality among Medicare Enrollees
Classification-JEL: I11
Author-Name: Jay Bhattacharya
Author-Name: Alan M. Garber
Author-Name: Thomas MaCurdy
Note: AG EH
Number: 5409
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5409
File-URL: http://www.nber.org/papers/w5409.pdf
File-Format: application/pdf
Publication-Status: published as Wise, D. (ed.) Inquires in the Economics of Aging. Chicago, IL: University of Chicago Press, 1997.
Publication-Status: published as Cause-Specific Mortality among Medicare Enrollees, Jayanta Bhattacharya, Alan M. Garber, Thomas E. MaCurdy. in Inquiries in the Economics of Aging, Wise. 1998
Abstract: Life tables with specific causes of death, particularly when adjusted for demographic and other personal characteristics, can be important components of cost-effectiveness and other economic studies. However, there are few sources of nationally representative information that can be used to develop life tables that incorporate cause-specific mortality. To produce such estimates, we relate annual mortality rates to a set of individual characteristics, applying a statistical model with a flexible functional form to data obtained from a random sample of Medicare eligibility and hospital insurance files, covering the years 1986-1990. Insofar as national data sources can be found to compare to the estimates of these models, the results are comparable. For example, the survival figures are comparable to the life table figures supplied as part of the series of vital statistics of the United States. The framework can be extended to analyze expenditures for both inpatient and outpatient care and to estimate lifetime profiles of Medicare expenditures for individuals falling into various demographic and clinical categories. The framework can also be extended to analyze the mortality and utilization associated with use of specific procedures.
Handle: RePEc:nbr:nberwo:5409
Template-Type: ReDIF-Paper 1.0
Title: Consumption, Stock Returns, and the Gains from International Risk-Sharing
Author-Name: Karen K. Lewis
Author-Person: ple1119
Number: 5410
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5410
File-URL: http://www.nber.org/papers/w5410.pdf
File-Format: application/pdf
Publication-Status: published as Lewis, Karen K. "Why Do Stocks And Consumption Imply Such Different Gains From International Risk Sharing?," Journal of International Economics, 2000, v52(1,Oct), 1-35.
Abstract: Standard theoretical models predict that domestic residents should diversify their portfolios into foreign assets much more than observed in practice. Whether this lack of diversification is important depends upon the potential gains from risk-sharing. General equilibrium models and consumption data tend to find that the costs are small, typically less than «% of permanent consumption. On the other hand, stock returns imply gains that are several hundred times larger. In this paper, I examine the reasons for these differences. I find that the primary differences are due to either: (a) the much higher variability of stocks, and/or (b) the higher degree of risk aversion required to reconcile an international equity premium. On the other hand, the significant differences do not arise treating stock returns as exogenous.
Handle: RePEc:nbr:nberwo:5410
Template-Type: ReDIF-Paper 1.0
Title: The Principle and Market Failure in Systems Competition
Classification-JEL: H70; L51
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 5411
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5411
File-URL: http://www.nber.org/papers/w5411.pdf
File-Format: application/pdf
Publication-Status: published as C and S Working Paper, November 1995 Journal of Public Economics 66 (1997) 247-274 H Selection
Abstract: Contrary to a frequent contention, systems competition cannot work when governments respect the Subsidiarity Principle. The principle implies that governments step in where markets fail. Reintroducing markets through the back door of systems competition will again result in market failure. Three models are presented which illustrate this wisdom. The first is concerned with congestion-prone public goods and shows that fiscal competition may be ruinous for the governments. The second considers the insurance function of redistributive taxation and shows that systems competition may suffer from adverse selection. The third studies the role of quality regulation and shows that systems competition may be a competition of laxity resulting in inefficiently low quality standards.
Handle: RePEc:nbr:nberwo:5411
Template-Type: ReDIF-Paper 1.0
Title: Trends in Regional Inequality in China
Classification-JEL: 040; 053
Author-Name: Tianlun Jian
Author-Name: Jeffrey D. Sachs
Author-Name: Andrew M. Warner
Note: EFG
Number: 5412
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5412
File-URL: http://www.nber.org/papers/w5412.pdf
File-Format: application/pdf
Publication-Status: published as China Economic Review, Vol. 7, no. 1 (1996).
Abstract: Several recent studies have examined the tendency of regions within a nation to exhibit long-term convergence in per capita income levels. Barro and Sala-i-Martin (1991, 1992, 1995) have found a tendency towards convergence among the U.S. states, among Japanese prefectures, and among regions within Western Europe. In this paper we examine the tendency towards convergence among the provinces of China during the period 1952-1993. We find that real income convergence of provinces in China has been a relatively recent phenomenon, emerging strongly only since the reform period began in 1978. During the initial phase of central planning, 1952-1965, there is some evidence for convergence, but it is weak and sensitive to the time period being analyzed. During the cultural revolution, 1965- 1978, there is strong evidence of divergence rather than convergence. We find strong evidence for convergence during the reform period is associated with rural reforms, and is especially strong within the coastal regions where there has been liberalization of international trade and investment flows. However, since 1990 regional incomes have begun to diverge. Such a divergence is entirely explained by the variance between the coastal and interior provinces, rather than increase in variance within each other. Therefore, it seems that China is now on a dual track, with a prosperous and fast growing coastal region and a poor interior growing at a lower rate.
Handle: RePEc:nbr:nberwo:5412
Template-Type: ReDIF-Paper 1.0
Title: The Missing Piece in Policy Analysis: Social Security Reform
Classification-JEL: H55
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 5413
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5413
File-URL: http://www.nber.org/papers/w5413.pdf
File-Format: application/pdf
Publication-Status: published as The Richard T. Ely Lecture, in American Economic Review, 86, No.2, May 1996 , pp.1-14.
Abstract: This lecture discusses the economic losses that result from an unfunded social security retirement system and the potential gain from shifting to a funded system. The social security payroll tax distorts labor supply and the form in which compensation is paid. Although each individual's benefits are linked to that individual's previous payroll tax payments, the low equilibrium rate of return inherent in an unfunded system implies a `net' payroll tax that causes distortions. The resulting deadweight loss is 1% of each year's GDP in perpetuity, an amount equal to 20% of payroll tax revenue and a 50% increase in deadweight loss of the personal income tax. Also, there is the loss of investment income resulting from forcing employees to accept the low implicit return of an unfunded program rather than the much higher return paid on private saving or in a funded social security program. The present value of the annual losses from using an unfunded system exceeds the benefit to those who received windfall transfers when the program began and when it expanded. Shifting to a funded program cannot reverse the crowding out of capital that has already occurred. Recognizing the existing unfunded obligation only makes that piece of the national debt explicit, but shifting to a funded program limits crowding out of capital formation to the amount that already occurred. Future increases in annual saving that result from economic growth are able to earn the higher rate of return on real capital. The present value of these gains is equivalent to a perpetuity of more than 2% of GDP a year. The combi- nation of improved labor market incentives and higher real return on saving has a net present value gain of more than $15 trillion, an amount equivalent to three percent of each future year's GDP forever.
Handle: RePEc:nbr:nberwo:5413
Template-Type: ReDIF-Paper 1.0
Title: The Poverty of Nations: A Quantitative Exploration
Classification-JEL: 011; 023
Author-Name: V. V. Chari
Author-Person: pch40
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Ellen R. McGrattan
Author-Person: pmc46
Note: EFG
Number: 5414
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5414
File-URL: http://www.nber.org/papers/w5414.pdf
File-Format: application/pdf
Abstract: We document regularities in the distribution of relative incomes and patterns of investment in countries and over time. We develop a quantitative version of the neoclassical growth model with a broad measure of capital in which investment decisions are affected by distortions. These distortions follow a stochastic process which is common to all countries. Our model generates a panel of outcomes which we compare to the data. In both the model and the data, there is greater mobility in relative incomes in the middle of the income distribution than at the extremes. The 10 fastest growing countries and the 10 slowest growing countries in the model have growth rates and investment-output ratios similar to those in the data. In both the model and the data, the `miracle' countries have nonmonotonic investment-output ratios over time. The main quantitative discrepancy between the model and the data is that there is more persistence in growth rates of relative incomes in the model than in the data.
Handle: RePEc:nbr:nberwo:5414
Template-Type: ReDIF-Paper 1.0
Title: Whither Flat Panel Displays?
Classification-JEL: F1; L5
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Marie Thursby
Author-Person: pth283
Note: ITI
Number: 5415
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5415
File-URL: http://www.nber.org/papers/w5415.pdf
File-Format: application/pdf
Publication-Status: published as The Effects of US Trade Protection and Promotion Policies, R. Feenstra, ed.pp. 247-271, (Chicago: University of Chicago Press, 1997).
Publication-Status: published as Whither Flat Panel Displays?, Kala Krishna, Marie Thursby. in The Effects of US Trade Protection and Promotion Policies, Feenstra. 1997
Abstract: This paper examines possible consequences of subsidies to R&D and to volume production proposed under the Clinton administration's flat panel display initiative. We do this in the context of a model in which firms behave competitively in the short run, while realizing that their choices of capacity and yield-improving R&D in the medium and long run will affect market price. Policy simulations show that steady state yields and profits are lower, while prices are higher with subsidies for capacity acquisition than with R&D subsidies. This occurs because a firm's incentives to do R&D are diminished by a subsidy on capacity costs.
Handle: RePEc:nbr:nberwo:5415
Template-Type: ReDIF-Paper 1.0
Title: Testing for Trade-Induced Investment-Led Growth
Classification-JEL: F10; F43
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Elena Seghezza
Author-Person: pse396
Note: ITI
Number: 5416
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5416
File-URL: http://www.nber.org/papers/w5416.pdf
File-Format: application/pdf
Publication-Status: published as Seghezza, Elena & Baldwin, Richard E., 2008. "Testing for Trade-Induced Investment-Led Growth," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 61(2-3), pages 507-537.
Abstract: Many studies have found a positive correlation between trade and growth, but do not attempt to identify the economic mechanisms involved. This paper attempts to identify one of the mechanisms linking trade and growth. In particular, we present a novel theoretical model that establishes a link between trade liberalization and investment-led growth. Estimating equations are derived from the model and estimated with three stage least squares on a cross-country data sample. We find that domestic protection depresses investment and thereby slows growth. Foreign trade barriers also lower domestic investment, but the anti-investment effect is weaker and is less robust to sample and specification changes.
Handle: RePEc:nbr:nberwo:5416
Template-Type: ReDIF-Paper 1.0
Title: Wage Dispersion and Technical Progress
Classification-JEL: J31; J42
Author-Name: Pierre-Richard Agenor
Author-Person: pag16
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI
Number: 5417
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5417
File-URL: http://www.nber.org/papers/w5417.pdf
File-Format: application/pdf
Publication-Status: Published as "Technology change, relative wages and unemployment," in the European Economic Review, Vol. 41, no. 2 (April 1997): 187-206.
Abstract: Since the early 1980s, wage dispersion and the ratio of skilled to unskilled employment have increased significantly in several industrial countries. A number of economists have attributed these trends to skill-biased technical progress. This paper studies the wage and employment effects of technological changes of this type. The analysis is based on a model with a heterogeneous work force and a segmented labor market. Skill-biased technical progress is modeled as a shock that switches demand from unskilled to skilled labor in the primary, high-wage sector, while leaving the total demand for labor in that sector constant at initial wages. Such a shock reduces total employment in the primary sector, as the equilibrium increase in skilled labor employment is smaller than the fall in employment of unskilled labor. Efficiency factors are shown to magnify the adverse employment effects of pro-skilled technical change.
Handle: RePEc:nbr:nberwo:5417
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Pharmaceutical Utilization and Innovation on Hospitalization and Mortality
Classification-JEL: I12; O33
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: EH PR
Number: 5418
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5418
File-URL: http://www.nber.org/papers/w5418.pdf
File-Format: application/pdf
Publication-Status: Published as "The Effect of Government Funding on Private Industrial Research and Development: A Re-Assessment", JINDE, Vol. 36, no. 1 (1987): 97-104. With Donald Siegel, published as "The Effect of Control Changes on the
Publication-Status: published as Productivity of U.S. Manufacturing Plants", JACF, Vol. 2, no. 2 (1989): 60-67.
Abstract: This paper presents an econometric analysis of the effect of changes in the quantity and type of pharmaceuticals prescribed by physicians in outpatient visits on rates of hospitalization, surgical procedure, mortality, and related variables. It examines the statistical relationship across diseases between changes in outpatient pharmaceutical utilization and changes in inpatient care utilization and mortality during the period 1980-92. The estimates indicate that the number of hospital stays, bed-days, and surgical procedures declined most rapidly for those diagnoses with the greatest increase in the total number of drugs prescribed and the greatest change in the distribution of drugs, by molecule. The estimates imply that an increase of 100 prescriptions is associated with 1.48 fewer hospital admissions, 16.3 fewer hospital days, and 3.36 fewer inpatient surgical procedures. A $1 increase in pharmaceutical expenditure is associated with a $3.65 reduction in hospital care expenditure.
Handle: RePEc:nbr:nberwo:5418
Template-Type: ReDIF-Paper 1.0
Title: Local Property and State Income Taxes: The Role of Interjurisdictional Competition and Collusion
Classification-JEL: H7
Author-Name: Thomas J. Nechyba
Author-Person: pne28
Note: PE
Number: 5419
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5419
File-URL: http://www.nber.org/papers/w5419.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, 105(2), 351-385, 1997.
Abstract: This paper attempts to address two long standing questions in Public Finance: (i) why is the property tax, despite popular complaints about its fairness, the almost exclusive tax instrument used by local governments, and (ii) why do we consistently observe higher levels of governments undermine local property tax systems through income tax funded grants and state imposed caps on local property tax rates. A new intuitive argument to explain (i) is presented and tested in general equilibrium simulations which utilize a compu- table general equilibrium model of local public finance with parameters set to be consistent with micro-tax data. Different types of agents are endowed with income and houses and are able to move to their most preferred house in their most preferred jurisdiction. Also, agents vote myopically on local property tax rates while non-myopic community planners set a local income tax. Six possible objective functions for community planners are postulated, and all 6 lead to the same equilibrium outcome: community planners will always set local tax rates at or close to zero. When faced with popular sentiment against the property tax, community planners can collude and introduce local income taxes simultaneously to prevent adverse general equilibrium migration and price changes. Since zero income tax rates are dominant strategies however, such an agreement is only enforceable if an outsider like the state government steps in. State grants funded through a state income tax can play such an enforcement role.
Handle: RePEc:nbr:nberwo:5419
Template-Type: ReDIF-Paper 1.0
Title: A Computable General Equilibrium Model of Intergovernmental Aid
Classification-JEL: H7
Author-Name: Thomas J. Nechyba
Author-Person: pne28
Note: PE
Number: 5420
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5420
File-URL: http://www.nber.org/papers/w5420.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, 62, 363-397, 1996.
Abstract: This paper introduces a computable general equilibrium model of intergovernmental relations in which heterogeneous agents (i) are endowed with income and houses, (ii) are fully mobile between multiple jurisdictions, and (iii) vote in both local and state elections to determine local property and state income tax rates. The model is calibrated to New Jersey micro tax data and used to study the general equilibrium effects of state government policies. Three different types of intergovernmental programs are analyzed: (i) redistributive revenue sharing, (ii) district power equalization and (iii) deductibility of local taxes. The approach facilitates a heretofore difficult comparative analysis in that it provides for an integrated investigation of these programs in a single general equilibrium model.
Handle: RePEc:nbr:nberwo:5420
Template-Type: ReDIF-Paper 1.0
Title: Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA
Author-Name: Carsten Kowalczyk
Author-Name: Donald Davis
Author-Person: pda33
Note: ITI
Number: 5421
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5421
File-URL: http://www.nber.org/papers/w5421.pdf
File-Format: application/pdf
Publication-Status: published as The Regionalization of the World Economy, Frankel, Jeffrey, ed., Chicago: University of Chicago Press, 1998.
Publication-Status: published as Tariff Phase-Outs: Theory and Evidence from GATT and NAFTA, Carsten Kowalczyk, Donald R. Davis. in The Regionalization of the World Economy, Frankel. 1998
Abstract: This paper considers tariff phase-outs in multilateral and preferential agreements. The paper finds that early GATT rounds primarily were over bindings of existing rates and that it was not until the 1962-67 Kennedy Round's 50% reduction in manufactured goods tariffs that time paths of tariff reductions became a substantive part of GATT agreements. Existing empirical work has demonstrated that U.S. industries with high initial tariffs tended to receive long periods for tariff adjustment or tended to be exempted from agreed reductions in both the Kennedy and Tokyo Rounds. This paper demonstrates that high U.S. tariffs and little intra-industry trade are associated with long NAFTA phase-out periods for U.S. imports from Mexico. Mexico's phase-outs are correlated, on the other hand, with those of the United States but not generally with Mexico's tariffs.
Handle: RePEc:nbr:nberwo:5421
Template-Type: ReDIF-Paper 1.0
Title: How Well do Foreign Exchange Markets Function: Might a Tobin Tax Help?
Classification-JEL: F31
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Note: IFM
Number: 5422
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5422
File-URL: http://www.nber.org/papers/w5422.pdf
File-Format: application/pdf
Publication-Status: published as in the Tobin Tax: Coping with Financial Volatility, Mahbub Ul Haq, Inga Kaul and Isabelle Grunberg, eds. Oxford University, (with E. Stein and S.J. Wei), American Economic Review, 86, no.2, May 1996, pp.52-56.
Abstract: Figures for 1995 estimate trading by dealers in the foreign exchange market at over $1,200 billion per day, most of it with other dealers. Some have linked this volume to concerns of excessive volatility in the market. Tobin's proposal to address this volatility with a small tax on all foreign exchange transactions has not received the serious attention it deserves. The paper argues that a better case can be made for the proposition that the tax might dampen exchange rate volatility than most economists believe. Calculations show that the tax, unlike some forms of capital control, would fall far more heavily on short-term transactions than long-term. Survey data and a simple model suggest, in turn, that short-term activity can be destabilizing. The paper also offers crude estimates of the revenue that would be raised from the Tobin tax. It is left to other authors to examine a major shortcoming of the proposal, enforceability.
Handle: RePEc:nbr:nberwo:5422
Template-Type: ReDIF-Paper 1.0
Title: Repeat Use of Unemployment Insurance
Classification-JEL: J65
Author-Name: Bruce D. Meyer
Author-Person: pme273
Author-Name: Dan T. Rosenbaum
Author-Person: pro561
Note: LS PE
Number: 5423
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5423
File-URL: http://www.nber.org/papers/w5423.pdf
File-Format: application/pdf
Abstract: We examine the extent to which unemployment insurance (UI) insures workers against unforeseen events or subsidizes firms and workers engaged in temporary layoffs. Our main source of data is a 5- year panel of UI administrative records from five states. While most claimants receive UI only once during this period, nearly forty percent of claims go to those individuals with three or more years of receipt during the 5-year period. Most repeat recipients are concentrated in seasonal industries and are laid off by the same employer each time. We also find that middle-aged and high-paid workers are more likely to be repeat recipients, suggesting that workers in bad jobs are not the individuals who repeatedly receive UI.
Handle: RePEc:nbr:nberwo:5423
Template-Type: ReDIF-Paper 1.0
Title: Globalization, Outsourcing, and Wage Inequality
Classification-JEL: F21; F23
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI
Number: 5424
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5424
File-URL: http://www.nber.org/papers/w5424.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, vol.86, no.2, May 1996, pp.240-245.
Abstract: There is considerable debate over whether international trade has contributed to the declining economic fortunes of less skilled workers. One issue that has become lost in the current discussion is how firms respond to import competition and how these responses, in turn, are transmitted to the labor market. In previous work, we have argued that outsourcing, by which we mean the import of intermediate inputs by domestic firms, has contributed to an increase in the relative demand for skilled labor in the United States. If firms respond to import competition from low-wage countries by moving non- skill-intensive activities abroad, then trade will shift employment towards skilled workers within industries. In this paper, we extend our previous work by combining new import data from the revised NBER trade database with disaggregated data on input purchases from the Census of Manufactures. We construct industry-by-industry estimates of outsourcing for the period 1972-1990 and reexamine whether outsourcing has contributed to an increase in relative demand for skilled labor. Our main finding is that outsourcing can account for 31-51% of the increase in the relative demand for skilled labor that occurred in U.S. manufacturing industries during the 1980s, compared to our previous estimate of 15-33%.
Handle: RePEc:nbr:nberwo:5424
Template-Type: ReDIF-Paper 1.0
Title: U.S.-Mexico Integration and Regional Economies: Evidence from Border- City Pairs
Classification-JEL: F15
Author-Name: Gordon H. Hanson
Author-Person: pha80
Note: ITI
Number: 5425
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5425
File-URL: http://www.nber.org/papers/w5425.pdf
File-Format: application/pdf
Publication-Status: published as Hanson, Gordon H. "U.S.-Mexico Integration And Regional Economies: Evidence From Border-City Pairs," Journal of Urban Economics, 2001, v50(2,Sep), 259-287.
Abstract: In this paper, I examine whether U.S.-Mexico economic integration is causing economic activity in the United States to relocate to the U.S.-Mexico border region. The approach I take is to study U.S.- Mexico border-city pairs. Border cities are natural laboratories in which to study the effects of trade policy. To the extent transport costs are the main non-trade policy barriers to trade, we expect regional economic integration to cause economic activity in border cities to expand. I exploit the fact that U.S.-Mexico integration has effectively been underway since the early 1980s. A large portion of U.S.-Mexico trade is the result of U.S. multinationals establishing export assembly operations in Mexico. Mexico's export assembly plants are concentrated in cities on the U.S.-Mexico border. The question I ask is whether the growth of export manufacturing in Mexican border cities increases the demand for goods and services produced in neighboring U.S. border cities. I estimate demand links between Mexican and U.S. border cities using data on the six largest border- city pairs over the period 1975-1989. The results indicate that the growth of export manufacturing in Mexico can account for a substantial portion of employment growth, in general, and of manufacturing employment growth, in particular, in U.S. border cities over the sample period. This suggests that NAFTA will contribute to the formation of binational regional production centers along the U.S.- Mexico border.
Handle: RePEc:nbr:nberwo:5425
Template-Type: ReDIF-Paper 1.0
Title: Education, Human Capital, and Growth: A Personal Perspective
Classification-JEL: J24; D24
Author-Name: Zvi Griliches
Note: LS PR
Number: 5426
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5426
File-URL: http://www.nber.org/papers/w5426.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, 15(1), pt.2, 1997, S330-S344.
Abstract: This paper reviews the literature on the relationship of economic growth to the education levels of the labor force. The emphasis is on Ben-Porath's contribution to some of the issues in this field: the endogeneity of schooling, the role of the public sector as an `absorber' of educated labor, and the importance of personal human capital created by investments in reputation and personal relationships, the F-connection.
Handle: RePEc:nbr:nberwo:5426
Template-Type: ReDIF-Paper 1.0
Title: In Search of Stolper-Samuelson Effects on U.S. Wages
Author-Name: Edward E. Leamer
Author-Person: ple440
Note: ITI
Number: 5427
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5427
File-URL: http://www.nber.org/papers/w5427.pdf
File-Format: application/pdf
Publication-Status: published as Imports, Exports and the American Worker, Collins, Susan, ed.,:Brookings, 1997, pp. 141-214.
Abstract: Economic growth in Europe and Asia and Latin America could have contri- buted in many different ways to lower wages and increased income inequality that the United States has been experiencing. One plausible model that links external product markets to internal labor markets is the Heckscher-Ohlin- amuelson general equilibrium model. This model operates over a time period long enough to allow complete detachment of workers and capital from their original sectors. According to this model the news of Asian growth is carried to the US labor markets by declines in prices of labor intensive tradables. These price reductions twist the labor demand curve, dictating lower real wages for unskilled workers who reside in communities with abundant unskilled labor but raising the wages for unskilled workers who are fortunate to live in communities inhabited mostly by skilled workers. US relative producer prices of labor-intensive tradables declined in the 1970s by about 30%. These product price declines are compatible in the long run with real wage reductions totalling almost 40% for unskilled workers. In the 1980s however, changes in US producer prices worked in favor of these low-wage workers, raising their equilibrium wages by about 20%. The sectoral bias of TFP growth did not favor low- or high-wage workers, but TFP changes did work strongly in favor of nonproduction workers and against production workers in the 1970s. If these TFP improvements had not generated any product price response, the TFP improvements in the 1970s call for a 100% increase in earnings of nonproduction workers and a 60% reduction in earnings of production workers.
Handle: RePEc:nbr:nberwo:5427
Template-Type: ReDIF-Paper 1.0
Title: Integrating Behavioral Choice into Epidemiological Models of the AIDS Epidemic
Classification-JEL: I10; O1
Author-Name: Michael Kremer
Author-Person: pkr20
Note: EH
Number: 5428
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5428
File-URL: http://www.nber.org/papers/w5428.pdf
File-Format: application/pdf
Publication-Status: published as The Quarterly Journal Of Economics, Volume CXI, Issue 2 (May 1996): 549-573.
Abstract: Increased HIV risk creates incentives for people with low sexual activity to reduce their activity, but may make high-activity people fatalistic, leading them to reduce their activity only slightly, or actually increase it. If high-activity people reduce their activity by a smaller proportion than low-activity people, the composition of the pool of available partners will worsen, creating positive feedbacks, and possibly multiple steady state levels of prevalence. The timing of public health efforts may affect long-run HIV prevalence.
Handle: RePEc:nbr:nberwo:5428
Template-Type: ReDIF-Paper 1.0
Title: Displacing the Family: Union Army Pensions and Elderly Living Arrange- ments
Classification-JEL: N31; J14
Author-Name: Dora L. Costa
Author-Person: pco358
Note: DAE AG
Number: 5429
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5429
File-URL: http://www.nber.org/papers/w5429.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 105, no. 6 (December 1997): 1269-1292.
Publication-Status: published as Dora L. Costa, 1998. "Displacing the Family," NBER Chapters, in: The Evolution of Retirement: An American Economic History, 1880-1990, pages 106-132 National Bureau of Economic Research, Inc.
Abstract: I argue that the trend toward single households among retired men 65 years of age or older has been ongoing since 1880. When coresidence is measured by the percentage of elderly men living in the households of their children or other relatives, fully 57 percent of the decline in coresidence among elderly retired men from 1880 to 1990 occurred between 1880 and 1940. This trend has been disguised in more aggregated statistics by the relatively low retirement rates that prevailed in the past and by the unchanging coresidence levels of labor force participants. I investigate the factors that fostered this rise in separate living quarters for the aged by examining the determinants of living arrangements in 1910 among retired veterans receiving Union Army pensions. I find that Union Army pensions exerted a sizable, negative impact on the coresidence rates of the retired, implying that increases in income have always been associated with an increased demand for the privacy and autonomy provided by separate living arrangements. My findings imply that prior to 1940 rising incomes were the most important factor enabling the elderly to live alone. After 1940, increases in the attractiveness of independent living may have played a role.
Handle: RePEc:nbr:nberwo:5429
Template-Type: ReDIF-Paper 1.0
Title: Why Is There More Crime in Cities?
Classification-JEL: K42; R10
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: Bruce Sacerdote
Note: LS
Number: 5430
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5430
File-URL: http://www.nber.org/papers/w5430.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 107, no. 6, part 2 (December 1999): S225-S258.
Abstract: Crime rates are much higher in big cities than in either small cities or rural areas, and this situation has been relatively pervasive for several centuries. This paper attempts to explain this connection by using victimization data, evidence from the NLSY on criminal behavior and the Uniform Crime Reports. Higher pecuniary benefits for crime in large cities can explain approximately 27% of the effect for overall crime, though obviously much less of the urban- crime connection for non-pecuniary crimes such as rape or assault. Lower arrest probabilities, and lower probability of recognition, are a feature of urban life, but these factors seem to explain at most 20% of the urban crime effect. The remaining 45-60% of the effect can be related to observable characteristics of individuals and cities. The characteristics that seem most important are those that reflect tastes, social influences and family structure. Ultimately, we can say that the urban crime premium is associated with these characteristics, but we are left trying to explain why these characteristics are connected with urban living.
Handle: RePEc:nbr:nberwo:5430
Template-Type: ReDIF-Paper 1.0
Title: Regional Trading Arrangement: Natural or Super-Natural?
Classification-JEL: F1
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Ernesto Stein
Author-Person: pst501
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM ITI
Number: 5431
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5431
File-URL: http://www.nber.org/papers/w5431.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 86, no.2 (May 1996).
Publication-Status: published as Regional Trading Arrangements, H. Singer, N. Hatti, and R. Tandon, eds., India: BRPC, 2000.
Abstract: This paper summarizes recent research by the authors on the effects of free trade areas (FTAs). Within our model, which emphasizes inter-continental transport costs, several conclusions arise. (1) FTAs are likely to be detrimental over a moderate range of parameter values, even if drawn along natural regional lines. (2) A small margin of preferences for neighbors is beneficial. (3) Optimal preferences depend on the parameters, particularly on transport costs. (4) If preferences are raised further, they enter the zone of negative returns to regionalization, and eventually the super-natural zone, where welfare is lower than under the MFN status quo. Estimates from the gravity model suggest the world system may already be in the super-natural zone. The core model leaves out many factors. But we have pursued a variety of extensions by now. Perhaps the two most important are generalizing the highly stylized model of trade (to include factor endowments), and relaxing the assumption that the inter-bloc level of tariffs remains fixed. In the latter case, allowing tariffs to be endogenous yields a much more optimistic outlook for the effects of FTAs.
Handle: RePEc:nbr:nberwo:5431
Template-Type: ReDIF-Paper 1.0
Title: On the Costs of Inward-Looking Development: Historical Perspectives on Price Distortions, Growth, and Divergence in Latin American from 1930s - 1980s
Classification-JEL: N1; 01
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE
Number: 5432
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5432
File-URL: http://www.nber.org/papers/w5432.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic History, vol. 58, no. 1, pp. 1-28, 1998.
Abstract: From the 1930s to the 1980s, economic policies in Latin America epitomized the inward-looking model of development. The model emerged in the Depression, and was later codified in unorthodox economic theories. Even though economic performance was seen as disappointing by the 1960s, the distortions of the regime were long lived, persisting and worsening into the 1970s and 1980s. I examine the costs of distortions and explore the structural differences between growth dynamics in Latin America and elsewhere. Distortions had pervasive and profound effects on many aspects of the growth process, and help explain divergent development in the region.
Handle: RePEc:nbr:nberwo:5432
Template-Type: ReDIF-Paper 1.0
Title: Labor Mobility and Fiscal Coordination
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Chi-Wa Yuen
Note: IFM
Number: 5433
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5433
File-URL: http://www.nber.org/papers/w5433.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, 1997.
Abstract: Using a human capital based growth model, we show the essential role of labor mobility and cross-country tax harmonization in equalizing income levels of countries that start off from different initial income positions. Knowledge spillovers cum labor mobility are the driving forces behind the income level equalization process. In the absence of tax harmonization within an economic union, equality in income levels is not achievable. Coordination of educational subsidies necessary for the internalization of knowledge spillovers may or may not be necessary. These considerations constitute the basis for our efficient growth agenda for an economic union such as the EU.
Handle: RePEc:nbr:nberwo:5433
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Maternal Drug Use on Birth Weight: Measurement Error in Binary Variables
Classification-JEL: I12
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Theodore Joyce
Author-Person: pjo112
Author-Name: Hassan Wehbeh
Note: EH
Number: 5434
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5434
File-URL: http://www.nber.org/papers/w5434.pdf
File-Format: application/pdf
Publication-Status: published as Economic Inquiry, Vol. 34, no. 4, (October 1996), pp. 617-629.
Abstract: This paper develops a method to correct for non-random measurement error in a binary indicator of illicit drugs. Our results suggest that estimates of the effect of self reported prenatal drug use on birth weight are biased upwards by measurement error -- a finding contrary to predictions of a model of random measurement error. We show that more accurate estimates of the true effect of drug use on birth weight can be obtained by using the predicted probability of falsely reporting drug use. This suggests that out-of-sample information on drug use may improve estimates of the effect of reported drug use in other settings.
Handle: RePEc:nbr:nberwo:5434
Template-Type: ReDIF-Paper 1.0
Title: Working for Nothing: The Supply of Volunteer Labor
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 5435
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5435
File-URL: http://www.nber.org/papers/w5435.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Vol. 15, no. 1, part 2 (January 1997): S140-S166.
Abstract: Volunteer activity is work performed without monetary recompense. This paper shows that volunteering is a sizeable economic activity in the U.S.; that volunteers have high skills and opportunity costs of time; that standard labor supply explanations of volunteering account for only a minor part of volunteer behavior; and that many volunteer only when requested to do so. This suggests that volunteering is a 'conscience good or activity' -- something that people feel morally obligated to do when asked, but which they would just as soon let someone else do.
Handle: RePEc:nbr:nberwo:5435
Template-Type: ReDIF-Paper 1.0
Title: Relational Investing: The Worker's Perspective
Author-Name: Edward P. Lazear
Author-Person: pla64
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 5436
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5436
File-URL: http://www.nber.org/papers/w5436.pdf
File-Format: application/pdf
Publication-Status: published as Gilson, Ronald, John C. Coffee, and Louis Lowenstein (eds.) Meaningful Relationships: Institutional Investors, Relational Investing, and the Future of Corporate Governance? NY: Oxford University Press, 1997.
Abstract: Workers who hold a firm's stock make decisions other than those that pure capital owners would make, but there exist institutions and compensation packages that will generally lead workers to favor efficient firm decisions. Workers care about their firm-specific rents and may seek shares in their firm to use them to protect those rents. Their views toward firm decisions will differ depending on their firm-specific human capital and tenure in the firm. The workers most favorable to efficient firm decisions are the very young and very old, who have the least amount to lose in employment rent and those with larger shares of ownership. An appropriate severance pay policy will induce workers to choose efficient outcomes even if it calls for their own layoffs. Single company based defined contribution pension funds, which hold shares in their own firm, are likely to tilt worker- owners to favor efficient decisions when layoffs and other changes are modest, but not when the changes are huge. Pension funds are more likely to buy up shares and successfully change behavior in small firms, in firms that are highly levered, and when the investment community has diverse views on the benefit from changing a firm's current irresponsible policies.
Handle: RePEc:nbr:nberwo:5436
Template-Type: ReDIF-Paper 1.0
Title: Currency Crashes in Emerging Markets: Empirical Indicators
Classification-JEL: F32; F34
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Andrew K. Rose
Author-Person: pro71
Number: 5437
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5437
File-URL: http://www.nber.org/papers/w5437.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, 1996
Abstract: We use a panel of annual data for over one hundred developing countries from 1971 through 1992 to characterize currency crashes. We define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation. We examine the composition of the debt as well as its level, and a variety of other macroeconomic factors, external and foreign. Crashes tend to occur when: output growth is low; the growth of domestic credit is high; and the level of foreign interest rates is high. A low ratio of FDI to debt is consistently associated with a high likelihood of a crash.
Handle: RePEc:nbr:nberwo:5437
Template-Type: ReDIF-Paper 1.0
Title: Employer Learning and the Signaling Value of Education
Classification-JEL: H83; J3
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Charles R. Pierret
Note: LS
Number: 5438
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5438
File-URL: http://www.nber.org/papers/w5438.pdf
File-Format: application/pdf
Publication-Status: published as Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning And Statistical Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 313-350, February.
Abstract: If profit maximizing firms have limited information about the general productivity of new workers, they may choose to use easily observable characteristics such as years of education to 'statistically discriminate' among workers. The pure credential value of education will depend on how quickly firms learn. To obtain information on employer learning, we work with a wage equation that contains both the interaction between experience and a hard-to-observe variable that is positively related to productivity and the interaction between experience and a variable that firms can easily observe, such as years of education. The time path of the coefficient on the unobservable productivity variable provides information about the rate at which employers learn about worker productivity. Using data from the NLSY we obtain preliminary estimates of the rate at which employers learn about worker quality and use these, along with some strong auxiliary assumptions, to explore the empirical relevance of the educational screening hypothesis. We show that even if employers learn relatively slowly about the productivity of new workers, the portion of the return to education that could reflect signaling of ability is limited.
Handle: RePEc:nbr:nberwo:5438
Template-Type: ReDIF-Paper 1.0
Title: Nominal Wage Stickiness and Aggregate Supply in the Great Depression
Classification-JEL: N31; N32
Author-Name: Ben S. Bernanke
Author-Person: pbe55
Author-Name: Kevin Carey
Note: EFG
Number: 5439
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5439
File-URL: http://www.nber.org/papers/w5439.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, August 1996, vol.111, no.3, pp.853-883.
Abstract: Building on earlier work by Eichengreen and Sachs, we use data for 22 countries to study the role of wage stickiness in propagating the Great Depression. Recent research suggests that monetary shocks, transmitted internationally by the gold standard, were a major cause of the Depression. Accordingly, we use money supplies and other aggregate demand shifters as instruments to identify aggregate supply relationships. We find that nominal wages adjusted quite slowly to falling prices, and that the resulting increases in real wages depressed output. These findings leave open the question of why wages were so inertial in the face of extreme labor market conditions.
Handle: RePEc:nbr:nberwo:5439
Template-Type: ReDIF-Paper 1.0
Title: The Trade Effects of U.S. Antidumping Actions
Classification-JEL: F13
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: ITI
Number: 5440
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5440
File-URL: http://www.nber.org/papers/w5440.pdf
File-Format: application/pdf
Publication-Status: published as The Effects of US Trade Protection and Promotion Policies, R. Feenstra, ed.pp. 191-213, (Chicago: University of Chicago Press, 1997).
Publication-Status: published as The Trade Effects of U.S. Antidumping Actions, Thomas J. Prusa. in The Effects of US Trade Protection and Promotion Policies, Feenstra. 1997
Abstract: In this paper I present evidence on the effectiveness of AD actions. Using a data set based on the line-item tariff codes identified in the cases, I examine the trade patterns of both countries named in the petition and those countries not subject to the investigation. Several important findings emerge. First, AD duties substantially restrict the volume of trade from named countries, especially for those cases with high duties. Second, AD actions that are rejected still have an important impact on named country trade, especially during the period of investigation. Third, there is substantial trade diversion from named to non-named countries and the diversion is greater the larger is the estimated duty. Because of the diversion of imports, the overall volume of trade continues to growþeven for those cases which result in duties. Fourth, despite the diversion of imports, AD law still offers important benefits because it induces substantial import price increases both by named and non- named countries. Finally, because of the diversion of imports, aggressive use of AD law by U.S. firms has the peculiar side-effect of benefiting non-named countries who are active in the areas under investigation.
Handle: RePEc:nbr:nberwo:5440
Template-Type: ReDIF-Paper 1.0
Title: The Social Costs of Rent Control Revisited
Classification-JEL: H89; R52
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: PE
Number: 5441
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5441
File-URL: http://www.nber.org/papers/w5441.pdf
File-Format: application/pdf
Abstract: The textbook graphical analysis of price control (see Figure 1) is inappropriate any time there is substantial consumer heterogeneity. In cases such as rental apartments, where one unit is usually the maximum bought per customer, and the downward slope of the demand function comes exclusively from consumer heterogeneity, this analysis misses a primary source of welfare loss. A major social cost of rent control is that without a fully operational price mechanism the 'wrong' consumers end up using apartments. When prices are set below market price, many consumers want to rent apartments even though they receive little utility from those apartments. Unless apartments are somehow allocated perfectly across consumers, rental units will be allocated to consumers who gain little utility from renting and rental units will not go to individuals who desire them greatly. The social costs of this misallocation are first order when the social costs from underprovision of housing are second order. Thus for a sufficiently marginal implementation of rent control, these costs will always be more important than the undersupply of housing. Figure 2 shows the losses graphically.
Handle: RePEc:nbr:nberwo:5441
Template-Type: ReDIF-Paper 1.0
Title: The Efficiency of Self-Regulated Payments Systems: Learning From the Suffolk System
Classification-JEL: G21; N21
Author-Name: Charles W. Calomiris
Author-Person: pca421
Author-Name: Charles M. Kahn
Author-Person: pka119
Note: DAE
Number: 5442
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5442
File-URL: http://www.nber.org/papers/w5442.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, Vol. 28, no. 4, part 2 (November 1996): 766-797
Publication-Status: Published as Calomiris, Charles W., "Gauging the Efficiency of Bank Consolidation During a Merger Wave," Journal of Banking and Finance, Vol. 23, nos. 2-4 (February 1999): 615-621.
Publication-Status: published as Charles W. Calomiris & Charles M. Kahn, 1996. "The efficiency of self-regulated payments systems: learning from the Suffolk System," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 766-803.
Abstract: This paper analyzes the operation of the Suffolk System, an interbank note-clearing network operating throughout New England from the 1820s through the 1850s. Banks made markets in each other's notes at par, which allowed New England to avoid discounting of bank notes in trade. Privately enforced regu- lations prevented free riding in the form of excessive risk taking. Observers of the Suffolk System have been divided. Some emphasized the stability and effi these arrangements. Others argued that the arrangements were motivated by rent-seeking on the part of Boston banks, and were primarily coervice and exploitative. In the neighboring Mid-Atlantic states, regulations limited the potential for developing a regional clearing system centered in New York City on the model of the Suffolk System. This difference makes it possible to compare the performance of banks across regulatory regimes to judge the relative merits of the sanguine and jaundiced views of the Suffolk System. Evidence supports the sanguine view. New England's banks were able to issue more notes and these notes traded at uniform and low discount rates compared to those of other banks. An examination of the balance sheets and stock returns of Boston and New York City banks indicates that the stock market perceived that bank lending produced less risk for bank debt holders in Boston than in New York. The benefits of the system extended outside of Boston. Peripheral New England banks displayed high propensities to issue notes, and wer able to maintain low specie reserves. Boston banks did not show high profit rates or high ratios of market-to-book values of equity; thus there is no evidence that Boston banks extracted rents from their control of the payments system.
Handle: RePEc:nbr:nberwo:5442
Template-Type: ReDIF-Paper 1.0
Title: Why, indeed, in America? Theory, History, and the Origins of Modern Economic Growth
Classification-JEL: O3; N1
Author-Name: Paul M. Romer
Author-Person: pro45
Note: DAE EFG
Number: 5443
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5443
File-URL: http://www.nber.org/papers/w5443.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 86, no. 2 (May 1996): 202-206.
Abstract: When they are used together, economic history and new growth theory give a more complete picture of technological change than either can give on its own. An empirical strategy for studying growth that does not use historical evidence is likely to degenerate into sterile model testing exercises. Historical analysis that uses the wrong kind of theory or no theory may not emphasize the lessons about technology that generalize. The complementarity between these fields is illustrated by an analysis of early industrialization. The key theoretical observation is that larger markets and larger stocks of resources create substantially bigger incentives for discovering new ways to use the resources. This simple insight helps explain why the techniques of mass production emerged in the United States during the first half of the 19th century. It also helps explain how a narrow advantage in the techniques of mass production for a small set of goods grew into broad position of industrial supremacy by the middle of the 20th century.
Handle: RePEc:nbr:nberwo:5443
Template-Type: ReDIF-Paper 1.0
Title: Incentives in Basic Research
Classification-JEL: D00; J33
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS
Number: 5444
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5444
File-URL: http://www.nber.org/papers/w5444.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Vol. 15, no. 1, part 2 (January 1997): S167-S197.
Abstract: Individuals involved in basic research, like other workers, respond to incentives. Funding agencies provide implicit incentives when they specify the rules by which awards are made. The following analysis is an exercise in understanding incentives at an applied level. Specific rules are examined and analyzed to determine their incentive effects. For example, what is the effect of rewarding past effort? What happens when a few large awards are replaced by many small awards? How does the timing of an award affect effort? How does an agency choose which topics to fund? After having mapped out the responses of researchers to rules, socially optimal rules are derived. Research incentive issues have private business analogues, and the extension to the operation of the firm is discussed briefly.
Handle: RePEc:nbr:nberwo:5444
Template-Type: ReDIF-Paper 1.0
Title: Target Zones and Exchange Rates: An Empirical Investigation
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Stephen F. Gray
Note: AP IFM
Number: 5445
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5445
File-URL: http://www.nber.org/papers/w5445.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 45 (June 1998): 1-35.
Abstract: In this paper we develop an empirical model of exchange rates in a target zone. The model is general enough to nest most theoretical and empirical models in the existing literature. We find evidence of two types of jumps in exchange rates. Realignment jumps are those that are associated with the periodic realignments of the target zone and within-the-band jumps are those that can be accommodated within the current target zone. The exchange rate may jump outside the current target zone band, in the case of a realignment, but when no jump occurs the target zone is credible (there is zero probability of a realignment) and the exchange rate must stay within the band. We incorporate jumps, in general, by conditioning the distribution of exchange rate changes on a jump variable where the probability and size of a jump vary over time as a function of financial and macroeconomic variables. With this more general model, we revisit the empirical evidence from the European Monetary System regarding the conditional distribution of exchange rate changes, the credibility of the system, and the size of the foreign exchange risk premia. In contrast to some previous findings, we conclude that the FF/DM rate exhibits considerable non-linearities, realignments are predictable and the credibility of the system did not increase after 1987. Moreover, our model implies that the foreign exchange risk premium becomes large during speculative crises. A comparison with the Deutschemark/Dollar rate suggests that an explicit target zone does have a noticeable effect on the time-series behavior of exchange rates.
Handle: RePEc:nbr:nberwo:5445
Template-Type: ReDIF-Paper 1.0
Title: Public Information and the Persistence of Bond Market Volatility
Classification-JEL: G12
Author-Name: Charles M. Jones
Author-Name: Owen Lamont
Author-Name: Robin Lumsdaine
Note: AP
Number: 5446
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5446
File-URL: http://www.nber.org/papers/w5446.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Economics, Vol. 47, no. 3 (March 1998): 315-337.
Abstract: We examine the reaction of daily bond prices to the release of government macroeconomic news. These news releases are of interest because they are released on periodic, preannounced dates and because they cause substantial bond market volatility. The news component of volatility is not positively autocorrelated on these dates, since the news is released at a specific moment in time. We find that (1) expected returns on the short end of the bond market are significantly higher on these announcement dates, and (2) the persistence pattern of daily volatility is quite different around these days.
Handle: RePEc:nbr:nberwo:5446
Template-Type: ReDIF-Paper 1.0
Title: Intergenerational Redistribution with Short-Lived Governments
Classification-JEL: E62; D72
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: EFG PE
Number: 5447
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5447
File-URL: http://www.nber.org/papers/w5447.pdf
File-Format: application/pdf
Publication-Status: published as Economic Journal, Vol. 108, no. 45 (September 1998): 1299-1325.
Abstract: We study the politics of intergenerational redistribution in an overlapping generations model with short-lived governments. The successive governmentsþwho care about the welfare of the currently living generations and possibly about campaign contributionsþare unable to pre-commit the future course of redistributive taxation. In a stationary politico-economic equilibrium, the tax rate in each period depends on the current value of the state variable and all expectations about future political outcomes are fulfilled. We find that there exist multiple stationary equilibria in many political settings. Steady-state welfare is often lower than it would be in the absence of redistributive politics.
Handle: RePEc:nbr:nberwo:5447
Template-Type: ReDIF-Paper 1.0
Title: What's the Use of Factor Contents?
Author-Name: Edward E. Leamer
Author-Person: ple440
Note: ITI
Number: 5448
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5448
File-URL: http://www.nber.org/papers/w5448.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol.50, no.1 (February 2000): 17-50.
Abstract: The net imports of labor embodied in international trade has been a fairly small and stable share of the US labor force. From this some conclude that trade has not been a major contributor to the income inequality trends. This is a non sequitur. The labor embodied in trade is jointly determined by tastes, technologies, factor supplies and the external goods market. Although it is impossible to use factor contents to disentangle trade from technology, the factor contents can be used to suggest the change of earnings shares if the country were to close down external trade entirely. However, this is a proper application of factor contents only if tastes and technologies are log-linear, if trade is balanced and if foreign input intensities are used to compute factor contents of non-competing imports. Factor contents are virtually useless if technologies and tastes are not log-linear, or if the external deficit is substantial and variable. Factor contents do not tell us anything about earnings levels as opposed to shares. They also do not inform us of the impact of partial trade barriers that change relative product prices but do not completely eliminate trade. In other words, the title question is rhetorical.
Handle: RePEc:nbr:nberwo:5448
Template-Type: ReDIF-Paper 1.0
Title: Budget Institutions and Fiscal Policy in the U.S. States
Classification-JEL: H61
Author-Name: James M. Poterba
Author-Person: ppo19
Note: PE
Number: 5449
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5449
File-URL: http://www.nber.org/papers/w5449.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 86 (May 1996): 395-400.
Abstract: This paper summarizes state balanced budget requirements, and the available empirical evidence on the effect of these rules on state fiscal policies. Existing state rules differ from many current proposals at the federal level. They are typically restricted to part of the state budget, they frequently permit short term borrowing, and they lack formal enforcement mechanisms. The paper also surveys previous research on how anti-deficit provisions affect state fiscal policy. The available evidence indicates that stringent anti-deficit provisions lead to more rapid adjustment of state taxes and expenditures when fiscal deficits emerge. This suggests that changing the federal budget process has the potential to affect federal fiscal policy.
Handle: RePEc:nbr:nberwo:5449
Template-Type: ReDIF-Paper 1.0
Title: Labor Market Effects of School Quality: Theory and Evidence
Classification-JEL: I20
Author-Name: David Card
Author-Person: pca271
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS
Number: 5450
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5450
File-URL: http://www.nber.org/papers/w5450.pdf
File-Format: application/pdf
Publication-Status: published as in Gary Burtless (ed.), Does Money Matter? The Link Between Schools, Student Achievement and Adult Success,(Washington, DC: Brookings Institute, 1996)pp.97-140.(With David Card).
Abstract: This paper presents an overview and interpretation of the literature relating school quality to students' subsequent labor market success. We begin with a simple theoretical model that describes the determination of schooling and earnings with varying school quality. A key insight of the model is that changes in school quality may affect the characteristics of individuals who choose each level of schooling, imparting a potential selection bias to comparisons of earnings conditional on education. We then summarize the literature that relates school resources to students' earnings and educational attainment. A variety of evidence suggests that students who were educated in schools with more resources tend to earn more and have higher schooling. We also discuss two important issues in the literature: the tradeoffs involved in using school-level versus more aggregated (district or state-level) quality measures; and the evidence on school quality effects for African Americans educated in the segregated school systems of the South.
Handle: RePEc:nbr:nberwo:5450
Template-Type: ReDIF-Paper 1.0
Title: Why Do So Many Young American Men Commit Crimes and What Might We Do About It?
Author-Name: Richard B. Freeman
Author-Person: pfr23
Note: LS
Number: 5451
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5451
File-URL: http://www.nber.org/papers/w5451.pdf
File-Format: application/pdf
Publication-Status: published as The Journal of Economic Perspectives, Vol. 10, no.1 (Winter 1996): 25-42.
Abstract: This paper shows that participation in crime and involvement with the criminal justice system has reached extraordinary levels among young men. With approximately 2 percent as many men incarcerated as in the labor force, the crime rate should have plummeted. It didn't. Evidence suggests that the depressed labor market for low skill American workers contributed to the continued high level of crime by less educated men, despite incapacitation and the deterrent effect of imprisonment. The costs of incarceration are such that even marginally effective prevention policies can be socially desirable.
Handle: RePEc:nbr:nberwo:5451
Template-Type: ReDIF-Paper 1.0
Title: Inflation's Children: Tales of Crises that Beget Reforms
Author-Name: Michael Bruno
Author-Name: William Easterly
Author-Person: pea1
Note: IFM ME
Number: 5452
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5452
File-URL: http://www.nber.org/papers/w5452.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 86, no. 2 (May 1996): 213-217.
Abstract: Are broad reforms the children of high inflation? Do growth recoveries follow? We find that countries that had external debt crises with high inflation both reformed more and recovered better than countries that had external debt crises with low inflation. Countries with extremely high inflation also later wound up with lower inflation than countries that has moderately high inflation. The low inflation debtor countries had more aid than the high inflation debtor countries, which may have created stronger incentives to reform in the high inflation countries. Recent reforms look like they are the children of high inflation, even if further paternity tests are in order.
Handle: RePEc:nbr:nberwo:5452
Template-Type: ReDIF-Paper 1.0
Title: Universal Banking and the Performance of German Firms
Classification-JEL: G2
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Frank A. Schmid
Note: CF
Number: 5453
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5453
File-URL: http://www.nber.org/papers/w5453.pdf
File-Format: application/pdf
Publication-Status: published as Gorton, Gary and Frank A. Schmid. "Universal Banking And The Performance Of German Firms," Journal of Financial Economics, 2000, v58(1-2,Jan), 29-80.
Abstract: Universal banking is an alternative mechanism to a stock market for risk-sharing, for providing information for guiding investment, and for contesting corporate governance. In Germany, where the stock market has historically been small, banks hold equity stakes in firms and have proxy voting rights over other agents' shares. In addition, banks lend to firms and have representatives on corporate boards. If a banking relationship is a substitute for the stock market, then interaction with a bank should improve the performance of firms. But, if banks have private information about firms that they lend to and have monopolistic control over access to external capital markets, then bank interests may conflict with those of other equityholders, especially those whose shares are voted by the banks in proxy. We empirically investigate the influence of banks on the performance of German firms taking account of banks' equity holdings, the extent of banks' proxy voting rights, and the ownership structure of the firms' equity. We test for conflicts-of-interest in bank behavior and ask whether the relationship between banks and firms has changed between the 1970s and 1980s.
Handle: RePEc:nbr:nberwo:5453
Template-Type: ReDIF-Paper 1.0
Title: Searching for the Effect of Immigration on the Labor Market
Author-Name: George J. Borjas
Author-Person: pbo44
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: LS
Number: 5454
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5454
File-URL: http://www.nber.org/papers/w5454.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, 86, pp.246-251, May 1996.
Abstract: We compare two approaches to analyzing the effects of immigration on the labor market and find that the estimated effect of immigration on U.S. native labor outcomes depends critically on the empirical experiment used. Area analyses contrast the level or change in immigration by area with the level or change in the outcomes of non- immigrant workers. Factor proportions analyses treat immigrants as a source of increased national supply of workers of the relevant skill. Cross-section comparisons of wages and immigration in the 1980 and 1990 Censuses yield unstable results casting doubt on the validity of these calculations. Analyses of changes over time for various education groups within regions give negative estimated immigration effects, which increase in magnitude the wider the area covered. Factor proportions calculations show that immigration was somewhat important in reducing the relative pay of U.S. high school dropouts during the 1980s, while immigration and trade contributed much more modestly to the falling pay of high school equivalent workers. The different effects of immigration on native outcomes in the area and factor proportions methodologies appear to result from the diluting effect of native migration flows across regions and failure to take adequate account of other regional labor market conditions in area comparisons.
Handle: RePEc:nbr:nberwo:5454
Template-Type: ReDIF-Paper 1.0
Title: Wage Mobility in the United States
Author-Name: Moshe Buchinsky
Author-Person: pbu314
Author-Name: Jennifer Hunt
Author-Person: phu9
Number: 5455
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5455
File-URL: http://www.nber.org/papers/w5455.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, (August 1999).
Abstract: This paper examines the mobility of individuals through the wage and earnings distributions. This is of extreme importance since mobility has a direct implication for the way one views the vast changes in wage and earnings inequality in the United States over the last few decades. The measures of wage and earnings mobility analyzed are based on data for individuals surveyed in the National Longitudinal Survey for Youth from 1979 to 1991. We introduce summary measures of mobility computed over varying time horizons in order to examine how the effect on measured inequality as the time horizon is increased. The results suggest that mobility is predominantly within group mobility and increases most rapidly when the time horizon is extended up to four years, reducing wage inequality by 12-26%. We proceed therefore with more detailed examination of short-term (year-to-year) within group mobility, by estimating non-parametrically transition probabilities among quintiles of the distribution. We find that the staying probabilities, by quintiles, were higher at the higher quintiles throughout the period for both wages and earnings, and that mobility is declining over time. Hence, this paper suggests that while the level of wage inequality in the United States is somewhat lower once mobility is taken into account, the sharp increase in inequality during the 1980's is worse than it appears, due to falling mobility over time.
Handle: RePEc:nbr:nberwo:5455
Template-Type: ReDIF-Paper 1.0
Title: The L.A. Riot and the Economics of Urban Unrest
Classification-JEL: K42; J78
Author-Name: Denise DiPasquale
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: LS
Number: 5456
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5456
File-URL: http://www.nber.org/papers/w5456.pdf
File-Format: application/pdf
Publication-Status: Published as "The Los Angeles Riot and the Economics of Urban Unrest", JUE, Vol. 43, no. 1 (January 1998): 52-78.
Abstract: The Los Angeles riot of 1992 resulted in 52 deaths, 2,500 injuries and at least $446 million in property damage; this staggering toll rekindled interest in understanding the underlying causes of the widespread social phenomenon of rioting. We examine the causes of rioting using international data, evidence from the race riots of the 1960s in the U.S., and Census data on Los Angeles, 1990. We find some support for the notions that the opportunity costs of time and the potential costs of punishment influence the incidence and intensity of riots. Beyond these individual costs and benefits, community structure matters. In our results, ethnic diversity seems a significant determinant of rioting, while we find little evidence that poverty in the community matters.
Handle: RePEc:nbr:nberwo:5456
Template-Type: ReDIF-Paper 1.0
Title: Japanese and U.S. Exports and Investment as Conduits of Growth
Author-Name: Jonathan Eaton
Author-Person: pea5
Author-Name: Akiko Tamura
Note: ITI
Number: 5457
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5457
File-URL: http://www.nber.org/papers/w5457.pdf
File-Format: application/pdf
Publication-Status: published as Financial Deregulation and Integration in East Asia, Takatoshi Ito and Anne O. Kruger, eds., University of Chicago Press, 1996, pp. 51-72
Publication-Status: published as Japanese and U.S. Exports and Investment as Conduits of Growth, Jonathan Eaton, Akiko Tamura. in Financial Deregulation and Integration in East Asia, Ito and Krueger. 1996
Abstract: We develop a simple model of the choice between exploiting a technology in another country via export and via direct foreign investment. The model points to the destination country's size, level of technological sophistication, and distance from the source as factors in the decision. Moreover, it suggests that the effects of these variables may not only be nonhomogeneous but nonmonotonic as well. We use the model as a basis for estimating Japanese and U.S. exports and DFI positions around the world. Consistent with the theory we find that the importance of DFI relative to exports grows with population, although, contrary to our theory, the elasticity of DFI, as well as exports, with respect to population is less than one. We find that distance tends to inhibit DFI much less than it inhibits exports, as our theory predicts. We find some tendency for Japanese exports to rise relative to DFI as countries become more advanced with U.S. exports and DFI exhibiting the opposite tendency. Taking population, per capita income, factor endowments, and distance into account, we find Japan to be more open to U.S. exports than any region in the world except East Asia.
Handle: RePEc:nbr:nberwo:5457
Template-Type: ReDIF-Paper 1.0
Title: Rent-Shifting Export Subsidies with an Imported Intermediate Product
Classification-JEL: F12; F13
Author-Name: Jota Ishikawa
Author-Person: pis97
Author-Name: Barbara J. Spencer
Author-Person: psp2
Note: ITI
Number: 5458
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5458
File-URL: http://www.nber.org/papers/w5458.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 48, no. 2 (August 1999): 199-232.
Abstract: This paper argues that export subsidies aimed at shifting rents from foreign to domestic producers of a final good may also serve to shift rents to foreign firms supplying an intermediate good, weakening the incentive for the subsidy. By contrast, assuming Cournot competition for both the final and intermediate goods, this second layer of rent-shifting between final and intermediate good firms can strengthen the argument for an export subsidy if intermediate good firms are domestic. The domestic welfare implications of alternative rent-shifting policies (a production subsidy and an import tariff) at the intermediate good stage are also considered.
Handle: RePEc:nbr:nberwo:5458
Template-Type: ReDIF-Paper 1.0
Title: Wage Inequality and Family Labor Supply
Classification-JEL: J22
Author-Name: Chinhui Juhn
Author-Person: pju42
Author-Name: Kevin M. Murphy
Author-Person: pmu108
Note: LS
Number: 5459
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5459
File-URL: http://www.nber.org/papers/w5459.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Vol. 15 (January 1997): 72-97.
Abstract: Using data from the March CPS and the 1960 Census, this paper describes earnings and employment changes for married couples in different types of households stratified by the husband's hourly wage. While the declines in male employment and earnings have been greatest for low wage men, employment and earnings gains have been largest for wives of middle and high wage men. These findings cast doubt on the notion that married women have increased their labor supply in the recent decades to compensate for the disappointing earnings growth of their husbands. We conclude that own wage effects dominate cross effects between husband and wife in accounting for changes in male and female employment.
Handle: RePEc:nbr:nberwo:5459
Template-Type: ReDIF-Paper 1.0
Title: A Citation-Based Test for Discrimination at Economics and Finance Journals
Classification-JEL: J71; K31
Author-Name: Scott Smart
Author-Name: Joel Waldfogel
Author-Person: pwa46
Number: 5460
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5460
File-URL: http://www.nber.org/papers/w5460.pdf
File-Format: application/pdf
Abstract: Discrimination is notoriously difficult to document. Convincing tests for discrimination require good measures of the legitimate determinants of the outcome of interest, for example wages and productivity. While few contexts provide data adequate to the task of measuring discrimination, copious bibliographic data on the impact of academic research make possible tests of discrimination in the editorial process. This study develops a test for possible bias þ with respect to author gender, prestige of author's institution, article content (theory vs. empiricism), and whether the author has ties to the editor þ using a new approach based on an analysis of citations. We treat citations as a measure of article quality and ask whether papers by certain groups receive systematically different numbers of citations. The key to our approach is the observation that editors do not simply accept or reject papers. For accepted papers, editors determine articles' order within journal issue and length based on their quality assessments. We show that these 'editorial treatment' decisions are highly correlated with citations. Thus, we infer bias against a particular group of authors if their published articles have more citations, conditional editorial treatment, than other articles. Surprisingly, we document systematic editorial bias in favor of authors located outside of top institutions.
Handle: RePEc:nbr:nberwo:5460
Template-Type: ReDIF-Paper 1.0
Title: Threats without Binding Commitment
Classification-JEL: K42; C70
Author-Name: Steven Shavell
Author-Person: psh42
Author-Name: Kathryn Spier
Note: LE
Number: 5461
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5461
File-URL: http://www.nber.org/papers/w5461.pdf
File-Format: application/pdf
Publication-Status: published as Steven Shavell & Kathryn E. Spier, 2002. "Threats Without Binding Commitment," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1).
Abstract: This paper explores the power of threats in the absence of binding commitment. The threatener cannot commit to carrying out the threat if the victim refuses payment, and cannot commit to not carrying out the threat if payment is made. If exercising the threat is costly to the threatener, then the threat cannot succeed in extracting money from the victim. If exercising the threat would benefit the threatener, however, then the threat's success depends upon whether the threat may be repeated. In the equilibrium of a finite-period game, the threat is carried out and the victim makes no payments. In an infinite-horizon game, however, it is an equilibrium for the victim to make a stream of payments over time. The expectation of future payments keeps the threatener from exercising the threat.
Handle: RePEc:nbr:nberwo:5461
Template-Type: ReDIF-Paper 1.0
Title: Financing Constraints and Corporate Investment: Response to Kaplan and Zingales
Classification-JEL: G3
Author-Name: Steven M. Fazzari
Author-Person: pfa87
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Author-Name: Bruce C. Petersen
Author-Person: ppe145
Note: CF
Number: 5462
Creation-Date: 1996-01
Order-URL: http://www.nber.org/papers/w5462
File-URL: http://www.nber.org/papers/w5462.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, vol 115, no. 2, (May 2000), pp. 695-705.
Publication-Status: published as Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen & Alan S. Blinder & James M. Poterba, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, vol 1988(1).
Abstract: Kaplan and Zingales (1995, hereafter KZ) criticize Fazzari, Hubbard and Petersen (1988, hereafter FHP) and much ensuing research that uses cross-sectional differences in firm behavior to test for financing constraints on investment. This reply identifies flaws in the KZ analysis. The questions KZ raise have been considered extensively and rigorously in the literature (most of which is not addressed in KZ), with results broadly similar to those of FHP. We also challenge both of KZ's main results. First, their finding that most of the FHP firms are not financially constrained relies on an inappropriate operational definition of what it means to be constrained. Their definition ignores the incentives for firms that operate in imperfect capital markets to accumulate stocks of cash or maintain unused debt capacity to offset partially shocks to the flow of internal finance. Second, the KZ regression results (lower sensitivity of investment to cash flow for firms classified as constrained than for those classified as unconstrained) are uninformative. Their classification approach relies on possibly self- serving managerial statements that may present a distorted picture of firm's availability of finance. It also employs misleading criteria to make unrealistically fine distinctions in the degree of financing constraints, and emphasizes financial distress rather than financing constraints. Finally, econometric problems affect the interpretation of the KZ regressions. We conclude that the KZ findings do not contradict the interpretation of the empirical results in FHP and subsequent research.
Handle: RePEc:nbr:nberwo:5462
Template-Type: ReDIF-Paper 1.0
Title: A Time-Series Analysis of Crime and Drug Use in New York City
Classification-JEL: K42
Author-Name: Hope Corman
Author-Name: H. Naci Mocan
Author-Person: pmo270
Note: EH
Number: 5463
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5463
File-URL: http://www.nber.org/papers/w5463.pdf
File-Format: application/pdf
Publication-Status: Published as "A Time-Series Analysis of Crime, Deterrence, and Drug Abuse in New York City" in the American Economic Review; June 2000, 90(3): 584-604 .
Abstract: This report summarizes the results of a project which investigated the time series interrelationships between crime, drug use, police, and arrests in New York City. We use monthly data from 1970 through 1990 for New York City. We plot the individual time series for five different non-drug crimes, arrest rates for these crimes, drug deaths, number of police officers, and drug arrests in New York City. We find that drug usage, as proxied by drug deaths, increased from the mid-1980's to about 1988-1989. At the same time, felony drug arrests increased substantially. During the mid-1980's, there were increases in murders, assaults, and motor vehicle thefts. Robberies increased in the later 1980s and burglaries declined throughout the 1980s. Arrest rates and total arrests for non-drug crimes did not decline during this period of increased drug arrests. In a multivariate analysis, we found that the three property crimes investigated - robberies, burglaries and motor vehicle thefts - increased when there were unexpected increases in drug usage. We did not find such a relationship between drug use and murders or assaults, holding constant arrest rates and police. In addition, we found evidence of police deterrence, either directly, or through arrests, of property-related and assault offenses, but not for murders. Thus, in a time-series approach, we are able to find a causal relationship between drug usage and property-related felonies.
Handle: RePEc:nbr:nberwo:5463
Template-Type: ReDIF-Paper 1.0
Title: The Channels of Monetary Transmission: Lessons for Monetary Policy
Classification-JEL: E0; E5
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG ME
Number: 5464
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5464
File-URL: http://www.nber.org/papers/w5464.pdf
File-Format: application/pdf
Publication-Status: published as Banque de France: Bulletin: Digest, no. 27, pp. 33-44, March 1996
Abstract: This paper provides an overview of the transmission mechanisms of monetary policy, starting with traditional interest rate channels, going on to channels operating through other asset prices, and then on to the so-called credit channels. The paper then discusses the implications from this literature for how central banks might best conduct monetary policy.
Handle: RePEc:nbr:nberwo:5464
Template-Type: ReDIF-Paper 1.0
Title: The Rise and Fall of Money Growth Targets as Guidelines for U.S. Monetary Policy
Classification-JEL: E5
Author-Name: Benjamin M. Friedman
Note: ME
Number: 5465
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5465
File-URL: http://www.nber.org/papers/w5465.pdf
File-Format: application/pdf
Publication-Status: published as “The Rise and Fall of Money Growth Targets as Guidelines for U.S. Monetary Policy.” Kuroda (ed.), Toward More Effective Monetary Policy. London: Macmillan, 1996.
Abstract: A familiar question raised by the Federal Reserve System's evolving use of money growth targets over the past twenty years is whether monetary policymakers had sound economic reasons for changing their procedures as they did -- either in adopting money growth targets in the first place, or in subsequently abandoning them, or in both instances. This paper addresses that question by comparing two kinds of evidence based on U.S. time-series data: first, evidence bearing on what Federal Reserve policymakers should have known about the relationship of money to income and prices, and when they should have known it; and second, evidence showing how and when the Federal Reserve changed its actual (as opposed to stated) reliance on money growth targets. The main conclusion from this comparison is that whatever economic conditions might have warranted reliance on money growth targets in the 1970s and early 1980s had long disappeared by the 1990s, so that abandoning these targets was an appropriate response to changing circumstances. Whether adopting money growth targets earlier on was likewise appropriate is less clear.
Handle: RePEc:nbr:nberwo:5465
Template-Type: ReDIF-Paper 1.0
Title: Do Doctors Practice Defensive Medicine?
Classification-JEL: I1; K13
Author-Name: Daniel P. Kessler
Author-Name: Mark McClellan
Note: EH LE
Number: 5466
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5466
File-URL: http://www.nber.org/papers/w5466.pdf
File-Format: application/pdf
Publication-Status: published as Kessler, Daniel and Mark McClellan. "Do Doctors Practice Defense Medicine?," Quarterly Journal of Economics, 1996, v111(2,May), 353-390.
Publication-Status: published as Towards a More Effective Monetary Policy, Kuroda, Twao, ed.,: Macmillan, 1997, pp. 137-164.
Abstract: `Defensive medicine' is a potentially serious social problem: if fear of liability drives health care providers to administer treatments that do not have worthwhile medical benefits, then the current liability system may generate inefficiencies many times greater than the costs of compensating malpractice claimants. To obtain direct empirical evidence on this question, we analyze the effects of malpractice liability reforms using data on all elderly Medicare beneficiaries treated for serious heart disease in 1984, 1987, and 1990. We find that malpractice reforms that directly reduce provider liability pressure lead to reductions of 5 to 9 percent in medical expenditures without substantial effects on mortality or medical complications. We conclude that liability reforms can reduce defensive medical practices.
Handle: RePEc:nbr:nberwo:5466
Template-Type: ReDIF-Paper 1.0
Title: Sustainability of Persistent Current Account Deficits
Classification-JEL: F32; F34
Author-Name: Gian Maria Milesi-Ferretti
Author-Person: pmi28
Author-Name: Assaf Razin
Author-Person: pra388
Note: IFM
Number: 5467
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5467
File-URL: http://www.nber.org/papers/w5467.pdf
File-Format: application/pdf
Publication-Status: published as International Journal of Finance Economics, vol. 1, no. 3, pp. 161-181, July 1996.
Abstract: This paper puts forward a notion of current account sustainability that explicitly takes into account willingness to pay and willingness to lend in addition to intertemporal solvency. It argues that this notion of sustainability provides a better framework for understanding the variety of country experiences with protracted current account imbalances. Based on this notion, we identify a number of operational indicators related to the structure of the economy, the economic policy stance, and political economy factors. We use these sustainability indicators to evaluate the experience of a number of countries that ran persistent current account imbalances, and derive policy implications consistent with our notion of sustainability.
Handle: RePEc:nbr:nberwo:5467
Template-Type: ReDIF-Paper 1.0
Title: Sticky Prices, Inventories, and Market Power in Wholesale Gasoline Markets
Classification-JEL: L1; E32
Author-Name: Severin Borenstein
Author-Person: pbo78
Author-Name: Andrea Shepard
Note: IO
Number: 5468
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5468
File-URL: http://www.nber.org/papers/w5468.pdf
File-Format: application/pdf
Publication-Status: published as Severin Borenstein & Andrea Shepard, 2002. "Sticky Prices, Inventories, and Market Power in Wholesale Gasoline Markets," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 116-139, Spring.
Abstract: We present and test an explanation for lags in the adjustment of wholesale gasoline prices to changes in crude oil prices. Our simple model with costly adjustment of production and inventories implies that output prices will respond with a lag to cost shocks even in the absence of menu costs, imperfect information, and long-term buyer/seller relationships. The model predicts that futures prices for gasoline will adjust incompletely to crude oil price shocks occurring close to the expiration date of the futures contract. We test and confirm this implication. The model also predicts that firms with market power will choose a different price adjustment path than would perfectly competitive firms. We examine the responses of prices in 188 local wholesale gasoline markets and find evidence that greater market power leads to slower output price adjustment.
Handle: RePEc:nbr:nberwo:5468
Template-Type: ReDIF-Paper 1.0
Title: The Costs and Benefits of Going from Low Inflation to Price Stability
Classification-JEL: E5; E6
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 5469
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5469
File-URL: http://www.nber.org/papers/w5469.pdf
File-Format: application/pdf
Publication-Status: published as Reducing Inflation: Motivation and Strategy, C. Romer and D. Romer, eds.,(Chiago: University of Chicago Press, 1997)
Publication-Status: published as The Costs and Benefits of Going from Low Inflation to Price Stability, Martin S. Feldstein. in Reducing Inflation: Motivation and Strategy, Romer and Romer. 1997
Abstract: This paper evaluates the welfare gain from achieving price stability and compares it to the cost of the transition. In calculating the gain from price stability, the paper emphasizes the distortions caused by the interaction of inflation and capital income taxes. Because inflation exacerbates the tax distortions that would exist even with price stability, the annual deadweight loss of a two percent inflation rate is a surprisingly large one percent of GDP. Since the real gain from shifting to price stability grows in perpetuity at the rate of growth of GDP, its present value is a substantial multiple of this annual gain. Discounting the annual gains at the rate that investors require for risky equity investments (i.e., at the 5.1 percent real net-of-tax rate of return on the Standard and Poors portfolio of equities from 1970 to 1994) implies a present value gain equal to more than 35 percent of the initial level of GDP. Since the estimated cost of shifting from two percent inflation to price stability is about five percent of GDP, the gain substantially outweighs the cost of transition.
Handle: RePEc:nbr:nberwo:5469
Template-Type: ReDIF-Paper 1.0
Title: Economic Growth and Social Capital in Asia
Classification-JEL: F43; O57
Author-Name: John F. Helliwell
Author-Person: phe368
Note: EFG ITI
Number: 5470
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5470
File-URL: http://www.nber.org/papers/w5470.pdf
File-Format: application/pdf
Publication-Status: published as The Asia Pacific Region in the Global Economy: A Canadian Perspective, Harris, Richard G., ed., Calgary: University of Calgary Press, 1996,pp. 21-42.
Abstract: The paper reviews the growth performance of different groups of Asian economies, confirms the role of openness as a key factor explaining the growth differences among the Asian economies, and undertakes a preliminary investigation of the role of social capital and institutions. The role of openness in explaining growth differences among the Asian economies appears to be if anything greater than has been established in global samples. Various measures of social capital and institutional quality were not found to add explanatory power, perhaps because of the shortage of comparable data for the Asian economies. It is conjectured that the prospects are good for the technological catchup that has taken place in South-East Asia to be repeated elsewhere in Asia, and especially South Asia, partly in response to recent increases in openness. The role of social capital and institutions in facilitating this catchup remains to be established.
Handle: RePEc:nbr:nberwo:5470
Template-Type: ReDIF-Paper 1.0
Title: The "Fundamental Transformation" in Macroeconomics
Classification-JEL: E00; D23
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Mohamad L. Hammour
Note: EFG
Number: 5471
Creation-Date: 1996-02
Order-URL: http://www.nber.org/papers/w5471
File-URL: http://www.nber.org/papers/w5471.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, papers and proceedings, 86(2) may 1996
Abstract: When factors enter into joint-production, they typically develop a degree of specificity with respect to each other. It is well known that, when combined with contracting difficulties, specificity gives rise to a Williamsonian 'Fundamental Transformation' from an ex-ante competitive relationship to an ex-post bilateral monopoly. The macroeconomic consequences of widespread specificity are far-reaching. Specificity results in misallocation, underutilization, and unemployment of the economy's productive factors; it hampers growth by depressing the incentives to replace what is outdated and to fully utilize the economy's resources; it disrupts macroeconomic adjustment by inducing a wedge between timid creation and excessive destruction of the old system; and it exacerbates downturns by `elastifying' the cyclical response of inelastic factors.
Handle: RePEc:nbr:nberwo:5471
Template-Type: ReDIF-Paper 1.0
Title: The Welfare Implications of Trading Blocs among Countries with Different Endowments
Classification-JEL: F15
Author-Name: Antonio Spilimbergo
Author-Person: psp16
Author-Name: Ernesto Stein
Author-Person: pst501
Note: IFM
Number: 5472
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5472
File-URL: http://www.nber.org/papers/w5472.pdf
File-Format: application/pdf
Publication-Status: published as The Welfare Implications of Trading Blocs among Countries with Different Endowments, Antonio Spilimbergo, Ernesto Stein. in The Regionalization of the World Economy, Frankel. 1998
Abstract: In this paper, we present a model where trade is motivated both by preference for variety and comparative advantages. We use this framework to analyze the welfare implications of trading blocs among countries with different endowments with and without transportation costs. In this framework, we address the following issues: a) the welfare implications of the consolidation of the world into a few trading blocs; b) the different incentives that rich and poor countries have in choosing their partners in trade arrangements; c) whether the welfare consequences of continental preferential trade arrangements depend on the relative endowments.
Handle: RePEc:nbr:nberwo:5472
Template-Type: ReDIF-Paper 1.0
Title: Domestic Distortions and the Deindustrialization Hypothesis
Author-Name: Paul Krugman
Author-Person: pkr10
Note: ITI
Number: 5473
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5473
File-URL: http://www.nber.org/papers/w5473.pdf
File-Format: application/pdf
Publication-Status: published as Feenstra, Robert C., Gene M. Grossman, and Douglas A. Irwin. The political economy of trade policy: Papers in honor of Jagdish Bhagwati. Cambridge and London: MIT Press, 1996.
Abstract: It is widely believed that U.S. trade deficits have displaced workers from highly paid manufacturing jobs into less well-paid service employment, contributing to declining incomes for the nation as a whole. Although proponents of this view do not usually think of it this way, this analysis falls squarely into the `domestic distortions' framework pioneered by Jagdish Bhagwati. This paper models the deindustrialization hypothesis explicitly as a domestic distortions issue, and shows that while it makes conceptual sense it is of limited quantitative importance.
Handle: RePEc:nbr:nberwo:5473
Template-Type: ReDIF-Paper 1.0
Title: Open Access Renewable Resources: Trade and Trade Policy in a Two-CountryModel
Classification-JEL: F1; Q2
Author-Name: James A. Brander
Author-Person: pbr168
Author-Name: M. Scott Taylor
Author-Person: pta60
Note: ITI
Number: 5474
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5474
File-URL: http://www.nber.org/papers/w5474.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 44, no. 2 (April 1998): 181-210.
Abstract: This paper develops a two-good, two-country model with national open access renewable resources. We derive an appropriate analog of `factor proportions' for the renewable resource case and link it to trade patterns and to the likelihood of diversified production. The resource importer gains from trade. However, a diversified resource exporting country necessarily suffers a decline in steady state utility resulting from trade, and may lose along the entire transition path. Thus the basic `gains from trade' presumption is substantially undermined by open access resources. Tariffs imposed by the resource importing country always benefit the resource exporter, and may be pareto-improving.
Handle: RePEc:nbr:nberwo:5474
Template-Type: ReDIF-Paper 1.0
Title: Protectionist Threats and Foreign Direct Investment
Classification-JEL: F13; F21
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Note: ITI
Number: 5475
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5475
File-URL: http://www.nber.org/papers/w5475.pdf
File-Format: application/pdf
Publication-Status: published as The Effects of US Trade Protection and Promotion Policies, R. Feenstra., edpp. 55-80, (Chicago: University of Chicago Press, 1997).
Publication-Status: published as Protectionist Threats and Foreign Direct Investment, Bruce A. Blonigen, Robert C. Feenstra. in The Effects of US Trade Protection and Promotion Policies, Feenstra. 1997
Abstract: The recent literature on quid pro quo foreign direct investment (FDI) suggests that FDI may be induced by the threat of protection, and further, that FDI may be used as an instrument to defuse a protectionist threat. This paper uses a panel data set of 4-digit SIC level observations of Japanese manufacturing FDI into the United States in the 1980s to explore these hypotheses empirically. We find strong statistical support for the hypothesis that higher threats of protection lead to greater FDI flows, and post-regression simulations find that a rise in the expected probability of protection from five to ten percent means over a 30 percent rise in next-period FDI flows for an average industry. In addition, there is evidence that non- acquisition FDI by the Japanese had success in defusing the threat of an escape clause investigation in future periods.
Handle: RePEc:nbr:nberwo:5475
Template-Type: ReDIF-Paper 1.0
Title: Trade and Growth: An Empirical Investigation
Classification-JEL: O47; F3
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: David Romer
Author-Person: pro406
Note: EFG IFM
Number: 5476
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5476
File-URL: http://www.nber.org/papers/w5476.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89, no. 3 (June 1999): 379-399.(Published under title "Does Trade Cause Growth?")
Abstract: Countries' geographic characteristics have important effects on their trade, and are plausibly uncorrelated with other determinants of their incomes. This paper therefore constructs measures of the geographic component of countries' trade and uses those measures to obtain instrumental variables estimates of the effect of trade on income. The results suggest that ordinary least squares estimates understate the effects of trade, and that trade has a quantitatively large, significant, and robust positive effect on income.
Handle: RePEc:nbr:nberwo:5476
Template-Type: ReDIF-Paper 1.0
Title: How Precise are Estimates of the Natural Rate of Unemployment?
Classification-JEL: E6
Author-Name: Douglas Staiger
Author-Person: pst466
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 5477
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5477
File-URL: http://www.nber.org/papers/w5477.pdf
File-Format: application/pdf
Publication-Status: published as Reducing Inflation: Motivation and Strategy, C. Romer and D. Romer(Chicago: University of Chicago Press, 1997)
Publication-Status: published as How Precise Are Estimates of the Natural Rate of Unemployment?, Douglas O. Staiger, James H. Stock, Mark W. Watson. in Reducing Inflation: Motivation and Strategy, Romer and Romer. 1997
Abstract: This paper investigates the precision of conventional and unconventional estimates of the natural rate of unemployment (the 'NAIRU'). The main finding is that the NAIRU is imprecisely estimated: a typical 95% confidence interval for the NAIRU in 1990 is 5.1% to 7.7%. This imprecision obtains whether the natural rate is modeled as a constant, as a slowly changing function of time, as an unobserved random walk, or as a function of various labor market fundamentals; it obtains using other series for unemployment and inflation, including additional supply shift variables in the Phillips curve, using monthly or quarterly data, and using various measures for expected inflation. This imprecision suggests caution in using the NAIRU to guide monetary policy.
Handle: RePEc:nbr:nberwo:5477
Template-Type: ReDIF-Paper 1.0
Title: Measuring Science: An Exploration
Classification-JEL: O47; H40
Author-Name: James Adams
Author-Person: pad11
Author-Name: Zvi Griliches
Note: PR
Number: 5478
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5478
File-URL: http://www.nber.org/papers/w5478.pdf
File-Format: application/pdf
Publication-Status: published as in Proceedings of the National Academy of Sciences, vol. 93, pp.12664-12670 November 1996.
Abstract: This paper examines available U.S. data on academic R&D expenditures and the number of papers published and the number of citations to these papers as possible measures of `output' of this enterprise. We look at these numbers for science and engineering as a whole, for 5 selected major fields, and at the individual university-field level. The published data in Science and Engineering Indicators imply sharply diminishing returns to academic R&D using published papers as a 'output' measure. These data are problematic. Using a newer set of data on papers and citations, based on an `expanding' set changes the picture drastically, eliminating seemingly diminishing returns but raising the question of why input prices of academic R&D are rising so much faster than either the GDP deflator or the implicit R&D deflator in industry. A production function analysis of such data indicates significant diminishing returns to `own' R&D, with the R&D coefficients hovering around 0.5 for estimates with paper numbers as the dependent variable and around 0.6 if total citations are used. When we substitute scientists and engineers in place of R&D as the right hand side variables, the coefficient on papers rises from 0.5 to 0.8, and the coefficient on citations rises from 0.6 to 0.9, indicating systematic measurement problems with R&D as the sole input into the production of scientific output. But allowing for individual university-field effects drives these numbers down below unity. Since in the aggregate both paper numbers and citations are growing as fast or faster than R&D, this can be seen as leaving a major, yet unmeasured role, for the contribution of spill- overs from other fields, other universities, and other countries.
Handle: RePEc:nbr:nberwo:5478
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Equilibrium and Volatility in Financial Asset Markets
Classification-JEL: C13; C22
Author-Name: Yacine Ait-Sahalia
Author-Person: pai23
Note: AP
Number: 5479
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5479
File-URL: http://www.nber.org/papers/w5479.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Econometrics, Vol. 84 (1998): 93-127.
Abstract: This paper develops and estimates a continuous-time model of a financial market where investors' trading strategies and the specialist's rule of price adjustments are the best response to each other. We examine how far modeling market microstructure in a purely rational framework can go in explaining alleged asset pricing `anomalies.' The model produces some major findings of the empirical literature: excess volatility of the market price compared to the asset's fundamental value, serially correlated volatility, contemporaneous volume-volatility correlation, and excess kurtosis of price changes. We implement a nonlinear filter to estimate the unobservable fundamental value, and avoid the discretization bias by computing the exact conditional moments of the price and volume processes over time intervals of any length.
Handle: RePEc:nbr:nberwo:5479
Template-Type: ReDIF-Paper 1.0
Title: Market Access and Welfare Effects of Free Trade Areas without Rules of Origin
Author-Name: Jiandong Ju
Author-Person: pju209
Author-Name: Kala Krishna
Author-Person: pkr26
Note: ITI
Number: 5480
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5480
File-URL: http://www.nber.org/papers/w5480.pdf
File-Format: application/pdf
Publication-Status: published as Ju, Jiandong and Kala Krishna. "Welfare And Market Access Effects Of Piecemeal Tariff Reform," Journal of International Economics, 2000, v51(2,Aug), 305-316.
Abstract: The market access and welfare effects of Free Trade Areas (FTAs) without Rules of Origin (ROOs) are studied. We consider both the final and intermediate goods markets and their interlinkage. The FTA weakly reduces all tariffs and prices within the FTA. This raises quantity demanded and reduces quantity supplied for both the final and intermediate goods, thereby raising imports. This is the classic trade creation effect and is welfare improving. We identify two additional effects which work in the opposite direction and identify conditions under which these welfare reducing, import reducing effects dominate.
Handle: RePEc:nbr:nberwo:5480
Template-Type: ReDIF-Paper 1.0
Title: Deterministic vs. Stochastic Trend in U.S. GNP, Yet Again
Classification-JEL: C00; E3
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Abdelhak S. Senhadji
Note: EFG
Number: 5481
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5481
File-URL: http://www.nber.org/papers/w5481.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, 86, 1291-1298 (1996).
Abstract: A sleepy consensus has emerged that U.S. GNP data are uninformative as to whether trend is better described as deterministic or stochastic. Although the distinction is not critical in some contexts, it is important for point forecasting, because the two models imply very different long-run dynamics and hence different long-run forecasts. We argue that, even for the famously recalcitrant GNP series, unit root tests over long spans can be informative. Our results make clear that uncritical repetition of the `we don't know, and we don't care' mantra is just as scientifically irresponsible as blind adoption of the view that `all macroeconomic series are difference-stationary,' or the view that `all macroeconomic series are trend-stationary.' There is simply no substitute for serious, case- by-case analysis.
Handle: RePEc:nbr:nberwo:5481
Template-Type: ReDIF-Paper 1.0
Title: Bounded Rationality and Strategic Complementarity in a Macroeconomic Model: Policy Effects, Persistence and Multipliers
Classification-JEL: E00
Author-Name: Antulio N. Bomfim
Author-Person: pbo1128
Author-Name: Francis X. Diebold
Author-Person: pdi1
Note: EFG
Number: 5482
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5482
File-URL: http://www.nber.org/papers/w5482.pdf
File-Format: application/pdf
Publication-Status: published as Economic Journal, Vol. 107 (1997): 1358-1375.
Abstract: Motivated by recent developments in the bounded rationality and strategic complementarity literatures, we examine an intentionally simple and stylized aggregative economic model, when the assumptions of fully rational expectations and no strategic interactions are relaxed. We show that small deviations from rational expectations, taken alone, lead only to small deviations from classical policy- ineffectiveness, but that the situation can change dramatically when strategic complementarity is introduced. Strategic complementarity magnifies the effects of even small departures from rational expectations, producing equilibria with policy effectiveness, output persistence and multiplier effects.
Handle: RePEc:nbr:nberwo:5482
Template-Type: ReDIF-Paper 1.0
Title: Multinational Production, Skilled Labor and Real Wages
Classification-JEL: F12; F23
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Anthony J. Venables
Author-Person: pve7
Note: ITI
Number: 5483
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5483
File-URL: http://www.nber.org/papers/w5483.pdf
File-Format: application/pdf
Publication-Status: published as in Richard Baldwin (ed), Dynamic Issues in Applied Commercial Policy Analysis, Cambridge: Cambridge University Press, 1999.
Abstract: Adapting our earlier model of multinationals, we address policy issues involving wages and labor skills. Multinational firms may arise endogenously, exporting their firm-specific knowledge capital to foreign production facilities, and geographically fragmenting production into skilled and unskilled-labor-intensive activities. Multinationals thus alter the nature of trade, from trade in goods (produced with both skilled and unskilled labor) to trade in skilled- labor-intensive producer services. Results shed light on several policy questions. First, multinationals increase the skilled/unskilled wage gap in the high income country and, under some circumstances, in the low income country as well. Second, there is a sense in which multinationals export low skilled jobs to the lower income country. Third, trade barriers do not protect unskilled labor in the high income countries. By inducing a regime shift to multinationals, trade barriers protect the abundant factor, at least in the high income country and possibly in both countries. Fourth, a convergence in country characteristics induces the entry of multinationals and raises the skilled-unskilled wage gap in the initially large and skilled-labor-abundant country, and possibly in the small skilled-labor-scarce country as well.
Handle: RePEc:nbr:nberwo:5483
Template-Type: ReDIF-Paper 1.0
Title: Transferable Licenses vs. Nontransferable Licenses: What is the Difference?
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Ling Hui Tan
Author-Person: pta161
Note: ITI
Number: 5484
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5484
File-URL: http://www.nber.org/papers/w5484.pdf
File-Format: application/pdf
Publication-Status: published as International Economic Review, Vol. 40, no.3 (1999): 785-800.
Abstract: This paper questions the presumption that transferable quota licenses are worth more and result in higher welfare. We show that the price of a transferable license will tend to be higher than that of its nontransferable counterpart only if the underlying quota is quite restrictive. Despite this, if consumer surplus and license revenue have equal weight in the welfare function, transferability is preferable to nontransferability. If their weights are unequal, then the comparison could go either way. We also show that increased uncertainty, in the form of a mean preserving spread, does not affect the license price under nontransferability and could raise or lower the level of the license price with transferability depending on the restrictiveness of the quota.
Handle: RePEc:nbr:nberwo:5484
Template-Type: ReDIF-Paper 1.0
Title: A Statistical Analysis of Crime Against Foreigners in Unified Germany
Classification-JEL: J15; K42
Author-Name: Alan B. Krueger
Author-Person: pkr63
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: LS
Number: 5485
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5485
File-URL: http://www.nber.org/papers/w5485.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 32, No. 1, Winter 1997, pp. 182-209, (with Jorn-Steffen Pischke.
Abstract: Germany has experienced a high and rising rate of anti-foreigner violence during the early 1990s. To analyze the determinants of crime against foreigners we assembled a new data set on the number and nature of such crimes at the county level based on newspaper reports. We find significant differences in the patterns of violence in the eastern and western parts of the country. The incidence of anti- foreigner crime is higher in the east and rises with distance from the former west German border. Economic variables like unemployment and wages matter little for the level of crime once location in the east is taken into account. The relative number of foreigners in a country has no relationship with the incidence of ethnic crimes in the west, whereas in the east it has a positive association with the number of crimes per resident and a negative association with the number of crimes per foreign resident.
Handle: RePEc:nbr:nberwo:5485
Template-Type: ReDIF-Paper 1.0
Title: Reputation Spillover Across Relationships with Enduring and Transient Beliefs: Reviving reputation Models of Debt
Classification-JEL: E61; F34
Author-Name: Harold L. Cole
Author-Person: pco70
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Note: IFM
Number: 5486
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5486
File-URL: http://www.nber.org/papers/w5486.pdf
File-Format: application/pdf
Publication-Status: published as as "Reviving Reputation Models of International Debt" in Quarterly Review of the Federal Reserve Bank of Minneapolis, Winter 1997
Abstract: A traditional explanation for why sovereign governments repay debts is that they want to keep good reputations so they can easily borrow more. Bulow and Rogoff show that this argument is invalid under two conditions: (i) there is a single debt relationship, and (ii) regardless of their past actions, governments can earn the (possibly state-contingent) market rate of return by saving abroad. Bulow and Rogoff conjecture that, even under condition (ii), in more general reputation models with multiple relationships and spillover across them, reputation may support debt. This paper shows what is needed for this conjecture to be true.
Handle: RePEc:nbr:nberwo:5486
Template-Type: ReDIF-Paper 1.0
Title: Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France
Classification-JEL: J31
Author-Name: David Card
Author-Person: pca271
Author-Name: Francis Kramarz
Author-Person: pkr29
Author-Name: Thomas Lemieux
Author-Person: ple92
Note: LS
Number: 5487
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5487
File-URL: http://www.nber.org/papers/w5487.pdf
File-Format: application/pdf
Publication-Status: published as David Card & Francis Kramarz & Thomas Lemieux, 1999. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," The Canadian Journal of Economics / Revue canadienne d'Economique, vol 32(4).
Abstract: Standard models suggest that adverse labor demand shocks will lead to bigger employment losses if institutional factors like minimum wages and trade unions prevent downward wage adjustments. Some economists have argued that this insight explains the contrast between the United States, where real wages fell over the 1980s and aggregate employment expanded vigorously, and Europe, where real wages were (roughly) constant and employment was stagnant. We test this hypothesis by comparing changes in wages and employment rates over the 1980s for different age and education groups in the United States, Canada, and France. We argue that the same forces that led to falling real wages for less-skilled workers in the U.S. affected similar workers in Canada and France. Consistent with the view that labor market institutions are more rigid in France, and more flexible in the U.S., we find that relative wages of less-skilled workers fell the most in the U.S., fell somewhat less in Canada, and did not fall at all in France. Contrary to expectations, however, we find little evidence that wage inflexibilities generated divergent patterns of relative employment growth across the three countries.
Handle: RePEc:nbr:nberwo:5487
Template-Type: ReDIF-Paper 1.0
Title: Reciprocal Trade Liberalization
Classification-JEL: F13
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 5488
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5488
File-URL: http://www.nber.org/papers/w5488.pdf
File-Format: application/pdf
Abstract: Why have governments found reciprocal trade agreements such as GATT to be a more effective means of facilitating trade liberalization than unilateral initiatives? We provide in this paper an analytic framework for the study of reciprocal trade agreements. We use this framework to establish three main results. First, we argue that political-economy factors are important for explaining the range of trade policies observed, but that these factors cannot explain why governments seek reciprocal trade agreements as an institutional form for implementing their preferred policies. Rather, whether or not governments are politically motivated, Johnson (1953-54) was right: The central purpose of a reciprocal trade agreement is to eliminate the terms-of-trade driven policies that arise in the absence of such an agreement. Second, we establish an economic interpretation of the principles of reciprocity and nondiscrimination that represent the foundation of postwar reciprocal trade agreements. Finally, we offer new insights regarding the treatment of export subsidies in reciprocal trade agreements.
Handle: RePEc:nbr:nberwo:5488
Template-Type: ReDIF-Paper 1.0
Title: Beyond Arbitrage: "Good-Deal" Asset Price Bounds in Incomplete Markets
Author-Name: John H. Cochrane
Author-Person: pco57
Author-Name: Jesus Saa-Requejo
Note: AP
Number: 5489
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5489
File-URL: http://www.nber.org/papers/w5489.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy (February 2000 Revision of W5489, March 1996)
Abstract: It is often useful to price assets and other random payoffs by reference to other observed prices rather than construct full-fledged economic asset pricing models. This approach breaks down if one cannot find a perfect replicating portfolio. We impose weak economic restrictions to derive usefully tight bounds on asset prices in this situation. The bounds basically rule out high Sharpe ratios - `good deals' - as well as arbitrage opportunities. We present the method of calculation, we extend it to a multiperiod context by finding a recursive solution, and we apply it to option pricing examples including the Black-Scholes setup with infrequent trading, and a model with stochastic stock volatility and a varying riskfree rate.
Handle: RePEc:nbr:nberwo:5489
Template-Type: ReDIF-Paper 1.0
Title: Costly Pollution Abatement, Competitiveness, and Plant Location Decisions
Classification-JEL: F23; Q20
Author-Name: James R. Markusen
Author-Person: pma528
Note: ITI
Number: 5490
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5490
File-URL: http://www.nber.org/papers/w5490.pdf
File-Format: application/pdf
Publication-Status: published as Resource and Energy Economics 19 (1997): 299-320.
Abstract: The US-Mexico free-trade debate included some theoretical assertions that were then used as arguments against trade and investment liberalization. (1) Trade liberalization increases the degree to which production is internationally relocated in response to environmental restrictions (`environmental dumping'?). (2) Investment liberalization, leading to multinational firms, similarly increases the production and welfare response to costly environmental restrictions. This paper adapts an oligopoly model, in which multinationals can arise endogenously, to examine these arguments. The findings are: (1) Trade liberalization increases production sensitivity to costly environmental restrictions, but arguments against liberal trade on welfare grounds do not follow. (2) Multinationals do not increase the production-reallocation effect caused by environmental restrictions or regulations. The inter-firm reallocation of production by competitive market forces in the absence of multinationals is slightly larger than the intra-firm reallocation when multinationals are present. In addition, the paper finds that the form taken by cost increases is crucial: restrictions that fall on fixed costs (e.g., more efficient burners and motors) have much smaller effects on production and welfare than restrictions that fall on marginal costs (e.g., cleaner fuels).
Handle: RePEc:nbr:nberwo:5490
Template-Type: ReDIF-Paper 1.0
Title: "Globalization and Inequality Past and Present"
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 5491
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5491
File-URL: http://www.nber.org/papers/w5491.pdf
File-Format: application/pdf
Publication-Status: published as World Bank Research Observer, Vol. 12, no. 2 (August 1997): 117-135.
Abstract: The late 19th and the late 20th century shared more than simply globalization and convergence. Globalization also seems to have had the same impact on income distribution: in the late 19th century, inequality rose in rich countries and fell in poor countries; according to Adrian Wood, the same has been true of the late 20th century. Furthermore, while George Borjas and Wood think that globalization accounted for something like a third to a half of the rise in inequality in America and other OECD countries since the 1970s, the late 19th century evidence suggests at least the same, perhaps more. However, those modern economists who favor a rising inequality explanation coming from (unskilled)-labor-saving technological change will be pleased to hear that it probably accounted for more than a third of the rising inequality in the New World and for more than a half of the falling inequality in Europe. It also appears that the inequality trends which globalization produced prior to World War I were at least partly responsible for the interwar retreat from globalization. Will the world economy of the next century also retreat from its commitment to globalization because of its inequality side effects?
Handle: RePEc:nbr:nberwo:5491
Template-Type: ReDIF-Paper 1.0
Title: Cross-State Variation in Medicaid Programs and Female Labor Supply
Classification-JEL: J22; J16
Author-Name: Edward Montgomery
Author-Name: John Navin
Note: EH LS
Number: 5492
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5492
File-URL: http://www.nber.org/papers/w5492.pdf
File-Format: application/pdf
Publication-Status: published as Montgomery, Edward and John C. Navin. "Cross-State Variation In Medicaid Programs And Female Labor Supply," Economic Inquiry, 2000, v38(3,Jul), 402-418.
Abstract: Although the Medicaid program is partially controlled by the federal government, there is considerable latitude in the ability of states to set eligibility requirements and the types of services available to recipients. This research examines the impact of different state Medicaid programs on the decision to enter the labor force and the number of hours worked by female heads of households. A pooled cross-section data set constructed from the 1988 through 1993 Current Population Survey March Supplements is used to test if different benefit levels across states impact labor supply behavior. This study adds to the existing Medicaid literature by incorporating new benefit measures and explicitly controlling for state random and fixed effects. OLS results support the prediction that Medicaid expenditures reduce labor supply, but controlling for state fixed or random effects alters the effect of both the AFDC and Medicaid programs on both the decision to participate as well as the number of hours worked of female heads of households. We also consider the effects of policy endogeneity on these estimates using instruments for state welfare generosity and find evidence that estimates of the effect of welfare on labor supply are sensitive to the failure to control for time-varying policy endogeneity.
Handle: RePEc:nbr:nberwo:5492
Template-Type: ReDIF-Paper 1.0
Title: Compensation Structure and Product Market Competition
Classification-JEL: J30; J51
Author-Name: John M. Abowd
Author-Person: pab175
Author-Name: Laurence Allain
Note: LS
Number: 5493
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5493
File-URL: http://www.nber.org/papers/w5493.pdf
File-Format: application/pdf
Publication-Status: published as Annales d'Economie et de Statistique, issue 41-42, (January-June 1996), pp.207-217
Abstract: The inability to measure the opportunity cost of labor has plagued analyses of firm-level compensation policies for many years. Using a newly constructed data set of French workers and firms, we estimate the opportunity cost of the employees' time based on a measure of the person-effect in the wage equations (derived from Abowd, Kramarz and Margolis 1994). We then make direct calculations of the quasi-rent per worker at each firm and the conditions within that firm's product market, as measured by international prices, using a representative sample of private French firms. We find that quasi- rents per worker are only mildly related to the structure of the French product market. The systematic variation in our quasi-rents is related to international market prices and work force structure, however, producing an estimate of bargaining power for the employees of about 0.4. This estimate, while slightly larger than other estimates, may be quite reasonable for the workers in an economy in which the vast majority of jobs are covered by industry-level collective bargaining agreements.
Handle: RePEc:nbr:nberwo:5493
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Privatization Prices
Author-Name: Florencio Lopez-de-Silane
Author-Person: plo137
Note: CF PE
Number: 5494
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5494
File-URL: http://www.nber.org/papers/w5494.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, November1997, forthcoming.
Abstract: Generating government revenue is a common objective in privatization. This paper asks: what determines privatization prices? Pursuing this query helps resolve the current controversies about the bearing of speed and the role for government actions prior to privatization. The data, gathered from primary sources, encompass 361 privatized Mexican companies in 49 four-digit industry codes. The determinants of auction privatization prices are divided into three groups: (1) company performance and industry parameters; (2) the auction process and its requirements; and (3) the prior restructuring actions taken by the government. Controlling for company and industry effects reveals the significant impact of the costs and characteristics of the labor force. Minority control packages carry large discounts. Auction requirements that allow foreign investors result in higher sale premia, while restrictions constraining participation or payment forms reduce net prices. The speed of privatization substantially influences net prices: the longer it takes to put the company on the block, the more severe the deterioration in performance, and the lower the premium obtained. Pre-sale reductions in labor force, and particularly the firing of CEOs, lead to significantly higher premiums. Debt absorption, investment, and performance improvement programs do not increase the net price, while de-investment measures prove more beneficial. Overall, the results show increased premia for government actions that stimulate bidder participation and expedite the privatization process.
Handle: RePEc:nbr:nberwo:5494
Template-Type: ReDIF-Paper 1.0
Title: Explaining Domestic Content: Evidence from Japanese and U.S. Auto Production in the U.S.
Author-Name: Deborah L. Swenson
Author-Person: psw14
Note: ITI
Number: 5495
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5495
File-URL: http://www.nber.org/papers/w5495.pdf
File-Format: application/pdf
Publication-Status: published as The Effects of US Trade Protection and Promotion Policies, R. Feenstra, ed.pp. 33-53, (Chicago: University of Chicago Press, 1997)
Publication-Status: published as Explaining Domestic Content: Evidence from Japanese and U.S. Automobile Production in the United States, Deborah L. Swenson. in The Effects of US Trade Protection and Promotion Policies, Feenstra. 1997
Abstract: This paper studies the domestic content decisions of auto makers in the U.S. between 1984 and 1993 using foreign trade zone activity as a tool by which one can observe individual sourcing and production. The results show that although the domestic content of Japanese firms is rising, differences are not being eliminated completely. Also, the apparent elasticity of substitution is lower for Japanese than for U.S. firms. These results suggest that although transplant production may reduce the U.S. automotive deficit with Japan, transplant production will not cause its elimination.
Handle: RePEc:nbr:nberwo:5495
Template-Type: ReDIF-Paper 1.0
Title: Rational Capital Budgeting in an Irrational World
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: AP CF
Number: 5496
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5496
File-URL: http://www.nber.org/papers/w5496.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Business, vol.69, no.4, October 1996, pp. 429-455.
Abstract: This paper addresses the following basic capital budgeting question: Suppose that cross-sectional differences in stock returns can be predicted based on variables other than beta (e.g., book-to- market), and that this predictability reflects market irrationality rather than compensation for fundamental risk. In this setting, how should companies determine hurdle rates? I show how factors such as managerial time horizons and financial constraints affect the optimal hurdle rate. Under some circumstances, beta can be useful as a capital budgeting tool, even if it is of no use in predicting stock returns.
Handle: RePEc:nbr:nberwo:5496
Template-Type: ReDIF-Paper 1.0
Title: Getting Pegged: Comparing the 1879 and 1925 Gold Resumptions
Classification-JEL: F31; E42
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Tamim Bayoumi
Author-Person: pba366
Note: DAE IFM ME
Number: 5497
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5497
File-URL: http://www.nber.org/papers/w5497.pdf
File-Format: application/pdf
Publication-Status: published as Oxford Economic Papers, No. 50, pp. 122-149, January 1998
Abstract: We compare the resumption of convertibility into gold by the United States in 1879 and Britain in 1925 to ascertain the degree to which the outcomes reflected differences in strategies adopted by the authorities or in the external environment. It is concluded that external factors were the most important determinant of the very different outcomes of the two episodes.
Handle: RePEc:nbr:nberwo:5497
Template-Type: ReDIF-Paper 1.0
Title: Pricing Strategy and Financial Policy
Classification-JEL: G31; G32
Author-Name: Sudipto Dasgupta
Author-Name: Sheridan Titman
Author-Person: pti51
Note: CF IO
Number: 5498
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5498
File-URL: http://www.nber.org/papers/w5498.pdf
File-Format: application/pdf
Publication-Status: published as Review of Financial Studies (1998).
Abstract: Recent empirical evidence indicates that capital structure changes affect pricing strategies. In most cases, prices increase following the implementation of a leveraged buyout of a major firm in an industry, with the more levered firm charging higher prices on average. Notable exceptions exist when rival firms are relatively unlevered. The first observation is consistent with a relatively simple model where firms compete for market share on the basis of price. To explain the second observations (i.e. the exceptions) the model must be extended to allow for reputation effects related to product quality. The extended model illustrates how product market imperfections in combination with high leverage can make firms vulnerable to predatory pricing.
Handle: RePEc:nbr:nberwo:5498
Template-Type: ReDIF-Paper 1.0
Title: Cash Flow and Investment: Evidence from Internal Capital Markets
Classification-JEL: G30; E44
Author-Name: Owen Lamont
Note: CF IO ME
Number: 5499
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5499
File-URL: http://www.nber.org/papers/w5499.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, March 1997, Vol. 52, No. 1, pp. 57-82
Abstract: Using data from the 1986 oil price decrease, I examine the capital expenditures of non-oil subsidiaries of oil companies. I test the joint hypothesis that 1) a decrease in cash/collateral decreases investment, holding fixed the profitability of investment, and 2) the finance costs of different parts of the same corporation are interdependent. The results support this joint hypothesis: oil companies significantly reduced their non-oil investment compared to the median industry investment. The 1986 decline in investment was concentrated in non-oil units that were subsidized by the rest of the company in 1985.
Handle: RePEc:nbr:nberwo:5499
Template-Type: ReDIF-Paper 1.0
Title: Implied Volatility Functions: Empirical Tests
Classification-JEL: G12; G13
Author-Name: Bernard Dumas
Author-Person: pdu519
Author-Name: Jeff Fleming
Author-Name: Robert E. Whaley
Note: AP
Number: 5500
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5500
File-URL: http://www.nber.org/papers/w5500.pdf
File-Format: application/pdf
Publication-Status: published as The Journal of Finance, Vol. L111, no.6, (December 1998), pp. 2059-2106.
Abstract: Black and Scholes (1973) implied volatilities tend to be systematically related to the option's exercise price and time to expiration. Derman and Kani (1994), Dupire (1994), and Rubinstein (1994) attribute this behavior to the fact that the Black-Scholes constant volatility assumption is violated in practice. These authors hypothesize that the volatility of the underlying asset's return is a deterministic function of the asset price and time and develop the deterministic volatility function (DVF) option valuation model, which has the potential of fitting the observed cross-section of option prices exactly. Using a sample of S&P 500 index options during the period June 1988 through December 1993, we evaluate the economic significance of the implied deterministic volatility function by examining the predictive and hedging performance of the DV option valuation model. We find that its performance is worse than that of an ad hoc Black-Scholes model with variable implied volatilities.
Handle: RePEc:nbr:nberwo:5500
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Productivity of Research and Development: An Exploration of GMM Methods Using Data on French & United States Manufacturing Firms
Author-Name: Jacques Mairesse
Author-Person: pma712
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: PR
Number: 5501
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5501
File-URL: http://www.nber.org/papers/w5501.pdf
File-Format: application/pdf
Publication-Status: published as International Productivity Differences, Measurement and Explanations,van Ark, Bart and Karin Wagner, eds., Amsterdam: Elsevier Science, 1996.
Publication-Status: published as "Le productivite de le recherche et developpement des entreprisesindutrielles aux Etats-Unis et en France: une exploration des biasessimultaneite par le methode des moments generalises," Economie et Prevision, no. 126 (1996).
Abstract: A comparative study of the contribution of R&D to firm-level productivity in French and United States manufacturing firms in the 1980s is presented. The study uses two large panels of approximately 1000 manufacturing firms covering over half of all R&D spending in each country and focuses on the estimation and interpretation of the relationship between output growth and the growth of R&D investment in the presence of simultaneity and firm heterogeneity. We use GMM methods to control for both sources of estimation bias, and we find 1) overall, the contribution of R&D to sales productivity growth appears to have declined during the 1980s, and 2) the role of simultaneity bias is higher in the U.S. than in France, possibly reflecting the greater importance of liquidity constraints for R&D investment in that country.
Handle: RePEc:nbr:nberwo:5501
Template-Type: ReDIF-Paper 1.0
Title: Reflections on Ricardian Equivalence
Classification-JEL: H6; E6
Author-Name: Robert J. Barro
Author-Person: pba251
Note: EFG PE
Number: 5502
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5502
File-URL: http://www.nber.org/papers/w5502.pdf
File-Format: application/pdf
Publication-Status: published as Maloney, J. (ed.) Debt and Deficits: An Historical Perspective. Edward Elgar, 1998.
Abstract: The Ricardian equivalence proposition for public debt in my 1974 JPE paper is related to the discussions in Ricardo's Funding System, Smith's Wealth of Nations, and a number of treatments in macroeconomics from the 1950s to the 1970s. Useful extensions of the basic invariance proposition involve tax smoothing (in the context of distorting taxation) and the determinants of the maturity and other characteristics of the debt structure (in an environment of uncertainty).
Handle: RePEc:nbr:nberwo:5502
Template-Type: ReDIF-Paper 1.0
Title: Labor Productivity: Structural Change and Cyclical Dynamics
Author-Name: Martin Neil Baily
Author-Name: Eric J. Bartelsman
Author-Person: pba253
Author-Name: John Haltiwanger
Author-Person: pha231
Note: EFG
Number: 5503
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5503
File-URL: http://www.nber.org/papers/w5503.pdf
File-Format: application/pdf
Publication-Status: published as Baily, Martin Neil, Eric J. Bartelsman and John Haltiwanger. "Labor Productivity: Structural Change And The Cyclical Dynamics," Review of Economics and Statistics, 2001, v83(3,Aug), 420-433.
Abstract: A longstanding puzzle of empirical economics is that average labor productivity declines during recessions and increases during booms. This paper provides a framework to assess the empirical importance of competing hypotheses for explaining the observed procyclicality. For each competing hypothesis we derive the implications for cyclical productivity conditional on expectations of future demand and supply conditions. The novelty of the paper is that we exploit the tremendous heterogeneity in long-run structural changes across individual plants to identify the short-run sources of procyclical productivity. Our findings favor an adjustment cost model which involves a productivity penalty for downsizing as the largest source of procyclical labor productivity.
Handle: RePEc:nbr:nberwo:5503
Template-Type: ReDIF-Paper 1.0
Title: Adoption of Financial Technologies: Implications for Money Demand and Monetary Policy
Classification-JEL: E40; E41
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: ME
Number: 5504
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5504
File-URL: http://www.nber.org/papers/w5504.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "Extensive Margins and the Demand for Money at Low Interest Rates") Journal of Political Economy (October 2000).
Publication-Status: published as Substitution over Time: Another Look at Life-Cycle Labor Supply, Casey B. Mulligan. in NBER Macroeconomics Annual 1998, volume 13, Bernanke and Rotemberg. 1999
Abstract: In this paper we argue that the relevant decision for the majority of US households is not the fraction of assets to be held in interest bearing form, but whether to hold any of such assets at all (we call this `the decision to adopt' the financial technology). We show that the key variable governing the adoption decision is the product of the interest rate times the total amount of assets. The implication is that, instead of studying money demand using time series and looking at historical interest rate variations, we can look at a cross-section of households and analyze variations in the amount of assets held. We can use this methodology to estimate the interest elasticity of money demand at interest rates close to zero. We find that (a) the elasticity of money demand is very small when the interest rate is small, (b) the probability that a household holds any amount of interest bearing assets is positively related to the level of financial assets, and (c) the cost of adopting financial technologies is positively related to age and negatively related to the level of education. The finding that the elasticity is very small for interest rates below 5 percent suggests that the welfare costs of inflation are small. We also find that at interest rates of 6 percent, the elasticity is close to 0.5. We find that roughly one half of this elasticity can be attributed to the Baumol-Tobin or intensive margin and half of it can be attributed to the new adopters or extensive margin. The intensive margin is less important at lower interest rates and more important at higher interest rates.
Handle: RePEc:nbr:nberwo:5504
Template-Type: ReDIF-Paper 1.0
Title: Technical Trading Rule Profitability and Foreign Exchange Intervention
Author-Name: Blake LeBaron
Author-Person: ple1
Note: AP
Number: 5505
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5505
File-URL: http://www.nber.org/papers/w5505.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 49, no. 1 (October 1999): 125-143 .
Abstract: There is reliable evidence that simple rules used by traders have some predictive value over the future movement of foreign exchange prices. This paper will review some of this evidence and discuss the economic magnitude of this predictability. The profitability of these trading rules will then be analyzed in connection with central bank activity using intervention data from the Federal Reserve. The objective is to find out to what extent foreign exchange predictability can be confined to periods of central bank activity in the foreign exchange market. The results indicate that after removing periods in which the Federal Reserve is active, exchange rate predictability is dramatically reduced.
Handle: RePEc:nbr:nberwo:5505
Template-Type: ReDIF-Paper 1.0
Title: R&D, Production Structure and Productivity Growth: A Comparison of the US, Japanese and Korean Manufacturing Sectors
Classification-JEL: H52; O32
Author-Name: M. Ishaq Nadiri
Author-Name: Seongjun Kim
Note: PR
Number: 5506
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5506
File-URL: http://www.nber.org/papers/w5506.pdf
File-Format: application/pdf
Publication-Status: Published as "R&D, Production Structure and Rates of Return in the U.S., Japanese and German Manufacturing Sectors: A Non-Sector Model", European Economic Review, Vol. 30, no. 4 (1986): 749-772.
Abstract: We estimate and compare the production structures of the US, Japanese, and Korean total manufacturing sectors for the 1974-1990 period. We employ a translog variable cost function that includes such inputs as labor, materials, physical and R&D capital with the physical and R&D capital treated as quasi-fixed subject to adjustment costs. The paper provides estimates for markups, returns to scale, rates of return on physical and R&D capital, and technical change. The paper also identifies the sources of the growth of output, labor productivity, and total factor productivity. The results show that resource accumulation, not technical change, is the key factor in rapid output growth, and that the R&D capital and technical change have been major contributors of the TFP growth in the US and Japanese manufacturing but not in the Korean manufacturing sector.
Handle: RePEc:nbr:nberwo:5506
Template-Type: ReDIF-Paper 1.0
Title: Inflation Targeting in a St. Louis Model of the 21st Century
Author-Name: Robert G. King
Author-Person: pki21
Author-Name: Alexander L. Wolman
Author-Person: pwo18
Note: EFG
Number: 5507
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5507
File-URL: http://www.nber.org/papers/w5507.pdf
File-Format: application/pdf
Publication-Status: published as King, Robert G. & Wolman, Alexander L., 2013. "Inflation Targeting in a St. Louis Model of the 21st Century," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 543-574.
Publication-Status: published as Robert G. King & Alexander L. Wolman, 1996. "Inflation targeting in a St. Louis model of the 21st century," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 83-107.
Abstract: Inflation targeting is a monetary policy rule that has implications for both the average performance of an economy and its business cycle behavior. We use a modern, rational expectations model to study the twin effects of this policy rule. The model highlights forward- looking consumption and labor supply decisions by households and forward-looking investment and price-setting decisions by firms. In it, monetary policy has real effects because imperfectly competitive firms are constrained to adjust prices only infrequently and satisfy all demand at posted prices. In this 'sticky price' model, there are also effects of the average rate of inflation on the amount of time that individuals must devote to shopping activity and on the average markup of price over cost that firms can charge. However, in terms of the welfare effects of long-run inflation, it is optimal to set monetary policy so that the nominal interest rate is close to zero, replicating in an imperfectly competitive model the result that Friedman found under perfect competition. A perfect inflation target has desirable effects on the response of the macroeconomy to permanent shocks to productivity and money demand. Under such a policy rule, the monetary authority makes the money supply evolve so a model with sticky prices behaves much like one with flexible prices.
Handle: RePEc:nbr:nberwo:5507
Template-Type: ReDIF-Paper 1.0
Title: Fixed Costs: The Demise of Marginal q
Classification-JEL: E22
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: John V. Leahy
Author-Person: ple189
Note: EFG
Number: 5508
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5508
File-URL: http://www.nber.org/papers/w5508.pdf
File-Format: application/pdf
Abstract: The standard version of q theory, in which investment is positively related to marginal q, breaks down in the presence of fixed costs of adjustment. With fixed costs, investment is a non-monotonic function of q. Therefore its inverse, which is the traditional investment function, does not exist. Depending upon auxiliary assumptions, the correlation between investment and marginal q can be either positive or negative. Given certain homogeneity assumptions, a version of the theory based on average q still holds, although under the same assumptions profits and sales perform as well as average q. More generally, q is no longer a sufficient statistic.
Handle: RePEc:nbr:nberwo:5508
Template-Type: ReDIF-Paper 1.0
Title: The Smoot-Hawley Tariff: A Quantitative Assessment
Classification-JEL: N72; C68
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: ITI DAE
Number: 5509
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5509
File-URL: http://www.nber.org/papers/w5509.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics (May 1998).
Abstract: In the two years after the imposition of the Smoot-Hawley tariff in June 1930, the volume of U.S. imports fell over 40 percent. To what extent can this collapse of trade be attributed to the tariff itself versus other factors such as declining income or foreign retaliation? Partial and general equilibrium assessments indicate that the Smoot-Hawley tariff itself reduced imports by 4-8 percent (ceteris paribus), although the combination of specific duties and deflation further raised the effective tariff and reduced imports an additional 8-10 percent. A counter-factual simulation suggests that nearly a quarter of the observed 40 percent decline in imports can be attributed to the rise in the effective tariff, (i.e., Smoot-Hawley plus deflation).
Handle: RePEc:nbr:nberwo:5509
Template-Type: ReDIF-Paper 1.0
Title: Log-Rolling and Economic Interests in the Passage of the Smoot-Hawley Tariff
Classification-JEL: D72; F13
Author-Name: Douglas A. Irwin
Author-Person: pir25
Author-Name: Randall S. Kroszner
Note: ITI DAE
Number: 5510
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5510
File-URL: http://www.nber.org/papers/w5510.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy, Vol. 45 (December 1996): 173-200
Abstract: We analyze Senate roll-call votes concerning tariffs on specific goods in order to understand the economic and political factors influencing the passage of the Smoot-Hawley Tariff Act of 1930. Contrary to recent studies emphasizing the partisan nature of the Congressional votes, our reading of the debates in the Congressional Record suggests that the final, party-line voting masks a rich vote- trading dynamic. We estimate a logit model of specific tariff votes that permits us to identify (a) important influences of specific producer beneficiaries in each Senator's constituency and (b) log- rolling coalitions among Senators with otherwise unrelated constituency interests which succeeded in raising tariff rates.
Handle: RePEc:nbr:nberwo:5510
Template-Type: ReDIF-Paper 1.0
Title: Second-Best Pollution Taxes
Classification-JEL: H23; Q28
Author-Name: Don Fullerton
Author-Person: pfu10
Note: PE
Number: 5511
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5511
File-URL: http://www.nber.org/papers/w5511.pdf
File-Format: application/pdf
Publication-Status: published as Enviromenmental Levies and Distortionary Taxation: Comment," American Economic Review, Vol. 87, no. 1 (March 1997): 245-251.
Abstract: When government needs more revenue than is available from a pollution tax rate equal to marginal environmental damage, our intuition tells us to raise the tax on the clean good above zero and to raise the tax on the dirty good above that first-best Pigouvian rate. Yet new results suggest that the second-best pollution tax is below the Pigouvian rate. This note reconciles these views by pointing out that these new results use a labor tax to acquire additional revenue, and that the labor tax is equivalent to a uniform tax on both clean and dirty goods. Thus, depending on the normalization, the total tax on the dirty good can be above the Pigouvian rate. These recent results are meant to show that the difference between the tax on the dirty good and the tax on the clean good is less than the Pigouvian rate. Any one tax rate can be set to zero as a conceptual matter, but implementation of some taxes might be easier than others as a practical matter.
Handle: RePEc:nbr:nberwo:5511
Template-Type: ReDIF-Paper 1.0
Title: "Social Security Privatization: A Structure for Analysis"
Classification-JEL: H55; E62
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: Stephen P. Zeldes
Note: AG PE
Number: 5512
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5512
File-URL: http://www.nber.org/papers/w5512.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review Papers and Proceedings, Vol. 86, no.2, pp. 363-367 May 1996
Abstract: This paper identifies the key economic issues that must be addressed in the debate over a privatized social security system. We examine a two-pillar plan. The first pillar would consist of a demogrant: a small indexed pension of the same dollar amount for all retirees who had contributed to the system over a full lifetime of work. The second pillar would consist of a fully-funded individual defined-contribution account, financed by payroll taxes, held in financial institutions, and directed by participants. We explore how such a system would affect the risks households face, how it would alter the distribution of income, and how it might influence household behavior, including incentives to work and save, and portfolio choices. We also examine macroeconomic issues: how the transition to a private plan would occur, and what the likely effects would be on national saving. We conclude that a two-pillar system offers several positive features, namely a reduction in political risk, an increase in household portfolio choice, and improved work incentives. Disadvantages include less redistributiveness and national risk sharing, and increased administrative costs.
Handle: RePEc:nbr:nberwo:5512
Template-Type: ReDIF-Paper 1.0
Title: Tax Principles and Capital Inflows: Is It Efficient to Tax Nonresident Income?
Classification-JEL: F21; H20
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Author-Name: Chi-Wa Yuen
Note: IFM
Number: 5513
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5513
File-URL: http://www.nber.org/papers/w5513.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, 1997.
Abstract: Even though financial markets today show a high degree of integration, the world capital market is still far from the textbook story of high capital mobility. The failure to have a tax scheme in which the rate of returns across countries are equated can result in inefficient capital flows across countries. This comes from the interactions of market failure and the tax system. The purpose of this paper is to highlight some key sources of market failure in the context of international capital flows and to provide guidelines for efficient tax structure in the presence of capital market imperfections. We distinguish among three main types of international capital flows: foreign portfolio debt investment (FPDI), foreign portfolio equity investment (FPEI), and foreign direct investment (FDI). The paper emphasizes the efficiency of a non-uniform tax treatment of the various vehicles of international capital flows.
Handle: RePEc:nbr:nberwo:5513
Template-Type: ReDIF-Paper 1.0
Title: Implicit Budget Deficits: The Case of a Mandated Shift to Community-Rated Health Insurance
Author-Name: David F. Bradford
Author-Name: Derrick A. Max
Note: PE EH
Number: 5514
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5514
File-URL: http://www.nber.org/papers/w5514.pdf
File-Format: application/pdf
Publication-Status: published as Implicit Budget Deficits: The Case of a Mandated Shift to Community-Rated Health Insurance, David F. Bradford, Derrick A. Max. in Tax Policy and the Economy, Volume 11, Poterba. 1997
Abstract: Since a typical regulatory mandate can be equated in its economic effect to a combination of an expenditure program and a tax program, observers have often suggested that it would serve consistent public policy to bring regulatory decisions into the same budgetary framework. This paper concerns an important example of a regulatory program that would mimic deficit financing in effecting a transfer of fiscal burdens toward younger and future generations, the mandated purchase of (or provision by employers of) health care insurance under a system of community rating, under which the same price is charged for health insurance for all comers, regardless of age, sex, or health condition. Such a shift would result in redistributions of burdens across birth cohorts, in this case from existing, especially middle-aged birth cohorts toward future generations. Using data from a variety of sources we conclude the effect would be substantial. For our central-case assumptions about discount, health care cost, and productivity growth rates, and about the locus of responsibility for paying health care bills, a shift to community rating is estimated to generate gains for people over age 30 in 1994, $16,700 per person aged 50 for example, at the cost to younger cohorts. Those born in 1994 would acquire an extra payment obligation with a discounted value of $7,100 each. The burden passed along to future generations can be described by a $9,300 per capita tax at birth (growing with productivity). The analysis makes clear that the regula- tory policy shift, with no direct budgetary implications, would have an intergenerational transfer effect comparable to what would be considered a major change in on-budget tax or transfer programs.
Handle: RePEc:nbr:nberwo:5514
Template-Type: ReDIF-Paper 1.0
Title: U.S. Imports, 1972-1994: Data and Concordances
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Note: ITI
Number: 5515
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5515
File-URL: http://www.nber.org/papers/w5515.pdf
File-Format: application/pdf
Abstract: This paper describes data on U.S. imports from 1972-1994, classified according to the Tariff Schedule of the U.S. Annotated (TSUSA), Harmonized System (HS), Standard International Trade Classification (SITC, Revisions 2 and 3), and Standard Industrial Classification (SIC, 1972 basis), along with various concordances. All of these data sets are disaggregated by the source country for imports. These data are available on the CD-ROM: `NBER Trade Database, Disk 1: U.S. Imports, 1972-1994,' which can be ordered for $50 from the Publications Department, NBER, 1050 Massachusetts Avenue, Cambridge, MA 02138. The TSUSA and HS import data are at the most disaggregate level collected by the U.S. Census, and will be particularly useful for research on antidumping cases. The SITC import data will be valuable for those wanting to compare U.S. trade flows at a more aggregate level with comparable data for other countries. The SIC import data will be particularly useful for those wanting to study the effects of import competition on U.S. industries. A summary of the SIC data, which does not contain the source country detail and incorporates earlier years, is available via anonymous FTP from: nber.harvard.edu/pub/feenstra. A second CD-ROM, containing U.S. export data, will be released later in 1996.
Handle: RePEc:nbr:nberwo:5515
Template-Type: ReDIF-Paper 1.0
Title: Measuring U.S. International Goods and Services Transactions
Classification-JEL: F1; J3
Author-Name: Robert E. Baldwin
Author-Name: Fukunari Kimura
Author-Person: pki214
Note: ITI
Number: 5516
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5516
File-URL: http://www.nber.org/papers/w5516.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Robert E. and Fukunari Kimura. "Measuring U.S. International Goods and Services Transactions". Geography and Ownership as Bases for Economic Accounting. Edited by Robert E. Baldwin, Robert E. Lipsey, and J. David Richardson, The Univ. Chicago Press: Chicago, Ill,1998, pp. 9-36
Publication-Status: published as Measuring U.S. International Goods and Services Transactions, Robert E. Baldwin, Fukunari Kimura. in Geography and Ownership as Bases for Economic Accounting, Baldwin, Lipsey, and Richardson. 1998
Abstract: In order to better capture the close relationship between firms' cross-border trading activities and the sales and purchasing activities of their foreign affiliates, this paper proposes supplementary accounting formats that classify cross-border and foreign affiliate activities on an ownership basis, in contrast to the residency approach followed in the balance-of-payments accounts. One format combines net cross-border sales by Americans to foreigners, net sales by foreign affiliates of U.S. firms to foreigners, and net sales of U.S. firms to U.S. affiliates of foreign firms to yield a figure that indicates net sales by Americans to foreigners. Another accounting format measures the value-added embodied in cross-border and foreign affiliate activities on an ownership basis. U.S. cross- border and foreign affiliate activities based on these two approaches are presented and analyzed for the period, 1987-1992. In addition, data by industry are presented in these formats.
Handle: RePEc:nbr:nberwo:5516
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policy and Monetary Union: Is There a Tradeoff between Federalism and Budgetary Restrictions?
Classification-JEL: E6; F3
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Jurgen von Hagen
Author-Person: pvo15
Note: IFM
Number: 5517
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5517
File-URL: http://www.nber.org/papers/w5517.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review (May 1996).
Abstract: The Maastricht Treaty on Europe Union features an Excessive Deficit Procedure limiting the freedom to borrow of governments participating in the European monetary union. One justification is to prevent states from over- borrowing and demanding a bailout which could divert the European Central Bank from its pursuit of price stability. We challenge this rationale. Using data for a cross section of federal states, we find no association between monetary union and restraints on borrowing by subcentral governments. There is,however, an association between fiscal restraints and the share of the tax base under the control of sub-national authorities. Restraints are prevalent where subcentral governments finance a relatively small share of spending with their own taxes. Lacking control of the tax base, such governments cannot be expected to resort to increased taxation to deal with debt crises. Prohibiting borrowing by subcentral governments will not eliminate the demand for tax smoothing and public investment. Governments whose ability to provide such services is limited may therefore pressure the central government to borrow for them. We report evidence that the financial position of central governments is more fragile where subcentral jurisdictions are prevented from borrowing. The implications for the EU are direct. That EU member states control their own taxes should strengthen the hand of authorities seeking to resist pressure for a bailout. But in the longer run, borrowing restraints may weaken the financial position of Brussels, transferring bailout risk from the member states to the EU itself.
Handle: RePEc:nbr:nberwo:5517
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Industry Structure on Economic Exposure
Classification-JEL: F3
Author-Name: Richard C. Marston
Note: IFM
Number: 5518
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5518
File-URL: http://www.nber.org/papers/w5518.pdf
File-Format: application/pdf
Publication-Status: published as Marston, Richard C. "The Effects Of Industry Structure On Economic Exposure," Journal of International Money and Finance, 2001, v20(2,Apr), 149-164.
Abstract: A firm is subject to `economic exposure' if changes in exchange rates affect the firm's value, as measured by the present value of its future cash flows. This paper shows that in many forms of competition, including the most commonly studied case of monopoly, the economic exposure of an exporting firm is simply proportional to the firm's net revenues based in foreign currency. So the firm's hedging strategy is simple: sell foreign currency futures equal to the value of its net revenues in foreign currency. This simple result breaks down under some, but not all, forms of competition between the exporting firm and local firms. In that case, the exporting firm needs to know about the price elasticity of its product demand and its marginal cost in order to assess its exposure to exchange rates. So its hedging strategy also requires detailed knowledge of demand and cost conditions. The key determinant of economic exposure, therefore, is the competitive structure of the industry in which a firm operates.
Handle: RePEc:nbr:nberwo:5518
Template-Type: ReDIF-Paper 1.0
Title: Problems in the Measurement and Performance of Service-Sector Productivity in the United States
Classification-JEL: 040; 047
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: PR
Number: 5519
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5519
File-URL: http://www.nber.org/papers/w5519.pdf
File-Format: application/pdf
Publication-Status: published as Productivity and Growth, edited by Palle Andersen, Jacqueline Dwyer and David Gruen, Proceedings of a Conference, Economic Group, Reserve Bank of Australia, pp. 139-166 (1995)
Abstract: Not only has U.S. productivity been poor by international standards but it is highly heterogeneous at the disaggregated industry level. Manufacturing has continued to do well while nonmanufacturing has done poorly, especially the services. Within services, apparel retailing has done well while food retailing has done badly; railroad productivity has accelerated while airline productivity has decelerated. This dispersion of performance argues against a single over-arching explanation of the slowdown. The recent shift to chain- weighted productivity measures substantially increases the magnitude of the U.S productivity slowdown and shifts it later in time. Performance in the 1970s is better than previously thought, while performance in the 1990s has been substantially worse. In addition, productivity performance in each decade has been understated due to an upward bias in the Consumer Price Index This 'CPI bias' has led to an uneven understatement of productivity change, with major errors in manufacturing, trade, and some services. The paper emphasizes two substantive causes of the productivity slowdown that go beyond measurement errors. First, some industries (e.g. electric utilities and airlines) reached a technological frontier in which the sources of earlier rapid productivity growth were exhausted. Second, slow productivity growth in food retailing and some service industries reflects a feedback from the weak bargaining position of U.S. labor. Weak unions, a falling real minimum wage, and immigration have combined to keep real wages in U.S. service industries relatively low, and this encourages overhiring by the standards of some other industrial nations.
Handle: RePEc:nbr:nberwo:5519
Template-Type: ReDIF-Paper 1.0
Title: Disinflation and the NAIRU
Classification-JEL: E31; J60
Author-Name: Laurence Ball
Author-Person: pba605
Note: EFG ME
Number: 5520
Creation-Date: 1996-03
Order-URL: http://www.nber.org/papers/w5520
File-URL: http://www.nber.org/papers/w5520.pdf
File-Format: application/pdf
Publication-Status: published as Reducing Inflation: Motivation and Strategy, C. Romer and D. Romer, eds.,(Chicago: University of Chicago Press, 1997)
Publication-Status: published as Disinflation and the NAIRU, Laurence M. Ball. in Reducing Inflation: Motivation and Strategy, Romer and Romer. 1997
Abstract: This paper asks why the NAIRU rose in most OECD countries in the 1980s. I find that a central cause was the tight monetary policy used to reduce inflation. The evidence comes from a cross-country comparison: countries with larger decreases in inflation and longer disinflationary periods have larger rises in the NAIRU. Imperfections in the labor market have little direct relation to changes in the NAIRU, but long-term unemployment benefits magnify the effects of disinflation. These results support `hysteresis' theories of unemployment.
Handle: RePEc:nbr:nberwo:5520
Template-Type: ReDIF-Paper 1.0
Title: Are Brothers Really Better? Sibling Sex Composition and Educational Achievement Revisited
Classification-JEL: I21; J13
Author-Name: Robert Kaestner
Author-Person: pka42
Note: LS
Number: 5521
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5521
File-URL: http://www.nber.org/papers/w5521.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 32, no. 2 (Spring 1997): 250-284.
Abstract: In this paper, I examine the relationship between sibling sex composition and educational achievement. First, I replicate the study of Butcher and Case (1994) using data on a more recent birth cohort. Contrary to the findings of that study, I find basically no effect of sibling sex composition on the educational attainment of white males or females, although among black adults, those who grew up with a sister, or who had relatively more sisters, had greater levels of educational attainment than persons with no or fewer sisters. Second, I broaden the analysis by examining the educational outcomes of children and teenagers. This extension is important because it provides an additional opportunity to test for sibling sex composition effects, and it helps differentiate between potential causes of a sibling sex composition effect. The results obtained from the analysis of child and teen outcomes suggest that sibling sex composition had little effect on educational achievement. The only group to be affected was black teens between the ages of 15 and 18. Those who grew up with sisters had higher educational achievement levels than those who grew up with brothers.
Handle: RePEc:nbr:nberwo:5521
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Income and Wealth on Time and Money Transfers between Parents and Children
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Fumio Hayashi
Author-Person: pha83
Author-Name: Laurence Kotlikoff
Author-Person: pko44
Note: AG LS PE
Number: 5522
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5522
File-URL: http://www.nber.org/papers/w5522.pdf
File-Format: application/pdf
Publication-Status: Published as "The Effects of High School Curriculum on Education and Labor Market Outcomes", Journal of Human Resources, Vol. 30, no. 3 (1995): 409-1 38.
Abstract: We use the 1988 PSID to study the effects of income and wealth on transfers of money and time between individuals and their parents as well as the effects of incomes of other relatives on these flows. We relate the relative incomes of parents and parents in-law to transfer amounts given and received by married couples. We also study how the relative incomes of divorced parents influence transfers. We find that money transfers tend to reduce inequality in household incomes and that time transfers are only weakly related to income differences. Richer siblings give more to parents and receive less. Among parents and parents in-law the richer set of parents is more likely to give money and less likely to receive money. The same is true of divorced parents. In contrast to the implications of simple exchange models of transfers, there is little evidence in the cross section or in the analysis using siblings that parental income or wealth raises time transfers from children or that time transfers are exchanged for money transfers. In the cross section and among siblings, the strong negative relationship between time transfers and distance from parents is not associated with a strong negative relationship between distance and money transfers. We discuss the implications of our results for alternative models of transfers.
Handle: RePEc:nbr:nberwo:5522
Template-Type: ReDIF-Paper 1.0
Title: The 1995 NRC Ratings of Doctoral Programs: A Hedonic Model
Classification-JEL: J21
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Peter J. Hurst
Note: LS
Number: 5523
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5523
File-URL: http://www.nber.org/papers/w5523.pdf
File-Format: application/pdf
Publication-Status: published as Change, vol.28, no.3, pp.46-55. (May/June 1996)
Abstract: We describe how one can use multivariate regression models and data collected by the National Research Council as part of its recent ranking of doctoral programs (Research-Doctorate Programs in the United States: Continuity and Change) to analyze how measures of program size, faculty seniority, faculty research productivity, and faculty productivity in producing doctoral degrees influence subjective ratings of doctoral programs in 35 academic fields. Using data for one of the fields, economics, we illustrate how university administrators can use the models to compute the impact of changing the number of faculty positions they allocate to the field on the ranking of their programs. Finally, we illustrate how administrators can `decompose' the differences between a department's rating and the ratings of a group of higher ranked departments in the field into difference due to faculty size, faculty seniority, faculty research productivity, and faculty productivity in producing doctoral students. This decomposition suggests the types of questions that a department and a university should be addressing if they are serious about wanting to improve the department's ranking.
Handle: RePEc:nbr:nberwo:5523
Template-Type: ReDIF-Paper 1.0
Title: Public Policy and Youth Smokeless Tobacco Use
Classification-JEL: I1
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: John A. Tauras
Author-Person: pta136
Note: EH
Number: 5524
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5524
File-URL: http://www.nber.org/papers/w5524.pdf
File-Format: application/pdf
Publication-Status: published as Southern Economic Journal, Vol. 64, no. 2 (October 1997): 503-516.
Abstract: While much is known about the effects of prices and tobacco control policies on cigarette smoking, relatively little is known about their impact on smokeless tobacco use. This paper addresses these issues using data on smokeless tobacco use by adolescent males taken from the 1992, 1993, and 1994 Monitoring the Future Surveys. Site-specific smokeless tobacco tax data and several measures of limits on youth access to tobacco products are added to the survey data. Ordered probit methods are used to examine the impact of prices and tobacco control policies on the frequency of smokeless tobacco use among young males. Comparable two-part models are estimated for participation in smokeless tobacco use and for conditional smokeless tobacco demand. The estimates indicate that increases in smokeless tobacco taxes would lead to significant reductions in both the number of young men using smokeless tobacco and in the frequency of smokeless tobacco use. The average estimated price elasticity of smokeless tobacco participation for adolescent males is -0.40, while the overall average estimated price elasticity of demand is -0.65. In addition, strong limits on youth access to smokeless tobacco products are found to be effective in reducing both participation in smokeless tobacco use and the frequency of smokeless tobacco use by young males.
Handle: RePEc:nbr:nberwo:5524
Template-Type: ReDIF-Paper 1.0
Title: Labor Market Responses to Rising Health Insurance Costs: Evidence on Hours Worked
Classification-JEL: I11; J32
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Brigitte C. Madrian
Author-Person: pma384
Note: AG EH PE
Number: 5525
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5525
File-URL: http://www.nber.org/papers/w5525.pdf
File-Format: application/pdf
Publication-Status: published as RAND Journal of Economics, Vol. 29 (1998): 509-530.
Abstract: Increases in the cost of providing health insurance must have some effect on labor markets, either in lower wages, changes in the composition of employment, or both. Despite a presumption that most of this effect will be in the form of lower wages, we document in this paper a significant effect on work hours as well. Using data from the CPS and the SIPP, we show that rising health insurance costs over the 1980s increased the hours worked of those with health insurance by up to 3 percent. We argue that this occurs because health insurance is a fixed cost, and as it becomes more expensive to provide, firms face an incentive to substitute hours per worker for the number of workers employed.
Handle: RePEc:nbr:nberwo:5525
Template-Type: ReDIF-Paper 1.0
Title: The Significance of International Tax Rules for Sourcing Income: The Relationship Between Income Taxes and Trade Taxes
Classification-JEL: F1
Author-Name: John Mutti
Author-Name: Harry Grubert
Note: ITI
Number: 5526
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5526
File-URL: http://www.nber.org/papers/w5526.pdf
File-Format: application/pdf
Publication-Status: published as John Mutti and Harry Grubert. "The Significance of International Tax Rules for Sourcing Income: The Relationship between Income Taxes and Trade Taxes" . Geography and Ownership as Bases for Economic Accounting. Edited by Robert E. Baldwin, Robert E. Lipsey, and J.David Richardson,Chicago,Ill: The University of Chicago Press, 1998, pp.285-310.
Publication-Status: published as The Significance of International Tax Rules for Sourcing Income: The Relationship between Income Taxes and Trade Taxes, John Mutti, Harry Grubert. in Geography and Ownership as Bases for Economic Accounting, Baldwin, Lipsey, and Richardson. 1998
Abstract: This paper examines how rules to determine the source of income internationally for tax purposes can have important effects on the form in which taxable income is reported and on the location of economic activity. In the case of U.S. law, two provisions are significant: allowing a portion of export income to be regarded as foreign source and treating royalties received as foreign source. These source rules have become increasingly important due to tax policy changes adopted in the 1980s and to the growing role in U.S. production and trade of goods that require intangible intellectual property. In addition, very similar transactions can be carried out as trade in goods, trade in services or production by a foreign affiliate, and tax incentives can influence that choice. How the source rules operate and the incentives they create are demonstrated in a set of stylized calculations to determine after-tax returns under various assumptions about relevant income and withholding tax rates, tariffs, and the importance of tangible and intangible capital in production. An assessment of the empirical importance of these provisions is based on recent studies of the determinants of trade and investment by U.S. multinational corporations. The treatment of royalty income appears to encourage royalty payments from high-tax countries and to promote real economic activity there.
Handle: RePEc:nbr:nberwo:5526
Template-Type: ReDIF-Paper 1.0
Title: Tax Avoidance and Value-Added vs. Income Taxation in an Open Economy
Classification-JEL: H21; H26
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: Soren Bo Nielsen
Author-Person: pni248
Note: PE
Number: 5527
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5527
File-URL: http://www.nber.org/papers/w5527.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Roger H. and Soren Bo Nielsen. "Tax Evasion In An Open Economy: Value-Added Vs. Income Taxation," Journal of Public Economics, 1997, v66(2,Nov), 173-197.
Abstract: Ignoring tax avoidance possibilities, a value-added tax and a cash-flow income tax have identical behavioral and distributional consequences. Yet the available means of tax avoidance under each are very different. Under a VAT, avoidance occurs through cross-border shopping, whereas under an income tax it occurs through shifting taxable income abroad. Given avoidance, we show that a country would make use of both taxes in order to minimize the efficiency costs of avoidance activity, relying relatively more on that tax that is harder to avoid. We then make use of aggregate Danish tax and accounting data from 1992 to measure the amount of avoidance that occurred under the two taxes. While the estimates of avoidance activity are small, the figures imply that Denmark could reduce the real costs of avoidance activity by putting more weight on income rather than value- added taxes.
Handle: RePEc:nbr:nberwo:5527
Template-Type: ReDIF-Paper 1.0
Title: Free Entry and Social Inefficiency in Radio Broadcasting
Classification-JEL: L13; L82
Author-Name: Steven Berry
Author-Person: pbe18
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: LE
Number: 5528
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5528
File-URL: http://www.nber.org/papers/w5528.pdf
File-Format: application/pdf
Publication-Status: published as Rand Journal of Economics, Vol. 30, no. 3 (Autumn 1999): 397-420.
Abstract: In theory, free entry can lead to social inefficiency. When new products are substitutes for existing products, the business stolen from incumbents places a wedge between private and social benefits of entry. The business stealing effect can be offset if entry reduces prices or increases available product variety. Our study of the radio industry provides one of the first empirical attempts to quantify the inefficiency associated with free entry. Using data on advertising prices, number of stations and radio listening in 135 U.S. metropolitan markets, we estimate how listening and revenue vary with the number of stations. Using a free-entry assumption, we infer the distribution of station costs, which are fixed with respect to listening. We then use our estimates of revenue and fixed costs to calculate the welfare of market participants (excluding listeners) and the number of stations under free entry and social optimality. Relative to the social optimum, the welfare loss of free entry is 40 percent of industry revenue. However, we calculate that the free entry equilibrium would be optimal if the marginal value of programming to listeners were over three times the value of marginal listeners to advertisers, who pay 4.5 cents per hour.
Handle: RePEc:nbr:nberwo:5528
Template-Type: ReDIF-Paper 1.0
Title: The Theory of Endowment, Intra-Industry, and Multinational Trade
Classification-JEL: F1; F2
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Anthony J. Venables
Author-Person: pve7
Note: ITI
Number: 5529
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5529
File-URL: http://www.nber.org/papers/w5529.pdf
File-Format: application/pdf
Publication-Status: published as Markusen, James R. and Anthony J. Venables. "The Theory Of Endowment, Intra-Industry And Multi-National Trade," Journal of International Economics, 2000, v52(2,Dec), 209-234.
Abstract: We consider a trade model combining a 2x2x2 Heckscher-Ohlin structure, monopolistic competition, transport costs, and multinational corporations. We demonstrate how the mix of national and multinational firms that operate in equilibrium depends on technology and on the division of the world endowment between countries. Multinationals are more likely to exist the more similar are countries in both relative and absolute endowments. Where multinationals exist they reduce the volume of trade and raise world welfare (although not necessarily that of both countries). They also reduce the agglomeration forces that arise when international factor mobility is allowed.
Handle: RePEc:nbr:nberwo:5529
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Dynamics and Learning
Author-Name: Pierre-Olivier Gourinchas
Author-Person: pgo28
Author-Name: Aaron Tornell
Author-Person: pto157
Note: IFM
Number: 5530
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5530
File-URL: http://www.nber.org/papers/w5530.pdf
File-Format: application/pdf
Abstract: Interest rate expectations are essential for exchange rate determination. Using a unique Survey data set on interest rate forecasts from 1986 to 1995 for G7 countries, we find that interest rate shocks were significantly more persistent in sample than expected by the market. This is consistent with ff3's finding that changes in the forward rate reflect changes in exchange rate expectations. We then present a model of nominal exchange rate determination that rationalizes the forward discount puzzle and exhibits the delayed overshooting pattern found by ee: following a monetary expansion that reduces the domestic interest rate, there is a gradual depreciation of the exchange rate followed by a gradual appreciation several months later. Delayed overshooting results from (a) the interaction of learning about the current state of affairs, and the intrinsic dynamic response of interest rates to monetary shocks and (b) the discrepancy between the actual distribution of shocks in sample and its expectation by market participants. This discrepancy is consistent with rational expectations if either (a) there is a small sample or Peso problem or (b) the true structure of the economy evolves over time and agents are learning with some delay.
Handle: RePEc:nbr:nberwo:5530
Template-Type: ReDIF-Paper 1.0
Title: Intra-National versus International Trade: How Stubborn are Nations in Global Integration?
Classification-JEL: F02; F10
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: ITI IFM
Number: 5531
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5531
File-URL: http://www.nber.org/papers/w5531.pdf
File-Format: application/pdf
Abstract: This paper examines the home country bias in the goods market among OECD countries. An average country imports about two and a half times as much from itself as from an otherwise identical foreign country, after controlling for sizes of exporter and importer, their direct distance, geographic positions relative to the rest of the world and a possible linguistic tie. If one believes that the substitutability among goods produced in OECD countries is high, as it seems reasonable, the observed bias implies relatively small non- tariff barriers. Over 1982-94, the home bias of OECD countries as a whole exhibited a slow but steady decline. The bias in a typical member country of the European Community relative to its imports from other member countries showed a fifty percent decline during the period.
Handle: RePEc:nbr:nberwo:5531
Template-Type: ReDIF-Paper 1.0
Title: Monetary Cohabitation in Europe
Classification-JEL: E42; F33
Author-Name: Torsten Persson
Author-Person: ppe28
Author-Name: Guido Tabellini
Author-Person: pta37
Note: IFM
Number: 5532
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5532
File-URL: http://www.nber.org/papers/w5532.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 86, no. 2 (May 1996): 111-116.
Abstract: How can monetary policy in stage III of European Monetary Union be coordinated between the `ins' and the `outs'? This paper compares alternative institutional mechanisms, and concludes that a generalized system of inflation targets at the European level has several merits. It strengthens domestic credibility of monetary policy. It rules out deliberate attempts to gain competitiveness through devaluations. It forces monetary policy to respond automatically to various macroeconomic shocks which is stabilizing for the real exchange rate. It distributes these shocks symmetrically across countries. On the basis of a simple theoretical model of policy coordination, the paper shows that a system of inflation targets approximates an optimal policy of international cooperation. Preliminary empirical evidence supports these theoretical results.
Handle: RePEc:nbr:nberwo:5532
Template-Type: ReDIF-Paper 1.0
Title: Balanced Budget Rules and Public Deficits: Evidence from the U.S. States
Classification-JEL: H61; H62
Author-Name: Henning Bohn
Author-Person: pbo25
Author-Name: Robert P. Inman
Note: PE
Number: 5533
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5533
File-URL: http://www.nber.org/papers/w5533.pdf
File-Format: application/pdf
Publication-Status: published as Bohn, Henning & Inman, Robert P., 1996. "Balanced-budget rules and public deficits: evidence from the U.S. states," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 13-76, December.
Abstract: Most states (Vermont is the exception) have a constitutional or statutory limitation restricting their ability to run deficits in the state's general fund. Balanced budget limitations may be either prospective or beginning-of-the-year requirements or retrospective or end-of-the-year requirements. Using budget data from a panel of 47 U.S. states for the period 1970-1991, the analysis finds that states with end-of-the-year (not prospective) balance requirements enforced as constitutional (not statutory) constraints by an independently elected (not politically appointed) state supreme court do have significant positive effects on a state's general fund surplus. The surplus is accumulated through cuts in spending, not through tax increases. It is saved in a state `rainy day' fund in anticipation of future general fund deficits. In contrast, prospective requirements, statutory end-of-the-year requirements, or constitutional end-of-the- year requirements enforced by a politically appointed court do not significantly constrain general fund deficit behavior. Finally, we find little evidence that the constraints `force' deficits into other fiscal accounts.
Handle: RePEc:nbr:nberwo:5533
Template-Type: ReDIF-Paper 1.0
Title: Technology and the Wage Structure
Classification-JEL: J31; O33
Author-Name: Steven G. Allen
Author-Person: pal6
Note: LS
Number: 5534
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5534
File-URL: http://www.nber.org/papers/w5534.pdf
File-Format: application/pdf
Publication-Status: published as Allen, Steven G. "Technology And The Wage Structure," Journal of Labor Economics, 2001, v19(2,Apr), 440-483.
Abstract: This paper reports direct evidence on how recent changes in technology are related to changes in wage differentials by schooling, experience, and gender. Wage differentials by industry in the full- year 1979 and 1989 Current Population Surveys are related to R&D intensity, usage of high-tech capital, recentness of technology, growth in total factor productivity, and growth of the capital-labor ratio. Returns to schooling are larger in industries that are intensive in R&D and high-tech capital. Technology variables account for 30 percent of the increase in the wage gap between college and high school graduates.
Handle: RePEc:nbr:nberwo:5534
Template-Type: ReDIF-Paper 1.0
Title: What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program
Author-Name: James J. Heckman
Author-Name: Jeffrey A. Smith
Author-Person: psm73
Author-Name: Christopher Taber
Note: LS
Number: 5535
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5535
File-URL: http://www.nber.org/papers/w5535.pdf
File-Format: application/pdf
Publication-Status: published as Advances in the Study of Entrepreneurship, Innovation and Economic Growth: Reinventing Government and the Problem of Bureaucracy, Vol. 7, Libecap, Gary, ed., Greenwich, CT: JAI Press, 1996, pp. 191-217.
Abstract: Bureaucratic performance standards are featured in many proposals to increase efficiency in government. These standards reward bureaucrats on the basis of measured outcomes. The performance standards system created under the Job Training Partnership Act (JTPA) of 1982 is often cited as a successful prototype. Under the JTPA system, local training centers receive monetary rewards based on the employment levels and wage rates attained by their trainees upon completion of the program. Critics of the JTPA performance standards system argue that it creates an incentive for program managers to encourage case workers to `cream-skim' the most employable applicants into the program. We examine this issue by analyzing the determinants of acceptance into JTPA among applicants at a training center for which we have data on everyone who applied over a two year period. We find that case workers prefer to accept the least employable applicants, rather than the most employable as suggested by the cream-skimming story. This evidence indicates that concerns about cream-skimming in JTPA may be exaggerated. Instead, the performance standards system may operate as a countervailing force against the preferences of case workers. Using experimental data from the recent National JTPA Study, we also determine whether or not case workers accept those applicants with higher expected gains from the program. Our evidence only weakly supports this hypothesis.
Handle: RePEc:nbr:nberwo:5535
Template-Type: ReDIF-Paper 1.0
Title: Race Differences in Labor Force Attachment and Disability Status
Classification-JEL: J15; J26
Author-Name: John Bound
Author-Person: pbo406
Author-Name: Michael Schoenbaum
Author-Name: Timothy Waidmann
Author-Person: pwa241
Note: LS
Number: 5536
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5536
File-URL: http://www.nber.org/papers/w5536.pdf
File-Format: application/pdf
Publication-Status: published as Bound, John, Michael Schoenbaum, and Timothy Waidmann. “Race Differences in Labor Force Attachment and Disability Status." The Gerontologist 36 (1996): 311-321.
Abstract: We use the first wave of the Health and Retirement Survey to study the effect of health on the labor force activity of Black and White men and women in their 50s. The evidence we present confirms the notion that health is an extremely important determinant of early labor force exit. Our estimates suggest that health differences between Blacks and Whites can account for most of the racial gap in labor force attachment for men. For women, where participation rates are comparable, our estimates imply that Black women would be substantially more likely to work than White women were it not for the marked health differences. We also find for both men and women that poor health has a substantially larger effect on labor force behavior for Blacks. The evidence suggests that these differences result from Black/White differences in access to the resources necessary to retire.
Handle: RePEc:nbr:nberwo:5536
Template-Type: ReDIF-Paper 1.0
Title: Why Do More Open Economies Have Bigger Governments?
Classification-JEL: H1; F15
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI IFM PE
Number: 5537
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5537
File-URL: http://www.nber.org/papers/w5537.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy (October 1998).
Abstract: This paper demonstrates that there is a robust empirical association between the extent to which an economy is exposed to trade and the size of its government sector. This association holds for a large cross-section of countries, in low- as well as high-income samples, and is robust to the inclusion of a wide range of controls. The explanation appears to be that government consumption plays a risk-reducing role in economies exposed to a significant amount of external risk. When openness is interacted with explicit measures of external risk, such as terms-of-trade uncertainty and product concentration of exports, it is the interaction terms that enter significantly, and the openness term loses its significance (or turns negative). The paper also demonstrates that government consumption is the majority of countries.
Handle: RePEc:nbr:nberwo:5537
Template-Type: ReDIF-Paper 1.0
Title: Does Inflation "Grease the Wheels of the Labor Market"?
Classification-JEL: E31; J30
Author-Name: David Card
Author-Person: pca271
Author-Name: Dean Hyslop
Author-Person: phy11
Note: EFG LS ME
Number: 5538
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5538
File-URL: http://www.nber.org/papers/w5538.pdf
File-Format: application/pdf
Publication-Status: published as Reducing Inflation: Motivation and Strategy, C. Romer and D. Romer, eds.,(Chicago: University of Chicago Press, 1997)
Publication-Status: published as Does Inflation "Grease the Wheels of the Labor Market"?, David Card, Dean Hyslop. in Reducing Inflation: Motivation and Strategy, Romer and Romer. 1997
Abstract: If nominal wages are downward rigid, moderate levels of inflation may improve labor market efficiency by facilitating real wage cuts. In this paper we attempt to test the hypothesis that downward real wage changes occur more readily in higher-inflation environments. Using individual wage change data from two sources, we find that about 6-10 percent of workers experience nominally rigid wages in a 10- percent inflation environment. This proportion rises to over 15 percent at a 5 percent inflation rate. We use the assumption of symmetry to generate counterfactual distributions of real wage changes in the absence of rigidities. These counterfactual distributions suggest that a 1 percent increase in the inflation rate reduces the fraction of workers with downward-rigid wages by about 0.8 percent, and allows real wages to fall about 0.06 percent faster. A market- level analysis of the effects of nominal rigidities, based on wage growth and unemployment at the state level, is less conclusive. We find only a weak statistical relationship between the rate of inflation and the pace of relative wage adjustments across local labor markets.
Handle: RePEc:nbr:nberwo:5538
Template-Type: ReDIF-Paper 1.0
Title: Why Do People Dislike Inflation?
Classification-JEL: E31
Author-Name: Robert J. Shiller
Author-Person: psh69
Note: ME
Number: 5539
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5539
File-URL: http://www.nber.org/papers/w5539.pdf
File-Format: application/pdf
Publication-Status: published as Reducing Inflation: Motivation and Strategy, C. Romer and D. Romer, eds.,(Chicago: University of Chicago Press, 1997)
Publication-Status: published as Why Do People Dislike Inflation?, Robert J. Shiller. in Reducing Inflation: Motivation and Strategy, Romer and Romer. 1997
Abstract: A questionnaire survey was conducted to explore how people think about inflation, and what real problems they see it as causing. With results from 677 people, comparisons were made among people in the US, Germany, and Brazil, between young and old, and between economists and non-economists. Among non-economists in all countries, the largest concern with inflation appears to be that it lowers people's standard of living. Non-economists appear often to believe in a sort of sticky-wage model, by which wages do not respond to inflationary shocks, shocks which are themselves perceived as caused by certain people or institutions acting badly. This standard of living effect is not the only perceived cost of inflation among non-economists: other perceived costs are tied up with issues of exploitation, political instability, loss of morale, and damage to national prestige. The most striking differences between groups studied were between economists and non-economists. There were also important international and intergenerational differences. The US - Germany differences (on questions not just about information) were usually less strong than the intergenerational differences.
Handle: RePEc:nbr:nberwo:5539
Template-Type: ReDIF-Paper 1.0
Title: Why Does Inflation Differ Across Countries?
Classification-JEL: E31; E58
Author-Name: Marta Campillo
Author-Name: Jeffrey A. Miron
Author-Person: pmi250
Note: ME
Number: 5540
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5540
File-URL: http://www.nber.org/papers/w5540.pdf
File-Format: application/pdf
Publication-Status: published as Reducing Inflation: Motivation and Strategy, C. Romer and D. Romer, eds.(Chicago: University of Chicago Press, 1997)
Publication-Status: published as Why Does Inflation Differ across Countries?, Marta Campillo, Jeffrey A. Miron. in Reducing Inflation: Motivation and Strategy, Romer and Romer. 1997
Abstract: This paper attempts to explain the differences in inflation performance across countries. Earlier research has examined this topic, but it has considered only some of the factors that might be empirically important determinants of inflation rates. We consider the distaste for inflation, optimal tax considerations, time consistency issues, distortionary non-inflation policies and other factors that might be empirically important determinants of inflation performance. Overall, the results suggest that institutional arrangements - central bank independence or exchange rate mechanisms - are relatively unimportant determinants of inflation performance, while economic fundamentals - openness and optimal tax considerations - are relatively important determinants.
Handle: RePEc:nbr:nberwo:5540
Template-Type: ReDIF-Paper 1.0
Title: Expectation Traps and Discretion
Classification-JEL: E32; E60
Author-Name: V. V. Chari
Author-Person: pch40
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Martin Eichenbaum
Author-Person: pei4
Note: EFG
Number: 5541
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5541
File-URL: http://www.nber.org/papers/w5541.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Theory, Vol. 81, no. 2 (August 1998): 462-492
Abstract: We argue that discretionary monetary policy exposes the economy to welfare-decreasing instability. It does so by creating the potential for private expectations about the response of monetary policy to exogenous shocks to be self-fulfilling. Among the many equilibria that are possible, some have good welfare properties. But others exhibit welfare-decreasing volatility in output and employment. We refer to the latter type of equilibria as expectation traps. In effect, our paper presents a new argument for commitment in monetary policy because commitment eliminates these bad equilibria. We show that full commitment is not necessary to achieve the best outcome, and that more limited forms of commitment suffice.
Handle: RePEc:nbr:nberwo:5541
Template-Type: ReDIF-Paper 1.0
Title: Sulfur Dioxide Compliance of a Regulated Utility
Classification-JEL: H23; D6
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Shaun P. McDermott
Author-Name: Jonathan P. Caulkins
Note: PE
Number: 5542
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5542
File-URL: http://www.nber.org/papers/w5542.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Environmental Economics and Management, Vol. 34, no. 1(September 1997): 32-53.
Abstract: Electric utilities can reduce sulfur dioxide emissions through a variety of strategies such as adding scrubbers, switching to low- sulfur coal, or shifting output between generating plants with different emissions. The cost of achieving a given emission target can be minimized using a market for emission allowances, as under the Clean Air Act Amendments of 1990, if firms with high abatement costs buy allowances while those with low abatement costs reduce emissions and sell allowances. However, public utility commissions regulate which costs can be passed to customers. Previous theoretical work has analyzed effects of regulations on a utility's choice between permits and a single continuous `abatement technology.' Here, we consider three abatement technologies and the discrete choices among them. Our numerical model uses market and engineering information on permit prices, scrubber cost and sulfur removal efficiency, alternative fuel costs and sulfur content, plus generating plant costs and efficiency. Using illustrative sets of parameters, we find that regulatory rules could more than double the cost of sulfur dioxide compliance.
Handle: RePEc:nbr:nberwo:5542
Template-Type: ReDIF-Paper 1.0
Title: U.S. Trade Policy and Cigarette Smoking in Asia
Classification-JEL: I1
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Adit Laixuthai
Note: EH
Number: 5543
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5543
File-URL: http://www.nber.org/papers/w5543.pdf
File-Format: application/pdf
Abstract: During the 1980's and early 1990's, the cigarette markets in Japan, Taiwan, South Korea, and Thailand were opened to U.S. cigarettes through actions taken under Section 301 of the 1974 Trade Act and its subsequent amendments. Using pooled annual time-series data from ten Asian countries, the impact of the Section 301 agreements on the market share of U.S. cigarettes and on per capita cigarette consumption is examined. Estimates from fixed effects models indicate that the market share of U.S. cigarettes in Japan, Taiwan, South Korea, and Thailand increased dramatically after the agreements as consumers switched from the brands produced by domestic monopolies to the brands of U.S. cigarette producers. In addition, simulations based on the regression results indicate that per capita cigarette consumption in 1991 in the four affected countries was nearly ten percent higher than it would have been had the markets remained closed to U.S. cigarettes.
Handle: RePEc:nbr:nberwo:5543
Template-Type: ReDIF-Paper 1.0
Title: Bounding the Effects of R&D: An Investigation Using Matched Establishment-Firm Data
Classification-JEL: 031; 032
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: Adam B. Jaffe
Author-Person: pja49
Note: PR
Number: 5544
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5544
File-URL: http://www.nber.org/papers/w5544.pdf
File-Format: application/pdf
Publication-Status: published as in the Rand Journal of Economics vol.27,no.4, (winter,1996), pp.700-721.
Abstract: Studies of firm-level data have shown that a firm's R&D and the R&D of other firms increase conventional factor productivity. We investigate these phenomena further by examining the relationship between plant-level productivity and firm-level R&D. We find that (1) the productivity-enhancing effects of parent firm R&D are diminished by geographic distance from the research lab and `technological' distance between the product-field focus of the R&D and the plants; (2) productivity appears to depend on the intensity of parent firm R&D (R&D per plant), not on the total amount; and (3) spillovers of research effects from technologically related firms are significant but also depend on R&D intensity rather than total industry R&D. These results suggest that, despite the externalities created by spillovers of R&D, the `dilution' of R&D across multiple target plants reduces its potency sufficiently that spillovers may not be a source of industry-wide or economy-wide increasing returns.
Handle: RePEc:nbr:nberwo:5544
Template-Type: ReDIF-Paper 1.0
Title: Environmental Regulation and Innovation: A Panel Data Study
Classification-JEL: Q28; O31
Author-Name: Adam B. Jaffe
Author-Person: pja49
Author-Name: Karen Palmer
Author-Person: ppa255
Note: PR
Number: 5545
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5545
File-URL: http://www.nber.org/papers/w5545.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics (1997): 610-619.
Abstract: In a 1991 essay in Scientific American, Michael Porter suggested that environmental regulation may have a positive effect on the performance of domestic firms relative to their foreign competitors, by stimulating domestic innovation. We examine the stylized facts regarding environmental expenditures and innovation in a panel of manufacturing industries. We find that lagged environmental compliance expenditures have significant positive effect on R&D expenditures when we control for unobserved industry-specific effects. We find little evidence, however, that industries' inventive output (as measured by patent applications) is related to compliance costs).
Handle: RePEc:nbr:nberwo:5545
Template-Type: ReDIF-Paper 1.0
Title: Business Fixed Investment and the Recent Business Cycle in Japan
Author-Name: Nobuhiro Kiyotaki
Author-Name: Kenneth D. West
Author-Person: pwe16
Note: EFG
Number: 5546
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5546
File-URL: http://www.nber.org/papers/w5546.pdf
File-Format: application/pdf
Publication-Status: published as Business Fixed Investment and the Recent Business Cycle in Japan, Nobuhiro Kiyotaki, Kenneth D. West. in NBER Macroeconomics Annual 1996, Volume 11, Bernanke and Rotemberg. 1996
Abstract: To analyze business fixed investment in Japan, which has been unusually volatile in recent years, we develop and apply a loglinear flexible accelerator model. We find that movements in business fixed investment are consistent with movements in output and the tax- adjusted cost of capital, both on average during our entire 1961-94 sample and during the recent 1986-94 business cycle.
Handle: RePEc:nbr:nberwo:5546
Template-Type: ReDIF-Paper 1.0
Title: Understanding the 20th Century Growth in U.S. School Spending
Classification-JEL: I2
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Steven G. Rivkin
Author-Person: pri265
Note: LS
Number: 5547
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5547
File-URL: http://www.nber.org/papers/w5547.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, 32(1), Winter1997, pp.35-68.
Abstract: The persistent increase in spending on elementary and secondary schools has gone virtually undocumented and has received insufficient attention. Real expenditure per student increased at 3« percent per year over the entire period of 1890-1990. A decomposition of the spending growth shows that it was propelled by a combination of falling pupil-teacher ratios, increasing real wages to teachers, and rising expenditures outside of the classroom. While the expansion of education for the handicapped has had a disproportionate effect on spending, most of the growth in expenditure during the 1980s came from other sources. Teacher salary increases, which reflect competitive pressures particularly for females, have nevertheless failed to keep up with wages in other occupationsþleading to likely declines in teacher quality over time. Moreover, the magnitude of the wage decline is larger than commonly thought because the relative aging of teachers has masked the sizable declines when teachers are compared to comparably aged people in other occupations.
Handle: RePEc:nbr:nberwo:5547
Template-Type: ReDIF-Paper 1.0
Title: Aggregation and the Estimated Effects of School Resources
Classification-JEL: I2; H7
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Steven G. Rivkin
Author-Person: pri265
Author-Name: Lori L. Taylor
Author-Person: pta778
Note: LS
Number: 5548
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5548
File-URL: http://www.nber.org/papers/w5548.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, 78(4), November 1996, pp.611-627.
Abstract: This paper attempts to reconcile the contradictory findings in the debate over school resources and school effectiveness by highlighting the role of aggregation in the presence of omitted variables bias. While data aggregation for well-specified linear models yields unbiased parameter estimates, aggregation alters the magnitude of any omitted variables bias. In general, the theoretical impact of aggregation is ambiguous. In a very relevant special case where omitted variables relate to state differences in school policy, however, aggregation implies clear upward bias of estimated school resource effects. Analysis of High School and Beyond data provides strong evidence that aggregation inflates the coefficients on school resources. Moreover, the pattern of results is not consistent with an errors-in-variables explanation, the alternative explanation for the larger estimated impact with aggregate estimates. Since studies using aggregate data are much more likely to find positive school resource effects on achievement, these results provide further support to the view that additional expenditures alone are unlikely to improve student outcomes.
Handle: RePEc:nbr:nberwo:5548
Template-Type: ReDIF-Paper 1.0
Title: Trade Liberalization and Endogenous Growth: A q-Theory Approach
Classification-JEL: F12; O40
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Rikard Forslid
Note: ITI IFM
Number: 5549
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5549
File-URL: http://www.nber.org/papers/w5549.pdf
File-Format: application/pdf
Publication-Status: published as "Trade liberalisation and endogenous growth: A q-theory approach," Journal of International Economics, Vol. 50, no. 2, pp. 497-517, April 2000
Abstract: This paper has two purposes. It introduces a direct approach to policy analysis in endogenous growth models - the q-theory approach - and uses this to illustrate several new openness-and-growth links that appear when we enrich the economic content of the early trade and growth models. The approach - inspired by Tobin's q - is merely a change of state variables and re-interpretation of steady-state conditions. The main difference is its focus on investment, which is after all, the heart of growth models. The approach's simplicity permits us to complicate the early models in interesting directions and to explicitly include trade barriers. The latter allows study of incremental policy reform rather than mere shifts from autarky to free trade (or small deviations from free trade) as in early literature.
Handle: RePEc:nbr:nberwo:5549
Template-Type: ReDIF-Paper 1.0
Title: Do Budget Rules Work?
Classification-JEL: H61; E62
Author-Name: James M. Poterba
Author-Person: ppo19
Note: PE
Number: 5550
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5550
File-URL: http://www.nber.org/papers/w5550.pdf
File-Format: application/pdf
Publication-Status: published as in A.Auerbach ed., Fiscal Policy: Lessons From Empirical Research (Cambridge: MIT Press, 1997) pp.53-86
Abstract: The design of budget rules and institutions, long a neglected area in public finance and macroeconomics, has recently been thrust to center stage by the debate over a balanced budget amendment and other deficit-reduction measures in the United States. This paper describes the existing evidence on how budget rules affect fiscal policy outcomes. It contrasts the `institutional irrelevance view,' which holds that budget rules can be circumvented by modifying accounting practices and changing the nominal timing or other classification of taxes and expenditures, with the `public choice view' in which fiscal institutions represent important constraints on the behavior of political actors. Several distinct strands of empirical evidence, from the U.S. federal experience with anti-deficit rules, from U.S. state experience with balanced budget rules, and from international comparisons of budget outcomes in nations with different fiscal institutions, suggest that fiscal institutions do matter. These results reject the institutional irrelevance view. The existing evidence is not refined enough, however, to provide detailed advice on how narrowly-defined changes in budget rules might affect policy outcomes.
Handle: RePEc:nbr:nberwo:5550
Template-Type: ReDIF-Paper 1.0
Title: The Entry and Exit of Workers and the Growth of Employment: An Analysis of French Establishments
Classification-JEL: J23; J60
Author-Name: John M. Abowd
Author-Person: pab175
Author-Name: Patrick Corbel
Author-Name: Francis Kramarz
Author-Person: pkr29
Note: LS
Number: 5551
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5551
File-URL: http://www.nber.org/papers/w5551.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, Vol. 81, no. 2 (May 1999): 170-187.
Abstract: Our empirical analyses distinguish between flows of workers, directly measured, and job creation and destruction, again, directly measured. We use a representative sample of all French establishments for 1987 to 1990. Our most important findings are that (1) annual job creation can be characterized as hiring three persons and separating two for each job created in a given year; (2) annual job destruction can be characterized as hiring one person and separating two for each job destroyed in a given year; (3) two-thirds of all hiring are short term contracts and more than half of all separations are due to the end of these short term contracts; (4) when an establishment is shrinking the adjustment is made by reducing entry (short and long contracts, and transfers) and not changing the separation rates; (5) for the highest skill groups ten percent of months with firm-initiated exits also have new hiring in the same skill group and for the lowest skill groups 25% of the months with firm-initiated separations also have new hiring in that skill group; (6) approximately one-third of all short-term employment contracts are converted to long-term contracts at their termination; (7) most worker flows are procyclical; (8) employment adjustment occurs primarily through changes in the entry rates (often of short-term contract workers) and not through the exit rates (except for quits); and (9) the rate of internal promotion into higher skilled positions is about three times the size of net employment changes inside the job category.
Handle: RePEc:nbr:nberwo:5551
Template-Type: ReDIF-Paper 1.0
Title: Why Do Countries Seek Regional Trade Agreements?
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 5552
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5552
File-URL: http://www.nber.org/papers/w5552.pdf
File-Format: application/pdf
Publication-Status: published as Why Do Countries Seek Regional Trade Agreements?, John Whalley. in The Regionalization of the World Economy, Frankel. 1998
Abstract: This paper emphasizes the range of factors which enter country calculations to seek regional trading arrangements. These include conventional access benefits, but extend to safe haven concerns, the use of trade arrangements to underpin security arrangements, and tactical interplay between multilateral and regional trade negotiating positions. In a final section, results from an earlier modelling effort by Perroni and Whalley are used to emphasize that non- traditional objectives may be quantitatively more important than traditionally analyzed objectives.
Handle: RePEc:nbr:nberwo:5552
Template-Type: ReDIF-Paper 1.0
Title: The Comovements Between Real Activity and Prices at Different Business Cycle Frequencies
Classification-JEL: E32; C82
Author-Name: Wouter J. Den Haan
Author-Person: pde12
Note: EFG
Number: 5553
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5553
File-URL: http://www.nber.org/papers/w5553.pdf
File-Format: application/pdf
Abstract: In this paper, I present two different methods that can be used to obtain a concise set of descriptive results about the comovement of variables. The statistics are easy to interpret and capture important information about the dynamics in the system that would be lost if one focused only on the unconditional correlation coefficient of detrended data. The methods do not require assumptions about the order of integration. That is, the methods can be used for stationary as well as integrated processes. They do not require the types of assumptions needed for VAR decompositions either. Both methods give similar results. In the postwar period, the comovement between output and prices is positive in the During the same period, the comovement between hours and real wages is negative in the that a model in which demand shocks dominate in the short run and supply shocks dominate in the long run can explain the empirical results, while standard sticky-price models with only demand shocks cannot.
Handle: RePEc:nbr:nberwo:5553
Template-Type: ReDIF-Paper 1.0
Title: A Survey of Corporate Governance
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Robert W. Vishny
Author-Person: pvi218
Note: CF
Number: 5554
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5554
File-URL: http://www.nber.org/papers/w5554.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 52, no. 2 (June 1997): 737-783.
Abstract: This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world.
Handle: RePEc:nbr:nberwo:5554
Template-Type: ReDIF-Paper 1.0
Title: Drug Use and AFDC Participation: Is There a Connection?
Classification-JEL: I38; I18
Author-Name: Robert Kaestner
Author-Person: pka42
Note: EH
Number: 5555
Creation-Date: 1996-04
Order-URL: http://www.nber.org/papers/w5555
File-URL: http://www.nber.org/papers/w5555.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Policy Analysis and Management, Vol. 17, no. 3 (Summer 1998): 495-520
Abstract: Drug use and welfare are two serious social problems that have received widespread public attention. Recently, it has been suggested that illicit drug use is a major cause of welfare, although there is only anecdotal evidence to support such a claim. This paper provides the first systematic analysis of the issue by examining the relationship between illicit drug use and welfare participation among a nationally representative sample of young adults. The results indicate that past year drug use, predominantly marijuana use, is positively related to future welfare participation for both non-black and black women. The magnitude of the drug effect, however, is modest: if drug use among welfare participants was reduced to the levels of non-participants, welfare participation would decline by approximately one percent.
Handle: RePEc:nbr:nberwo:5555
Template-Type: ReDIF-Paper 1.0
Title: Budget Deficits and Budget Institutions
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Roberto Perotti
Author-Person: ppe66
Note: ME
Number: 5556
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5556
File-URL: http://www.nber.org/papers/w5556.pdf
File-Format: application/pdf
Publication-Status: published as Fiscal Institutions and Fiscal Performance. Poterba, James M., and Jurgenvon Hagen, eds., Chicago: The University of Chicago Press, 1999,pp. 13-36.
Publication-Status: published as Budget Deficits and Budget Institutions, Alberto F. Alesina, Roberto Perotti. in Fiscal Institutions and Fiscal Performance, Poterba and von Hagen. 1999
Publication-Status: published as Alberto Alesina & Roberto Perotti, 1996. "Budget Deficits and Budget Institutions," IMF Working Papers, vol 96(52).
Abstract: By discussing the available theoretical and empirical literature, this paper argues that budget procedures and budget institutions do influence budget outcomes. Budget institutions include both procedural rules and balanced budget laws. We critically assess theoretical contributions in this area and suggest several open and unresolved issues. We also examine the empirical evidence drawn from studies on samples of OECD countries, Latin American countries and US states.
Handle: RePEc:nbr:nberwo:5556
Template-Type: ReDIF-Paper 1.0
Title: Institutions for Monetary Stability
Classification-JEL: E52; D58
Author-Name: Christina D. Romer
Author-Person: pro407
Author-Name: David H. Romer
Author-Person: pro406
Note: ME
Number: 5557
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5557
File-URL: http://www.nber.org/papers/w5557.pdf
File-Format: application/pdf
Publication-Status: published as Reducing Inflation: Motivation and Strategy, C. Romer and D. Romer, eds.(Chicago: University of Chicago Press, 1997)
Publication-Status: published as Institutions for Monetary Stability, Christina D. Romer, David H. Romer. in Reducing Inflation: Motivation and Strategy, Romer and Romer. 1997
Abstract: This paper demonstrates that failures in monetary policy arise not just from dynamic inconsistency, but more importantly, from imperfect understanding of the economy and the effects of policy. Using recent and historic episodes from the United States and abroad, we show that limited knowledge on the part of economists, policymakers, elected leaders, and voters has been an important source of monetary policy mistakes. We then analyze what institutions of monetary policy could address the problems of both dynamic inconsistency and limited knowledge. Our analysis suggests that one set of institutions that could do this is a highly independent central bank with discretion about both the goals and the conduct of policy, combined with a two-level structure where elected leaders appoint a board of trustees for the central bank, which in turn selects the actual policymakers. We conclude by discussing recent and proposed reforms in monetary policy and institutions in industrialized countries in light of this analysis.
Handle: RePEc:nbr:nberwo:5557
Template-Type: ReDIF-Paper 1.0
Title: Optimal Tax and Debt Policy with Endogenously Imperfect Creditworthiness
Classification-JEL: F18; F34
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Michael Gavin
Author-Name: Ricardo Hausmann
Author-Person: pha552
Note: ITI
Number: 5558
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5558
File-URL: http://www.nber.org/papers/w5558.pdf
File-Format: application/pdf
Publication-Status: published as Joshua Aizenman, Michael Gavin, Ricardo Hausmann. "Optimal tax and debt policy with endogenously imperfect creditworthiness," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 9(4), pages 367-395, December 2000.
Abstract: This paper shows that the patterns of optimal tax rates and borrowing in the presence of endogenous borrowing constraints differ considerably from the patterns observed with fully integrated capital markets. We study a developing country characterized by a costly tax collection. Its access to the international credit market is determined by the efficiency of the tax system and the relative bargaining power of creditors. Partial defaults induce a `burden shifting' from bad to good states of nature, reducing the cost of borrowing, implying that a switch from no default to a partial default regime is associated with a borrowing boom. The switch to a partial default regime is associated with financial fragility, where small adverse changes in fundamentals lead to a large accumulation of debt. The tax rate exhibits strong counter-cyclical patterns in economies operating at the credit ceiling, whereas the tax rate exhibits strong pro-cyclical patterns in economies operating on the upward sloping portion of the supply of credit, where the risk premium is positive, and very little cyclical patterns in economies operating on the elastic portion of the supply of credit. We identify a volatility- debt curve for a given realization of output. With low debt, higher volatility tends to reduce borrowing. When volatility reaches a threshold, we observe a switch from a no default to a partial default regime, where a further rise in volatility increases borrowing and reduces present taxes.
Handle: RePEc:nbr:nberwo:5558
Template-Type: ReDIF-Paper 1.0
Title: Axiomatic and Economic Approaches to International Comparisons
Classification-JEL: C43; F31
Author-Name: W. Erwin Diewert
Author-Person: pdi117
Note: ITI PR
Number: 5559
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5559
File-URL: http://www.nber.org/papers/w5559.pdf
File-Format: application/pdf
Publication-Status: published as Axiomatic and Economic Approaches to International Comparisons, W. Erwin Diewert. in International and Interarea Comparisons of Income, Output, and Prices, Heston and Lipsey. 1999
Abstract: The paper considers the problem of choosing a multilateral system of index numbers in order to make aggregate price and quantity comparisons between many countries and regions. The problems involved in choosing functional forms in order to make these comparisons are both theoretically and empirically more difficult than the problems involved in choosing a bilateral index number formula. The great variation in relative prices and quantities in the international context means that the choice of a multilateral method is empirically important: different methods will give very different answers. The paper reviews ten classes of multilateral methods both from the viewpoint of the axiomatic approach as well as the economic approach. A new system of 11 desirable axioms or properties for multilateral systems is suggested. With respect to the economic approach, the concept of a superlative bilateral index number formula (which can adequately model substitution effects) is adapted to the multilateral context. Each of the 10 classes of multilateral methods is evaluated from the axiomatic and economic perspectives. Four classes of methods are identified as being `best' They are all superlative and satisfy slightly different sets of axioms.
Handle: RePEc:nbr:nberwo:5559
Template-Type: ReDIF-Paper 1.0
Title: Asian Demography and Foreign Capital Dependence
Author-Name: Matthew Higgins
Author-Person: phi220
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 5560
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5560
File-URL: http://www.nber.org/papers/w5560.pdf
File-Format: application/pdf
Publication-Status: published as Population and Development Review, Vol. 23, no. 2 (June 1997): 261-293.(Published as "Age Structure Dynamics in Asia and Dependence on Foreign Capital")
Abstract: Ansley Coale and Edgar Hoover were right about Asia. Rising fertility and declining infant mortality have had a profound impact on Asian savings, investment and foreign capital dependency since Coale and Hoover wrote in 1958. We argue that: Much of the impressive rise in Asian savings rates since the 1960s can be explained by the equally impressive decline in youth dependency burdens; Where Asia has kicked the foreign capital dependence habit is where youth dependency burdens have fallen most dramatically; Aging will not diminish Japan's capacity to export capital in the next century, but little of it will go to the rest of Asia since the rest will become net capital exporters, at least if demography is allowed to have its way. These conclusions emerge from a model which rejects steady-state analysis in favor of transition analysis, and extends the conventional focus of the dependency rate literature on savings to investment and net capital flows.
Handle: RePEc:nbr:nberwo:5560
Template-Type: ReDIF-Paper 1.0
Title: Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity
Classification-JEL: L11; L13
Author-Name: Steven Berry
Author-Person: pbe18
Author-Name: Michael Carnall
Author-Name: Pablo T. Spiller
Author-Person: psp34
Note: IO
Number: 5561
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5561
File-URL: http://www.nber.org/papers/w5561.pdf
File-Format: application/pdf
Publication-Status: published as Lee, Darin (ed.) Advances in Airline Economics. Volume 1. Competition Policy and Antitrust. Amsterdam and San Diego: Elsevier, 2006.
Abstract: This paper estimates a model of airline competition that captures the two major features of the industry: product differentiation and economies of density. The results not only provide support to some of the traditional common wisdom in the industry, but are also useful for understanding major puzzles concerning the evolution of the industry. The estimates indicate that a hubbing airline's ability to raise prices is focused on tickets that appeal to price-inelastic business travelers, who favor the origin-hub airline, even while paying an average premium of 20%. These high prices do not, however, provide a `monopoly umbrella' to other non-hub airlines. Finally, on the cost side there is evidence of economies of density (and therefore cost economies of hubbing) on longer routes. Consistent with the `Southwest Airlines' effect, there is no evidence of economies of density on shorter routes.
Handle: RePEc:nbr:nberwo:5561
Template-Type: ReDIF-Paper 1.0
Title: Information Technology and the Future of Cities
Classification-JEL: R11; O18
Author-Name: Jess Gaspar
Author-Name: Edward Glaeser
Author-Person: pgl9
Note: EFG
Number: 5562
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5562
File-URL: http://www.nber.org/papers/w5562.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Urban Economics, Vol. 43, no. 1 (January 1998): 136-156
Abstract: Will improvements in information technology eliminate face-to- face interactions and make cities obsolete? In this paper, we present a model where individuals make contacts and choose whether to use electronic or face-to-face meetings in their interactions. Cities are modeled as a means of reducing the fixed travel costs involved in face-to-face interactions. When telecommunications technology improves, there are two opposing effects on cities and face-to-face interactions: some relationships that used to be face-to-face will be done electronically (an intuitive substitution effect), and some individuals will choose to make more contacts, many of which result in face-to-face interactions. Our empirical work suggests that telecommunications may be a complement, or at least not a strong substitute for cities and face-to-face interactions. We also present simple models of learning in person, from a written source, or over the phone, and find that interactive communication dominates other forms of learning when ideas are complicated.
Handle: RePEc:nbr:nberwo:5562
Template-Type: ReDIF-Paper 1.0
Title: The Mexican Peso Crisis: Sudden Death or Death Foretold?
Classification-JEL: E52; F31
Author-Name: Jeffrey Sachs
Author-Name: Aaron Tornell
Author-Person: pto157
Author-Name: Andres Velasco
Note: IFM
Number: 5563
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5563
File-URL: http://www.nber.org/papers/w5563.pdf
File-Format: application/pdf
Publication-Status: published as Sachs, Jeffrey & Tornell, Aaron & Velasco, Andres, 1996. "The Mexican peso crisis: Sudden death or death foretold?," Journal of International Economics, Elsevier, vol. 41(3-4), pages 265-283, November.
Abstract: We argue that allowing for the possibility of a self-fulfilling panic helps in understanding several features of the recent Mexican crisis. Self-fulfilling expectations became decisive in generating a panic only after the government ran down gross reserves and ran up short-term dollar debt. We present a simple model to explain how and why multiple equilibria can occur for some levels of reserves or debt, but not for others. Lastly, we argue that the imperfect credibility of Mexican exchange rate policy made it advisable to follow more contractionary fiscal and monetary policies in 1994. Our model formalizes the reasons why this is so.
Handle: RePEc:nbr:nberwo:5563
Template-Type: ReDIF-Paper 1.0
Title: Parametric and Non-Parametric Approaches to Price and Tax Reform
Classification-JEL: H2; C4
Author-Name: Angus Deaton
Author-Person: pde30
Author-Name: Serena Ng
Author-Person: png6
Note: PE
Number: 5564
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5564
File-URL: http://www.nber.org/papers/w5564.pdf
File-Format: application/pdf
Publication-Status: published as Journal of the American Statistical Association, Vol. 93 (September 1998): 900-919.
Abstract: In the analysis of tax reform, when equity is traded off against efficiency, the measurement of the latter requires us to know how tax- induced price changes affect quantities supplied and demanded. In this paper, we present various econometric procedures for estimating how taxes affect demand. We examine advantages and disadvantages of parametric methods of tax reform analysis and suggest that the nonparametric `average derivate estimator' is a useful alternative. We apply both parametric and nonparametric methods to analyze possible price reform for foods in rural Pakistan, and discuss the issues that remain to be dealt with in empirical welfare analyses.
Handle: RePEc:nbr:nberwo:5564
Template-Type: ReDIF-Paper 1.0
Title: The Role of History in Bilateral Trade Flows
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: ITI
Number: 5565
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5565
File-URL: http://www.nber.org/papers/w5565.pdf
File-Format: application/pdf
Publication-Status: published as The Role of History in Bilateral Trade Flows, Barry Eichengreen, Douglas A. Irwin. in The Regionalization of the World Economy, Frankel. 1998
Abstract: This paper investigates the theory and evidence that history plays a role in shaping the direction of international trade. Because there are reasons to anticipate a positive correlation between the predominant direction of trade flows in the past and membership in preferential arrangements in the present, there may be a tendency to spuriously attribute to preferential arrangements the effects of historical factors and to exaggerate the influence of the former. Thus, the standard gravity-model formulation, which neglects the role of historical factors, suffers from omitted-variables bias. We illustrate these points by analyzing the evolution of trade between 1949 and 1964. We find that historical factors exercise an important influence on trade even after controlling for the arguments of the standard gravity model.
Handle: RePEc:nbr:nberwo:5565
Template-Type: ReDIF-Paper 1.0
Title: How Much Does Sorting Increase Inequality?
Classification-JEL: D31; D91
Author-Name: Michael Kremer
Author-Person: pkr20
Note: EFG
Number: 5566
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5566
File-URL: http://www.nber.org/papers/w5566.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics (February 1997): 15-139.
Abstract: Social commentators from William Julius Wilson to Charles Murray have argued that increased sorting of people into internally homogeneous" neighborhoods,schools, and marriages is spurring long-run inequality. Cali- bration of a formal model suggests that these fears are misplaced. In order to increase the steady-state standard deviation of education by one percent, the correlation between neighbors' education would have to double, or the correlation between spouses' education would have to increase by one-third. In fact, both correlations have declined slightly over the past few decades. Sorting has somewhat more significant effects on intergenerational mobility than on inequality."
Handle: RePEc:nbr:nberwo:5566
Template-Type: ReDIF-Paper 1.0
Title: Do Workplace Smoking Bans Reduce Smoking?
Classification-JEL: J28; I18
Author-Name: William N. Evans
Author-Person: pev28
Author-Name: Matthew C. Farrelly
Author-Name: Edward Montgomery
Note: EH LS
Number: 5567
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5567
File-URL: http://www.nber.org/papers/w5567.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89, no. 5 (September 1999): 729-747.
Abstract: In recent years there has been a heightened public concern over the potentially harmful effects of environmental tobacco smoke (ETS). In response, smoking has been banned on many jobs. Using data from the 1991 and 1993 National Health Interview Survey and smoking supplements to the September 1992 and May 1993 Current Population Survey, we investigate whether these workplace policies reduce smoking prevalence and smoking intensity among workers. Our estimates suggest that workplace bans reduce smoking prevalence by 5 percentage points and average daily consumption among smokers by 10 percent. The impact of the ban is greatest for those with longer work weeks. Although workers with better health habits are more likely to work at establishments with workplace smoking bans, estimates from bivariate probit and two-stage least square equations suggest that these estimates are not subject to an omitted variables bias. The rapid increase in workplace bans can explain all of the recent sharp fall in smoking among workers relative to non-workers.
Handle: RePEc:nbr:nberwo:5567
Template-Type: ReDIF-Paper 1.0
Title: Abandoning the Nest Egg? 401(k) Plans and Inadequate Pension Saving
Classification-JEL: J32; D31
Author-Name: Andrew A. Samwick
Author-Person: psa395
Author-Name: Jonathan Skinner
Author-Person: psk23
Note: AG PE
Number: 5568
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5568
File-URL: http://www.nber.org/papers/w5568.pdf
File-Format: application/pdf
Publication-Status: published as Public Policy Towards Pensions, Schieber, Sylvester J. and John B. Shoven,eds., Cambridge: MIT Press, 1997, pp. 197-217.
Abstract: There has been rapid growth in `self-directed' pension programs such as the 401(k) plan. Because such plans are voluntary, there is concern that many workers neglecting to contribute will reach retirement with inadequate pension saving. First, we show that people who are eligible for 401(k)s, do not contribute to them, and have no alternative pension plan make up only 2-4 percent of the workforce. By contrast, nearly 50 percent of workers have no pension coverage at all. Imposing mandatory 3 percent or 5 percent contribution rates will improve retirement prospects among the lowest decile of pension- eligible, but would have small aggregate effects. Finally, restricting 401(k) withdrawals when the worker changes jobs could have a larger impact on retirement pension security.
Handle: RePEc:nbr:nberwo:5568
Template-Type: ReDIF-Paper 1.0
Title: Quality Change in Capital Goods and Its Impact on Economic Growth
Author-Name: Charles R. Hulten
Note: PR
Number: 5569
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5569
File-URL: http://www.nber.org/papers/w5569.pdf
File-Format: application/pdf
Publication-Status: Published as "Quality Change in the CPI: Some Missing Links", Challenge - the Magazine of Economic Affairs. Vol 40, no 2. (March-April 1997): 48-74.
Publication-Status: Published as "Quality Change in the CPI", The Federal Reserve Bank of St. Louis Review, Vol. 79, no. 3 (May/June 1997): 87-100.
Abstract: This paper argues that productivity puzzles like the Solow Paradox arise, in part, from the omission of an important dimension of the debate: the resource cost of achieving a given rate of technical change. A remedy is proposed in which a new parameter, defined as the cost elasticity of producing capital with respect to the rate of technical change, is introduced. This parameter is shown to be latent in the Hall-Jorgenson user-cost of capital, as well as in the Solow residual. It is also shown that an increase in the rate of embodied technical change may actually cause a decrease in the Solow residual, in the short run, if the parameter is greater than the ratio of the user cost to the corresponding asset price. Different values of the new parameter also correspond to different theories of technological innovation: the Solow-Swan and Cass-Koopmans assumption of costless technical change is consistent with a zero value of the cost elasticity parameter, while the model of endogenous growth with R&D externalities implies a larger value. Finally, the appropriate investment-good price deflator is shown to be a function of the cost-elasticity. When the parameter equals zero, no quality adjustment should be undertaken, but values greater than zero lead to a partial adjustment for quality change, and a value of one leads to a full correction.
Handle: RePEc:nbr:nberwo:5569
Template-Type: ReDIF-Paper 1.0
Title: Are Recessions Good For Your Health?
Classification-JEL: I12
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: EFG EH
Number: 5570
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5570
File-URL: http://www.nber.org/papers/w5570.pdf
File-Format: application/pdf
Publication-Status: published as Ruhm, Christopher J. "Are Recessions Good For Your Health?," Quarterly Journal of Economics, 2000, v115(2,May), 617-650.
Abstract: This study examines the relationship between economic conditions and health. Fixed-effect models are estimated using state level data for the 1972-1991 time period. Health is proxied by total and age- specific mortality rates, as well as by 10 particular causes of death. Total mortality and nine of the ten sources of fatalities exhibit a procyclical variation, with suicides representing the important exception. The fluctuations in mortality are larger for 20-44 year olds than for older individuals. The predicted relationship between personal incomes and health is quite weak and is sensitive to the choice of model specifications, time periods and dependent variables. These findings suggest the possible importance of cyclical variations in the time costs of medical care or healthy lifestyles and of negative health effects of job-holding.
Handle: RePEc:nbr:nberwo:5570
Template-Type: ReDIF-Paper 1.0
Title: Understanding the Postwar Decline in U.S. Saving: A Cohort Analysis
Classification-JEL: E21
Author-Name: Jagadeesh Gokhale
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: John Sabelhaus
Note: AG EFG PE
Number: 5571
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5571
File-URL: http://www.nber.org/papers/w5571.pdf
File-Format: application/pdf
Publication-Status: published as Brookings Papers On Economic Activity, No. 1, Washington, DC, 1996, pp. 315-390.
Abstract: Since 1980, the U.S. net national saving rate has averaged less than half the rate observed in the 1950s and 60s. This paper develops a unique cohort data set to study the decline in U.S. national saving. It decomposes postwar changes in U.S. saving into those due to changes in cohort-specific consumption propensities, those due to changes in the intergenerational distribution of resources, those due to changes in government spending on goods and services, and those due to changes in demographics. Our findings are striking. The decline in U.S. saving can be traced to two factors: The redistribution of resources from young and unborn generations with low or zero propensities to consume toward older generations with high consumption propensities, and a significant increase in the consumption propensities of older Americans. Most of the redistribution to the elderly reflects the growth in Social Security, Medicare, and Medicaid benefits. The increase in the elderly's consumption propensities may also reflect government policy, namely the fact that Social Security, Medicare, and Medicaid benefits are paid in the form of annuities and that, in the case of Medicare and Medicaid, the annuities are in-kind and must, therefore, be consumed.
Handle: RePEc:nbr:nberwo:5571
Template-Type: ReDIF-Paper 1.0
Title: Large Cash Transfers to the Elderly in South Africa
Classification-JEL: H3; J1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Angus Deaton
Author-Person: pde30
Note: AG PE
Number: 5572
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5572
File-URL: http://www.nber.org/papers/w5572.pdf
File-Format: application/pdf
Publication-Status: published as Economic Journal, Vol. 108, no. 450 (September 1998): 1330-1361.
Abstract: We examine the social pension in South Africa, where large cash sumsþabout twice the median per capita income of African householdsþare paid to people qualified by age but irrespective of previous contributions. We present the history of the scheme and use a 1993 nationally representative survey to investigate the redistributive consequences of the transfers, documenting who receives the pensions, their levels of living, and those of their families. We also look at behavioral effects, particularly the effects of the cash receipts on the allocation of income to food, schooling, transfers, and savings. Two methodological issues run through our analysis. The first is the danger of interpreting simple correlations and regressions without adequate consideration of likely biases. The second is the problem of measuring the effects of a program that is determined by individual or household characteristics. We examine both in the context of the South African pension. Our results are consistent with the view that pension income is spent in much the same way as other income, and that a rand is a rand, regardless of its source.
Handle: RePEc:nbr:nberwo:5572
Template-Type: ReDIF-Paper 1.0
Title: Debt and Monetary Policy: The Policy Issues
Classification-JEL: E5; E6
Author-Name: Rudi Dornbusch
Note: IFM ME
Number: 5573
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5573
File-URL: http://www.nber.org/papers/w5573.pdf
File-Format: application/pdf
Publication-Status: published as Calvo, Guillermo and Mervyn King. The debt burden and its consequences for monetary policy: Proceedings of a conference held by the International Economic Association at the Deutsche Bundesbank, Frankfurt, Germany, IEA Conference Volume, no. 118. New York: St. Martin's Press; London: Macmillan Press; in association with the International Economic Association, 1998.
Abstract: The paper explores the implications of high debt for monetary policy. In Europe, debt (and deficits) play a special role at present in the run up to Maastricht because large debts are seen as a threat to the integrity of the new European money. The paper reviews two historical episodes-- the German, UK, and French experience in the 1920s and the US debt liquidation of the 1950-1980 period. The theoretical review focuses on hypotheses of Keynes, Clark and Sargent- Wallace. The paper adds to the range of concerns private balance sheet vulnerability.
Handle: RePEc:nbr:nberwo:5573
Template-Type: ReDIF-Paper 1.0
Title: Strategic Export Subsidies and Reciprocal Trade Agreements: The Natural Monopoly Case
Classification-JEL: F12; F13
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 5574
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5574
File-URL: http://www.nber.org/papers/w5574.pdf
File-Format: application/pdf
Publication-Status: published as Japan and the World Economy, Vol. 9, issue 4 (1997).
Abstract: Why do governments seek restrictions on the use of export subsidies through reciprocal trade agreements such as GATT? With existing arguments, it is possible to understand GATT's restrictions on export subsidies as representing an inefficient victory of the interests of exporting governments over the interests of importing governments. However, to our knowledge, there does not exist a formal theoretical treatment that provides circumstances under which GATT's restrictions on export subsidies can be given a world-wide efficiency rationale. In this paper, we offer one such treatment in the context of a natural monopoly market. We emphasize that subsidy competition between governments can serve to coordinate the entry decisions of firms, finding that consumers in the importing countries may suffer if the coordination afforded exporters by government subsidy programs does more to prevent entry than to promote it. In such circumstances, we show that the existence of export subsidy programs can lead to inefficiencies, and importing countries and the world as a whole can be better off when such programs are banned.
Handle: RePEc:nbr:nberwo:5574
Template-Type: ReDIF-Paper 1.0
Title: Inflation and the Growth Rate of Output
Classification-JEL: E31
Author-Name: Christina D. Romer
Author-Person: pro407
Note: EFG ME
Number: 5575
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5575
File-URL: http://www.nber.org/papers/w5575.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "Why Did Prices Rise in the 1930's") Journal of Economic History, Vol. 59 (March 1999): 167-199.
Abstract: This paper shows that inflation has depended strongly on the growth rate of output for most of the twentieth century. Only in recent years has the deviation of output from trend become the predominant determinant of price behavior. The paper also shows that the growth rate effect works primarily through materials prices, and that the declining importance of materials can explain why the growth rate effect has weakened over time. Finally, the paper shows that the growth rate effect can explain why prices rose in the mid- and late- 1930s despite the fact that output was substantially below trend.
Handle: RePEc:nbr:nberwo:5575
Template-Type: ReDIF-Paper 1.0
Title: Financial Crises in Emerging Markets: The Lessons from 1995
Author-Name: Jeffrey Sachs
Author-Name: Aaron Tornell
Author-Person: pto157
Author-Name: Andres Velasco
Note: IFM
Number: 5576
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5576
File-URL: http://www.nber.org/papers/w5576.pdf
File-Format: application/pdf
Publication-Status: published as Brookings Papers on Economic Activity, 1996, No. 1 (vol. 27): 147-199
Abstract: In this paper we examine closely the financial events following the Mexican peso devaluation to uncover new lessons about the nature of financial crises. We explore the question of why, during 1995, some emerging markets were hit by financial crises while others were not. To this end, we ask whether there are some fundamentals that help explain the variation in financial crises across countries or whether the variation just reflects contagion. We present a simple model identifying three factors that determine whether a country is more vulnerable to suffer a financial crisis: a high real exchange rate appreciation, a recent lending boom, and low reserves. We find that for a set of 20 emerging markets, differences in these fundamentals go far in explaining why during 1995 some emerging markets were hit by financial crises while others were not. We also find that alternative hypotheses that have been put forth to explain such crises often do not seem to be supported by the data, such as high current account deficits, excessive capital inflows and loose fiscal policies.
Handle: RePEc:nbr:nberwo:5576
Template-Type: ReDIF-Paper 1.0
Title: Costly Information in Firm Transformation, Exit, or Persistent Failure
Classification-JEL: 033
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Author-Name: Michael R. Darby
Note: PR
Number: 5577
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5577
File-URL: http://www.nber.org/papers/w5577.pdf
File-Format: application/pdf
Publication-Status: published as American Behavioral Scientist, vol. 39, no. 8, August 1996.
Abstract: Firms invest differentially in the intellectual human capital required to recognize, evaluate, and utilize technological breakthroughs occurring outside the firm. Such differential investment has been crucial in explaining which incumbent pharmaceutical firms have successfully transformed their technological identities in response to the biotechnological revolution and which are threatened by persistent low performance. While all incumbent firms lagged the dedicated new biotechnology firms in adopting the new drug-discovery technology, firms with higher R&D expenditures before the biotech revolution were more likely to successfully adopt the new techniques and likely to do so earlier. Failure to adopt the new techniques was associated with lower performance compared to firms adopting more fully and faster.
Handle: RePEc:nbr:nberwo:5577
Template-Type: ReDIF-Paper 1.0
Title: Multilevel "General Policy Equilibria": Evidence from the American Unemployment Insurance Tax Ceiling
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Author-Name: David Scoones
Author-Person: psc273
Note: LS
Number: 5578
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5578
File-URL: http://www.nber.org/papers/w5578.pdf
File-Format: application/pdf
Publication-Status: published as "Policy Equilibria in a Federal System: The Effects of Higher Tax Ceilings for Unemployment Insurance" Hamermesh, D. S.; Scoones, W. D.; Journal of Public Economics, November 1999, v. 74, iss. 2, pp. 191-213
Abstract: In a large variety of multilevel political systems changes imposed by a higher authority alter the equilibrium panoply of lower- level policies. The new equilibrium depends on the type of change imposed and on the relative strengths of and differences among interested parties at the lower level. As an example we describe how the equilibrium parameters of American states' unemployment insurance (UI) systems are changed when the federal government raises the minimum annual earnings on which employers are taxed to finance UI benefits. Even though benefits determine total taxes at a point in time within state systems, bargaining among the interested parties alters the equilibrium level of benefits and taxes. We estimate a `difference-in-differences' model describing total system costs in those states where federal increases in 1972, 1978 and 1983 forced increases in the tax ceiling. Holding constant changes in interstate differences in unemployment, where the federal constraint was binding costs rose roughly 20 percent above where they would have been. The increase was larger in those states where unionism, a measure of workers' legislative power, was greater. The theoretical model and the implied empirical analysis suggest themselves as examples for future research on a variety of topics in labor economics, public finance and international trade.
Handle: RePEc:nbr:nberwo:5578
Template-Type: ReDIF-Paper 1.0
Title: Inflation Targeting in Canada, New Zealand, Sweden, the United Kingdom, and in General
Classification-JEL: E52; D58
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 5579
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5579
File-URL: http://www.nber.org/papers/w5579.pdf
File-Format: application/pdf
Abstract: This paper begins with a description of the inflation targeting arrangements currently in place in the four above-mentioned countries and their performance records through mid-1995 are reviewed. It is argued, however, that too little time has passed for conclusions to be drawn, so that tentative evaluations of inflation targeting need to be based on theoretical analysis and more generalized historical experiences. Accordingly, two alternative rationalizations are considered, one stemming from the literature on dynamic inconsistency and the other based on more pragmatic considerations. In addition, it is asked whether some other nominal magnitude might be preferable as a target variable and the issue of growth-rate versus growing-level target paths is addressed.
Handle: RePEc:nbr:nberwo:5579
Template-Type: ReDIF-Paper 1.0
Title: Sex-Based Differences in School Content and the Male/Female Wage Gap
Classification-JEL: J16
Author-Name: Charles Brown
Author-Person: pbr341
Author-Name: Mary Corcoran
Note: LS
Number: 5580
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5580
File-URL: http://www.nber.org/papers/w5580.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Charles and Mary Corcoran. "Sex-Based Differences In School Content And The Male/Female Wage Gap," Journal of Labor Economics, 1997, v15(3,Jul), Part 1, 431-465.
Abstract: In high school and in college, men and women take significantly different courses. Using data from the Survey of Income and Program Participation and the National Longitudinal Study Class of 1972, we relate these differences in school content to sex differences in adult wages. Differences in field of highest degree account for a significant part of the male-female wage gap among college graduates, but differences in coursework account for very little of the equally large wage gap between men and women with less schooling. We find little consistent evidence that men receive larger rewards for taking traditionally male rather than traditionally female courses and majors, though there is some indication of this for college graduates.
Handle: RePEc:nbr:nberwo:5580
Template-Type: ReDIF-Paper 1.0
Title: How the Bundesbank Conducts Monetary Policy
Classification-JEL: E5
Author-Name: Richard Clarida
Author-Person: pcl69
Author-Name: Mark Gertler
Author-Person: pge11
Note: IFM ME
Number: 5581
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5581
File-URL: http://www.nber.org/papers/w5581.pdf
File-Format: application/pdf
Publication-Status: published as Reducing Inflation: Motivation and Strategy, C. Romer and D. Romer, eds.(Chicago: University of Chicago Press, 1997)
Publication-Status: published as How the Bundesbank Conducts Monetary Policy, Richard H. Clarida, Mark Gertler. in Reducing Inflation: Motivation and Strategy, Romer and Romer. 1997
Abstract: This paper analyzes German monetary policy in the post-Bretton Woods era. Despite the public focus on monetary targeting, in practice, German monetary policy involves the management of short term interest rates, as it does in the United States. Except during the mid to late 1970s, the Bundesbank has aggressively adjusted interest rates to achieve and maintain low inflation. The performance of the real economy, however, also influences its decision-making. Our formal analysis suggests that the Bundesbank has adjusted short term interest rates according to a modified version of the feedback rule that Taylor (1994) has used to characterize the behavior of the Federal Reserve Board under Alan Greenspan.
Handle: RePEc:nbr:nberwo:5581
Template-Type: ReDIF-Paper 1.0
Title: Trade-Induced Investment-led Growth
Classification-JEL: F43; F12
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Elena Seghezza
Author-Person: pse396
Note: ITI IFM
Number: 5582
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5582
File-URL: http://www.nber.org/papers/w5582.pdf
File-Format: application/pdf
Publication-Status: published as Seghezza, Elena & Baldwin, Richard E., 2008. "Testing for Trade-Induced Investment-Led Growth," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 61(2-3), pages 507-537.
Abstract: This paper presents five theoretical openness-and-growth links that can account for trade-induced investment-led growth. The links are all demonstrated with neoclassical growth models developed in the context of trade models that allow for imperfect competition and scale economies. This sort of old-growth-theory-in-a-new-trade-model has not been thoroughly explored in the literature since the profession skipped from old-growth-old-trade models straight to new-growth-new- trade models. Nonetheless, such models are necessary to explain several key aspects of the econometric evidence on trade and growth. For example, cross-country data suggests that openness influences growth only via its effect on investment, and suggests that openness promotes investment in all countries whatever the capital-intensive of their exports (contrary to predictions of the old-growth-old-trade models).
Handle: RePEc:nbr:nberwo:5582
Template-Type: ReDIF-Paper 1.0
Title: Unequal Societies
Classification-JEL: E62; I22
Author-Name: Roland Benabou
Author-Person: pbe27
Note: EFG
Number: 5583
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5583
File-URL: http://www.nber.org/papers/w5583.pdf
File-Format: application/pdf
Publication-Status: published as (Published with new title- Unequal Societies: Income Distribution and the Social Contract) American Economic Review, Vol. 90, no. 1 (March 2000): 96-129.
Abstract: This paper aims to explain the significant variations in the social contract observed across nations. It shows how countries with similar technologies and preferences, as well as equally democratic political systems, can sustain very different average and marginal tax rates. Similarly, it provides an explanation for the striking difference between the US and European systems of education finance or health insurance. The underlying mechanism operates as follows. With imperfect credit and insurance markets some redistributive policies can have a positive effect on aggregate output, growth, or more generally ex-ante welfare. Examples considered here include social insurance, progressive taxation combined with investment subsidies, and public education. Aggregate efficiency gains imply very different political economy consequences from those of standard models: the extent of political support for such redistributive policies decreases with the degree of inequality, at least over some range. This can generate a negative correlation between inequality and growth, as found in the data, without the usual feature that transfers increase with inequality, which is not supported empirically. Moreover, capital market imperfections make future earning a function of current resources. Combined with the politics of redistribution this creates the potential for multiple steady-states, with mutually reinforcing high inequality and low redistribution, or vice-versa. Temporary shocks to the distribution of income or the political system can then have permanent effects.
Handle: RePEc:nbr:nberwo:5583
Template-Type: ReDIF-Paper 1.0
Title: Corporate Ownership Structures: Private versus Social Optimality
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Luigi Zingales
Note: CF LE
Number: 5584
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5584
File-URL: http://www.nber.org/papers/w5584.pdf
File-Format: application/pdf
Abstract: This paper analyzes the inefficiencies that might arise in the ownership structure chosen at the initial public offering stage. We show that, contrary to what is commonly believed, the desire of initial owners to maximize their proceeds leads them to choices that, although privately optimal, may be socially inefficient. This distortion tends to be in the direction of excessive incidence of controlling shareholder structures and excessive divestment of cash flow rights. Our analysis has far-reaching policy implications for dual class stock, stock pyramiding, sale of control rules, and public offerings of minority shares. Among its positive implications, our analysis suggests reasons for the substantial differences in the incidence of control blocks across different countries.
Handle: RePEc:nbr:nberwo:5584
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of Franchise Contracting: Evidence from Panel Data
Classification-JEL: L14; L20
Author-Name: Francine Lafontaine
Author-Person: pla92
Author-Name: Kathryn L. Shaw
Author-Person: psh162
Note: IO
Number: 5585
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5585
File-URL: http://www.nber.org/papers/w5585.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 107, no. 5 (October 1999): 1041-1080.
Abstract: In this paper, we model the determinants of franchise contract terms, namely royalty rates and franchise fees, using a unique panel data set of about 1000 franchisors for the period 1980-1992. We focus on the extent to which firms adjust the terms of their contracts as they become better established, and find that adjustment is relatively infrequent and that firms do not systematically raise or lower their royalty rates or franchise fees when they do adjust them. These results tend to refute a number of existing theories of franchising that are based on risk-sharing, asymmetric information, and certain incentive structures, but support those based on franchisor opportunism and to some extent double-sided moral hazard. Our results also suggest that when industrial organization economists do not have access to panel data, their work may well suffer from the omitted variable bias caused by unobserved firm effects.
Handle: RePEc:nbr:nberwo:5585
Template-Type: ReDIF-Paper 1.0
Title: Budget Institutions and Fiscal Performance in Latin America
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Ricardo Hausmann
Author-Person: pha552
Author-Name: Rudolf Hommes
Author-Name: Ernesto Stein
Author-Person: pst501
Note: PE ME
Number: 5586
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5586
File-URL: http://www.nber.org/papers/w5586.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Development Economics, Vol. 59, no. 2 (August 1999): 253-273.
Abstract: In this paper we collect detailed information on the budget institutions of Latin American countries. We classify these institutions on a `hierarchical'/'collegial' scale, as a function of their transparency and the existence of legislative constraints on the deficit. We then show that `hierarchical' and transparent procedures have been associated with more fiscal discipline in Latin America in the eighties and early nineties.
Handle: RePEc:nbr:nberwo:5586
Template-Type: ReDIF-Paper 1.0
Title: A Scorecard for Indexed Government Debt
Classification-JEL: G12; E44
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Robert J. Shiller
Author-Person: psh69
Note: AP EFG ME
Number: 5587
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5587
File-URL: http://www.nber.org/papers/w5587.pdf
File-Format: application/pdf
Publication-Status: published as A Scorecard for Indexed Government Debt, John Y. Campbell, Robert J. Shiller. in NBER Macroeconomics Annual 1996, Volume 11, Bernanke and Rotemberg. 1996
Abstract: Within the last five years, Canada, Sweden and New Zealand have joined the ranks of the United Kingdom and other countries in issuing government bonds that are indexed to inflation. Some observers of the experience in these countries have argued that the United States should follow suit. This paper provides an overview of the issues surrounding debt indexation, and it tries to answer three empirical questions about indexed debt. First, how different would the returns on indexed bonds be from the returns on existing US debt instruments? Second, how would indexed bonds affect the government's average financing costs? Third, how might the Federal Reserve be able to use the information contained in the prices of indexed bonds to help formulate monetary policy? The paper concludes with a more speculative discussion of the possible consequences of increased use of indexed debt contracts by the private sector.
Handle: RePEc:nbr:nberwo:5587
Template-Type: ReDIF-Paper 1.0
Title: Investor Reaction to Salient News in Closed-End Country Funds
Classification-JEL: G12
Author-Name: Peter Klibanoff
Author-Name: Owen Lamont
Author-Name: Thierry A. Wizman
Note: AP
Number: 5588
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5588
File-URL: http://www.nber.org/papers/w5588.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 53, no. 2 (April 1998): 673-699.
Abstract: We provide a model of closed-end fund pricing which includes investors who do not form expectations correctly and allows for salient country-specific news to affect this expectation formation process. We use panel data on prices and net asset values of closed- end country funds to examine investor reaction to news that affects fundamentals, and measure the response of the idiosyncratic change in fund prices to the idiosyncratic change in fund asset values. In a typical week, US prices underreact to changes in foreign fundamentals; the (short-run) elasticity of price with respect to asset value is significantly less than one. In weeks with major news (relevant to the specific country) appearing on the front page of The New York Times, prices react much more to fundamentals; the elasticity of price with respect to asset value is closer to one. These results are roughly consistent with the hypothesis that major news events lead some investors who normally lag behind in updating their expectations to temporarily react more quickly.
Handle: RePEc:nbr:nberwo:5588
Template-Type: ReDIF-Paper 1.0
Title: Tax Policy and the Activities of Multinational Corporations
Classification-JEL: H87; F23
Author-Name: James R. Hines, Jr.
Author-Person: phi111
Note: ITI PE
Number: 5589
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5589
File-URL: http://www.nber.org/papers/w5589.pdf
File-Format: application/pdf
Publication-Status: published as in Alan J. Auerbach, ed. Fiscal Policy: Lessons From Economic Research(Cambridge, MA: MIT Press, 1997), pp.401-445.
Abstract: This paper reviews quantitative studies of the impact of international tax rules on the financial and real behavior of multinational firms. The evidence, much of it recent, indicates that taxation significantly influences foreign direct investment, corporate borrowing, transfer pricing, dividend and royalty payments, R&D activity, exports, bribe payments, and location choices. While taxes appear to influence a wide range of activity, the literature does not offer many subtle tests designed to distinguish different theories of the effects of taxation on multinational firms. The paper evaluates the reliability of existing evidence and its implications for the design of international tax policy.
Handle: RePEc:nbr:nberwo:5589
Template-Type: ReDIF-Paper 1.0
Title: Mismeasurement in the Consumer Price Index: An Evaluation
Classification-JEL: C82; E31
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Author-Name: David W. Wilcox
Author-Person: pwi165
Note: EFG ME PR
Number: 5590
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5590
File-URL: http://www.nber.org/papers/w5590.pdf
File-Format: application/pdf
Publication-Status: published as Mismeasurement in the Consumer Price Index: An Evaluation, Matthew D. Shapiro, David W. Wilcox. in NBER Macroeconomics Annual 1996, Volume 11, Bernanke and Rotemberg. 1996
Abstract: A number of analysts have claimed recently that the consumer price index overstates the annual increase in the cost of living. This paper develops a framework for studying measurement problems in the consumer price index and systematically analyzes the available evidence concerning the magnitude of these problems. It concludes that the CPI overstates increases in the cost of living. The evidence suggests that the bias is centered on 1.0 percentage point per year. The extent of this bias is not known exactly. To take into account this uncertainty, the estimated bias is presented in terms of a probability distribution rather than a point estimate or range. We estimate that there is a 10 percent chance that the bias is less than 0.6 percentage point and a 10 percent chance that it is greater than 1.5 percentage points per year. CPI procedures overstate the rate of inflation for medical procedures that are subject to technological improvement. To illustrate this point and to show how better to measure medical care prices, the paper presents a prototypical price index for cataract surgery. This price index grows much more slowly than a price index for cataract surgery constructed using the methodology of the CPI. The paper discusses implications of CPI mismeasurement for monetary and fiscal policy as well as for other official statistics. It also offers some suggestions for improving the CPI.
Handle: RePEc:nbr:nberwo:5590
Template-Type: ReDIF-Paper 1.0
Title: Public Policy for Health Care
Classification-JEL: I11; I18
Author-Name: David M. Cutler
Author-Person: pcu64
Note: AG EH PE
Number: 5591
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5591
File-URL: http://www.nber.org/papers/w5591.pdf
File-Format: application/pdf
Publication-Status: published as A.Auerbach, ed., Fiscal Policy: Lessons From Economic Research, Cambridge, MA: MIT Press, 1997.
Abstract: This paper reviews the public sector role in the provision of health care. A first role of the government is to use tax policy to correct externalities associated with individual behaviors. Estimates suggest that the external effects of many `sins' such as alcohol consumption are greater than current taxes on these goods. A second role of the government is to correct distortions in markets for medical care and health insurance. Markets for health insurance have traditionally not offered a choice between cost and the generosity of benefits. As a result, there have been incentives for excessive technological development, particularly technologies that increase spending. Once technologies have diffused widely, they are overutilized. Policies to increase choice in insurance markets could increase welfare, provided they limit segmentation on the basis of risk.
Handle: RePEc:nbr:nberwo:5591
Template-Type: ReDIF-Paper 1.0
Title: Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border
Classification-JEL: F22
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Antonio Spilimbergo
Author-Person: psp16
Note: ITI
Number: 5592
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5592
File-URL: http://www.nber.org/papers/w5592.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89 (1999): 1337-1357.
Abstract: We examine illegal immigration in the United States from Mexico over the period 1976-1995. One challenge is that we do not observe the number of individuals that attempt to enter the United States illegally; we only observe the number of individuals apprehended attempting to cross the U.S.-Mexico border illegally. Based on a simple migration model, we postulate the existence of an apprehensions function, which expresses apprehensions at the border as a function of illegal attempts to cross the border and U.S. border-enforcement effort. We estimate a reduced-form apprehensions function using monthly data on apprehensions at the U.S.-Mexico border, person hours the U.S. Border Patrol spends policing the border, and wages in the United States and Mexico. We find that a 10% decrease in the Mexican real wage leads to a 7.5% to 8.8% increase in apprehensions at the border. Under plausible conditions this is a lower bound for the effect of the Mexican wage on attempted illegal immigration. It is the purchasing power of U.S. wages in Mexico, not the purchasing power of U.S. wages in the United States, that matters for border apprehensions, suggesting that migrants expect to maintain ties with Mexico. Border apprehensions are higher in the month following a large devaluation of the peso and higher when the change in the Mexican real wage is negative. Each additional hour the U.S. Border Patrol spends policing the border yields an additional 0.25 to 0.33 apprehensions.
Handle: RePEc:nbr:nberwo:5592
Template-Type: ReDIF-Paper 1.0
Title: Implementing Market Access
Classification-JEL: F12; F13
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Suddhasatwa Roy
Author-Name: Marie Thursby
Author-Person: pth283
Note: ITI
Number: 5593
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5593
File-URL: http://www.nber.org/papers/w5593.pdf
File-Format: application/pdf
Publication-Status: published as Review of International Economics, Vol.6, no.4 (1998): 529-544.
Abstract: The outcome of trade policies to increase access for foreign firms to the home country's market is shown to be sensitive to the implementation procedure used. The importance of the timing of moves between government and firms is highlighted by focusing on taxes and subsidies to implement minimum market share requirements. Both taxes and subsidies chosen by the home government after firms have picked prices create powerful incentives for firms to raise prices - effects that are similar in nature to those found with quotas/VERs. We show that some degree of imprecision in implementing the target engenders less anticompetitive outcomes relative to perfect enforcement.
Handle: RePEc:nbr:nberwo:5593
Template-Type: ReDIF-Paper 1.0
Title: Policies for Green Design
Classification-JEL: D6; H2
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Wenbo Wu
Note: PE
Number: 5594
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5594
File-URL: http://www.nber.org/papers/w5594.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Environmental Economics and Management, Vol. 36, no. 2(September 1998): 131-148.
Abstract: We analyze alternative policies such as a disposal content fee, a subsidy for recyclable designs, unit pricing of household disposal, a deposit-refund system, and a manufacturer `take-back' requirement. In order to identify the problem being addressed, we build a simple general equilibrium model in which household utility depends on a negative externality from total waste generation, and in which firms use primary and recycled inputs to produce output that has two `attributes': packaging per unit output, and recyclability. If households pay the social cost of disposal, then they send the right signals to producers to reduce packaging and to design products that can more easily be recycled. But if local governments are constrained to collect household garbage for free, then households do not send the right signals to producers. The socially optimal attributes can still be achieved by a tax on producers' use of packaging and subsidy to producers' use of recyclable designs.
Handle: RePEc:nbr:nberwo:5594
Template-Type: ReDIF-Paper 1.0
Title: Accounting for Chinese Trade: Some National and Regional Considerations
Author-Name: K.C. Fung
Author-Person: pfu90
Note: ITI
Number: 5595
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5595
File-URL: http://www.nber.org/papers/w5595.pdf
File-Format: application/pdf
Publication-Status: published as K.C. Fung. "Accounting for Chinese Trade: Some National and Regional Considerations". Geography and Ownership as Bases for Economic Accounting. Edited by Robert E. Baldwin, Robert E. Lipsey, and J.David Richardson, Chicago, Ill: The Univ. of Chicago Press, 1998, pp. 173-200.
Publication-Status: published as Accounting for Chinese Trade: Some National and Regional Considerations, K. C. Fung. in Geography and Ownership as Bases for Economic Accounting, Baldwin, Lipsey, and Richardson. 1998
Abstract: China's trade has three features: high incidence of re-exports through Hong Kong, high degree of trade related to foreign investment, and large amount of `illegal' trade. Re-exports occur when imports to Hong Kong are consigned to a buyer in Hong Kong, who adds a markup, and exports the goods elsewhere without fundamentally changing the goods. Using U.S. data and accounting for re-exports, the U.S.-China trade balance has to be lowered by 35 percent. Foreign investments in China accounted for 45 percent of China's exports. Foreign investments include foreign direct investment (FDI) and foreign subcontracting. `Illegal' trade between China and Taiwan has been induced by Taiwan's `no direct trade' policy. Illegal trade such as smuggling and tariff evasion also affect China's trade with her other trading partners.
Handle: RePEc:nbr:nberwo:5595
Template-Type: ReDIF-Paper 1.0
Title: The Changing Face of Job Loss in the United States, 1981-1993
Classification-JEL: J63
Author-Name: Henry S. Farber
Note: LS
Number: 5596
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5596
File-URL: http://www.nber.org/papers/w5596.pdf
File-Format: application/pdf
Publication-Status: published as Farber, Henry S. "What Do We Know About Job Loss In The United States? Evidence From The Displaced Workers Survey, 1984-2004." FRB Chicago - Economic Perspectives, QII (2005): 13-28.
Abstract: I examine changes in the incidence and consequences of job loss by reported cause between 1981 and 1993 using data from Displaced Workers Surveys (DWS), conducted as part of the Current Population Survey (CPS) in even years since 1984. The overall rate of job loss is up somewhat in the 1990s. The increase in job loss is larger for older and more educated workers, but younger and less-educated workers continue to have the highest rates of job loss. Some significant changes are also found in the rate of job loss by reported reason. Next I examine the consequences of displacement for several post- displacement labor market outcomes, including the probability of employment, full-time/part-time status, the change in earnings, job stability, and self-employment status. The adverse consequences of job loss, which have always been substantial, do not appear to have changed systematically over time. More educated workers suffer less economic loss relative to income due to displacement than do the less educated. Self-employment appears to be an important response to displacement, and older workers and the more educated are more likely to turn to self-employment.
Handle: RePEc:nbr:nberwo:5596
Template-Type: ReDIF-Paper 1.0
Title: Crucial Issues Concerning Central Bank Independence
Classification-JEL: E52; D58
Author-Name: Bennett T. McCallum
Note: EFG ME
Number: 5597
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5597
File-URL: http://www.nber.org/papers/w5597.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 39, no. 1 (June 1997): 99-112.
Abstract: This paper argues, first, that it is inappropriate to presume that central banks will, in the absence of any tangible precommitment technology, inevitably behave in a `discretionary' fashion that implies an inflationary bias. Furthermore, there is no necessary tradeoff between `flexibility and commitment.' Second, to the extent that the absence of any precommitment technology is nevertheless a problem, it will apply to a consolidated central bank-plus-government entity as well as to the central bank alone. Thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency, they merely relocate it. Several implications are discussed.
Handle: RePEc:nbr:nberwo:5597
Template-Type: ReDIF-Paper 1.0
Title: Should Transfer Payments Be Indexed to Local Price Levels?
Classification-JEL: H21; R50
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Note: PE
Number: 5598
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5598
File-URL: http://www.nber.org/papers/w5598.pdf
File-Format: application/pdf
Publication-Status: published as Glaeser, E. L. "Should Transfer Payments Be Indexed To Local Price Levels?," Regional Science and Urban Economics, 1998, v28(1,Jan), 1-20.
Abstract: This paper examines the optimal location-based redistribution policy and shows that adjustment for local price levels is occasionally optimal, but never for the reasons suggested by the popular press. First, the existence of a spatial equilibrium suggests that utility levels will be equalized across space, so there is little equity rationale for indexing transfers to local prices. Second, since transfers to high cost areas buy less than transfers to low cost areas, it is in fact less efficient to transfer to high cost areas. However, even though migration ensures that utilities are equalized across space, marginal utilities of income will not necessarily be equalized, and since optimal transfer policy equalizes marginal,not total, utilities there is possibly a rationale for indexing to local pricelevels. Optimal indexing is a function of the coefficient of relative risk aversion, the elasticity of migration with respect to transfer differences across space and the degree to which higher amenities in high cost areas increase or decrease the marginal utility of income. Given my best parameter estimates, a one percent increase in local prices should lead to a .5 percent increase in transfers, when transfers are 2/3 of total income. My estimates from current AFDC payments suggest that the current level of implicit indexing is too high to possibly be optimal.
Handle: RePEc:nbr:nberwo:5598
Template-Type: ReDIF-Paper 1.0
Title: Personal Retirement Saving Programs and Asset Accumulation: Reconciling the Evidence
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Steven F. Venti
Author-Name: David A. Wise
Author-Person: pwi45
Note: AG PE
Number: 5599
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5599
File-URL: http://www.nber.org/papers/w5599.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, vol. 10, no. 4, pp. 91-112, Fall 1996.
Publication-Status: published as Frontiers in the Economics of Aging. Wise, David,ed.pp. 23-124, Chicago: University of Chicago Press, 1998)
Publication-Status: published as Personal Retirement Saving Programs and Asset Accumulation: Reconciling the Evidence, James M. Poterba, Steven F. Venti. in Frontiers in the Economics of Aging, Wise. 1998
Abstract: Over the past several years, we have undertaken a series of analysies of the effect of IRA and 401(k) contributions on net personal saving. Saver hetero- geneity is the key impediment to determining the saving effect of these plans We emphasize that no single method can provide sure control for all forms of heterogeneity. Taken together, however, we believe that the analyses address the key complications presented by heterogeneity. In our view, the weight of the evidence, based on the many non-parametric approaches discussed here provides strong support for the view that contributions to IRA and 401(k) represent largely new saving. Some of the evidence is directed to the IRA program, some to the 401(k) plan, and some to both plans. Several other investigators have used different methods to consider the effect of these retirement saving programs on personal saving and in some cases have reached very different conclusions from ours. Thus we have devoted particular effort to trying to reconcile the results, explaining why different approaches, sometimes based on the same data, have led to different conclusions. In some instances, we believe the limitations of the methods used by others have undermined the reliability of the results. Particular attention is devoted to a recent paper by Gale and Scholz [1994] that is widely cited as demonstrating that IRAs have no saving effect. Based on our analysis of the data used by Gale and Scholz, we find that their conclusions are inconsistent with the raw data and their formal model does not provide reliable information on the extent of substitution.
Handle: RePEc:nbr:nberwo:5599
Template-Type: ReDIF-Paper 1.0
Title: Understanding Financial Crises: A Developing Country Perspective
Classification-JEL: F4; G2
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG ME
Number: 5600
Creation-Date: 1996-05
Order-URL: http://www.nber.org/papers/w5600
File-URL: http://www.nber.org/papers/w5600.pdf
File-Format: application/pdf
Abstract: This paper explains the puzzle of how a developing economy can shift from a path of reasonable growth before a financial crisis, as in Mexico in 1994, to a sharp decline in economic activity after a crisis occurs. It does so by outlining an asymmetric information framework for analyzing banking and finan- cial crises in developing countries. The asymmetric inforamtion framework shows why the banking sector is so important to the economy, and provides a rationale for bank regulation and supervision. This asymmetric information framework is then used to understand why banking and financial crises occur and why they can have such a devastating effect on the economy countries. The paper concludes by discussing policy implications for developing countries. An important theme is that an appropriate institutional structure is critical to preventing banking and financial crises in developing countries and to reducing their undesirable effects if they should occur.
Handle: RePEc:nbr:nberwo:5600
Template-Type: ReDIF-Paper 1.0
Title: The Effect of New Political Administration on Federal Government Productivity and Employment
Classification-JEL: H5; J23
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: PR
Number: 5601
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5601
File-URL: http://www.nber.org/papers/w5601.pdf
File-Format: application/pdf
Publication-Status: Published as "The Effect of Government Funding on Private Industrial Research and Development: A Re-Assessment", JINDE, Vol. 36, no. 1 (1987): 97-104. With Donald Siegel, published as "The Effect of Control Changes on the
Publication-Status: published as Productivity of U.S. Manufacturing Plants", JACF, Vol. 2, no. 2 (1989): 60- 67.
Abstract: There have been a number of econometric studies of the effect of changes in management and control on the productivity and employment of private,but not but not of public, enterprises. This paper examines the impact of changes in political administration on the productivity and employment of the entire executive branch of the U.S. government using data compiled under the Bureau of Labor Statistics' Federal Productivity Measurement Program. The estimates Measurement Program. The estimates indicate that the mean rate of productivity growth in the first year of administrations is 2.6 times as high as the mean growth in subsequent years. Also, employment growth is strictly increasing with respect to the administration's tenure: 95% of federal employment growth during the period 1967-94 occurred in the fourth or later years of political administrations, although administrations were that old only 36% of the time. These findings are broadly consistent with evidence about the private sector. They suggest that the inauguration of a new administration initially purges the executive branch, but as an administration's tenure increases, fat and inefficiency tend to accumulate.
Handle: RePEc:nbr:nberwo:5601
Template-Type: ReDIF-Paper 1.0
Title: Trade Credit: Theories and Evidence
Classification-JEL: G2; G3
Author-Name: Mitchell A. Petersen
Author-Person: ppe42
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: CF
Number: 5602
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5602
File-URL: http://www.nber.org/papers/w5602.pdf
File-Format: application/pdf
Publication-Status: published as Review of Financial Studies, Vol. 10, no. 3 (1997): 661-691.
Abstract: In addition to borrowing from financial institutions, firms may be financed by their suppliers. Although there are many theories explaining why non-financial firms lend money, there are few comprehensive empirical tests of these theories. This paper attempts to fill the gap. We focus on a sample of small firms whose access to capital markets may be limited. We find evidence that firms use trade credit relatively more when credit from financial institutions is not available. Thus while short term trade credit may be routinely used to minimize transactions costs, medium term borrowing against trade credit is a form of financing of last resort. Suppliers lend to firms no one else lends to because they may have a comparative advantage in getting information about buyers cheaply, they have a better ability to liquidate goods, and they have a greater implicit equity stake in the firm's long term survival. We find some evidence consistent with the use of trade credit as a means of price discrimination. Finally, we find that firms with better access to credit from financial institutions offer more trade credit. This suggests that firms may intermediate between institutional creditors and other firms who have limited access to financial institutions.
Handle: RePEc:nbr:nberwo:5602
Template-Type: ReDIF-Paper 1.0
Title: Are Affirmative Action Hires Less Qualified? Evidence from Employer-Employee Data on New Hires
Classification-JEL: J15; J16
Author-Name: Harry Holzer
Author-Person: pho162
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 5603
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5603
File-URL: http://www.nber.org/papers/w5603.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Vol. 17, no. 3 (July 1999): 534-569
Abstract: In this paper we use micro-level data on employers and employees to investigate whether Affirmative Action procedures lead firms to hire minority or female employees who are less qualified than workers who might otherwise be hired. Our measures of qualifications include the educational attainment of the workers hired (both absolutely and relative to job requirements), skill requirements of the job into which they are hired, and a variety of outcome measures that are presumably related to worker performance on the job. The analysis is based on a representative sample of over 3,200 employers in four major metropolitan areas in the U.S. Our results show some evidence of lower educational qualifications among blacks and Hispanics hired under Affirmative Action, but not among white women. Further, our results show little evidence of substantially weaker job performance among most groups of minority and female Affirmative Action hires.
Handle: RePEc:nbr:nberwo:5603
Template-Type: ReDIF-Paper 1.0
Title: Evidence on the Characteristics of Cross Sectional Variation in Stock Returns
Classification-JEL: G11; G12
Author-Name: Kent Daniel
Author-Name: Sheridan Titman
Author-Person: pti51
Note: CF
Number: 5604
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5604
File-URL: http://www.nber.org/papers/w5604.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, March 1997.
Abstract: Firm size and book-to-market ratios are both highly correlated with the returns of common stocks. Fama and French (1993) have argued that the association between these firm characteristics and their stock returns arises because size and book-to-market ratios are proxies for non-diversifiable factor risk. In contrast, the evidence in this paper indicates that the return premia on small capitalization and high book-to-market stocks does not arise because of the co-movements of these stocks with pervasive factors. It is the firm characteristics and not the covariance structure of returns that explain the cross-sectional variation in stock returns.
Handle: RePEc:nbr:nberwo:5604
Template-Type: ReDIF-Paper 1.0
Title: Why Do Firms Train? Theory and Evidence
Classification-JEL: D82; J24
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: LS
Number: 5605
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5605
File-URL: http://www.nber.org/papers/w5605.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 113 (February 1998): 79-119.
Abstract: This paper offers and tests a theory of training whereby workers do not pay for general training they receive. The crucial ingredient in our model is that the current employer has superior information about the worker's ability relative to other firms. This informational advantage gives the employer an ex post monopsony power over the worker which encourages the firm to provide training. We show that the model can lead to multiple equilibria. In one equilibrium quits are endogenously high, and as a result employers have limited monopsony power and are willing to supply only little training, while in another equilibrium quits are low and training high. We also derive predictions from our model not shared by other explanations of firm sponsored training. Using microdata from Germany, we show that the predictions of the specific human capital model are rejected, while our model receives support from the data.
Handle: RePEc:nbr:nberwo:5605
Template-Type: ReDIF-Paper 1.0
Title: The Returns to Computer Use Revisited: Have Pencils Changed the Wage Structure Too?
Classification-JEL: J3; O33
Author-Name: John E. DiNardo
Author-Person: pdi178
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: LS
Number: 5606
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5606
File-URL: http://www.nber.org/papers/w5606.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 112 (February 1997): 291-303.
Abstract: Are the large measured wage differentials associated with on-the-job computer use productivity gains or the result of unobserved heterogeneity? We examine this issue with three large cross-sectional surveys from Germany. First, we confirm that the estimated wage differentials associated with computer use in Germany are very similar to the U.S. differential. Second, using the same techniques we also measure large differentials for on-the-job use of calculators, telephones, pens or pencils, or for those who work while sitting down. Along with our reanalysis of the U.S. data these findings cast some doubt on the interpretation of the computer-use wage differential as reflecting productivity effects arising from the introduction of computers in the workplace.
Handle: RePEc:nbr:nberwo:5606
Template-Type: ReDIF-Paper 1.0
Title: Stock Market Yields and the Pricing of Municipal Bonds
Author-Name: N. Gregory Mankiw
Author-Name: James M. Poterba
Author-Person: ppo19
Note: AP EFG ME PE
Number: 5607
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5607
File-URL: http://www.nber.org/papers/w5607.pdf
File-Format: application/pdf
Abstract: This paper proposes an alternative to the traditional model for explaining the spread between taxable and tax-exempt bond yields. This alternative model is a special case of a general class of clientele models of portfolio choice and asset market equilibrium. In particular, we consider a setting with two types of investors, a taxable investor and a tax-exempt investor, who hold specialized bond portfolios. The tax-exempt investor holds only taxable bonds, and the taxable investor holds only tax-exempt bonds. Both investors hold equity, and the taxable and tax-exempt bond markets are linked through the equilibrium conditions governing equity holding and bond holding for each type of investor. In contrast to the traditional model, this alternative model has the potential to explain the small observed spread between taxable and tax-exempt yields. In addition, this model predicts that the yield spread between taxable and tax-exempt bonds should be an increasing function of the dividend yield on corporate stocks. Although the substantial changes in the tax code during the last four decades complicate the testing of this model, we find some support for the predicted relationship between the equity dividend yield and the yield spread between taxable and tax-exempt bonds.
Handle: RePEc:nbr:nberwo:5607
Template-Type: ReDIF-Paper 1.0
Title: Spousal Labor Supply as Insurance: Does Unemployment Insurance Crowd Outthe Added Worker Effect?
Classification-JEL: J64; J65
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Julie Berry Cullen
Author-Person: pcu44
Note: PE LS
Number: 5608
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5608
File-URL: http://www.nber.org/papers/w5608.pdf
File-Format: application/pdf
Publication-Status: published as JOLE (2000), forthcoming.
Abstract: We consider the role of spousal labor supply as insurance against spells of unemployment. Standard theory suggests that women should work more when their husbands are out of work (the Added Worker Effect or AWE), but there has been little empirical support for this contention. We too find little evidence of an AWE over the 1984-1993 period. We suggest that one reason for the absence of the AWE may be that unemployment insurance (UI) is providing a state-contingent income stream that counteracts the negative income shock from the husband's unemployment. We in fact find that increases in the generosity of UI lower labor supply among wives of unemployed husbands. Our results suggest that UI is crowding out a sizeable fraction of offsetting spousal earnings in response to unemployment spells, although even in the absence of a UI system the spousal response would only make up a small share of the associated reduction in family income. We also find evidence that families are making labor supply decisions in a life cycle context, since there are effects of UI on the labor supply of wives of employed husbands who face high unemployment risk. Yet, couples do not appear able to smooth the labor supply response to UI income flows equally over periods of employment and unemployment, suggesting the presence of liquidity constraints. Finally, wives in families with small children are more responsive to UI benefits in their labor supply decisions, which is consistent with the notion that they have a higher opportunity cost of market work.
Handle: RePEc:nbr:nberwo:5608
Template-Type: ReDIF-Paper 1.0
Title: The Wealth of Cohorts: Retirement Saving and the Changing Assets of Older Americans
Author-Name: Steven F. Venti
Author-Name: David A. Wise
Author-Person: pwi45
Note: AG PE
Number: 5609
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5609
File-URL: http://www.nber.org/papers/w5609.pdf
File-Format: application/pdf
Publication-Status: published as Schieber, S. and J. Shoven (ed.) Public Policy Towards Pensions. Twentieth Century Fund and MIT Press. 1997.
Abstract: Personal retirement accounts are becoming an increasingly important form of retirement saving. Using data from the Survey of Income and Program Participation, the paper considers the effect of this change on the assets of recent retirees and persons who are approaching retirement. Much of the analysis is based on comparisons of younger and older cohorts with different lengths of exposure to personal retirement saving programs. The findings suggest that personal retirement saving has already added substantially to the personal financial assets of older families. Projections imply that the personal financial assets of the cohort that will attain age 76 in 28 years will be almost twice as large as the personal financial assets of the cohort that attained age 76 in 1991. The results indicate also that to date there" has been little replacement of employer-provided pension saving with personal retirement saving. Together with evidence that personal financial saving is unrelated to changes in home equity, the results suggest that personal retirement saving will lead to an important increase in the overall wealth of the elderly.
Handle: RePEc:nbr:nberwo:5609
Template-Type: ReDIF-Paper 1.0
Title: Consumption and the Stock Market: Interpreting International Experience
Classification-JEL: G2
Author-Name: John Y. Campbell
Author-Person: pca54
Note: AP EFG ME
Number: 5610
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5610
File-URL: http://www.nber.org/papers/w5610.pdf
File-Format: application/pdf
Publication-Status: published as Swedish Economic Policy Review, Vol.3 (1996): 251-299.
Abstract: This paper reviews the behavior of stock prices in relation to consumption. The paper lists some important stylized facts that characterize US data, and relates them to recent developments in equilibrium asset pricing theory. Data from other countries are examined to see which features of the US experience apply more generally. The paper argues that to make sense of stock market behavior one needs a model in which investors' risk aversion is both high and varying, such as the external habit-formation model of Campbell and Cochrane (1995).
Handle: RePEc:nbr:nberwo:5610
Template-Type: ReDIF-Paper 1.0
Title: Keynesianism, Pennsylvania Avenue Style: Some Economic Consequences of the Employment Act of 1946
Classification-JEL: E6; N1
Author-Name: J. Bradford De Long
Note: DAE ME
Number: 5611
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5611
File-URL: http://www.nber.org/papers/w5611.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, Vol. 10, no. 3 (Summer 1996): 41-53
Abstract: The Employment Act of 1946 created the Council of Economic Advisers as an institution and serves as a convenient marker of a broader change in opinions: the assumption by the federal government of the role of stability the macro- economy. The magnitude of this shift should not be understated: before the Great Depression strong currents of macroeconomic theory held that stabiliza- tion policy was positively unwise. It solved problems in the present only by storing up deeper and more dangerous problems for the future. Yet as a result of the shift in opinions and sentiments marked by the 1946 Employment Act, no government since WWII has dared do anything other than let fiscal automatic stabilizers swing into action during recession. This may have been a significant force tending to moderate the post-WWII business cycle, but the bulk of the CEA's time and energy now and in the past has been devoted not to macroeconomic but to microeconomic issues. The CEA has been one of the few advocates of the public interest in allocative efficiency present in the government. The CEA has been more successful in its microeconomic role than many would have predicted ex ante. Its relative success can be traced to the staffing pattern set up by two strong early chairs Arthur Burns and Walter Heller who made sure that the CEA staff was largely composed of short-term appointees whose principal loyalties were to the discipline of economics and who were less vulnerable to the processes that block pressure for allocative efficiency in other parts of the government.
Handle: RePEc:nbr:nberwo:5611
Template-Type: ReDIF-Paper 1.0
Title: Foreign Direct Investment and Keiretsu: Rethinking U.S. and Japanese Policy
Author-Name: David E. Weinstein
Author-Person: pwe34
Note: ITI
Number: 5612
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5612
File-URL: http://www.nber.org/papers/w5612.pdf
File-Format: application/pdf
Publication-Status: published as The Effects of US Trade Protection and Promotion Policies, R. Feenstra, ed.pp. 81-116, (Chicago: University of Chicago Press, 1997).
Publication-Status: published as Foreign Direct Investment and Keiretsu: Rethinking U.S. and Japanese Policy, David E. Weinstein. in The Effects of US Trade Protection and Promotion Policies, Feenstra. 1997
Abstract: This paper focuses on two issues. First, a reexamination of the data on the level of foreign direct investment (FDI) in Japan suggests that foreign firms sell five to six times more in Japan than is commonly believed. Previous studies severely underestimated the stock of FDI in Japan due to poor data. Second, after finding that even after adjusting for various factors the level of FDI in Japan is still low, the paper explores explanations for this phenomenon. A second main conclusion is that government tax and financial policy continues to inhibit foreign takeovers through the promotion of stable shareholding.
Handle: RePEc:nbr:nberwo:5612
Template-Type: ReDIF-Paper 1.0
Title: Does It Pay To Attend An Elite Private College? Cross Cohort Evidence on the Effects of College Quality on Earnings
Classification-JEL: J21
Author-Name: Dominic J. Brewer
Author-Name: Eric Eide
Author-Person: pei11
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Note: LS
Number: 5613
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5613
File-URL: http://www.nber.org/papers/w5613.pdf
File-Format: application/pdf
Publication-Status: published as Brewer, Dominic J., Eric R. Eide and Ronald G. Ehrenberg. "Does It Pay To Attend An Elite Private College? A Cross-Cohort Evidence On The Effects Of College Type On Earnings?," Journal of Human Resources, 1999, v34(1,Winter), 104-123.
Abstract: While there is evidence of a substantial and rising labor market premium associated with college attendance, little is known about how this premium varies across institutions of different quality and across time. Previous research which has estimated the return to college quality has not taken into account that individuals likely select the type of college they attend based in part on the expected economic return and net costs. In this paper we explicitly model high school students' choice of college type (characterized by quality and control) based on individual and family characteristics (including ability and parental economic status), and an estimate of the net costs of attendance and expected labor market return. We estimate selectivity corrected outcome equations, using data from both the National Longitudinal Study of the High School Class of 1972 and High School and Beyond, which permit us to determine the effects of college quality on wages and earnings and how this effect varies across time. Even after controlling for selection effects there is strong evidence of significant economic return to attending an elite private institution, and some evidence that this premium has increased over time.
Handle: RePEc:nbr:nberwo:5613
Template-Type: ReDIF-Paper 1.0
Title: The Costs and Benefits of Fiscal Rules: Evidence from U.S. States
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Tamim Bayoumi
Author-Person: pba366
Note: ME PE
Number: 5614
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5614
File-URL: http://www.nber.org/papers/w5614.pdf
File-Format: application/pdf
Publication-Status: Published as "Together or Separately? Issues on the Costs and Benefits of Political and Fiscal Unions", European Economic Review, Vol. 39, nos. 3-4(1995).
Abstract: This paper shows that in American states balanced budget rules are effective in enforcing fiscal discipline but they have no costs in terms of increased output variability. More specifically, we show that tighter fiscal rules are associated with larger average surplus and lower cyclical variability of the budget balance. However, the lower flexibility of the budget balance does not affect state output variability.
Handle: RePEc:nbr:nberwo:5614
Template-Type: ReDIF-Paper 1.0
Title: Roe v. Wade and American Fertility
Classification-JEL: J13; I10
Author-Name: Phillip B. Levine
Author-Person: ple553
Author-Name: Douglas Staiger
Author-Person: pst466
Author-Name: Thomas J. Kane
Author-Name: David J. Zimmerman
Author-Person: pzi72
Note: EH
Number: 5615
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5615
File-URL: http://www.nber.org/papers/w5615.pdf
File-Format: application/pdf
Publication-Status: published as American Journal of Public Health, Vol. 89, no. 2 (1999): 199-203.
Abstract: We consider the effect of abortion legalization on births in the United States. A simple theoretical model demonstrates that the impact of abortion legalization on the birth rate is ambiguous, because both pregnancy and abortion decisions could be affected. We use variation in the timing of legalization across states in the early 1970's to estimate the effect of abortion on birth rates. Our findings indicate that states legalizing abortion experienced a 5% decline in births relative to other states. The decline among teens, women over 35, and nonwhite women was even greater: 13%, 8%, and 12% respectively. Out-of-wedlock births declined by twice as much as births in wedlock. If legalization in some states affected birth rates in neighboring states (through travel to obtain an abortion), comparing births between states will underestimate the actual reduction. Using more distant comparison states increases the estimated impact of abortion legalization on birth rates to about 8%. Applying this estimate to the current level of births, a complete recriminalization of abortion would result in 320,000 additional births per year.
Handle: RePEc:nbr:nberwo:5615
Template-Type: ReDIF-Paper 1.0
Title: Computer Use and Productivity Growth in Federal Government Agencies, 1987 to 1992
Classification-JEL: J23; J24
Author-Name: William Lehr
Author-Name: Frank R. Lichtenberg
Author-Person: pli76
Note: PR
Number: 5616
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5616
File-URL: http://www.nber.org/papers/w5616.pdf
File-Format: application/pdf
Publication-Status: Published as "Computer Use and Productivity Growth in US Federal Government Agencies, 1987-92", JINDE, Vol. 46, no. 2 (June 1998): 257-279.
Abstract: This paper examines trends in computer usage and the effect on productivity growth for a sample of federal government agencies over the period from 1987 to 1992. We link data from the Bureau of Labor Statistics (BLS) on the growth in real output per employee with data from a marketing research firm, Computer Intelligence (CI), on the growth in per capita computer assets for a sample of 44 federal agencies. The data show that computer usage increased dramatically and that there was a shift towards more powerful, lower cost, distributed systems and that usage diffused more extensively throughout the sampled agencies. These trends mirror, while perhaps lagging, those experienced by large private firms over the same period. From estimates of a Cobb-Douglas production function for government services, we derive an estimated output elasticity for computers of 0.06, which allows us to conclude that computers did contribute significantly to output growth, thereby refuting the Computer Productivity Paradox as it applies to the public sector. Computers do not appear to be responsible for the disappointing productivity performance of the service sector. Although the magnitude of our estimated elasticity suggests that the returns to computer investments exceeded those to other types of capital, our results are not conclusive. We also observe a positive correlation between increased computer usage and compensation growth which is consistent with skill-biased technical change.
Handle: RePEc:nbr:nberwo:5616
Template-Type: ReDIF-Paper 1.0
Title: Networks versus Markets in International Trade
Classification-JEL: F10
Author-Name: James E. Rauch
Author-Person: pra166
Note: ITI
Number: 5617
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5617
File-URL: http://www.nber.org/papers/w5617.pdf
File-Format: application/pdf
Publication-Status: published as "Networks Versus Markets in International Trade," Journal of International Economics, Vol. 48 (June 1999): 7-35.
Abstract: I propose a network/search view of international trade in differentiated products. I present evidence that supports the view that proximity and common language/colonial ties are more important for differentiated products than for products traded on organized exchanges in matching international buyers and sellers, and that search barriers to trade are higher for differentiated than for homogeneous products. I also discuss alternative explanations for the findings.
Handle: RePEc:nbr:nberwo:5617
Template-Type: ReDIF-Paper 1.0
Title: Trade and Search: Social Capital, Sogo Shosha, and Spillovers
Classification-JEL: F10; F13
Author-Name: James E. Rauch
Author-Person: pra166
Note: ITI
Number: 5618
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5618
File-URL: http://www.nber.org/papers/w5618.pdf
File-Format: application/pdf
Abstract: A network/search view of international trade in differentiated products is proposed. It is shown that this view can explain the importance of ethnic and extended family ties in trade, the success of diversified trading intermediaries such as Japan's sogo shosha, and the ubiquity of government export promotion policies such as subsidized trade missions.
Handle: RePEc:nbr:nberwo:5618
Template-Type: ReDIF-Paper 1.0
Title: Age Discrimination, Job Separation, and Employment Status of Older Workers: Evidence from Self-Reports
Classification-JEL: J18; J71
Author-Name: Richard W. Johnson
Author-Person: pjo267
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 5619
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5619
File-URL: http://www.nber.org/papers/w5619.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 32, no. 4 (Fall 1997).
Abstract: This paper explores the prevalence and consequences of age discrimination in the workplace by analyzing self-reports of discrimination by respondents in the National Longitudinal Survey of Older Men. Age discrimination was reported in seven percent of our cases, during the period 1966-1980. Workers with positive reports were much more likely to separate from their employer and less likely to remain employed than workers who report no age discrimination. The estimated effect of reported discrimination remains large and significant even when controlling for the existence of mandatory retirement provisions on the current job. These findings are generally robust to numerous attempts to correct the estimates for the inherent limitations of self-reported data, particularly the potential heterogeneity bias that arises from differences in the propensity to report discrimination, and the possibility that discrimination is reported in response to other negative labor market outcomes.
Handle: RePEc:nbr:nberwo:5619
Template-Type: ReDIF-Paper 1.0
Title: Does European Unemployment Prop up American Wages?
Classification-JEL: F11; J31
Author-Name: Donald R. Davis
Author-Person: pda33
Note: ITI
Number: 5620
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5620
File-URL: http://www.nber.org/papers/w5620.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review (June 1998).
Abstract: We consider trade between a flexible wage America and a rigid real wage Europe. In a benchmark case, a move from autarky to free trade doubles the European unemployment rate, while it raises the American unskilled wage to the high European level. Entry of the unskilled South to world markets raises unemployment in Europe. But Europe's commitment to the high wage completely insulates America from the shock. Immigration to America raises American income, but lowers European income dollar-for-dollar, while European unemployment rises one-for-one. We consider a stylized game of the choice of factor market institutions. Mitterand's Europe chooses a high minimum wage and Reagan's America chooses a flexible wage for the unskilled. Paradoxically, unskilled workers are worse off in Europe. Trade equalizes wages, but Europeans bear all of the unemployment required to sustain the high wage.
Handle: RePEc:nbr:nberwo:5620
Template-Type: ReDIF-Paper 1.0
Title: Trade Sensitivity, Technology, and Labor Displacement
Classification-JEL: F15; J68
Author-Name: John T. Addison
Author-Person: pad14
Author-Name: Douglas A. Fox
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: LS ITI
Number: 5621
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5621
File-URL: http://www.nber.org/papers/w5621.pdf
File-Format: application/pdf
Publication-Status: published as Southern Economic Journal, Vol. 66, no. 3 (January 2000): 682-699.
Abstract: We study the relationship between international trade, technology, and the probability and consequences of job displacement, using data on displaced workers as well as those at risk of job dislocation for 1984-86 and 1989-91. Workers employed in industries with elevated import shares and high levels of investment in computers appear to have increased rates of job loss, with the results for export penetration varying on the time period examined. These risks do not, however, translate into unfavorable postdisplacement labor market outcomes. Indeed, there is some evidence that individuals displaced from export-oriented sectors have fewer adjustment problems than the generality of dislocated workers, while those terminated from sectors investing heavily in computer technologies are more likely to retain health insurance coverage. That being said, our findings are frequently sensitive to the choice of specifications and time periods.
Handle: RePEc:nbr:nberwo:5621
Template-Type: ReDIF-Paper 1.0
Title: Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links
Classification-JEL: J23; M13
Author-Name: Thomas Dunn
Author-Name: Douglas Holtz-Eakin
Note: LS PE
Number: 5622
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5622
File-URL: http://www.nber.org/papers/w5622.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, vol. 18, no.2, (April, 2000), pp. 287-305.
Abstract: The environment for business creation is central to economic policy, as entrepreneurs are believed to be forces of innovation, employment and economic dynamism. We use data from the National Longitudinal Surveys (NLS) to investigate the relative importance of financial and human capital exploiting the variation provided by intergenerational links. Specifically, we estimate the impacts of parental wealth and human capital on the probability that an individual will make the transition from a wage and salary job to self-employment. We find that young men's own financial assets exert a statistically significant, but quantitatively modest effect on the transition to self-employment. In contrast, the capital of parents exerts a large influence. Parents' strongest effect runs not through financial means, but rather through human capital, i.e., the intergenerational correlation in self-employment. This link is even stronger along gender lines.
Handle: RePEc:nbr:nberwo:5622
Template-Type: ReDIF-Paper 1.0
Title: Affine Models of Currency Pricing
Classification-JEL: F31; G12
Author-Name: David Backus
Author-Person: pba242
Author-Name: Silverio Foresi
Author-Name: Chris I. Telmer
Author-Person: pte102
Note: AP IFM
Number: 5623
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5623
File-URL: http://www.nber.org/papers/w5623.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Volume 56: Issue 1 February 2001
Abstract: Perhaps the most puzzling feature of currency prices is the tendency for high interest rate currencies to appreciate, when the expectations hypothesis suggests the reverse. Some have attributed this forward premium anomaly to a time-varying risk premium, but theory has been largely unsuccessful in producing a risk premium with the requisite properties. We characterize the risk premium in a general arbitrage-free setting and describe the features a theory must have to account for the anomaly. In affine models, the anomaly requires either that state variables have asymmetric effects on state prices in different currencies or that we abandon the common requirement that interest rates be strictly positive.
Handle: RePEc:nbr:nberwo:5623
Template-Type: ReDIF-Paper 1.0
Title: Perceptions of Equity and the Distribution of Income
Classification-JEL: D63
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: EFG
Number: 5624
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5624
File-URL: http://www.nber.org/papers/w5624.pdf
File-Format: application/pdf
Publication-Status: published as Rotemberg, Julio J. "Perceptions Of Equity And The Distribution Of Income," Journal of Labor Economics, 2002, v20(2,Apr), Part 1, 249-288.
Abstract: This paper builds a simple model where there is a link between employees' perception of the fairness of employers and the actual distribution of income. Wages are based in part on employers' assessments of the productivity of individual employees. I show that the equilibrium distribution of income depends on the beliefs of employees concerning the accuracy of these evaluations. I give conditions under which the distribution of income across employees of the same vintage is more equal if employees believe that these evaluations are generally inaccurate (so that they are skeptical of capitalists in general) than when they believe that these evaluations are accurate. The model is consistent with the fact that, in a sample of seven countries, the distribution of income is more unequal in countries where people feel that income inequality is not too large.
Handle: RePEc:nbr:nberwo:5624
Template-Type: ReDIF-Paper 1.0
Title: The Heckscher-Ohlin-Vanek Model of Trade: Why Does It Fail? When Does It Work?
Classification-JEL: F1; D5
Author-Name: Donald R. Davis
Author-Person: pda33
Author-Name: David E. Weinstein
Author-Person: pwe34
Author-Name: Scott C. Bradford
Author-Person: pbr132
Author-Name: Kazushige Shimpo
Author-Person: psh641
Note: ITI
Number: 5625
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5625
File-URL: http://www.nber.org/papers/w5625.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review (June 1997).
Abstract: The Heckscher-Ohlin-Vanek model of factor service trade is a central construct in international economics. Empirically, though, it is a flop. This warrants a new approach. Using Japanese regional data we are able to test the HOV model by independently examining its component production and consumption elements. The strict HOV model performs poorly because it cannot explain the international location of production. However, relaxing the assumption of universal factor price equalization yields a dramatic improvement. We also solve most of what Trefler (1995) calls the mystery of the missing trade. In sum, the HOV model performs remarkably well.
Handle: RePEc:nbr:nberwo:5625
Template-Type: ReDIF-Paper 1.0
Title: Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations
Classification-JEL: J24; J71
Author-Name: Judith K. Hellerstein
Author-Person: phe270
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Kenneth R. Troske
Author-Person: ptr38
Note: LS
Number: 5626
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5626
File-URL: http://www.nber.org/papers/w5626.pdf
File-Format: application/pdf
Publication-Status: published as Hellerstein, Judith K., David Neumark and Kenneth R. Troske. "Wages, Productivity, And Worker Characteristics: Evidence From Plant-Level Production Functions And Wage Equations," Journal of Labor Economics, 1999, v17(3,Jul), 409-446.
Abstract: We use a unique new data set that combines individual worker data with data on workers' employers to estimate plant-level production functions and wage equations, and thus to compare relative marginal products and relative wages for various groups of workers. The data and empirical framework lead to new evidence on numerous questions regarding the determination of wages, questions that hinge on the relationship between wages and marginal products of workers in different demographic groups. These include race and sex discrimination in wages, the causes of rising wages over the life cycle, and the returns to marriage. First, workers who have ever been married are more productive than never-married workers and are paid accordingly. Second, prime-aged workers (aged 35-54) are equally as productive as younger workers, and in some specifications are estimated to receive higher wages. However, older workers (aged 55+) are less productive than younger workers but are paid more. Third, the data indicate no difference between the relative wage and relative productivity of black workers. Finally, with the exception of managerial and professional occupations, women are paid about 25-35% less than men, but estimated productivity differentials for women are generally no larger than 15%, and significantly smaller than the pay differential.
Handle: RePEc:nbr:nberwo:5626
Template-Type: ReDIF-Paper 1.0
Title: Relative Price Variability and Inflation: Evidence from US Cities
Classification-JEL: E31
Author-Name: Guy Debelle
Author-Person: pde95
Author-Name: Owen Lamont
Note: ME
Number: 5627
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5627
File-URL: http://www.nber.org/papers/w5627.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy Feb.1997, Vol. 105, No. 1, pp. 132-152
Abstract: We test whether the time-series positive correlation of inflation and intermarket relative price variability is also present in a cross-section of US cities. We find this correlation to be a robust empirical regularity: cities which have higher than average inflation also have higher than average relative price dispersion, ceteris paribus. This result holds for different periods of time, different classes of goods, and across different time horizons. Our results suggest that at least part of the relationship between inflation and relative price variability cannot be explained by monetary factors.
Handle: RePEc:nbr:nberwo:5627
Template-Type: ReDIF-Paper 1.0
Title: R&D Spillovers and Global Growth
Classification-JEL: 031; 040
Author-Name: Tamim Bayoumi
Author-Person: pba366
Author-Name: David T. Coe
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: ITI
Number: 5628
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5628
File-URL: http://www.nber.org/papers/w5628.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 47, no. 2 (April 1999): 399-428.
Abstract: We examine the growth promoting roles of R&D, international R&D spillovers, and trade in a world econometric model. A country can raise its total factor productivity by investing in R&D. But countries can also boost their productivity by trading with other countries that have large stocks of knowledge from their cumulative R&D activities. We use a special version of MULTIMOD that incorporates R&D spillovers among industrial countries and from industrial countries to developing countries. Our simulations suggest that R&D, R&D spillovers, and trade play important roles in boosting growth in industrial and developing countries.
Handle: RePEc:nbr:nberwo:5628
Template-Type: ReDIF-Paper 1.0
Title: Expected Home Ownership and Real Wealth Accumulation of Youth
Classification-JEL: E21; R21
Author-Name: Donald R. Haurin
Author-Person: pha178
Author-Name: Patric H. Hendershott
Author-Name: Susan M. Wachter
Note: PE
Number: 5629
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5629
File-URL: http://www.nber.org/papers/w5629.pdf
File-Format: application/pdf
Abstract: This paper describes the real wealth accumulation of American youth and relates this behavior to variations in real constant-quality house prices in their localities of residence. We argue that increases in the real constant-quality house price have two offsetting effects on wealth. First, the greater the local constant-quality price of housing, the greater the wealth needed to meet the lender imposed down payment constraint if housing demand is price inelastic. However, increased real constant-quality house price reduces the likelihood of home ownership and thus the desire the accumulate wealth needed for a down payment. Using a panel data set for youth age 20-33 for the years 1985 through 1990 we find that the combined direct and indirect impact of variations in real constant-quality house price on wealth is modest for changes near the average real house price, but youths' wealth declines substantially in areas with high real house price.
Handle: RePEc:nbr:nberwo:5629
Template-Type: ReDIF-Paper 1.0
Title: Borrowing Constraints and the Tenure Choice of Young Households
Classification-JEL: R21
Author-Name: Donald R. Haurin
Author-Person: pha178
Author-Name: Patric H. Hendershott
Author-Name: Susan M. Wachter
Note: PE
Number: 5630
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5630
File-URL: http://www.nber.org/papers/w5630.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Housing Research, Vol. 8, 1997.
Abstract: In this paper we analyze the factors that affect the tenure choice of young adults, highlighting the impact of mortgage lender imposed borrowing constraints. The data set is a panel of youth age 20-33 for the years 1985-90. Our methods differ from most prior studies in many ways including consideration of possible sample selection bias, a richer model of the stochastic error structure, better measurement of which households are bound by borrowing constraints, and a fuller consideration of the endogeneity of wealth and income. Once all changes are implemented, we find ownership tendencies to be quite sensitive to economic variables. Specifically, potential earnings, the relative cost of owning a home, and especially borrowing constraints affect the tendency to own a home. In our sample of youth, 37% of households are constrained even after choosing their loan-to-value ratio to minimize the impact of the separate wealth and income requirements. The constraints reduce the probability of ownership of these households by 10 to 20 percentage points (a third to a half) depending on the particular characteristics of the household.
Handle: RePEc:nbr:nberwo:5630
Template-Type: ReDIF-Paper 1.0
Title: Is the Time-Series Evidence on Minimum Wage Effects Contaminated by Publication Bias?
Classification-JEL: C10; J23
Author-Name: David Neumark
Author-Person: pne16
Author-Name: William Wascher
Note: LS
Number: 5631
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5631
File-URL: http://www.nber.org/papers/w5631.pdf
File-Format: application/pdf
Publication-Status: published as Economic Inquiry, Vol. 36, no. 3 (July 1998): 458-470
Abstract: Publication bias in economics may lead to selective specification searches that result in overreporting in the published literature of results consistent with economists' priors. In reassessing the published time-series studies on the employment effects of minimum wages, some recent research has reported evidence consistent with publication bias, and concluded that the most plausible explanation of this evidence is editors' and authors' tendencies to look for negative and statistically significant estimates of the employment effect of the minimum wage, (Card and Krueger, 1995a, p. 242). We present results indicating that the evidence is more consistent with a change in the estimated minimum wage effect over time than with publication bias. More generally, we demonstrate that existing approaches to testing for publication bias may generate spurious evidence of such bias when there are structural changes in some parameters. We then suggest an alternative strategy for testing for publication bias that is more immune to structural change. Although changing parameters may be uncommon in clinical trials on which most of the existing literature on publication bias is based, they are much more plausible in economics.
Handle: RePEc:nbr:nberwo:5631
Template-Type: ReDIF-Paper 1.0
Title: Observations on International Labor Standards and Trade
Classification-JEL: J38; F13
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS
Number: 5632
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5632
File-URL: http://www.nber.org/papers/w5632.pdf
File-Format: application/pdf
Publication-Status: published as Bruno, Michael and Boris Pleskovic (eds.) Annual World Bank Conferenceon Development Economics, 1996. Washington, DC: The World Bank, 1997.
Abstract: This paper reviews the theoretical arguments for and against linking international labor standards to trade. Based on theory alone it is difficult to generalize about the effect of labor standards on efficiency and equity. Some economists have argued that international labor standards are merely disguised protectionism. An evaluation of determinants of support for legislation that would ban imports to the United States of goods made with child labor provides little support for the prevailing political economy view. In particular, members of Congress representing districts with relatively many unskilled workers, who are most likely to compete with child labor, are less likely to support a ban on imports made with child labor. Another finding is that the prevalence of child labor declines sharply with national income. Last, an analysis of compulsory schooling laws, which are often suggested as an alternative to prohibiting child labor, finds a tremendous amount of noncompliance in developing nations.
Handle: RePEc:nbr:nberwo:5632
Template-Type: ReDIF-Paper 1.0
Title: Trade and Wages: Insights from the Crystal Ball
Author-Name: Robert Z. Lawrence
Author-Person: pla608
Author-Name: Carolyn L. Evans
Note: ITI
Number: 5633
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5633
File-URL: http://www.nber.org/papers/w5633.pdf
File-Format: application/pdf
Abstract: This study uses both a net factor content analysis and a small simulation model to explore the impact on the U.S. labor market of a fivefold increase in imports of manufactured goods from developing countries. The simulation, which is parameterized by the US economy in 1990, involves a balanced trade expansion which displaces almost half of US manufacturing workers who are reemployed in the remaining manufacturing and non-trade sectors. The results show that relative wages of workers with a high school education or less would be depressed, while those with some college education would rise. However, despite the magnitude of the shock, the effects are surprisingly small. Once account is taken of productivity increases, labor force growth and export sector wage premiums, given unitary elasticities of demand and of substitution between workers with different levels of education, relative wages of workers with some college education rise by 3.5 percent, while the real wages of workers with a high school education or less decline by 1.3 percent. The impact of a variety of parameter assumptions is also explored.
Handle: RePEc:nbr:nberwo:5633
Template-Type: ReDIF-Paper 1.0
Title: Imperfect Competition and the Effects of Energy Price Increases on Economic Activity
Classification-JEL: E32; L71
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG
Number: 5634
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5634
File-URL: http://www.nber.org/papers/w5634.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit, and Banking, Vol. 28, no. 4, part 1, (November 1996), pp. 549-577
Abstract: We show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil. Plausibly parameterized models of this type are able to mimic the response of output and real wages in the United States. The responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output.
Handle: RePEc:nbr:nberwo:5634
Template-Type: ReDIF-Paper 1.0
Title: Hyperbolic Discount Functions, Undersaving, and Savings Policy
Classification-JEL: D91; E21
Author-Name: David I. Laibson
Author-Person: pla164
Note: AP
Number: 5635
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5635
File-URL: http://www.nber.org/papers/w5635.pdf
File-Format: application/pdf
Publication-Status: Published as "Life-Cycle Consumption and Hyperbolic Discount Functions", European Economic Review, Vol. 42, nos. 3-5 (May 1998): 861-871.
Abstract: Studies of animal and human behavior suggest that discount functions are approximately hyperbolic (Ainslie, 1992). I analyze an economy with complete markets which is populated by hyperbolic consumers. I identify two ways in which this economy can be distinguished from an exponential economy. First, hyperbolic discounting predicts the empirical regularity that the elasticity of intertemporal substitution is less than the inverse of the coefficient of relative risk aversion. Second, hyperbolic discounting explains many features of the policy debate about undersaving. The calibrated hyperbolic economy matches Bernheim's (1994) survey data on self-reported undersaving, and predicts pro-savings government interventions like capital-income subsidies and penalties for early withdrawal from retirement accounts. Hyperbolic consumers are willing to sacrifice 9/10 of a year's worth of income to induce the government to implement optimal revenue-neutral saving incentives.
Handle: RePEc:nbr:nberwo:5635
Template-Type: ReDIF-Paper 1.0
Title: Technology, Unemployment, and Relative Wages in a Global Economy
Classification-JEL: F11; J31
Author-Name: Donald R. Davis
Author-Person: pda33
Note: ITI
Number: 5636
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5636
File-URL: http://www.nber.org/papers/w5636.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review (November 1998).
Abstract: Arguably the most important development in recent decades in US factor markets is the decline in the relative wage of the unskilled. By contrast, in Europe it is undoubtedly the rise and persistence of unemployment. Technology has been identified as a key reason for the rising US wage inequality, while labor market rigidities are often cited as a key reason for European unemployment. This paper seeks to provide a unified account of these major factor market developments. It models the impact of technical change on relative wages and unemployment in a world in which one country has flexible and the other rigid labor market institutions. The results depart significantly but sensibly from what one would expect in a fully flexible wage world. A few stylized facts help to narrow the field to a few candidates to account for these factor market developments.
Handle: RePEc:nbr:nberwo:5636
Template-Type: ReDIF-Paper 1.0
Title: Contracts and Money
Classification-JEL: E4
Author-Name: Boyan Jovanovic
Author-Name: Masako Ueda
Note: PR
Number: 5637
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5637
File-URL: http://www.nber.org/papers/w5637.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy (August1997): pp.700-709.
Abstract: We analyze the contractual relation between workers and their employers when there is nominal risk. The key feature of the problem is that the consumption deflator is random and observed sometime after the effort is exerted. The worker's effort is not observable, and to induce the agent to work, second-best contracts do not insure the worker fully. They do eliminate all nominal risk for the parties (by fully indexing the terms of the contracts to the price level) but they would be re-negotiated. Foreseeing this, the parties to the contract will write one that is renegotiation-proof. Under such a contract, nominal shocks affect real consumption. Since the argument should apply in many situations, it will have macroeconomic implications, one of which is short-run non-neutrality of money. We have found that surprise money is likely to redistribute consumption and welfare towards workers, and away from shareholders.
Handle: RePEc:nbr:nberwo:5637
Template-Type: ReDIF-Paper 1.0
Title: Arbitrage Opportunities in Arbitrage-Free Models of Bond Pricing
Classification-JEL: E43; G12
Author-Name: David Backus
Author-Person: pba242
Author-Name: Silverio Foresi
Author-Name: Stanley Zin
Author-Person: pzi46
Note: AP
Number: 5638
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5638
File-URL: http://www.nber.org/papers/w5638.pdf
File-Format: application/pdf
Publication-Status: published as Backus, David, Silverio Foresi and Stanley Zin. "Arbitrage Opportunities In Arbitrage-Free Models On Bond Pricing," Journal of Business and Economic Statistics, 1998, v16(1,Jan), 13-26.
Abstract: Mathematical models of bond pricing are used by both academics and Wall Street practitioners, with practitioners introducing time-dependent parameters to fit arbitrage-free models to selected asset prices. We show, in a simple one-factor setting, that the ability of such models to reproduce a subset of security prices need not extend to state-contingent claims more generally. The popular Black-Derman-Toy model, for example, overprices call options on long bonds relative to those on short bonds when interest rates exhibit mean reversion. We argue, more generally, that the additional parameters of arbitrage-free models should be complemented by close attention to fundamentals, which might include mean reversion, multiple factors, stochastic volatility, and/or non-normal interest rate distributions.
Handle: RePEc:nbr:nberwo:5638
Template-Type: ReDIF-Paper 1.0
Title: An Analysis of Divisional Investment Policies
Author-Name: Hyun-Han Shin
Author-Name: Rene M. Stulz
Note: CF
Number: 5639
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5639
File-URL: http://www.nber.org/papers/w5639.pdf
File-Format: application/pdf
Abstract: This paper investigates the divisional investment policies of diversified firms. We find that investment of the smallest division of diversified firms is significantly related to the cash flow of the other segments. We then show that the smallest division's investment is more sensitive to the cash flow of the other divisions for firms where one expects aggregate investment to be related to cash flow also, namely low q firms and firms with high leverage. This and other evidence we provide is consistent with what we call the bureaucratic rigidity hypothesis. This hypothesis states that relative allocations of investment funds in diversified firms are sticky. We fail to find support for the view that diversified firms allocate more funds to divisions in industries with better investment opportunities
Handle: RePEc:nbr:nberwo:5639
Template-Type: ReDIF-Paper 1.0
Title: Insurance or Self-Insurance?: Variation, Persistence, and Individual Health Accounts
Author-Name: Matthew J. Eichner
Author-Name: Mark B. McClellan
Author-Name: David A. Wise
Author-Person: pwi45
Note: EH PE
Number: 5640
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5640
File-URL: http://www.nber.org/papers/w5640.pdf
File-Format: application/pdf
Publication-Status: published as Wise, D. (ed.) Inquiries in the Economics of Aging, University of Chicago Press, 1998
Publication-Status: published as Insurance or Self-Insurance? Variation, Persistence, and Individual Health Accounts, Matthew Eichner, Mark B. McClellan, David A. Wise. in Inquiries in the Economics of Aging, Wise. 1998
Abstract: We explore the feasibility of catastrophic health insurance established in conjunction with individual health accounts (IHAs). Under this plan, the employer establishes both a high-deductible health insurance plan and an IHA. Employee health care costs below the deductible are then paid out of the IHA; costs above the deductible are paid by the insurance plan. Assets remaining in the account when the employee retires are available for other purposes. Although attractive because it helps to solve the moral hazard problem associated with conventional insurance plans, the scheme may be considered infeasible if medical expenditures over a working life are so persistent that certain individuals accumulate little in the IHA while others accumulate a great deal. Within the context of an illustrative IHA plan, we develop preliminary empirical evidence on the distribution of medical expenditures and hence savings under an IHA plan. Our analysis is based on longitudinal health insurance claims data from a large firm. We emphasize the balance in the IHA account at retirement. Although such a plan would produce a range of balances across employees, approximately 80% would retain over 50% of their contributions. Only about 5% would retain less than 20% of their contributions. The outcomes suggest to us that such a plan is feasible. And, we believe that such a plan could be structured to increase retirement savings.
Handle: RePEc:nbr:nberwo:5640
Template-Type: ReDIF-Paper 1.0
Title: Revenue-Raising vs. Other Approaches to Environmental Protection: The Critical Significance of Pre-Existing Tax Distortions
Classification-JEL: D62; H21
Author-Name: Lawrence H. Goulder
Author-Name: Ian W. H. Parry
Author-Person: ppa261
Author-Name: Dallas Burtraw
Author-Person: pbu91
Note: PE
Number: 5641
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5641
File-URL: http://www.nber.org/papers/w5641.pdf
File-Format: application/pdf
Publication-Status: published as Goulder, Lawrence H., Ian W. H. Parry and Dallas Burtraw. "Revenue-Raising Versus Other Approaches To Environmental Protection: The Critical Significance Of Preexisting Tax Distortions," Rand Journal of Economics, 1997, v28(4,Winter), 708-731.
Abstract: This paper examines the choice between revenue-raising and non-revenue-raising instruments for environmental protection in a second-best setting with pre- existing factor taxes. We find that interactions with pre-existing taxes influence the costs of regulation and seriously militate against pollution abatement policies that do not raise revenue. If the marginal environmental benefits from pollution reductions are below a certain threshold value, any amount of pollution abatement through non-revenue-raising (NRR) policies like emissions quotas is efficiency-reducing. Under conditions approximating S02 emissions from electric power plants in the U.S., efficiency gains vanish if marginal environmental benefits are below $109 per ton and an NRR policy is employed. These results are largely independent of the size of the regulated sector relative to the overall economy and stem from two underlying effects. The tax-interaction effect is the adverse impact in factor markets arising from reductions in after-tax returns to factors associated with the higher production costs caused by environmental regulation. This effect leads to significantly higher efficiency costs than what would apply in a first-best world with no pre-existing taxes. Revenue-raising regulations (taxes) enjoy a revenue-recycling effect that offsets much of the tax-interaction effect, but non-revenue-raising regulations (quotas) enjoy no such offset.For any target level of emissions reduction, the gross efficiency costs of quotas are higher than those of revenue-raising policies.. To the extent that government regulations of international trade or agricultural production raise the costs of output and thus reduce real factor returns, they generate much higher social costs than indicated by partial equilibrium analyses.
Handle: RePEc:nbr:nberwo:5641
Template-Type: ReDIF-Paper 1.0
Title: Public School Finance in a General Equilibrium Tiebout World: Equalization Programs, Peer Effects and Private School Vouchers
Classification-JEL: I22; H70
Author-Name: Thomas J. Nechyba
Author-Person: pne28
Note: PE
Number: 5642
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5642
File-URL: http://www.nber.org/papers/w5642.pdf
File-Format: application/pdf
Publication-Status: published as Nechyba, Thomas J. "What Can Be (and What Has Been) Learned From General Equilibrium Simulation Models Of School Finance?," National Tax Journal, 2003, v56(2,Jun), 387-414.
Abstract: This paper uses computable general equilibrium simulations to investigate the effect of private school vouchers. It improves on past computational approaches by (i) endogenizing the funding of public schools through the modelling of an explicit political process at the school district level; (ii) embedding the private/public school choice in a Tiebout model in which agents also choose between communities that provide different public school/property tax packages; and (iii) allowing for a variety of different public school financing mechanisms ranging from purely local financing and control all the way to pure state funding. While voucher programs are shown to increase school-based stratification of agents, they tend to decrease residence-based stratification. This implies that untargeted vouchers may be equity-enhancing under some institutional settings even when there are no direct improvements in public school efficiency from increased competition. Furthermore, the effects of targeting vouchers to low income districts may not differ significantly from the effects of untargeted voucher plans.
Handle: RePEc:nbr:nberwo:5642
Template-Type: ReDIF-Paper 1.0
Title: Local Labor Markets and Welfare Spells: Do Demand Conditions Matter?
Classification-JEL: I38; J23
Author-Name: Hilary Williamson Hoynes
Author-Person: pho278
Note: PE LS
Number: 5643
Creation-Date: 1996-06
Order-URL: http://www.nber.org/papers/w5643
File-URL: http://www.nber.org/papers/w5643.pdf
File-Format: application/pdf
Publication-Status: published as Hoynes, Hilary Williamson. "Welfare Transfers In Two-Parent Families: Labor Supply And Welfare Participation Under AFDC-UP," Econometrica, 1996, v64(2,Mar), 295-332. Also: Hilary Williamson Hoynes. "Local Labor Markets And Welfare Spells: Do Demand Conditions Matter?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 351-368, August 2000.
Abstract: This paper examines the role of local labor markets in determining how long families receive benefits from the Aid to Families with Dependent Children (AFDC) program. Given the current policy emphasis on devolution and reducing the AFDC caseload through employment, understanding the role of local labor demand is important. The study uses a unique data set based on administrative data which has detailed information on welfare spells for over 100,000 AFDC cases. The empirical work is based on estimates of a duration model where the hazard rate is a function of demographic characteristics, local labor market variables, neighborhood characteristics, county fixed effects and time effects Several alternative measures of local labor market conditions are used and the results show that higher unemployment rates, lower employment growth, lower employment to population ratios, and lower wage growth are associated with longer welfare spells. On average, a typical employment fluctuation over the business cycle, if permanent, would lead to an 8-10 percent reduction in AFDC caseload. Typical changes in real quarterly earnings generate somewhat smaller effects. The combined effect of these two changes,if permanent, would lead to sizeable reductions in the caseload, on the order of 15 percent. The estimated labor market effects are robust to including county level fixed effects and time effects. AFDC-UP participants, blacks, and residents of urban areas are more sensitive to changes in economic conditions while teen parents and refugee groups are found to be much less sensitive to changes in local labor market conditions.
Handle: RePEc:nbr:nberwo:5643
Template-Type: ReDIF-Paper 1.0
Title: Work, Welfare, and Family Structure: What Have We Learned?
Classification-JEL: I38; J22
Author-Name: Hilary Williamson Hoynes
Author-Person: pho278
Note: PE LS
Number: 5644
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5644
File-URL: http://www.nber.org/papers/w5644.pdf
File-Format: application/pdf
Publication-Status: published as Fiscal Policy: Lessons From Economic Research, Auerbach, Alan, ed., Cambridge: Cambridge University Press, 1997, 101-146.
Abstract: Welfare reform has once again made its way to the top of the domestic policy agenda. While part of the motivation behind recent reform efforts is fiscally driven, there is also an interest in making changes that address two prominent criticisms of the existing system of public assistance in the United States. First, the system has significant, adverse work incentives. Second, the system discourages the formation of two-parent families and is responsible in a major part for the high and rising rates of female headship and out-of-wedlock birth rates. This paper explores the validity of these criticisms using available empirical evidence and in turn evaluates the impact of various reforms to the system. The programs examined include Aid to Families with Dependent Children Food Stamps and Medicaid programs. The paper relies on evidence based on three sources of variation in welfare policy: cross-state variation, over time variation, and demonstration projects at the state level. The paper concludes that current reforms aimed at reducing female headship and nonmarital births such as family caps, eliminating benefits for teens, and equal treatment of two-parent families are unlikely to create large effects. Changes to implicit tax rates and benefit formulas may increase work among current recipients, but overall work effort may not be affected. These predictions should be accompanied by a word of caution. Many of the proposed changes have never been implemented at the state or federal level and require out of sample predictions. Current state experimentation may help fill this gap.
Handle: RePEc:nbr:nberwo:5644
Template-Type: ReDIF-Paper 1.0
Title: Cognitive Ability, Wages, and Meritocracy
Classification-JEL: J24; J33
Author-Name: John Cawley
Author-Person: pca6
Author-Name: Karen Conneely
Author-Name: James Heckman
Author-Name: Edward Vytlacil
Author-Person: pvy2
Note: LS
Number: 5645
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5645
File-URL: http://www.nber.org/papers/w5645.pdf
File-Format: application/pdf
Publication-Status: published as Cawley, John, Karen Conneely, James Heckman, and Edward Vytlacil. "Cognitive Ability, Wages, and Meritocracy." In Intelligence, Genes, and Success: Scientists Respond to The Bell Curve, edited by Bernie Devlin, Stephen Fienberg, Daniel Resnick, and Kathryn Roeder. (Springer Verlag: New York), 1997.
Abstract: This paper presents new evidence from the NLSY on the importance of meritocracy in American society. In it, we find that general intelligence, or g -- a measure of cognitive ability--is dominant in explaining test score variance. The weights assigned to tests by g are similar for all major demographic groups. These results support Spearman's theory of g. We also find that g and other measures of ability are not rewarded equally across race and gender, evidence against the view that the labor market is organized on meritocratic principles. Additional factors beyond g are required to explain wages and occupational choice. However, both blue collar and white collar wages are poorly predicted by g or even multiple measures of ability. Observed cognitive ability is only a minor predictor of social performance. White collar wages are more g loaded than blue collar wages. Many noncognitive factors determine blue collar wages.
Handle: RePEc:nbr:nberwo:5645
Template-Type: ReDIF-Paper 1.0
Title: Long-Run PPP May Not Hold After All
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 5646
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5646
File-URL: http://www.nber.org/papers/w5646.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Charles. "Long-Run PPP May Not Hold After All," Journal of International Economics, 2000, v51(2,Aug), 243-273.
Abstract: Recent tests using long data series find evidence in favor of long-run PPP (by rejecting either the null hypothesis of unit roots in real exchange rates or the null of no cointegration between nominal exchange rates and relative prices.) These tests may have reached the wrong conclusion. Monte Carlo experiments using artificial data calibrated to nominal exchange rates and disaggregated data on prices show that tests of long-run PPP have serious size biases. They may fail to detect a sizable and economically significant unit root component. For example, in the baseline case which is calibrated to actual price data, unit roots and cointegration tests with a nominal size of five percent have true sizes that range from .90 to .98 in artificial 100-year long data series, even though the unit root component accounts for 42% of the variance of the real exchange rate in sample. On the other hand, tests of stationarity are shown to have very low power in the same circumstances, so it is quite likely that a researcher would reject a unit root and fail to reject stationarity even when the series embodied a large unit root component.
Handle: RePEc:nbr:nberwo:5646
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Child-Bearing on Married Women's Labor Supply and Earnings: Using Twin Births as a Natural Experiment
Classification-JEL: J22; J13
Author-Name: Jaisri Gangadharan
Author-Name: Joshua Rosenbloom
Author-Person: pro664
Author-Name: Joyce Jacobson
Author-Name: James Wishart Pearre III
Number: 5647
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5647
File-URL: http://www.nber.org/papers/w5647.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 34, no. 3 (Summer 1999): 449-474.
Abstract: Married women's decisions about child-bearing and market work are importantly interrelated. Although there are many estimates of the effects of fertility on female labor supply few of them have adequately addressed the problems of simultaneity inherent in these choices. In this paper, we use exogenous variations in fertility due to twin births to measure the impact of an unanticipated child on married women's labor supply and earnings. We find that the short-run effects of an unanticipated birth on labor supply are appreciable and have increased in magnitude as more mothers enter the labor market. It also appears that the impact of unanticipated births on earnings and wages has changed from 1980 to 1990. In 1980 reduced labor supply caused a temporary drop in earnings, but in 1990 earnings and wages remained depressed well after the labor supply effects of a twin birth had disappeared.
Handle: RePEc:nbr:nberwo:5647
Template-Type: ReDIF-Paper 1.0
Title: Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence
Classification-JEL: G30; L13
Author-Name: Rajesh Aggarwal
Author-Person: pag94
Author-Name: Andrew A. Samwick
Author-Person: psa395
Note: IO
Number: 5648
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5648
File-URL: http://www.nber.org/papers/w5648.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 54 (December 1999): 1999-2043.
Abstract: We argue that strategic interactions between firms in an oligopoly can explain the puzzling lack of high-powered incentives in executive compensation contracts written by shareholders whose objective is to maximize the value of their shares. We derive the optimal compensation contracts for managers and demonstrate that the use of high-powered incentives will be limited by the need to soften product market competition. In particular, when managers can be compensated based on their own and their rivals' performance, we show that there will be an inverse relationship between the magnitude of high-powered incentives and the degree of competition in the industry. More competitive industries are characterized by weaker pay-performance incentives. Empirically, we find strong evidence of this inverse relationship in the compensation of executives in the United States. Our econometric results are not consistent with alternative theories of the effect of competition on executive compensation. We conclude that strategic considerations can preclude the use of high-powered incentives, in contrast to the predictions of the standard principal-agent model.
Handle: RePEc:nbr:nberwo:5648
Template-Type: ReDIF-Paper 1.0
Title: The Litigious Plaintiff Hypothesis: Case Selection and Resolution
Classification-JEL: K41
Author-Name: Theodore Eisenberg
Author-Name: Henry S. Farber
Note: LE LS
Number: 5649
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5649
File-URL: http://www.nber.org/papers/w5649.pdf
File-Format: application/pdf
Publication-Status: published as RAND Journal of Economics, 1997, Vol. 28 (Spec): S92-S112.
Abstract: A central feature of the litigation process that affects case outcomes is the selection of cases for litigation. In this study, we present a theoretical framework for understanding the operation of this suit selection process and its relationship to the underlying distribution of potential claims and claimants. We implement the model empirically by assuming that individuals vary more in their litigiousness (inverse costs of litigation) than do corporations. This assumption, coupled with the case selection process we present, yields clear predictions on trial rates as a function of whether the plaintiff and defendant were individuals or corporations. The model also yields a prediction on the plaintiff's win rate in lawsuits as a function of the plaintiff's identity. Our empirical analysis, using data on over 200,000 federal civil litigations, yields results that are generally consistent with the theory. Lawsuits where the plaintiff is an individual are found to have higher trial rates and lower plaintiff win rates.
Handle: RePEc:nbr:nberwo:5649
Template-Type: ReDIF-Paper 1.0
Title: The Aftermath of Appreciations
Classification-JEL: F31; F33
Author-Name: Ilan Goldfajn
Author-Name: Rodrigo O. Valdes
Author-Person: pva726
Number: 5650
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5650
File-URL: http://www.nber.org/papers/w5650.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 114, no. 1 (February 1999): 229-262.
Abstract: This paper empirically analyzes a broad range of real exchange rate appreciation episodes. The cases are identified after compiling a large sample of monthly multilateral real exchange rates from 1960 to 1994. The objective is twofold. First, the paper studies the dynamics of appreciations, avoiding the sample selection of analyzing exclusively the crisis (or devaluation) cases. Second, the paper analyzes the mechanism by which overvaluations are corrected. In particular, we are interested in the proportion of the reversions that occur through nominal devaluations, rather than cumulative inflation differentials. We calculate the probability of undoing appreciations without nominal depreciations for various degrees of misalignment. The overall conclusion is that it is very unlikely to undo large and medium appreciations without nominal devaluations.
Handle: RePEc:nbr:nberwo:5650
Template-Type: ReDIF-Paper 1.0
Title: Stepping Stone Mobility
Classification-JEL: J6
Author-Name: Boyan Jovanovic
Author-Name: Yaw Nyarko
Author-Person: pny18
Note: PR
Number: 5651
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5651
File-URL: http://www.nber.org/papers/w5651.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy, Volume 46, June 1997, pp. 289-325
Abstract: People at the top of an occupational ladder earn more partly because they have spent time on lower rungs, where they have learned something. But what precisely do they learn? There are two contrasting views: First, the Bandit model assumes that people are different, that experience reveals their characteristics, and that consequently an occupational switch can result. Second, in our Stepping Stone model, experience raises a worker's productivity on a given task and the acquired skill can in part be transferred to other occupations, and this prompts movement. Safe activities (where mistakes destroy less output) are a natural training ground.
Handle: RePEc:nbr:nberwo:5651
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Tax-Law Changes on Property-Casualty Insurance Prices
Author-Name: David F. Bradford
Author-Name: Kyle Logue
Note: PE
Number: 5652
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5652
File-URL: http://www.nber.org/papers/w5652.pdf
File-Format: application/pdf
Publication-Status: published as Bradford, David F. and Kyle Logue. "The Effects of Tax-Law Changes on Property-Casualty Insurance Prices". The Economics of Property-Casualty Insurance. Edited by David F. Bradford, Chicago: The University of Chicago Press, 1998, pp. 29-79.
Publication-Status: published as The Effects of Tax Law Changes on Property-Casualty Insurance Prices, David F. Bradford, Kyle Logue. in The Economics of Property-Casualty Insurance, Bradford. 1998
Abstract: During the 1980s, the federal income tax treatment of property-casualty insurers and their policyholders underwent several important changes, the most significant of which came in 1986. This paper develops theoretical predictions for how these changes should have affected the equilibrium prices of property-casualty insurance policies, and explores the extent to which the theoretical predictions are reflected in data on industry experience. The paper is devoted mainly to a careful specification of the income tax rules, and to deriving the connection between predictions about simple forms of insurance policy and industry data on premiums earned. Although the predicted impact of the changes in the tax rules enacted in 1986 translates into a tax on premiums (net of the cost of acquisition) of up to 13 percent (on medical malpractice, the longest-tail line of insurance, in 1987), it is small relative to the variability of the actual loss experience.
Handle: RePEc:nbr:nberwo:5652
Template-Type: ReDIF-Paper 1.0
Title: Personal Bankruptcy and Credit Supply and Demand
Author-Name: Reint Gropp
Author-Person: pgr26
Author-Name: John Karl Scholz
Author-Name: Michelle White
Author-Person: pwh52
Note: PE
Number: 5653
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5653
File-URL: http://www.nber.org/papers/w5653.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics (February 1997): 217-251.
Abstract: This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policymakers as benefitting less-well-off borrowers, our results using data from the 1983 Survey of Consumer Finances suggest they increase the amount of credit held by high-asset households and reduce the availability and amount of credit to low-asset households, conditioning on observable characteristics. We also find evidence that interest rates on automobile loans for low-asset households are higher in high exemption states. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets.
Handle: RePEc:nbr:nberwo:5653
Template-Type: ReDIF-Paper 1.0
Title: Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations
Author-Name: David C. Parsley
Author-Person: ppa30
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM
Number: 5654
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5654
File-URL: http://www.nber.org/papers/w5654.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 111, no. 4 (Novmeber 1996): 1211-1236.
Abstract: Using a panel of 51 prices from 48 cities in the United States we provide an upper bound estimate of the rate of convergence to Purchasing Power Parity. We find convergence rates substantially higher than typically found in cross-country data. We investigate some potentially serious biases induced by i.i.d. measurement errors in the data, and find our estimates to be robust to these potential biases. We also present evidence that convergence occurs faster for larger price differences. Finally, we find that rates of convergence are slower for cities farther apart. However, our estimates suggest that distance alone can only account for a small portion of the much slower convergence rates across national borders.
Handle: RePEc:nbr:nberwo:5654
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Financial Education in the Workplace: Evidence from a Survey of Employers
Classification-JEL: H31; I31
Author-Name: Patrick J. Bayer
Author-Person: pba636
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: John Karl Scholz
Note: AG PE
Number: 5655
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5655
File-URL: http://www.nber.org/papers/w5655.pdf
File-Format: application/pdf
Publication-Status: published as Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 2009. "The Effects Of Financial Education In The Workplace: Evidence From A Survey Of Employers," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 605-624, October.
Abstract: We examine the effects of education on financial decision-making skills by identifying an interesting source of variation in pertinent training. During the 1990s, an increasing number of individuals were exposed to programs of financial education provided by their employers. If, as some have argued, low saving frequently results from a failure to appreciate economic vulnerabilities, then education of this form could prove to have a powerful effect on rates of behavior. The current paper undertakes an analysis of these programs using a previously unexploited survey of employers. We find that both participation in and contributions to voluntary savings plans are significantly higher when employers offer retirement seminars. The effect is typically much stronger for non-highly compensated employees than for highly compensated employees. The frequency of seminars emerges as a particularly important correlate of behavior. We are unable to detect any effects of written materials, such as newsletters and summary plan descriptions, regardless of frequency. We also present evidence on other determinants of plan activity.
Handle: RePEc:nbr:nberwo:5655
Template-Type: ReDIF-Paper 1.0
Title: Technology and Jobs: Secular Changes and Cyclical Dynamics
Classification-JEL: E2; J2
Author-Name: Timothy Dunne
Author-Person: pdu86
Author-Name: John Haltiwanger
Author-Person: pha231
Author-Name: Kenneth R. Troske
Author-Person: ptr38
Note: EFG
Number: 5656
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5656
File-URL: http://www.nber.org/papers/w5656.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy, Vol. 46, no. 1 (June 1997): 107-178
Abstract: In this paper, we exploit plant-level data for U.S. manufacturing for the 1970s and 1980s to explore the connections between changes in technology and the structure of employment and wages. We focus on the nonproduction labor share (measured alternatively by employment and wages) as the variable of interest. Our main findings are summarized as follows: (i) aggregate changes in the nonproduction of labor share at annual and longer frequencies are dominated by within plant changes; (ii) the distribution of annual within plant changes exhibits a spike at zero, tremendous heterogeneity and fat left and right tails; (iii) within plant secular changes are concentrated in recessions; and (iv) while observable indicators of changes in technology account for a significant fraction of the secular increase in the average nonproduction labor share, unobservable factors account for most of the secular increase, most of the cyclical variation and most of the cross sectional heterogeneity.
Handle: RePEc:nbr:nberwo:5656
Template-Type: ReDIF-Paper 1.0
Title: The Origins of Technology-Skill Complementarity
Classification-JEL: J0; N0
Author-Name: Claudia Goldin
Author-Person: pgo601
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: DAE LS
Number: 5657
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5657
File-URL: http://www.nber.org/papers/w5657.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 113 (June 1998): 683-732.
Abstract: Current concern with relationships among particular technologies, capital, and the wage structure motivates this study of the origins of technology-skill complementarity in manufacturing. We offer evidence of the existence of technology-skill and capital-skill (relative) complementarities from 1909 to 1929, and suggest that they were associated with continuous-process and batch methods and the adoption of electric motors. Industries that used more capital per worker and a greater proportion of their horsepower in the form of purchased electricity employed relatively more educated blue-collar workers in 1940 and paid their blue-collar workers substantially more from 1909 to 1929. We also infer capital-skill complementarity using the wage-bill for non-production workers and find that the relationship was as large from 1909-19 as it has been recently. Finally, we link our findings to those on the high-school movement (1910 to 1940). The rapid increase in the supply of skills from 1910 to 1940 may have prevented rising inequality with technological change.
Handle: RePEc:nbr:nberwo:5657
Template-Type: ReDIF-Paper 1.0
Title: Inequality and Growth
Classification-JEL: O11; D31
Author-Name: Roland Benabou
Author-Person: pbe27
Note: EFG
Number: 5658
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5658
File-URL: http://www.nber.org/papers/w5658.pdf
File-Format: application/pdf
Publication-Status: published as Inequality and Growth, Roland Bénabou. in NBER Macroeconomics Annual 1996, Volume 11, Bernanke and Rotemberg. 1996
Abstract: Using two unifying models and an empirical exercise, this paper present and extends the main theories linking income distribution and growth, as well as the relevant empirical evidence. The first model integrates the political economy and imperfect capital markets theories. It allows for explicit departures from perfect democracy and embodies the tradeoff between the growth costs and benefits of redistribution through taxes, land reform or public schooling: such policies simultaneously depress savings incentives and ease wealth constraints which impede investment by the poor. The second model is a growth version of the prisoner's dilemma which captures the essence of theories where sociopolitical conflict reduces the security of property rights thereby discouraging accumulation. The economy's growth rate is shown to fall with interest groups' rent-seeking abilities, as well as with the gap between rich and poor. It is not income inequality per se that matters, but inequality in the relative distribution of earnings and political power. For each of the three channels of political economy, capital markets and social conflict, the empirical evidence is surveyed and discussed in conjunction with theoretical analysis. Finally, the possibility of multiple steady-states leads me to to raise and take up a new empirical issue: are cross-country differences in inequality permanent, or gradually narrowing? Equivalently, is there conver- gence not only in first moments (GDP per capita), but convergence in distribution?
Handle: RePEc:nbr:nberwo:5658
Template-Type: ReDIF-Paper 1.0
Title: Growth Cycles
Classification-JEL: E3; O4
Author-Name: George Evans
Author-Person: pev4
Author-Name: Seppo Honkapohja
Author-Person: pho12
Author-Name: Paul Romer
Author-Person: pro45
Note: EFG
Number: 5659
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5659
File-URL: http://www.nber.org/papers/w5659.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 88, no. 3 (June 1998): 495-515.
Abstract: We construct a rational expectations model in which aggregate growth alternates between a low growth and a high growth state. When all agents expect growth to be slow, the returns on investment are low, and little investment takes place. This slows growth and confirms the prediction that the returns on investment will be low. But if agents expect fast growth, investment is high, returns are high, and growth is rapid. This expectational indeterminacy is induced by complementarity between different types of capital goods. In a growth cycle there are stochastic shifts between high and low growth states and agents take full account of these transitions. The rules that agents need to form rational expectations in this equilibrium are simple. The equilibrium with growth cycles is stable under the dynamics implied by a correspondingly simple learning rule
Handle: RePEc:nbr:nberwo:5659
Template-Type: ReDIF-Paper 1.0
Title: Loan Commitments and Optimal Monetary Policy
Classification-JEL: E50
Author-Name: Michael Woodford
Author-Person: pwo3
Note: ME
Number: 5660
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5660
File-URL: http://www.nber.org/papers/w5660.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 37, no. 3 (June 1996): 573-605
Abstract: With loan commitments negotiated in advance, the use of tight money to restrain nominal spending has asymmetric effects upon different categories of borrowers. This can reduce efficiency, even though aggregate demand is stabilized. This is illustrated in the context of an equilibrium model of financial intermediation with loan commitments, where monetary policy is characterized by a supply curve for reserves on the part of the central bank in an inter-bank market. If demand uncertainty relates primarily to the intensity of demand by each borrower with no difference in the degree of cyclicality of individual borrowers' demands, an inelastic supply of reserves by the central bank is optimal, because it stabilizes aggregate demand and as a result increases average capacity utilization. But if demand uncertainty relates primarily to the number of borrowers rather than to each one's demand for credit, an interest-rate smoothing policy is optimal, because it eliminates inefficient rationing of credit in high-demand states.
Handle: RePEc:nbr:nberwo:5660
Template-Type: ReDIF-Paper 1.0
Title: Law and Finance
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopez-de-Silane
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Robert W. Vishny
Author-Person: pvi218
Note: CF
Number: 5661
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5661
File-URL: http://www.nber.org/papers/w5661.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 106, no. 6 (1998): 1113-1155.
Abstract: This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.
Handle: RePEc:nbr:nberwo:5661
Template-Type: ReDIF-Paper 1.0
Title: United States Steel's Acquisition of the Great Northern Ore Properties: Vertical Foreclosure or Efficient Contractual Governance?
Classification-JEL: L2; L4
Author-Name: Joseph C. Mullin
Author-Name: Wallace P. Mullin
Note: IO
Number: 5662
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5662
File-URL: http://www.nber.org/papers/w5662.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law, Economics, & Organization (April 1997): 74-100.
Abstract: This paper examines United States Steel's acquisition by long-term lease of the iron ore properties of the Great Northern Railway. This 1906 transaction, which significantly increased U.S. Steel's already substantial ore holdings, has been characterized by contemporary observers and modern economists as an example of vertical foreclosure. We present quantitative and qualitative evidence to support an alternative view that the lease generated a net efficiency gain, resulting in lower steel prices, as it promoted relationship-specific investment in the exploitation of the ore properties. Quantitatively, we examine the stock market reactions of U.S. Steel, the Great Northern Railway, steel industry rivals, and the railroads, a major steel customer, to the announcement of the lease signing. Strikingly, the railroads had a significant positive excess return. Qualitatively, we examine the terms of the lease and the performance of the parties to document the role of the lease in encouraging relationship-specific investment.
Handle: RePEc:nbr:nberwo:5662
Template-Type: ReDIF-Paper 1.0
Title: Entry and Predation: British Shipping Cartels 1879-1929
Classification-JEL: L92; L12
Author-Name: Fiona Scott Morton
Note: IO
Number: 5663
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5663
File-URL: http://www.nber.org/papers/w5663.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economics and Management Strategy, Vol. 6, no. 1 (1997).
Abstract: I examine the outcomes of cases of entry by merchant shipping lines into established markets around the turn of the century. These established markets are completely dominated by an incumbent cartel composed of several member shipping lines. The cartel makes the decision whether or not to begin a price war against the entrant; some entrants are formally admitted to the cartel without any conflict. I use characteristics of the entrant to predict whether or not the entrant will encounter a price war conditional on entering. I find that weaker entrants are fought, where weaker means less financial resources, experience, size, or poor trade conditions. The empirical results provide support for the long purse theory of predation. I discuss qualitative evidence such as predatory intent expressed in correspondence between cartel members which supports the empirical results. The results are also found to be robust to misclassification of the dependent variable which is a particular concern when dealing with historical data.
Handle: RePEc:nbr:nberwo:5663
Template-Type: ReDIF-Paper 1.0
Title: The Gender Pay Gap
Classification-JEL: J31; J16
Author-Name: Francine D. Blau
Author-Person: pbl16
Note: LS
Number: 5664
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5664
File-URL: http://www.nber.org/papers/w5664.pdf
File-Format: application/pdf
Publication-Status: published as Women's Work and Wages, Jonung, Christina and Inga Persson, eds., London: Routledge, 1998.
Publication-Status: published as Blau, Francine D. and Lawrence M. Kahn. "Analyzing The Gender Pay Gap," Quarterly Review of Economics and Finance, 1999, Vol, 39, no. 5, 625-646
Publication-Status: published as Blau, Francine D. and Kahn, Lawrence M. (2007) "The Gender Pay Gap," The Economists' Voice: Vol. 4: Iss. 4, Article 5
Publication-Status: published as Francine D. Blau & Lawrence M. Kahn, 2007. "The Gender Pay Gap," Academy of Management Perspectives, vol 21(1), pages 7-23.
Abstract: Empirical research on gender pay gaps has traditionally focused on the role of gender-specific factors, particularly gender differences in qualifications and differences in the treatment of otherwise equally qualified male and female workers (i.e., labor market discrimination). This paper explores the determinants of the gender pay gap and argues for the importance of an additional factor, wage structure, the array of prices set for labor market skills and the rewards received for employment in favored sectors. Drawing on joint work with Lawrence Kahn, I illustrate the impact of wage structure by presenting empirical results analyzing its effect on international differences in the gender gap and trends over time in the gender differential in the U.S.
Handle: RePEc:nbr:nberwo:5664
Template-Type: ReDIF-Paper 1.0
Title: Changes in U.S. Tariffs: Prices or Policies?
Classification-JEL: F13; N72
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: ITI DAE
Number: 5665
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5665
File-URL: http://www.nber.org/papers/w5665.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review (September 1998).
Abstract: In the century after the Civil War, roughly two-thirds of U.S. dutiable imports were subject to specific duties whose ad valorem equivalent was inversely related to the price level. This paper finds that import price fluctuations easily dominate commercial policies (changes in rates of import duty) in bringing about changes in the average U.S. tariff from 1865-1973. About three-quarters of the post-Smoot Hawley decline in U.S. tariffs, for example, can be attributed to higher import prices, the remainder to negotiated reductions in tariff rates.
Handle: RePEc:nbr:nberwo:5665
Template-Type: ReDIF-Paper 1.0
Title: Exclusive Dealing
Classification-JEL: L42
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Michael D. Whinston
Author-Person: pwh46
Note: IO
Number: 5666
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5666
File-URL: http://www.nber.org/papers/w5666.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas and Michael D. Whinston. "Exclusive Dealing," Journal of Political Economy, 1998, v106(1,Feb), 64-103.
Abstract: In this paper, we provide a conceptual framework for understanding the phenomenon of exclusive dealing, and we explore the motivations for and effects of its use. For a broad class of models, we characterize the outcome of a contracting game in which manufacturers may employ exclusive dealing provisions in their contracts. We then apply this characterization to a sequence of specialized settings. We demonstrate that exclusionary contractual provisions may be irrelevant, anticompetitive, or efficiency-enhancing, depending upon the setting. More specifically, we exhibit the potential for anticompetitive effects in non-coincident markets (that is, markets other than the ones in which exclusive dealing is practiced), and we explore the potential for the enhancement of efficiency in a setting where common representation gives rise to incentive conflicts. In each instance, we describe the manner in which equilibrium outcomes would be altered by a ban on exclusive dealing. We demonstrate that a ban may have surprisingly subtle and unintended effects.
Handle: RePEc:nbr:nberwo:5666
Template-Type: ReDIF-Paper 1.0
Title: The Determinants and Consequences of Financial Education in the Workplace: Evidence from a Survey of Households
Classification-JEL: H31; I21
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Daniel M. Garrett
Note: AG PE
Number: 5667
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5667
File-URL: http://www.nber.org/papers/w5667.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas and Daniel M. Garrett. "The Effects Of Financial Education In The Workplace: Evidence From A Survey Of Households," Journal of Public Economics, 2003, v87(7-8,Aug), 1487-1519.
Abstract: In recent years, the United States has witnessed significant growth in programs of financial and retirement education in the workplace. This phenomenon provides an opportunity to assess the effects of targeted education programs on financial choices. This paper uses a novel household survey to develop econometric evidence on the efficacy of employer-based financial education. While our primary focus concerns the effects of these programs on saving (both in general and for the purposes of retirement), we also examine a number of collateral issues. These include the circumstances under which employers offer, and employees participate in, financial education programs, and the effects of these programs on sources of information and advice concerning retirement planning. Our findings indicate that employer-based retirement education strongly influences household financial behavior.
Handle: RePEc:nbr:nberwo:5667
Template-Type: ReDIF-Paper 1.0
Title: International R&D Spillovers: A Re-Examination
Classification-JEL: F10; O30
Author-Name: Frank Lichtenberg
Author-Person: pli76
Author-Name: Bruno van Pottelsberghe de la Potterie
Note: PR
Number: 5668
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5668
File-URL: http://www.nber.org/papers/w5668.pdf
File-Format: application/pdf
Publication-Status: Published as "International R&D Spillovers: A Comment", European Economic Review, Vol. 42, no. 8 (September 1998): 1483-1491.
Abstract: Coe and Helpman(1995) have measured the extent to which technology spills over between industrialized countries through the particular channel of trade flows. This paper re-examines two particular features of their study. First, we suggest that their functional form of how foreign R&D affects domestic productivity via imports is probably incorrect. We provide an alternative model which turns out to be more accurate, both theoretically and empirically. Second, we take into account two new potential channels of technology transfer: inward FDI and technology sourcing, as proxied by outward FDI. The empirical results show that outward FDI flows and imports flows are two simultaneous channels through which technology is internationally diffused. Inward FDI flows are not a significant channel of technology transfer. The hypothesis of technology sourcing associated with MNEs activities abroad is therefore confirmed while the widespread belief that inward FDI is a major channel of technology transfer is rejected.
Handle: RePEc:nbr:nberwo:5668
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Examination of Information Barriers to Trade in Insurance
Classification-JEL: D8; G22
Author-Name: John Cawley
Author-Person: pca6
Author-Name: Tomas Philipson
Author-Person: pph37
Note: EH
Number: 5669
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5669
File-URL: http://www.nber.org/papers/w5669.pdf
File-Format: application/pdf
Publication-Status: published as Cawley, John, and Tomas Philipson. An Empirical Examination of Information Barriers to Trade in Insurance." American Economic Review, September 1999, 89(4): 827-846.
Abstract: This paper tests restrictions implied by the canonical theory of insurance under asymmetric information using ideal data that contains the self-perceived and actual mortality risk of individuals, as well as the price and quantity of their life insurance. We report several findings which are hard to reconcile with the canonical theory. First, we find a striking independence of self-perceived risk and the price of insurance. Second, we find strong evidence of the opposite type of non-linear pricing than predicted by theory: the theory predicts that prices rise with quantity, but we find that they fall. Third, we find that risk is negatively correlated with the quantity of insurance purchased although the theory predicts a positive correlation. Fourth, we find that a substantial fraction of individuals hold multiple insurance contracts, which casts doubt on the prediction that unit prices rise with quantity because multiple small contracts dominate a large one in such a case. Lastly, we test the accuracy of the self-perceived risk of the insured through estimating the induced profits they imply. We conclude by discussing the robustness of these results and the questions they raise for future theoretical models.
Handle: RePEc:nbr:nberwo:5669
Template-Type: ReDIF-Paper 1.0
Title: Application of Nationality-Adjusted Net Sales and Value Added Framework: The Case of Japan
Classification-JEL: F1
Author-Name: Fukunari Kimura
Author-Person: pki214
Author-Name: Robert E. Baldwin
Note: ITI
Number: 5670
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5670
File-URL: http://www.nber.org/papers/w5670.pdf
File-Format: application/pdf
Publication-Status: published as Kimura, Fukunari and Robert E. Baldwin. "Application of a Nationality-Adjusted Net Sales and Value-Added Framework: The Case of Japan". Geography and Ownership as Bases for Economic Accounting. Edited by Robert E. Baldwin, Robert E. Lipsey, and J.David Richardson,Chicago,Ill: The University of Chicago Press, 1998, pp. 49-80.
Publication-Status: published as Application of a Nationality-Adjusted Net Sales and Value- Added Framework: The Case of Japan, Fukunari Kimura, Robert E. Baldwin. in Geography and Ownership as Bases for Economic Accounting, Baldwin, Lipsey, and Richardson. 1998
Abstract: This paper applies the nationality-adjusted net sales and value added framework proposed in Baldwin and Kimura (1996) to Japan. Despite possibly large estimation errors due to statistical deficiencies, the framework is very useful for analyzing the relationship of the Japanese economy to the world economy. We find that Japan is special in the following four aspects. First, Japanese-owned firms have become increasingly dependent on the marketing activities of their foreign affiliates, rather than depending on cross-border exports by parent firms located in Japan. Second, the much smaller activities of Japanese affiliates of foreign firms (JAFF) relative to those of foreign affiliates of Japanese firms (FAJF) are apparent in terms of sales, value added, and employment, at both the macroeconomic and sectoral levels. Third, Japanese net sales to foreigners are consistently larger than cross-border net exports of Japan. Fourth, among the activities of FAJF, the importance of commercial FAJF is particularly large; these commercial FAJF handle a large portion of Japanese exports and imports. The paper concludes by discussing a number of statistical improvements required by the Japanese government in order to apply our analytical framework more rigorously.
Handle: RePEc:nbr:nberwo:5670
Template-Type: ReDIF-Paper 1.0
Title: Earnings and Expected Returns
Classification-JEL: G12
Author-Name: Owen Lamont
Note: AP
Number: 5671
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5671
File-URL: http://www.nber.org/papers/w5671.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 53, no. 5 (October 1998): 1563-1587.
Abstract: The aggregate dividend payout ratio forecasts aggregate excess returns on both stocks and corporate bonds in post-war US data. Both high corporate profits and high stock prices forecast low excess returns on equities. When the payout ratio is high, expected returns are high. The payout ratio's correlation with business conditions gives it predictive power for returns; it contains information about future stock and bond returns that is not captured by other variables. The payout ratio is useful because it captures the temporary components of earnings. The dynamic relationship between dividends, earnings and stock prices shows that a positive innovation in earnings lowers expected returns in the near future, but raises them thereafter.
Handle: RePEc:nbr:nberwo:5671
Template-Type: ReDIF-Paper 1.0
Title: Performance Pay and Productivity
Classification-JEL: J00; J33
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS PR
Number: 5672
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5672
File-URL: http://www.nber.org/papers/w5672.pdf
File-Format: application/pdf
Publication-Status: published as Lazear, E. P. "Performance Pay And Productivity," American Economic Review, 2000, v90(5,Dec), 1346-1361.
Abstract: What happens when a firm switches from paying hourly wages to paying piece rates? The theory developed below predicts that average productivity rises, that the firm will attract a more able work force and that the variance in output across individuals at the firm will rise as well. The theory is tested with data from a large autoglass company that changed compensation structures between 1994 and 1995. All theoretical predictions are borne out. In the firm examined, the productivity effects are extremely large, amounting to anywhere from about 20% to 36% of output, depending on what is held constant. About half of the worker-specific increase in productivity is passed on to workers in the form of higher wages.
Handle: RePEc:nbr:nberwo:5672
Template-Type: ReDIF-Paper 1.0
Title: The Effects of the Corporate Average Fuel Efficiency Standards
Author-Name: Pinelopi Koujianou Goldbe
Author-Person: pgo1
Number: 5673
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5673
File-URL: http://www.nber.org/papers/w5673.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Industrial Economics (March 1998): 1-33.
Abstract: This paper examines the effects of the Corporate Average Fuel Efficiency standards (CAFE) on the automobile product mix, prices and fuel consumption First a discrete choice model of automobile demand and a continuous model of vehicle use are estimated using micro data from the Consumer Expenditure Survey for 1984-1990. Next, the demand side model is combined with a model of oligopoly and product differentiation on the supply side. After estimating the demand and supply parameters, the effects of the CAFE regulation are assessed through simulations and compared to the effects of alternative policy instruments such as a powerful gas guzzler tax and an increase in the gasoline tax. Our results are as follows: Vehicle use is in the short run unresponsive to fuel cost changes; vehicle purchases, however, respond to both car prices and fuel cost. These results taken together imply that (1) contrary to the CAFE opponents' claims, higher fleet fuel efficiency is not neutralized by increased driving, and (2) policies to reduce fuel consumption by shifting the composition of the car fleet towards more fuel efficient vehicles are more promising than policies that target utilization. Policies with compositional effects operate through two channels: changes in vehicle prices and in operating costs. Contrary to environmental groups' claims, our results do not indicate the existence of consumer myopia. Still, we find the gasoline tax increase necessary to achieve fuel consumption reductions equivalent to the ones currently achieved through CAFE is 780%; whether an increase of this size is politically feasible is questionable. Our results indicate that the CAFE regulation reduced fuel consumption but shifts in the classification of products as domestic vs. imports weakened the effectiveness of the standards.
Handle: RePEc:nbr:nberwo:5673
Template-Type: ReDIF-Paper 1.0
Title: Elephants
Classification-JEL: D90; Q20
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Charles Morcom
Note: EFG
Number: 5674
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5674
File-URL: http://www.nber.org/papers/w5674.pdf
File-Format: application/pdf
Publication-Status: published as Kremer, Michael and Charles Morcom. "Elephants," American Economic Review, 2000, v90(1,Mar), 212-234.
Abstract: Existing models of open-access resources are applicable to non-storable resources, such as fish. Many open-access resources, however, are used to produce storable goods. Elephants, rhinos, and tigers are three prominent examples. Anticipated future scarcity of these resources will increase current prices, and current poaching. This implies that, for given initial conditions, there may be rational expectations equilibria leading both to extinction and to survival. Governments may be able to eliminate extinction equilibria by promising to implement tough anti-poaching measures if the population falls below a threshold. Alternatively, they, or private agents, may be able to eliminate extinction equilibria by accumulating a sufficient stockpile of the storable good.
Handle: RePEc:nbr:nberwo:5674
Template-Type: ReDIF-Paper 1.0
Title: Forecasting Exchange Rates and Relative Prices with the Hamburger Standard: Is What You Want What You Get With McParity?
Classification-JEL: F31; F30
Author-Name: Robert E. Cumby
Author-Person: pcu115
Note: IFM
Number: 5675
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5675
File-URL: http://www.nber.org/papers/w5675.pdf
File-Format: application/pdf
Abstract: A decade ago the Economist began an annual survey of Big Mac prices as a guide to whether currencies are trading at the right exchange rates. This paper asks how well the hamburger standard has performed. Although average deviations from absolute Big Mac parity are large for several currencies, once estimates of these average deviations are removed from the data, the evidence suggests that convergence to relative Big Mac parity is quite rapid. The half-life of deviations from Big Mac parity appear to be about 1 year, which is considerably shorter than estimates of the half-life of deviations from purchasing power parity (4-5 years) that are reported in the literature. In addition, deviations from relative Big Mac parity appear to provide useful information for forecasting exchange rates. After accounting for currency-specific constants, a 10 percent undervaluation according to the hamburger standard in one year is associated with a 3.5 percent appreciation over the following year. Finally, deviations from relative Big Mac parity seem to be helpful in forecasting relative local currency prices. When the U.S. dollar price of Big Macs is high in a country, the relative local currency price of Big Macs in that country is likely to fall during the following year.
Handle: RePEc:nbr:nberwo:5675
Template-Type: ReDIF-Paper 1.0
Title: Relative Labor Productivity and the Real Exchange Rate in the Long Run: Evidence for a Panel of OECD Countries
Classification-JEL: F30; F31
Author-Name: Matthew B. Canzoneri
Author-Person: pca260
Author-Name: Robert E. Cumby
Author-Person: pcu115
Author-Name: Behzad Diba
Author-Person: pdi273
Note: IFM
Number: 5676
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5676
File-URL: http://www.nber.org/papers/w5676.pdf
File-Format: application/pdf
Publication-Status: published as Canzoneri, Matthew B., Robert E. Cumby and Behzad Diba. "Relative Labor Productivity And The Real Exchange Rate In The Long Run: Evidence For A Panel Of OECD Countries," Journal of International Economics, 1999, v47(2,Apr), 245-266.
Abstract: The Balassa-Samuelson model, which explains real exchange rate movements in terms of sectoral productivities, rests on two components. First, for a class of technologies including Cobb-Douglas, the model implies that the relative price of nontraded goods in each country should reflect the relative productivity of labor in the traded and nontraded goods sectors. Second, the model assumes that purchasing power parity holds for traded goods in the long-run. We test each of these implications using data from a panel of OECD countries. Our results suggest that the first of these two fits the data quite well. In the long run, relative prices generally reflect relative labor productivities. The evidence on purchasing power parity in traded goods is considerably less favorable. When we look at US dollar exchange rates, PPP does not appear to hold for traded goods, even in the long run. On the other hand, when we look at DM exchange rates purchasing power parity appears to be a somewhat better characterization of traded goods prices.
Handle: RePEc:nbr:nberwo:5676
Template-Type: ReDIF-Paper 1.0
Title: Demographic Structure and the Political Economy of Public Education
Classification-JEL: H42; J14
Author-Name: James M. Poterba
Author-Person: ppo19
Note: AG PE
Number: 5677
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5677
File-URL: http://www.nber.org/papers/w5677.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Policy Analysis and Management, Vol 16, no. 1, pp. 48-66, (Winter 1997)
Abstract: This papers examines the relationship between demographic structure and the level of government spending on K-12 education. Panel data for the U.S. states over the 1960-1990 period suggests that an increase in the fraction of elderly residents in a jurisdiction is associated with a significant reduction in per child educational spending. This reduction is particularly large when the elderly residents and the school-age population are from different racial groups. Variation in the size of the school-age population does not result in proportionate changes in education spending, so students in states with larger school-age populations receive lower per-student spending than those in states with smaller numbers of potential students. These results provide support for models of generational competition in the allocation of public sector resources. They also suggest that the effect of cohort size on government-mediated transfers must be considered in analyzing how cohort size affects economic well-being.
Handle: RePEc:nbr:nberwo:5677
Template-Type: ReDIF-Paper 1.0
Title: Money and Exchange Rates in the Grossman-Weiss-Rotemberg Model
Classification-JEL: F31; F33
Author-Name: Fernando Alvarez
Author-Name: Andrew Atkeson
Author-Person: pat52
Note: IFM
Number: 5678
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5678
File-URL: http://www.nber.org/papers/w5678.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 40, no. 3 (1997): 619-640.
Abstract: We examine the impact of monetary injections in the Grossman-Weiss-Rotemberg Model and show that monetary shocks can lead to nominal exchange rates that are more volatile than inflation, money growth or interest rate differentials. Moreover, movements in real exchange rates following monetary injections can be persistent and nearly as large as movements in nominal exchange rates nominal exchange rates.
Handle: RePEc:nbr:nberwo:5678
Template-Type: ReDIF-Paper 1.0
Title: Wage Subsidies for the Disadvantaged
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: LS
Number: 5679
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5679
File-URL: http://www.nber.org/papers/w5679.pdf
File-Format: application/pdf
Publication-Status: published as Generating Jobs, Freeman, R. and P. Gottschalk, eds., New York: Russell Sage Foundation, 1998, pp. 21-53.
Abstract: Wage subsidies to private employers have often been proposed by economists as a potentially flexible and efficient method to improve the earnings and employment of low-wage workers. This paper lays out the basic economics of wage subsidies; examines issues arising in the design of alternative forms of wage subsidies; and reviews evidence on the effectiveness of recent U.S. wage subsidy programs and demonstration projects. Wage subsidies to employers to hire disadvantaged workers appear to modestly raise the demand for labor for those workers. Stand-alone wage subsidies (or employment tax credits) that are highly targeted on very specific groups (such as welfare recipients) appear to have low utilization rates and may (in some cases) stigmatize the targeted group. But new evidence based on an examination of changes in eligibility rules for the Targeted Jobs Tax Credit, the major U.S. wage subsidy program for the economically disadvantaged from 1979 to 1994, suggests modest positive employment effects of the TJTC on economically disadvantaged young adults. Policies combining wage subsidies with job development, training, and job search assistance efforts appear to have been somewhat successful in improving the employment and earnings of specific targeted disadvantaged groups.
Handle: RePEc:nbr:nberwo:5679
Template-Type: ReDIF-Paper 1.0
Title: Implementing Results-Oriented Trade Policies: The Case of the US-Japanese Auto Parts Dispute
Classification-JEL: F12; F13
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: John Morgan
Author-Person: pmo131
Note: ITI
Number: 5680
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5680
File-URL: http://www.nber.org/papers/w5680.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review, Vol.42, no.8 (October 1998): 1443-1467.
Abstract: Why would the US threaten punitive tariffs on luxury autos to implement a market share target in auto parts? We show that by making threats to a linked market, a market share may be implemented with fairly weak informa- tional and administrative requirements. Moreover, such policies can be both pro-competitive and advatageous to US firms.
Handle: RePEc:nbr:nberwo:5680
Template-Type: ReDIF-Paper 1.0
Title: Contagious Currency Crises
Classification-JEL: F31
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Andrew K. Rose
Author-Person: pro71
Author-Name: Charles Wyplosz
Author-Person: pwy2
Note: IFM
Number: 5681
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5681
File-URL: http://www.nber.org/papers/w5681.pdf
File-Format: application/pdf
Publication-Status: published as Scandinavian Journal of Economics (1996).
Publication-Status: published as Barry Eichengreen & Andrew K. Rose, 1999. "Contagious Currency Crises: Channels of Conveyance," NBER Chapters, in: Changes in Exchange Rates in Rapidly Development Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7), pages 29-56 National Bureau of Economic Research, Inc.
Abstract: This paper is concerned with the fact that the incidence of speculative attacks tends to be temporally correlated; that is, currency crises appear to pass contagiously from one country to another. The paper provides a survey of the theoretical literature, and analyzes the contagious nature of currency crises empirically. Using thirty years of panel data from twenty industrialized countries, we find evidence of contagion. Contagion appears to spread more easily to countries which are closely tied by international trade linkages than to countries in similar macroeconomic circumstances.
Handle: RePEc:nbr:nberwo:5681
Template-Type: ReDIF-Paper 1.0
Title: Optimal Money Burning: Theory and Application to Corporate Dividend Policy
Classification-JEL: H32; G35
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Lee Redding
Note: PE
Number: 5682
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5682
File-URL: http://www.nber.org/papers/w5682.pdf
File-Format: application/pdf
Publication-Status: published as B. Douglas Bernheim & Lee S. Redding, 2001. "Optimal Money Burning: Theory and Application to Corporate Dividends," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 10(4), pages 463-507, December.
Abstract: We explore signaling behavior in settings with a discriminating signal and several costly nondiscriminating ( money burning ) activities. In settings where informed parties have many options for burning money, existing theory provides no basis for selecting one nondiscriminating activity over another. When senders have private information about the costs of these activities, each sender's indifference is resolved, the taxation of a nondiscriminating signal is Pareto improving, and the use of the taxed activity becomes more widespread as the tax rate rises. We apply this analysis to the theory of dividend signaling. The central testable implication of the model is verified empirically.
Handle: RePEc:nbr:nberwo:5682
Template-Type: ReDIF-Paper 1.0
Title: Tax Policy and Investment
Classification-JEL: H3
Author-Name: Kevin A. Hassett
Author-Person: pha378
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: PE EFG
Number: 5683
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5683
File-URL: http://www.nber.org/papers/w5683.pdf
File-Format: application/pdf
Publication-Status: published as Fiscal Policy: Lessons from Economic Research, Auerbach, Alan, ed., Cambridge: MIT Press, 1997.
Abstract: In this paper, we summarize recent advances in the study of effects of tax policy on the fixed investment decisions of firms. We attempt to identify consensus where it has been achieved and to highlight important unresolved issues. In addition, we discuss the implications of recent findings for the analysis of policy options, and discuss arguments for and against long-run tax policy that favors business investment spending.
Handle: RePEc:nbr:nberwo:5683
Template-Type: ReDIF-Paper 1.0
Title: Control of the Public Debt: A Requirement for Price Stability?
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 5684
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5684
File-URL: http://www.nber.org/papers/w5684.pdf
File-Format: application/pdf
Publication-Status: published as The Debt Burden and Monetary Policy, Calvo, G. and M. King, eds., London: MacMillan, 1997.
Publication-Status: published as Woodford, Michael. "Fiscal Requirements For Price Stability," Journal of Money, Credit and Banking, 2001, v33(3,Aug), 669-728.
Abstract: The paper considers the role of limits upon the permissible growth of public debt, like those stipulated in the Maastricht treaty, in making price stability possible. It is shown that a certain type of fiscal instability, namely variations in the present value of current and future primary government budgets, necessarily results in price level instability, in the sense that there exists no possible monetary policy that results in an equilibrium with stable prices. In the presence of sluggish price adjustment, the fiscal shocks disturb real output and real interest rates as well. On the other hand, shocks of this kind can be eliminated by a Maastricht-type limit on the value of the public debt. In the presence of the debt limit (and under assumptions of frictionless financial markets, etc.), Ricardian equivalence holds, and fiscal shocks have no effects upon real or nominal variables. Furthermore, an appropriate monetary policy rule can ensure price stability even in the face of other kinds of real shocks. Thus the debt limit serves as a precondition for the common central bank in a monetary union to be charged with responsibility for maintaining a stable value for the common currency.
Handle: RePEc:nbr:nberwo:5684
Template-Type: ReDIF-Paper 1.0
Title: Demand Shifts, Population Adjustments, and Labor Market Outcomes during the 1980s
Classification-JEL: J31; J61
Author-Name: John Bound
Author-Person: pbo406
Author-Name: Harry J. Holzer
Author-Person: pho162
Note: LS
Number: 5685
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5685
File-URL: http://www.nber.org/papers/w5685.pdf
File-Format: application/pdf
Publication-Status: Published as "Did Criminal Activity Increase During the 1980s? Comparisons Across Data Sources," Social Science Quarterly, Vol. 78, no. 3 (September 1997): 725-739
Publication-Status: published as Journal of Labor Economics, Vol. 18, no. 1, January 2000, pp. 20-54
Abstract: In this paper we explore the effects of labor demand shifts and population adjustments across metropolitan areas on the employment and earnings of various demographic groups during the 1980s. Results show that, although earnings and employment deteriorated for less-education and black males in most areas in the 1980s, there was a good deal of geographic variation in the magnitudes of these changes. Shifts in labor demand across local areas contributed to this variation, and had greater relative impacts on the earnings and employment of these demographic groups. We also find that popu- lation shifts across areas, presumably due to migation, at least partially offset the effects of these demand shifts. But less-education workers showed substantially lower population adjustments in response to these demand shifts. These limited supply responses apparently contributed importantly to relatively greater deterioration of employment and earnings of these groups in declining areas during the 1980s.
Handle: RePEc:nbr:nberwo:5685
Template-Type: ReDIF-Paper 1.0
Title: Assessing the Effectiveness of Saving Incentives
Classification-JEL: E2; H3
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Author-Name: Jonathan S. Skinner
Author-Person: psk23
Note: PE
Number: 5686
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5686
File-URL: http://www.nber.org/papers/w5686.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, vol. 10, no. 4, pp. 73-90, Fall 1996.
Publication-Status: published as R. Glenn Hubbard & Jonathan S. Skinner, 2009. "Assessing the Effectiveness of Savings Incentives," Books, American Enterprise Institute, number 24067, 9.
Abstract: In this paper, we argue that there is more to be learned from recent research on the effectiveness of targeted saving incentives than is suggested by the wide variation in empirical estimates. First, we conclude that characterizations of saving appear to stimulate moderate amounts of new saving. Second, we suggest a cost-benefit approach to ask: What is the incremental gain in capital accumulation per dollar of foregone revenue? We find that for quite conservative measures of the saving impacts of IRAs or 401(k)s, the incremental gains in capital accumulation per dollar of lost revenue are large
Handle: RePEc:nbr:nberwo:5686
Template-Type: ReDIF-Paper 1.0
Title: Deregulation and Labor Earnings in the Airline Industry
Classification-JEL: J4
Author-Name: David Card
Author-Person: pca271
Note: LS
Number: 5687
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5687
File-URL: http://www.nber.org/papers/w5687.pdf
File-Format: application/pdf
Publication-Status: published as in James Peoples, ed. Regulatory Reform and Labor Markets. Norwell, MA: Kluwer Academic Press, forthcoming 1997.
Abstract: This paper uses a variety of data sources to study the effect of deregulation on the structure of wages in the airline industry. Microdata from the 1980 and 1990 Censuses show a 10 percent decline in the relative earnings of airline workers after deregulation, with roughly similar declines for industry-specific occupations (pilots and flight attendants) and general occupations (managers and secretaries). Union contract data for pilots, flight attendants and mechanics at the major firms show similar trends in the levels of earnings along with a rise in inter-firm wage inequality -- especially for pilots. Finally, data from the displaced worker surveys reveal that airline workers experienced similar wage losses to job-losers from other industries over the 1980s. Taken as a whole, the evidence suggests that the rent premiums earned by airline workers in the regulatory era were relatively modest, and comparable to the wage premiums earned in many other sectors.
Handle: RePEc:nbr:nberwo:5687
Template-Type: ReDIF-Paper 1.0
Title: The Economic Consequences of Parental Leave Mandates: Lessons from Europe
Classification-JEL: J38
Author-Name: Christopher J. Ruhm
Author-Person: pru7
Note: EH LS PE
Number: 5688
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5688
File-URL: http://www.nber.org/papers/w5688.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 108, no. 1 (February 1998): 285-317. Published as "The Economic Consequences of Labor Mobility", Industrial and Labor Relations Review, Vol. 41, no. 1 (1987): 30-42.
Abstract: This study investigates the economic consequences of parental leave mandates using data for 16 European countries over the 1969 through 1988 period. Since women use virtually all of the family leave in most nations, men constitute a reasonable comparison group and the natural experiment in most of the analysis involves examining how changes in leave entitlements affect the gap between female and male labor market outcomes. The employment-to-populations ratios of women in their prime childbearing years are also compared to those of older females, as a function of changes in leave regulations. Parental leave mandates are associated with increases in total employment but appear to have a more modest effect on weekly work hours and there is some evidence that women pay for entitlements to extended leave by receiving lower relative wages. The econometric estimates are sensitive to the inclusion of controls for time-varying country effects and sex-specific within-country time-trends.
Handle: RePEc:nbr:nberwo:5688
Template-Type: ReDIF-Paper 1.0
Title: Preliminary Injunctive Relief: Theory and Evidence from Patent Litigation
Author-Name: Jean O. Lanjouw
Author-Name: Josh Lerner
Author-Person: ple60
Note: PR
Number: 5689
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5689
File-URL: http://www.nber.org/papers/w5689.pdf
File-Format: application/pdf
Publication-Status: published as "Tilting the Table? The Use of Preliminary Injunctions," Journal of Law and Economics, 44 (October 2001) 573-603.
Abstract: This paper examines the suggestion that established plaintiffs request preliminary injunctions to engage in predation against less financially healthy firms. We first present a model in which differences in litigation costs drive the use of preliminary injunctions in civil litigation. The hypothesis is tested using a sample of 252 patent suits, which allows us to characterize the litigating parties while controlling for the nature of the dispute. The evidence is consistent with the predation hypothesis. We then explore various implications of the model and the impact of policy reforms.
Handle: RePEc:nbr:nberwo:5689
Template-Type: ReDIF-Paper 1.0
Title: Perceptions of Economic Insecurity: Evidence from the Survey of Economic Expectations
Author-Name: Jeff Dominitz
Author-Name: Charles F. Manski
Author-Person: pma111
Note: LS
Number: 5690
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5690
File-URL: http://www.nber.org/papers/w5690.pdf
File-Format: application/pdf
Publication-Status: published as Dominitz, Jeff and Charles F. Manski. "Perceptions of Economic Insecurity: Evidence From the Survey of Economic Expectations." The Public Opinion Quarterly 61, 2 (Summer 1997): 261-287.
Abstract: We have recently initiated the Survey of Economic Expectations (SEE) to learn how Americans perceive their near-term futures. This paper uses SEE data on over two thousand labor force participants interviewed in 1994 and 1995 to describe how Americans in the labor force perceive the risk of near-term economic misfortune. We measure economic insecurity through responses to questions eliciting subjective probabilities of three events in the year ahead: absence of health insurance, victimization by burglary, and job loss. With item response rates exceeding 98 percent, respondents clearly are willing to answer the expectations questions and they appear to do so in a meaningful way. Using the responses to classify individuals as relatively secure, relatively insecure, and highly insecure, we find that respondents with a high risk of one adverse outcome tend also to perceive high risks of the other outcomes. Economic insecurity tends to decline with age and with schooling. Black respondents perceive much greater insecurity than do whites, especially among males. Within the period 1994-1995, we find some time-series variation in insecurity but no clear trends. We find that expectations and realizations of health insurance coverage and of jobs tend to match up quite closely, but respondents substantially overpredict the risk of burglary.
Handle: RePEc:nbr:nberwo:5690
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Complementarities: A Quantitative Analysis
Classification-JEL: E32; E23
Author-Name: Russell Cooper
Author-Name: Alok Johri
Author-Person: pjo22
Note: EFG
Number: 5691
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5691
File-URL: http://www.nber.org/papers/w5691.pdf
File-Format: application/pdf
Publication-Status: published as Cooper, Russel W. and Alok Johri. "Dynamic Complementarities: A Quantitative Analysis," Journal of Monetary Economics, 1997, v40(1,Sep), 97-119.
Abstract: This paper considers the importance of dynamic complementarities as an endogenous source of propagation in a dynamic stochastic economy. Dynamic complementarities link the stocks of human and organizational capital, which are influenced by past levels of economic activity, to current levels of productivity. We supplement an otherwise standard dynamic business cycle model with both contemporaneous and dynamic complementarities. The model is calibrated using estimates of these effects. Our quantitative analysis identifies empirically relevant dynamic complementarities as a source of propagation for both technology and taste shocks.
Handle: RePEc:nbr:nberwo:5691
Template-Type: ReDIF-Paper 1.0
Title: Federal Reserve Private Information and the Behavior of Interest Rates
Classification-JEL: E52; D82
Author-Name: Christina D. Romer
Author-Person: pro407
Author-Name: David H. Romer
Author-Person: pro406
Note: EFG ME
Number: 5692
Creation-Date: 1996-07
Order-URL: http://www.nber.org/papers/w5692
File-URL: http://www.nber.org/papers/w5692.pdf
File-Format: application/pdf
Publication-Status: published as Romer, Christina D. and David H. Romer. "Federal Reserve Information And The Behavior Of Interest Rates," American Economic Review, 2000, v90(3,Jun), 429-457.
Abstract: Many authors argue that asymmetric information between the Federal Reserve and the public is important to the conduct and the effects of monetary policy. This paper tests for the existence of such asymmetric information by examining Federal Reserve and commercial inflation forecasts. We demonstrate that the Federal Reserve has considerable information about inflation beyond what is known to commercial forecasters. We also provide evidence that monetary policy actions provide signals of the Federal Reserve's private information and that commercial forecasters modify their forecasts in response to those signals. These findings may explain why long-term interest rates typically rise in response to shifts to tighter monetary policy.
Handle: RePEc:nbr:nberwo:5692
Template-Type: ReDIF-Paper 1.0
Title: Trade Liberalization and Income Distribution
Classification-JEL: F11; O19
Author-Name: Donald R. Davis
Author-Person: pda33
Note: ITI
Number: 5693
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5693
File-URL: http://www.nber.org/papers/w5693.pdf
File-Format: application/pdf
Abstract: Empirical work relating trade liberalization and income distributed has iden- tified an important anomaly. The Stolper-Samuelson theorem predict trade liberalization will shift income toward a country's abundant factor. For developing countries, this suggests liberalization will principally benefit the abundant unskilled labor. Yet extensive empirical studies have identified many cases with a contrary result. This paper develops a simple theoretical explanation for this anomaly. It shows that countries which are labor abundant in a global sense may see wages decline with liberalization if they are capital abundant in a local sense. The current absence of empirical work that would allow us to identify the relevant local abundance implies that virtually all assertions regarding anticipated distributional consequences of trade liberalization are without foundation. There may likewise be important implications for industrialized countries that border developing countries undertaking trade liberalization, particularly in regard to the incentives for migration.
Handle: RePEc:nbr:nberwo:5693
Template-Type: ReDIF-Paper 1.0
Title: International Conflict, Defense Spending and the Size of Countries
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Enrico Spolaore
Author-Person: psp27
Note: ME
Number: 5694
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5694
File-URL: http://www.nber.org/papers/w5694.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Ablerto and Enrico Spolaore. "Conflict, Defense Spending, And The Number Of Nations," European Economic Review, 2006, v50(1,Jan), 91-120.
Abstract: This paper provides a formal model of endogenous country formation and of choice of defense spending in a world with international conflict. The model is consistent with three observations. First, secessions and, more generally, break-up of countries should follow a reduction in the likelihood of international conflict. Second, the number of regional conflicts between smaller countries may increase as a result of the break-up of larger countries. Third, the size of the peace divided -- i.e., the reduction in the defense spending in a more peaceful world -- is limited by the process of country break-up.
Handle: RePEc:nbr:nberwo:5694
Template-Type: ReDIF-Paper 1.0
Title: Quota Licenses for Imported Capital Equipment: Could Bureaucrats Ever DoBetter than the Market?
Classification-JEL: F13
Author-Name: Barbara J. Spencer
Author-Person: psp2
Note: ITI
Number: 5695
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5695
File-URL: http://www.nber.org/papers/w5695.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 43, nos. 1 & 2 (August 1997): 1-29.
Abstract: Despite valid criticisms, many developing countries have issued non-transferable import licenses to a limited number of final-good producers so as to restrict imports of an input capital equipment. This paper demonstrates that for a given import quota, such licensing restrictions can actually increase domestic production of both the input and the final product, but at the cost of reduced quota rents. Under pure competition, domestic welfare falls relative to the use of marketable quota licenses, but if foreigners would get the quota rents, or if external economies cause decreasing costs, then bureaucratic allocation can dominate.
Handle: RePEc:nbr:nberwo:5695
Template-Type: ReDIF-Paper 1.0
Title: A Unified Treatment of Horizontal Direct Investment, Vertical Direct Investment, and the Pattern of Trade in Goods and Services
Classification-JEL: F12; F23
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Anthony J. Venables
Author-Person: pve7
Author-Name: Denise Eby Konan
Author-Person: pko137
Author-Name: Kevin H. Zhang
Note: ITI
Number: 5696
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5696
File-URL: http://www.nber.org/papers/w5696.pdf
File-Format: application/pdf
Abstract: This paper contributes to research endogenizing multinational firms in general-equilibrium trade models. We attempt to integrate separate contributions on horizontal multinationals which produce the same final product in multiple locations, with work on vertical multinationals, which geographically fragment production by stages. Previously derived results now emerge as special cases of a more general model. Vertical multinationals dominate when countries are very different in relative factor endowments. Horizontal multinationals dominate when the countries are similar in size and in relative endowments, and trade costs are moderate to high. In some cases, foreign investment or trade liberalization leads to a reversal in the direction of trade. Investment liberalization can also lead to an increase in the volume of trade and produces a strong tendency toward factor-price equalization. Thus direct investment can be a complement to trade in both a volume-of-trade sense and in a welfare sense.
Handle: RePEc:nbr:nberwo:5696
Template-Type: ReDIF-Paper 1.0
Title: Why Are There Rich and Poor Countries? Symmetry-Breaking in the World Economy
Classification-JEL: F12; O12
Author-Name: Kiminori Matsuyama
Author-Person: pma143
Note: ITI
Number: 5697
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5697
File-URL: http://www.nber.org/papers/w5697.pdf
File-Format: application/pdf
Publication-Status: published as Matsuyama, Kiminori, 1996. "Why Are There Rich and Poor Countries? Symmetry-Breaking in the World Economy," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 419-439, December.
Abstract: To explain cross-country differences in economic performance, the economics of coordination failures typically portrays each country in a closed economy model with multiple equilibria and then argues that the poor countries are in an equilibrium inferior to those achieved by the rich. This approach cannot tell us anything about the degree of inequality in the world economy. A more satisfactory approach would be to build a world economy model and show why it has to be separated into the rich and the poor regions, i.e., to demonstrate the co-existence of the rich and poor as an inevitable aspect of the world trading system. In the present model, the symmetry-breaking of the world economy into the rich and the poor occurs because international trade causes agglomeration of different economic activities in different regions of the world. International trade thus creates a kind of pecking order among nations, and as in a game of musical chairs, some countries must be excluded from being rich.
Handle: RePEc:nbr:nberwo:5697
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Economic Growth: A Cross-Country Empirical Study
Classification-JEL: O4
Author-Name: Robert J. Barro
Author-Person: pba251
Note: EFG
Number: 5698
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5698
File-URL: http://www.nber.org/papers/w5698.pdf
File-Format: application/pdf
Publication-Status: published as Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, April.
Publication-Status: published as Levine, Ross, 1998. "Robert J. Barro, Determinants of Economic Growth: A Cross-Country Empirical Study," Journal of Comparative Economics, Elsevier, vol. 26(4), pages 822-824, December.
Abstract: Empirical findings for a panel of around 100 countries from 1960 to 1990 strongly support the general notion of conditional convergence. For a given starting level of real per capita GDP, the growth rate is enhanced by higher initial schooling and life expectancy, lower fertility, lower government consumption, better maintenance of the rule of law, lower inflation, and improvements in the terms of trade. For given values of these and other variables, growth is negatively related to the initial level of real per capita GDP. Political freedom has only a weak effect on growth but there is some indication of a nonlinear relation. At low levels of political rights, an expansion of these rights stimulates economic growth. However, once a moderate amount of democracy has been attained, a further expansion reduces growth. In contrast to the small effect of democracy on growth, there is a strong positive influence of the standard of living on a country's propensity to experience democracy.
Handle: RePEc:nbr:nberwo:5698
Template-Type: ReDIF-Paper 1.0
Title: From Obscurity to Notoriety: A Biography of the Exchange Stabilization Fund
Classification-JEL: 310; E
Author-Name: Anna J. Schwartz
Note: ME
Number: 5699
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5699
File-URL: http://www.nber.org/papers/w5699.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, Vol. 29, no. 2 (May 1997): 135-153.
Abstract: The U.S. Treasury's $20 billion loan to Mexico in January 1995 from the Exchange Stabilization Fund (ESF) brought to public notice the fund that had functioned in obscurity since its authorization by the Gold Reserve Act of January 31, 1934. The design of the ESF, as set forth in the statute, contributed to its obscurity. Its stated mission was to stabilize the exchange value of the dollar, but it has also assumed a role that had no mandate, that of lender to favored countries. ESF's intervention activities and the Federal Reserve's warehousing of ESF foreign currency assets are questionable. A statistical profile of the ESF accounts for the growth of its working balance from $200 million in 1934 to $42.6 billion in assets in 1995.
Handle: RePEc:nbr:nberwo:5699
Template-Type: ReDIF-Paper 1.0
Title: The Endogeneity of the Optimum Currency Area Criteria
Classification-JEL: F14; F41
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: ITI IFM
Number: 5700
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5700
File-URL: http://www.nber.org/papers/w5700.pdf
File-Format: application/pdf
Publication-Status: published as The Economic Journal, Vol. 108, no. 449 (July 1998): 1009-1025. Reprinted in Swedish Economy Policy Review 4 (1997): 487-512.
Abstract: A country's suitability for entry into a currency union depends on a number of economic conditions. These include, inter alia, the intensity of trade with other potential members of the currency union, and the extent to which domestic business cycles are correlated with those of the other countries. But international trade patterns and international business cycle correlations are endogenous. This paper develops and investigates the relationship between the two phenomena. Using thirty years of data for twenty industrialized countries, we uncover a strong and striking empirical finding: countries with closer trade links tend to have more tightly correlated business cycles. It follows that countries are more likely to satisfy the criteria for entry into a currency union after taking steps toward economic integration than before.
Handle: RePEc:nbr:nberwo:5700
Template-Type: ReDIF-Paper 1.0
Title: Do Financial Incentives Encourage Welfare Recipients to Work? Evidence from a Randomized Evaluation of the Self-Sufficiency Project
Classification-JEL: I3
Author-Name: David Card
Author-Person: pca271
Author-Name: Philip K. Robins
Author-Person: pro189
Note: LS
Number: 5701
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5701
File-URL: http://www.nber.org/papers/w5701.pdf
File-Format: application/pdf
Publication-Status: published as Card, David and Philip K. Robins. "How Important Are 'Entry Effects' In Financial Incentive Programs For Welfare Recipients? Experimental Evidence From The Self-Sufficiency Project," Journal of Econometrics, 2005, v125(1-2,Mar-Apr), 113-139.
Abstract: This paper reports on a randomized evaluation of an earnings subsidy offered to long-term welfare recipients in Canada. The program -- known as the Self-Sufficiency Project (SSP) -- provides a supplement equal to one-half of the difference between a target earnings level and a participant's actual earnings. The SSP supplement is similar to a negative income tax with two important differences: (1) eligibility is limited to long-term welfare recipients who find a full-time job; and (2) the payment depends on individual earnings rather than family income. Our evaluation is based on a classical randomized design: one half of a group of single parents who had been on welfare for over a year were eligible to receive the SSP supplement, while the other half were assigned to a control group. Results for an early cohort of SSP participants and controls suggest that the financial incentives of the Self-Sufficiency Program increase labor market attachment and reduce welfare participation.
Handle: RePEc:nbr:nberwo:5701
Template-Type: ReDIF-Paper 1.0
Title: Social Policy Dimensions of Economic Integration: Environmental and Labour Standards
Classification-JEL: F13; F15
Author-Name: Kym Anderson
Author-Person: pan22
Note: ITI
Number: 5702
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5702
File-URL: http://www.nber.org/papers/w5702.pdf
File-Format: application/pdf
Publication-Status: published as Social Policy Dimensions of Economic Integration: Environmental and Labor Standards, Kym Anderson. in Regionalism versus Multilateral Trade Arrangements, Ito and Krueger. 1997
Abstract: Social policies, particularly environmental and labour issues, are not new to trade policy fora including the GATT. However, they are likely to have a more prominent role in trade policy discussions in the years ahead for the new World Trade Organization. Many developing countries perceive the entwining of these social issues with trade policy as a threat to both their sovereignty and their economies, while significant groups in advanced economies consider it unfair, ecologically unsound, even immoral to trade with countries adopting much lower standards than theirs. This paper examines why these issues are becoming more prominent, whether the WTO is an appropriate forum to discuss them, and how they affect developing and other economies. It concludes that (a) the direct effect on developing economies is likely to be small and for some may even be positive through improved terms of trade and/or compensatory transfer payments, but (b) there is an important indirect negative effect on them and other economies, namely, the potential erosion of the rules-based multilateral trading system that would result from an over-use of trade measures to pursue environmental or labour market objectives.
Handle: RePEc:nbr:nberwo:5702
Template-Type: ReDIF-Paper 1.0
Title: Chaos, Sunspots, and Automatic Stabilizers
Classification-JEL: E13; D3
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Sharon G. Harrison
Note: EFG
Number: 5703
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5703
File-URL: http://www.nber.org/papers/w5703.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 44, no. 1 (August 1999): 3-31.
Abstract: We study a one-sector growth model which is standard except for the presence of an externality in the production function. The set of competitive equilibria is large. It includes constant equilibria, sunspot equilibria, cyclical and chaotic equilibria, and equilibria with deterministic or stochastic regime switching. The efficient allocation is characterized by constant employment and a constant growth rate. We identify an income tax-subsidy schedule that supports the efficient allocation as the unique equilibrium outcome. That schedule has two properties: (i) it specifies the tax rate to be an increasing function of aggregate employment, and (ii) earnings are subsidized when aggregate employment is at its efficient level. The first feature eliminates inefficient, fluctuating equilibria, while the second induces agents to internalize the externality.
Handle: RePEc:nbr:nberwo:5703
Template-Type: ReDIF-Paper 1.0
Title: Inequality, Predation and Welfare
Classification-JEL: D31; D63
Author-Name: Herschel I. Grossman
Author-Name: Minseong Kim
Author-Person: pki94
Note: EFG
Number: 5704
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5704
File-URL: http://www.nber.org/papers/w5704.pdf
File-Format: application/pdf
Abstract: This paper studies the relation between inequality and welfare in a general- equilibrium model in which people can choose to be either producers or preda- tors. We assume some people (the privileged) are well endowed with human capital and other people (the unprivileged) are poorly endowed with human capital. We analyze how the choice of the privileged between deterring and tolerating predation by the unprivileged depends on the interpersonal distri- bution of human capital. We find that, if the number of unprivileged people is large, but a privileged person doesn't have too much human capital relative to an unprivileged person, then the privileged allocate enough time and effort to guarding against predation to deter the unprivileged from being predators. Otherwise, the privileged tolerate predation by the unprivileged. A distribu- tion of human capital that is more egalitarian in that the number of people who are unprivileged is smaller can result in the privileged choosing to tolerate rather than to deter predation by the unprivileged. Next, we partition the feasible distributions of human capital into sets of Pareto efficient and inefficient distributions. Interestingly, we find that if the average endowment of human capital is large, then the fully egalitarian distribution is not Pareto efficient. Instead, Pareto efficiency implies an unegalitarian distribution of human capital where each unprivileged person has only the endowment of human capital he had at birth. Also, this unegalitarian distribution satisfies the Rawlsian criterion of maximizing the consumption of the unprivileged. With this unegalitarian distribution the privileged tolerate predation by the unprivileged, which results in maximum consumption for all.
Handle: RePEc:nbr:nberwo:5704
Template-Type: ReDIF-Paper 1.0
Title: Incentives and Careers in Organizations
Classification-JEL: J41; D23
Author-Name: Robert Gibbons
Author-Person: pgi283
Note: LS
Number: 5705
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5705
File-URL: http://www.nber.org/papers/w5705.pdf
File-Format: application/pdf
Publication-Status: published as Advances in Economics and Econometrics: Theory and Applications, ed. D.Kreps and K. Wallis, Cambridge University Press, 1995.
Abstract: This paper surveys two related pieces of the labor-economics literature: incentive pay and careers in organizations. In the discussion of incentives, I first summarize theory and evidence related to the classic agency model, which emphasizes the tradeoff between insurance and incentives. I then offer econometric and case-study evidence suggesting that this classic model ignores several crucial issues and sketch new models that begin to analyze these issues. In the discussion of careers in organizations, I begin by summarizing evidence on wages and positions using panel data within firms. This evidence is sparse and far-flung (drawn from industrial relations, organizational behavior, and sociology, as well as from labor economics); I identify ten basic questions that merit more systematic investigation. Turning to theory, I describe building-block models that address one or a few pieces of evidence, but focus on more recent models that address broad patterns of evidence.
Handle: RePEc:nbr:nberwo:5705
Template-Type: ReDIF-Paper 1.0
Title: Does Economic Geography Matter for International Specialization?
Author-Name: Donald R. Davis
Author-Person: pda33
Author-Name: David E. Weinstein
Author-Person: pwe34
Note: ITI
Number: 5706
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5706
File-URL: http://www.nber.org/papers/w5706.pdf
File-Format: application/pdf
Abstract: There are two principal theories of why countries trade: comparative advantage and increasing returns to scale. Yet there is no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade. We use a framework that nests an increasing returns model of economic geography featuring home market effects with that of Heckscher-Ohlin-Vanek. We employ these trade models to account for the structure of OECD manufacturing production. The data militate against the economic geography framework. Moreover, even in the specification most generous to economic geography, endowments account for 90 percent of the explainable variance, economic geography but 10 percent.
Handle: RePEc:nbr:nberwo:5706
Template-Type: ReDIF-Paper 1.0
Title: Construction of the Earnings and Benefits File (EBF) for Use With the Health and Retirement Survey
Author-Name: Olivia Mitchell
Author-Person: pmi73
Author-Name: Jan Olson
Author-Name: Thomas Steinmeier
Note: AG LS
Number: 5707
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5707
File-URL: http://www.nber.org/papers/w5707.pdf
File-Format: application/pdf
Abstract: Analysts using the Health and Retirement Survey (HRS) often require information on earnings, labor market attachment, and social security benefits in order to better understand the factors affecting retirement and well-being at older ages. To this end, several derived variables were constructed and documented in the Earnings and Benefits File (EBF) described here. The EBF provides a set of summary earnings, employment, and social security wealth measures for a subset of HRS respondents in Wave 1 of the survey, for whom administrative records are available. The EBF, a restricted data file, is available from the University of Michigan's Institute for Social Research for matching only with versions of the HRS containing geographic detail no finer than the Census Division level. Interested users should contact hrsquest@umich.edu by email for further information on access to the data.
Handle: RePEc:nbr:nberwo:5707
Template-Type: ReDIF-Paper 1.0
Title: School Resources and Student Outcomes: An Overview of the Literature and New Evidence from North and South Carolina
Classification-JEL: J24
Author-Name: David Card
Author-Person: pca271
Author-Name: Alan Krueger
Author-Person: pkr63
Note: LS
Number: 5708
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5708
File-URL: http://www.nber.org/papers/w5708.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, vol. 10, Fall 1996. (With David Card.)pp.31-50
Abstract: This paper reviews and interprets the literature on the effect of school resources on students' eventual earnings and educational attainment. In addition, new evidence is presented on the impact of the great disparity in school resources between black and white students in North and South Carolina that existed in the first half of the 20th century, and the subsequent narrowing of these resource disparities. Following birth cohorts over time, gaps in earnings and educational attainment for blacks and whites in the Carolinas tend to mirror the gaps in school resources.
Handle: RePEc:nbr:nberwo:5708
Template-Type: ReDIF-Paper 1.0
Title: Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries
Classification-JEL: F31; F41
Author-Name: Menzie Chinn
Author-Person: pch129
Author-Name: Louis Johnston
Note: IFM
Number: 5709
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5709
File-URL: http://www.nber.org/papers/w5709.pdf
File-Format: application/pdf
Abstract: This paper investigates the determinants of the real exchange rate using a panel of disaggregated data for the OECD countries. It also marries two literatures - one which uses panel data to measure relationships between changes in exchange rates to changes in the determinants, and the other which uses cointegration techniques to measure the long-run relationship between the level of the exchange rate and the level of the determining factors. The previous panel studies cannot account for deviations from long-run trend levels, while the extant literature using time series cointegration techniques can only intermittently detect and measure posited relationships. Estimating the relationships in levels is an interesting activity because it allows one to calculate trend real exchange rates. After surveying the previous litera- ture, a dynamic model of the real exchange rate is used to motivate the empi- rical exercise. In examining this problem, we exploit recent developments in the econometric analysis of nonstationary variables in panel data. The results indicate that under certain assumptions it is easier to detect cointegration in panel data than in the available time series; moreover, the estimates of reversion to trend are also estimated with greater precision. The most empirically successful models include productivity measures, government spend- ing ratios, and either the terms of trade, or the real price of oil. Using this latter model, we find that the implied equilibrium exchange rates indicate less overvaluation of the dollar than that implied by a naive version of purchasing power parity.
Handle: RePEc:nbr:nberwo:5709
Template-Type: ReDIF-Paper 1.0
Title: Why Clashes Between Internal and External Stability Goals End in Currency Crises, 1797-1994
Classification-JEL: 431; F
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Anna J. Schwartz
Note: ME IFM
Number: 5710
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5710
File-URL: http://www.nber.org/papers/w5710.pdf
File-Format: application/pdf
Publication-Status: published as Open Economies Review, Vol. 7 pp. 437-468, December 1996
Abstract: We argue that recent currency crises reflect clashes between fundamentals and pegged exchange rates, just as did crises in the past. We reject the view that crises reflect self-fulfilling prophecies that are not closely related to measured fundamentals. Doubts about the timing of a market attack on a currency are less important than the fact that it is bound to happen if a government's policies are inconsistent with pegged exchange rates. We base these conclusions on a review of currency crises in the historical record under metallic monetary regimes and of crises post-World War II under Bretton Woods, and since, in European and Latin American pegged exchange rate regimes.
Handle: RePEc:nbr:nberwo:5710
Template-Type: ReDIF-Paper 1.0
Title: Risk-Shifting by Federally Insured Commercial Banks
Classification-JEL: G2; K2
Author-Name: Armen Hovakimian
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 5711
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5711
File-URL: http://www.nber.org/papers/w5711.pdf
File-Format: application/pdf
Publication-Status: published as (Under new title: Changing Effectiveness of Capital Regulation at U.S. Commercial Banks, 1985-1994) Journal of Finance, Vol. 55 (February 2000): 451-461.
Abstract: Mispriced and misadministered deposit insurance imparts risk-shifting incentives to U.S. banks. Regulators are expected to monitor and discipline increases in bank risk exposure that would transfer wealth from the FDIC to bank stockholders. This paper assesses the success regulators had in controlling risk-shifting by U.S. banks during 1985-1994. In contrast to single-equation estimates developed from the option model by others, our simultaneous-equation evidence indicates that regulators failed to prevent large U.S. banks from shifting risk to the FDIC. Moreover, at the margin, banks that are undercapitalized shifted risk more effectively than other sample banks.
Handle: RePEc:nbr:nberwo:5711
Template-Type: ReDIF-Paper 1.0
Title: Flows of Knowledge from Universities and Federal Labs: Modeling the Flowof Patent Citations Over Time and Across Institutional and Geographic Boundari
Classification-JEL: O3
Author-Name: Adam B. Jaffe
Author-Person: pja49
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: PR
Number: 5712
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5712
File-URL: http://www.nber.org/papers/w5712.pdf
File-Format: application/pdf
Publication-Status: published as Proceedings of the National Academy of Sciences, Vol.93, pp.12671-12677, November 1996.
Abstract: The extent to which new technological knowledge flows across institutional and national boundaries is a question of great importance for public policy and the modeling of economic growth. This paper develops a model of the process generating subsequent citations to patents as a lens for viewing knowledge diffusion. We find that the probability of patent citation over time after a patent is granted fits well to a double-exponential function that can be interpreted as the mixture of diffusion and obsolescence functions. The results indicate that diffusion is geographically localized. Controlling for other factors, within-country citations are more numerous and come more quickly than those that cross country boundaries.
Handle: RePEc:nbr:nberwo:5712
Template-Type: ReDIF-Paper 1.0
Title: The Demand for Cocaine by Young Adults: A Rational Addiction Approach
Classification-JEL: I10
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Charles C. Brown
Author-Person: pbr341
Note: EH
Number: 5713
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5713
File-URL: http://www.nber.org/papers/w5713.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Health Economics, vol. 17, no. 4, pp. 427-474, August, 1998.
Publication-Status: published as Frank J. Chaloupka & Michael Grossman & John A. Tauras, 1999. "The Demand for Cocaine and Marijuana by Youth," NBER Chapters, in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometrics and Behavioral Economic Research, pages 133-156 National Bureau of Economic Research, Inc.
Abstract: This paper applies the rational addiction model, which emphasizes the interdependency of past, current, and future consumption of an addictive good, to the demand for cocaine by young adults in the Monitoring the Future Panel. The price of cocaine is added to this survey from the System to Retrieve Information from Drug Evidence (STRIDE) maintained by the Drug Enforcement Administration of the U.S. Department of Justice. Results suggest that annual participation and frequency of use given participation are negatively related to the price of cocaine. In addition current participation is positively related to past and future participation, and current frequency of use given participation is positively related to past and future frequency of use. The long-run price elasticity of total consumption (participation multiplied by frequency given participation) of -1.18 is substantial. A permanent 10 percent reduction in price due, for example, to the legalization of cocaine would cause the number of cocaine users to grow by slightly more than 8 percent and would increase the frequency of use among users by a little more than 3 percent. Surely, both proponents and opponents of drug legalization should take account of this increase in consumption in debating their respective positions.
Handle: RePEc:nbr:nberwo:5713
Template-Type: ReDIF-Paper 1.0
Title: Country Fund Discounts, Asymmetric Information and the Mexican Crisis of 1994: Did Local Residents Turn Pessimistic Before International Investors?
Classification-JEL: F30; G15
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: Sergio L. Schmukler
Author-Person: psc64
Note: AP IFM
Number: 5714
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5714
File-URL: http://www.nber.org/papers/w5714.pdf
File-Format: application/pdf
Publication-Status: published as Reprinted in Currency Crashes: Causes, Consequences and Policy Responses, edited by George Tavlas, Kluwer, 1997, 81-104.
Abstract: It has been suggested that Mexican investors were the front-runners in the peso crisis of December 1994, turning pessimistic before international investors. Different expectations about their own economy, perhaps due to asymmetric information, prompted Mexican investors to be the first ones to leave the country. This paper uses data from three Mexican country funds to investigate the hypothesis of divergent expectations. We find that, right before the devaluation, Mexican fund Net Asset Values (mainly driven by Mexican investors) dropped faster than Mexican country fund prices (mainly driven by foreign investors). Moreover, we find that Mexican NAVs tend to Granger-cause the country fund prices. This suggests that causality, in some sense, flows from the Mexico City investor community to the Wall Street investor community. More generally, the paper proposes an asymmetric information approach that differs from the existing explanations of country fund discounts.
Handle: RePEc:nbr:nberwo:5714
Template-Type: ReDIF-Paper 1.0
Title: Is "Learning-by-Exporting" Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco
Author-Name: Sofronis Clerides
Author-Person: pcl7
Author-Name: Saul Lach
Author-Person: pla110
Author-Name: James Tybout
Note: ITI
Number: 5715
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5715
File-URL: http://www.nber.org/papers/w5715.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, no. 454, issue 3 (August 1998): 903-947.
Abstract: Is there any empirical evidence that firms become more efficient after becoming exporters? Do firms that become exporters generate positive spillovers for domestically-oriented producers? In this paper we analyze the causal links between exporting and productivity using firm-level panel data from three semi-industrialized countries. Representing export market" participation and production costs as jointly dependent autoregressive processes, we look for evidence that firms' stochastic cost processes shift when they break into foreign markets. We find that relatively efficient firms become exporters, but firms' unit costs are not affected by previous export market participation. So the well-known efficiency gap between exporters and non-exporters is due to self-selection of the more efficient firms into the export market, rather than learning by exporting. Further, we find some evidence that exporters reduce the costs of breaking into foreign markets for domestically oriented producers, but they do not appear to help these producers become more efficient.
Handle: RePEc:nbr:nberwo:5715
Template-Type: ReDIF-Paper 1.0
Title: The Response of Wages and Actual Hours Worked to the Reductions of Standard Hours
Classification-JEL: J31; J51
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LS
Number: 5716
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5716
File-URL: http://www.nber.org/papers/w5716.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol.CXIV, Issue 1 (February 1999),pp. 117-148. "Has Work-sharing Worked in Germany?"
Abstract: A transformation of what had become a universal 40 hour standard work week in Germany began in 1985 with reductions negotiated in the metal-working and printing sectors. These reductions have continued through 1995, and were followed by reductions in other sectors. The union campaign aimed to increase employment through work-sharing, and is being emulated in the United States with the launch of a reduced hours campaign by the AFL-CIO. Using data from the German Socio-Economic Panel, I find that increased overtime or reduced short time was little used to offset the reduction in standard hours: a one hour reduction in standard hours appears to have translated into a reduction in actual hours worked of between 0.85 and 1 hour for workers in manufacturing. One might expect this to have resulted in a loss of earnings for workers in affected industries. However, I substantiate the union claim of full wage compensation : reductions in standard hours were accompanied by a relative rise in the hourly straight-time wage of 2-3% for each hour fall in standard hours, enough to keep monthly earnings the same as in unaffected industries.
Handle: RePEc:nbr:nberwo:5716
Template-Type: ReDIF-Paper 1.0
Title: The Strategic Response by Pharmaceutical Firms to the Medicaid Most-Favored-Customer Rules
Classification-JEL: L13; L41
Author-Name: Fiona Scott Morton
Note: IO
Number: 5717
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5717
File-URL: http://www.nber.org/papers/w5717.pdf
File-Format: application/pdf
Publication-Status: published as RAND Journal of Economics, Vol.28, no.2 (1997).
Abstract: In 1990 the Federal Government included a Most Favored Customer (MFC) clause in the contract (OBRA 90) which would govern the prices paid to firms for pharmaceutical products supplied to Medicaid recipients. The firms had to give Medicaid their best (lowest) price in some cases, a percentage below average price in others. Many theoretical models have shown that an MFC rule commits a firm to compete less aggressively in prices. We might expect prices to rise following the implementation of the MFC rule, yet the work done to date on OBRA 90 has found this result somewhat difficult to show empirically. I also conclude that the effects of the law are small and relatively weak; however, the results are strongest where the product's characteristics match the incentives in the law. I find that after the MFC rule was implemented the average price of branded products facing generic competition rose - the median presentation's price rose about 4%. Brands protected by patents did not significantly increase price. Generics in concentrated markets should display a strategic response to the brand's adoption of the MFC. I find support for the strategic effect; generic firms raise their prices more as their markets become more concentrated. I find little change in hospital prices. The results suggest that the MFC rule resulted in higher prices to some non-Medicaid consumers of pharmaceuticals.
Handle: RePEc:nbr:nberwo:5717
Template-Type: ReDIF-Paper 1.0
Title: Wage Inequality and Segregation by Skill
Classification-JEL: D30; J31
Author-Name: Michael Kremer
Author-Person: pkr20
Author-Name: Eric Maskin
Author-Person: pma498
Note: LS EFG
Number: 5718
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5718
File-URL: http://www.nber.org/papers/w5718.pdf
File-Format: application/pdf
Abstract: Evidence from the US, Britain, and France suggests that recent growth in wage inequality has been accompanied by greater segregation of high- and low-skill workers into separate firms. A model in which workers of different skill-levels are imperfect substitutes can simultaneously account for these increases in segregation and inequality either through technological change, or, more parsimoniously, through observed changes in the skill-distribution
Handle: RePEc:nbr:nberwo:5718
Template-Type: ReDIF-Paper 1.0
Title: Price Level Targeting vs. Inflation Targeting: A Free Lunch?
Classification-JEL: D42; E58
Author-Name: Lars E. O. Svensson
Author-Person: psv2
Note: IFM ME
Number: 5719
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5719
File-URL: http://www.nber.org/papers/w5719.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, Vol. 31 (1999): 277-295.
Abstract: Price level targeting (without base drift) and inflation targeting (with base drift) are compared under commitment and discretion, with persistence in unemployment. Price level targeting is often said to imply more short-run inflation variability and thereby more employment variability than inflation targeting. Counter to this conventional wisdom, under discretion a price level target results in lower inflation variability than an inflation target (if unemployment is at least moderately persistent). A price level target also eliminates the inflation bias under discretion and, as is well known, reduces long-term price variability. Society may be better off assigning a price level target to the central bank even if its preferences correspond to inflation targeting. A price level target thus appears to have more advantages than commonly acknowledged.
Handle: RePEc:nbr:nberwo:5719
Template-Type: ReDIF-Paper 1.0
Title: The Yen and Its East Asian Neighbors, 1980-1995: Cooperation or Competition?
Classification-JEL: F31; F33
Author-Name: Shinji Takagi
Author-Person: pta768
Number: 5720
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5720
File-URL: http://www.nber.org/papers/w5720.pdf
File-Format: application/pdf
Publication-Status: published as Changes in Exchange Rates in Rapidly Developing Countries. Ito,Takatoshiand Anne O. Krueger, eds., Chicago: The University of Chicago Press, 1999, pp. 185-207.
Publication-Status: published as The Yen and Its East Asian Neighbors 1980-1995: Cooperation or Competition?, Shinji Takagi. in Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, Ito and Krueger. 1999
Abstract: By looking at how an East Asian currency moves when the yen fluctuates sharply against the US dollar, we sometimes find that the reaction has been much more significant than would be suggested by the econometric estimates of the weight of the yen in nominal exchange rate determination. Moreover, the Korean won and the Malaysian ringgit have tended to move more closely with a depreciating yen, suggesting the countries' emphasis on export promotion. The Singapore dollar, on the other hand, has tended to move more closely with an appreciating yen, underscoring the importance attached to price stability. The paper concludes that, given the trend appreciation of the yen during the recent past, emphasis on price stability has contributed more to monetary cooperation in Asia than emphasis on export promotion.
Handle: RePEc:nbr:nberwo:5720
Template-Type: ReDIF-Paper 1.0
Title: Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations
Classification-JEL: E32; E24
Author-Name: Jordi Gali
Author-Person: pga43
Note: EFG
Number: 5721
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5721
File-URL: http://www.nber.org/papers/w5721.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review (March 1999): 249-271.
Abstract: Using data for the G7 countries, I estimate conditional correlations of employment and productivity, based on a decomposition of the two series into technology and non-technology components. The picture that emerges is hard to reconcile with the predictions of the standard Real Business Cycle model. For a majority of countries the following results stand out: (a) technology shocks appear to induce a negative comovement between productivity and employment, counterbalanced by a positive comovement generated by demand shocks, (b) the impulse responses show a persistent decline of employment in response to a positive technology shock, and (c) measured productivity increases temporarily in response to a positive demand shock. More generally, the pattern of economic fluctuations attributed to technology shocks seems to be largely unrelated to major postwar cyclical episodes. A simple model with monopolistic competition, sticky prices, and variable effort is shown to be able to account for the empirical findings.
Handle: RePEc:nbr:nberwo:5721
Template-Type: ReDIF-Paper 1.0
Title: Technology, Factor Supplies and International Specialization: Estimating the Neoclassical Model
Classification-JEL: F1; F11
Author-Name: James Harrigan
Author-Person: pha151
Note: ITI
Number: 5722
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5722
File-URL: http://www.nber.org/papers/w5722.pdf
File-Format: application/pdf
Publication-Status: published as Harrigan, James. "Technology, Factor Supplies, And International Specialization: Estimating The Neoclassical Model," American Economic Review, 1997, v87(4,Sep), 475-494.
Abstract: The standard neoclassical model of trade theory predicts that international specialization will be jointly determined by cross-country differences in relative factor endowments and relative technology levels. This paper uses duality theory combined with a flexible functional form to specify an empirical model of specialization consistent with the neoclassical explanation. According to the empirical model, a sector's share in GDP depends on both relative factor supplies and relative technology differences, and the estimated parameters of the model have a close and clear connection to theoretical parameters. The model is estimated for manufacturing sectors using a 20 year, 10 country panel of data on the OECD countries. Hicks-neutral technology differences are measured using an application of the theory of total factor productivity comparisons, and factor supplies are measured directly. The estimated model performs well in explaining variation in production across countries and over time, and the estimated parameters are generally in line with theory and previous empirical work on the factor proportions model. Relative technology levels are found to be an important determinant of specialization
Handle: RePEc:nbr:nberwo:5722
Template-Type: ReDIF-Paper 1.0
Title: Hong Kong's Currency Board and Changing Monetary Regimes
Classification-JEL: E5; F4
Author-Name: Yum K. Kwan
Author-Name: Francis T. Lui
Author-Person: plu151
Number: 5723
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5723
File-URL: http://www.nber.org/papers/w5723.pdf
File-Format: application/pdf
Publication-Status: published as Changes in Exchange Rates in Rapidly Developing Countries. Ito,Takatoshiand Anne O. Krueger, eds., Chicago: The University of Chicago Press, 1999,pp. 403-429.
Publication-Status: published as Hong Kong's Currency Board and Changing Monetary Regimes , Yum K. Kwan, Francis Lui. in Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, Ito and Krueger. 1999
Abstract: The paper discusses the historical background and institutional details of Hong Kong's currency board. We argue that its experience provides a good opportunity to test the macroeconomic implications of the currency board regime. Using the method of Blanchard and Quah (1989), we show that the parameters of the structural equations and the characteristics of supply and demand shocks have significantly changed since adopting the regime. Variance decomposition and impulse response analyses indicate Hong Kong's currency board is less susceptible to supply shocks, but demand shocks can cause greater short-term volatility under the system. The decent performance of Hong Kong's currency board is due mainly to the stable fiscal policy of its government. Counter-factual exercises also show that three-fourths of the reduction in observed output volatility and two-thirds of that in observed inflation volatility are explained by the adoption of the currency board, while the remainder is explained by changes in the external environment. The improvement in stability does not rule out the possibility of monetary collapse, however.
Handle: RePEc:nbr:nberwo:5723
Template-Type: ReDIF-Paper 1.0
Title: Has Work-Sharing Worked in Germany?
Classification-JEL: J23
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LS
Number: 5724
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5724
File-URL: http://www.nber.org/papers/w5724.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 114, no. 1 (February 1999): 117-148.
Abstract: Starting in 1985, (West) German unions began to reduce standard hours on an industry by industry basis, in an attempt to lower unemployment. Whether work-sharing works - whether employment rises when hours per worker are reduced - is theoretically ambiguous. I test this using both individual data from the German Socio-Economic Panel and industry data to exploit the cross-section and time-series hours variation. For the 1984-1989 period I find that, in response to a one hour fall in standard hours, employment rose by 0.3-0.7%, but that total hours worked fell 2-3%, implying possible output losses. As a group workers were better off, however, as the wage bill rose. The employment growth implied by the mean standard hours decline, at most 1.1%, was not enough to bring German employment growth close to the U.S. rate. Results for the 1990-94 period were more pessimistic.
Handle: RePEc:nbr:nberwo:5724
Template-Type: ReDIF-Paper 1.0
Title: Capital Account Liberalization as a Signal
Classification-JEL: F21; C73
Author-Name: Leonardo Bartolini
Author-Person: pba22
Author-Name: Allan Drazen
Author-Person: pdr25
Note: IFM
Number: 5725
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5725
File-URL: http://www.nber.org/papers/w5725.pdf
File-Format: application/pdf
Publication-Status: published as The American Economic Review, Vol. 87, No. 1 (Mar., 1997), pp. 138-154
Abstract: We present a model in which a government's current capital controls policy signals future policies. Controls on capital outflows evolve in response to news on technology, conditional on government attitudes towards taxation of capital. When there is uncertainty over government types, a policy of liberal capital outflows sends a favorable signal that may trigger a capital inflow. This prediction is consistent with the experience of several countries that have liberalized their capital account
Handle: RePEc:nbr:nberwo:5725
Template-Type: ReDIF-Paper 1.0
Title: Market Segmentation and the Sources of Rents from Innovation: Personal Computers in the Late 1980's
Classification-JEL: L1; O31
Author-Name: Timothy F. Bresnahan
Author-Person: pbr34
Author-Name: Scott Stern
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: IO PR
Number: 5726
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5726
File-URL: http://www.nber.org/papers/w5726.pdf
File-Format: application/pdf
Publication-Status: published as RAND Journal of Economics, Special Issue in Honor of Richard E. Quandt, Volume 28-0, (1997): pp. 17-44
Abstract: This paper evaluates the sources of transitory market power in the market for personal computers (PCs) during the late 1980's. Our analysis is motivated by the coexistence of low entry barriers into the PC industry and high rates of innovative investment by a small number of PC manufacturers. We attempt to understand these phenomena by measuring the role that different principles of product differentiation (PDs) played in segmenting this dynamic market. Our first PD measures the substitutability between Frontier (386-based) and Non- Frontier products, while the second PD measures the advantage of a brand-name reputation (e.g., by IBM). Building on advances in the measurement of product differentiation, we measure the separate roles that these PDs played in contributing to transitory market power. In so doing, this paper attempts to account for the market origins of innovative rents in the PC industry. Our principal finding is that, during the late 1980's, the PC market was highly segmented along both the Branded (B versus NB) and Frontier (F versusNF) dimensions. The effects of competitive events in any one cluster were confined mostly to that particular cluster, with little effect on other clusters. For example, less than 5% of the market share achieved by a hypothetical entrant would be market-stealing from other clusters. In addition, the product diffe- rentiation advantages of B and F were qualitatively different. The main advantage of F was limited to the isolation from NF competitors it provided; Brandedness both shifted out the product demand curve as well as segmenting B products from NB competition. These results help explain how transitory market power (arising from market segmentation) shaped the underlying incen- tives for innovation in the PC industry during the mid to late 1980s.
Handle: RePEc:nbr:nberwo:5726
Template-Type: ReDIF-Paper 1.0
Title: When Liberal Policies Reflect External Shocks, What Do We Learn?
Classification-JEL: F21; C73
Author-Name: Leonardo Bartolini
Author-Person: pba22
Author-Name: Allan Drazen
Author-Person: pdr25
Note: IFM
Number: 5727
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5727
File-URL: http://www.nber.org/papers/w5727.pdf
File-Format: application/pdf
Publication-Status: published as Bartolini, Leonardo & Drazen, Allan. "When liberal policies reflect external shocks, what do we learn?," Journal of International Economics, Elsevier, vol. 42(3-4), pages 249-273, May 1997
Abstract: We present a model where policies of free capital mobility can signal governments' future policies, but the informativeness of the signal depends on the path of world interest rates. Capital flows to emerging markets reflect investors' perception of these markets' political risk. With low world interest rates, emerging markets experience a capital inflow and engage in a widespread policy of free capital mobility; with higher rates, only sufficiently committed countries allow free capital mobility, whereas others impose controls to trap capital onshore, thus signaling future policies affecting capital mobility. These predictions are consistent with the recent experience of capital flows and policies affecting capital mobility in developing countries.
Handle: RePEc:nbr:nberwo:5727
Template-Type: ReDIF-Paper 1.0
Title: Price versus Quantity: Market Clearing Mechanisms When Sellers Differ in Quality
Classification-JEL: L11; L62
Author-Name: Andrew Metrick
Author-Person: pme99
Author-Name: Richard Zeckhauser
Author-Person: pze7
Note: IO
Number: 5728
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5728
File-URL: http://www.nber.org/papers/w5728.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Risk and Uncertainty, Vol. 17, no. 3 (December 1998): 215-243.
Abstract: High-quality producers in a vertically differentiated market can reap superior profits by charging higher prices, selling greater quantities, or both. If qualities are known by consumers and production costs are constant, then having a higher quality secures the producer both higher price and higher quantity; if marginal costs are rising, having a higher quality assures only higher price. If only some consumers can discern quality but others cannot, then high- and low-quality producers may set a common price, but the high-quality producer will sell more. In this context, quality begets quantity. Empirical analyses suggest that in both the mutual fund and automobile industries, high-quality producers sell more units than their low-quality competitors, but at no higher price (or markup) per unit.
Handle: RePEc:nbr:nberwo:5728
Template-Type: ReDIF-Paper 1.0
Title: Unraveling in Assignment Markets
Author-Name: Hao Li
Author-Name: Shewin Rosen
Note: LS
Number: 5729
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5729
File-URL: http://www.nber.org/papers/w5729.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 88 (June 1998): 371-387.
Abstract: We present a two-period model of the assignment market with uncertainty in the first period regarding productive characteristics of participants. This model is used to understand incentives toward early contracts or unraveling in labor markets for entry-level professionals. We study two contractual situations, one where firms are bound by ex post unsuccessful early contracts, and the other where they can buy out of unsuccessful early contracts. The economic benefit of unraveling is to provide insurance in the absence of complete markets, but it can come at the cost of inefficient assignments. Without reentry, unraveling need not occur. It is more likely, the smaller the applicant pool or the proportion of more promising applicants in the pool, and the greater the degree of heterogeneity in the pool. A ban on early contracts always hurts firms and benefits less promising applicants, but the welfare effects on more promising applicants depends on how the gains from early contracts are shared. With buyouts, inefficiencies in assignments are eliminated, and unraveling always occurs between firms and the more promising applicants. The efficiency gains of buyouts can be distributed unevenly and sometimes firms benefit from a ban on buyouts.
Handle: RePEc:nbr:nberwo:5729
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects
Classification-JEL: H1; E62
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Roberto Perotti
Author-Person: ppe66
Note: ME
Number: 5730
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5730
File-URL: http://www.nber.org/papers/w5730.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto and Roberto Perotti. "Fiscal Adjustments In OECD Countries: Composition And Macroeconomic Effects," International Monetary Fund Staff Papers, 1997, v44(2,Jun), 210-248.
Abstract: This ppaer studies how the composition of fiscal adjustments influences their likelihood of success, defined as a long lasting deficit reduction, and their macroeconomic consequences. We find that fiscal adjustments which rely primarily on spending cuts on transfers and the government wage bill have a better chance of being successful and are expansionary. On the contrary fiscal adjustments which rely primarily on tax increases and cuts in public investment tend not to last and are contractionary. We discuss alternate explanations for these findings by studying both a full sample of OECD countries and by focusing on three case studies: Denmark, Ireland and Italy.
Handle: RePEc:nbr:nberwo:5730
Template-Type: ReDIF-Paper 1.0
Title: Private Consumption, Nontraded Goods and Real Exchange Rate: A Cointegration_Euler Equation Approach
Author-Name: Kenneth S. Lin
Number: 5731
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5731
File-URL: http://www.nber.org/papers/w5731.pdf
File-Format: application/pdf
Publication-Status: published as Changes in Exchange Rates in Rapidly Developing Countries. Ito,Takatoshiand Anne O. Krueger, eds., Chicago: The University of Chicago Press, 1999, pp.155-179.
Publication-Status: published as Private Consumption, Nontraded Goods, and Real Exchange Rate: Evidence from South Korea and Taiwan, Kenneth S. Lin. in Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, Ito and Krueger. 1999
Abstract: This paper presents an empirical study of real exchange rate movements from a consumer's perspective. Trade between two countries creates a link between real exchange rate and terms of trade. It is the private consumption of non-traded goods that induces an equilibrium relationship between real exchange rate and private consumption of traded and non-traded goods. We use Ogaki and Park's (1989) cointegration-Euler equation approach to explore long-run implications from the equilibrium relationship. Given the stationary preference shocks assumption, the testable restriction is that real exchange rate and private consumption of traded and non-traded goods in the home and foreign countries are cointegrated. The empirical evidence suggests that private consumption in the home and foreign countries accounts for a significant fraction of the long run movements of real exchange rate in South Korea and Taiwan. Accounting for real government consumption does not overturn the result.
Handle: RePEc:nbr:nberwo:5731
Template-Type: ReDIF-Paper 1.0
Title: Trade and Growth in East Asian Countries: Cause and Effect?
Classification-JEL: O1; O4
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Author-Name: David Romer
Author-Person: pro406
Author-Name: Teresa Cyrus
Note: ITI IFM EFG
Number: 5732
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5732
File-URL: http://www.nber.org/papers/w5732.pdf
File-Format: application/pdf
Publication-Status: published as NICs After the Asian Miracle, Singer, H., N. Hatti, and R. Tandon, eds., India: BR Publishing, 2000.
Abstract: Estimates of growth equations have found a role for openness, particularly in explaining rapid growth among East Asian countries. But major concerns of simultaneous causality between growth and trade have been expressed. This study aims to deal with the endogeneity of trade by using as instrumental variables the exogenous determinants from the gravity model of bilateral trade, such as proximity to trading partners. We find that the effect of openness on growth is even stronger when we correct for the endogeneity of openness than in standard OLS estimates. We conclude with estimates of how much has been contributed to East Asian growth both by the exogenous or geographical component of openness and by the residual or policy component.
Handle: RePEc:nbr:nberwo:5732
Template-Type: ReDIF-Paper 1.0
Title: Women Helping Women? Role-Model and Mentoring Effects on Female Ph.D. Student in Economics
Classification-JEL: I20; J16
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Rosella Gardecki
Note: LS
Number: 5733
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5733
File-URL: http://www.nber.org/papers/w5733.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 33, no. 1 (Winter 1998): 220-246.
Abstract: One potential method to increase the success of female graduate students in economics may be to encourage mentoring relationships between these students and female faculty members. Increased hiring of female faculty is viewed as one way to promote such mentoring relationships, perhaps because of role-model effects. A more direct method of promoting such relationships may be for female graduate students to have female faculty serve as dissertation chairs. The evidence in this paper addresses the question of whether either of these strategies results in more successful outcomes for female graduate students. The evidence is based on survey information on female graduate students and faculties of Ph.D.-producing economics departments, covering the mid-1970s to the early 1990s. With respect to characteristics of the institutions at which students are first placed when leaving graduate school, the empirical evidence provides no support for the hypothesis that outcomes for female graduate students are improved by adding female faculty members, or by having a female dissertation chair. However, with respect to time to complete graduate school, and the completion rate, there is some limited evidence of beneficial effects of female faculty members.
Handle: RePEc:nbr:nberwo:5733
Template-Type: ReDIF-Paper 1.0
Title: Administrative Costs in Public and Private Retirement Systems
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Note: AG
Number: 5734
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5734
File-URL: http://www.nber.org/papers/w5734.pdf
File-Format: application/pdf
Publication-Status: published as Privatizing Social Security, Feldstein, Martin, ed., Chicago: Universityof Chicago Press, 1998, pp. 403-456.
Publication-Status: published as Administrative Costs in Public and Private Retirement Systems, Olivia S. Mitchell. in Privatizing Social Security, Feldstein. 1998
Abstract: This paper collects and analyzes available information on administrative costs associated with public and private retirement systems. We explore expenses of the US social security system and compare these with data from national systems in other countries. We find that administration costs of publicly-run social security systems vary a great deal across countries and institutional settings. A key factor influencing public old-age program costs is the system's scale: plans with more assets and more participants are less expensive. We also investigate expenses reported by US pension plans and mutual funds, programs seen by many as alternative mechanisms for managing retirement saving. Based on an analysis of costs associated with retirement savings plans managed by financial institutions, we conclude that privately managed old-age retirement programs would be somewhat more costly to operate than current publicly-managed programs, depending on the program's specific design. Nevertheless these costs would be accompanied by new services for participants.
Handle: RePEc:nbr:nberwo:5734
Template-Type: ReDIF-Paper 1.0
Title: The Time-Varying NAIRU and its Implications for Economic Policy
Classification-JEL: E30; E31
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG
Number: 5735
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5735
File-URL: http://www.nber.org/papers/w5735.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, vol. 11, no. 1, pp. 11-32, Winter 1997.
Abstract: This paper estimates the NAIRU (standing for the Non-Accelerating Inflation Rate of Unemployment) as a parameter that varies over time. The NAIRU is the unemployment rate that is consistent with a constant rate of inflation. Its value is determined in an econometric model in which the inflation rate depends on its own past values ( inertia ), demand shocks proxied by the difference between the actual unemployment rate and the estimated NAIRU, and a set of supply shock variables. The estimated NAIRU for the U.S. economy differs somewhat for alternative measures of the inflation rate. The NAIRU estimated for the GDP deflator varies over the past forty years within the narrow range of 5.7 to 6.4 percent; its estimated value for the most recent quarter (1996:Q1) is 5.7 percent. In that quarter a lower NAIRU of 5.3 percent is obtained for the chain-weighted PCE deflator. Recent research claiming that there is a three-percentage-point range of uncertainty about the NAIRU is rejected as inconsistent with the behavior of the American economy in the late 1980s and early 1990s.
Handle: RePEc:nbr:nberwo:5735
Template-Type: ReDIF-Paper 1.0
Title: Are 401(k) Plans Replacing Other Employer-Provided Pensions? Evidence from Panel Data
Classification-JEL: H3
Author-Name: Leslie E. Papke
Author-Person: ppa153
Note: AG PE
Number: 5736
Creation-Date: 1996-08
Order-URL: http://www.nber.org/papers/w5736
File-URL: http://www.nber.org/papers/w5736.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 34, no. 2 (Spring 1999): 346-368.
Abstract: This paper examines whether sponsors of traditional defined benefit (DB) plans are replacing them with 401(k) or other defined contribution (DC) plans. I compare pension plan offerings by sponsors of a DB plan in 1985 with their offerings in 1992 using Form 5500 filings from those two years. I find that 401(k) and other DC plans are substituting for terminated DB plans and that offering a DC plan of any type increases the probability of a DB termination. Thus, it appears that, at the sponsor level, many of the new 401(k) plans may not be avenues for net saving but are replacements for the more traditional pension forms. Using several specifications, I estimate that a sponsor that starts with no 401(k) or other DC plan and adds a 401(k) is predicted to reduce the number of DB plans offered by at least 0.3. That is, the estimates imply that one sponsor terminates a DB plan for about every three sponsors that offer one new 401(k) plan. The addition of a non-401(k) DC plan is estimated to reduce DB plan offerings by at least 0.4. Plan-level point estimates indicate that if a 401(k) plan is added by a sponsor, the DB termination probability increases by about 18 percentage points to 35 percent. The addition of a non-401(k) DC plan similarly increases the probability that an accompanying DB plan will be terminated.
Handle: RePEc:nbr:nberwo:5736
Template-Type: ReDIF-Paper 1.0
Title: Crime, Urban Flight, and the Consequences for Cities
Classification-JEL: K42; R23
Author-Name: Julie Berry Cullen
Author-Person: pcu44
Author-Name: Steven D. Levitt
Author-Person: ple59
Note: PE
Number: 5737
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5737
File-URL: http://www.nber.org/papers/w5737.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, Vol. 81, no. 2 (May 1999): 159-169.
Abstract: This paper demonstrates that rising crime rates in cities are correlated with city depopulation. Instrumental variables estimates, using measures of the certainty and severity of a state?s criminal justice system as instruments for city crime rates, imply that the direction of causality runs from crime to urban flight. Using annual city-level panel data, our estimates suggest that each additional reported crime is associated with a one person decline in city residents. There is some evidence that increases in suburban crime tend to keep people in cities, although the magnitude of this effect is small. Analysis of individual-level data from the 1980 census confirms the city-level results and demonstrates that almost all of the crime-related population decline is attributable to increased outmigration rather than a decrease in new arrivals to a city. Those households that leave the city because of crime are much more likely to remain within the SMSA than those leaving the city for other reasons. The migration decisions of high-income households and those with children are much more responsive to changes in crime than other households. Crime-related mobility imposes costs on those who choose to remain in the city through declining property values and a shrinking tax base.
Handle: RePEc:nbr:nberwo:5737
Template-Type: ReDIF-Paper 1.0
Title: Cash Welfare as a Consumption Smoothing Mechanism for Single Mothers
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: PE LS
Number: 5738
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5738
File-URL: http://www.nber.org/papers/w5738.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan. "Cash Welfare As A Consumption Smoothing Mechanism For Divorced Mothers," Journal of Public Economics, 2000, v75(2,Feb), 157-182.
Abstract: While there has been considerable research on the disincentive effects of cash welfare under the Aid to Families with Dependent Children (AFDC) program, there is little evidence on the benefits of the program for single mothers and their children. One potential benefit of this program is that it provides short-run consumption insurance for women at the point that they become single mothers. This is only true, however, to the extent that the program is not crowding out other sources of support, such as own savings, labor supply, or transfers from others. I assess the importance of this insurance mechanism by measuring the extent to which AFDC smooths the consumption of women who transition to single motherhood. I use longitudinal data on family structure and consumption expenditures on food and housing from the Panel Study of Income Dynamics (PSID), matched to information on the welfare benefits available in each state and year over the 1968-1985 period. I find that raising potential benefits by one dollar raises the food and housing consumption of all women who become single mothers (and their families) by 30 cents. This estimate implies that for each dollar of AFDC received by this population their consumption of these categories of goods rises by up to 95 cents. This consumption smoothing benefit appears to be larger for women who become single mothers through marital dissolution, rather than through out-of-wedlock childbearing; this is due to increased housing expenditures of the former group but not of the latter.
Handle: RePEc:nbr:nberwo:5738
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomic Policy in the Presence of Structural Maladjustment
Classification-JEL: E30; E50
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: EFG
Number: 5739
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5739
File-URL: http://www.nber.org/papers/w5739.pdf
File-Format: application/pdf
Publication-Status: published as macroeconomic policy and structural reform (paris:oecd, 1996"),pp. 173-204.
Abstract: This paper analyzes two-way interactions between structural reform and macro policy. If structural reforms increase the flexibility of labor markets, they are likely to improve the short-run inflation-unemployment tradeoff, providing an incentive for policymakers to expand aggregate demand. Also, policymakers' promises that they will encourage a decline in unemployment in response to good news on inflation can be used to strike a political deal with interests opposed to the introduction or extension of structural reform. Expansionary monetary policy also gives relief on the fiscal front by bringing the actual budget deficit closer to the structural budget deficit, and indirectly, by encouraging structural reform, potentially reducing the structural budget deficit itself. In 1992-93 several European countries dropped out of the ERM to pursue more expansionary monetary policies. The difference in the results of these countries and those countries which maintained a peg between their currencies and the Deutschemark provides a test case of the consequences of expansionary monetary policy. The depreciating nations by 1995 enjoyed a relative acceleration of nominal GDP and an even greater deceleration of inflation, so that their growth rate of real GDP accelerated more than their growth rate of nominal GDP in relation to the pegging countries. The continued deceleration of inflation in the depreciating countries provides evidence that their natural unemployment rate has declined and that expansionary monetary policy has interacted beneficially with structural reform.
Handle: RePEc:nbr:nberwo:5739
Template-Type: ReDIF-Paper 1.0
Title: Price, Tobacco Control Policies and Youth Smoking
Classification-JEL: I1
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 5740
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5740
File-URL: http://www.nber.org/papers/w5740.pdf
File-Format: application/pdf
Publication-Status: Published as "Price, Tobacco Control Policies and Smoking Among Young Adults", Journal of Health Economics, Vol. 16, no. 3 (June 1997): 359-373.
Abstract: This paper examines effectiveness of several tobacco control policies in discouraging cigarette smoking among youths. These policies include increased cigarette excise taxes (which result in higher cigarette prices), restrictions on smoking in public places and at private worksites, and limits on the availability of tobacco products to youths. The data employed in this research are taken from the 1992, 1993, and 1994 surveys of eighth, tenth, and twelfth grade students conducted by the University of Michigan's Institute for Social Research as part of the Monitoring the Future Project. Site specific cigarette prices and measures of tobacco related policies are added to the survey data. The results indicate that tobacco control policies can be effective in reducing youth cigarette smoking. The average overall estimated price elasticity of youth cigarette demand of 1.313 indicates that large increases in cigarette excise taxes would lead to sharp reductions in youth smoking. Similarly, strong restrictions on smoking in public places would reduce the prevalence of smoking among youths, while limits on smoking in schools would reduce average cigarette consumption among young smokers. However, limits on youth access to tobacco products appear to have little impact on youth cigarette smoking. This is most likely the result of the relatively weak enforcement of these laws.
Handle: RePEc:nbr:nberwo:5740
Template-Type: ReDIF-Paper 1.0
Title: How to Count Patents and Value Intellectual Property: Uses of Patent Renewal and Application Data
Classification-JEL: C81; L10
Author-Name: Jean O. Lanjouw
Author-Name: Ariel Pakes
Author-Person: ppa20
Author-Name: Jonathan Putnam
Note: PR
Number: 5741
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5741
File-URL: http://www.nber.org/papers/w5741.pdf
File-Format: application/pdf
Publication-Status: published as The Journal of Industrial Economics, Vol. XLVI, no. 4 (1998): 405-433.
Abstract: Patent counts are very imperfect measures of innovative output. This paper discusses how additional data-the number of years a patent is renewed and the number of countries in which protection for the same invention is sought - can be used to improve on counts in studies which require a measure of the extent of innovation. A simple renewal based weighting scheme is proposed which may remove half of the noise in patent counts as a measure of innovative output. The paper also illustrates how these data can be used to estimate the value of the proprietary rights created by the patent laws. The parameters estimated in this analysis can be used to answer a series of questions related to the value of patents. We illustrate with estimates of how the value of patent protection would vary under alternative legal rules and renewal fees, and with estimates of the international flows of returns from the patent system. Recent progress in the development of databases has increased the potential for this type of analysis.
Handle: RePEc:nbr:nberwo:5741
Template-Type: ReDIF-Paper 1.0
Title: International Capital Mobility in History: Purchasing-Power Parity in the Long Run
Classification-JEL: N20; F30
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: IFM DAE
Number: 5742
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5742
File-URL: http://www.nber.org/papers/w5742.pdf
File-Format: application/pdf
Publication-Status: Published as "Argentina and the World Capital Market: Saving, Investment,and International Capital Mobility in the Twentieth Century", Journal of Development Economics, Vol. 57, no. 1 (October 1998): 147-184.
Abstract: This paper investigates purchasing-power parity (PPP) since the late nineteenth century for a sample of twenty countries, a broader sample of pooled annual data than has been studied before. Econometric results for time-series and panel samples allows us to test the robustness of the PPP hypothesis in different eras: the gold-standard, interwar, Bretton Woods, and the recent float. The evidence for PPP is mixed: Strong PPP, entailing stationarity of the real exchange rate, is not broadly supported, and real-exchange-rate dispersion shows counterintuitive historical patterns. However, not-much-weaker forms of PPP can be supported, with evidence of cointegration between different countries' common-currency price levels. Residual variances here confirm the conventional wisdom that the interwar period, particularly the Great Depression, represented the nadir of international capital market integration in the modern era.
Handle: RePEc:nbr:nberwo:5742
Template-Type: ReDIF-Paper 1.0
Title: International Capital Mobility in History: The Saving-Investment Relationship
Classification-JEL: N20; F30
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: IFM DAE
Number: 5743
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5743
File-URL: http://www.nber.org/papers/w5743.pdf
File-Format: application/pdf
Publication-Status: Published as "Argentina and the World Capital Market: Saving, Investment,and International Capital Mobility in the Twentieth Century", Journal of Development Economics, Vol. 57, no. 1 (October 1998): 147-184.
Abstract: Economic historians have been concerned with the evolution of international capital markets over the long run, but empirical testing of market integration has been limited. This paper augments the literature by investigating long- and short-run criteria for capital mobility using time-series and cross-section analysis of saving-investment correlation for twelve countries since 1850. The results present a nuanced picture of capital market evolution. The sample shows considerable cross-country heterogeneity. Broadly speaking, the inter-war period, and especially the Great Depression, emerge as an era of diminishing capital mobility, and only recently can we observe a tentative return to the degree of capital mobility witnessed during the late nineteenth century.
Handle: RePEc:nbr:nberwo:5743
Template-Type: ReDIF-Paper 1.0
Title: The Proper Scope of Government: Theory and an Application to Prisons
Classification-JEL: D23; H11
Author-Name: Oliver Hart
Author-Person: pha222
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Robert W. Vishny
Author-Person: pvi218
Note: CF PE
Number: 5744
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5744
File-URL: http://www.nber.org/papers/w5744.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 112, no. 4 (1997): 1126-1161.
Abstract: When should a government provide a service inhouse and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost. If contracts are incomplete, the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee. However, the private contractor's incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on non-contractible quality. The model is applied to understanding the costs and benefits of prison privatization.
Handle: RePEc:nbr:nberwo:5744
Template-Type: ReDIF-Paper 1.0
Title: Auction Design and the Market for Sulfur Dioxide Emissions
Classification-JEL: D44; Q25
Author-Name: Paul L. Joskow
Author-Person: pjo110
Author-Name: Richard Schmalensee
Author-Person: psc313
Author-Name: Elizabeth M. Bailey
Note: IO
Number: 5745
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5745
File-URL: http://www.nber.org/papers/w5745.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "The Market for Sulfur Dioxide Emissions) American Economic Review, Vol. 88, no. 4 (September 1998): 669-685.
Abstract: Title IV of the Clean Air Act Amendments of 1990 created a market for electric utility emissions of sulfur dioxide (SO2). Recent papers have argued that flaws in the design of the auctions that are part of this market have adversely affected its performance. These papers incorrectly assume that trade can only occur at auctions, however. Our empirical analysis of the SO2 emissions market shows that the auctions have become a small part of a relatively efficient market and that the auction design problems that have attracted the most attention have had no effect on actual market prices
Handle: RePEc:nbr:nberwo:5745
Template-Type: ReDIF-Paper 1.0
Title: Environmental Change and Hedonic Cost Functions for Automobiles
Classification-JEL: D24; L62
Author-Name: Steven Berry
Author-Person: pbe18
Author-Name: Samuel Kortum
Author-Person: pko74
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: IO PR
Number: 5746
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5746
File-URL: http://www.nber.org/papers/w5746.pdf
File-Format: application/pdf
Publication-Status: published as Steven Berry, Samuel Kortum, and Ariel Pakes. "Environmental change and hedonic cost functions for automobiles," Proceeding of the National Academy of Sciences, Vol. 93, No.23, pp. 12731- 12738. (November 12, 1996)
Abstract: This paper focuses on how changes in the economic and regulatory environment have affected production costs and product characteristics in the automobile industry. We estimate cost functions characteristics. Then we examine how this cost surface has changed over time and how these changes relate to changes in gas prices and in emission standard regulations. We also briefly consider the related questions of how changes in automobile characteristics, and in the rate of patenting, are related to regulations and gas prices.
Handle: RePEc:nbr:nberwo:5746
Template-Type: ReDIF-Paper 1.0
Title: Issues in Korean Exchange Rate Policy
Classification-JEL: F3
Author-Name: Stanley W. Black
Number: 5747
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5747
File-URL: http://www.nber.org/papers/w5747.pdf
File-Format: application/pdf
Publication-Status: published as Changes in Exchange Rates in Rapidly Developing Countries. Ito,Takatoshiand Anne O. Krueger, eds., Chicago: The University of Chicago Press, 1999, pp. 269-281.
Publication-Status: published as Issues in Korean Exchange Rate Policy, Stanley Black. in Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, Ito and Krueger. 1999
Abstract: Korea faces a number of unique problems that affect its exchange rate policy. Among these are its asymmetric competitive position vis-…-vis Japan, which is both its major supplier of machine tools and a leading competitor in third markets; the current policy of financial liberalization that goes along with democratic liberalization; and the implications of the potential future unification of the Korean peninsula. This paper considers the question of exchange rate policy for Korea in the face of fluctuations in the yen/dollar rate, increasing competition from lower cost Asian countries, and financial liberalization. The paper deals with external vs. internal targets, choice of external comparison basket, and the effects of financial liberalization. The Korean choice of an independent exchange rate policy is analyzed in terms of the trade-off between external shocks and inflation-fighting credibility of the central bank. Financial liberalization brings with it increased capital mobility. The paper also considers the possibility of a regional currency area, Korean unification, and long run equilibrium.
Handle: RePEc:nbr:nberwo:5747
Template-Type: ReDIF-Paper 1.0
Title: The Equilibrium Approach to Exchange Rates: Theory and Tests
Classification-JEL: F31
Author-Name: Prakash Apte
Author-Name: Piet Sercu
Author-Name: Raman Uppal
Number: 5748
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5748
File-URL: http://www.nber.org/papers/w5748.pdf
File-Format: application/pdf
Publication-Status: published as Apte, Prakash, Piet Sercu and Raman Uppal. "The Exchange Rate And Purchasing Power Parity: Extending The Theory And Tests," Journal of International Money and Finance, 2004, v23(4,Jun), 553-571.
Abstract: We characterize the equilibrium exchange rate in a general equilibrium economy without imposing strong restrictions on the output processes, preferences, or commodity market imperfections. The nominal exchange rate is determined by differences in initial wealths the currencies of richer countries tend to be overvalued by PPP standards and by differences of marginal indirect utilities of total nominal spending. Changes in the exchange rate mirror differences in growth rates of real spending weighted by relative risk-aversion (which can be time-varying and can differ across countries), and in the case of non-homothetic utility functions, differences in inflation rates computed from marginal spending weights. Thus, standard regression or cointegration tests of PPP suffer from missing-variables biases and ignore variations in risk aversions across countries and over time. We also present cointegration tests of the version of the model with constant relative risk aversion (CRRA) and homothetic preferences. When nominal spending is given an independent role (next to prices) in the short-term dynamics, both PPP and the CRRA model become acceptable.
Handle: RePEc:nbr:nberwo:5748
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Pass-through and Industry Characteristics: The Case of Taiwan's Exports of Midstream Petrochemical Products
Classification-JEL: F31; L1
Author-Name: Kuo-Liang Wang
Author-Name: Chung-Shu Wu
Number: 5749
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5749
File-URL: http://www.nber.org/papers/w5749.pdf
File-Format: application/pdf
Publication-Status: published as Changes in Exchange Rates in Rapidly Developing Countries. Ito,Takatoshiand Anne O. Krueger, eds., Chicago: The University of Chicago Press, 1999,pp. 211-230.
Publication-Status: published as Exchange Rate Pass-through and Industry Characteristics: The Case of Taiwan's Exports of Midstream Petrochemical Products, Kuo-Liang Wang, Chung-Shu Wu. in Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, Ito and Krueger. 1999
Abstract: Based on 1986-1992 survey data of 22 midstream petrochemical industries in Taiwan, the empirical results of the export price, the markup ratio and the price-cost margin equations in this study show that Taiwan's petrochemical firms absorb only a small portion of a given weighted exchange rate change in their export prices, markup ratios and price-cost margins. It implies that Taiwan's petrochemical firms have a weak pricing-to-market pattern. The empirical results may be explained by the volatility of profitability, high market concentration and small export/domestic production share. However, the impacts of the exchange rate change on the export price, markup ratio and price-cost margin have a tendency to increase during the period of 1987" to 1992. The tendency might be attributed to increasing competition of the petrochemical markets in the world, or Taiwanese firms' gradual realization of the importance of holding their world market shares in response to the exchange rate change.
Handle: RePEc:nbr:nberwo:5749
Template-Type: ReDIF-Paper 1.0
Title: Are Medical Prices Declining?
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Mark McClellan
Author-Name: Joseph P. Newhouse
Author-Name: Dahlia Remler
Note: AG PR PE
Number: 5750
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5750
File-URL: http://www.nber.org/papers/w5750.pdf
File-Format: application/pdf
Publication-Status: Published as "Are Medical Prices Declining? Evidence for Heart Attack Treatments", Quarterly Journal of Economics, Vol. 108, no. 4 (November 1998).
Abstract: We address long-standing problems in measuring health care prices by estimating two medical care price indices. The first, a Service Price Index, prices specific medical services, as does the current CPI. The second, a Cost of Living Index, measures the net valuation of treating a health problem. We apply these indices to heart attack treatment between 1983 and 1994. Because of technological change and increasing price discounts, the current CPI overstates a chain-weighted price index by three percentage points annually. For plausible values of an additional life-year, the real Cost of Living Index fell about 1 percent annually.
Handle: RePEc:nbr:nberwo:5750
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Technological Change in Heart Attack Treatment
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Mark McClellan
Note: AG EH PR PE
Number: 5751
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5751
File-URL: http://www.nber.org/papers/w5751.pdf
File-Format: application/pdf
Publication-Status: published as With Joseph D. Newhouse and Dahlia Remler, published as "Are Medical Prices Declining? Evidence for Heart Attack Treatments", Quarterly Journal of Economics, Vol. 108, no. 4 (November 1998).
Abstract: This paper examines the sources of expenditure growth in heart attack treatment. We first show that essentially all of cost growth is a result of the diffusion of particular intensive technologies; the prices paid for a given level of technology have been constant or falling over time. We then examine the reasons for this technology diffusion. We distinguish six factors that may influence technology diffusion: organizational factors within hospitals; the insurance environment in which technology is reimbursed; public policy regulating new technology; malpractice concerns; competitive or cooperative interactions among providers; and demographic composition. We conclude that insurance variables, technology regulation, and provider interactions have the largest quantitative effect on technological diffusion. These factors affect both technology acquisition and the frequency of technology use.
Handle: RePEc:nbr:nberwo:5751
Template-Type: ReDIF-Paper 1.0
Title: Heterogeneous Information Arrivals and Return Volatility Dynamics: Uncovering the Long-Run in High Frequency Returns
Classification-JEL: C22; E44
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Note: AP
Number: 5752
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5752
File-URL: http://www.nber.org/papers/w5752.pdf
File-Format: application/pdf
Publication-Status: published as Torben G. Andersen and Tim Bollerslev. "Heterogeneous Information Arrivals and Return Volatility Dynamics: Uncovering the Long-Run in High Frequency Returns," Journal of Finance. Volume 52, issue 3. (1997) pp. 975-1005
Abstract: Recent empirical evidence suggests that the long-run dependence in financial market volatility is best characterized by a slowly mean-reverting fractionally integrated process. At the same time, much shorter-lived volatility dependencies are typically observed with high-frequency intradaily returns. This paper draws on the information arrival, or mixture-of-distributions hypothesis interpretation of the latent volatility process in rationalizing this behavior. By interpreting the overall volatility as the manifestation of numerous heterogeneous information arrivals, sudden bursts of volatility typically will have both short-run and long-run components. Over intradaily frequencies, the short-run decay stands out most clearly, while the impact of the highly persistent processes will be dominant over longer horizons. These ideas are confirmed by our empirical analysis of a one-year time series of intradaily five-minute Deutschemark - U.S. Dollar returns. Whereas traditional time series based measures for the temporal dependencies in the absolute returns give rise to very conflicting results across different intradaily sampling frequencies, the corresponding semiparametric estimates for the order of fractional integration remain remarkably stable. Similarly, the autocorrelogram for the low-pass filtered absolute returns, obtained by annihilating periods in excess of one day, exhibit a striking hyperbolic rate of decay.
Handle: RePEc:nbr:nberwo:5752
Template-Type: ReDIF-Paper 1.0
Title: The Government as Venture Capitalist: The Long-Run Effects of the SBIR Program
Author-Name: Josh Lerner
Author-Person: ple60
Note: PR
Number: 5753
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5753
File-URL: http://www.nber.org/papers/w5753.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Business, Vol. 72 (July 1999): 285-318.
Publication-Status: published as Science, Vol. 287 (2000): 977-979 (condensed version, printed as "The Problematic Venture Capitalist").
Publication-Status: published as Journal of Private Equity, Vol. 3 (Winter/Spring 2000): 55-78 (reprinted).
Abstract: Public programs to provide early-stage financing to firms, particularly high-technology companies, have become commonplace in the United States and abroad. The long-run effectiveness of these programs, however, has attracted little empirical scrutiny. This paper examines the impact of the largest U.S. public venture capital initiative, the Small Business Innovation Research (SBIR) program, which has provided over $6 billion to small high-technology firms between 1983 and 1995. Using a unique database" of awardees compiled by the U.S. General Accounting Office, I show that SBIR awardees grew significantly faster than a matched set of firms over a ten-year period. The positive effects of SBIR awards were confined to firms based in zip codes with substantial venture capital activity. The findings are consistent with both the corporate finance literature on capital constraints and the growth literature on the importance of localization effects.
Handle: RePEc:nbr:nberwo:5753
Template-Type: ReDIF-Paper 1.0
Title: Fixing Capital Gains: Symmetry, Consistency and Correctness in the Taxation of Financial Instruments
Classification-JEL: H24
Author-Name: David F. Bradford
Note: PE
Number: 5754
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5754
File-URL: http://www.nber.org/papers/w5754.pdf
File-Format: application/pdf
Publication-Status: published as Tax Law Review, vol. 50, no. 4, pp. 731-785, 1995.
Abstract: A great deal of effort and ingenuity has been addressed to patching holes in the income tax attributable to realization accounting. A classic instance of the problem is the headachescreated by capital gains, whereby the taxpayer can choose to postpone recognition of gain and accelerate recognition of loss (known as cherry picking). The inconsistencies resulting from realization accounting are most pronounced than in the taxation of financial instruments, especially requirements for income measurement rules based on realization that are `linear' in the sense that doubling a person's transactions will double the taxable income, and adding one set of transactions to another will result in the sum of the associated income. Under present realization conventions, the tax law cannot be linear because there would then be no limit on tax arbitrage profit via variations on borrowing with deductible interest and lending tax exempt. To focus on the principles, the paper assumes transactions are costless. In that case, it is shown that to deal with the intertemporal aspect requires virtually universal imputation of taxable interest income to basis. To deal with the risk aspect of the problem (lock-in and cherry picking) requires simply that the effective rate of tax on gains and losses be the same (not necessarily equal to the rate on intertemporal returns). A new method is proposed that satisfies the requirements for linear income measurement. It is shown that the retroactive taxation of gain devised by Alan Auerbach is a special case of the new approach (involving a zero effective rate of tax on gains and losses).
Handle: RePEc:nbr:nberwo:5754
Template-Type: ReDIF-Paper 1.0
Title: "Basket" Cases: International Joint Ventures After the Tax Reform Act of 1986
Classification-JEL: H87; F23
Author-Name: Mihir A. Desai
Author-Name: James R. Hines, Jr.
Author-Person: phi111
Note: PE
Number: 5755
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5755
File-URL: http://www.nber.org/papers/w5755.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, Vol. 71, no. 3 (March 1999): 379-402.
Abstract: This paper examines the impact of the Tax Reform Act of 1986 (TRA) on international joint ventures by American firms. The evidence suggests that the TRA had a significant effect on the organizational form of U.S. business activity abroad. The TRA mandates the use of separate credits on income received from foreign corporations owned 50% or less by Americans. This limitation on worldwide averaging greatly reduces the attractiveness of joint ventures to American investors, particularly ventures in low-tax foreign countries. Aggregate data indicate that U.S. participation in international joint ventures fell sharply after 1986. The decline in U.S. joint venture activity is most pronounced in low-tax countries, which is consistent with the incentives created by the TRA. Moreover, joint ventures in low-tax countries use more debt and pay greater royalties to their U.S. parents after 1986, which reflects their incentives to economize on dividend payments
Handle: RePEc:nbr:nberwo:5755
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of the Choice between Fixed and Flexible Exchange-Rate Regimes
Classification-JEL: F31; F32
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 5756
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5756
File-URL: http://www.nber.org/papers/w5756.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi and Anne O. Krueger (eds.) Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, National Bureau of Economic Research East Asia Seminar on Economics. University of Chicago Press, 1999.
Abstract: In recent years, analysts and policy makers alike have been evaluating the nexus between exchange rates and macroeconomic stability. Among the most important questions is why have some countries adopted rigid, including fixed, exchange-rate paper addresses this question from a political economy perspective both theoretically and empirically. The model assumes that the monetary authority minimizes a quadratic loss function that captures the trade-off between infla- tion and unemployment. This framework is initially applied to the case where monetary authorities must choose between a (permanently) fixed and a flexible exchange-rate regime. In choosing the regime it is assumed authorities compare the expected losses under each scenario. The model is subsequently extended extended to cover the somewhat more complicated case where the authoriities must choose between fixed-but-adjustable and flexible exchange-rate regimes. In this latter case, potential political costs of abandoningithe pegged rate are taken into account. In the empirical section, an unbalanced panel data set of 63 countries from 1980-1992 is used to estimate a series of probit models, with a binary exchange-rate regime index as the dependent variable. Among the most important explanatory variables were measures of countries' historical degree of political instability, measures of the probability of abandoning pegged rates, and variables related to the relative importance of real (unemployment) targets in the preferences of monetary authorities. The regression results support the political economy approach developed in the theoretical discussion.
Handle: RePEc:nbr:nberwo:5756
Template-Type: ReDIF-Paper 1.0
Title: The Macroeconomics of Specificity
Classification-JEL: E00; E1
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Mohamad L. Hammour
Note: EFG
Number: 5757
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5757
File-URL: http://www.nber.org/papers/w5757.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 106, no. 4 (August 1998): 724-767.
Abstract: Specific quasi-rents build up in a wide variety of economic relationships, and are exposed to opportunism unless fully protected by contract. The recognition that such contracts are often incomplete has yielded major insights into the organization of microeconomic exchange. Rent appropriation, we argue, also has important macroeconomic implications. Resources are underutilized, factor markets are segmented, production suffers from technological with creation, recessions are excessively sharp, and expansions run into bottlenecks. While, depending on the nature of the shock, expansions may require reinforcement or stabilization, recessions should always be softened. In the long run, institutions, such as those governing capital-labor relations, may evolve to alleviate the problem by balancing appropriation. Technology choice will also be affected, with the appropriated factor partially appropriation as manifested in the role capital-labor substitution played in the rise of European unemployment.
Handle: RePEc:nbr:nberwo:5757
Template-Type: ReDIF-Paper 1.0
Title: Financial Dependence and Growth
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Author-Name: Luigi Zingales
Note: CF EFG
Number: 5758
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5758
File-URL: http://www.nber.org/papers/w5758.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 88, no. 3 (1998): 559-586.
Abstract: Does finance affect economic growth? A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of growth of its per capita income. As has been noted elsewhere, the observed correlation does not necessarily imply a causal relationship. This paper examines whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship; that financial development reduces the costs of external finance to firms. Specifically, we ask whether industrial sectors that are relatively more in need of external finance develop disproportionately faster in countries with more developed financial markets. We find this to be true in a large sample of countries over the 1980s. We show this result is unlikely to be driven by omitted variables, outliers, or reverse causality.
Handle: RePEc:nbr:nberwo:5758
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Tax-Based Saving Incentives On Saving and Wealth
Classification-JEL: H31; E21
Author-Name: Eric M. Engen
Author-Name: William G. Gale
Author-Person: pga40
Author-Name: John Karl Scholz
Note: PE
Number: 5759
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5759
File-URL: http://www.nber.org/papers/w5759.pdf
File-Format: application/pdf
Publication-Status: published as Engen, Eric M., William G. Gale and John Karl Scholz. "The Illusory Effects Of Saving Incentives On Saving," Journal of Economic Perspectives, 1996, v10(4,Fall), 113-138.
Abstract: This paper evaluates research examining the effects of tax-based saving incentives on private and national saving. Several" factors make this an unusually difficult problem. First, households that participate in, or are eligible for, saving incentive plans have systematically stronger tastes for saving than other households. Second, the data indicate that households with saving incentives have taken on more debt than other households. Third, significant changes in the 1980s in financial markets, pensions, social security, and nonfinancial assets interacted with the expansion of saving incentives. Fourth, saving incentive accounts represent pre-tax balances, whereas conventional taxable accounts represent post-tax balances. Fifth, the fact that employer contributions to saving incentive plans are a part of total employee compensation is typically ignored. A major theme of this paper is that analyses that ignore these issues overstate the impact of saving incentives on saving. We show that accounting for these factors largely or completely eliminates the estimated positive impact of saving incentives on saving found in the literature. Thus, we conclude that little if any of the overall contributions to existing saving incentives have raised private or national saving. *Portions of this article were published in the JEP, 1996, under title of "The Illusory Effects of Saving Incentives on Saving."
Handle: RePEc:nbr:nberwo:5759
Template-Type: ReDIF-Paper 1.0
Title: Mortality Contingent Claims, Health Care, and Social Insurance
Classification-JEL: I1
Author-Name: Tomas Philipson
Author-Person: pph37
Author-Name: Gary S. Becker
Note: EH
Number: 5760
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5760
File-URL: http://www.nber.org/papers/w5760.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol.106, no.3 (1996): 550-574.
Abstract: This paper analyzes the savings and health care impacts of mortality contingent claims, defined here as income measures, such as annuities and life-insurance, under which earned income is contingent on the length of one's life. The postwar increase in mandatory annuity and life-insurance programs, as well as the rapid increase in life-expectancy, motivates a better understanding of the effects that mortality contingent claims have on resources devoted to life-extension. We analyze the incentives that such claims imply for life-extension when resources may affect mortality endogenously and argue that these incentives dramatically alter the standard conclusions obtained when mortality is treated exogenously.
Handle: RePEc:nbr:nberwo:5760
Template-Type: ReDIF-Paper 1.0
Title: The Transition Path in Privatizing Social Security
Classification-JEL: H55
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Andrew Samwick
Author-Person: psa395
Note: PE
Number: 5761
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5761
File-URL: http://www.nber.org/papers/w5761.pdf
File-Format: application/pdf
Publication-Status: published as Privatizing Social Security, Feldstein, Martin, ed., Chicago: Universityof Chicago Press, 1998, pp. 215-260.
Publication-Status: published as The Transition Path in Privatizing Social Security, Martin Feldstein, Andrew Samwick. in Privatizing Social Security, Feldstein. 1998
Abstract: This paper analyzes the transition from the existing pay-as-you-go Social Security program to a system of funded Mandatory" Individual Retirement Accounts (MIRAs). Because of the high return on real capital relative to the very low return in a mature pay-as-you-go program, the benefits that can be financed with the existing 12.4 percent payroll tax could eventually be funded with mandatory contributions of only 2.1 percent of payroll. A transition to that fully funded program could be done with a surcharge of less than 1.5 percent of payroll during the early part of the transition. After 25 years, the combination of financing the pay-as-you-go benefits and accumulating the funded accounts would require less than the current 12.4 percent of payroll. The paper also discusses how a MIRA system could deal with the benefits of low income employees and with the risks associated with uncertain longevity and fluctuating market returns.
Handle: RePEc:nbr:nberwo:5761
Template-Type: ReDIF-Paper 1.0
Title: Individual Financial Decisions in Retirement Saving Plans and The Provision of Resources for Retirement
Classification-JEL: J14; H55
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: David A. Wise
Author-Person: pwi45
Note: PE AG
Number: 5762
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5762
File-URL: http://www.nber.org/papers/w5762.pdf
File-Format: application/pdf
Publication-Status: published as Privatizing Social Security. Feldstein, Martin, ed. pp. 85-105. (Chicago: University of Chicago Press, 1998)
Publication-Status: published as Individual Financial Decisions in Retirement Saving Plans and the Provision of Resources for Retirement, James M. Poterba, David A. Wise. in Privatizing Social Security, Feldstein. 1998
Abstract: Proposals for mandatory private saving accounts differ in the degree of investment discretion that they provide to individual savers, and in their provisions for annuitization of accumulated assets. With respect to investment choices, some argue that individuals must be prevented from investing too conservatively, and earning low returns over their accumulation period, while others argue that individuals should be protected from recklessly investing their retirement assets. With respect to annuitization, there is concern that individuals might not choose annuities and would thereby expose themselves to a risk of outliving their assets in a privatized system. This paper draws on the existing experience with 401(k) plans and other defined contribution pension plans to provide evidence on each of these issues. We find that the share of 401(k) plan assets held in corporate equities has increased substantially in recent years. We are only able to provide limited evidence on participant asset management, since many 401(k) plans have limited options in this regard. We do find, however, that a participant's education and income levels are related to asset allocation decisions, with less educated and lower income participants less inclined to invest in equity securities. We also analyze a unique data base on TIAA-CREF participants and find several attributes of annuitization behavior that seem inconsistent with standard behavior in the lifecycle model.
Handle: RePEc:nbr:nberwo:5762
Template-Type: ReDIF-Paper 1.0
Title: The Wages and Language Skills of U.S. Immigrants
Classification-JEL: J31; J15
Author-Name: Geoffrey Carliner
Author-Person: pca858
Note: LS
Number: 5763
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5763
File-URL: http://www.nber.org/papers/w5763.pdf
File-Format: application/pdf
Abstract: This paper finds that immigrants on average earned about $0.50/hour less than native-born Americans in 1989. Immigrants from some regions earned much more than natives, while others, especially from Mexico, earned much less. This paper also finds that when immigrants first arrive in the U.S. they earn significantly less than native workers, but they close the gap by about 0.8 percentage points with each added year of residence. As a result, the wage of the typical immigrant who arrived in the 1950s and 1960s eventually surpassed the average native wage. Improvements in English language skills contributed 6 to 18 percent of this narrowing, depending on sex and education level. The remainder came from unmeasured sources of assimilation. However, since the 1950s and 1960s the wage gap between natives and newly arrived immigrants has widened by 0.2 to 0.6 percentage points annually. Because they start with a larger disadvantage the average wage of more recent immigrants may never exceed the average native wage. A decline in the average education of newly arrived immigrants accounts for 4-23% percent of the starting wage gap, and shifts in the source countries of new immigrants from Europe to Latin America and Asia account for 73 to 95 percent. Changes in English skills and in other factors have played little role in this relative decline. This analysis also finds a significant return to English skills. Even after controlling for education, region of origin, and years of U.S. residence, workers are rewarded for speaking English well. Differences between each of the five English skill categories reported in the Census data are about the same as the return to an additional year of schooling.
Handle: RePEc:nbr:nberwo:5763
Template-Type: ReDIF-Paper 1.0
Title: What Does the Bundesbank Target?
Author-Name: Ben S. Bernanke
Author-Person: pbe55
Author-Name: Ilian Mihov
Author-Person: pmi131
Note: EFG ME
Number: 5764
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5764
File-URL: http://www.nber.org/papers/w5764.pdf
File-Format: application/pdf
Publication-Status: published as Bernanke, Ben S. and Ilian Mihov. "What Does The Bundesbank Target?," European Economic Review, 1997, v41(6,Jun), 1025-1053.
Abstract: Although its primary ultimate objective is price stability, the Bundesbank has drawn a distinction between its money-focus strategy and the inflation targeting approach recently adopted by a number of central banks. We show that, holding constant the current forecast of inflation, German monetary policy responds very little to changes in forecasted money growth; we conclude that the Bundesbank is much better described as an inflation targeter than as a money targeter. An additional contribution of the paper is to apply the structural VAR methods of Bernanke and Mihov (1995) to determine the optimal indicator of German monetary policy: We find that the Lombard rate has historically been a good policy indicator, although the use of the call rate as an indicator cannot be statistically rejected.
Handle: RePEc:nbr:nberwo:5764
Template-Type: ReDIF-Paper 1.0
Title: Non-Monetary Exchange Within Firms and Industry
Classification-JEL: D8; J3
Author-Name: Canice Prendergast
Author-Name: Lars A. Stole
Author-Person: pst479
Note: LS
Number: 5765
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5765
File-URL: http://www.nber.org/papers/w5765.pdf
File-Format: application/pdf
Abstract: This paper considers why non-monetary means of exchange, such as barter and the reciprocation of favors, are chosen by firms despite the usual benefits of monetary transactions. We consider the chosen means of exchange when both monetary and non-monetary exchange mechanisms are available. We illustrate three potential reasons for the emergence of non-monetary trade. First, a willingness to barter may reveal information that cannot be revealed solely through monetary trade. Second, non-monetary trade may constrain the ability of agents to engage in inefficient rent-seeking activities. Finally, non-monetary trade improves the ability of agents to impose trade sanctions on those who act dishonestly. We consider a number of applications of each of these ideas.
Handle: RePEc:nbr:nberwo:5765
Template-Type: ReDIF-Paper 1.0
Title: A Model of Foreign Exchange Rate Indetermination
Classification-JEL: F40
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 5766
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5766
File-URL: http://www.nber.org/papers/w5766.pdf
File-Format: application/pdf
Abstract: Economic agents undertake actions to protect themselves from the short-run impact of foreign exchange rate fluctuations: Nominal goods prices are set in consumers' currencies, and firms hedge foreign exchange risk. A model is presented here which shows that these features of the economy can lead to indeterminacy in the nominal exchange rate in the short run. There can be noise in the exchange rate, unrelated to any fundamentals, essentially because the short-run fluctuations do not influence any rational agent's behavior. Empirical implications of this sort of noise are explored.
Handle: RePEc:nbr:nberwo:5766
Template-Type: ReDIF-Paper 1.0
Title: Aggregate Employment Fluctuations with Microeconomic Asymmetries
Classification-JEL: E1
Author-Name: Jeffrey R. Campbell
Author-Person: pca89
Author-Name: Jonas D.M. Fisher
Author-Person: pfi4
Note: EFG
Number: 5767
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5767
File-URL: http://www.nber.org/papers/w5767.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, J. R. and J. D. M. Fisher. "Aggregate Employment Fluctuations With Microeconomic Asymmetries," American Economic Review, 2000, v90(5,Dec), 1323-1345.
Abstract: We provide a simple explanation for the observation that the variance of job destruction is greater than the variance of job creation: job creation is costlier at the margin than job destruction. As Caballero [2] has argued, asymmetric employment adjustment costs at the establishment level need not imply asymmetric volatility of aggregate job flows. We construct an equilibrium model in which (S,s)-type employment policies respond endogenously to aggregate shocks. The microeconomic asymmetries in the model can dampen the response of total job creation to an aggregate shock and cause it to be less volatile than total job destruction. This is so even though aggregate shocks are symmetrically distributed.
Handle: RePEc:nbr:nberwo:5767
Template-Type: ReDIF-Paper 1.0
Title: Trade and Environment Beyond Singapore
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 5768
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5768
File-URL: http://www.nber.org/papers/w5768.pdf
File-Format: application/pdf
Publication-Status: published as Sampson, G. and J. Whalley (eds.) The WTO, Trade and the Environment. Cheltenham, UK; Northampton, MA, USA: Edward Elgar, 2005.
Abstract: This paper discusses the likely evolution of the trade and environment issue in the World Trade Organization after the upcoming ministerial meeting in Singapore this December. It makes a number of points. Progress within the GATT/WTO on this issue looks likely to be slow and painfully incremental rather than bold as environmental groups would wish to see. The paper also argues that despite (and beyond) Singapore, one has to go further than the GATT/WTO to see the potential evolution of the trade and environment issue. Developments seem likely to be driven in the next few years as much by factors outside the GATT/WTO as well as within it, as new global environmental arrangements, some with potentially large trade implications (such as carbon emission limitation agreements), emerge.
Handle: RePEc:nbr:nberwo:5768
Template-Type: ReDIF-Paper 1.0
Title: Do Markets Respond More to More Reliable Labor Market Data? A Test of Market Rationality
Classification-JEL: G14; J10
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: LS
Number: 5769
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5769
File-URL: http://www.nber.org/papers/w5769.pdf
File-Format: application/pdf
Publication-Status: published as Alan B. Krueger & Kenneth N. Fortson, 2003. "Do Markets Respond More to More Reliable Labor Market Data? A Test of Market Rationality," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 931-957, 06.
Abstract: Since 1979, the Bureau of Labor Statistics (BLS) has nearly quadrupled the size of the sample used to estimate monthly employment changes. Although first-reported employment estimates are still noisy, the magnitude of sampling variability has declined in proportion to the increase in the sample size. A model of rational Bayesian updating predicts that investors would assign more weight to the BLS employment survey as it became more precise. However, a regression analysis of changes in interest rates on the day the employment data are released finds no evidence that the bond market's reaction to employment news intensified in the late 1980s or early 1990s. For the time period as a whole, an unexpected increase of 200,000 jobs is associated with an 8 basis point increase in the interest rate on 30 year Treasury bonds, and a 9 basis point increase in the interest rate on 3 month bills, all else equal. Additionally, announced hourly wage increases are associated with higher long-term interest rates rate and revisions to past months' employment estimates have a statistically insignificant effect on long-term interest rates.
Handle: RePEc:nbr:nberwo:5769
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Welfare Effects of Digital Infrastructure
Classification-JEL: L51; O30
Author-Name: Shane M. Greenstein
Author-Person: pgr134
Author-Name: Pablo T. Spiller
Author-Person: psp34
Note: PR
Number: 5770
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5770
File-URL: http://www.nber.org/papers/w5770.pdf
File-Format: application/pdf
Abstract: While much economic policy presumes that more information infrastructure yields higher economic returns, little empirical work measures the magnitudes of these returns. We examine investment by local exchange telephone companies in fiber optic cable, ISDN lines and signal seven software, infrastructure which plays an essential role in bringing digital technology to local telephone networks. We estimate the elasticity of the derived demand for infrastructure investment faced by local exchange companies, controlling for factors such as local economic activity and the political disposition of state regulators. Our model postulates a regulated profit maximizing local exchange firm and a regulatory agency with predetermined political leanings in favor of consumer prices or firm profits. The model accounts for variation in state regulation and local economic conditions. In all our estimates we find that consumer demand is sensitive to investment in modern infrastructure, particularly as represented by fiber optic cable. Our estimates imply that infrastructure investment is responsible for a substantial fraction of the recent growth in consumer surplus and business revenue in local telecommunication services.
Handle: RePEc:nbr:nberwo:5770
Template-Type: ReDIF-Paper 1.0
Title: The Exchange Value of the Renminbi and China's Balance of Trade: An Emp irical Study
Classification-JEL: F31; F22
Author-Name: Zhaoyong Zhang
Number: 5771
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5771
File-URL: http://www.nber.org/papers/w5771.pdf
File-Format: application/pdf
Abstract: This paper aims at assessing the relationship between the exchange value of the Chinese Renminbi (RMG) and China's trade balance by means of some recent econometric techniques designed to evaluate the existence and the direction of causality. We find strong evidence suggesting that changes in the trade balance and each of its components Granger-cause changes in the exchange rate but no evidence indicating a causal link running from the exchange rate to the trade balance. Our results seem to be rather supportive of the accommodative role of the exchange rate proposed by the modern theory of the trade balance determination and not supportive of the existence of a J-curve in China's trade balance. Our finding of a bidirectional causal relationship between the real exchange rate and the price variables confirms the presence of a vicious circle hypothesis following currency devaluation. This has important implications for the discussions of impacts of the RMB devaluation on China's trade balance.
Handle: RePEc:nbr:nberwo:5771
Template-Type: ReDIF-Paper 1.0
Title: Debt, Cash Flow and Inflation Incentives: A Swedish Example
Classification-JEL: E31; H62
Author-Name: Mats Persson
Author-Person: ppe498
Author-Name: Torsten Persson
Author-Person: ppe28
Author-Name: Lars E. O. Svensson
Author-Person: psv2
Note: IFM ME PE
Number: 5772
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5772
File-URL: http://www.nber.org/papers/w5772.pdf
File-Format: application/pdf
Publication-Status: published as The Debt Burden and it's Consequences for Monetary Policy, King, M. and G. Calvo, eds., London: MacMillan, 1998, pp. 28-62.
Abstract: The fiscal gains from, and hence the political incentives to, an increase in inflation rate of ten percentage points may be substantial: with Swedish data from 1994, these gains would have been an annual real flow of 3-4 percent of GDP, or a capitalized value of nearly 100 percent of GDP. They would mainly have arisen from the nominalistic features of the tax and transfer systems rather than from the traditional sources: seignorage and real depreciation of the public debt. The welfare costs of such an inflation increase would have been even larger, however, and would thus have reduced net welfare. Possible institutional reforms, aimed at making the political costs of inflation more equal to the social costs, are presented and discussed
Handle: RePEc:nbr:nberwo:5772
Template-Type: ReDIF-Paper 1.0
Title: Diffusion of General Purpose Technologies
Classification-JEL: 010; 030
Author-Name: Elhanan Helpman
Author-Person: phe205
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: PR
Number: 5773
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5773
File-URL: http://www.nber.org/papers/w5773.pdf
File-Format: application/pdf
Publication-Status: published as General Purpose Technologies and Economic Growth, Helpman, E., ed., Cambridge: MIT Press, 1998.
Abstract: History and theory alike suggest that General Purpose Technologies (GPT's), such as the steam engine or electricity, may play a key role in economic growth. In a previous paper (Helpman and Trajtenberg, 1994) we incorporated this notion into a Grossman-Helpman growth model, and explored the economy-wide dynamics that a GPT generates. The present paper deals with the diffusion of the GPT over heterogeneous final-good sectors. We show that the gradual adoption of the GPT by each user sector generates a sequence of two-phased cycles, culminating in a bringing about a spell of sustained growth. We also analyze the welfare implications of the order of adoption, by way of numerical simulations. As a diffusion of the transistor (the first embodiment of semiconductors, the dominant GPT of our era), and seek to characterize both the early adopters and the laggards in terms of the parameters of the model.
Handle: RePEc:nbr:nberwo:5773
Template-Type: ReDIF-Paper 1.0
Title: The Decline of Welfare Benefits in the U.S.: The Role of Wage Inequality
Classification-JEL: H72; I38
Author-Name: Robert Moffitt
Author-Person: pmo48
Author-Name: David Ribar
Author-Person: pri33
Author-Name: Mark Wilhelm
Author-Person: pwi112
Note: PE
Number: 5774
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5774
File-URL: http://www.nber.org/papers/w5774.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics 68 (1998) 421-452
Abstract: Welfare benefits in the U.S. have experienced a much-studied secular decline since the mid-1970s. We explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the distribution: we posit that voters prefer benefits which are tied to low-skilled wages. We test the hypothesis using a 1969-1992 panel of state-level data. An additional contribution of" our analysis is the use of General Social Survey data on voter preferences for welfare which we combine with Current Population Survey data to determine the voter in each state who has the median preferred welfare benefit level. Our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits.
Handle: RePEc:nbr:nberwo:5774
Template-Type: ReDIF-Paper 1.0
Title: On the Driving Forces Behind Cyclical Movement, in Employment and Job Reallocation
Classification-JEL: E32; J63
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: John Haltiwanger
Author-Person: pha231
Note: EFG
Number: 5775
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5775
File-URL: http://www.nber.org/papers/w5775.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89, no. 5 (December 1999): 1234-1258.
Abstract: We rely on a decomposition of employment changes into job creation and job destruction components - and a novel set of identifying restrictions that this decomposition permits - to develop new evidence about the driving forces behind aggregate fluctuations and the channels through which they operate. We implement our approach to identification using quarterly postwar U.S. data on oil shocks, monetary shocks, and manufacturing rates of job creation and destruction. Our analysis delivers many inferences: 1) The data favor a many- shock characterization of fluctuations in employment and job reallocation, 2) Theories of employment fluctuations that attribute a predominant role to aggregate shocks must in order to fit the data involve contemporaneous effects of such shocks on job destruction that are at least as large as the effects on job creation, 3) Theories in which aggregate shocks primarily affect the first moment of the cross-sectional density of employment growth imply that allocative shocks have bigger contemporaneous effects on destruction than on creation and, hence, that allocative shocks reduce aggregate employment, 4) Allocative shocks drive most fluctuations in the intensity of job reallocation, 5) Oil shocks drive employment fluctuations through a mixture of allocative and aggregate channels, 6) Monetary shocks trigger job creation and destruction dynamics that fit the profile of an aggregate shock.
Handle: RePEc:nbr:nberwo:5775
Template-Type: ReDIF-Paper 1.0
Title: Simulating the Privatization of Social Security in General Equilibrium
Classification-JEL: H55
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: AG PE
Number: 5776
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5776
File-URL: http://www.nber.org/papers/w5776.pdf
File-Format: application/pdf
Publication-Status: published as Simulating the Privatization of Social Security in General Equilibrium, Laurence J. Kotlikoff. in Privatizing Social Security, Feldstein. 1998
Abstract: This paper studies the macroeconomic and efficiency effects of privatizing social security. It does so by simulating alternative privatization schemes using the Auerbach-Kotlikoff Dynamic Life-Cycle Model. The simulations indicate three things. First, privatizing social security can generate very major long-run increases in output and living standards. Second the long-run gains from privatization are larger if privatization redistributes resources from initial to future generations, the pure efficiency gains from privatization are also substantial. Efficiency gains refers to the welfare improvement available to future generations after existing generations have been fully compensated for their losses from privatization. The precise size of the efficiency gain depends on the existing tax structure, the linkage between benefits and taxes under the existing social security system, and the method chosen to finance benefits during the transition. Third, at least in the long run, privatizing social security is likely to be progressive in that it improves the well-being of the lifetime poor relative to that of the lifetime rich
Handle: RePEc:nbr:nberwo:5776
Template-Type: ReDIF-Paper 1.0
Title: The Long-Run U.S./U.K. Real Exchange Rate
Classification-JEL: F40
Author-Name: Charles Engel
Author-Person: pen14
Author-Name: Chang-Jin Kim
Note: IFM
Number: 5777
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5777
File-URL: http://www.nber.org/papers/w5777.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, Volume 31, Number 3, Part 1 (August 1999): 335-355.
Publication-Status: Published as "Accounting for U.S. Real Exchange Rate Changes", Journal of Political Economy, Vol. 107, no. 3 (June 1999): 507-538. Published as "Real Exchange Rates and Relative Prices: An Empirical
Abstract: We investigate the behavior of the long-run U.S./U.K. real exchange rate from 1885 to 1995. Our long-run real exchange rate series is derived from an unobserved components model which divides the real exchange rate into permanent and transitory components. The transitory component is modeled as having variances which switch, according to a Markov-switching process, among low, medium and high variance states. The underlying assumptions of our time-series model are based on an economic theory in which the permanent component represents real influences, while the transitory component represents primarily short-run movements due to nominal exchange rate fluctuations. Because the model is difficult to estimate by standard methods, we describe how the method of Gibbs sampling can handle this model. We find that our long-run real exchange rate series moves similarly to other measures proposed in the literature based on economic models.
Handle: RePEc:nbr:nberwo:5777
Template-Type: ReDIF-Paper 1.0
Title: Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size
Classification-JEL: J0; J2
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: William N. Evans
Author-Person: pev28
Note: LS
Number: 5778
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5778
File-URL: http://www.nber.org/papers/w5778.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review (June 1998).
Abstract: Although theoretical models of labor supply and the family are well developed, there are few credible estimates of key empirical relationships in the work-family nexus. This study uses a new instrumental variable, the sex composition of the first two births in families with at least two children, to estimate the effect of additional children on parents' labor supply. Instrumental variables estimates using the sex mix are substantial but smaller than the corresponding ordinary least squares (OLS) estimates. Moreover, unlike the OLS estimates, the female labor supply effects estimated using sex-mix instruments appear to be absent among more educated women and women with high-wage husbands. We also find that married women who have a third child reduce their labor supply by as much as women in the full sample, while there is no relationship between wives' child-bearing and husbands' labor supply. Finally results to estimates produced using twins to generate instruments. Estimates using twins instruments are very close to the estimates generated by sex-mix instruments, once the estimators are corrected for differences in the ages of children whose birth was caused by the instruments. The estimates imply that the labor supply consequences of child-bearing disappear by the time the child is about 13 years old.
Handle: RePEc:nbr:nberwo:5778
Template-Type: ReDIF-Paper 1.0
Title: Executive Compensation and the Optimality of Managerial Entrenchment
Classification-JEL: G3
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Bruce D. Grundy
Note: CF
Number: 5779
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5779
File-URL: http://www.nber.org/papers/w5779.pdf
File-Format: application/pdf
Abstract: Firms are more complicated than standard principal-agent theory allows: firms have assets-in-place; firms endure through time, allowing for the possibility of replacing a shirking manager; firms have many managers, constraining the amount of equity that can be awarded to any one manager; and, a firm's owner can transfer some control to a manager, thereby entrenching her. Recognizing these characteristics, we solve for the vesting dates; wage, equity and options components; and control rights of an optimal contract. Managerial entrenchment makes the promise of deferred compensation credible. Deferring compensation by delaying vesting reduces a manager's ability to free-ride on a replacement's effort.
Handle: RePEc:nbr:nberwo:5779
Template-Type: ReDIF-Paper 1.0
Title: Pension System Reform: The Mexican Case
Author-Name: Carlos Sales-Sarrapy
Author-Name: Fernando Solis-Soberon
Author-Name: Alejandro Villagomez-Amez
Note: PE
Number: 5780
Creation-Date: 1996-09
Order-URL: http://www.nber.org/papers/w5780
File-URL: http://www.nber.org/papers/w5780.pdf
File-Format: application/pdf
Publication-Status: published as Pension System Reform: The Mexican Case, Carlos Sales-Sarrapy, Fernando Solis-Soberon, Alejandro Villagomez-Amezcua. in Privatizing Social Security, Feldstein. 1998
Abstract: The paper analyzes the Mexican pension reform of December 1995. Essentially, the reform substituted a defined-benefit pay-as-you-go system with a fully funded defined contribution system based" on individual accounts with a minimum pension guarantee provided by the government. Total contributions to the accounts will amount to 13.5 percent of the salary for the average worker plus 2.5 percent for disability and life insurance that will still be managed by the government's Social Security Institute (IMSS). The new system shares many common elements with other Latin American experiences. However, it shows some advantages and disadvantages with respect to them. Regarding the advantages, the new system completely substitutes the old system; administrative costs are reduced by limiting the number of transfers between pension fund managers to once per year; pension managers are allowed to operate several funds; the law does not establish a minimum guaranteed rate of return for pension funds; and there is a centralized contributions collector agency. Disadvantages include the prohibition of the funds from investing in foreign securities; the IMSS is the sole provider of disability and life insurance; the IMSS will be able to operate a pension fund manager; the housing subaccount offers low returns; there are market share limits; and the new system still faces some portability problems. Finally, we found that the fiscal cost of the transition to the new system is relatively low compared to similar reforms in other Latin American countries.
Handle: RePEc:nbr:nberwo:5780
Template-Type: ReDIF-Paper 1.0
Title: Child Support and Fathers' Remarriage and Fertility
Classification-JEL: J1
Author-Name: David E. Bloom
Author-Person: pbl79
Author-Name: Cecilia Conrad
Author-Name: Cynthia Miller
Note: AG EH LS
Number: 5781
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5781
File-URL: http://www.nber.org/papers/w5781.pdf
File-Format: application/pdf
Publication-Status: published as Garfinkel, I., S. McLanahan, D. Meyer, and J. Seltor (eds.) The Effects of Child Support Enforcement on Non-Resident Fathers. New York: Russell Sage, 1998.
Abstract: This paper tests the hypothesis that child support obligations impede remarriage among nonresident fathers. Hazard models fit to data from the National Longitudinal Survey of Youth and from the Survey of Income and Program Participation reveal that child support obligations deter remarriage among low-income nonresident fathers. The benefits to children of stricter child support enforcement are thus diminished by the negative effects of child support on remarriage, as a substantial share of nonresident fathers remarry and help support women with children. Indeed, simple calculations based on our findings suggest that the financial benefits to children in single-parent families of improved enforcement may be substantially or completely offset by the negative effects of enforcement that operate indirectly through diminished remarriage. The results provide no evidence that child support influences the nature of matches in the remarriage market or the likelihood of subsequent fertility.
Handle: RePEc:nbr:nberwo:5781
Template-Type: ReDIF-Paper 1.0
Title: A Critical Assessment of the Role of Imperfect Competition in Macroeconomics
Classification-JEL: D43; L16
Author-Name: Dennis W. Carlton
Author-Person: pca14
Note: EFG IO
Number: 5782
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5782
File-URL: http://www.nber.org/papers/w5782.pdf
File-Format: application/pdf
Publication-Status: published as in Market Behaviour and Macroeconomic Modelling, Edited by Steven Brakman, Hans Van Ees and Simon Kuipers St. Martin's Press, 1998
Abstract: New Keynesian models and some models of growth rely on market power for their results. This sole focus on market power as the source for certain macroeconomic phenomena is misguided both theoretically and empirically. New Keynesian multipliers are closely related to standard measures of deadweight loss used in the public finance literature. The theoretical analysis shows that a standard competitive model with taxes exactly reproduces the multipliers in the new Keynesian models, and the empirical evidence strongly suggests that taxes, not market power, will be the far more important influence on explaining short-run fluctuations in GNP. Theory and the empirical evidence suggest that the existence of intellectual property rights is likely to be a more important determinant of innovation than market power. Finally, the paper shows how models that incorporate the cost of market making, durability and dynamic policies, and timing based on the option value of resolving uncertainty can yield more valuable insights into macroeconomic phenomena than can models with market power.
Handle: RePEc:nbr:nberwo:5782
Template-Type: ReDIF-Paper 1.0
Title: DM-Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies
Classification-JEL: C22; F31
Author-Name: Torben G. Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Note: AP
Number: 5783
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5783
File-URL: http://www.nber.org/papers/w5783.pdf
File-Format: application/pdf
Publication-Status: published as Torben G. Andersen and Tim Bollerslev. "Deutsche Mark–Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies" Volume 53: Issue 1, pp 219 - 265 (February 1998)
Abstract: This paper characterizes the volatility in the DM-dollar foreign exchange market using an annual sample of five-minute returns. Our modeling approach explicitly captures the pronounced intraday activity patterns, the strong macroeconomic announcement effects, and the volatility persistence, or ARCH effects, familiar from lower frequency returns. The different features are separately quantified and shown, in conjunction, to account for a substantial fraction of the realized return variability, both at the intradaily and daily levels. Moreover, we demonstrate how the high frequency returns, when properly modeled, constitute an extremely valuable and vastly underutilized resource for better understanding the volatility dynamics at the daily or lower frequencies.
Handle: RePEc:nbr:nberwo:5783
Template-Type: ReDIF-Paper 1.0
Title: Do Nontraded Goods Explain the Home Bias Puzzle?
Author-Name: Paolo Pesenti
Author-Person: ppe152
Author-Name: Eric van Wincoop
Author-Person: pva387
Note: IFM
Number: 5784
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5784
File-URL: http://www.nber.org/papers/w5784.pdf
File-Format: application/pdf
Publication-Status: published as as "Can Nontradables Generate Substantial Home Bias?" Journal of Money, Credit and Banking, Volume: 34 Issue: 1 (February 2002) Pages: 25-50
Abstract: Interpretations of the home bias puzzle in international finance have fre- quently focused on the role of fluctuations in domestic nontraded output, through their effects on the marginal utility of tradables consumption. This paper assesses the empirical evidence of this aproach, by deriving an explicit solution for the optimal international portfolio and applying the model to a set of fourteen OECD countries. Computing asset returns according to a `fundamentals' approach, it is possible to account for an average gap of no more than 10-15 percantage points between estimated domestic ownership shares and domestic shares under full diversification. When stock-market data are directly used, the predicted coefficient of home bias shrinks to 3%.
Handle: RePEc:nbr:nberwo:5784
Template-Type: ReDIF-Paper 1.0
Title: Linear Probability Models of the Demand for Attributes with an Empirical Application to Estimating the Preferences of Legislators
Classification-JEL: C25; D72
Author-Name: James J. Heckman
Author-Name: James M. Snyder, Jr.
Author-Person: psn39
Note: PE
Number: 5785
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5785
File-URL: http://www.nber.org/papers/w5785.pdf
File-Format: application/pdf
Publication-Status: published as James J. Heckman & James M. Snyder Jr., 1997. "Linear Probability Models of the Demand for Attributes with an Empirical Application to Estimating the Preferences of Legislators," The RAND Journal of Economics, vol 28.
Abstract: This paper formulates and estimates a rigorously-justified linear probability model of binary choices over alternatives characterized by unobserved attributes. The model is applied to estimate preferences of congressmen as expressed in their votes on bills. The effective dimension of the attribute space characterizing votes is larger than what has been estimated in recent influential studies of congressional voting by Poole and Rosenthal. Congressmen vote on more than ideology. Issue-specific attributes are an important determinant of congressional" voting patterns. The estimated dimension is too large for the median voter model to describe congressional voting
Handle: RePEc:nbr:nberwo:5785
Template-Type: ReDIF-Paper 1.0
Title: Measuring Short-Run Inflation for Central Bankers
Classification-JEL: E31; E52
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Note: ME
Number: 5786
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5786
File-URL: http://www.nber.org/papers/w5786.pdf
File-Format: application/pdf
Publication-Status: published as Cecchetti, Stephen G. "Measuring Short-Run Inflation For Central Bankers," FRB Saint Louis - Review, 1997, v79(3,May/Jun), 143-155.
Abstract: As central bankers intensify their focus on inflation as the primary goal of monetary policy, it becomes increasingly important to have accurate and reliable measures of changes in the aggregate price level. Measuring inflation is surprisingly difficult, involving two types of problems. Commonly used indices, such as the Consumer Price Index (CPI), contain both transitory noise and bias. Noise causes short-run changes in measured inflation to inaccurately reflect movements in long-run trends, while bias leads the long-run average change in the CPI to be too high. In this paper I propose methods of reducing both the noise and the bias in the CPI. Noise reduction is achieved by average monthly inflation in measures called trimmed means' over longer horizons. Trimmed means are statistics similar to the median that are calculated by ignoring the CPI components with extreme high and low changes each month, and averaging the rest. I find that using three month averages halves the noise, while removing the highest and lowest ten percent of the cross-sectional distribution of inflation reduces the monthly variation in inflation by one-fifth.
Handle: RePEc:nbr:nberwo:5786
Template-Type: ReDIF-Paper 1.0
Title: Testing for the Fundamental Determinants of the Long-Run Real Exchange Rate: The Case of Taiwan
Classification-JEL: F3
Author-Name: Hsiu-Ling Wu
Number: 5787
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5787
File-URL: http://www.nber.org/papers/w5787.pdf
File-Format: application/pdf
Publication-Status: published as Changes in Exchange Rates in Rapidly Developing Countries. Ito,Takatoshiand Anne O. Krueger, eds., Chicago: The University of Chicago Press, 1999,pp. 377-396.
Publication-Status: published as Testing for the Fundamental Determinants of the Long-Run Real Exchange Rate: The Case of Taiwan, Hsiu-Ling Wu. in Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, Ito and Krueger. 1999
Abstract: Three things have been suggested in this paper regarding the real exchange rate movements of the Taiwanese dollar with respect to the US dollar. First, the real exchange rates between the Taiwanese and the US dollar did not move as PPP predicts by cointegration test and impulse response function analysis. Also, through the analyses of impulse response functions, innovation in nominal exchange rate, domestic and foreign prices results in permanent changes in the real exchange rate. Finally, in the long-run, differential productivity growth between the traded and non-traded goods and the changes in relative unit labor cost can lead to the changes in the real exchange rates.
Handle: RePEc:nbr:nberwo:5787
Template-Type: ReDIF-Paper 1.0
Title: Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis
Classification-JEL: D91; E21
Author-Name: Christopher D. Carroll
Author-Person: pca45
Note: EFG ME
Number: 5788
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5788
File-URL: http://www.nber.org/papers/w5788.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 107, no. 1 (February 1997): 1-56.
Abstract: This paper argues that the typical household's saving is better described by a "bufferstock" version than by the traditional version of the Life Cycle/Permanent Income Hypothesis (LC/PIH) model. Buffer-stock behavior emerges if consumers with important income uncertainty are sufficiently impatient. In the traditional model, consumption growth is determined solely by tastes; in contrast, buffer-stock consumers set average consumption growth equal to average labor income growth, regardless of tastes. The model can explain three empirical puzzles: the [1991]; the the 1930's; and the temporal stability of the household age/wealth profile despite the unpredictability of idiosyncratic wealth changes.
Handle: RePEc:nbr:nberwo:5788
Template-Type: ReDIF-Paper 1.0
Title: Speculative Attacks: Fundamentals and Self-Fulfilling Prophecies
Classification-JEL: E42; F31
Author-Name: Robert P. Flood
Author-Person: pfl25
Author-Name: Nancy P. Marion
Author-Person: pma1464
Note: IFM
Number: 5789
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5789
File-URL: http://www.nber.org/papers/w5789.pdf
File-Format: application/pdf
Abstract: We develop a modified understand better the 1994 Mexican peso crisis as well as aspects of the European currency crises in 1992-93. We introduce the assumption that the speculative attack is sterilized by the domestic monetary authority, we incorporate a stochastic risk premium, and we allow for some price stickiness. The modified model shows that macroeconomic policies inconsistent in the longer run with a fixed exchange rate can push the economy inevitably towards a currency crisis, but it also demonstrates how a government currently following consistent macroeconomic policies can suddenly face a speculative attack triggered by a large shift in speculative opinion. However, the ability of a sudden shift in speculative opinion to trigger an attack is bounded by the position of fundamentals. Thus an attack does not require a later change in policies to make it profitable.
Handle: RePEc:nbr:nberwo:5789
Template-Type: ReDIF-Paper 1.0
Title: Index Number and Factor Demand Approaches to the Estimation of Productivity
Classification-JEL: O3; L6
Author-Name: David H. Good
Author-Name: M. Ishaq Nadiri
Author-Name: Robin C. Sickles
Author-Person: psi296
Note: PR
Number: 5790
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5790
File-URL: http://www.nber.org/papers/w5790.pdf
File-Format: application/pdf
Publication-Status: published as Pesaran, H. and P. Schmidt (eds.) Handbook of Applied Econometrics Vol. II-Microeconometrics. Malden, MA: Blackwell Publishers, 1997.
Abstract: In this paper we review a number of analytical methods and issues related to identifying and estimating the source of productivity growth. The two major methods used in measuring productivity growth -- index number and econometric estimation approach -- are briefly discussed. Substantive issues such as the contribution of R&D capital and R&D spillovers, infrastructure capital, allocative distortions, nature of the market structure and technological advancement on productivity growth at various levels of aggregation are examined. The attributes of the static and dynamic factor demand models used to estimate the contribution of different inputs to productivity growth are described and the evaluation of the production process changes in response to exogenous factors and their impact on productivity growth are discussed. Econometric issues and data considerations for proper estimation of the underlying structural models are noted briefly as well.
Handle: RePEc:nbr:nberwo:5790
Template-Type: ReDIF-Paper 1.0
Title: Current Account Sustainability: Selected East Asian and Latin American Experiences
Classification-JEL: F32; F34
Author-Name: Gian Maria Milesi-Ferretti
Author-Person: pmi28
Author-Name: Assaf Razin
Author-Person: pra388
Note: IFM
Number: 5791
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5791
File-URL: http://www.nber.org/papers/w5791.pdf
File-Format: application/pdf
Publication-Status: published as Princeton Studies in International Finance, no. 81, (October 1996).
Abstract: A number of developing countries have run large and persistent current account deficits in both the late seventies/early eighties and in the early nineties, raising the issue of whether these persistent imbalances are sustainable. This paper puts forward a notion of current account sustainability and compares the experience of three Latin American countries -- Chile, Colombia and Mexico -- and three East Asian countries--Korea, Malaysia and Thailand. It identifies a number of potential sustainability indicators and discusses their usefulness in predicting external crises.
Handle: RePEc:nbr:nberwo:5791
Template-Type: ReDIF-Paper 1.0
Title: Understanding Equilibrium Models with a Small and a Large Number of Agents
Classification-JEL: E21; E43
Author-Name: Wouter J. Den Haan
Author-Person: pde12
Note: EFG
Number: 5792
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5792
File-URL: http://www.nber.org/papers/w5792.pdf
File-Format: application/pdf
Abstract: In this paper, I compare a two-agent asset pricing model with the corresponding model with a continuum of agents. In a two-agent economy, interest rates respond to because each agent represents half of the population. These interest rate effects facilitate consumption smoothing. An agent in a two-agent economy, however, can never lend more than the other agent is allowed to borrow, which prevents him from building a buffer stock of assets. For most parameter values, the first effect is more important. For some parameter values, the interest rate effects in the two-agent economy are so strong that a relaxation of the borrowing constraint reduces an agent's utility. In contrast to these differences, I find that for most parameter values there are no large differences in average interest rates across the two types of economies. In addition, I analyze the business cycle behavior of interest rates in an incomplete markets economy with a continuum of agents. The dynamic response of interest rates to aggregate shocks is a lot more complicated than the response in a complete markets economy and the magnitude of the response is bigger.
Handle: RePEc:nbr:nberwo:5792
Template-Type: ReDIF-Paper 1.0
Title: Inflation and the Distribution of Price Changes
Classification-JEL: E31; C12
Author-Name: Michael F. Bryan
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Note: ME
Number: 5793
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5793
File-URL: http://www.nber.org/papers/w5793.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, Vol. 81 (May 1999): 188-196.
Abstract: its higher order moments, and in particular, its third moment the skewness of the price change distribution. Evidence on correlations between inflation and its moments goesback over thirty years, and was first used to reject the independence of relative price changes and inflation that is assumed in neo- classical models. More recently, New Keynesian macroeconomists have shown that the strong positive correlation between inflation and the skewness of the price change distribution is consistent with menu-cost models of price setting behavior. This is a fairly controversial result, prompting other researchers to demonstrate that the same correlation can be found in a multi- sector, flexible-price (real business cycle) model. We examine the small-sample properties of the main empirical finding on which this work is based: the positive correlation between the sample mean and sample skewness of price change distributions. Our results show that this particular statistic suffers from a large positive small-sample bias, and demonstrate that the entirety of the observed correlation can be explained by this bias. To the extent that we find any relationship at all, it is that the correlation is negative. In other words, we establish that one of the most accepted stylized facts in the literature on aggregate price behavior, that inflation and the skewness of the price change distribution are positively linked, need not be a fact at all.
Handle: RePEc:nbr:nberwo:5793
Template-Type: ReDIF-Paper 1.0
Title: A Tale of Two Crises: Chile and Mexico
Classification-JEL: E52; F31
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: ITI IFM
Number: 5794
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5794
File-URL: http://www.nber.org/papers/w5794.pdf
File-Format: application/pdf
Publication-Status: Published as "Exchange-Rate Anchors, Credibility, and Inertia: A Tale of Two Crises, Chile and Mexico", American Economic Review, Vol. 82, no. 2(May 1996): 176-180.
Abstract: The Mexican peso crisis of December 1994 sent shock waves through the world's financial and policy communities. What is to some extent surprising is not that the Mexican economy faced a major currency crisis, but that so many analysts and observers were shocked by this turn of events. Mexico had a remarkable historical precedent: merely a dozen years earlier Chile suffered a prophetically similar crisis. Like Mexico during the 1980s, Chile during the 1970s undertook major structural reforms characterized by a drastic opening of the economy, a sweeping privatization program and a major deregu- lation effort aimed at creating a modern financial sector. In Chile, as in Mexico more than a decade later, the use of a predetermined exchange rate to eliminate inflation, combined with very large capital inflows that were intermediated by a weak banking system, generated a situation of exchange- rate overvaluation, a vulnerable financial sector and eventually the collapse of the currency. This paper provides a comparative analysis of some macroeconomic aspects of the Chilean and Mexican crises and discusses the extent to which exchange-rate-based stabilization programs are successful in reducing or even eliminating inflationary inertia? The paper provides a brief overview of the Chilean and Mexican reform and stabilization programs started in 1975 and 1985. I develop a theoretical model on the effects of exchange- rate-based stabilization programs on inflationary inertia. The model emphasizes the roles of government preferences and credibility. I use detailed data on Chile and Mexico to assess whether these programs affected the time series properties of inflation; more specifically, I investigate whether they reduced inflationary inertia.
Handle: RePEc:nbr:nberwo:5794
Template-Type: ReDIF-Paper 1.0
Title: Star Scientists, Institutions, and the Entry of Japanese Biotechnology Enterprises
Classification-JEL: 031
Author-Name: Michael R. Darby
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Note: PR
Number: 5795
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5795
File-URL: http://www.nber.org/papers/w5795.pdf
File-Format: application/pdf
Publication-Status: published as Zucker, Lynne G & Darby, Michael R, 2001. " Capturing Technological Opportunity via Japan's Star Scientists: Evidence from Japanese Firms' Biotech Patents and Products," The Journal of Technology Transfer, Springer, vol. 26(1-2), pages 37-58, January.
Abstract: Advance of science and its commercial applications are in a close, symbiotic relationship in the U.S. biotechnology industry. Comparing Japan and the U.S., the structure of the science appears broadly similar, but the organization of the biotechnology industry is quite dissimilar. In the U.S., some 77 percent of new biotechnology enterprises (NBEs) were dedicated new biotechnology firms (NBFs) started for this purpose while 88 percent of Japanese biotech firms in our data base were subunits of existing firms (NBSs). We report pooled poisson regression estimates of the relation of NBE births in Japan to top-producing is at work in Japan and America, stars in Japan induce entry of significantly fewer NBEs than in the U.S. and preexisting economic activity plays a greater role. We find no such significant difference for entry of keiretsu-member and nonmember firms within Japan. We relate the significant Japan-U.S. differences to Japan's relatively compact geography and institutional differences between the higher-education and research funding systems, the venture-capital and IPO markets, cultural characteristics and incentive systems which impact scientists' entrepreneurialism, and tort-liability exposures. The relative importance of these factors and whether differences in organization of biotechnology result in substantial differences in productivity and international competitiveness are issues for future research.
Handle: RePEc:nbr:nberwo:5795
Template-Type: ReDIF-Paper 1.0
Title: Paying for Health Insurance: The Tradeoff between Competition and Adverse Selection
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Sarah Reber
Note: EH PE
Number: 5796
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5796
File-URL: http://www.nber.org/papers/w5796.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics, Vol. 108, no. 2 (May 1998): 433-466.
Abstract: This paper uses data on health insurance choices by employees of Harvard University to examine the effect of alternative pricing rules on market equilibrium. In the mid-1990s, Harvard moved from a system of subsidizing more expensive insurance to a system of contributing an equal amount to each plan. We estimate a substantial demand response to the policy change, with a short-run elasticity of about -2. The reform also induced substantial" adverse selection. Because of this selection, the long-run demand response is three times the short-run response. Price variation induced by adverse selection is inefficient; we estimate the magnitude of the welfare loss from adverse selection at 2 percent of baseline health spending. Finally, as insurance choice was made more competitive, premiums to Harvard fell relative to premiums in the Boston area by nearly 10 percent. This savings was large enough to compensate for the inefficiency induced by adverse selection, so that reform overall was welfare enhancing.
Handle: RePEc:nbr:nberwo:5796
Template-Type: ReDIF-Paper 1.0
Title: Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets
Classification-JEL: E42; E58
Author-Name: Lars E. O. Svensson
Author-Person: psv2
Note: IFM ME
Number: 5797
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5797
File-URL: http://www.nber.org/papers/w5797.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review, Vol. 41 (1997): 1111-1146.
Abstract: Inflation targeting is shown to imply inflation forecast targeting: the central bank's inflation forecast becomes an explicit intermediate target. Inflation forecast targeting simplifies both implementation and monitoring of monetary policy. The weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target. Money growth or exchange rate targeting is generally inferior to inflation targeting and leads to higher inflation variability. Commitment to commitment to
Handle: RePEc:nbr:nberwo:5797
Template-Type: ReDIF-Paper 1.0
Title: Convergence and International Factor Flows in Theory and History
Classification-JEL: F43; N10
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE
Number: 5798
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5798
File-URL: http://www.nber.org/papers/w5798.pdf
File-Format: application/pdf
Abstract: Standard neoclassical growth models rarely admits international factor mobility: convergence may result from factor accumulation in a closed economy, or from technology transfer. Conventional models are thus poorly equipped to explain the contribution of international factor flows to convergence in history. A general model with many goods, and multiple mobile and fixed factors is developed. In response to recent historical research, a four-factor case is studied, with labor, capital, and resources as potentially mobile factors, and land fixed. The model is then explored in the context of recent historical analyses of the sources of long-run convergence and divergence.
Handle: RePEc:nbr:nberwo:5798
Template-Type: ReDIF-Paper 1.0
Title: Australia's Retirement Income System: Implications for Saving and Capital Markets
Classification-JEL: E21; G23
Author-Name: Malcolm Edey
Author-Name: John Simon
Author-Person: psi44
Note: PE
Number: 5799
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5799
File-URL: http://www.nber.org/papers/w5799.pdf
File-Format: application/pdf
Publication-Status: published as Malcolm Edey & John Simon, 1998. "Australia's Retirement Income System," NBER Chapters, in: Privatizing Social Security, pages 63-97 National Bureau of Economic Research, Inc.
Abstract: Australia is in the early stages of introducing a system of self-provision for retirement through mandatory contributions to" private superannuation funds. For most employees, the scheme will eventually replace, either fully or partially, the government age pension, currently relied upon by a large majority of retirees. The scheme has been implemented reasonably smoothly by building on existing financial infrastructure for voluntary superannuation. This paper summarizes the historical background of mandatory superannuation in Australia, reviews its potential impact on saving and capital markets, and highlights some remaining policy issues. Perhaps the most important of these is the impact of the system on retirement decisions. A number of features of the system contribute to incentives favouring early retirement and continued reliance on the government pension. Also important is the increasing complexity of the system, a result of the layering of rule changes and grandfathering of existing rights at each stage of the process.
Handle: RePEc:nbr:nberwo:5799
Template-Type: ReDIF-Paper 1.0
Title: Are Knowledge Spillovers International or Intranational in Scope? Microeconometric Evidence from the Japan and the United States
Classification-JEL: F12; O31; O30; L6
Author-Name: Lee Branstetter
Author-Person: pbr854
Note: ITI PR
Number: 5800
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5800
File-URL: http://www.nber.org/papers/w5800.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Volume 53, Issue 1, February 2001, Pages 53–79
Abstract: In a number of theoretical models, it has been shown that technological externalities can generate multiple equilibria in the global pattern of specialization and trade, with different consequences for the relative welfare of the trading countries. In such models, temporary government policies can have lasting effects by pushing the global economy into a particular equilibrium. However, the prediction of multiple equilibria generally hinges on the assumption that the technological externalities are intranational rather than international in scope. In this paper, I point out important shortcomings in previous attempts to estimate the effects of intranational and international knowledge spillovers. Then, I provide new estimates of the relative impact of intranational and international knowledge spillovers on innovation and productivity at the firm level, using previously unexploited panel data from the U.S. and Japan which provide a rich description of the firms' technological activities and allow for potentially much more accurate measurement of spillover effects. My estimates indicate that knowledge spillovers are primarily intranational in scope, providing empirical confirmation of a crucial assumption in much of the theoretical literature. This finding has important implications for the theoretical literature and the public debate on policy.
Handle: RePEc:nbr:nberwo:5800
Template-Type: ReDIF-Paper 1.0
Title: International R&D Spillovers, Trade and Productivity in Major OECD Countries
Classification-JEL: F41; F43
Author-Name: M. Ishaq Nadiri
Author-Name: Seongjun Kim
Note: PR
Number: 5801
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5801
File-URL: http://www.nber.org/papers/w5801.pdf
File-Format: application/pdf
Publication-Status: Published as "Sources of Growth of Output and Convergence of Productivityin Major OECD Countries", IJPRODE, Vol. 52, nos. 1-2 (October 1997): 133-1 46.
Abstract: In this paper we: (1) estimate the effects of international R&D spillovers on total factor productivity growth of the seven largest industrialized countries (G-7); (2) analyze the effect of spillovers on the structure of production, i.e., the effects on factor demand such as labor and investment and output supply; (3) examine the effect of technological transfers on the pattern of trade, i.e., on imports and exports and; (4) calculate the private rates of return on physical capital and R&D investment as well as the social rates of return of foreign R&D spillovers. To achieve the objectives of this study, we have developed a framework that integrates several strands of the available approaches in the literature: the GNP function approach suggested by Burgess (1974) and Kohli (1978), the spillover models proposed by Bernstein and Nadiri (1988), Bernstein and Mohnen (1994), Coe and Helpman (1995) and Park (1995), and the familiar interrelated factor demand and cost models.
Handle: RePEc:nbr:nberwo:5801
Template-Type: ReDIF-Paper 1.0
Title: What Happens Within Firms? A Survey of Empirical Evidence on Compensation Policies
Classification-JEL: J3
Author-Name: Canice Prendergast
Note: LS
Number: 5802
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5802
File-URL: http://www.nber.org/papers/w5802.pdf
File-Format: application/pdf
Publication-Status: published as What Happens within Firms? A Survey of Empirical Evidence on Compensation Policies, Canice Prendergast. in Labor Statistics Measurement Issues, Haltiwanger, Manser, and Topel. 1998
Abstract: with the compensation policies of firms. This literature is considered from the perspective of three major theories: human capital, learning, and incentives. Considerable empirical work has addressed each of these theories with some success. However, our understanding of the effect of compensation on behavior and of the motivations for firms in choosing certain policies has been constrained by two important problems. First, the absence of data on contracts and performance has limited the ability of researchers to ask even the most basic question, Do Incentives Matter? Second, the available theoretical work has not been sufficiently orientated towards distinguishing between plausible alternatives, so that many observed facts are consistent with any of the major theories.
Handle: RePEc:nbr:nberwo:5802
Template-Type: ReDIF-Paper 1.0
Title: Effort, Wages and the International Division of Labor
Classification-JEL: F11; J22
Author-Name: Edward E. Leamer
Author-Person: ple440
Note: ITI
Number: 5803
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5803
File-URL: http://www.nber.org/papers/w5803.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol.107, no.6, part 1 (December 1999): 1127-1163.
Abstract: This paper embeds variable effort into a traditional multi-sector model. Effort enters a production function like total-factor-productivity and on the assumption that effort doesn't affect capital depreciation, the capital-cost savings from high effort operations are passed on to workers. The labor market thus offers a set of contracts with higher wages compensating for higher effort. Among the implications of the model are: The capital savings from effort are greatest in the capital-intensive sectors where the high-effort high-wage contracts occur; Communities inhabited by industrious workers have high returns to capital and comparative advantage in capital-intensive goods; Capital accumulation in a closed economy causes reductions in effort; Capital accumulation in an open economy creates new high-wage high-effort jobs and higher effort levels; Price declines of labor intensive goods twist the wage-eff offer curve reward for hard work; A deterioration in the terms of trade causes an economy- wide reduction in effort; A minimum wage does not cause unemployment. It forces effort in local services up high enough to support the higher wage. This acts like an increase in labor supply which increases the return on capital. A minimum wage by forcing greater effort increases GDP and reduces earnings inequality, but it makes workers worse off since they prefer the the contracts offered by the free market.
Handle: RePEc:nbr:nberwo:5803
Template-Type: ReDIF-Paper 1.0
Title: Sticky Price and Limited Participation Models of Money: A Comparison
Classification-JEL: E3; E5
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Charles L. Evans
Author-Person: pev23
Note: EFG ME
Number: 5804
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5804
File-URL: http://www.nber.org/papers/w5804.pdf
File-Format: application/pdf
Publication-Status: published as Christiano, Lawrence J., Martin Eichenbaum and Charles L. Evans. "Sticky Price And Limited Participation Models Of Money: A Comparison," European Economic Review, 1997, v41(6,Jun), 1201-1249.
Abstract: This paper provides new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts. In response to a contractionary monetary policy shock, the aggregate price level responds very little, aggregate output falls, interest rates initially rise, real wages decline, though by a modest amount, and profits fall. The paper argues that neither sticky price nor limited participation models can convincingly account for these facts. The key failing of the sticky price model is that it implies profits rise after a contractionary monetary policy shock. This finding is robust to a variety of perturbations of the benchmark sticky price model that we consider. In contrast, the limited participation model can account for all of the facts mentioned above. But it can do so only if one is willing to assume a high labor supply elasticity (2) and a high average markup (40%). The shortcomings of both models reflect the absence of other frictions, such as wage contracts, which dampen movements in the marginal cost of production after a monetary policy shock.
Handle: RePEc:nbr:nberwo:5804
Template-Type: ReDIF-Paper 1.0
Title: Does Head Start Help Hispanic Children?
Classification-JEL: I38; I28
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Duncan Thomas
Author-Person: pth20
Note: LS CH
Number: 5805
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5805
File-URL: http://www.nber.org/papers/w5805.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, Vol. 74, no.2 (November 1999): 235-262. Published as "Does Head Start Make a Difference?", American Economic Review , Vol. 85, no. 3 (1995): 341-364.
Abstract: Poor educational attainment is a persistent problem among Latino children, relative to non-Latinos. This paper examines the effects of participation in the Head Start program on Latinos. We find that large and significant benefits accrue to Head Start children when we compare them to siblings who did not participate in the program. On average, Head Start closes at least 1/4 of the gap in test scores between Latino children and non-Hispanic white children, and 2/3 of the gap in the probability of grade repetition. Latinos are not a homogenous group and we find that the benefits of Head Start are not evenly distributed across sub-groups. Relative to siblings who attend no preschool from Head Start are greatest among children of Mexican-origin and children of native-born mothers, especially those whose mothers have more human capital. In contrast, Latino children whose mothers are foreign-born and Puerto Rican children appear to reap little benefit from attending Head Start, relative to their siblings.
Handle: RePEc:nbr:nberwo:5805
Template-Type: ReDIF-Paper 1.0
Title: Sources of Convergence in the Late Nineteenth Century
Classification-JEL: F02; F43
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE
Number: 5806
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5806
File-URL: http://www.nber.org/papers/w5806.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review, Vol. 43 (September 1999): 1621-1645.
Abstract: Although the empirical growth literature has yielded many findings on postwar convergence patterns, it has had little to say about the determinants of convergence in earlier epochs. This paper investigates convergence for group of seven countries during the period 1870-1914, the last great phase of global convergence before the present postwar era. A standard empirical growth model, the Augmented Solow Model, which includes physical and human capital accumulation, proves unsatisfactory in this setting. Its shortcomings appear to lie in a failure to control for changes in land endowments, a feature of the endogenous frontier dynamics of the period. An alternative neoclassical open-economy factor accumulation model is proposed, which admits capital and labor migration, and may be extended to include a moving frontier. The model explains the observed convergence pattern in the sample, and suggests that factor accumulation patterns were the prime sources of labor productivity convergence from 1870 to 1914. The analysis gives little role to human capital, trade, or technological catch-up as important convergence mechanisms in this group of countries during the era studied. Since factor accumulation was influenced heavily by factor migration in the late nineteenth century, the findings also point to the limited use of conventional closed-economy growth models in this historical setting.
Handle: RePEc:nbr:nberwo:5806
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Teen Childbearing and Single Parenthood on Childhood Disabilities and Progress in School
Classification-JEL: J12; J13
Author-Name: Joshua D. Angrist
Author-Person: pan29
Author-Name: Victor Lavy
Author-Person: pla111
Note: LS CH
Number: 5807
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5807
File-URL: http://www.nber.org/papers/w5807.pdf
File-Format: application/pdf
Abstract: be responsible for poor health and low levels of schooling among the children of young mothers. This paper uses special disability and grade repetition questions from the school enrollment supplement to the 1992 Current Population Survey to estimate the effect of maternal age and single parenthood on children's disability status and school progress. Our results suggest that there is little association between maternal age at birth and children's disabilities. But the children of teen mothers are much more likely to repeat one or more grades than other children, and within-household estimates of this relationship are even larger than OLS estimates. The grade repetition findings from the CPS are replicated using a smaller sample from the National Longitudinal Survey of Youth. Another finding of interest is that having a father in the household is associated with lower disability prevalence and fewer grade repetitions. But many of the effects of single parenthood on disability, as well as the effect on grade repetition, appear to be explained by higher incomes in two-parent families.
Handle: RePEc:nbr:nberwo:5807
Template-Type: ReDIF-Paper 1.0
Title: Firm Heterogeneity, Jobs, and International Trade: Evidence from Chile
Classification-JEL: F14
Author-Name: James Levinsohn
Author-Person: ple386
Note: ITI
Number: 5808
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5808
File-URL: http://www.nber.org/papers/w5808.pdf
File-Format: application/pdf
Abstract: This paper is about jobs and international trade. It is about what researchers can learn of the relationship between the two using firm-level data. It is about the particular experience of Chile following a broad trade liberalization and spanning significant macroeconomic contraction and expansion. Finally, this paper is about discerning patterns in the data that might later influence how international economists model the interaction between international trade and employment.
Handle: RePEc:nbr:nberwo:5808
Template-Type: ReDIF-Paper 1.0
Title: Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?
Classification-JEL: E32; E52
Author-Name: V. V. Chari
Author-Person: pch40
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Author-Name: Ellen R. McGrattan
Author-Person: pmc46
Note: EFG ME
Number: 5809
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5809
File-URL: http://www.nber.org/papers/w5809.pdf
File-Format: application/pdf
Publication-Status: published as Chari, V. V., Patrick J. Kehoe and Ellen R. McGrattan. "Sticky Price Models With The Business Cycle: Can The Contract Multiplier Solve The Persistence Problem?," Econometrica, 2000, v68(5,Sep), 1151-1179.
Abstract: The purpose of this paper is to construct a quantitative equilibrium model with price setting and use it to ask whether staggered price setting can generate persistent output fluctuations following monetary shocks. We construct a business cycle version of a standard sticky price model in which imperfectly competitive firms set nominal prices in a staggered fashion. We assume that prices are exogenously sticky for a short period of time. Persistent output fluctuations require endogenous price stickiness in the sense that firms choose not to change prices very much when they can do so. We find the amount of endogenous stickiness to be small. As a result, we find that such a model cannot generate persistent movements in output following monetary shocks.
Handle: RePEc:nbr:nberwo:5809
Template-Type: ReDIF-Paper 1.0
Title: Balance Sheets, Multinational Financial Policy, and the Cost of Capital at Home and Abroad
Author-Name: Rosanne Altshuler
Author-Person: pal34
Author-Name: Harry Grubert
Note: PE
Number: 5810
Creation-Date: 1996-10
Order-URL: http://www.nber.org/papers/w5810
File-URL: http://www.nber.org/papers/w5810.pdf
File-Format: application/pdf
Abstract: We use data from the balance sheets of controlled foreign corporations,(CFCs) to study the real and financial behavior of U.S. multinational corporations. Previous literature on repatriations has mostly been restricted to the choice between dividend distributions to the parent and further real investment in the CFC. The balance sheet data allows us to study a broader range of financial flows between CFCs and parents. Our theoretical work considers models that depart from the previous work in several important ways. We drop the standard arbitrage condition in which the after-tax return to equity and debt is equalized on the margin and instead impose a worldwide financial constraint consistent with a rising cost of debt finance. In our model, parents can borrow against financial assets held abroad and may allocate debt across locations to achieve the lowest cost of capital at home and abroad. We also consider the implications of models in which CFCs can invest in CFCs in other foreign countries. We explain how low-tax CFCs can repatriate tax-free by investing in high-tax CFCs that are repatriating income to parent corporations. Our theoretical results confirm that financial assets, including the equity or debt of other CFCs, are attractive alternatives to repatriation and investment in real assets. We show that if the parent can borrow against its CFC's financial assets it can achieve the equivalent of a dividend repatriation. Our regression results confirm the importance of tax considerations in explaining CFC holdings of financial assets. Low-tax CFCs invest in financial assets in order to avoid U.S. taxes on repatriations. CFCs in high-tax locations are much more highly leveraged than low-tax CFCs.
Handle: RePEc:nbr:nberwo:5810
Template-Type: ReDIF-Paper 1.0
Title: The Chilean Pension Reform: A Pioneering Program
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: PE
Number: 5811
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5811
File-URL: http://www.nber.org/papers/w5811.pdf
File-Format: application/pdf
Publication-Status: published as The Chilean Pension Reform: A Pioneering Program, Sebastian Edwards. in Privatizing Social Security, Feldstein. 1998
Abstract: In the mid-1970s Chile initiated a deep market-oriented reform program aimed at opening up the economy, privatizing state owned enterprises and stabilizing the macroeconomy. In the 1980s Chile began to grow at increasingly rapid rates -- between 1986 and 1995 the average rate of growth bordered 7% --, becoming a star performer. Perhaps one of the most admired aspects of the Chilean program has been the reform of the pension system, which replaced an inefficient pay-as-you-go system with a privately administered defined contribution one. " This reform has been credited with helping develop Chile's capital market, with reducing government contingent liabilities and with helping boost Chile's traditionally anemic savings rate. The purpose of this paper is to analyze the most salient aspects of the Chilean program and to evaluate its achievements to date. The paper provides a brief background of the Chilean reforms effort and deals with Chile's old pay-as-you-go system, including its degree of (in)efficiency, its distributive characteristics and its fiscal consequences. The functioning of the new privately managed system is discussed in detail, and the system's results up to date are evaluated. I also discuss transitional issues, including the fiscal consequences of the reforms. Finally, the analysis also deals with the reforms effects on labor markets and savings.
Handle: RePEc:nbr:nberwo:5811
Template-Type: ReDIF-Paper 1.0
Title: The Productivity of Nations
Classification-JEL: E23; O47
Author-Name: Robert E. Hall
Author-Name: Charles I. Jones
Author-Person: pjo24
Note: EFG PR
Number: 5812
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5812
File-URL: http://www.nber.org/papers/w5812.pdf
File-Format: application/pdf
Abstract: Output per worker varies enormously across countries. Why? Our analysis shows that differences in governmental, cultural, and natural infrastructure are important sources of this variation. According to our results, a high-productivity country (i) has institutions that favor production over diversion, (ii) is open to international trade, (iii) has at least some private ownership, (iv) speaks an international language, and (v) is located in a temperate latitude far from the equator. A favorable infrastructure helps a country both by stimulating the accumulation of human and physical capital and by raising its total factor productivity.
Handle: RePEc:nbr:nberwo:5812
Template-Type: ReDIF-Paper 1.0
Title: Alternate Insurance Arrangements and the Treatment of Depression: What Are the Facts?
Classification-JEL: I1
Author-Name: Ernst R. Berndt
Author-Name: Richard G. Frank
Author-Name: Thomas G. McGuire
Note: EH PR
Number: 5813
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5813
File-URL: http://www.nber.org/papers/w5813.pdf
File-Format: application/pdf
Publication-Status: published as in American Journal of Managed Care, vol.3, no.2, pp.243-252, 1997.
Abstract: Using insurance claims data from nine large self-insured employers offering 26 alternative health benefit plans, we examine empirically how the composition and utilization for the treatment of depression vary under alternative organizational forms of insurance (indemnity, preferred provider organization networks or PPOs, and mental health carve-outs), and variations in patient cost-sharing (copayments for psychotherapy and for prescription drugs). Although total outpatient mental health/substance abuse (MHSA) expenditures per treated individual do not vary significantly across insurance forms, the depressed outpatient is more likely to receive anti-depressant drug (ADD) medications in PPOs and carve-outs than under indemnity insurance. Those individuals facing higher copayments for psychotherapy are more likely to receive ADD medications. For those receiving ADD treatment, increases in prescription drug copay tend to increase the share of ADD medication costs accounted for by the newest (and more costly) generation of drugs, the selective serotonin reuptake inhibitors.
Handle: RePEc:nbr:nberwo:5813
Template-Type: ReDIF-Paper 1.0
Title: Financial and Capital Account Liberalization in the Pacific Basin: Korea and Taiwan during the 1980's
Classification-JEL: F32; F34
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: William F. Maloney
Author-Person: pma705
Note: IFM
Number: 5814
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5814
File-URL: http://www.nber.org/papers/w5814.pdf
File-Format: application/pdf
Publication-Status: published as International Economic Journal, Vol. 12, no. 1 (Spring 1999): 53-74.
Abstract: This paper presents an alternative method of testing for financial capital mobility in the absence of forward exchange markets. A model of domestic interest rate determination during liberalization is applied to Korean and Taiwanese data. A variety of diagnostic and recursive tests are used to isolate structural breaks in the data. It is shown that Korean interest rates behave as if determined domestically until late 1988 or early 1989, while Taiwanese rates exhibit this behavior until early 1989. Thereafter, these economies' interest rates appear tightly linked to the EuroYen rate. These results contrast with those obtained by Reisen and Yches (1993) which indicated a single opening and closing for Korea, and no structural break for Taiwan. They also differ from those results of Jwa (1994) indicating two temporary openings for Korea. Greater integration of these domestic markets with world financial markets suggests that it will be more difficult for these countries to stabilize their economies in the face of capital inflows and outflows.
Handle: RePEc:nbr:nberwo:5814
Template-Type: ReDIF-Paper 1.0
Title: The Taxation of Pensions: A Shelter can Become a Trap
Classification-JEL: H2
Author-Name: John B. Shoven
Author-Name: David A. Wise
Author-Person: pwi45
Note: AG PE
Number: 5815
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5815
File-URL: http://www.nber.org/papers/w5815.pdf
File-Format: application/pdf
Publication-Status: published as Frontiers in the Economics of Aging. Edited by David Wise, Chicago: The University of Chicago Press, 1998, pp. 173-212.
Publication-Status: published as The Taxation of Pensions: A Shelter Can Become a Trap, John B. Shoven, David A. Wise. in Frontiers in the Economics of Aging, Wise. 1998
Abstract: Pensions are widely thought to be attractive tax shelters which encourage saving for retirement. They allow people to save before-tax dollars and to compound investment returns without current taxation. However, the taxation of pension assets as they are distributed in retirement or as they pass through an estate may turn the shelter into a trap, at least for large pension accumulations. Pension distributions can face marginal tax rates as high as 61.5 percent; pension assets passing through an estate can face virtually confiscatory marginal tax rates between 92 and 99 percent. The analysis of this paper shows the circumstances under which these extraordinarily high marginal tax rates will be encountered. They are not limited to the rich. In fact, people of modest incomes who participate in a pension plan over a long career may face such rates. The paper presents a comprehensive examination of the taxation of pensions and discusses the optimal responses of households to the incentives created by the tax system.
Handle: RePEc:nbr:nberwo:5815
Template-Type: ReDIF-Paper 1.0
Title: The Econometrics of Ultra-High Frequency Data
Author-Name: Robert F. Engle
Note: AP
Number: 5816
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5816
File-URL: http://www.nber.org/papers/w5816.pdf
File-Format: application/pdf
Publication-Status: published as Econometrica, Vol. 68 (2000): 1-22.
Abstract: Ultra-high frequency data are complete transactions data which inherently arrive at random times. Marked point processes provide a theoretical framework for analysis of such data sets. The ACD model developed by Engle and Russell (1995) is then applied to IBM transactions data to develop semi-parametric hazard estimates and measures of instantaneous conditional variances. The variances are negatively influenced by surprisingly long durations as suggested by some of the market micro-structure literature
Handle: RePEc:nbr:nberwo:5816
Template-Type: ReDIF-Paper 1.0
Title: Private and Public Supply of Liquidity
Classification-JEL: D21; E62
Author-Name: Bengt Holmstrom
Author-Person: pho488
Author-Name: Jean Tirole
Author-Person: pti33
Note: CF
Number: 5817
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5817
File-URL: http://www.nber.org/papers/w5817.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 106, no. 1 (February 1998): 1-40.
Abstract: This paper addresses a basic yet unresolved question: Do claims on private assets provide sufficient liquidity for an efficient functioning of the productive sector? Or does the State have a role in creating liquidity and regulating it either through adjustments in the stock of government securities or by other means? In our model, firms can meet future liquidity needs in three ways: by issuing new claims and diluting old ones, by obtaining a credit credit line from a financial intermediary, and by holding claims on other firms. When there is no aggregate uncertainty, we show that these instruments are sufficient for attaining the socially optimal (second-best) contract between investors and firms. Such a contract imposes both a maximum leverage ratio and a liquidity constraint on firms. Intermediaries coordinate the use of liquidity. Without intermediation, scarce liquidity may be wasted and the social optimum may not be attainable. When there is only aggregate uncertainty the private sector is no longer self-sufficient with regard to liquidity. The government can improve liquidity by issuing bonds that commit future consumer income. Government bonds command a liquidity premium over private claims. The supply of liquidity can be managed by loosening liquidity (boosting the value of its securities) when the aggregate liquidity shock is high and tightening liquidity when the shock is low. The paper thus provides a microeconomic example of government supplied liquidity as well as of the possibility of active government policy.
Handle: RePEc:nbr:nberwo:5817
Template-Type: ReDIF-Paper 1.0
Title: The Myth of the Patient Japanese: Corporate Myopia and Financial Distress in Japan and the US
Author-Name: Brian J. Hall
Author-Name: David E. Weinstein
Author-Person: pwe34
Note: PR
Number: 5818
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5818
File-URL: http://www.nber.org/papers/w5818.pdf
File-Format: application/pdf
Abstract: It is widely believed that the stock-market oriented US financial system forces corporate managers to behave myopically relative to their Japanese counterparts, who operate in a bank-based system. We hypothesize that if US firms are more myopic than Japanese firms, then episodes of financial distress (when myopia should be most pronounced) should cause US firms to decrease their R&D spending (our main proxy for long-term investment) more than Japanese firms. We find no evidence that this is the case. In addition, we show that Japanese firms do not invest more than US firms after the onset of distress. Our results hold up even when US firms are compared to Japanese financial ties to their banks and are thought to be the least myopic (and the most able to weather distress). The results also withstand a variety of robustness checks. Our findings that US and Japanese firms respond similarly to financial distress cast doubt on the view that US managers are more short-sighted than their Japanese counterparts.
Handle: RePEc:nbr:nberwo:5818
Template-Type: ReDIF-Paper 1.0
Title: The Underreaction Hypothesis and the New Issue Puzzle: Evidence from Japan
Author-Name: Jun-Koo Kang
Author-Name: Yong-Cheol Kim
Author-Name: Rene M. Stulz
Note: AP CF
Number: 5819
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5819
File-URL: http://www.nber.org/papers/w5819.pdf
File-Format: application/pdf
Publication-Status: published as Kang, J. K., Y. C. Kim and R. M. Stulz. "The Underreaction Hypothesis And The New Issue Puzzle: Evidence From Japan," Review of Financial Studies, 1999, v12(3,Fall), 519-534.
Abstract: This paper investigates the long-term performance of Japanese firms issuing convertible debt or equity. We find that these firms perform poorly even though the stock-price reaction to convertible debt and equity issue announcements is not significantly negative for Japanese firms and Japanese firms do not issue equity or convertible debt following strong positive abnormal returns. Whereas in the U.S. underperformance appears to be concentrated in the smaller firms and in the firms with a high market-to-book ratio, this is not the case in Japan. The underperformance of Japanese issuing firms cannot be understood in terms of the underreaction hypothesis that some have advanced as an explanation for the poor returns of U.S. issuing firms.
Handle: RePEc:nbr:nberwo:5819
Template-Type: ReDIF-Paper 1.0
Title: The Changing Structure of Cost and Demand for the U.S. Telecommunications Industry
Classification-JEL: L5; L7
Author-Name: M. Ishaq Nadiri
Author-Name: Banani Nandi
Note: PR
Number: 5820
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5820
File-URL: http://www.nber.org/papers/w5820.pdf
File-Format: application/pdf
Publication-Status: published as IEP, Vol. 9, no. 4 (December 1997): 319-347. Published as "Technical Change, Markup, Divestiture and Productivity Growth in the U.S. Telecommunications Industry", Review of Economics and Statistics, Vol. 18, no. 3 (August 1999).
Publication-Status: published as M.Ishaq Nadiri & Banani Nandi, 1997. "The changing structure of cost and demand for the U.S. telecommunications industry," Information Economics and Policy, vol 9(4), pages 319-347.
Abstract: This paper formulates a multiproduct structural model to examine the evolution of the structure of production and demand and the dynamic interaction between the two in the context of the U.S. telecommunications industry over an extended period, from 1935 to 1987. We estimate the degree of scale economies, cost elasticities, input price elasticities and the determinants of output demand. The contribution of the quasi-fixed inputs, such as R&D and physical capital, in the evolution of this industry are examined. Using our analytical framework and a long sample period, we examine a number of important issues such as the stability of the cost and demand structure over time, the changing characteristics of demand for local and toll services and the variation of price-cost margin over time under different economic conditions, market structures and regulatory environments. Use of this approach makes it possible to analyze the effects of the 1984 divestiture of the Bell System on the cost structure, employment and capital formation of the telecommunications industry in the U.S.
Handle: RePEc:nbr:nberwo:5820
Template-Type: ReDIF-Paper 1.0
Title: Inflation, Real Interest Rates, and the Bond Market: A Study of UK Nominal and Index-Linked Government Bond Prices
Classification-JEL: E31; E43
Author-Name: David G. Barr
Author-Name: John Y. Campbell
Author-Person: pca54
Note: AP ME
Number: 5821
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5821
File-URL: http://www.nber.org/papers/w5821.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 39 (August 1997): 361-383.
Abstract: This paper estimates expected future real interest rates and inflation rates from observed prices of UK government nominal and index-linked bonds. The estimation method takes account of imperfections in the indexation of UK index-linked bonds. It assumes that expected log returns on all bonds are equal, and that expected real interest rates and inflation follow simple time-series processes whose parameters can be estimated from the cross-section of bond prices. The extracted inflation expectations forecast actual future inflation more accurately than nominal yields do. The estimated real interest rate is highly variable at short horizons, but comparatively stable at long horizons. Changes in real rates and expected inflation are strongly negatively correlated at short horizons, but not at long horizons.
Handle: RePEc:nbr:nberwo:5821
Template-Type: ReDIF-Paper 1.0
Title: What We Know and Do Not Know About the Natural Rate of Unemployment
Classification-JEL: E20; E30
Author-Name: Olivier Blanchard
Author-Person: pbl2
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: EFG LS
Number: 5822
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5822
File-URL: http://www.nber.org/papers/w5822.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, 11, winter 1997, pp.51-72.
Abstract: Over the past three decades, a large amount of research has attempted to identify the determinants of the natural rate of unemployment. It is this body of work we assess in this paper. We reach two main conclusions. First, there has been considerable theoretical progress over the past 30 years. A framework has emerged. We present it, and show how it can be used to think for example about the relation between technological progrss and unemployment. Second, empirical knowledge lags behind. Economists do not have a good quantitative understanding of the determinants of the natural rate, either across time or across countries. We look at two issues, the relation of wages to unemployment, and the risk of European unemployment.
Handle: RePEc:nbr:nberwo:5822
Template-Type: ReDIF-Paper 1.0
Title: Changes in Wage Inequality, 1970-1990
Author-Name: Jacob Mincer
Note: LS
Number: 5823
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5823
File-URL: http://www.nber.org/papers/w5823.pdf
File-Format: application/pdf
Publication-Status: published as Economic Development, Growth of Human Capitol, and the Dynasty of the Wage Structure, "Journal of Economic Growth , Vol.16 (1997).
Abstract: Differences in wages between skill groups declined in the 1970's and rose in the 1980's, but aggregate wage inequality grew throughout the period. This divergence remains a puzzle in recent studies of U.S. wage inequality. In this paper the sometimes divergent paths of inter-group and intra-group inequality are explained by the human capital approach. In it, wages are the return on cumulated human capital investments. In turn, interpersonal distributions of investments and of marginal rates of return on them are determined by individual supply and demand curves. Recent studies have shown that relative growth of human capital supply in the 1970's and of demand in the 1980's generated the U-shaped time pattern of ( differentials. Argument and evidence in this paper show that a widening of dispersion among individual demand curves started in the 1970's and generated a continuous expansion of ( group demand curves reflects a growing skill bias in the demand for labor. Aggregate inequality grew throughout the period because within group inequality accounts for the larger part of total inequality. The data also indicate that wage inequality grew in the face of stability in the dispersion of human capital and despite the likely decline in inequality of opportunity, as reflected in the decline in dispersion among supply curves.
Handle: RePEc:nbr:nberwo:5823
Template-Type: ReDIF-Paper 1.0
Title: Liberalization of Capital Flows in Korea: Big-Bang or Gradualism?
Classification-JEL: F4; F2
Author-Name: Dongchul Cho
Author-Name: Youngsun Koh
Number: 5824
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5824
File-URL: http://www.nber.org/papers/w5824.pdf
File-Format: application/pdf
Publication-Status: published as Changes in Exchange Rates in Rapidly Developing Countries. Ito,Takatoshiand Anne O. Krueger, eds., Chicago: The University of Chicago Press, 1999,pp. 285-306.
Publication-Status: published as Liberalization of Capital Flows in Korea: Big Bang or Gradualism?, Dongchul Cho, Youngsun Koh. in Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues, Ito and Krueger. 1999
Abstract: Capital market liberalization has become an irreversible trend in Korea since 1992. With the current level of high interest rate in Korea, however, drastic full-scale liberalization would certainly attract a large amount of capital inflows and appreciate the Korean won. This would affect the price competitiveness of Korean products in international markets, which could bring about significant macro-instability in an economy like Korea which relies heavily upon external transactions. Through simulations using a macro-model based on the neoclassical long-run convergence and the Keynesian short-run dynamics, this paper attempts to provide some quantitative assessments of several alternative policy choices including the speed of liberalization.
Handle: RePEc:nbr:nberwo:5824
Template-Type: ReDIF-Paper 1.0
Title: New Activities, the Welfare Cost of Uncertainty and Investment Policies
Classification-JEL: F12; F21
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI
Number: 5825
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5825
File-URL: http://www.nber.org/papers/w5825.pdf
File-Format: application/pdf
Publication-Status: published as International Journal of Finance & Economics, Vol. 3, no. 2 (April 1998): 97-110
Abstract: This paper studies the effect of policy uncertainty on the formation of new activities in Romer's (1994) type of an economy, where productivity of labor increases with the number of capital goods. Adding a new capital good requires a capital specific set-up cost, invested prior to using the capital good. Agents are disappointment averse, putting greater utility weight on downside risk [as modeled by Gul (1991)]. Policy uncertainty is induced by the Disappointment aversion implies that investment, labor and capitalists' income drop at a rate proportional to the standard deviation of the tax rate. Hence, policy uncertainty induces first-order adverse effects, whereas policy uncertainty leads to second-order effects when consumers maximize the conventional expected utility. The adverse effects of policy uncertainty can be partially overcome by a proper investment policy. The paper interprets the tax concessions granted to multinationals as a commitment device that helps overcoming the adverse implications of policy uncertainty.
Handle: RePEc:nbr:nberwo:5825
Template-Type: ReDIF-Paper 1.0
Title: Taxation and Economic Growth
Author-Name: Eric M. Engen
Author-Name: Jonathan Skinner
Author-Person: psk23
Note: PE
Number: 5826
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5826
File-URL: http://www.nber.org/papers/w5826.pdf
File-Format: application/pdf
Publication-Status: published as National Tax Journal (december 1996)
Abstract: Tax reforms are sometimes touted to have strong macroeconomic growth effects. We consider the impact of a major tax reform on the long-term growth rates of the U.S. economy using three approaches. The first approach is to examine the historical record of the U.S. economy to evaluate whether tax cuts have been associated with economic growth. The second is to consider the evidence on taxation and growth for a large sample of countries. And finally, we use evidence from micro-level studies of labor supply, investment demand, and productivity growth. Our results suggest modest effects, on the order of 0.2 to 0.3 percentage point differences in growth rates in response to a major tax reform that changes all marginal tax rates by 5 percentage points and average tax rates by 2.5 percentage points. Nevertheless, even such small effects can have a large cumulative impact on living standards.
Handle: RePEc:nbr:nberwo:5826
Template-Type: ReDIF-Paper 1.0
Title: Trade Reform with a Government Budget Constraint
Classification-JEL: H21; F13
Author-Name: James E. Anderson
Author-Person: pan2
Note: ITI
Number: 5827
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5827
File-URL: http://www.nber.org/papers/w5827.pdf
File-Format: application/pdf
Publication-Status: published as in Trade Policy and the Pacific Rim, J.Piggott and A.Woodland, eds., MacMilan for the IEA, 1999.
Abstract: The standard theory of trade reform uses a passive government budget constraint, in which changes in tariff revenue are offset by changes in lump sum transfers. This paper offers a general framework for the analysis of trade reform when the government budget constraint is active, meaning that tariff revenue cuts must be offset by distortionary fiscal policy changes --- public good supply cuts or alternative tax increases. Useful and simple new expressions characterizing welfare improving trade reform compare the Marginal Cost of Funds (MCF) of trade taxes with the MCF of consumption taxes. The MCF expressions provide an intuitive index number which is operational with Computable General Equilibrium models. The theoretical analysis and an application to Korean data in 1963 both cast doubt on the desirability of tariff cuts in convex competitive economies with active government budget constraints.
Handle: RePEc:nbr:nberwo:5827
Template-Type: ReDIF-Paper 1.0
Title: Institutions and Labor Reallocation
Classification-JEL: J31; J63
Author-Name: Giuseppe Bertola
Author-Person: pbe54
Author-Name: Richard Rogerson
Author-Person: pro53
Note: EFG
Number: 5828
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5828
File-URL: http://www.nber.org/papers/w5828.pdf
File-Format: application/pdf
Publication-Status: published as Bertola, Giuseppe & Rogerson, Richard. "Institutions and labor reallocation," European Economic Review, Elsevier, vol. 41(6), pages 1147-1171, June 1997
Abstract: Despite stringent dismissal restrictions in most European countries, rates of job creation and destruction are remarkably similar across European and North American labor markets. This paper shows that relative-wage compression is conducive to higher employer-initiated job turnover, and argues that wagesetting institutions and job-security provisions differ across countries in ways that are both consistent with rough uniformity of job turnover statistics and readily explained by intuitive theoretical considerations. When viewed as a component of the mix of institutional differences in Europe and North America, European dismissal restrictions are essential to a proper interpretation of both similar patterns in job turnover and marked differences in unemployment flows.
Handle: RePEc:nbr:nberwo:5828
Template-Type: ReDIF-Paper 1.0
Title: Continuous Training in Germany
Classification-JEL: J24; J31
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: LS
Number: 5829
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5829
File-URL: http://www.nber.org/papers/w5829.pdf
File-Format: application/pdf
Publication-Status: published as Pischke, Jorn-Steffen. "Continuous Training In Germany," Journal of Population Economics, 2001, v14(3), 523-548.
Abstract: Using data from the German Socio Economic Panel, I describe the incidence, attributes, and outcomes of continuous training received by workers in Germany between 1986 and 1989. Further training is primarily a white collar phenomenon, is concentrated among the more highly educated, and in the service sector and in public administration. Much of this training seems to be general and provided to workers by their employers at no direct cost. On the other hand, the training also does not seem to result in large short-run wage gains, especially for men. These results are somewhat at odds with the conventional models about the financing of human capital formation.
Handle: RePEc:nbr:nberwo:5829
Template-Type: ReDIF-Paper 1.0
Title: Conditioning Manager Alphas on Economic Information: Another Look at the Persistence of Performance
Classification-JEL: G1; G2
Author-Name: Jon A. Christopherson
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Debra A. Glassman
Note: AP
Number: 5830
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5830
File-URL: http://www.nber.org/papers/w5830.pdf
File-Format: application/pdf
Publication-Status: published as Review of Financial Studies, 1998, Volume 11, Number 1 Pp. 111-142
Abstract: This paper evaluates persistence in the performance of institutional equity managers. We build on recent work on conditional performance evaluation, using time-varying conditional expected returns and risk measures. We find evidence that the investment performance of pension fund managers persists over time. A conditional approach is able to better detect this persistence and to predict the future performance of the funds than are traditional methods. The performance persistence is especially concentrated in the managers with negative prior-period conditional alphas.
Handle: RePEc:nbr:nberwo:5830
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance for Poor Women and Children in the U.S.: Lessons from the Past Decade
Classification-JEL: I18
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EH LS PE CH
Number: 5831
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5831
File-URL: http://www.nber.org/papers/w5831.pdf
File-Format: application/pdf
Publication-Status: published as Health Insurance for Poor Women and Children in the US: Lessons from the Past Decade, Jonathan Gruber. in Tax Policy and the Economy, Volume 11, Poterba. 1997
Abstract: to low income women and children, has expanded dramatically over the past decade. This expansion provides a `natural laboratory' for learning about the effect of public health insurance eligibility on insurance coverage, health utilization, and health outcomes. This paper provides an overview of what has been learned about these questions from studying the expansions. Medicaid eligibility rose steeply over the 1984-1992 period, but coverage rose much less sharply, due to limited takeup of benefits. This is partly due to the fact that many eligibles already had private insurance coverage, and evidence suggests that a large share of new enrollees dropped their private coverage to join the program. Nevertheless, utilization of preventive care rose substantially as a result of the expansions, and there were significant improvements in health outcomes, specifically infant and child mortality. While these mortality reductions came at significant cost to the Medicaid program, the cost per life saved was low relative to alternative uses of government funds. These findings highlight both the potential benefits of public insurance policy and the importance of appropriately targeting scarce public health dollars.
Handle: RePEc:nbr:nberwo:5831
Template-Type: ReDIF-Paper 1.0
Title: Distributional Implications of Introducing a Broad-Based Consumption Tax
Classification-JEL: H2
Author-Name: William M. Gentry
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Note: PE
Number: 5832
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5832
File-URL: http://www.nber.org/papers/w5832.pdf
File-Format: application/pdf
Publication-Status: published as Distributional Implications of Introducing a Broad-Based Consumption Tax, William M. Gentry, R. Glenn Hubbard. in Tax Policy and the Economy, Volume 11, Poterba. 1997
Abstract: As a tax base, 'consumption' is sometimes argued to be less fair than 'income' because the benefits of not taxing capital income accrue to high-income households. We argue that, despite the common perception that consumption taxation eliminates all taxes on capital income, consumption and income taxes actually treat similarly much of what is commonly called capital income. Indeed, relative to an income tax, a consumption tax exempts only the tax on the opportunity cost of capital. In contrast to a pure income tax, a consumption tax replaces capital depreciation with capital expensing. This change eliminates the tax on the opportunity cost of capital, but does not change, relative to the income tax, the tax treatment of capital income arising from a risk premium, inframarginal profit, or luck. Because these components of capital income are more heavily skewed toward the top of the distribution of economic well-being, a consumption tax is more progressive than would be estimated under conventional distributional assumptions. We prepare distribution tables and demonstrate that this modification is quantitatively important.
Handle: RePEc:nbr:nberwo:5832
Template-Type: ReDIF-Paper 1.0
Title: Research Productivity in a System of Universities
Classification-JEL: D3; L3
Author-Name: James D. Adams
Author-Person: pad11
Author-Name: Zvi Griliches
Note: PR
Number: 5833
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5833
File-URL: http://www.nber.org/papers/w5833.pdf
File-Format: application/pdf
Publication-Status: published as James D. Adams & Zvi Griliches, 1998. "Research Productivity in a System of Universities," Annals of Economics and Statistics, GENES, issue 49-50, pages 127-162.
Abstract: The focus of this paper is the research performance of a system of universities and sciences. Using data from the US during the 1980s we study the relationship between research output and R&D in 8 different fields of science We begin at the field level by examining the time series behavior of outputs measured by papers and citations in relation to R&D. At this level we find approximate parity between growth rates of papers and citations and the growth rate of R&D, except mathematics and agriculture, which diverge from parity in opposite directions, suggesting the predominance of a CRS production process for new scientific results. We then conduct an analysis at the university and field using small samples of leading U.S. research universities. We find returns to R&D are diminishing in nearly every case. One explanation points to the importance of research spillovers between universities and fields which are excluded at the university level but not at the system level, another is that errors in R&D are more important at the university level. The errors arise from misclassification of R&D by university and field. These explanations emphasize the relevance of research spillovers and of the system-wide aspects of university research, and pinpoint the sources of failings of current data on science resource. In addition we explore some efficiency aspects of the university system. Our findings suggest that leading schools have lower average and marginal costs of performing research than lesser institutions, and that leading institutions have a comparative advantage at generating higher quality, more highly cited research. In our comparisons of private and public institutions the results are not as one-sided, yet they suggest that private schools have a comparative advantage at generating more highly cited research.
Handle: RePEc:nbr:nberwo:5833
Template-Type: ReDIF-Paper 1.0
Title: Medicaid and Service Use Among Homeless Adults
Classification-JEL: I11
Author-Name: Sherry Glied
Author-Name: Christina Hoven
Author-Name: Robert Moore
Author-Name: A. Bowen Garrett
Author-Person: pga231
Note: EH
Number: 5834
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5834
File-URL: http://www.nber.org/papers/w5834.pdf
File-Format: application/pdf
Publication-Status: published as Inquiry, Vol. 35, no. 4 (1998): 380-388.
Abstract: Expansions of Medicaid eligibility intend to improve access to care, and to shift care from emergency rooms and inpatient hospital care to more appropriate sites. We examine the effect of Medicaid recipiency on the level and site of medical service utilization using data from 1985 and 1987 surveys of New York City homeless single men and women. Simple regressions of Medicaid on the use of health services among homeless adults indicate that Medicaid significantly increases the likelihood that these individuals receive services, especially emergency and inpatient hospital services. We test this result in further analyses that control for health status, use instrumental variables procedures, and examine differences between a similar population in 1985 and 1987. These analyses suggest that Medicaid neither increases nor diminishes access to emergency rooms. We find some evidence that suggests that Medicaid does improve access to non-hospital medical care.
Handle: RePEc:nbr:nberwo:5834
Template-Type: ReDIF-Paper 1.0
Title: On the Validity of Season of Birth as an Instrument in Wage Equations: A Comment on Angrist & Krueger's "Does Compulsory School Attendance Affect Scho
Classification-JEL: J24
Author-Name: John Bound
Author-Person: pbo406
Author-Name: David A. Jaeger
Author-Person: pja17
Note: LS
Number: 5835
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5835
File-URL: http://www.nber.org/papers/w5835.pdf
File-Format: application/pdf
Publication-Status: Published as "Evidence on the Validity of Cross-Sectional and Longitudinal Labor Market Data", JLE, Vol. 12, no. 3 (1994).
Abstract: In an important and provocative paper, `Does Compulsory School Attendance Affect Schooling and Earnings?', Angrist and Krueger use quarter of birth as an instrument for educational attainment in wage equations. To support a causal interpretation of their estimates, they argue that compulsory school attendance laws alone account for the association between quarter of birth and earnings. In this note we present evidence that the association between quarter of birth and earnings is too strong to be fully explained by compulsory school attendance laws in the samples studied by Angrist and Krueger. Moreover, while the association between quarter of birth and educational attainment was weaker for more recent cohorts, we found no evidence that the strength of the relationship between quarter of birth and earnings was also weaker in those cohorts. In addition, we present evidence that suggests the association between quarter of birth and earnings or other labor market outcomes existed for cohorts that were not bound by compulsory school attendance laws. Our results call into question the validity of any causal inferences based on Angrist and Krueger's estimates regarding the effect of education on earnings.
Handle: RePEc:nbr:nberwo:5835
Template-Type: ReDIF-Paper 1.0
Title: Computers and Productivity in France: Some Evidence
Classification-JEL: C20; C81
Author-Name: Nathalie Greenan
Author-Person: pgr420
Author-Name: Jacques Mairesse
Author-Person: pma712
Note: PR
Number: 5836
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5836
File-URL: http://www.nber.org/papers/w5836.pdf
File-Format: application/pdf
Publication-Status: published as Greenan, Nathalie and Jacques Mairesse. "Computers and Productivity in France: Some Evidence." Economics of Innovation and New Technology 9, 3 (2000): 275-315.
Abstract: In this paper, we make a first attempt to explore the relationship between computer use and productivity in French manufacturing and services industries. We match information on computer utilization in the work place collected at the employee level in the years 1987, 1991 and 1993, with information on firm productivity, capital intensity and average wage available at the firm level. Being based on the answers of very few interviewed employees (only one for 75% of the firms in our samples), our measure of firm computer use is subject to important sampling errors, and hence our estimates of computer impacts are largely affected by random errors in variables downward biases. Nonetheless we find coherent and persuasive evidence that the computer impacts on productivity are indeed positive and that the returns to the firm should at least be in the same range as the returns to the other types of capital. We also show that the sampling errors in measurement biases can be assessed, and we make the general point that econometric studies of the firm can be effectively and substantially enriched by using information collected from workers, even if very few of them are surveyed per firm.
Handle: RePEc:nbr:nberwo:5836
Template-Type: ReDIF-Paper 1.0
Title: You Can't Take It With You? Immigrant Assimilation and the Portability of Human Capital
Classification-JEL: J61; J24
Author-Name: Rachel M. Friedberg
Author-Person: pfr67
Note: LS
Number: 5837
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5837
File-URL: http://www.nber.org/papers/w5837.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Vol. 18, no. 2 (April 2000): 221-251.
Abstract: The national origin of an individual's human capital is a crucial determinant of its value. Education acquired abroad is significantly less valued than education obtained domestically. This difference can fully explain the earnings disadvantage of immigrants relative to comparable natives in Israel. Variation in the return to foreign schooling across origin countries may reflect differences in its quality and compatibility with the host labor market. Three factors language proficiency, domestic labor market experience, and further education following immigration appear to raise the return to education acquired abroad, suggesting a compound benefit of policies encouraging immigrants to obtain language and other training.
Handle: RePEc:nbr:nberwo:5837
Template-Type: ReDIF-Paper 1.0
Title: Do Balanced Budget Rules Work? U.S. Experience and Possible Lessons for the EMU
Classification-JEL: D78; H61
Author-Name: Robert P. Inman
Note: PE
Number: 5838
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5838
File-URL: http://www.nber.org/papers/w5838.pdf
File-Format: application/pdf
Abstract: The `Excessive Deficit Procedure' of the Maastricht Treaty on Economic and Monetary Union proposes two fiscal convergence conditions for entry and continued membership in the EMU: 1) a country's overall budget deficit for each fiscal year must be equal to or below 3% of GDP, and 2) a country's stock of gross public debt must be equal to or less than 60% of GDP. Will the current EMU Excessive Deficit Procedure work as an effective constraint on countries' deficit behaviors? When understood within the context of a political economy model of deficit behavior, recent U.S. evidence on balanced budget rules strongly suggests that effective deficit constraints must use ex post deficit accounting, must be constitutionally grounded, must be enforced by an open and politically independent review panel or court with significant sanctions for violations, and costly to amend. While ex post, constitutionally grounded, and difficult to amend, current EMU rules are not enforced, at present, by an open and politically independent review panel using significant penalties. The ability of the EMU's deficit procedure to constrain in doubt. Institutional reforms that will strengthen the EMU's balanced budget procedures are discussed.
Handle: RePEc:nbr:nberwo:5838
Template-Type: ReDIF-Paper 1.0
Title: International Implications of German Unification
Classification-JEL: F01
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: IFM
Number: 5839
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5839
File-URL: http://www.nber.org/papers/w5839.pdf
File-Format: application/pdf
Publication-Status: published as The Economics of Globalization. Razin, A., and E. Sadka, eds., Cambridge: Cambridge University Press, 1999, pp. 33-58.
Abstract: This paper advances the hypothesis that the EUS crisis was caused by German unification. The unification has implied a massive resource demand which parallels the US resource demand following Reagan's tax reforms in the eighties. The resource demand revised the German interest rates relative to the rest of the world which brought about devaluations of other European currencies. The paper identifies those European currencies which currently are undervalued.
Handle: RePEc:nbr:nberwo:5839
Template-Type: ReDIF-Paper 1.0
Title: The Adoption of Workers' Compensation in the United States 1900-1930
Classification-JEL: J38; K31
Author-Name: Price V. Fishback
Author-Person: pfi13
Author-Name: Shawn Everett Kantor
Author-Person: pka54
Note: DAE
Number: 5840
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5840
File-URL: http://www.nber.org/papers/w5840.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law and Economics, Vol. 41, no. 2, part 2 (October 1998): 305-341.
Abstract: The adoption of workers' compensation in the 1910s, from a variety of perspectives, was a significant event in the economic, legal, and political history of the United States. The legislation represented the first instance of a widespread social insurance program in the United States, setting the stage for the later adoption of federal government programs for unemployment insurance, old-age pensions, and health insurance. In this paper, we show that the adoption of workers' compensation was not the result of employers' or workers' to secure benefits at the expense of the other group. Nor was the success of compensation legislation simply the outcome of Progressive Era social reformers' demands for protective legislation. Workers' compensation was enacted rapidly across the United States in the 1910s because the key economic interest groups with a stake in the legislation -- employers, workers, and insurance companies -- anticipated benefits from resolving an apparent first decade of the twentieth century, workplace accident risk rose, state legislatures adopted a series of employers' liability laws, and court decisions limited employers' defenses in liability suits, which all combined to substantially increase the uncertainty of the negligence liability system.
Handle: RePEc:nbr:nberwo:5840
Template-Type: ReDIF-Paper 1.0
Title: Volatility and the Investment Response
Classification-JEL: F21; E2
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Nancy P. Marion
Author-Person: pma1464
Note: ITI
Number: 5841
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5841
File-URL: http://www.nber.org/papers/w5841.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "Volatility and Investment") Economica, Vol. 66 (1999): 157-179.
Abstract: We use the World Bank decomposition of aggregate investment shares into their private and public components to test for the correlation between volatility and investment in a set of developing countries. We uncover a statistically significant negative correlation between various volatility measures and private investment, even when adding the standard control variables. No such correlation is uncovered when the investment measure is the sum of private and public investment spending. Indeed, public investment spending is positively correlated with some measures of volatility. We also use the new World Bank data to redo the Ramey and Ramey (1995) test for a correlation between investment and the standard deviation of innovations to a forecasting equation for growth. While Ramey and Ramey found no significant correlation using aggregate investment data, we find a negative and highly significant relationship between innovation volatility and private investment in developing countries. These findings suggest that the detrimental impact of volatility on investment may be difficult to detect using aggregate data.
Handle: RePEc:nbr:nberwo:5841
Template-Type: ReDIF-Paper 1.0
Title: When Are Fixed Exchange Rates Really Fixed?
Classification-JEL: E52; F31
Author-Name: Andres Velasco
Note: IFM
Number: 5842
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5842
File-URL: http://www.nber.org/papers/w5842.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Development Economics, Vol. 54, no. 1 (October 1997): 5-25.
Abstract: This paper analyzes the sustainability of fixed exchange rates by extending the Barro-Gordon framework to a fully dynamic context in which the level of a state variable (in this case debt) determines the payoffs available to the government at each point in time. The model yields the following results. If debt is sufficiently low, there is an equilibrium in which the government does not devalue. For an intermediate range of debt levels, the government devalues in response to an attack but not otherwise, so that self-fulfilling attacks can occur. Finally, for yet another debt range there can also be sunspot equilibria in which an attack (and the corresponding devaluation) occurs with positive probability.
Handle: RePEc:nbr:nberwo:5842
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Short-Term Variation in Abortion Funding on Pregnancy Outcomes
Classification-JEL: I18
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Allan M. Parnell
Author-Name: Michael J. Moore
Author-Person: pmo284
Author-Name: Deanna Pagnini
Note: EH
Number: 5843
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5843
File-URL: http://www.nber.org/papers/w5843.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Health Economics, Vol. 18, no. 2 (1999): 241-258.
Abstract: In 1978 North Carolina created a special fund to pay for abortions for indigent women. The appropriations for that fund have proven inadequate during five of the years in which it has been in operation, with the result in each case that no state funding was available for several months. This on-again, off-again funding pattern provides a natural experiment for" estimating the short-run effect of changes in the cost of abortions on the number of abortions (and births) to indigent women. We utilize a unique dataset obtained from the State, which includes individual records for all pregnancies terminated in the State since 1978. We estimate the effects of funding termination on the abortion rate per month, the birth rate per month (adjusted to take account of variations in gestation periods), and the probability that a pregnancy will end in abortion, for various demographic groups. The results suggest that the decisions of poor black women aged 18-29 are particularly sensitive to the availability of abortion funding. Overall, approximately 3 in every 10 pregnancies that would have resulted in an abortion, had state funds been available, are instead carried to term.
Handle: RePEc:nbr:nberwo:5843
Template-Type: ReDIF-Paper 1.0
Title: Neoclassical vs. Endogenous Growth Analysis: An Overview
Classification-JEL: 040; 030
Author-Name: Bennett T. McCallum
Note: EFG
Number: 5844
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5844
File-URL: http://www.nber.org/papers/w5844.pdf
File-Format: application/pdf
Publication-Status: published as Bennett T. McCallum, 1996. "Neoclassical vs. endogenous growth analysis: an overview," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 41-71.
Abstract: This paper begins with an exposition of neoclassical growth theory, including several analytical results such as the distinction between golden-rule and optimal steady states. Next it emphasizes that the neoclassical approach fails to provide any explanation of steady-state growth in per capita values of output and consumption, and also cannot plausibly explain actual growth differences by reference to transitional episodes. Three types of endogenous growth models, which attempt to provide explanations of ongoing per-capita growth, are presented and discussed. The likelihood of strictly justifying steady-state growth with these models is very small, since it would require highly special parameter values, but the models' predictions may be reasonably accurate nevertheless.
Handle: RePEc:nbr:nberwo:5844
Template-Type: ReDIF-Paper 1.0
Title: Is There a Role for Monetary Aggregates in the Conduct of Monetary Policy?
Classification-JEL: E52
Author-Name: Arturo Estrella
Author-Person: pes29
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG ME
Number: 5845
Creation-Date: 1996-11
Order-URL: http://www.nber.org/papers/w5845
File-URL: http://www.nber.org/papers/w5845.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 40, no. 2 (1997): 279-304.
Abstract: We examine the potential policy role of monetary aggregates by attempting to use them as effectively as possible in the analysis of empirical relationships. We consider three possible roles: as information variables, as indicators of policy actions and as instruments in a policy rule. These require successively stronger and more stable relationships between the aggregates and the final policy targets. Our results show that in the United States since 1979, the monetary aggregates fall considerably short of those requirements, and results with German M3 are hardly more favorable. We also investigate whether empirical relationships are not reflective of causal relationships because of the use of these variables in counter cyclical policy. The results are reasonably consistent with that notion in the case of interest rates, but not in the case of the aggregates.
Handle: RePEc:nbr:nberwo:5845
Template-Type: ReDIF-Paper 1.0
Title: Manufactured Inequality
Author-Name: Sherwin Rosen
Note: LS
Number: 5846
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5846
File-URL: http://www.nber.org/papers/w5846.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Vol. 15, no. 2 (April 1997): 189-196.
Abstract: Many discrete life choices--where to live, what kind of job to hold, and consumption lifestyle--are stratified by income. Stratification and sorting often manifest state-dependent preferences in which the marginal utility of income (consumption) depends on the outcome of prior choices. For example, one can choose to live a quiet life in the country, where money buys few things, or can choose a more active and exciting lifestyle in a large city, where money has greater value because all kinds of goods are available to buy. The natural market equilibrium stratification is for rich people to live in the city, where their money has more value, and for poor people to live in the country, where money is less productive. But before location is chosen, the a priori von Neuman-Morgenstern utility function over both choices can take the Friedman-Savage form, providing pareto efficient social demands for inequality. If there is not enough inequality to produce the socially optimum stratification to begin with, inequality is socially manufactured. People voluntarily participate in gambles and lotteries in which the winners are rich and live in the exciting places and the losers are poor and choose the quiet life. There is a inequality.
Handle: RePEc:nbr:nberwo:5846
Template-Type: ReDIF-Paper 1.0
Title: Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have
Author-Name: Charles R. Hulten
Note: PR
Number: 5847
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5847
File-URL: http://www.nber.org/papers/w5847.pdf
File-Format: application/pdf
Abstract: This paper shows that those low and middle income countries that use infrastructure inefficiently pay a growth penalty in the form of a much smaller benefit from infrastructure investments. The magnitude of this penalty is apparent when the growth experience of Africa is compared with that of East Asia: over one-quarter of the differential growth rate between these two regions can be attributed to the difference in effective use of infrastructure resources. At the same time, the difference due to new public capital formation is negligible. An even stronger impression is conveyed by the comparison of high and low growth rate economies. Here, more than forty percent of the growth differential is due to the efficiency effect, making it the single most important explanator of differential growth performance.
Handle: RePEc:nbr:nberwo:5847
Template-Type: ReDIF-Paper 1.0
Title: The Demise of Double Liability as an Optimal Contract for Large-Bank Stockholders
Classification-JEL: G2; N2
Author-Name: Berry K. Wilson
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 5848
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5848
File-URL: http://www.nber.org/papers/w5848.pdf
File-Format: application/pdf
Publication-Status: published as Edward K. Kane & Berry K. Wilson, 1997. "The demise of double liability as an optimal contract for large-bank stockholders," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 374-401.
Abstract: This paper tests the optimal-contracting hypothesis, drawing upon data from a natural experiment that ended during the Great Depression. The subjects of our experiment are bank stockholders. The experimental manipulation concerns the imposition of state or federal restrictions on the contracts they write with bank creditors. We contrast stockholders that were subject to the now-conventional privilege of limited liability with stockholders that faced an additional liability in liquidation tied to the par value of the bank's capital. Our tests show that optimal contracting theory can provide an explanation both for the long survival of extended-liability rules in banking and for why they were abandoned in the 1930s.
Handle: RePEc:nbr:nberwo:5848
Template-Type: ReDIF-Paper 1.0
Title: Bank Consolidation: A Central Banker's Perspective
Classification-JEL: G21
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG ME
Number: 5849
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5849
File-URL: http://www.nber.org/papers/w5849.pdf
File-Format: application/pdf
Publication-Status: published as Mergers of Finanial Institutions, Yakov Amihud and Geoffrey Miller, eds., pp. 31-25, (Boston: Irwin Professional Publishing, 1998)
Abstract: This paper looks at why bank consolidation has been taking place in the United States and what the structure of the banking industry might look like in the future. It then discusses the implications of bank consolidation for the economy and the challenge it poses for central bankers.
Handle: RePEc:nbr:nberwo:5849
Template-Type: ReDIF-Paper 1.0
Title: Tax Burden and Migration: A Political Economy Perspective
Classification-JEL: F22; H2
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM PE
Number: 5850
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5850
File-URL: http://www.nber.org/papers/w5850.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf & Sadka, Efraim & Swagel, Phillip, 2002. "Tax burden and migration: a political economy theory and evidence," Journal of Public Economics, Elsevier, vol. 85(2), pages 167-190, August.
Abstract: The extent of taxation and redistribution policy is generally determined at a political-economy equilibrium by a balance between those who gain and those who lose from a more extensive tax-transfer policy. In a stylized model of migration and human capital formation we find, somewhat against conventional wisdom, that low-skill migration may lead to a lower tax burden and less redistribution than without migration, even though the migrants (naturally) join the pro-tax cum transfer coalition.
Handle: RePEc:nbr:nberwo:5850
Template-Type: ReDIF-Paper 1.0
Title: Optimal Government Spending and Taxation in Endgenous Growth Models
Classification-JEL: E62; O41
Author-Name: Giancarlo Corsetti
Author-Name: Nouriel Roubini
Author-Person: pro145
Note: PE
Number: 5851
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5851
File-URL: http://www.nber.org/papers/w5851.pdf
File-Format: application/pdf
Abstract: This paper analyzes optimal spending, tax and financial policies in models of endogenous growth where public spending is productive. We extend previous work in four directions. First, we analyze optimal policies when the government is allowed to borrow and lend, rather than being restricted to run a balanced budget in every period. Second, we develop a model with a separate human capital accumulation sector. Therefore, the properties of optimal policies depend on whether government spending affects the productivity of the final goods sector or the human capital accumulation sector. Third, we consider the policy implications of alternative assumptions about which factor of production benefits from the external effects of productive public goods. Fourth, we study the implications of restrictions on the menu of tax instruments available to the policy maker. We contrast optimal tax rates on human and physical capital under different assumptions on technology and distribution. We analyze the welfare properties of public debt and assets.
Handle: RePEc:nbr:nberwo:5851
Template-Type: ReDIF-Paper 1.0
Title: Are Some Mutual Funds Managers Better Than Others? Cross-Sectional Patterns in Behavior and Performance
Classification-JEL: G23; G14
Author-Name: Judith Chevalier
Author-Person: pch151
Author-Name: Glenn Ellison
Author-Person: pel10
Note: AP CF IO
Number: 5852
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5852
File-URL: http://www.nber.org/papers/w5852.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 54, no. 3 (June 1999): 875-899.
Abstract: In this paper we explore cross-sectional differences in the behavior and performance of mutual fund managers. In our simplest regression of a fund's market excess return on characteristics of its manager we find that younger managers earn much higher returns than older managers and that managers who attended colleges with higher average SAT scores earn much higher returns than do managers from less selective institutions. These differences appear to derive both from systematic differences in expense ratios and risk-taking behavior and from additional systematic differences in performance managers from higher SAT schools have higher risk-adjusted excess returns. Managers with the paper also presents a preliminary look at the labor market for mutual fund managers. Our data suggest that managerial turnover is more performance sensitive for younger managers
Handle: RePEc:nbr:nberwo:5852
Template-Type: ReDIF-Paper 1.0
Title: Product Standards Coalitions in a Market Without Borders
Classification-JEL: F15; L16
Author-Name: Alessandra Casella
Author-Person: pca496
Note: IFM ITI
Number: 5853
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5853
File-URL: http://www.nber.org/papers/w5853.pdf
File-Format: application/pdf
Publication-Status: published as Casella, Alessandra. "Product Standards And International Trade: Harmonization Through Private Coalitions?," Kyklos, 2001, v54(2/3), 243-264.
Abstract: Traditional analyses of standards in international trade identify standards as government regulations and investigate the potential for distortion of trade flows. In reality, however, private industry groups exercise critical influence on the determination of technical standards. The composition of these groups is affected by technology and market conditions, and in an integrated market the alliances of private firms are likely to cross national boundaries, generating harmonization bottom. across economic activities and across countries, economic integration should bring increased harmonization across countries and finer differentiation across products. Empirical evidence from the United States and the European Union, although mostly anecdotical, supports this prediction.
Handle: RePEc:nbr:nberwo:5853
Template-Type: ReDIF-Paper 1.0
Title: Effective Protection Redux
Classification-JEL: F13; D72
Author-Name: James E. Anderson
Author-Person: pan2
Note: ITI
Number: 5854
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5854
File-URL: http://www.nber.org/papers/w5854.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 44 (1998): 21-44.
Abstract: This paper rehabilitates the concept of effective rate of protection for use in political economy. The usual definition corresponds to no economically interesting magnitude in general equilibrium. The effective rate of protection for a sector is redefined here as the uniform tariff which is equivalent to the actual differentiated tariff structure in its effect on rents to residual claimants in the sector. The new ERP permits a political economic ranking of across sectors, since higher uniform tariff equivalents imply higher losses of welfare sacrificed to interest groups. The new ERP converges to the old ERP under a very special set of assumption, and elsewhere generalizes the ERP concept to any economic structure in which residual claims are defined. Numerical results for the new ERP are presented for the US economy in 1982 using the USDA/ERS computable general equilibrium model. The calculated old and new ERP's are not significantly correlated.
Handle: RePEc:nbr:nberwo:5854
Template-Type: ReDIF-Paper 1.0
Title: The Timing of Work Time Over Time
Classification-JEL: J20
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 5855
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5855
File-URL: http://www.nber.org/papers/w5855.pdf
File-Format: application/pdf
Publication-Status: published as "The Timing of Work over Time Hamermesh", Daniel S.; Economic Journal, January 1999, v. 109, iss. 452, pp. 37-66
Abstract: The incidence of evening and night work declined sharply in the United States between the early 1970s and the early 1990s, while the fraction of work performed at the fringes of the traditional regular working day grew. The secular decline in evening and night work did not result from industrial shifts or demographic changes. It was greatest at the upper end of the wage distribution, slowest among workers in the lowest quartile of wages. The observed changes in timing are consistent with and magnify the increase in wage inequality in the U.S. that occurred during this period. They are easily explained by a model that views evening/night work as a disamenity, with rising real incomes causing workers to shift away from such work in the presence of only neutral technical change in the profitability of work at different times of day.
Handle: RePEc:nbr:nberwo:5855
Template-Type: ReDIF-Paper 1.0
Title: The Invisible Hand and the Grabbing Hand
Classification-JEL: 123; E
Author-Name: Timothy Frye
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: EFG PE
Number: 5856
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5856
File-URL: http://www.nber.org/papers/w5856.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Papers and Proceedings, May 1997.
Abstract: Evidence from a survey of 105 shop-owners in Moscow and Warsaw shows that the reliance on private protection, as well as the burden of regulation and corruption, are much greater in Moscow. The evidence suggests that the `invisible hand' model of government better fits the Warsaw local government, and the`grabbing hand' model is more appropriate for Moscow. The evidence implies that the singular focus on the speed of economic reforms to understand the success of transition is misplaced, and that the quality of government may be as essential.
Handle: RePEc:nbr:nberwo:5856
Template-Type: ReDIF-Paper 1.0
Title: Consumption and Portfolio Decisions When Expected Returns are Time Varying
Classification-JEL: G12
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Luis M. Viceira
Author-Person: pvi31
Note: AP EFG ME
Number: 5857
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5857
File-URL: http://www.nber.org/papers/w5857.pdf
File-Format: application/pdf
Publication-Status: published as The Quarterly Journal of Economics, Vol. CXIV (May 1999), Issue 2: 433-496.
Abstract: This paper proposes and implements a new approach to a classic unsolved problem in financial economics: the optimal consumption and portfolio choice problem of a long-lived investor facing time-varying investment opportunities. The investor is assumed to be infinitely-lived, to have recursive Epstein-Zin-Weil utility, and to choose in discrete time between a riskless asset with a constant return, and a risky asset with constant return variance whose expected log return follows and AR(1) process. The paper approximates the choice problem by log-linearizing the budget constraint and Euler equations, and derives an analytical solution to the approximate problem. When the model is calibrated to US stock market data it implies that intertemporal hedging motives greatly increase, and may even double, the average demand for stocks by investors whose risk-aversion coefficients exceed one.
Handle: RePEc:nbr:nberwo:5857
Template-Type: ReDIF-Paper 1.0
Title: Accounting for Outward Direct Investment from Hong Kong and Singapore: Who Controls What?
Author-Name: Linda Low
Author-Name: Eric D. Ramstetter
Author-Name: Henry Wai-Chung Yeung
Number: 5858
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5858
File-URL: http://www.nber.org/papers/w5858.pdf
File-Format: application/pdf
Publication-Status: published as Linda Low, Eric D. Ramstetter, and Henry Wai-Chung Yeung. "Accounting for Outward Direct Investment from Hong Kong and Singapore: Who Controls What?" Geography and Ownership as Bases for Economic Accounting. Editedby Robert E. Baldwin, Robert E. Lipsey, and J.David Richardson, Chicago, Ill: The Univ. of Chicago Press, 1998, pp.139-168.
Publication-Status: published as By Way of Analogy: The Expansion of the Federal Government in the 1930s, Hugh Rockoff. in The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, Bordo, Goldin, and White. 1998
Abstract: After a brief introduction and examination of the economic rationale for accounting for foreign direct investment (FDI), we survey information on outward investors from Hong Kong and Singapore with the aim of illuminating the implications of accounting for such FDI by geographical source or by country of ultimate beneficial owner. By any measure it is clear that a large part of FDI from these economies comes from foreign-controlled firms and hence that ownership-based estimates of FDI from these two economies would be much smaller than the standard, geography-based estimates. However, because outward investment by foreign firms in Hong Kong and Singapore often involves sub- stantial contributions from local staff and partners, an attempt is made to examine the extent of control over investment decisions exercised by these local staff and partners. Case studies from Hong Kong indicate a tendency for for local control over investment decisions to be relatively strong in 4 types of foreign-controlled Hong Kong firms, recently acquired firms, firms with strong local entrepreneurial involvement, customer-oriented firms, and relocated holding companies. On the other hand, evidence froma sample of Thai affiliates of foreign-controlled Hong Kong or Singapore investors suggested that many of the investors were acting as part of an integrated network of foreign investors. Thus, although it is clear local staff and partners have a large influence over the investment decisions of foreign-controlled outward investors in Hong Kong and Singapore, it does not appear that such firms are a majority among foreign-controlled investors in these economies.
Handle: RePEc:nbr:nberwo:5858
Template-Type: ReDIF-Paper 1.0
Title: The Characteristics of Multi-Unit Ownership in Franchising: Evidence from Fast-Food Restaurants in Texas
Classification-JEL: L2; L8
Author-Name: Arturs Kalnins
Author-Name: Francine Lafontaine
Author-Person: pla92
Note: IO
Number: 5859
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5859
File-URL: http://www.nber.org/papers/w5859.pdf
File-Format: application/pdf
Abstract: One empirical phenomenon that has received little attention in the franchising literature is the tendency for individual franchisees to own not just one but several units of a given franchised chain. Most current theories of franchising, based on incentives, information asymmetries, and strategic arguments, have little capacity to explain this phenomenon. In fact, several of them imply that all units should be independently owned and operated. However, given the existence of multi-unit owners, most of the theories have implications for the extent to which units owned by a single owner should be 1) geographically near each other, 2) located in areas where populations display similar demographic characteristics, and 3) contiguous to each other, that is, should share a market boundary. This paper provides empirical evidence that restaurants of individual owners in the six largest fast-food chains in Texas are geographically close to each other, that they are located in areas with similar demographic characteristics, and that they are contiguous. This evidence suggests among other things that franchising is not a strategic delegation device, and that the location of units is not determined by the franchisee's desire to diversify away risk. Instead, the minimization of monitoring or free-riding costs, and the franchisor's reliance on the franchisee's local market expertise, appear to be central concerns in the allocation of units across franchisees.
Handle: RePEc:nbr:nberwo:5859
Template-Type: ReDIF-Paper 1.0
Title: Fundamental Determinants of National Equity Market Returns: A Perspective on Conditional Asset Pricing
Classification-JEL: F3; G0
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Campbell R. Harvey
Author-Person: pha102
Note: AP
Number: 5860
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5860
File-URL: http://www.nber.org/papers/w5860.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Banking and Finance, Vol. 21 (1997): 1625-1665.
Abstract: This paper provides a global asset pricing perspective on the debate over the relation between predetermined attributes of common stocks, such as ratios of price-to-book-value, cash-flow, earnings, and other variables to the future returns. Some argue that such variables may be used to find securities that are systematically undervalued by the market, while others argue that the measures are proxies for exposure to underlying economic risk factors. It is not possible to distinguish between these views without explicitly modeling the relation between such attributes and risk factors. We present an empirical framework for attacking the problem at a global level, assuming integrated markets. Our perspective pulls together the traditional academic and practitioner viewpoints on lagged attributes. We present new evidence on the relative importance of risk and mispricing effects, using monthly data for 21 national equity markets. We find that the cross-sectional explanatory power of the lagged attributes is related to both risk and mispricing in the two-factor model than mispricing.
Handle: RePEc:nbr:nberwo:5860
Template-Type: ReDIF-Paper 1.0
Title: An International Comparison of Employment Adjustment to Exchange Rate Fluctuations
Classification-JEL: E24; F14
Author-Name: Simon Burgess
Author-Person: pbu44
Author-Name: Michael M. Knetter
Note: IFM ITI
Number: 5861
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5861
File-URL: http://www.nber.org/papers/w5861.pdf
File-Format: application/pdf
Publication-Status: published as Review of International Economics (February 1998): 151-163.
Abstract: This paper evaluates the response of employment to exchange rate shocks at the industry level for the G-7 countries. Using a simple empirical framework that places little a priori structure on the pattern of response to shocks, we find the data are consistent with the view that employment in European industries, at least France and Germany, is much less influenced by exchange rate shocks and much slower to adjust to long run steady states. The United States, Japan, Canada, the United Kingdom and Italy all appear to adjust more quickly. German and Japanese employment are quite insensitive to exchange rate fluctuations, consistent with previous research on output and markup responses to exchange rates.
Handle: RePEc:nbr:nberwo:5861
Template-Type: ReDIF-Paper 1.0
Title: Goods Prices and Exchange Rates: What Have We Learned?
Classification-JEL: F1; F3
Author-Name: Pinelopi K. Goldberg
Author-Person: pgo1
Author-Name: Michael M. Knetter
Note: IFM ITI
Number: 5862
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5862
File-URL: http://www.nber.org/papers/w5862.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Literature (September 1997): 1243-1272.
Abstract: Import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country. Recent research indicates that common-currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets. This evidence suggests that incomplete pass-through is a consequence of third-degree price discrimination. While distance matters for market segmentation, borders have independent effects. The source of the border effect has not been clearly identified. Furthermore, there is little evidence yet to suggest substantial market power is implied by the observed price discrimination.
Handle: RePEc:nbr:nberwo:5862
Template-Type: ReDIF-Paper 1.0
Title: Do Borders Matter for Social Capital? Economic Growth and Civic Culture in U.S. States and Canadian Provinces
Classification-JEL: F15; O15
Author-Name: John F. Helliwell
Author-Person: phe368
Number: 5863
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5863
File-URL: http://www.nber.org/papers/w5863.pdf
File-Format: application/pdf
Publication-Status: published as John F. Helliwell, 1996. "Do National Borders Matter for Quebec's Trade?," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 507-22, August.
Publication-Status: published as in "The economic implications of social cohesion" Lars Osberg (ed). University of Toronto Press, 2003
Abstract: The paper first assesses regional and ethnic group differences in social trust and memberships in both Canada and the United States. The ethnic categories people choose to describe themselves are as important as regional differences, but much less important than education, in explaining differences in trust. Respondents who qualify their nationality by any of seven adjectives, a feature more prevalent in the United States than in Canada, (black, white, Hispanic and Asian in the United States; French, English and Ethnic in Canada) have lower levels of trust than those who consider themselves Canadians or Americans either first or only. The dispersion of incomes across states or provinces has been dropping in both countries, but faster in Canada than in the United States. The 1980s increase in regional income disparity in the United States has no parallel in Canada. In neither country is there evidence that per capita economic growth is faster in regions marked by high levels of trust. However, U.S. migrants tend to move to states with higher perceived levels of trust, thus contributing to higher total growth in those states. The economic responsiveness of migration appears to be even stronger in Canada than in the United States, despite the much more extensive systems of fiscal equalization and social safety nets in Canada.
Handle: RePEc:nbr:nberwo:5863
Template-Type: ReDIF-Paper 1.0
Title: Trust in Large Organizations
Classification-JEL: 123; E
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopez-de-Silane
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Robert W. Vishny
Author-Person: pvi218
Note: CF
Number: 5864
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5864
File-URL: http://www.nber.org/papers/w5864.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Papers and Proceedings, May 1997.
Abstract: Several authors suggest that trust is an important determinant of cooperation between strangers in a society, and therefore of performance of social institutions. We argue that trust should be particularly important for the performance of large organizations. In a cross-section of countries, evidence on government performance, participation in civic and professional societies, importance of large firms, and the performance of social institutions more generally supports this hypothesis. Moreover, trust is lower in countries with dominant hierarchical religions, which may have deterred networks of cooperation trust hold up remarkably well on a cross-section of countries.
Handle: RePEc:nbr:nberwo:5864
Template-Type: ReDIF-Paper 1.0
Title: Appropriate Technology and Growth
Classification-JEL: 030; 040
Author-Name: Susanto Basu
Author-Person: pba274
Author-Name: David N. Weil
Author-Person: pwe24
Note: EFG
Number: 5865
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5865
File-URL: http://www.nber.org/papers/w5865.pdf
File-Format: application/pdf
Publication-Status: published as Quarterly Journal of Economics (November 1998).
Abstract: We present a model of growth and technology transfer based on the idea that technologies are specific to particular combinations of inputs. We argue that this model is more realistic than the usual specification, in which an improvement in any technique for producing a given good improves all other techniques for producing that good. Our model implies that technology improvements will diffuse only slowly, even if there are no barriers to the flow of knowledge and no adoption costs. On the other hand, although our basic production technology is of the `Ak' variety, technology diffusion implies that countries with identical policies and different initial incomes do eventually converge to the same level of per-capita income. We argue that a model with appropriate technology and technology diffusion is more appealing, and has more realistic predictions for long-run convergence and growth, than either the standard neoclassical model or simple endogenous-growth models.
Handle: RePEc:nbr:nberwo:5865
Template-Type: ReDIF-Paper 1.0
Title: Disability Insurance Benefits and Labor Supply
Classification-JEL: J26
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: EH LS PE
Number: 5866
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5866
File-URL: http://www.nber.org/papers/w5866.pdf
File-Format: application/pdf
Publication-Status: published as Gruber, Jonathan. "Disability Insurance Benefits And Labor Supply," Journal of Political Economy, 2000, v108(6,Dec), 1162-1183.
Abstract: Disability Insurance (DI) is a public program that provides income support to persons unable to continue work due to disability. The difficulty of defining disability, however, has raised the possibility that this program may be subsidizing the early retirement of workers who are not truly disabled. A critical input for assessing the optimal size of the DI program is therefore the elasticity of labor force participation with respect to benefits generosity. Unfortunately, this parameter has been difficult to estimate in the context of the U.S. DI program, since all workers face an identical benefits schedule. I surmount this problem by studying the experience of Canada, which operates two distinct DI programs, for Quebec and the rest of Canada. The latter program raised its benefits by 36% in January, 1987, while benefits were constant in Quebec, providing exogenous variation in benefits generosity across similar workers. I study this relative benefits increase using both simple `difference-in-difference' estimators and more parameterized estimators that exploit the differential impact of this policy change across workers. I find that there was a sizeable labor supply response to the policy change; my central estimates imply an elasticity of labor force non-participation with respect to DI benefits of 0.25 to 0.32. Despite this large labor supply response, simulations suggest that there were welfare gains from this policy change under plausible assumptions about preference parameters.
Handle: RePEc:nbr:nberwo:5866
Template-Type: ReDIF-Paper 1.0
Title: Racism, Xenophobia or Markets? The Political Economy of Immigration Policy Prior to the Thirties
Classification-JEL: F22; F13
Author-Name: Ashley S. Timmer
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: LS DAE
Number: 5867
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5867
File-URL: http://www.nber.org/papers/w5867.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "Immigration Policy Prior to the Thirties: Labor Markets, Policy Interaction, and Globalization Backlash") Population and Development Review, Vol. 24, no. 4 (December 1998): 739-771.
Abstract: Contrary to conventional wisdom, the doors did not suddenly slam shut on American immigrants when Congress passed the Emergency Quota Act of May 1921. Rather, the United States started imposing restrictions a half century earlier. Argentina, Australia, Brazil, and Canada enacted similar measures, although the anti-immigration policy drift often took the form of an enormous drop in (or even the disappearance of) large immigrant subsidies. Contrary to conventional wisdom, there wasn't simply one big regime switch around World War I. What explains immigration policy between 1860-1930? This paper identifies the fundamentals that underlay the formation of immigration policy, distinguishes between the impact of these long run fundamentals and short run timing, and clarifies the difference between market and non-market forces. The key bottom line is this: Over the long haul, immigrant countries tried to maintain the relative economic position of unskilled labor, compared with skilled labor, landowner and industrialist. The morals for the present are obvious.
Handle: RePEc:nbr:nberwo:5867
Template-Type: ReDIF-Paper 1.0
Title: How Big Should Government Be?
Classification-JEL: H2
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 5868
Creation-Date: 1996-12
Order-URL: http://www.nber.org/papers/w5868
File-URL: http://www.nber.org/papers/w5868.pdf
File-Format: application/pdf
Publication-Status: published as NTJ, Vol. 50, no. 2 (June 1997): 197-213.
Abstract: The appropriate size and role of government depends on the deadweight burden caused by incremental transfers of funds from the private sector. The magnitude of that burden depends on the increases in tax rates required to raise incremental revenue and on the deadweight loss that results from higher tax rates. Both components depend on the full range of behavioral responses of taxpayers to increases in tax rates. The first part of this paper explains why the official method of revenue estimation used by the Treasury and the Congress underestimates the tax rate increases required to raise additional revenue. This is closely related to the on-going debate about the use of `dynamic' revenue estimation. The second part of the paper emphasizes that the deadweight burden caused by a tax rate increase depends not just on the response of labor force participation and average working hours but also on other dimensions of labor supply, on the forms in which compensation is paid, on the individuals' spending on tax favored (deductible or excludable) forms of consumption, and on the intertemporal allocation of consumption. Recent econometric work implies that the deadweight burden caused by incremental taxation (the marginal excess burden) may exceed one dollar per dollar of revenue raised, making the cost of incremental government spending more than two dollars for each dollar of government spending.
Handle: RePEc:nbr:nberwo:5868