# generated by /homes/nber/adrepec/bin/nbrred running on mysql0
Template-Type: ReDIF-Paper 1.0
Title: A House of Her Own: Old Age Assistance and the Living Arrangements of Older Nonmarried Women
Classification-JEL: J14; N12
Author-Name: Dora L. Costa
Author-Person: pco358
Note: AG DAE
Number: 6217
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w6217
File-URL: http://www.nber.org/papers/w6217.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, vol. 72, pp. 39-59, 1999.
Abstract: I show that the trend towards single households among older nonmarried women, the majority of whom were widows, has been ongoing only since 1940 and investigate the factors that fostered the rise in separate living quarters since mid-century by examining the impact of Old Age Assistance on living arrangements in 1940 and 1950. I find that Old Age Assistance substantially increased demand for separate living quarters, but that demand depended upon the rules of the program, in particular whether children were held legally responsible for the care of their aged parents. I argue that almost half of the decline in the fraction of older nonmarried women living with relatives from 1950 to 1990 can be attributed to rising Social Security benefits and expanded eligibility and to the fact that Social Security benefits were given with no strings attached.
Handle: RePEc:nbr:nberwo:6217
Template-Type: ReDIF-Paper 1.0
Title: A Strategy for Launching the Euro
Classification-JEL: F31; F33
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: IFM
Number: 6233
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6233
File-URL: http://www.nber.org/papers/w6233.pdf
File-Format: application/pdf
Publication-Status: published as European Economic Review, vol. 42, no. 6, pp. 975-1007, 1998.
Abstract: This paper analyzes the constraints European Union law places on the 1 January 1999" choices of irrevocably fixed conversion rates between the Euro and the currencies of EMU" member states. Current EU legislation, notably the Maastricht treaty bilateral currency conversion factors implied by the 1 January 1999 choices equal closing" market exchange rates on 31 December 1998. Given that legal constraint several strategies for choosing the relative prices of EMU member currencies against the Euro. " Unfortunately, most of these have potentially damaging side effects. One approach official Stage 2 offers of contingent Euro forward contracts with value dates at the start of" Stage 3, allows a highly credible preannouncement of the bilateral currency conversion factors" to be set at the start of EMU. That approach assumes, however, that no prospective EMU" members can withdraw between their selection in May 1998 and the start of Stage 3."
Handle: RePEc:nbr:nberwo:6233
Template-Type: ReDIF-Paper 1.0
Title: The Rate of Return to Corporate Capital and Factor Shares: New EstimatesUsing Revised National Income Accounts and Capital Stock Data
Classification-JEL: D24; D33
Author-Name: James M. Poterba
Author-Person: ppo19
Note: CF PE
Number: 6263
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w6263
File-URL: http://www.nber.org/papers/w6263.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy 48 (1998) 211-246
Abstract: This paper presents new evidence on the rate of return on tangible assets in the United" States, incorporating the recently-revised national accounts as well as new estimates of the" replacement cost of the reproducible physical capital stock. The pretax return on capital in the" nonfinancial corporate sector has averaged 8.5 percent over the 1959-1996 period. The paper" also presents new estimates of the total tax burden on nonfinancial corporate capital averages 54.1 percent over this time period. For the 1990s, this tax rate corporate income taxes, corporate property taxes, and taxes on stock- and bondholders 42.1 percent of pretax profits. The average pretax rate of return for the 1990-1996 period is 8.6" percent, and the average after-tax return is 5.0 percent. Although the accounting return to" corporate capital has been higher in the mid-1990s than at any previous point in the last two" decades, the substantial volatility in the return series makes it premature to conclude that these" years represent a departure from past experience.
Handle: RePEc:nbr:nberwo:6263
Template-Type: ReDIF-Paper 1.0
Title: Costly Capital Reallocation and the Effects of Government Spending
Classification-JEL: E62; E13
Author-Name: Valerie A. Ramey
Author-Person: pra154
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Note: EFG
Number: 6283
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w6283
File-URL: http://www.nber.org/papers/w6283.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy, vol. 48, 1998, pp. 1 145-194
Abstract: Changes in government spending often lead to significant shifts in demand across sectors. This paper analyzes the effects of sector-specific changes in government spending in a two-sector dynamic general equilibrium model in which the reallocation of capital across sectors is costly. The two-sector model leads to a richer array of possible responses of aggregate variables than the one-sector model. The empirical part of the paper estimates the effects of military buildups on a variety of macroeconomic variables using a new measure of military shocks. The behavior of macroeconomic aggregates is consistent with the predictions of a multi-sector neoclassical model. In particular, consumption, real product wages and manufacturing productivity fall in response to exogenous military buildups in the post-World War II United States.
Handle: RePEc:nbr:nberwo:6283
Template-Type: ReDIF-Paper 1.0
Title: Implications of Rising Personal Retirement Saving
Classification-JEL: J14; J26
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: 6295
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6295
File-URL: http://www.nber.org/papers/w6295.pdf
File-Format: application/pdf
Publication-Status: published as Frontiers in the Economics of Aging. Wise, David, ed. pp. 125-172 (Chicago: University of Chicago Press, 1998)
Publication-Status: published as Implications of Rising Personal Retirement Saving, James M. Poterba, Steven F. Venti. in Frontiers in the Economics of Aging, Wise. 1998
Abstract: Retirement saving accounts, particularly employer-provided 401(k) plans rapidly in the last decade. More than forty percent of workers are currently eligible for these" plans, and over seventy percent of eligibles participate in these plans. The substantial and" ongoing accumulation of assets in these plans has the potential to significantly alter the financial" preparations for retirement by future retirees. This paper uses data on current age-specific" patterns of 401(k) participation, in conjunction with Social Security earnings records that provide" detailed information on age-earnings profiles over the lifetime, to project the 401(k) balances of" future retirees. The results, which are illustrated by reference to individuals who were 27 and 37" in 1996, demonstrate the growing importance of 401(k) saving. The projected mean 401(k)" balance at retirement for a current 37 year old is $91,600, assuming that the 401(k) plan assets" are invested half in stocks and half in bonds. For a current 27 year old $125,000. These results support the growing importance of personal saving through retirement" saving accounts in contributing to financial well-being in old age.
Handle: RePEc:nbr:nberwo:6295
Template-Type: ReDIF-Paper 1.0
Title: Unequal at Birth: A Long-Term Comparison of Income and Birth Weight
Classification-JEL: I12; N30
Author-Name: Dora L. Costa
Author-Person: pco358
Note: DAE
Number: 6313
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w6313
File-URL: http://www.nber.org/papers/w6313.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic History, vol. 38, no. 4, pp. 987-1009, December 1998.
Abstract: I demonstrate that although socioeconomic differences in birth weight have always been" fairly small in the United States, they have narrowed since the beginning of this century. I argue" that maternal height, and therefore the mother's nutritional status during her growing years accounted for most of the socioeconomic differences in birth weight in the past implying that in the past health inequality was transmitted across generations. I also show that" children born at the beginning of this century compared favorably to modern populations in terms" of birth weights, but suffered higher fetal and neonatal death rates because obstetrical and" medical knowledge was poorer. In addition, by day ten children in the past were at a" disadvantage relative to children today because best practice resulted in insufficient feeding. The" poor average health of past populations therefore originated in part in the first days of life."
Handle: RePEc:nbr:nberwo:6313
Template-Type: ReDIF-Paper 1.0
Title: Open-Economy Macroeconomics, Developments in Theory and Policy
Classification-JEL: F41
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: IFM
Number: 6319
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w6319
File-URL: http://www.nber.org/papers/w6319.pdf
File-Format: application/pdf
Publication-Status: published as Scandinavian Journal of Economics, vol. 100, no. 1, pp. 247-275, 1998
Abstract: This paper surveys recent research in open-economy macroeconomics, using questions raised by European economic and monetary unification to guide the topics discussed. A striking empirical regularity is the tendency for changes in the nominal exchange rate regime systematically to affect the variability of nominal and real exchange rates alike. This regularity (which disappears in high-inflation conditions) can be explained by sticky-price theories or by models of asset-market liquidity effects. But plausible liquidity models have difficulty generating enough persistence (in output and real exchange rates, in particular) to match the data. So the macroeconomic costs of giving up the exchange-rate realignment option, emphasized in Mundell's optimum currency area concept, seem empirically relevant. The paper discusses other possible costs of currency unification, associated with a reduced number of asset markets. On the benefit side, our theories of the efficiencies due to a common currency remain unsatisfactory, despite recent advances. A key motivation for the choice of a common currency over a fixed exchange rate between national currencies is the fear of speculative attack. The paper concludes by showing how self-fulfilling currency crises can occur, and describes recent progress in narrowing the range of multiple equilibria in adjustable-peg regimes.
Handle: RePEc:nbr:nberwo:6319
Template-Type: ReDIF-Paper 1.0
Title: Transfer Motives and Tax Policy
Classification-JEL: D64; H21
Author-Name: Louis Kaplow
Author-Person: pka44
Note: PE
Number: 6340
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6340
File-URL: http://www.nber.org/papers/w6340.pdf
File-Format: application/pdf
Publication-Status: published as AEA Papers and Proceedings, vol. 88, no. 2, pp. 283-288k, May 1998.(Published as "Tax Policy and "
Abstract: This paper considers the optimal tax treatment of voluntary transfers to individuals in a" framework that integrates redistributive income taxation and estate and gift taxation. Under this" formulation, redistributive considerations become secondary. The optimal tax treatment of" transfers depends upon the differences between expenditures on transfers and ordinary personal" consumption. It turns out that some types of transfers confer a sort of positive externality on" donees, some create tax revenue externalities, and some affect donors' and donees' marginal" utilities of income in a manner relevant to the optimal taxation problem. Different types of" transfers have qualitatively different effects.
Handle: RePEc:nbr:nberwo:6340
Template-Type: ReDIF-Paper 1.0
Title: Alcohol Regulation and Violence Towards Children
Classification-JEL: I10
Author-Name: Sara Markowitz
Author-Person: pma138
Author-Name: Michael Grossman
Author-Person: pgr107
Note: CH EH
Number: 6359
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6359
File-URL: http://www.nber.org/papers/w6359.pdf
File-Format: application/pdf
Publication-Status: published as Contemporary Economic Policy, Vol. 16, no. 3 (July 1996): 309-320.
Abstract: In recent years, economists have paid much attention to the demand for alcohol and the negative externalities associated with excessive drinking. Largely ignored in the literature is the link" between alcohol use and domestic violence. Given the established positive relationship between" alcohol consumption and acts of violence, the purpose of this paper is to examine the role changes" in the determinants of the demand for alcohol may play in reducing the incidence of violence aimed" at children. Data on violence come from the 1976 Physical Violence in American Families survey. " We estimate a reduced form demand model in which violent outcomes are affected by the state" excise tax rate on beer, illegal drug prices and other regulatory variables such as availability" measures and laws restricting advertising of alcohol. Results show that increasing the tax on beer" can be an effective policy tool in reducing violence. Laws designed to make obtaining beer more" difficult may also be effective in reducing violence, while restrictions on advertising and increases" in illegal drug prices have no effects.
Handle: RePEc:nbr:nberwo:6359
Template-Type: ReDIF-Paper 1.0
Title: Has the Business Cycle Been Abolished?
Classification-JEL: E32; E37
Author-Name: Victor Zarnowitz
Note: EFG
Number: 6367
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w6367
File-URL: http://www.nber.org/papers/w6367.pdf
File-Format: application/pdf
Publication-Status: published as Business Economics, vol. 33, no. 4, October 1998. pp. 39-45
Abstract: Long business expansions have repeatedly generated expectations of self- perpetuating prosperity, yet it is clear that such popular forecasts always proved wrong eventually. Few business cycle peaks are successfully predicted; indeed, most are publicly recognized only with lengty delays. Analysts have been prompter to recognize troughs than peaks, even though the latter have often followed major slowdowns and have much longer (but also more variable variable) leadtimes of the indicators. Oil price boosts and monetary policy shifts triggered some recent cyclical downturns, but even in these particular episodes other more regularly observed developments played major roles. THe insistence on single shocks as the causes of recessions is erroneous: the older emphasis on movements in the growth of demand, money and credit, profits and investment deserve a revival. The relatively new but now widely held belief is that, for the recession-free stability to reign, real growth must be no more than moderate and inflation must stay quiescent but financial asset prices can rise indefinitely. The risk of overheating alone is being emphasized but downside as well as upside risks exist and both need to be continually considered."
Handle: RePEc:nbr:nberwo:6367
Template-Type: ReDIF-Paper 1.0
Title: International Capital Movements, Financial Volatility and Financial Instability
Classification-JEL: E3; F3
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: EFG ME
Number: 6390
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w6390
File-URL: http://www.nber.org/papers/w6390.pdf
File-Format: application/pdf
Publication-Status: published as Schriften des Vereins fur Socialpolitik Gelleschaft fur Wirtscharges und Socialwissenschafter, pp. 11-40, 1998.
Abstract: This lecture outlines an asymmetric information theory of financial instability which describes the fundamental forces which harm both the financial sector and economic activity. This asymmetric information framework is then used to demonstrate that although international capital movements and financial volatility can play a role in destabilizing the economy is frequently overstated.
Handle: RePEc:nbr:nberwo:6390
Template-Type: ReDIF-Paper 1.0
Title: Regional Nonadjustment and Fiscal Policy: Lessons for EMU
Classification-JEL: F4; J61
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Giovanni Peri
Author-Person: ppe210
Note: IFM
Number: 6431
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w6431
File-URL: http://www.nber.org/papers/w6431.pdf
File-Format: application/pdf
Publication-Status: published as Economic Policy, vol. 26, pp. 205-259, 1998.
Abstract: How will countries handle idiosyncratic national macroeconomic shocks under the European single currency? The ways in which European countries now react to internally asymmetric shocks provide a better forecast than do the regional response pattern of the United States. In this paper we compare the US with Germany, Italy, the United Kingdom, and also with Canada, which is closer to European than the US is in its labor market and fiscal institutions. Europe's (and to some extent Canada's) model of regional response differs from that of the US. Changes in relative regional real exchange rates are general small. Outside of the US, however, there is more reliance on interregional transfer payments, less on labor migration, and the pace of regional adjustment appears slower. The regional adjustment patterns currently prevailing within European currency unions--characterized by limited labor mobility and price inflexibility--seem likely to prevail at the national level under the single currency. If EMU aims to attain the economic and social cohesion of its constituent nations, it therefore may be hard to resist the eventual extension of existing EU mechanisms of income redistribution--a transfer union. We propose an alternative strategy based on a relaxed stability pact, further strictures against central EU borrowing, labor market and fiscal reform, and the issuance by individual member states of debt indexed to nominal GDP.
Handle: RePEc:nbr:nberwo:6431
Template-Type: ReDIF-Paper 1.0
Title: Producers and Predators
Classification-JEL: D50; D61
Author-Name: Herschel I. Grossman
Number: 6499
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w6499
File-URL: http://www.nber.org/papers/w6499.pdf
File-Format: application/pdf
Publication-Status: published as Pacific Economic Review, vol. 3, no. 3, pp. 169-187, 1998.
Abstract: This paper explores a series of general-equilibrium models in which people can choose to be either producers or predators, and in which producers can allocate their resources either to production or to guarding their production against predators. The analysis shows how the ratio of predators to producers and the social cost of predation depend on the technology of predation, on the interpersonal distribution of productive resources, and in an fundamental way on whether the decision to allocate resources to guarding against predators is made individually or collectively.
Handle: RePEc:nbr:nberwo:6499
Template-Type: ReDIF-Paper 1.0
Title: Vertical Externalities in Tax Setting: Evidence from Gasoline and Cigarettes
Classification-JEL: H20; H77
Author-Name: Timothy J. Besley
Author-Person: pbe46
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE
Number: 6517
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6517
File-URL: http://www.nber.org/papers/w6517.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics 70 (1998) 383-398
Abstract: A common feature of federal systems is that tax bases are joint property. Consequently, state and federal tax setting decisions are interdependent. Our aim here is to put forward a rudimentary theoretical analysis of this phenomenon, and to use the theory as a framework for econometrically estimating the magnitude of the responses. We find that when the federal government increases taxes, there is a significant positive response of state taxes. For example, a 10-cent per gallon increase in the federal tax rate on gasoline leads to a 3.2-cent increase in the state tax rate.
Handle: RePEc:nbr:nberwo:6517
Template-Type: ReDIF-Paper 1.0
Title: Maintaining Social Security Benefits and Tax Rates through Personal Retirement Accounts: An Update Based on the 1998 Social Security Trustees Report
Classification-JEL: H55
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Andrew Samwick
Author-Person: psa395
Note: AG PE
Number: 6540
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6540
File-URL: http://www.nber.org/papers/w6540.pdf
File-Format: application/pdf
Abstract: A program of Personal Retirement Accounts (PRAs) funded by deposits equal to 2.3 percent of earnings (up to the Social Security maximum) would permit retirees to receive more income in retirement than with the current Social Security program while at the same time making it unnecessary to increase the 12.4 percent payroll tax in response to the aging of the population. The gross cost of these deposits, approximately 0.9 percent of GDP, could be financed for more than a decade out of the budget surpluses currently projected by the Congressional Budget Office. By the year 2030, the additional corporate tax revenue that results from the enlarged capital stock financed by PRA assets would be able to finance fully these personal tax credits. During the intervening years (about 2020 to 2030), a reduction of other government spending or an increase in taxes would be needed if budget deficits are to be avoided. If implemented, the PRA program would not only increase retirement income and stabilize the Social Security payroll tax, but would also substantially increase national saving and GDP. NOTE: This is a revised version of "Two Percent Personal Retirement Accounts: Their Potential Effects on Social Security Tax Rates and National Saving," by Martin Feldstein and Andrew Samwick, issued in April, 1998 as working paper 6540.
Handle: RePEc:nbr:nberwo:6540
Template-Type: ReDIF-Paper 1.0
Title: Why Do Some Countries Produce So Much More Output per Worker than Others?
Classification-JEL: E23; O47
Author-Name: Robert E. Hall
Author-Name: Charles I. Jones
Author-Person: pjo24
Note: EFG
Number: 6564
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w6564
File-URL: http://www.nber.org/papers/w6564.pdf
File-Format: application/pdf
Publication-Status: published as The Quarterly Journal of Economics, vol. 114, no. 1, pp. 83-116, February 1999.
Abstract: Output per worker varies enormously across countries. Why? On an accounting basis, our analysis shows that differences in physical capital and educational attainment can only partially explain the variation in output per worker we find a large amount of variation in the level of the Solow residual across countries. At a deeper level, we document that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which we call social infrastructure. We treat social infrastructure as endogenous, determined historically by location and other factors captured in part by language.
Handle: RePEc:nbr:nberwo:6564
Template-Type: ReDIF-Paper 1.0
Title: Financial Consolidation: Dangers and Opportunities
Classification-JEL: G21
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: ME
Number: 6655
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w6655
File-URL: http://www.nber.org/papers/w6655.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Banking and Finance. 23 (1999) 675-691
Abstract: This paper argues that although financial consolidation creates some dangers because it is leading to larger institutions who might expose the U.S. financial system to increased systemic risk, these dangers can be handled by vigilant supervision and a government safety net with an appropriate amount of constructive ambiguity. Financial consolidation also opens up opportunities to dramatically reduce the scope of deposit insurance and limit it to narrow bank accounts, thus substantially reducing the moral hazard created by the government safety net. Reducing the scope of deposit insurance, however, does not eliminate the need for a government safety net, and thus there is still a strong need for adequate prudential supervision of the financial system. Moving to a world in which we have larger, nationwide, diversified financial institutions and in which deposit insurance plays a very limited role, should improve the efficiency of the financial system. However, it is no panacea: the job of financial regulators and supervisors will continue to be highly challenging in the future.
Handle: RePEc:nbr:nberwo:6655
Template-Type: ReDIF-Paper 1.0
Title: Are Investment Incentives Blunted by Changes in Prices of Capital Goods?
Author-Name: Kevin A. Hassett
Author-Person: pha378
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Number: 6676
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w6676
File-URL: http://www.nber.org/papers/w6676.pdf
File-Format: application/pdf
Publication-Status: published as International Finance, vol. 1, no. 1, pp. 106-125, 1998.
Abstract: Recent research on business investment decisions suggests that real investment in plant and equipment is quite sensitive to changes in the user cost of capital, pointing to the possibility that long-run changes in tax policy may have a significant impact on an economy's capital stock. Indeed, many countries have at times adopted investment tax incentives to stimulate investment. The prevalence of investment incentives suggests that local policymakers believe that incentives are effective in increasing investment at a reasonable cost in terms of lost revenue for a given increment to investment. In this paper, we explore this issue by estimating the extent to which countries are price-takers in the world market for capital goods. We find that most countries -- even the United States -- likely currently face a highly elastic supply of capital goods, suggesting that the effect of investment incentives on the price of investment goods is small. Hence efforts of long-run changes in investment tax policy are likely to materialize in real investment rather than simply being dissipated in changes in capital-goods prices.
Handle: RePEc:nbr:nberwo:6676
Template-Type: ReDIF-Paper 1.0
Title: EMU: Ready, or Not?
Classification-JEL: F02; F33
Author-Name: Maurice Obstfeld
Author-Person: pob13
Note: IFM
Number: 6682
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w6682
File-URL: http://www.nber.org/papers/w6682.pdf
File-Format: application/pdf
Publication-Status: published as Princeton Essays in International Finance, no. 209, July 1998
Abstract: In this paper I focus on two specific hazard areas in the transition from Stage Two to Stage Three of European economic and monetary union (EMU), as well as on some key problems of Stage Three that EMU's monetary and fiscal structures appear ill-prepared to handle. The transitional hazards are of considerable theoretical as well as policy interest: the best way to coordinate monetary stances and lock exchange parties for a smooth switch from eleven national currencies to a single joint currency. A third problems, one that is central for EMU and to any currency union, lies behind the difficulty of the transition: the possibility of nationally asymmetric real shocks. I review that topic in the context of Ireland's recent experience. The paper goes on to discuss weaknesses in the structure of Stage Three, already much noted, connected with the provision of lender of last resort facilities in the euro zone and the framework for supervising financial institutions. The deficit and debt limits embodies in the excessive deficits procedure of the Maastrich treaty and the subsequent Stability and Growth Pact have been justified by the threat high debts might pose to the stability of the euro zone's financial markets. I consider the past and prospective fiscal adjustments of the EMU 11, and suggest these might pose future difficulties for macroeconomic policy and growth.
Handle: RePEc:nbr:nberwo:6682
Template-Type: ReDIF-Paper 1.0
Title: How Did the Dollar Peg Fail in Asia?
Classification-JEL: F31; O11
Author-Name: Takatoshi Ito
Author-Name: Eiji Ogawa
Author-Name: Yuri Nagataki Sasaki
Note: IFM
Number: 6729
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w6729
File-URL: http://www.nber.org/papers/w6729.pdf
File-Format: application/pdf
Publication-Status: published as Ito, Takatoshi & Ogawa, Eiji & Sasaki, Yuri Nagataki, 1998. "How Did the Dollar Peg Fail in Asia?," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 256-304, December.
Abstract: In this paper we have constructed a theoretical model in which Asian firms maximize their profit, competing with Japanese and US firms in their markets. The duopoly model is used to determine export prices and volumes in response to the exchange rate fluctuations vis-…-vis the Japanese yen and the US dollar. Then, the optimal basket weight to minimize the fluctuation of the growth rate of trade balance is derived. These are the novel features of our model. The export price equation and export volume equation are estimated for several Asian countries for the sample period of 1981 to 1996. Results are generally reasonable. The optimal currency weights for the yen and the US dollars are derived and compared with actual weights that had been adopted before the currency crisis of 1997. For all the countries in the sample, it is shown that the optimal weight of the yen is significantly higher than the actual weight.
Handle: RePEc:nbr:nberwo:6729
Template-Type: ReDIF-Paper 1.0
Title: The Mercantilist Index of Trade Policy
Classification-JEL: F13
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: J. Peter Neary
Author-Person: pne11
Note: ITI
Number: 6870
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6870
File-URL: http://www.nber.org/papers/w6870.pdf
File-Format: application/pdf
Publication-Status: published as Anderson, James E. and J. Peter Neary. "The Mercantilist Index Of Trade Policy," International Economic Review, 2003, v44(2,May), 627-649.
Abstract: This paper develops and characterizes an index of trade policy restrictiveness defined as the uniform tariff equivalent which maintains the same volume of trade as a given set of tariffs, quota, and domestic taxes and subsidies. We relate this volume-equivalent index to the Trade Restrictiveness Index welfare-equivalent measure changes in the generalised mean and variance of the tariff schedule. Applications to international cross-section and time-series comparisons of trade policy show that the new index frequently gives a very different picture than do standard indexes.
Handle: RePEc:nbr:nberwo:6870
Template-Type: ReDIF-Paper 1.0
Title: Statistical Discrimination in a Competitive Labor Market
Author-Name: Jonathan B. Berk
Note: LS
Number: 6871
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6871
File-URL: http://www.nber.org/papers/w6871.pdf
File-Format: application/pdf
Abstract: This paper studies the effect of employee job selection in a model of statistical discrimination in a competitive labor market. In an economy in which there are quality differences between groups, a surprisingly strong condition is required to guarantee discrimination against the worse qualified group --- MLRP must hold. In addition, because of the self-selection bias induced by competition, the resulting discrimination is small when compared to the magnitude of the underlying quality differences between groups. In cases in which the discrimination results because employers' ability to measure qualifications differs from one group to another, the conditions under which one group is discriminated against are much weaker. In general, the group employers know least about is always favored. The economic impact of discrimination that is derived from quality differences between groups is shown to be quite different to the economic impact of discrimination that derives from differences in employer familiarity between groups. In the latter case, for a set of equally qualified employees, it is possible for members of the group that is discriminated against to have higher wages. Finally, we show how the results can be used to explain a number of empirical puzzles that are documented in the literature.
Handle: RePEc:nbr:nberwo:6871
Template-Type: ReDIF-Paper 1.0
Title: Did Community Rating Induce an Adverse Selection Death Spiral? Evidencefrom New York, Pennsylvania and Connecticut
Classification-JEL: I11; I18
Author-Name: Thomas Buchmueller
Author-Person: pbu179
Author-Name: John DiNardo
Author-Person: pdi178
Note: EH
Number: 6872
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6872
File-URL: http://www.nber.org/papers/w6872.pdf
File-Format: application/pdf
Publication-Status: published as Thomas Buchmueller & John Dinardo, 2002. "Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania, and Connecticut," American Economic Review, American Economic Association, vol. 92(1), pages 280-294, March.
Abstract: Using data from the 1987 to 1996 March Current Population Surveys we find no evidence for the conventional wisdom' that the imposition of pure community rating leads to an adverse selection death spiral.' Specifically, the percentage of individuals in small groups covered by health insurance did not fall in New York (which enacted community rating legislation in 1993) relative to either Pennsylvania (which enacted no insurance reform) or Connecticut (which enacted moderate insurance reform without imposing community rating). Consistent with the predictions of the simple Rothschild and Stiglitz (1975) framework, however, we find that the New York reforms appear to have had a significant impact on the structure of the New York insurance market. Specifically, New York has experienced a dramatic shift away from indemnity insurance toward HMOs. While this shift took place during a period of nationwide increases in the percentage with managed care, the increase in HMO penetration in New York's small group and individual markets was significantly greater than in Pennsylvania or Connecticut.
Handle: RePEc:nbr:nberwo:6872
Template-Type: ReDIF-Paper 1.0
Title: Explaining Rising Income and wage Inequality Among the College Educated
Author-Name: Caroline M. Hoxby
Author-Person: pho46
Author-Name: Bridget Terry
Author-Person: plo320
Note: LS
Number: 6873
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6873
File-URL: http://www.nber.org/papers/w6873.pdf
File-Format: application/pdf
Abstract: The incomes and wages of college-educated Americans have become significantly more dispersed since 1970. This paper attempts to decompose this growing dispersion into three possible sources of growth. The first source, or extensive margin,' is the increasing demographic diversity of people who attend college. The second is an increasing return to aptitude. The third, or intensive margin,' combines the increasing self-segregation (on the basis of aptitude) of students among colleges and the increasing correlation between the average aptitude of a college's student body and its expenditure on education inputs. These tendencies are the result of changes in the market structure of college education, as documented elsewhere. We find that about 70% of the growth in inequality among recipients of baccalaureate degrees can be explained with observable demographics, measures of aptitude, and college attributes. About 50% of the growth in inequality among people who have 2 years of college education can be similarly explained. Of the growth that can be explained, about 1/4th is associated with the extensive margin, 1/3rd with an increased return to measured aptitude, and 5/12ths with the intensive margin. If the intensive margin is not taken into account, the role of increasing returns to aptitude is greatly overstated.
Handle: RePEc:nbr:nberwo:6873
Template-Type: ReDIF-Paper 1.0
Title: Financial Markets' Assessment of EMU
Classification-JEL: F36
Author-Name: David S. Bates
Note: IFM
Number: 6874
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6874
File-URL: http://www.nber.org/papers/w6874.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy, Vol. 51, no. 1(1999): 229-269.
Abstract: This article reviews the assumptions and methodologies underlying EMU probability calculators,' which infer from financial data the probability of specific countries joining the European Monetary Union. Some historical evidence is presented in support of the expectations hypothesis for intra-European interest rate differentials underlying most calculators, while various potential biases are deemed negligible. The various EMU calculators differ primarily in their scenarios for intra-European interest rate differentials conditional upon EMU not occurring. This article also discusses what can be inferred from financial data regarding future policies of the European Central Bank.
Handle: RePEc:nbr:nberwo:6874
Template-Type: ReDIF-Paper 1.0
Title: Managerial Incentive Problems: A Dynamic Perspective
Classification-JEL: D8
Author-Name: Bengt Holmstrom
Author-Person: pho488
Note: CF
Number: 6875
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6875
File-URL: http://www.nber.org/papers/w6875.pdf
File-Format: application/pdf
Publication-Status: published as The Review of Economic Studies, Vol. 66, no. 1 (January 1999): 169-182.
Abstract: The paper studies how a person's concern for a future career may influence his or her incentives to put in effort or make decisions on the job. In the model, the person's productive abilities are revealed over time through observations of performance. There are no explicit output contingent contracts, but since the wage in each period is based on expected output and expected output depends on assessed ability, an implicit contact' links today's performance to future wages. An incentive problem arises from the person's ability and desire to influence the learning process, and therefore the wage process, by taking unobserved actions that affect today's performance. The fundamental incongruity in preferences is between the individual's concern for human capital returns and the firm's concern for financial returns. The two need to be only weakly related. It is shown that career motives can be beneficial as well as detrimental, depending on how well the two kinds of capital returns are aligned.
Handle: RePEc:nbr:nberwo:6875
Template-Type: ReDIF-Paper 1.0
Title: The Location and Characteristics of U.S. Affiliates in Asia
Classification-JEL: F23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 6876
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6876
File-URL: http://www.nber.org/papers/w6876.pdf
File-Format: application/pdf
Publication-Status: published as Papers and Proceedings of International Symposium: Foreign Direct Investment in Asia (October 22-23, 1998), Tokyo, Department of Research Cooperatoin, Economic Research Institute, Economic Planning Agency, Government of Japan.
Abstract: Market size and growth rates, per capita income, distance from the United States, and tax rates on U.S. affiliates accounted for about half the variation among developing host countries in most aspects of U.S. FDI activity. Residuals from the equations for one period add greatly to the explanatory power of the next period's equations, suggesting that there are long-run characteristics of the host economies, omitted from the equations, that are favorable or unfavorable to U.S. investment and FDI activity. There are considerable differences in the determinants of U.S. FDI activity between industries in which U.S. affiliates are export-oriented, such as machinery, and industries in which the affiliates' sales are mainly local. In the export-oriented industries, market size and distance from the United States were unimportant, and high per capita real income was the most consistent favorable influence. In the industries oriented to local sales, large market size attracted U.S. firms and long distance from the United States discouraged them. Among the ten Asian countries studied, Singapore and Malaysia had the largest U.S. affiliate shares of aggregate output while India, China, and Korea had the smallest. The countries with the largest shares were also those that ranked high on measures of institutional characteristics, including low levels of corruption. Measured by deviations from the equations, however, the relation to the institutional measures was blurred, suggesting that the institutional measures are correlated with the economic characteristics used as explanatory variables in the equations.
Handle: RePEc:nbr:nberwo:6876
Template-Type: ReDIF-Paper 1.0
Title: Factor Adjustment, Quality Change, and Productivity Growth for U.S. Manufacturing
Classification-JEL: D24; D47
Author-Name: Jeffrey I. Bernstein
Author-Person: pbe327
Author-Name: Theofanis P. Mamuneas
Author-Person: pma43
Author-Name: Panos Pashardes
Note: PR DEV
Number: 6877
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6877
File-URL: http://www.nber.org/papers/w6877.pdf
File-Format: application/pdf
Abstract: This paper accounts for quality improvements and adjustment costs in all inputs to U.S. manufacturing production. Adjustment processes for non-capital inputs are slower than previously recognized. Annual adjustment percentages are: labor 77, capital 30, energy 20, and materials 21. Factor prices should be adjusted for quality improvements to reflect higher marginal products. The percentage increases in marginal products from quality improvements are: labor 0.25, capital 0.30, energy 2.13, and materials 0.92. Observed input growth should be adjusted for quality improvements. Unadjusted input growth causes efficiency-based productivity growth rates to exceed observed productivity growth in the slowdown period of 1974 - 1995.
Handle: RePEc:nbr:nberwo:6877
Template-Type: ReDIF-Paper 1.0
Title: Post-Unification Wage Growth in East Germany
Classification-JEL: J3; P2
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LS
Number: 6878
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6878
File-URL: http://www.nber.org/papers/w6878.pdf
File-Format: application/pdf
Publication-Status: published as Hunt, Jennifer. "The Transition In East Germany: When Is A Ten-Point Fall In The Gender Wage Gap Bad News?," Journal of Labor Economics, 2002, v20(1,Jan), 148-169.
Publication-Status: published as Jennifer Hunt, 2001. "Post-Unification Wage Growth in East Germany," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 190-195, February.
Abstract: Following monetary union with west Germany in June 1990, the median real monthly wage of prime age east German workers rose by 83% in six years. I use the German Socio-Economic Panel data to investigate the determinants of this wage growth and some of its implications. For the 1990-1991 period I find that the biggest gainers were low-wage workers generally, and women and the less educated specifically. In the 1991-1996 period the biggest gainers were women and the better educated. Job changing rates were high; a majority of workers had changed jobs by 1996. The return to job changing, particularly changing to a job in the west, was high in 1990-1991 but fell greatly in the later period, so that overall only 18% of wage growth was due to job changing within the east, and 7% to east-west job changing.
Handle: RePEc:nbr:nberwo:6878
Template-Type: ReDIF-Paper 1.0
Title: Productivity Differences
Classification-JEL: F43; O14
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Fabrizio Zilbotti
Note: LS
Number: 6879
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6879
File-URL: http://www.nber.org/papers/w6879.pdf
File-Format: application/pdf
Publication-Status: published as Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 563-606, May.
Abstract: Many technologies used by the LDCs are developed in the OECD economies, and as such are designed to make optimal use of the skills of these richer countries' workforces. Due to differences in the supply of skills, some of the tasks performed by skilled workers in the OECD economies will be carried out by unskilled workers in the LDCs. Since the technologies in these tasks are designed to be used by skilled workers, productivity in the LDCs will be low. Even when all countries have equal access to new technologies, this mismatch between skills and technology can lead to sizable differences in total factor productivity and output per worker. Our theory also suggests that productivity differences should be highest in medium-tech sectors, and that the trade regime and the degree of intellectual property right enforcement in the LDCs have an important effect on the direction of technical change and on productivity differences.
Handle: RePEc:nbr:nberwo:6879
Template-Type: ReDIF-Paper 1.0
Title: Conditioning Information and Variance Bounds on Pricing Kernels
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Jun Liu
Note: AP
Number: 6880
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6880
File-URL: http://www.nber.org/papers/w6880.pdf
File-Format: application/pdf
Publication-Status: published as Bekaert, Geert and Jun Liu. "Conditioning Information And Variance Bounds On Pricing Kernels," Review of Financial Studies, 2004, v17(2,Summer), 339-378.
Abstract: We show how to use conditioning information optimally to construct a sharper unconditional Hansen-Jagannathan (1991) bound. The approach in this paper is different from that of Gallant, Hansen and Tauchen (1990), but both approaches yield the same bound when the conditional moments are known. Unlike Gallant, Hansen and Tauchen, our approach is robust to misspecification of the first and second conditional moments. Potential applications include testing dynamic asset pricing models, studying the predictability of asset returns, diagnosing the accuracy of competing models for the first and second conditional moments of asset returns, dynamic asset allocation and mutual fund performance measurement. The illustration in this article starts with the familiar Hansen-Singleton (1983) setup of an autoregressive model for consumption growth and bond and stock returns. Our innovation is to add time-varying volatility to the model. Both an unconstrained version and a version with the restrictions of the standard consumption-based asset pricing model imposed serve as the data-generating processes to illustrate the behavior of the bounds. In the process, we discover and explore an interesting empirical phenomenon: asymmetric volatility in consumption growth.
Handle: RePEc:nbr:nberwo:6880
Template-Type: ReDIF-Paper 1.0
Title: General Equilibrium Cost Benefit Analysis of Education and Tax Policies
Classification-JEL: H52; H43
Author-Name: James J. Heckman
Author-Name: Lance Lochner
Author-Person: plo31
Author-Name: Christopher Taber
Note: LS PE
Number: 6881
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6881
File-URL: http://www.nber.org/papers/w6881.pdf
File-Format: application/pdf
Publication-Status: published as Ranis, G. and L. K. Raut (eds.) Trade, Growth and Development: Essays in Honor of Professor T. N. Srinivasan. Amsterdam: Elsevier Science B. V., 1999.
Abstract: This paper formulates and estimates an open-economy overlapping generation general-equilibrium model of endogenous heterogeneous human capital in the form of schooling and on-the-job training. Physical capital accumulation is also analyzed. We use the model to explain rising wage inequality in the past two decades due to skill-biased technical change and to estimate investment responses. We compare an open economy version with a closed economy version. Using our empirically grounded general equilibrium model that explains rising wage inequality, we evaluate two policies often suggested as solutions to the problem of rising wage inequality: (a) tuition subsidies to promote skill formation and (b) tax policies. We establish that conventional partial equilibrium policy evaluation methods widely used in labor economics and public finance give substantially misleading estimates of the impact of national tax and tuition policies on skill formation. Conventional microeconomic methods for estimating the schooling response to tuition overestimate the response by an order of magnitude. Simulations of our model also reveal that move to a flat consumption tax raises capital accumulation and the real wages of all skill groups and barely affects overall measures of income inequality.
Handle: RePEc:nbr:nberwo:6881
Template-Type: ReDIF-Paper 1.0
Title: Balancing Incentives: The Tension Between Basic and Applied Research
Classification-JEL: D23; G31
Author-Name: Iain Cockburn
Author-Person: pco166
Author-Name: Rebecca Henderson
Author-Name: Scott Stern
Note: PR
Number: 6882
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6882
File-URL: http://www.nber.org/papers/w6882.pdf
File-Format: application/pdf
Abstract: This paper presents empirical evidence that the intensity of research workers' incentives for the distinct tasks of basic and applied research are positively associated with each other. We relate this finding to the prediction of the theoretical literature that when effort is multi-dimensional, firms will balance' the provision of incentives; when incentives are strong along one dimension, firms will set high-powered incentives for effort along other dimensions which compete for the worker's effort and attention (Holmstrom and Milgrom, 1991). We test for this effect in the context of pharmaceutical research using detailed data on individual research programs financed by private firms. Consistent with the complementarity hypothesis, we find strong evidence that firms who provide strong promotion-based incentives for individuals to invest in fundamental or basic' research also provide more intense incentives for success in applied research through the capital budgeting process. The intensity of these bonus' incentives is weaker in firms who use a more centralized research budgeting process. We interpret this latter finding as providing support for theories which emphasize substitutability between contractible and non-contractible signals of effort (Baker, Gibbons, and Murphy, 1994).
Handle: RePEc:nbr:nberwo:6882
Template-Type: ReDIF-Paper 1.0
Title: Is Europe Going Too Far?
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Romain Wacziarg
Author-Person: pwa67
Note: ME
Number: 6883
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6883
File-URL: http://www.nber.org/papers/w6883.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto & Wacziarg, Romain, 1999. "Is Europe going too far?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 51(1), pages 1-42, December.
Abstract: This paper examines the process of European political integration. We start with a political economy model of monetary policy, illustrating a general principle: economic integration requires setting up European institutions endowed with the authority to enact Europe-wide policies. However, when countries can take advantage of scale effects thanks to economic integration, the need for large countries is reduced. Thus increased economic integration reduces the need for political integration in Europe. To reconcile these views, we propose a model for the optimal allocation of prerogatives across levels of government. When the provision of public goods is characterized by cross-border spillovers, some centralization of policies may be needed to internalize the externality. These gains from centralization must be traded-off against the costs from imposing the same policies upon heterogeneous groups. The optimal allocation of prerogatives results from this trade-off. Using our model as a benchmark, we analyze the institutional incentives at play for the allocation of political prerogatives in Europe and conclude that the EU has gone too far on most issues.
Handle: RePEc:nbr:nberwo:6883
Template-Type: ReDIF-Paper 1.0
Title: An Information-Based Model of Foreign Direct Investment: The Gains from Trade Revisited
Classification-JEL: F10; G15
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Author-Name: Chi-Wa Yuen
Note: ITI
Number: 6884
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6884
File-URL: http://www.nber.org/papers/w6884.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf, Efraim Sadka and Chi-Wa Yuen. "An Information-Based Model Of Foreign Direct Investment: The Gains From Trade Revisited," International Tax and Public Finance, 1999, v6(4,Nov), 579-596.
Abstract: Foreign direct investment (FDI) is observed to be a predominant form of capital flows to emerging economies, especially when they are liquidity-constrained internationally during a global financial crisis. The financial aspects of FDI are the focus of the paper. We analyze the problem of channeling domestic saving into productive investment in the presence of asymmetric information between the managing owners of firms and the other portfolio stakeholders. We explore the role played by FDI in reviving equity-financed capital investment for economies plagued by such information problems. In the presence of asymmetry, the paper identifies how, however, FDI gives rise to foreign overinvestment as well as domestic undersaving. We re-examine the gains from trade argument (applied to intertemporal trade) in this case of informational-asymmetry driven FDI. We show that the gains could be sizable when the domestic credit market is either underdeveloped or failing as a result of a financial crisis. But with well-functioning domestic credit market, the gains turn into losses. Surprisingly, capital may flow into the country even though the autarkic marginal productivity of capital in the domestic economy falls short of the world rate of interest. In such a situation, capital should have efficiently flown out rather than in, and FDI is a loss-generating phenomenon.
Handle: RePEc:nbr:nberwo:6884
Template-Type: ReDIF-Paper 1.0
Title: Capitalization of Capital Gains Taxes: Evidence from Stock Price Reactions to the 1997 Rate Reduction
Classification-JEL: H24; G12
Author-Name: Mark H. Lang
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Note: PE
Number: 6885
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6885
File-URL: http://www.nber.org/papers/w6885.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics, Vol. 76 (2000): 69-85.
Abstract: We empirically document that stock prices moved inversely with dividend yields during the May, 1997 week, when the White House and Congress agreed on a budget accord that included a reduction in the capital gains tax rate. The share prices of firms not currently paying dividends increased approximately 6 percentage points more over a five-day window than the share prices of other firms. Among firms paying dividends, the change in share prices was decreasing in dividend yields. The results are consistent with at least two related explanations. First, to the extent a stock's returns are expected to be taxed as capital gains, a reduction in the expected capital gains tax rate enhances the attractiveness of the investment to investors. Second, to the extent a firm's stock is held by shareholders subject to the capital gains tax, a reduction in the expected capital gains tax rate increases its market value. The findings present evidence consistent with neither a sell-off of appreciated securities following the rate reduction nor a reduction in the compensation for capital gains taxes that selling shareholders demand from buyers. The upward price pressure around the accord dominated any downward price pressure imposed by these factors.
Handle: RePEc:nbr:nberwo:6885
Template-Type: ReDIF-Paper 1.0
Title: Risks to Lenders and Borrowers in International Capital Markets
Classification-JEL: F3; G15
Author-Name: Benjamin E. Hermalin
Author-Person: phe59
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM
Number: 6886
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6886
File-URL: http://www.nber.org/papers/w6886.pdf
File-Format: application/pdf
Publication-Status: published as Risks to Lenders and Borrowers in International Capital Markets, Benjamin Hermalin, Andrew K. Rose, Peter M. Garber, Andrew Crockett, David W. Mullins, Jr. in International Capital Flows, Feldstein. 1999
Abstract: This paper provides a framework for understanding the risks to borrowers and lenders in capital markets. We begin with a description of a capital markets in a domestic context. This allows us to focus on two key imperfections which lie at the heart of all financial systems: imperfect information, and the difficulty of making credible commitments for repayment. In the international context, these problems tend to be exacerbated. There are also two sources of risk in international borrowing that are absent in a purely domestic context: the risk that sovereign borrowers will default, and the risk of macroeconomic instability that stems from the impact of net capital flows on the monetary system.
Handle: RePEc:nbr:nberwo:6886
Template-Type: ReDIF-Paper 1.0
Title: Does Publicly Provided Health Insurance Improve the Health of Low-Income Children in the United States
Classification-JEL: I12; I18
Author-Name: Robert Kaestner
Author-Person: pka42
Author-Name: Theodore Joyce
Author-Person: pjo112
Author-Name: Andrew Racine
Note: CH EH
Number: 6887
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6887
File-URL: http://www.nber.org/papers/w6887.pdf
File-Format: application/pdf
Abstract: In this study we analyze the effect of Medicaid on children's heath. We examine the effect of Medicaid on a variety of health outcomes using two data sources: the National Health Interview Surveys (NHIS) and the Nationwide Inpatient Sample (NIS) of hospital discharges. Using the NHIS, we examine the effect of Medicaid participation on maternal ratings of child health and maternal reports of the number of bed days in the past year (i.e. morbidity). The NIS data was used to examine the effect of Medicaid program expansions on the incidence of ambulatory care sensitive (ACS) discharges. ACS discharges are known to be sensitive to medical intervention and are objective measures of children's health. The results of this paper provide at best weak support for the hypothesis that Medicaid improves the health of low-income children.
Handle: RePEc:nbr:nberwo:6887
Template-Type: ReDIF-Paper 1.0
Title: The Lives of the Painters of Modern Life: The Careers of Artists in France from Impressionism to Cubism
Classification-JEL: J24
Author-Name: David W. Galenson
Note: LS
Number: 6888
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6888
File-URL: http://www.nber.org/papers/w6888.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. "The Careers Of Modern Artists," Journal of Cultural Economics, 2000, v24(2,May), 87-112.
Abstract: Modern painting began in France during the nineteenth century. Using transactions from art auctions for the work of 50 leading painters who worked in France during the first century of modern art, I estimate the relationship between the value of a painting and the artist's age at the date of its execution. The econometric estimates show that artists born before 1850 - including Manet, C‚zanne, and Degas - typically produced their most valuable work late in their careers, whereas artists born after 1850 - including Picasso, L‚ger, and Braque - were more likely to have done their most valuable work at early ages. Comparison of these results to evidence drawn from art history textbooks furthermore demonstrates that these artists' most valuable work has also been that most highly regarded by scholars. I argue that the change over time in the shape of these artists' age-price profiles was a result of changes in the nature of painting during the late nineteenth century, as painting increasingly became an activity in which innovation was a principal determinant of an artist's importance.
Handle: RePEc:nbr:nberwo:6888
Template-Type: ReDIF-Paper 1.0
Title: Competitive Devaluations: A Welfare-Based Approach
Classification-JEL: F32; F41
Author-Name: Giancarlo Corsetti
Author-Name: Paolo Pesenti
Author-Person: ppe152
Author-Name: Nouriel Roubini
Author-Person: pro145
Author-Name: Cedric Tille
Author-Person: pti5
Note: IFM
Number: 6889
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6889
File-URL: http://www.nber.org/papers/w6889.pdf
File-Format: application/pdf
Publication-Status: published as Corsetti, Giancarlo, Paolo Pesenti, Nouriel Roubini and Cedric Tille. "Competitive Devaluations: Toward A Welfare-Based Approach," Journal of International Economics, 2000, v51(1,Jun), 217-241.
Abstract: This paper studies the mechanism of international transmission of exchange rate shocks within a 3-country Center-Periphery model, providing a choice-theoretic framework for the policy analysis and empirical assessment of competitive devaluations. If relative prices and terms of trade exhibit some flexibility conforming to the law of one price, a devaluation by one country is beggar-thy-neighbor relative to another country through its effects on cost-competitiveness in a third market. Yet, due to direct bilateral trade among the two countries, there is a large range of parameter values for which a country is better off by maintaining a peg in response to its partner's devaluation. If instead deviations from the law of one price are to be considered the dominant empirical paradigm, then the beggar-thy-neighbor effect based on competition in a third market may disappear. However, a country's devaluation has a negative welfare impact on the economies of its trading partners based on the deterioration of their export revenues and profits and the increase in disutility from higher labor effort for any level of consumption.
Handle: RePEc:nbr:nberwo:6889
Template-Type: ReDIF-Paper 1.0
Title: Patient Welfare and Patient Compliance: An Empirical Framework for Measuring the Benefits from Pharmaceutical Innovation
Classification-JEL: C51; C81
Author-Name: Paul Ellickson
Author-Person: pel140
Author-Name: Scott Stern
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: EH
Number: 6890
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6890
File-URL: http://www.nber.org/papers/w6890.pdf
File-Format: application/pdf
Publication-Status: published as Patient Welfare and Patient Compliance -- An Empirical Framework for Measuring the Benefits from Pharmaceutical Innovation, Paul Ellickson, Scott Stern, Manuel Trajtenberg. in Medical Care Output and Productivity, Cutler and Berndt. 2001
Abstract: The main goal of this paper is to develop an empirical framework for evaluating the patient welfare benefits arising from pharmaceutical innovation. Extending previous studies of the welfare benefits from innovation (Trajtenberg, 1990; Hausman, 1996), this paper unpacks the separate choices made by physicians and patients in pharmaceutical decisionmaking and develops an estimable econometric model which reflects these choices. Our proposed estimator for patient welfare depends on (a) whether patients comply with the prescriptions they receive from physicians and (b) the motives of physicians in their prescription behavior. By focusing on compliance behavior, the proposed welfare measure reflects a specific economic choice made by patients. We review evidence that the rate of noncompliance ranges up to 70%, suggesting an important gulf between physician prescription behavior and realized patient welfare. Since physicians act as imperfect but interested agents for their patients, the welfare analysis based on compliance must account for the nonrandom selection of patients into drugs by their physicians. The key contribution of this paper resides in integrating the choices made by both physicians and patients into a unified theoretical framework and suggesting how the parameters of such a model can be estimated from data.
Handle: RePEc:nbr:nberwo:6890
Template-Type: ReDIF-Paper 1.0
Title: Optimal Fiscal and Monetary Policy
Author-Name: V. V. Chari
Author-Person: pch40
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Note: EFG
Number: 6891
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6891
File-URL: http://www.nber.org/papers/w6891.pdf
File-Format: application/pdf
Publication-Status: Published as "Optimal Fiscal and Monetary Policy: Some Recent Results", Journal of Money, Credit and Banking, Vol. 23, no. 3, part 2 (1991):
Publication-Status: published as Chari, V.V. & Kehoe, Patrick J., 1999. "Optimal fiscal and monetary policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 26, pages 1671-1745 Elsevier.
Abstract: We provide an introduction to optimal fiscal and monetary policy using the primal approach to optimal taxation. We use this approach to address how fiscal and monetary policy should be set over the long run and over the business cycle. We find four substantive lessons for policymaking: Capital income taxes should be high initially and then roughly zero; tax rates on labor and consumption should be roughly constant; state-contingent taxes on assets should be used to provide insurance against adverse shocks; and monetary policy should be conducted so as to keep nominal interest rates close to zero. We begin optimal taxation in a static context. We then develop a general framework to analyze optimal fiscal policy. Finally, we analyze optimal monetary policy in three commonly used models of money: a cash-credit economy, a money-in-the-utility-function economy
Handle: RePEc:nbr:nberwo:6891
Template-Type: ReDIF-Paper 1.0
Title: What Will Technology Do to Financial Structure?
Classification-JEL: G2
Author-Name: Fredric S. Mishkin
Author-Person: pmi37
Author-Name: Philip E. Strahan
Note: ME
Number: 6892
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6892
File-URL: http://www.nber.org/papers/w6892.pdf
File-Format: application/pdf
Publication-Status: published as Litan, Robert and Anthony Santomero (eds.) Brookings-Wharton Papers on Financial Services. Brookings Institution Press, 1999.
Abstract: This paper looks at how advances in information and telecommunications technologies have been changing the structure of the financial system by lowering transaction costs and reducing asymmetric information. Households and smaller businesses can now raise funds in securities markets as financial institutions have become better at unbundling risks while financial products can be distributed more efficiently through electronic networks. These changes have reduced the role of traditional financial intermediaries overall efficiency by lowering the costs of financial contracting. Despite these benefits technological progress presents policymakers with some important challenges. First markets for financial products become larger and more contestable, defining geographic and product markets narrowly becomes more problematic. Second, financial consolidation and the trend towards new activities of financial intermediaries require the exploration of new methods to preserve the safety and soundness of the financial system. A combined system of vigilant supervision and constructive ambiguity to deal with failures of larger institutions should be capable of mitigating the potential for increased risk-taking and help preserve the health of the financial system.
Handle: RePEc:nbr:nberwo:6892
Template-Type: ReDIF-Paper 1.0
Title: When Industries Become More Productive, Do Firms?
Author-Name: James Levinsohn
Author-Person: ple386
Author-Name: Amil Petrin
Note: PR
Number: 6893
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6893
File-URL: http://www.nber.org/papers/w6893.pdf
File-Format: application/pdf
Abstract: This paper investigates two explanations for why industries might become more productive over time. The first explanation, termed the real productivity case,' is one in which firms become more productive and this leads to more productive industries. The second explanation, termed the rationalization case,' is one in which firm productivity is constant, but productive firms expand while less productive firms either shrink or exit. Each case has very different implications for factor markets, long term growth prospects, and public policy regarding productivity. Further, one can only distinguish between these two cases with plant- or firm-level data. We investigate the empirical relevance of the two cases using the Chilean manufacturing census. We find that the rationalization case explains much of the measured increase in industry productivity. When industry productivity fails, the rationalization case appears much less important. We also contribute to the applied econometric literature on productivity estimation as we show that the value-added production function is especially well-suited to a simple extension of recent methods developed by Oiley and Pakes.
Handle: RePEc:nbr:nberwo:6893
Template-Type: ReDIF-Paper 1.0
Title: Managed Care and Medical Technology Growth
Author-Name: Laurence Baker
Author-Name: Joanne Spetz
Note: EH
Number: 6894
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6894
File-URL: http://www.nber.org/papers/w6894.pdf
File-Format: application/pdf
Publication-Status: published as Frontiers in Health Policy Research. Garber, Alan M., ed., Cambridge: MIT Press, 1999, pp. 27-52.
Publication-Status: published as Managed Care and Medical Technology Growth, Laurence Baker, Joanne Spetz. in Frontiers in Health Policy Research, volume 2, Garber. 1999
Abstract: Many questions about technology growth and development in health care call for a broad-based characterization of technology availability. In this paper, we explore the possibility of producing aggregated estimates of technology availability by constructing an index of technology availability in hospitals. Our index is based on the number of services provided by a hospital, weighted by how rare those services are. We use the index to examine the relationship between managed care and technology availability in hospitals. We find that managed care may have slowed technology growth in the mid 1980s, but in the early 1990s we find little evidence that technology growth in areas with high-HMO market share is any slower than growth in lower market share areas. To the extent that our index captures variation in the costs of new technologies, this finding leaves open the question of whether managed care can help control long term cost growth by slowing technology adoption. We also discuss the general strengths and weaknesses of indices of the type we develop. One concern arises from the considerable variation across individual technologies. We profile several individual technologies and note that conclusions drawn from the aggregated index may not apply to each of the constituent technologies. Nonetheless, this exercise shows that it is feasible to develop and analyze hospital technology indices if aggregated information about technologies is appropriate to the research question.
Handle: RePEc:nbr:nberwo:6894
Template-Type: ReDIF-Paper 1.0
Title: Your Money and Your Life: The Value of Health and What Affects It
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Elizabeth Richardson
Note: EH
Number: 6895
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6895
File-URL: http://www.nber.org/papers/w6895.pdf
File-Format: application/pdf
Publication-Status: published as Your Money and Your Life: The Value of Health and What Affects It, David M. Cutler, Elizabeth Richardson. in Frontiers in Health Policy Research, volume 2, Garber. 1999
Abstract: This paper examines the role of medical care in improving health and compares that value of better health produced by medical care with the costs of that care. Valuing medical care requires measuring the health of the population. We start by developing a measure of the nation's health capital -- the dollar value of health a person will have over the course of their remaining life. We estimate health capital empirically using data on the length of life, the prevalence of adverse conditions for those alive, and the quality of life conditional on having an adverse condition. For a newborn in 1990, we estimate health capital at about $3 million, while for the elderly, health capital is nearly $1 million. Health capital has increased greatly over time -- by roughly $40,000 to $50,000 per decade. Comparing the change in health capital with the increase in medical spending, we estimate that, for most plausible assumptions, increased medical technology has been worth its cost. In our preferred specification, only about 30 percent of the improvement in health capital in the past 40 years would need to result from medical care advances for the improvement of medical technology to justify its cost. While we find that on average value of medical technology is high, we discuss other evidence that substantial amounts of medical care is provided in situations where its value is low. We thus suggest a fundamental repositioning of the public debate about medical spending. Traditionally, the question that has been posed in the public sector is: how can society (or the government) limit medical costs so that we can afford medical care in the future on our budget today? Our results suggest that a more appropriate question is: how can we get more of the spending that is valuable but avoid the spending that is not valuable?
Handle: RePEc:nbr:nberwo:6895
Template-Type: ReDIF-Paper 1.0
Title: Does Where You Are Admitted Make a Difference? An Analysis of Medicare Data
Author-Name: Frank A. Sloan
Author-Person: psl34
Author-Name: Gabriel A. Picone
Author-Person: ppi8
Author-Name: Donald H. Taylor, Jr.
Author-Name: Shin-Yi Chou
Note: EH
Number: 6896
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6896
File-URL: http://www.nber.org/papers/w6896.pdf
File-Format: application/pdf
Publication-Status: published as Does Where You Are Admitted Make a Difference? An Analysis of Medicare Data, Frank A. Sloan, Gabriel A. Picone, Donald H. Taylor, Jr., Shin-Yi Chou. in Frontiers in Health Policy Research, volume 2, Garber. 1999
Abstract: This study investigated whether the type of hospital in which a Medicare beneficiary is admitted for hip fracture, stroke, coronary heart disease, or congestive heart failure matters in terms of amount and timing of Medicare payments and survival. In total, government hospitals were the least expensive for Medicare, with major teaching hospitals being most expensive within 6 months of admission after the index even. Survival was best in major teaching hospitals. When considering payments subsequent to those for the initial hospitalization, Medicare spent more for patients admitted to for-profit hospitals than for those admitted to other non-teaching facilities survival. Payments on behalf of patients treated in for-profit hospitals were higher for Medicare Part B and home health, especially during the first two months following discharge from the initial hospital. Results of our research suggest that Medicare has a definite financial interest in where Medicare beneficiaries are admitted for their hospital care.
Handle: RePEc:nbr:nberwo:6896
Template-Type: ReDIF-Paper 1.0
Title: Designing Hospital Antitrust Policy to Promote Social Welfare
Author-Name: Daniel Kessler
Author-Name: Mark McClellan
Note: EH
Number: 6897
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6897
File-URL: http://www.nber.org/papers/w6897.pdf
File-Format: application/pdf
Publication-Status: published as Frontiers in Health Policy Research. Garber, Alan M., ed., Cambridge: MIT Press, 1999, pp. 53-75.
Publication-Status: published as Designing Hospital Antitrust Policy to Promote Social Welfare, Daniel Kessler, Mark McClellan. in Frontiers in Health Policy Research, volume 2, Garber. 1999
Abstract: Applying principles of merger evaluation to the health care industry in general, and to hospital markets in particular, poses several unique challenges. Definition of relevant geographic markets and assessment of the consequences of changes in competition for patient and social welfare are complicated by asymmetric information and moral hazard due to health insurance. We suggest a new empirical approach to assessing the impact of hospital competition which addresses the shortcomings of existing methods. We then summarize our main results on the welfare consequences of competition. We conclude with an illustration of how our methods can be used to assess the welfare implications of specific hospital mergers, and with some implications of our findings for antitrust policy.
Handle: RePEc:nbr:nberwo:6897
Template-Type: ReDIF-Paper 1.0
Title: Learning by Doing and Aggregate Fluctuations
Author-Name: Russell Cooper
Author-Name: Alok Johri
Author-Person: pjo22
Note: EFG
Number: 6898
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6898
File-URL: http://www.nber.org/papers/w6898.pdf
File-Format: application/pdf
Publication-Status: published as Cooper, Russell and Alok Johri. "Learning-By-Doing And Aggregate Fluctuations," Journal of Monetary Economics, 2002, v49(8,Nov), 1539-1566.
Abstract: A major unresolved issue in business cycle theory is the construction of an endogenous propagation mechanism capable of capturing the amount of persistence displayed in the data. In this paper we explore the quantitative implications of one propagation mechanism: learning by doing. Estimation of the parameters characterizing learning by doing is based both on aggregate 2-digit data and plant level observations in the US. The estimated learning by doing function is then integrated into a stochastic growth model in which fluctuations are driven by technology shocks. We conclude that learning by doing can be a powerful mechanism for generating endogenous persistence.
Handle: RePEc:nbr:nberwo:6898
Template-Type: ReDIF-Paper 1.0
Title: The Core-Periphery Model and Endogenous Growth: Stabilising and De-Stabilising Integration
Classification-JEL: F1; F2
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Rikard Forslid
Note: ITI
Number: 6899
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6899
File-URL: http://www.nber.org/papers/w6899.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Richard E. and Rikard Forslid. "The Core-Periphery Model And Endogenous Growth: Stabilizing And Destabilizing Integration," Economica, 2000, v67(267,Aug), 307-324.
Abstract: traditionally seen only in terms of trade costs, many aspects of economic integration are more naturally viewed as lowering the cost of trading information rather than goods, i.e. as reducing the extent to which learning externalities are localised. Raising learning spillovers is stabilising, so integration may encourage geographic dispersion (the traditional result is that integration tends to encourage agglomeration). This may be useful for evaluating real-world regional policies e.g. subsidisation of universities, technical colleges and high-technology industrial parks in disadvantaged regions that are aimed at combating the localisation of learning externalities. Finally we show that agglomeration of industry is favourable to growth and that this growth effect can mitigate, but not reverse, losses suffered by residents of the periphery when catastrophic agglomeration occurs.
Handle: RePEc:nbr:nberwo:6899
Template-Type: ReDIF-Paper 1.0
Title: From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship
Classification-JEL: J2; J41
Author-Name: Marianne Bertrand
Author-Person: pbe697
Note: LS
Number: 6900
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6900
File-URL: http://www.nber.org/papers/w6900.pdf
File-Format: application/pdf
Publication-Status: published as Bertrand, Marianne. "From The Invisible Handshake To The Invisible Hand? How Import Competition Changes The Employment Relationship," Journal of Labor Economics, 2004, v22(4,Oct), 723-765.
Abstract: There is a popular perception that increased competitive pressures in U.S. product markets are turning the employment relationship from one governed by implicit agreements into one governed by the market. In this paper, I examine whether changes in import competition indeed affect the use of implicit agreements between employers and workers in a key aspect of their relationship, wage setting. I focus on the extent to which employers, after negotiating workers' wages upon hire, subsequently shield those wages from external labor market conditions. If increased competition induces a switch from these implicit agreements to spot market wage setting, then: (1) the sensitivity of workers' wages to the current unemployment rate should increase as competition increases; and (2) the sensitivity of workers' wages to the unemployment rate prevailing upon hire should decrease as competition increases. I find evidence supporting both of these predictions, using exchange rate movements to generate exogenous variation in import competition. I then show more directly that increased financial pressure on employers is one mechanism behind these effects -- both of the wage-unemployment sensitivity changes are larger in high leverage industries than in low leverage ones. Moreover, declines in corporate returns following increased competition directly increase the sensitivity of wages to the current unemployment rate. There are two general interpretations of my set of results. Wage flexibility may be a response to competition either because such flexibility reduces the probability of costly financial distress or because lower corporate profits weaken the enforceability of implicit wage setting agreements.
Handle: RePEc:nbr:nberwo:6900
Template-Type: ReDIF-Paper 1.0
Title: Imperfect Labor Contracts and International Trade
Classification-JEL: F11; D51
Author-Name: Gene M. Grossman
Author-Person: pgr21
Note: ITI
Number: 6901
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6901
File-URL: http://www.nber.org/papers/w6901.pdf
File-Format: application/pdf
Publication-Status: Published as "Product Development and International Trade", Journal of Political Economy, Vol. 97, no. 6 (1989): 1261-1283.
Abstract: In an economy with imperfect labor contracts, differences in the distribution of human capital are an independent source of comparative advantage. I study a world economy with two sectors, one where output is produced by teams and another where individuals can work alone. When workers' abilities are private information and workers cannot verify the value of output or the level of a firm's profits, feasible labor contracts fail to generate efficient matching of workers within teams. The general equilibrium has the most talented workers opting for individualistic activities, while their less talented compatriots join teams. The team mismatches are more severe in the country with the more heterogeneous labor force, which generates a comparative disadvantage for this country in team production. Trade exacerbates the polarization' of the more diverse society. National income could be raised, and the distribution of income improved, by a marginal expansion in the size of the team sector.
Handle: RePEc:nbr:nberwo:6901
Template-Type: ReDIF-Paper 1.0
Title: Schooling, Intelligence, and Income in America: Cracks in the Bell Curve
Classification-JEL: I21; J31
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Cecilia Rouse
Note: LS
Number: 6902
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6902
File-URL: http://www.nber.org/papers/w6902.pdf
File-Format: application/pdf
Publication-Status: published as (new title "Schooling, Intelligence, and Income in Mentocracy and Inequality") Arrow, Kenneth, Steven Durlarf and Samuel Bowles, eds., Princeton: Princeton University Press, 2000.
Abstract: One of the best documented relationships in economics is the link between education and income: higher educated people have higher incomes. Advocates argue that education provides skills, or human capital, that raises an individual's productivity. Critics argue that the documented relationship is not causal. Education does not generate higher incomes; instead, individuals with higher ability receive more education and more income. This essay reviews the evidence on the relationship between education and income. We focus on recent studies that have attempted to determine the causal effect of education on income by either comparing income and education differences within families or using exogenous determinants of schooling in what are sometimes called natural experiments.' In addition, we assess the potential for education to reduce income disparities by presenting evidence on the return to education for people of differing family backgrounds and measured ability. The results of all these studies are surprisingly consistent: they indicate that the return to schooling is not caused by an omitted correlation between ability and schooling. Moreover, we find no evidence that the return to schooling differs significantly by family background or by the measured ability of the student.
Handle: RePEc:nbr:nberwo:6902
Template-Type: ReDIF-Paper 1.0
Title: Understanding Tax Evasion Dynamics
Classification-JEL: H26; K42
Author-Name: Eduardo M.R.A. Engel
Author-Person: pen3
Author-Name: James R. Hines, Jr.
Author-Person: phi111
Note: PE
Number: 6903
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6903
File-URL: http://www.nber.org/papers/w6903.pdf
File-Format: application/pdf
Abstract: Americans who are caught evading taxes in one year may be audited for prior years. While the IRS does not disclose its method of selecting tax returns to audit, it is widely believed that a taxpayer's probability of being audited is an increasing function of current evasion. Under these circumstances, a rational taxpayer's current evasion is a decreasing function of prior evasion, since, if audited and caught for evading this year, the taxpayer may incur penalties for past evasions. The paper presents a model that formalizes this notion, and derives its implications for the responsiveness of individual and aggregate tax evasion to changes in the economic environment. The aggregate behavior of American taxpayers over the 1947 - 1993 period is consistent with the implications of this model. Specifically, aggregate tax evasion is higher in years in which past evasions are small relative to current tax liabilities -- which is the case when incomes or tax rates rise. Furthermore, aggregate audit-related fines and penalties imposed by the IRS are positively related not only to aggregate current-year evasion but also to evasion in prior years. The estimates imply that the average tax evasion rate in the United states over this period is 42% lower than it would be if taxpayers were unconcerned about retrospective audits.
Handle: RePEc:nbr:nberwo:6903
Template-Type: ReDIF-Paper 1.0
Title: Two Waves of Globalisation: Superficial Similarities, Fundamental Differences
Classification-JEL: F1; F4
Author-Name: Richard E. Baldwin
Author-Person: pba124
Author-Name: Philippe Martin
Author-Person: pma588
Note: ITI
Number: 6904
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6904
File-URL: http://www.nber.org/papers/w6904.pdf
File-Format: application/pdf
Publication-Status: published as Globalisation and Labour, J.C.B. Mohr for Kiel Institute of World Economics Siebert, H., ed., Tubingen, 1999.
Abstract: This paper looks at the two waves of globalisation (roughly 1820-1914 and 1960-present) focusing on key economic facts (trade investment, migration, and capital flows, Industrialisation/de-industrialisation convergence/divergence) beliefs and policymaking environments. The two waves are superficial similarities but are fundamentally different. Chief similarities include aggregate trade and capital flow ratios, and the importance of reductions in barriers to international transactions. The fundamental difference lies in the impact that these reductions had on trade in goods versus trade in ideas. Initial conditions constitute another important difference. Before the first wave, all the world was poor and agrarian. When the second wave began, it was sharply divided between rich and poor nations.
Handle: RePEc:nbr:nberwo:6904
Template-Type: ReDIF-Paper 1.0
Title: Alcohol
Classification-JEL: I1
Author-Name: Philip J. Cook
Author-Person: pco30
Author-Name: Michael J. Moore
Author-Person: pmo284
Note: EH
Number: 6905
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6905
File-URL: http://www.nber.org/papers/w6905.pdf
File-Format: application/pdf
Publication-Status: published as Cook, Philip J. & Moore, Michael J., 2000. "Alcohol," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 30, pages 1629-1673 Elsevier.
Publication-Status: published as Cook, Philip and Michael J. Moore. "The Economics Of Alcohol Abuse And Alcohol-Control Policies," Health Affairs, 2002, v21(2,Mar/Apr), 120-133.
Abstract: Excess drinking is associated with lost productivity, accidents, disability, early death, crime, neglect of family responsibilities, and personality deterioration. These and related concerns have justified special restrictions on alcoholic-beverage commerce and consumption. The nature and extent of government involvement in this arena vary widely over time and place, and are often controversial. Economists have contributed to the evaluation of alcohol policy through empirical work on the effects of alcohol-control measures on consumption and its consequences. Economics has also provided an accounting framework for defining and comparing costs and benefits of interventions, including excise taxes. Outside of the policy arena, economists have analyzed alcohol consumption in the context of stretching the standard model of consumer choice to include intertemporal effects and social influence. Nonetheless, perhaps the most important contribution by economists has been the repeated demonstration that there is nothing unusual about alcohol in at least one essential respect: consumers drink less ethanol (and have fewer alcohol-related problems) when alcohol-beverage prices are increased. Important econometric challenges remain, including the search for a satisfactory resolution to the conflicting results on the effect of price changes on consumption by consumers who tend to drunk heavily. There are also unresolved puzzles about the relationship between drinking and productivity; even after controlling for a variety of other characteristics, drinkers tend to have higher earnings than abstainers, and women's earnings (but not men's) tend to increase with alcohol consumption.
Handle: RePEc:nbr:nberwo:6905
Template-Type: ReDIF-Paper 1.0
Title: What Drives Venture Capital Fundraising?
Classification-JEL: G24
Author-Name: Paul A. Gompers
Author-Person: pgo301
Author-Name: Josh Lerner
Author-Person: ple60
Note: CF PR
Number: 6906
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6906
File-URL: http://www.nber.org/papers/w6906.pdf
File-Format: application/pdf
Publication-Status: published as Paul A. Gompers & Josh Lerner & Margaret M. Blair & Thomas Hellmann, 1998. "What Drives Venture Capital Fundraising?," Brookings Papers on Economic Activity. Microeconomics, vol 1998.
Abstract: We examine the determinants of venture capital fundraising in the U.S. over the past twenty-five years. We study industry aggregate, state-level, and firm-specific fundraising to determine if macroeconomic, regulatory, or performance factors affect venture capital activity. We find that shifts in demand for venture capital appear to have a positive and important impact on commitments to new venture capital funds. Commitments by taxable and tax-exempt investors seem equally sensitive to changes in capital gains tax rates that decreases in capital gains tax rates increase the demand for venture capital as more workers are incented to become entrepreneurs. Aggregate and state level venture fundraising are positively affected by easing of pension investment restrictions as well as industrial and academic R&D expenditures. Fund performance and reputation also lead to greater fundraising by venture organizations.
Handle: RePEc:nbr:nberwo:6906
Template-Type: ReDIF-Paper 1.0
Title: Self-Protection for Emerging Market Economies
Classification-JEL: F3
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: IFM PE
Number: 6907
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6907
File-URL: http://www.nber.org/papers/w6907.pdf
File-Format: application/pdf
Abstract: International economic crises will continue to occur in the future as they have for centuries past. The rapid spread of the 1997 crisis in Asia and of the 1982 crisis in Latin America showed how shifts in market perceptions can suddenly bring trouble to countries even when there has been no change in objective conditions. More recently, the sharp jump in emerging market interest rates after Russia's August 1998 default underlined the vulnerability of all emerging market economies to increases in investors' aversion to risk. Emerging market countries that want to avoid the devastating effects of such crises must protect themselves. They cannot depend on the International Monetary Fund or other international organizations nor expect that a new global financial architecture' will make the world economy less dangerous. Taking steps to protect themselves requires more than avoiding those bad policies that make a currency crisis inevitable. The process of contagion makes even the virtuous vulnerable to currency runs. Liquidity is the key to self-protection. A country that has substantial international liquidity -- large foreign exchange reserves and a ready source of foreign currency loans -- is less likely to be the object of a currency attack. Substantial liquidity also permits a country that is attacked from within or without to defend itself better and to make more orderly adjustments. The challenge is to find ways to increase liquidity at reasonable cost.
Handle: RePEc:nbr:nberwo:6907
Template-Type: ReDIF-Paper 1.0
Title: Worker Perceptions of Job Insecurity in the Mid-1990s: Evidence from the Survey of Economic Expectations
Author-Name: Charles F. Manski
Author-Person: pma111
Author-Name: John D. Straub
Note: LS
Number: 6908
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6908
File-URL: http://www.nber.org/papers/w6908.pdf
File-Format: application/pdf
Publication-Status: published as Manski, Charles F. and John D. Straub. "Worker Perceptions Of Job Insecurity In The Mid-1990s: Evidence From The Survey Of Economic Expectations," Journal of Human Resources, 2000, v35(3,Summer), 447-479.
Abstract: This paper analyzes the probabilistic measures of job insecurity that have recently become available through the nationwide Survey of Economic Expectations (SEE). Since 1994, employed SEE respondents have been asked questions eliciting their subjective probabilities of job loss in the coming year and their expectations of a good outcome should they lose their current job and have to engage in job search. The responses of 3600 persons interviewed from 1994 through early 1998 are analyzed here. It is found that workers vary considerably in their perceptions of job insecurity, with most workers perceiving little or no risk but some perceiving moderate to high risk. Expectations of job loss tend to decrease markedly with age, but so do expectations of a good outcome should job search become necessary. The net result is that composite job insecurity tends not to vary at all with age. Subjective probabilities of job loss tend to decrease with schooling and subjective probabilities of good search outcomes tend to increase with schooling; hence composite job insecurity tends to decrease with schooling. Perceptions of job insecurity vary little by sex. Perceptions of job insecurity vary substantially by race, the main differences being that subjective probabilities of job loss among blacks tend to be nearly double those of whites. Self-employed workers see themselves as facing less job insecurity than do those who work for others. Workers tended to perceive less job insecurity in 1996 and 1997 than in 1994 and 1995. Expectations within groups are heterogeneous, the covariates (age, schooling, sex, race, employer, year) collectively explaining only a small part of the sample variation in worker expectations. Moving beyond descriptive analysis, the paper connects the empirical findings to modern theories of the labor market. A competing-risks formalization of job separations by the two routes of job loss and voluntary quits is used to draw conclusions about workers' expectations of exogenous job destruction in the year ahead. The theory of job search is used to interpret the empirical finding that the distribution of search-outcome expectations is symmetric and quite dispersed.
Handle: RePEc:nbr:nberwo:6908
Template-Type: ReDIF-Paper 1.0
Title: The Cyclical Behavior of Prices and Costs
Classification-JEL: E32
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG
Number: 6909
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6909
File-URL: http://www.nber.org/papers/w6909.pdf
File-Format: application/pdf
Publication-Status: published as Handbook of Macroeconomics, Vol.1B, Taylor, J.B., and M. Woodford, eds., Amsterdam: North-Holland, 1999.
Abstract: Because inputs are scarce, marginal cost should be an increasing function of output. Without changes in this real marginal cost schedule, aggregate output can vary if and only if the markup of price over marginal cost varies. In this review, we discuss the extent to which observed fluctuations in aggregate economic activity depend upon such variations in average markups. We first study whether, empirically, real marginal cost rises in cyclical expansions. Average real labor cost is not very procyclical, but, for reasons such as overhead labor and adjustment costs, marginal labor cost should be more procyclical. Measures of marginal cost based on materials costs and inventories also appear procyclical. We next show that countercyclical markup variation may, depending upon how costs are modeled, account for a substantial fraction of cyclical output movements. We also show that the observed procyclical variations in productivity and profits are consistent with the hypothesis that cyclical variations in output are primarily due to markup variations than to shifts in the real marginal cost schedule. Finally, we survey theories of endogenous markup variation. These include both models of sticky and models in which firms' desired markup varies over time.
Handle: RePEc:nbr:nberwo:6909
Template-Type: ReDIF-Paper 1.0
Title: The Distributional Effects of Medicare
Classification-JEL: H5; I18
Author-Name: Julie Lee
Author-Name: Mark McClellan
Author-Name: Jonathan Skinner
Author-Person: psk23
Note: EH
Number: 6910
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6910
File-URL: http://www.nber.org/papers/w6910.pdf
File-Format: application/pdf
Publication-Status: published as The Distributional Effects of Medicare, Julie Lee, Mark McClellan, Jonathan Skinner. in Tax Policy and the Economy, Volume 13, Poterba. 1999
Abstract: The Medicare program is now an important source of transfers to elderly and disabled beneficiaries, and will continue to grow rapidly in the future. Because the Medicare program is so large in magnitude, it can have significant redistributional effects. In this paper, we measure the flow of Medicare benefits to high-income and low-income neighborhoods in 1990 and 1995. We find that Medicare spending per capita for the lowest income groups grew much more rapidly than Medicare spending in either high income or middle income neighborhoods. Home health care spending played an important role in the increased spending among the lowest income neighborhoods. To our knowledge, this differential shift in spending has not been documented, yet it exceeds in magnitude the entire per capita transfer from the Earned Income Tax Credit (EITC) and is half of the average transfers to the elderly poor from Supplemental Security Income (SSI). Recent cutbacks in home health care benefits may undo some of this change. Still, this example illustrates how specific technical changes in Medicare policy can have redistributional effects comparable to major and much more visible expenditure and tax policies.
Handle: RePEc:nbr:nberwo:6910
Template-Type: ReDIF-Paper 1.0
Title: The Productivity of Schools and Other Local Public Goods Providers
Classification-JEL: H70; I22
Author-Name: Caroline M. Hoxby
Author-Person: pho46
Note: PE
Number: 6911
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6911
File-URL: http://www.nber.org/papers/w6911.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Public Economics (1999).
Abstract: I construct an agency model of local public goods producers with special reference to public schools. The model assumes that households make Tiebout choices among jurisdictions, but it has more realistic assumptions about information and the cost of residential mobility. I examine producers' effort and rent under local property tax finance and centralized finance. I show that, if there are a sufficient number of jurisdictions to choose among, conventional local property tax finance substantially reduces the agency problem and associated loss of productivity. Specifically, I demonstrate that local property tax finance can attain about as much productivity as a social planner with centralized finance can, even if the social planner is armed with more information that a real social planner could plausibly have. The key insight is that decentralized Tiebout choices make some information the social planner would need verifiable and other information unnecessary.
Handle: RePEc:nbr:nberwo:6911
Template-Type: ReDIF-Paper 1.0
Title: Aggregate Job Destruction and Inventory Liquidation
Classification-JEL: E24
Author-Name: Robert E. Hall
Note: EFG
Number: 6912
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6912
File-URL: http://www.nber.org/papers/w6912.pdf
File-Format: application/pdf
Abstract: In a recession, jobs are destroyed and inventories are liquidated. I concentrate on the intertemporal mechanisms that result in economy-wide job destruction and inventory runoffs. Forces that raise the real interest rate -- especially temporarily -- also cause destruction and runoffs. I consider a model where the job destruction decision is made efficiently, will full consideration of the search costs imposed on discharged workers. I also consider a model of inefficient job destruction, where employers discharge workers who are paid fixed wages as long as they are employed. The impulse response functions for these models resemble those found in data for the United States. A shock that causes a jump in the expected real interest rate results in an immediate spike of job destruction and inventory liquidation, followed by a declining pattern of additional destruction and runoff.
Handle: RePEc:nbr:nberwo:6912
Template-Type: ReDIF-Paper 1.0
Title: The Profits to Insider Trading: A Performance-Evaluation Perspective
Classification-JEL: G14; G28
Author-Name: Leslie A. Jeng
Author-Name: Andrew Metrick
Author-Person: pme99
Author-Name: Richard Zeckhauser
Author-Person: pze7
Note: AP
Number: 6913
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6913
File-URL: http://www.nber.org/papers/w6913.pdf
File-Format: application/pdf
Abstract: This paper estimates the profits to insiders when they trade their company's stock. We construct a rolling purchase portfolio' that holds all shares purchased by insiders over the previous year and an analogous sale portfolio' that holds all shares sold by insiders over the previous year. We then analyze the returns to these value-weighted portfolios using performance-evaluation methods. This approach allows us to study the returns to insider transactions beginning on the day after their execution, and is free of the statistical difficulties that plague event studies on long-horizon returns. Using a comprehensive sample of reported insider transactions from 1975 - 1996, we find that the purchase portfolio earns abnormal returns of about 40 basis points per month, with about one-sixth of these abnormal returns accruing within the first five days after the initial transaction, and one-third within the first month. The sale portfolio does not earn abnormal returns. Our portfolio-based approach also allows for straightforward decompositions of the purchase and sale portfolios by various characteristics. We find that the abnormal returns to insider trades in small firms are not significantly different from those in large firms, and that top executives do not earn higher abnormal returns than do other insiders.
Handle: RePEc:nbr:nberwo:6913
Template-Type: ReDIF-Paper 1.0
Title: Controlling the Price Level
Classification-JEL: E42
Author-Name: Robert E. Hall
Note: EFG
Number: 6914
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6914
File-URL: http://www.nber.org/papers/w6914.pdf
File-Format: application/pdf
Publication-Status: published as Contributions to Macroeconomics, (The B.E. Journal of Macroeconomics), Vol. 2: Iss. 1, Article 5 (2002)
Publication-Status: published as American Journal of Economics and Sociology, Vol. 64, no. 1 (January 2005): 93-112
Abstract: Governments determine the size of the unit of value just as they determine the length of the length and weight of physical units of measure. What are the different ways that a government can control the size of the unit of value, that is, control the price level? In general, the government designates a resource gold, paper currency, another country's currency and defines its unit of value as a particular amount of that resource. An interesting variant proposed by Irving Fisher in 1913 and implemented more recently in Chile is to alter the resource content of the unit to stabilize the price level. Another idea is to alter the interest rate paid on reserves in a way that stabilizes the price level.
Handle: RePEc:nbr:nberwo:6914
Template-Type: ReDIF-Paper 1.0
Title: Who Gains from Trade Reform? Some Remaining Puzzles
Classification-JEL: F13; F16
Author-Name: Ann Harrison
Author-Person: pha441
Author-Name: Gordon Hanson
Author-Person: pha80
Note: ITI
Number: 6915
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6915
File-URL: http://www.nber.org/papers/w6915.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Development Economics, Vol. 51 (1999): 315-324.
Abstract: This paper focuses on three unresolved issues with regard to the impact of trade reform. First, many studies linking trade reform to long run growth are surprisingly fragile. To illustrate the problems with this literature, we examine a popular measure of openness recently introduced by Sachs and Warner (1995). We show that their measure fails to establish a robust link between more open trade policies and long run growth. The second puzzle we identify is the small impact of trade reform on employment in developing countries. Finally, we analyze evidence on the relationship between trade reform and rising wage inequality, focusing on the 1985 Mexican trade reform. Wage inequality in Mexico rose after the reform, which is puzzling in a Heckscher-Ohlin context if Mexico has a comparative advantage in producing low skill-intensive goods.
Handle: RePEc:nbr:nberwo:6915
Template-Type: ReDIF-Paper 1.0
Title: The Price of Alcohol, Wife Abuse, and Husband Abuse
Classification-JEL: I10
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 6916
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6916
File-URL: http://www.nber.org/papers/w6916.pdf
File-Format: application/pdf
Publication-Status: published as Southern Economic Journal, 67, No.2 (October 2000), 279-303.
Abstract: Alcohol consumption has been frequently linked to family violence. The purpose of this paper is to examine the direct relationship between the price of alcohol, which determines consumption, and violence towards spouses. The data come from the 1985 cross section and the 1985-1987 panel of the National Family Violence Survey. The 1985 data are a nationally representative sample while the panel oversamples violent individuals. Dichotomous indicators of severe violence towards wives and husbands are used. A reduced for violence equation is estimated, and individual-level fixed effects are used to control for unobserved characteristics in the panel. A consistent result that emerges from this paper is that an increase in the pure price of alcohol, as measured by a weighted average of the price of alcohol from beer, wine, and liquor, will serve to reduce severe violence aimed at wives. By contrast, the evidence on the propensity of an increase in the price of alcohol to lower violence towards husbands is mixed. When individual level characteristics are not controlled for, the price is not a predictor of violence towards men. However, once the individual traits are controlled for, a negative relationship between the price and violence emerges.
Handle: RePEc:nbr:nberwo:6916
Template-Type: ReDIF-Paper 1.0
Title: Prefunding Medicare
Classification-JEL: H5
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE EH
Number: 6917
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6917
File-URL: http://www.nber.org/papers/w6917.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Prefunding Medicare," American Economic Review, 1999, v89(2,May), 222-227.
Abstract: The Medicare program of health care for the aged now costs more than $5,000 per enrollee, a national cost of more than $200 billion a year. The official projections that these costs will rise rapidly from 2.5% of GDP now to 5.5% of GDP in 2030 and 7% of GDP in 2070 assume that structural changes in health care will prevent the even more rapid growth of spending that would occur if past trends continue. These GDP shares are equivalent to increasing the payroll tax rates that rise from 5% of total wages now to 14% of total wages by 2070. Alternatively, if the increased Medicare spending is financed by an across-the-board increase in income tax rates, all tax rates would rise by 46 percent (e.g., from 28% to 41%). If Medicare costs continue to be tax financed, the sharp increase in Medicare costs would cause a substantial increase in the deadweight loss of the tax system. Even with quite favorable assumptions, the increased deadweight loss is likely to be almost as large as the direct increase in the health care costs themselves. This paper analyzes an alternative life cycle approach to paying for the cost of health care of the aged: a system of investment-based individual Retiree Health Accounts (RHAs) to which the government deposits funds during individuals' working years. At retirement the individual could use the accumulated fund to purchase a fee-for-service plan like the current Medicare package, to pay for membership in an HMO, or to establish a medical savings account with a high deductible insurance policy. Using data from the Social Security administration, I estimate that annual RHA deposits equal to about 1.4% of total payroll would eventually be enough to pay for the full increase in the cost of Medicare, obviating a nine percentage point payroll tax increase.
Handle: RePEc:nbr:nberwo:6917
Template-Type: ReDIF-Paper 1.0
Title: The Costs of Annuitizing Retirement Payouts from Individual Accounts
Classification-JEL: J14; G22
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Mark J. Warshawsky
Note: AG PE
Number: 6918
Creation-Date: 1999-01
Order-URL: http://www.nber.org/papers/w6918
File-URL: http://www.nber.org/papers/w6918.pdf
File-Format: application/pdf
Publication-Status: published as Shoven, J. (ed.) Administrative Costs and Social Security Privatization. Chicago: University of Chicago Press, 2000.
Publication-Status: published as The Costs of Annuitizing Retirement Payouts from Individual Accounts, James M. Poterba, Mark Warshawsky. in Administrative Aspects of Investment-Based Social Security Reform, Shoven. 2000
Abstract: This paper presents new evidence on the costs of purchasing private annuity contracts to spread a given stock of assets over an uncertain future lifetime. It also describes the operation of individual annuity arrangements within two large group retirement saving plans. First presents information on life annuity contracts that are now available in the individual single-premium-immediate annuity marketplace. For a 65-year-old male annuity buyer present discounted value of the payouts offered by the average policy available in June 1998 was approximately 85 percent of the purchase price. This assumes that the individual faces the mortality risks of the average individual in the population, and that the payouts are discounted at a riskless interest rate. The expected present value of payouts rises if we assume that the buyer faces the mortality rates of the typical annuitant, while it declines if we assume a higher riskier, interest rate for discounting. Second, the paper considers individual annuity policies available to participants in the government's Thrift Savings Plan. Because these annuities are purchased through a large group retirement saving program, some of the administrative costs are lower than those in the national individual annuity market. The expected present value of payouts is correspondingly higher than that in the public' market. Third individual annuity products offered by TIAA-CREF, the retirement system for college and university employees. TIAA offers annuities with non-guaranteed elements the highest payouts in the individual annuity market, mainly due to superior investment returns and low expenses. CREF annuities offer valuable payouts that reflect basis, the investment experience of the accounts.
Handle: RePEc:nbr:nberwo:6918
Template-Type: ReDIF-Paper 1.0
Title: Job Loss and Retirement Behavior of Older Men
Classification-JEL: J64; J26
Author-Name: Sewin Chan
Author-Name: Ann Huff Stevens
Author-Person: pst180
Note: LS
Number: 6920
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6920
File-URL: http://www.nber.org/papers/w6920.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Labor Economics, Volume 19, Issue 2, (April 2001) Pages: 484-521
Abstract: This paper uses data from the Health and Retirement Study to examine the employment and retirement behavior of men aged fifty and above who have experienced an involuntary job loss. Hazard models for returning to work and for exiting post-displacement employment are estimated and used to examine work patterns for ten years following a job loss. The findings show that a job loss results in large and lasting effects on future employment probabilities, and that these effects vary with the age of the worker. Displaced workers in their fifties are estimated to have a three in four chance of returning to work within two years after a job loss, whereas for a 62-year-old job loser, the probability is less than a third. Once re-employed, men 50 and above face significantly higher probabilities of exiting the workforce than do workers who have not experienced a recent job loss; however, the direction of this effect gradually reverses over time. The net outcome of these entry and exit rates is a substantial gap between the employment rates of men who have and have not lost jobs, that lasts at least seven years.
Handle: RePEc:nbr:nberwo:6920
Template-Type: ReDIF-Paper 1.0
Title: The Core-Periphery Model with Forward-Looking Expectations
Classification-JEL: F1; F2
Author-Name: Richard E. Baldwin
Author-Person: pba124
Note: ITI
Number: 6921
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6921
File-URL: http://www.nber.org/papers/w6921.pdf
File-Format: application/pdf
Publication-Status: published as Baldwin, Richard E. "Core-Periphery Model With Forward-Looking Expectations," Regional Science and Urban Economics, 2001, v31(1,Feb), 21-49.
Abstract: The 'core-periphery model' is vitiated by its assumption of static expectations. That is, migration (inter-regional or intersectoral) is the key to agglomeration, but migrants base their decision on current wage differences alone--even though migration predictably alters wages and workers are (implicitly) infinitely lived. The assumption was necessary for analytic tractability. The model can have multiple stable equilibria, so allowing forward-looking expectations would have forced consideration of the very difficult perhaps even intractable issues of global stability in non-linear dynamic systems. This paper's main contribution is to present a set of solution techniques partly analytic and partly numerical that allow us to consider forward-looking expectations. These techniques reveal a startling result. If quadratic migration costs are sufficiently high, allowing forward-looking behaviour has no impact on the main results, so static expectations are truly an assumption of convenience. If migration costs are lower, however, forward-looking behaviour creates history-vs-expectations considerations. In this case self-fulfilling prophecy.
Handle: RePEc:nbr:nberwo:6921
Template-Type: ReDIF-Paper 1.0
Title: Green Tax Reform and Competitiveness
Classification-JEL: H20; J51
Author-Name: Erkki Koskela
Author-Name: Ronnie Schob
Author-Person: psc185
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 6922
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6922
File-URL: http://www.nber.org/papers/w6922.pdf
File-Format: application/pdf
Publication-Status: published as Erkki Koskela & Hans-Werner Sinn & Ronnie Schöb, 2001. "Green Tax Reform and Competitiveness," German Economic Review, Blackwell Publishing, vol. 2(1), pages 19-30, 02.
Abstract: This paper develops a model of a small open economy that produces an export good with domestic labour and imported energy and is stuck in an unemployment situation resulting from an excessive fixed net-of-tax wage rate. We study a revenue-neutral green tax reform that substitutes energy for wage taxes. A moderate green tax reform will boost employment, improve welfare, and increase the economy's competitiveness. The driving force behind these results is the technological substitution process that a green tax reform will bring about by inducing the producers to substitute labour for energy as factors of production. The resulting reduction in unemployment is welfare increasing since energy, which the country has to buy at its true national opportunity cost, is replaced with labour, whose price is above its social opportunity cost. As long as the labour tax rate exceeds the resource tax rate, a revenue-neutral green-tax reform will reduce the domestic firms' unit cost of production and hence increase international competitiveness and output of the economy.
Handle: RePEc:nbr:nberwo:6922
Template-Type: ReDIF-Paper 1.0
Title: Foreign Ownership and Wages in the United States, 1987 - 1992
Classification-JEL: F23; J31
Author-Name: Zadia M. Feliciano
Author-Person: pfe586
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 6923
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6923
File-URL: http://www.nber.org/papers/w6923.pdf
File-Format: application/pdf
Publication-Status: published as Feliciano, Zadia M. and Robert E. Lipsey. "Foreign Ownerhsip, Wages, And Wage Changes In U.S. Industries, 1987-92," Contemporary Economic Policy, 2006, v24(1,Jan), 74-91.
Abstract: Foreign-owned establishments in the United States pay higher wages, on average, than domestically-owned establishments. Much of the difference is related to industry composition, but there are also differences within industries within states, 5-7 percent in manufacturing and 9-10 percent in other industries. Within manufacturing, the difference can all be related to establishment, state, and industry characteristics, but in other industries, a substantial difference in average wages in favor of foreign establishments remains even when these other determinants of wages are taken into account. Within manufacturing, the extent of foreign ownership in an industry in a state had no impact on wages in 1987 when these other factors were taken into account, but it was associated with higher wages in 1992. Outside of manufacturing, higher foreign ownership was associated with higher wages in both years, and in 1992, even with higher-wages in domestically-owned establishments. Outside of manufacturing, larger increases in foreign ownership in an industry in a state between 1987 and 1992 were associated with larger increases in average wages. The wage effect was confined to the foreign-owned establishments themselves.
Handle: RePEc:nbr:nberwo:6923
Template-Type: ReDIF-Paper 1.0
Title: Wage Dynamics: Reconciling Theory and Evidence
Classification-JEL: E31; J64
Author-Name: Olivier Jean Blanchard
Author-Person: pbl2
Author-Name: Lawrence Katz
Author-Person: pka266
Note: LS
Number: 6924
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6924
File-URL: http://www.nber.org/papers/w6924.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89 (May 1999): 69-74.
Abstract: U.S. macroeconomic evidence shows a negative relation between the rate of change of wages and unemployment. In contrast, most theories of wage determination imply a negative relation between the level of wages and unemployment. In this paper, we ask whether one can reconcile the empirical evidence with theoretical wage relations. We reach three main conclusions. First, we derive the condition under which the two can indeed be reconciled. We show the constraints that such a condition imposes on the determinants of workers' reservation wages as well as the relative importance of workers' outside options as opposed to match specific productivity in wage determination. Second, in the light of this condition, we reinterpret the presence of an "error correction" term in macroeconomic wage relations for most European economies but not in the United States. Third, we show that whether this condition holds or not has important implications for the effects of a number of variables -- from real interest rates to oil prices to payroll taxes -- on the natural rate of unemployment.
Handle: RePEc:nbr:nberwo:6924
Template-Type: ReDIF-Paper 1.0
Title: Inflation Stabilization and BOP Crises in Developing Countries
Classification-JEL: F41; E63
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Carlos A. Vegh
Author-Person: pve34
Note: IFM
Number: 6925
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6925
File-URL: http://www.nber.org/papers/w6925.pdf
File-Format: application/pdf
Publication-Status: published as Handbook of Macroeconomics, Volume C, Taylor, John, and Michael Woodford,eds., North Holland: 1999, pp. 1531-1614.
Abstract: High and persistent inflation has been one of the distinguishing macroeconomic characteristics of many developing countries since the end of World War II. Countries afflicted by chronic inflation, however, have not taken their fate lightly and have engaged in repeated stabilization attempts. More often than not, stabilization plans have failed. The end of stabilizations -- particularly those which rely on a pegged exchange rate -- has often involved dramatic balance of payment crises. As stabilization plans come and go, a large literature has developed trying to document the main empirical regularities and understand the key issues involved. This paper undertakes a critical review and evaluation of the literature related to inflation stabilization policies and balance of payment crises in developing countries.
Handle: RePEc:nbr:nberwo:6925
Template-Type: ReDIF-Paper 1.0
Title: Are Macroeconomic Forecasts Informative? Cointegration Evidence from the ASA-NBER Surveys
Classification-JEL: E17; C53
Author-Name: Yin-Wong Cheung
Author-Person: pch261
Author-Name: Menzie D. Chinn
Author-Person: pch129
Note: EFG
Number: 6926
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6926
File-URL: http://www.nber.org/papers/w6926.pdf
File-Format: application/pdf
Abstract: We examine the properties of the ASA-NBER forecasts for several US macroeconomic variables, specifically: (i) are the actual and forecast series integrated of the same order; (ii) are they cointegrated, and; (iii) is the cointegrating vector consistent with long run unitary elasticity of expectations with respect to the actual series. We also examine whether forecasts respond to error correction terms. Tests are applied to both final and preliminary versions of the data. We find that the Treasury bill rate, housing starts, industrial production, inflation and their forecasts are trend stationary. The corporate bond rate, GNP, the GNP deflator, unemployment and their forecasts are difference stationary. About half of the these pairs are cointegrated, with the unitary elasticity restriction seldom rejected. Similar results are obtained when using the originally-reported data.
Handle: RePEc:nbr:nberwo:6926
Template-Type: ReDIF-Paper 1.0
Title: The Art of Labormetrics
Classification-JEL: J00; C1
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 6927
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6927
File-URL: http://www.nber.org/papers/w6927.pdf
File-Format: application/pdf
Publication-Status: published as Hamermesh, Daniel S. "The Craft Of Labormetrics," International Labor Relations Review, 2000, v53(3,Apr), 363-380.
Abstract: Using a wide array of examples from the literature and from original estimates, this essay examines the pitfalls that make good empirical research in labor economics as much art as science. Appropriateness and cleanliness of data are considered, as are problems of extreme observations and interactions. The validity of attempts to produce exogeneity using instrumental variables and natural experiments' is examined, as are the treatment of selectivity and unobservable individual effects. Testing empirical results to ensure that they make sense is stressed along with the importance of clear, economical and useful presentation of those results.
Handle: RePEc:nbr:nberwo:6927
Template-Type: ReDIF-Paper 1.0
Title: Unit Root Tests Are Useful for Selecting Forecasting Models
Classification-JEL: C1
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Lutz Kilian
Author-Person: pki110
Note: EFG AP
Number: 6928
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6928
File-URL: http://www.nber.org/papers/w6928.pdf
File-Format: application/pdf
Publication-Status: published as Diebold, Francis X. and Lutz Kilian. "Unit-Root Tests Are Useful For Selecting Forecasting Models," Journal of Business and Economic Statistics, 2000, v18(3,Jul), 265-273.
Abstract: We study the usefulness of root tests as diagnostic tools for selecting forecasting models. Difference stationary and trend stationary models of economic and financial time series often imply very different predictions, so deciding which model to use is tremendously important for applied forecasters. Forecasters face three choices: always difference the data, never difference, or use a unit-root pretest. We characterize the predictive loss of these strategies for the canonical AR(1) process with trend, focusing on the effects of sample size, forecast horizon, and degree of persistence. We show that pretesting routinely improves forecast accuracy relative to forecasts from models in differences, and we give conditions under which pretesting is likely to improve forecast accuracy relative to forecasts from models in levels.
Handle: RePEc:nbr:nberwo:6928
Template-Type: ReDIF-Paper 1.0
Title: An Options-Based Analysis of Emerging Market Exchange Rate Expectations: Brazil's Real Plan, 1994-1997
Classification-JEL: F31; G15
Author-Name: Jose M. Campa
Author-Person: pca393
Author-Name: P.H. Kevin Chang
Author-Name: James F. Refalo
Note: IFM
Number: 6929
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6929
File-URL: http://www.nber.org/papers/w6929.pdf
File-Format: application/pdf
Publication-Status: published as Campa, Jose M. & Chang, P. H. Kevin & Refalo, James F., 2002. "An options-based analysis of emerging market exchange rate expectations: Brazil's Real Plan, 1994-1999," Journal of Development Economics, Elsevier, vol. 69(1), pages 227-253, October.
Abstract: This paper uses currency option data from the BMF, the Commodities and Futures exchange in Sao Paulo, Brazil, to investigate market expectations on the Brazilian Real-U.S. dollar exchange rate from October 1994 through July 1997. Using options data, we derive implied probability density functions (PDF) for expected future exchange rates and thus measures of the credibility of the crawling peg' and target zone ( maxiband') regimes governing the exchange rate. Since we do not impose an exchange rate model, our analysis is based on either the risk-neutral PDF or arbitrage-based tests of target zones. The paper one of the first to use options data from an emerging market, finds that target zone credibility was poor prior to February 1996, but improved afterwards. The market anticipated periodic band adjustments, but over time developed greater confidence in the Real. We also test whether devaluation intensities estimated from these option prices can be explained by standard macroeconomic factors.
Handle: RePEc:nbr:nberwo:6929
Template-Type: ReDIF-Paper 1.0
Title: Public Policies and Private Saving in Mexico
Classification-JEL: H2; O16
Author-Name: Martin Feldstein
Author-Person: pfe112
Note: PE
Number: 6930
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6930
File-URL: http://www.nber.org/papers/w6930.pdf
File-Format: application/pdf
Publication-Status: published as Feldstein, Martin. "Public Policies and Private Saving in Mexico." Economia Mexicana 8, 2 (Fall 1999): 231-265.
Abstract: Increasing the rate of saving is an important priority for many emerging market countries. This paper focuses on Mexico and discusses a variety of policies through which the government of Mexico could stimulate a higher rate of saving. These ideas are building blocks rather than an overall plan. Some are mutually exclusive but most are options that could be combined to achieve a higher rate of saving. Although the emphasis is on policy options that can be helpful in raising saving, the paper also discusses proposals that would be likely to reduce the rate of saving. The primary focus of the paper is on tax reforms, but there is also a discussion of financial regulation, government debt management, and the new system of retirement saving accounts.
Handle: RePEc:nbr:nberwo:6930
Template-Type: ReDIF-Paper 1.0
Title: The IT Revolution and the Stock Market
Classification-JEL: O3; G1
Author-Name: Jeremy Greenwood
Author-Person: pgr12
Author-Name: Boyan Jovanovic
Note: PR
Number: 6931
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6931
File-URL: http://www.nber.org/papers/w6931.pdf
File-Format: application/pdf
Publication-Status: Published as "The Information-Technology Revolution and the Stock Market", American Economic Review, Vol. 89, no. 2 (May 1999): 116-122.
Abstract: A new technology or product is often developed by the single entrepreneur. Whether he reaches the public offering stage or is acquired by a listed firm it takes time for the innovator to add value to the stock market. Indeed first, reduce the market's value because some firms -- usually large or old -- will cling to old technologies that have lost their momentum. This paper argue that (a) the market declined in the late 1960s because it felt that the old technologies either had lost their momentum or would give way to IT, and that (b) IT innovators boosted the stock market's value only in the 1980s. If the stock market provides a forecast of future events, then the recent dramatic upswing represents a rosy estimate about growth in future profits for the economy. This translates into a forecast of higher output and productivity growth, holding other things equal (such as capital's share of income).
Handle: RePEc:nbr:nberwo:6931
Template-Type: ReDIF-Paper 1.0
Title: Prices and Coupons for Breakfast Cereals
Author-Name: Aviv Nevo
Author-Person: pne133
Author-Name: Catherine Wolfram
Note: IO
Number: 6932
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6932
File-URL: http://www.nber.org/papers/w6932.pdf
File-Format: application/pdf
Publication-Status: published as Nevo, Aviv and Catherine Wolfram. "Why Do Manufacturers Issue Coupons? An Empirical Analysis Of Breakfast Cereals," Rand Journal of Economics, 2002, v33(2,Summer), 319-339.
Abstract: This paper explores the relationship between shelf prices and manufacturers' coupons for 25 ready-to-eat breakfast cereals. Contrary to the predictions of static monopoly price discrimination, we find the shelf prices for a particular brand in a particular city are generally lower during periods when coupons are available. We find evidence that is also inconsistent with dynamic theories of pricing that predict lower prices and coupons after periods of low demand, and find little support for explanations of couponing based on the vertical relationship between manufacturers and retailers. We find some support for models of price discrimination in oligopoly settings that suggest inter-brand competition can cause all prices to be lower than the uniform (non-discriminatory) price. We also find some evidence suggesting that firm-wide incentives may induce managers to use coupons and price cuts simultaneously in order, for example, to meet market share targets.
Handle: RePEc:nbr:nberwo:6932
Template-Type: ReDIF-Paper 1.0
Title: Contingent Protection as Better Insurance
Classification-JEL: F13
Author-Name: Ronald D. Fischer
Author-Person: pfi53
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: ITI
Number: 6933
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6933
File-URL: http://www.nber.org/papers/w6933.pdf
File-Format: application/pdf
Abstract: We formalize the notion that GATT exceptions such as antidumping and escape clause actions can act as insurance for import competing sectors affected by adverse price shocks. We use a general equilibrium model with several import competing sectors and assume incomplete markets so that agents cannot contract insurance. We show that these measures are superior to uniform tariffs as insurance mechanisms. Moreover, we demonstrate that the optimal uniform policy may not involve a tariff at all, but rather might entail an export tax. We also show that a tax cum subsidy policy (i.e., taxing all sectors in order to subsidize the shocked sector) improves welfare.
Handle: RePEc:nbr:nberwo:6933
Template-Type: ReDIF-Paper 1.0
Title: Per-Mile Premiums for Auto Insurance
Author-Name: Aaron S. Edlin
Author-Person: ped12
Note: LE
Number: 6934
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6934
File-URL: http://www.nber.org/papers/w6934.pdf
File-Format: application/pdf
Publication-Status: published as Economics for an Imperfect World: Essays In Honor of Joseph Stiglitz. MIT Press, 2003.
Abstract: Americans drive 2,360,000,000,000 miles each year, far outstripping other nations. Every time a driver takes to the road, and with each mile she drives, she exposes herself and others to the risk of accident. Insurance premiums are only weakly linked to mileage, however, and have largely lump-sum characteristics. The result is too much driving and too many accidents. This paper begins by developing a model of the relationship between driving and accidents that formalizes Vickrey's [1968] central insights about the accident externalities of driving. We use this model to estimate the driving, accident, and congestion reductions that could be expected from switching to other insurance pricing systems. Under a competitive system of per-mile premiums, in which insurance companies quote risk-classified per-mile rates, we estimate that the reduction in insured accident costs net of lost driving benefits would be $9.8 -$12.7 billion nationally, or $58 -$75 per insured vehicle. When uninsured accident cost savings and congestion reductions are considered, the net benefits rise to $25 -$29 billion, exclusive of monitoring costs. The total benefits of uniform per-gallon insurance charge could be $1.3 -$2.3 billion less due to heterogeneity in fuel efficiency. The total benefits of optimal' per-mile premiums in which premiums are taxed to account for accident externalities would be $32 -$43 billion, or $187 - $254 per vehicle, exclusive of monitoring costs. One reason that insurance companies may have not switched to per-mile premiums on their own is that most of the benefits are external and the transaction costs to the company and its customers of checking odometers could exceed the $31 per vehicle of gains that a single company could temporarily realize on its existing base of customers.
Handle: RePEc:nbr:nberwo:6934
Template-Type: ReDIF-Paper 1.0
Title: Recent G3 Current Account Imbalances: How Important are Structural Factors?
Author-Name: Richard Clarida
Author-Person: pcl69
Author-Name: Joe Prendergast
Note: IFM
Number: 6935
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6935
File-URL: http://www.nber.org/papers/w6935.pdf
File-Format: application/pdf
Abstract: This paper implements a novel empirical approach for estimating the importance of structural factors in explaining the recent behavior of G3 current account positions. Following the contribution of Sims (1982), we employ a tractable econometric framework that can be used to answer the following basic question: assuming that there is a stable underlying structure that links the current account with other macroeconomic variables such as economic growth, world demand, and the real exchange rate, how important are the observed departures of these variables from their long run equilibrium levels in accounting for the observed adjustments in a country's current account? Our approach interprets the departure of the actual current account from this estimated structural component of the current account path as arising from a combination of cyclical and idiosyncratic factors. The cyclical influences on the current account are assumed to be captured by the deviations of the multilateral real exchange rate, home GDP growth, and global GDP growth from their respective long run averages.
Handle: RePEc:nbr:nberwo:6935
Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Oligopoly with Collusion and Price Wars
Classification-JEL: C71; C73
Author-Name: Chaim Fershtman
Author-Person: pfe232
Author-Name: Ariel Pakes
Author-Person: ppa20
Note: IO
Number: 6936
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6936
File-URL: http://www.nber.org/papers/w6936.pdf
File-Format: application/pdf
Publication-Status: published as Fershtman, Chaim and Ariel Pakes. "A Dynamic Oligopoly With Collusion And Price Wars," Rand Journal of Economics, 2000, v31(2,Summer), 207-236.
Abstract: Most of the theoretical work on collusion and price wars assumes identical firms and an unchanging environment, assumptions which are at odds with what we know about most industries. Further that literature focuses on the impact of collusion on prices. Whether an industry can support collusion also effects investment incentives and hence the variety, cost, and quality of the products marketed. We provide a collusive framework with heterogeneity among firms, investment, entry, and exit. It is a symmetric information model in which it is hard to sustain collusion when either one of the firms does not keep up with the advances of its competitors, or a low quality' entrant enters. In either case there will be an active firm that is quite likely to exit after it deviates, but if one of the competitors is near an exit state the other incumbent(s) has an incentive to price predatorily (that is to deviate themselves). We use numerical analysis to compare an institutional structure that allows for collusion to one which does not (perhaps because of an active antitrust authority). Price paths clearly differ in the two environments; in particular only the collusive industry generates price wars. The collusive industry offers both more and higher quality products to consumers, albeit often at a higher price. The positive effect of collusion on the variety and quality of products marketed more than compensates consumers for the negative effect of collusive prices, so that consumer surplus is larger in the collusive environment.
Handle: RePEc:nbr:nberwo:6936
Template-Type: ReDIF-Paper 1.0
Title: Price, Clean Indoor Air, and Cigarette Smoking: Evidence from the Longitudinal Data for Young Adults
Classification-JEL: I1
Author-Name: John A. Tauras
Author-Person: pta136
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Note: EH
Number: 6937
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6937
File-URL: http://www.nber.org/papers/w6937.pdf
File-Format: application/pdf
Abstract: The upward trend in cigarette smoking among teenagers throughout the 1990's has spurred a great deal of interest on how to discourage young people from smoking. This paper attempts to inform policy makers by providing evidence on the effects cigarette prices (which can be increased through cigarette excise taxes) and restrictions on smoking in public places and private worksites have on the use of cigarettes by young adults. Data on cigarette use are taken from the 1976 through 1993 surveys of high school seniors as part of the Monitoring the Future program. Seven follow-ups are conducted on each senior class and therefore each individual is sampled up to eight times. Site-specific data on cigarette prices and clean indoor air laws are added to the survey data. Individual fixed effects methods are used to estimate smoking participation and conditional demand equations. The results indicate that increases in cigarette prices would lead to significant reductions in both the number of people smoking and the frequency with which individuals smoke. The estimated overall average price elasticity of demand is -0.791. In addition, restrictions on smoking in public places and private worksites are found to be effective in reducing both the intensity and the propensity to smoke.
Handle: RePEc:nbr:nberwo:6937
Template-Type: ReDIF-Paper 1.0
Title: The 'Lemons Effect' in Corporate Freeze-Outs
Classification-JEL: G30
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Marcel Kahan
Note: CF LE
Number: 6938
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6938
File-URL: http://www.nber.org/papers/w6938.pdf
File-Format: application/pdf
Abstract: In a corporate freeze-out, the controller is required to compensate minority shareholders for the no-freezeout value of their shares that are taken from them. This paper seeks to highlight the difficulties involved in determining this no-freezeout value when private information. In particular, the analysis shows that the pre-freezeout market price of minority shares cannot be used an a proxy for the no-freezeout value that these shares would have in the absence of a freeze-out. It is shown that, under a regime in which frozen out minority shareholders receive a compensation equal to the pre-freezeout market price, the pre-freezeout market price will be set a level below the expected no-freezeout value of minority shares. The reason for this is a lemons effect' that arises when a controller uses her private information in deciding whether to affect a freeze-out. By showing how controllers are able to use their private information to affect freeze-outs at terms favorable to them, this paper demonstrates that freeze-outs can become a significant source for private benefits of control.
Handle: RePEc:nbr:nberwo:6938
Template-Type: ReDIF-Paper 1.0
Title: Do Higher Cigarette Prices Encourage Youth to Use Marijuana?
Classification-JEL: I18
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Rosalie Liccardo Pacula
Author-Person: ppa1299
Author-Name: Matthew C. Farrelly
Author-Name: Lloyd D. Johnston
Author-Name: Patrick M. O'Malley
Note: EH
Number: 6939
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6939
File-URL: http://www.nber.org/papers/w6939.pdf
File-Format: application/pdf
Abstract: Every major national tobacco legislation proposed in the past two years has called for significant increases in the price of cigarettes as a way to discourage youths from smoking. One argument used to oppose these bills is that increases in the price of cigarettes would cause youths to substitute marijuana for cigarettes. Although it has long been believed that cigarettes are a gateway drug,' no economic research has been done to determine whether cigarettes and marijuana are economic complements or substitutes. This paper begins to fill the void in the current research by examining the contemporaneous relationship between the demands for cigarettes and marijuana among a nationally representative sample of 8th, 10th and 12th graders from the 1992-1994 Monitoring the Future Project. Two part models are used to estimate reduced form demand equations. Examination of the cross-price effects clearly shows that higher cigarette prices will not increase marijuana use among youths. In addition to reducing youth smoking, we find that higher cigarette prices significantly reduce the average level of marijuana used by current users. Cigarette prices also have a negative effect on the probability of using marijuana findings are not significant at conventional levels.
Handle: RePEc:nbr:nberwo:6939
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Prices and Policies on the Demand for Marijuana: Evidence from the National Household Surveys on Drug Abuse
Classification-JEL: I18
Author-Name: Matthew C. Farrelly
Author-Name: Jeremy W. Bray
Author-Name: Gary A. Zarkin
Author-Name: Brett W. Wendling
Author-Name: Rosalie Liccardo Pacula
Author-Person: ppa1299
Note: EH
Number: 6940
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6940
File-URL: http://www.nber.org/papers/w6940.pdf
File-Format: application/pdf
Abstract: Recent studies have shown that efforts to curb alcohol use by increasing the price of alcohol and limiting youth's access have succeeded, but they may have had the unintended consequencce of increasing marijuana use. This possibility is troubling in light of a recent government report that shows that marijuana use among teens more than doubled between 1990 and 1997. What impact will the proposed large increase in cigarette prices have on the demand for other substances such as marijuana? To better understand how the demand for marijuana responds to changes in the policies and prices that affect its use, we explore the National Household Survy on Drug Abuse (NHSDA). Overall, we find that marijuana, alcohol, and tobacco are complements, sot that increasing the price of any one will decrease the demand for marijuana. The results of this paper will help guide the creation of comprehensive policies that curb the use of marijuana in two ways: first, they quantify the effects of policies aimed at curbing the use of each substance, allowing policymakers to evaluate alternative policy options; and second, they clarify the dynamics and interactions between alcohol, tobacco, and marijuana use in response to government policies.
Handle: RePEc:nbr:nberwo:6940
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Economic Effects of Military Base Closures
Classification-JEL: R23; J23
Author-Name: Mark A. Hooker
Author-Name: Michael M. Knetter
Note: PE
Number: 6941
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6941
File-URL: http://www.nber.org/papers/w6941.pdf
File-Format: application/pdf
Publication-Status: published as Mark A. Hooker & Michael M. Knetter, 2001. "Measuring the Economic Effects of Military Base Closures," Economic Inquiry, vol 39(4), pages 583-598.
Abstract: Quite often, policy changes that are seen as welfare-improving at the national level encounter significant resistance in localities where the policies are implemented. Defense spending cuts and international trade agreements are classic examples. However, there is little systematic evidence on the magnitude of economic costs that fall on adversely affected communities. In this paper, we use a newly constructed dataset to analyze the county-level employment and personal income effects resulting from closures of military bases during 1971 - 1994. Our estimated multipliers are mostly less than one, and considerably smaller than those typically used in economic impact studies. We find that the employment costs are mostly limited to the direct job loss associated with military transfers out of the region, and per-capita income is little affected by closures on average.
Handle: RePEc:nbr:nberwo:6941
Template-Type: ReDIF-Paper 1.0
Title: Why Not Africa?
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: David L. Lindauer
Note: LS
Number: 6942
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6942
File-URL: http://www.nber.org/papers/w6942.pdf
File-Format: application/pdf
Abstract: Various arguments have been used to explain Sub-Saharan Africa's economic decline. We find that a stress on investments in education as a prerequisite for more rapid growth is misplaced; that greater openness is far from sufficient to insure economic progress; that income inequality and urban bias are not so extreme as to foreclose prospects for more rapid growth and poverty alleviation; and that the constraints imposed by Sub-Saharan Africa's human and physical geography are not core explanations for the regions poor performance. If African countries can establish an institutional environment that enables individuals to gain the rewards of their investments, the alleged barriers to the region's growth should prove surmountable.
Handle: RePEc:nbr:nberwo:6942
Template-Type: ReDIF-Paper 1.0
Title: Early Test Scores, Socioeconomic Status and Future Outcomes
Classification-JEL: I20; J20
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Duncan Thomas
Author-Person: pth20
Note: LS CH
Number: 6943
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6943
File-URL: http://www.nber.org/papers/w6943.pdf
File-Format: application/pdf
Publication-Status: published as Currie, Janet and "Early Test Scores, Socioeconomic Status, School Quality and Future Outcomes." Research in Labor Economics 20 (2001): 103-132.
Abstract: This paper examines the long-term effects of early test scores using data from the British National Child Development Survey. We show that test scores measured as early as age 7 have significant effects on future educational and labor market outcomes. For example, men and women in the lowest quartile of the reading test score distribution have wages 20% lower at age 33 than those who scored in the highest quartile. We test several hypotheses about the interactions between socioeconomic status and high or low test scores at age 7. In terms of test scores, educational attainments, and employment at age 33, low-SES children reap both larger gains from having high age 7 test scores and smaller losses from having low age 7 test scores. The opposite is true among high-SES children who suffer larger losses from low scores and smaller gains from high scores. However we find little evidence of comparable interactive effects for wages.
Handle: RePEc:nbr:nberwo:6943
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Effect of Alcohol on Driver Risk Using Only Fatal Accident Statistics
Classification-JEL: C13; I12
Author-Name: Steven D. Levitt
Author-Person: ple59
Author-Name: Jack Porter
Note: PE LE
Number: 6944
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6944
File-URL: http://www.nber.org/papers/w6944.pdf
File-Format: application/pdf
Abstract: Measuring the relative likelihood of fatal crash involvement for different types of drivers would seem to require information on both the number of fatal crashes by driver type and the fraction of drivers on the road falling into each category. In this paper, however, we present a methodology for measuring fatal crash likelihood that relies solely on fatal crash data. The key to our identification strategy is the hidden richness inherent to two-car crashes. Crashes involving two drinking drivers are proportional to the square of the number of drinking drivers on the road; crashes with one drinking and one sober driver increase linearly in the number of drinking drivers. Imposing a limited set of assumptions (e.g. independence across crashes, equal mixing on the roads), we are able to estimate both the likelihood of causing a fatal crash and the fraction of drivers of each type on the road. Our estimates suggest that drivers with alcohol in their blood are at least eight times more likely to cause a fatal crash; legally drunk drivers pose a risk at least 15 times greater than sober drivers. Males, young drivers, and drivers with bad past driving records are all more dangerous, but the impact of these other factors is far less than that of alcohol.
Handle: RePEc:nbr:nberwo:6944
Template-Type: ReDIF-Paper 1.0
Title: Corruption and Optimal Law Enforcement
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 6945
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6945
File-URL: http://www.nber.org/papers/w6945.pdf
File-Format: application/pdf
Publication-Status: published as Polinsky, A. Mitchell and Steven Shavell. "Corruption And Optimal Law Enforcement," Journal of Public Economics, 2001, v81(1,Jul), 1-24.
Abstract: This article analyzes corruption of law enforcement agents: payment of bribes to agents so that they will not report violations. Corruption dilutes deterrence because bribe payments are less than sanctions. The state may not be able to offset this effect of bribery by raising sanctions for the underlying offense. Thus, it may be optimal to expend resources to detect and penalize corruption. At the optimum, however, corruption may not be deterred. Nonetheless, it may be desirable to attempt to control corruption in order to raise the offender's costs -- the sum of the bribe payment and the expected sanction for bribery -- and thereby increase deterrence of the underlying violation.
Handle: RePEc:nbr:nberwo:6945
Template-Type: ReDIF-Paper 1.0
Title: Labor-Market Competition and Individual Preferences Over Immigration Policy
Classification-JEL: F22; J31
Author-Name: Kenneth F. Scheve
Author-Name: Matthew J. Slaughter
Note: ITI
Number: 6946
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6946
File-URL: http://www.nber.org/papers/w6946.pdf
File-Format: application/pdf
Publication-Status: published as Scheve, Kenneth F. and Matthew J. Slaughter. "What Determines Individual Trade-Policy Preferences?," Journal of International Economics, 2001, v54(2,Aug), 267-292.
Abstract: This paper uses an individual-level data set to analyze the determinants of individual preferences over immigration policy in the United States. In particular, we test for a link from individual skill levels to stated immigration-policy preferences. Different economic models make contrasting predictions about the nature of this link. We have two main empirical results. First, less-skilled workers are significantly more likely to prefer limiting immigrant inflows into the United States. The result is robust to several different econometric specifications which account for determinants of policy preferences other than skills. Our finding suggests that over time horizons relevant to individuals when evaluating immigration policy, individuals thank that the U.S. economy absorbs immigrant inflows at least partly by changing wages. These preferences are consistent with a multi-cone' Heckscher Ohlin trade model and with a factor-proportions-analysis labor model. Second that less-skilled workers in high-immigration communities are especially anti-immigrationist. If anything, our evidence suggests attenuation of the skills-preferences correlation in high-immigration communities. These preferences are inconsistent with an area-analysis labor model.
Handle: RePEc:nbr:nberwo:6946
Template-Type: ReDIF-Paper 1.0
Title: Do Subsidies to Commercial R&D Reduce Market Failures? Microeconomic Evaluation Studies
Classification-JEL: G30; O40
Author-Name: Tor Jakob Klette
Author-Name: Jarle Møen
Author-Name: Zvi Griliches
Note: PR
Number: 6947
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6947
File-URL: http://www.nber.org/papers/w6947.pdf
File-Format: application/pdf
Publication-Status: published as Research Policy, vol.29 (4-5), pp. 471-495, 2000.
Abstract: A number of market failures have been associated with R&D investments and significant amounts of public money have been spent on programs to stimulate innovative activities. In this paper, we review some recent microeconomic studies evaluating effects of government sponsored commercial R&D. We pay particular attention to the conceptual problems involved. Neither the firms receiving support, nor those not applying, constitute random samples. Furthermore, those not receiving support may be affected by the programs due to spillover effects which often are a main justification for R&D subsidies. Constructing a valid control group under these circumstances is challenging, and we relate our discussion to recent advances in econometric methods for evaluation studies based on non-experimental data. We also discuss some analytical questions that need to be addressed in order to assess whether R&D support schemes can be justified. For instance, what are the implication of firms' R&D investments being complementary to each other, and to what extent are potential R&D spillovers internalized in the market?
Handle: RePEc:nbr:nberwo:6947
Template-Type: ReDIF-Paper 1.0
Title: Changes in Business Cycles: Evidence and Explanations
Classification-JEL: E32; E63
Author-Name: Christina D. Romer
Author-Person: pro407
Note: DAE EFG ME
Number: 6948
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6948
File-URL: http://www.nber.org/papers/w6948.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, Vol. 13, no. 2 (Spring 1999): 23-44.
Abstract: This paper analyzes changes in American business cycles over the twentieth century and suggests a possible explanation for the major changes that have and have not occurred. The empirical analysis shows that the volatility of annual real macroeconomic indicators and the average severity of recessions have declined only slightly between the pre-World War I and post-World War II eras. Recessions have, however, become somewhat less frequent and more uniform. The paper goes on to suggest that the advent of macroeconomic policy after World War II can account for both the continuity and the changes in business cycles. Countercyclical monetary policy and automatic stabilizers have prolonged postwar expansions and prevented severe depressions. At the same time, policy-induced booms and recessions have led to the continued volatility of the postwar economy.
Handle: RePEc:nbr:nberwo:6948
Template-Type: ReDIF-Paper 1.0
Title: Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?
Author-Name: Antonio Rangel
Author-Person: pra69
Author-Name: Richard Zeckhauser
Author-Person: pze7
Note: AG PE
Number: 6949
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6949
File-URL: http://www.nber.org/papers/w6949.pdf
File-Format: application/pdf
Publication-Status: published as Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?, Antonio Rangel, Richard Zeckhauser. in Risk Aspects of Investment-Based Social Security Reform, Campbell and Feldstein. 2001
Abstract: Are market and voting institutions capable of producing optimal intergenerational risk-sharing? To study this question, we consider a simple endowment economy with uncertainty and overlapping generations. Endowments are stochastic; thus it is possible to increase the welfare of every generation using intergenerational transfers that might depend on the state of the world. We characterize the transfers that are necessary to restore efficiency and compare them to the transfers that take place in markets and voting institutions. Unlike most of that literature, we study both ex-ante and interim risk-sharing. Our main conclusion is that both types of institutions have serious problems. Markets cannot generate ex-ante risk-sharing because agents can trade only after they are born. Furthermore, markets generate interim efficient insurance in some but not all economies because they cannot generate forward (old to young) intergenerational transfers. This market failure, in theory, could be corrected by government intervention. However, as long as government policy is determined by voting, intergenerational transfers might by driven more by redistributive politics than by risk sharing considerations. Successful government intervention can arise, even though agents can only vote after they are born, but only if the young determine policy in every election.
Handle: RePEc:nbr:nberwo:6949
Template-Type: ReDIF-Paper 1.0
Title: Violence and the U.S. Prohibition of Drugs and Alcohol
Classification-JEL: K42
Author-Name: Jeffrey A. Miron
Author-Person: pmi250
Note: EH
Number: 6950
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6950
File-URL: http://www.nber.org/papers/w6950.pdf
File-Format: application/pdf
Publication-Status: published as JA Miron, 1999. "Violence and the U.S. prohibitions of drugs and alcohol," American Law and Economics Review, vol 1(1), pages 78-114.
Abstract: Among the many unresolved questions regarding the determinants of violence is the role of prohibitions against drugs and alcohol. Conventional wisdom holds that consumption of these goods encourages violence and that prohibitions discourage such consumption; thus, prohibitions reduce violence. An alternative view, however, is that prohibitions create black markets, and in black markets participants use violence to resolve commercial disputes. Thus, prohibitions potentially increase violence. This paper examines the relation between prohibitions and violence using the historical behavior of the homicide rate in the United States. The results document that increases in enforcement of drug and alcohol prohibition have been associated with increases in the homicide rate, and auxiliary evidence suggests this positive correlation reflects a causal effect of prohibition enforcement on homicide. Controlling for other potential determinants of the homicide rate -- the age composition of the population, the incarceration rate, economic conditions, gun availability, and the death penalty -- does not alter the conclusion that drug and alcohol prohibition have substantially raised the homicide rate in the United States over much of the past 100 years.
Handle: RePEc:nbr:nberwo:6950
Template-Type: ReDIF-Paper 1.0
Title: Stock Pyramids, Cross-Ownership, and the Dual Class Equity: The Creation and Agency Costs of Seperating Control from Cash Flow Rights
Classification-JEL: G30
Author-Name: Lucian Bebchuk
Author-Person: pbe72
Author-Name: Reinier Kraakman
Author-Name: George Triantis
Note: CF PE
Number: 6951
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6951
File-URL: http://www.nber.org/papers/w6951.pdf
File-Format: application/pdf
Publication-Status: published as Lucian A. Bebchuk & Reinier Kraakman & George Triantis, 2000. "III. ECONOMIC EFFECTS OF CONCENTRATED CORPORATE OWNERSHIP: 10. Stock Pyramids, Cross-Ownership, and Dual Class Equity: The Mechanisms and Agency Costs of Separating Control from Cash-Flow Rights," NBER Chapters, in: Concentrated Corporate Ownership, pages 295-318 National Bureau of Economic Research, Inc.
Abstract: This paper examines common arrangements for separating control from cash flow rights: stock pyramids, cross-ownership structures, and dual class equity structures. We describe the ways in which such arrangements enable a controlling shareholder or group to maintain a complete lock on the control of a company while holding less than a majority of the cash flow rights associated with its equity. Next, we analyze the consequences and agency costs of these arrangements. In particular, we show that they have the potential to create very large agency costs -- costs that are an order of magnitude larger than those associated with controlling shareholders who hold a majority of the cash flow rights in their companies. The agency costs of these structures, we suggest, are also likely to exceed the agency costs of attending highly leveraged capital structures. Finally, we put forward an agenda for research concerning structures separating control from cash flow rights.
Handle: RePEc:nbr:nberwo:6951
Template-Type: ReDIF-Paper 1.0
Title: Efficient Competition With Small Numbers -- With Applications to Privatisation and Mergers
Classification-JEL: D4; L5
Author-Name: Kala Krishna
Author-Person: pkr26
Author-Name: Torben Tranaes
Note: ITI
Number: 6952
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6952
File-URL: http://www.nber.org/papers/w6952.pdf
File-Format: application/pdf
Abstract: This paper studies competition between a small number of suppliers and a single buyer (or an auction with a small number of bidders and a single seller), when total demand (supply) is uncertain. It is well known that when a small number of suppliers compete in supply functions the service is not provided efficiently. We show that production efficiency is obtained if suppliers compete in simple two-part bid functions. However, profits are not eliminated. Moreover, the buyers' (sellers') decision regarding how much to buy is not efficient. We also show that suppliers (bidders in an auction) always have an incentive to merge (form bidding rings) in this setting.
Handle: RePEc:nbr:nberwo:6952
Template-Type: ReDIF-Paper 1.0
Title: Quantitative Asset Pricing Implications of Endogenous Solvency Constraints
Classification-JEL: G12; D50
Author-Name: Fernando Alvarez
Author-Name: Urban J. Jermann
Author-Person: pje4
Note: AP
Number: 6953
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6953
File-URL: http://www.nber.org/papers/w6953.pdf
File-Format: application/pdf
Publication-Status: published as Alvarez, F. and U. J. Jermann. "Quantitative Asset Pricing Implications Of Endogenous Solvency Constructs," Review of Financial Studies, 2001, v14(4,Oct), 1117-1151.
Abstract: We study the asset pricing implications of an economy where solvency constraints are determined to efficiently deter agents from defaulting. We present a simple example for which efficient allocations and all equilibrium elements are characterized analytically. The main model produces large equity premia and risk premia for long term bonds with low risk aversion and a plausibly calibrated income process. We characterize the deviations from independence of aggregate and individual income uncertainty that produce equity and term premia.
Handle: RePEc:nbr:nberwo:6953
Template-Type: ReDIF-Paper 1.0
Title: Program Evaluation as a Decision Problem
Classification-JEL: C11; I38
Author-Name: Rajeev Dehejia
Author-Person: pde179
Note: LE PE
Number: 6954
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6954
File-URL: http://www.nber.org/papers/w6954.pdf
File-Format: application/pdf
Publication-Status: published as Dehejia, Rajeev H., 2005. "Program evaluation as a decision problem," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 141-173.
Abstract: I argue for thinking of program evaluation as a decision problem. In the context of California's GAIN experiment (a randomized trial of a welfare-to-work alternative to AFDC), I show that GAIN first-order stochastically dominates AFDC when considering the choice between the treatment and control programs in terms of average earnings, even though the treatment effect is not statistically significant. I also argue for incorporating the post-evaluation assignment mechanism for the program under consideration into the evaluation process. I show that if policies, such as allowing a career counselor to choose which program individuals join, are included in the evaluation, then GAIN is superior to AFDC whereas the opposite ranking emerges from the standard treatment versus control comparison which ignores potential heterogeneity in the treatment impact.
Handle: RePEc:nbr:nberwo:6954
Template-Type: ReDIF-Paper 1.0
Title: Emerging Market Business Groups, Foreign Investors, and Corporate Governance
Author-Name: Tarun Khanna
Author-Name: Krishna Palepu
Note: CF
Number: 6955
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6955
File-URL: http://www.nber.org/papers/w6955.pdf
File-Format: application/pdf
Publication-Status: published as Khanna, Tarun and Krishan Palepu. "Is Group Affiliation Profitable In Emerging Markets? An Analysis Of Diversified Indian Business Groups," Journal of Finance, 2000, v55(2,Apr), 867-891.
Publication-Status: published as Tarun Khanna & Krishna Palepu, 2000. "III. ECONOMIC EFFECTS OF CONCENTRATED CORPORATE OWNERSHIP: 9. Emerging Market Business Groups, Foreign Intermediaries, and Corporate Governance," NBER Chapters, in: Concentrated Corporate Ownership, pages 265-294 National Bureau of Economic Research, Inc.
Abstract: We examine the interaction between three kinds of concentrated owners commonly found in an emerging market: family-run business groups, domestic financial institutions, and foreign financial institutions. Using data from India in the early 1990s, we find evidence that domestic international investors are poor monitors, and that foreign institutional investors are good monitors. Whereas affiliates of those groups that attract foreign institutional investment are no more difficult to monitor than are unaffiliated firms, we find that group affiliation reduces the likelihood of foreign institutional investment. More transparent groups (where greater transparency is proxied for by a lower incidence of intra-group financial transactions) are more likely to attract such investment. We conclude that groups are difficult to monitor, and that foreign institutional investors serve a valuable monitoring function as emerging markets integrate with the global economy.
Handle: RePEc:nbr:nberwo:6955
Template-Type: ReDIF-Paper 1.0
Title: Rewards versus Intellectual Property Rights
Classification-JEL: D23; K11
Author-Name: Steven Shavell
Author-Person: psh42
Author-Name: Tanguy van Ypersele
Note: LE PR
Number: 6956
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6956
File-URL: http://www.nber.org/papers/w6956.pdf
File-Format: application/pdf
Publication-Status: published as Shavell, Steven and Tanguy Van Ypersele. "Rewards Versus Intellectual Property Rights," Journal of Law and Economics, 2001, v44(2,Oct), 525-547.
Abstract: This paper compares reward systems to intellectual property rights (patents and copyrights). Under a reward system, innovators are paid for innovations directly by government (possibly on the basis of sales), and innovations pass immediately into the public domain. Thus, reward systems engender incentives to innovate without creating the monopoly power of intellectual property rights, but a principal difficulty with rewards is the information required for their determination. We conclude in our model that intellectual property rights do not possess a fundamental social advantage over reward systems, and that an optional reward system under which innovators choose between rewards and intellectual property rights is superior to intellectual property rights.
Handle: RePEc:nbr:nberwo:6956
Template-Type: ReDIF-Paper 1.0
Title: Personnel Economics: Past Lessons and Future Directions
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS
Number: 6957
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6957
File-URL: http://www.nber.org/papers/w6957.pdf
File-Format: application/pdf
Publication-Status: published as JLE, Vol. 17, no. 2 (April 1999): 199-236.
Abstract: In 1987, the Journal of Labor Economics published an issue on the economics of personnel. Since then, personnel economics, defined as the application of labor economics principles to business issues, has become a major part of labor economics, now accounting for a substantial proportion of papers in this and other journals. Much of the work in personnel economics has been theoretical, in large part because the data needed to test these theories has not been available. In recent years, a number of firm-based data sets have surfaced that allow personnel economics to be tested. Using two such data sets, the implications of theories that relate to life-cycle incentives compression, and peer pressure are given support. The conclusion is that personnel economics is real. It is far more than a set of clever theories. It has relevance to the real world. Additionally, firm-based data make asking and answering new kinds of questions feasible. The value of research in this area is high because so little is known as compared with other fields in labor economics. Questions about the importance of a worker's relative position in a firm, about intrafirm mobility, about the effect of the firm's business environment on worker welfare, about the significance of first impressions can be answered using the new data. Finally, it is argued that the importance of personnel economics in undergraduate as well as business school curricula will continue to grow.
Handle: RePEc:nbr:nberwo:6957
Template-Type: ReDIF-Paper 1.0
Title: Tobacco Advertising: Economic Theory and International Evidence
Classification-JEL: 913; H
Author-Name: Henry Saffer
Author-Person: psa935
Author-Name: Frank Chaloupka
Author-Person: pch236
Note: EH
Number: 6958
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6958
File-URL: http://www.nber.org/papers/w6958.pdf
File-Format: application/pdf
Publication-Status: published as Saffer, Henry & Chaloupka, Frank, 2000. "The effect of tobacco advertising bans on tobacco consumption," Journal of Health Economics, Elsevier, vol. 19(6), pages 1117-1137, November.
Abstract: Tobacco advertising is a public health issue if these activities increase smoking. Although public health advocates assert that tobacco advertising does increase smoking, there is significant empirical literature that finds little or no effect of tobacco advertising on smoking. In this paper, these prior studies are examined more closely with several important insights emerging from this analysis. This paper also provides new empirical evidence on the effect of tobacco advertising. The primary conclusion of this research is that a comprehensive set of tobacco advertising bans can reduce tobacco consumption and that a limited set of tobacco advertising bans will have little of no effect. The regression results indicate that a comprehensive set of tobacco advertising bans can reduce consumption by 6.3 percent. The regression results also indicate that the new European Commission directive tobacco advertising in the EC countries, will reduce tobacco consumption by about 6.9 percent on average in the EC. The regression results also indicate that the ban on outdoor advertising included in the US tobacco industry state level settlement will probably not result in much change in advertising expenditures nor in tobacco use. Under the settlement industry would also contribute $1.5 billion over five years for public education on tobacco use. This counteradvertising could reduce tobacco use by about two percent.
Handle: RePEc:nbr:nberwo:6958
Template-Type: ReDIF-Paper 1.0
Title: Poisoned Grapes, Mad Cow, and Protectionism
Classification-JEL: F13; F14
Author-Name: Eduardo Engel
Author-Person: pen3
Note: ITI
Number: 6959
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6959
File-URL: http://www.nber.org/papers/w6959.pdf
File-Format: application/pdf
Publication-Status: published as Eduardo M.R.A Engel, 2001. "Poisoned grapes, mad cows and protectionism," The Journal of Policy Reform, vol 4(2), pages 91-111.
Abstract: This paper studies two episodes where an exporting industry saw its sales plummet after importing countries banned their products to protect their citizens' health. The first case is the poisoned grapes crisis involving Chile and the United States in 1989. The second is the mad cows dispute between the United Kingdom and the European Union in 1996. These case studies motivate a new definition of protectionist measure' which is applied to argue the European Union's ban on British beef exports did not constitute a protectionist measure, while the US ban on Chilean fruit possibly classifies as such a measure.
Handle: RePEc:nbr:nberwo:6959
Template-Type: ReDIF-Paper 1.0
Title: Economic Analysis of Law
Classification-JEL: K00; K10
Author-Name: Louis Kaplow
Author-Person: pka44
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE PE
Number: 6960
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6960
File-URL: http://www.nber.org/papers/w6960.pdf
File-Format: application/pdf
Publication-Status: published as Handbook of Public Economics, Auerbach and Feldstein, eds., 2001,forthcoming.
Abstract: This is a survey of the field of economic analysis of law, focusing on the work of economists. The survey covers the three central areas of civil law liability for accidents (tort law), property law, and contracts as well as the litigation process and public enforcement of law.
Handle: RePEc:nbr:nberwo:6960
Template-Type: ReDIF-Paper 1.0
Title: The Distribution of Exchange Rate Volatility
Author-Name: Torben Andersen
Author-Name: Tim Bollerslev
Author-Person: pbo66
Author-Name: Francis X. Diebold
Author-Person: pdi1
Author-Name: Paul Labys
Note: AP IFM
Number: 6961
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6961
File-URL: http://www.nber.org/papers/w6961.pdf
File-Format: application/pdf
Publication-Status: published as Andersen, Torben G., Tim Bollerslev, Francis X. Diebold and Paul Labys. "The Distribution Of Realized Exchange Rate Volatility," Journal of the American Statistical Association, 2001, v96(453,Mar), 42-55.
Abstract: Using high-frequency data on Deutschemark and Yen returns against the dollar, we construct model-free estimates of daily exchange rate volatility and correlation, covering an entire decade. In addition to being model-free, our estimates are also approximately free of measurement error under general conditions, which we delineate. Hence, for all practical purposes, we can treat the exchange rate volatilities and correlations as observed rather than latent. We do so, and we characterize their joint distribution, both unconditionally and conditionally. Noteworthy results include a simple normality-inducing volatility transformation, high contemporaneous correlation across volatilities, high correlation between correlation and volatilities, pronounced and highly persistent temporal variation in both volatilities and correlation, clear evidence of long-memory dynamics in both volatilities and correlation remarkably precise scaling laws under temporal aggregation.
Handle: RePEc:nbr:nberwo:6961
Template-Type: ReDIF-Paper 1.0
Title: Banks as Liquidity Providers: An Explanation for the Co-Existence of Lending and Deposit-Taking
Author-Name: Anil K. Kashyap
Author-Person: pka35
Author-Name: Raghuram Rajan
Author-Person: pra149
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: CF ME
Number: 6962
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6962
File-URL: http://www.nber.org/papers/w6962.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 57, no. 1 (February 2002): 33-73
Publication-Status: published as Anil Kashyap & Raghuram Rajan & Jeremy S. Stein, 1998. "Banks as liquidity providers: an explanation for the co-existence of lending and deposit-taking," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 90-112.
Abstract: This paper addresses the following question: what ties together the traditional commercial banking activities of deposit-taking and lending? We begin by observing that since banks often lend via commitments, or credit lines, their lending and deposit-taking may be two manifestations of the same primitive function: the provision of liquidity on demand. After all, once the decision to extend a line of credit has been made, it is really nothing more than a checking account with overdraft privileges. This observation leads us to argue that there will naturally be synergies between the two activities, to the extent that both require banks to hold large volumes of liquid assets (cash and securities) on their balance sheets: if deposit withdrawals and commitment takedowns are imperfectly correlated, the two activities can share any deadweight costs of holding the liquid assets. We develop this idea with a simple model, and then use a variety of data to test the model's empirical implications.
Handle: RePEc:nbr:nberwo:6962
Template-Type: ReDIF-Paper 1.0
Title: The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design
Author-Name: Alvin E. Roth
Author-Person: pro40
Author-Name: Elliott Peranson
Note: EH LS
Number: 6963
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6963
File-URL: http://www.nber.org/papers/w6963.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89, no. 4 (September 1999): 748-780.
Abstract: We report on the design of the new clearinghouse adopted by the National Resident Matching Program, which annually fills approximately 20,000 jobs for new physicians in the United States. Because that market exhibits many complementarities between applicants and between positions, the theory of simple matching markets does not apply directly. However, computational experiments reveal that the theory provides a good approximation, and furthermore the set of stable matchings, and the opportunities for strategic manipulation, are surprisingly small. A new kind of core convergence' result is presented to explain this; the fact that each applicant can interview for only a small fraction of available positions is important. We also describe in detail engineering aspects of the design process.
Handle: RePEc:nbr:nberwo:6963
Template-Type: ReDIF-Paper 1.0
Title: The Aftermath of the 1992 ERM Breakup: Was There a Macroeconomic Free Lunch?
Classification-JEL: E3; F4
Author-Name: Robert J. Gordon
Author-Person: pgo50
Note: IFM
Number: 6964
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6964
File-URL: http://www.nber.org/papers/w6964.pdf
File-Format: application/pdf
Publication-Status: published as The Aftermath of the 1992 ERM Breakup: Was There a Macroeconomic Free Lunch?, Robert J. Gordon. in Currency Crises, Krugman. 2000
Abstract: This paper examines the macroeconomic aftermath of the 1992 breakdown of the European Exchange Rate Mechanism (ERM). The economic performance of six leaver' nations is compared with five stayer' nations that maintained a roughly fixed parity with the Deutsche Mark. Recent writing about post-1992, which I call the conventional wisdom,' reports that a surprising miracle occurred the leaver nations are alleged to have enjoyed a burst of real growth and a decline in unemployment, all without any evidence of extra inflation. The results in this paper turn the conventional wisdom on its head. While the leaver nations experienced an acceleration of nominal GDP growth relative to the stayers, fully 80 percent of this spilled over into extra inflation, leaving only 20 percent remaining for extra real GDP growth. Virtually 100 percent of the nominal exchange rate depreciation passed through into higher import prices, and extra inflation would have been even more pronounced if it were not for quiescent wage rates, which the paper attributes to high unemployment. The absence of any significant stimulus to real output growth is attributed to fiscal tightening under pressure from the Maastricht criteria, which offset nearly all of the stimulus coming from the improved current account of the leaver nations.
Handle: RePEc:nbr:nberwo:6964
Template-Type: ReDIF-Paper 1.0
Title: International Experiences with Different Monetary Policy Regimes
Classification-JEL: E5
Author-Name: Frederic S. Mishkin
Author-Person: pmi37
Note: ME EFG
Number: 6965
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6965
File-URL: http://www.nber.org/papers/w6965.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Monetary Economics, Vol. 43, no. 3 (June 1999): 579-605.
Abstract: This paper examines the international experiences with four basic types of monetary policy regimes: 1) exchange-rate targeting, 2) monetary targeting, 3) inflation targeting, and 4) monetary policy with an implicit but not an explicit nominal anchor. The basic theme that emerges from this analysis is that transparency and accountability are crucial to constraining discretionary monetary policy so that it produces desirable long-run outcomes. Because the devil is in the details in achieving transparency and accountability, what strategy will work best in a country depends on its political, cultural and economic institutions and its past history.
Handle: RePEc:nbr:nberwo:6965
Template-Type: ReDIF-Paper 1.0
Title: Has Job Security Vanished in Large Corporations?
Classification-JEL: J6; L2
Author-Name: Steven G. Allen
Author-Person: pal6
Author-Name: Robert L. Clark
Author-Name: Sylvester J. Schieber
Note: LS
Number: 6966
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6966
File-URL: http://www.nber.org/papers/w6966.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David (ed.) On The Job: Is Long-Term Employment a Thing of the Past? New York: Russell Sage Foundation, 2001.
Abstract: The prevailing wisdom in media accounts is that job stability has vanished, especially for those in large corporations. Academic studies of job stability have found little difference between the 1990s and earlier decades, but these studies have not been able to focus on large firms. This paper provides the first detailed analysis of job stability in large corporations in the 1990s using a sample of 51 firms that are clients of Watson Wyatt Worldwide. We find that mean tenure and the percentage of employees with 10 or more years of service have actually increased in our sample. Even in large firms with shrinking employment, the odds that a worker would be with the same employer five years later were higher than the same odds for the labor market as a whole. There is no evidence that mid-career employees have been singled out in downsizing decisions; their turnover rate is the same in both growing and downsizing firms. Regression analysis shows that the impact of downsizing is still being borne by the most junior workers and that there is no evidence that rising wage differentials by experience are encouraging firms to substitute junior for senior workers.
Handle: RePEc:nbr:nberwo:6966
Template-Type: ReDIF-Paper 1.0
Title: Economic, Financial, and Fundamental Global Risk In and Out of the EMU
Classification-JEL: G12; G15
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Campbell R. Harvey
Author-Person: pha102
Note: AP
Number: 6967
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6967
File-URL: http://www.nber.org/papers/w6967.pdf
File-Format: application/pdf
Publication-Status: published as Swedish Economic Policy Review, Vol. 6 (1999): 123-184.
Abstract: We explore the different factors that drive expected returns in world markets. Our research offers two innovations. First, the introduction of the Euro currency unit greatly reduces the complexity of including foreign exchange risk in asset pricing models. We use a synthetic Euro excess return along with a Yen excess return to assess country equity sensitivities to currency risk factors. Second, when combining the currency factors with a group of economic factors, we measure the incremental information in the factor proposed in Fama and French (1998). We find that a global price-to-book factor offers little additional explanatory power over and above a model that includes economic risk factors.
Handle: RePEc:nbr:nberwo:6967
Template-Type: ReDIF-Paper 1.0
Title: Foreign Portfolio Investors Before and During a Crisis
Classification-JEL: F21; F3
Author-Name: Woochan Kim
Author-Person: pki10
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM
Number: 6968
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6968
File-URL: http://www.nber.org/papers/w6968.pdf
File-Format: application/pdf
Publication-Status: published as Kim, Woochan and Shang-Jin Wei. "Foreign Portfolio Investors Before And During A Crisis," Journal of International Economics, 2002, v56(1,Jan), 77-96.
Abstract: Different categories of foreign portfolio investors in Korea have differences as well as similarities in their trading behavior before and during a currency crisis. First, non-resident institutional investors are always positive feedback traders, whereas resident investors were negative feedback (contrarian) traders before the crisis but switch to be positive feedback traders during the crisis. Second, individual investors herd significantly more than institutional investors. Non-resident (institutional as well as individual) investors herd significantly more than their resident counterparts. Third, differences in the Western and Korean news coverage are correlated with differences in net selling by non-resident investors relative to resident investors.
Handle: RePEc:nbr:nberwo:6968
Template-Type: ReDIF-Paper 1.0
Title: Measuring Product-Market Integration
Classification-JEL: F15; F30
Author-Name: Michael M. Knetter
Author-Name: Matthew J. Slaughter
Note: ITI
Number: 6969
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6969
File-URL: http://www.nber.org/papers/w6969.pdf
File-Format: application/pdf
Publication-Status: published as Festschrift in Honor of Bob Lipsey, NBER Conference Volume, Blomstrom, Magnus and Linda Goldberg, eds., 2000, forthcoming.
Publication-Status: published as Measuring Product-Market Integration, Michael M. Knetter, Matthew J. Slaughter. in Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, Blomstrom and Goldberg. 2001
Abstract: Globalization -- the integration of national economies -- has become one of the most widely used buzzwords of the late 20th century. Yet there are remarkably few statistical measures of product-market integration across time, countries, and goods. In this paper we present some new measures of product-market integration based on price and quantity data. We find evidence of greater integration, but we also find that this process has not been uniform over time, countries, or goods.
Handle: RePEc:nbr:nberwo:6969
Template-Type: ReDIF-Paper 1.0
Title: Reforming Social Security: A Practical and Workable System of Personal Retirement Accounts
Author-Name: Fred T. Goldberg, Jr.
Author-Name: Michael J. Graetz
Note: AG PE
Number: 6970
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6970
File-URL: http://www.nber.org/papers/w6970.pdf
File-Format: application/pdf
Publication-Status: published as Fred T. Goldberg, Jr. & Michael Graetz, 2000. "Reforming Social Security --A Practical and Workable System of Personal Retirement Accounts," NBER Chapters, in: Administrative Aspects of Investment-Based Social Security Reform, pages 9-40 National Bureau of Economic Research, Inc.
Abstract: This paper details a method for implementing personal retirement accounts (PRAs) as a part of Social Security reform. The approach described here answers the following questions: how funds are collected and credited to each participants' retirement account; how money is invested; and how funds are distributed to retirees. It is designed to accommodate a variety of answers to a wide range of important policy questions; to minimize administrative costs and distribute those costs in a fair and reasonable way; to minimize the burden on employers, especially small employees who do not now maintain a qualified retirement plan; and to meet the expectations of Americans for simplicity, security, control, and independence in ways that are easy to explain and to understand. The system we describe relies on existing payroll and income tax mechanisms for collecting PRA funds and crediting PRA accounts. It provides two basic options for investments: (i) a simply system involving a limited number of funds sponsored by the Social Security Administration and managed by private companies, and (ii) privately sponsored funds with additional investment choices. It also provides two distribution alternatives if distributions are required to be annuitized: (i) an increase in Social Security benefits, and (ii) inflation-protected annuities provided directly to retirees by private companies.
Handle: RePEc:nbr:nberwo:6970
Template-Type: ReDIF-Paper 1.0
Title: Quality Improvement in Health Care: A Framework for Price and Output Measurement
Classification-JEL: O39; I10
Author-Name: Irving Shapiro
Author-Name: Matthew D. Shapiro
Author-Person: psh144
Author-Name: David W. Wilcox
Author-Person: pwi165
Note: EH PR
Number: 6971
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6971
File-URL: http://www.nber.org/papers/w6971.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review Proceedings, Vol. 89 (May 1999): 333-337.
Abstract: The durability of health care treatment, the substantial technical change in health care treatment, and the prevalence of third-party payment interact to create substantial difficulty in measuring the price and output of health care. This paper provides a framework for analyzing the demand for health care taking into account these difficulties. It then suggests how this framework might be used to improve measurement of health care prices and output.
Handle: RePEc:nbr:nberwo:6971
Template-Type: ReDIF-Paper 1.0
Title: Contract-Theoretic Approaches to Wages and Displacement
Classification-JEL: C78; E24
Author-Name: Wouter J. den Haan
Author-Person: pde12
Author-Name: Garey Ramey
Author-Person: pra338
Author-Name: Joel Watson
Author-Person: pwa36
Note: EFG
Number: 6972
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6972
File-URL: http://www.nber.org/papers/w6972.pdf
File-Format: application/pdf
Publication-Status: published as Wouter J. den Haan & Garey Ramey & Joel Watson, 1999. "Contract-theoretic approaches to wages and displacement," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-68.
Abstract: This paper develops a theoretical framework for analyzing contracting imperfections in long-term employment relationships. We focus chiefly on limited enforceability and limited worker liquidity. Inefficient severance of employment relationships, payment of efficiency wages, the relative response of wages and employment to business cycle shocks, and the propagation of these shocks are linked to the nature of contracting imperfections.
Handle: RePEc:nbr:nberwo:6972
Template-Type: ReDIF-Paper 1.0
Title: Investment Plans and Stock Returns
Classification-JEL: E22; E44
Author-Name: Owen Lamont
Note: EFG
Number: 6973
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6973
File-URL: http://www.nber.org/papers/w6973.pdf
File-Format: application/pdf
Publication-Status: published as Lamont, Owen A. "Investment Plans And Stock Returns," Journal of Finance, 2000, v55(6,Dec), 2719-2745.
Abstract: Capital expenditure plans at the beginning of the year, from a US government survey of firms, explain more than three quarters of the variation in real annual aggregate investment growth between 1948 and 1993. The negative correlation of contemporaneous investment and stock returns is explained by the negative correlation of planned investment and subsequent stock returns. Unexpected revisions to aggregate investment (actual minus plan) within a year are essentially unrelated to current stock returns, and positively related to current profits. Revisions to industry investment are positively related to industry-specific stock returns and to aggregate profits.
Handle: RePEc:nbr:nberwo:6973
Template-Type: ReDIF-Paper 1.0
Title: The Role of Deportation in the Incarceration of Immigrants
Classification-JEL: K42; J18
Author-Name: Kristin F. Butcher
Author-Person: pbu245
Author-Name: Anne Morrison Piehl
Author-Person: ppi106
Note: LS PE CH
Number: 6974
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6974
File-URL: http://www.nber.org/papers/w6974.pdf
File-Format: application/pdf
Publication-Status: published as Issues in the Economics of Immigration, Borjas, George, ed., Chicago: University of Chicago Press, 2000, pp. 351-385.
Publication-Status: published as The Role of Deportation in the Incarceration of Immigrants, Kristin F. Butcher, Anne Morrison Piehl. in Issues in the Economics of Immigration, Borjas. 2000
Abstract: Using data on all new admissions to California state prisons in 1986, 1990, and 1996, we find that the foreign born have a very different offense mix from native-born inmates, with foreigners much more likely to be serving time for drug offenses. We document and discuss many of the substantial changes in the enforcement environment over this period, including the war on drugs, changes in public law expanding the classes eligible for deportation, and increases in the level of resources appropriated for enforcement activities targeting deportable aliens. These developments have resulted in much greater attention by the Immigration and Naturalization Service to the incarceration of the foreign born. By 1996, the definition of deportable' was such that it covered essentially all noncitizens in the California prison system. Throughout the period, those foreign-born inmates designated by the California Department of Corrections to be released to INS custody serve substantially (6-12 percent) longer terms (conditional upon sentence length) than natives or other similar' foreigners. These longer terms of incarceration impose substantial costs on the state.
Handle: RePEc:nbr:nberwo:6974
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Patronage Politics on City Government in American Cities, 1900-1910
Classification-JEL: N41; R53
Author-Name: Rebecca Menes
Note: DAE PE
Number: 6975
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6975
File-URL: http://www.nber.org/papers/w6975.pdf
File-Format: application/pdf
Abstract: In this paper I explore the effect of patronage or machine' politics on government performance in American cities during the Progressive era. I use game theoretic models and an empirical analysis of spending and public goods provision during the first decade of the twentieth century in a cross section of American cities with and without governments dominated by political machines. The ability to buy votes relaxes the electoral constraints on the government. Taxes, budgets, municipal wages, and (unobserved) corruption are all predicted to rise under a patronage based regime. But in a city, patronage politics does not relax the incentives to provide public goods. A politician who buys his way into office will still be motivated to provide optimal levels of government goods and services because he can capture the resulting locational rents in higher taxes and graft. Empirically, city governments dominated by political machines paid city government employees more and had larger budgets but provided high levels of public goods.
Handle: RePEc:nbr:nberwo:6975
Template-Type: ReDIF-Paper 1.0
Title: Do Indirect Costs Rates Matter?
Classification-JEL: I2; L31
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Author-Name: Jaroslava K. Mykula
Note: LS PE
Number: 6976
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6976
File-URL: http://www.nber.org/papers/w6976.pdf
File-Format: application/pdf
Abstract: This study addresses the relationship between a university's indirect cost rate and its level of federal research funding. Both direct and indirect cost funding are examined. The data used in the analyses include unpublished institutional level data for all doctoral and research universities on funding and indirect cost rates obtained from the National Science Foundation for the fiscal years 1988 to 1997 period. Our major finding is that higher indirect cost rates are associated with higher levels of direct and indirect cost funding for institutions that initially are among the largest recipients of federal funding. In contrast, for universities initially in the lower tail of funding recipients, higher indirect cost rates are associated with lower levels of direct and indirect cost funding. This pattern of results is hypothesized to be based upon an institution's indirect cost rate serving primarily as a price' of research for lesser institutions but serving primarily as a proxy for the quality of the institution's research infrastructure for the major recipients of federal funds. Our findings are consistent with the observation that since 1990 both indirect cost rates and shares of research funding for major private research universities have tended to decline. We find no evidence that faculty at major research universities are disadvantaged in their quests for external research funding by high indirect cost rates.
Handle: RePEc:nbr:nberwo:6976
Template-Type: ReDIF-Paper 1.0
Title: The Tiebout Hypothesis and Majority Rule: An Empirical Analysis
Classification-JEL: C51; H31
Author-Name: Dennis Epple
Author-Person: pep21
Author-Name: Thomas Romer
Author-Name: Holger Sieg
Note: PE
Number: 6977
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6977
File-URL: http://www.nber.org/papers/w6977.pdf
File-Format: application/pdf
Publication-Status: published as A revision of this paper was published as: “Interjurisdictional Sorting and Majority Rule: An Empirical Analysis,� D. Epple, T. Romer and H. Sieg, Econometrica, November 2001.
Abstract: The paper provides a comprehensive empirical analysis of majority rule and Tiebout sorting within a system of local jurisdictions. The idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice. The estimator controls for both observed and unobserved heterogeneity among households, observed and unobserved characteristics of communities, the potential endogeneity of prices and expenditures as well as the self-selection of households into communities of their choice. We estimate the structural parameters of the model using data from the Boston Metropolitan Area. The empirical findings are by and large supportive of our approach.
Handle: RePEc:nbr:nberwo:6977
Template-Type: ReDIF-Paper 1.0
Title: Trade, Technology and U.K. Wage Inequality
Classification-JEL: F1; J3
Author-Name: Jonathan Haskel
Author-Person: pha161
Author-Name: Matthew J. Slaughter
Note: ITI
Number: 6978
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6978
File-URL: http://www.nber.org/papers/w6978.pdf
File-Format: application/pdf
Publication-Status: published as Haskel, Jonathan and Matthew J. Slaughter. "Teade, Technology And U.K. Wage Inequality," Economic Journal, 2001, v111(468,Jan), 163-187.
Abstract: The U.K. skill premium fell from the 1950s to the late 1970s and then rose very sharply. This paper examines the contributions to these relative wage movements of international trade and technical change. We first measure trade as changes in product prices and technical change as TFP growth. Then we relate price and TFP changes to a set of underlying factors. Among a number of results, we find that changes in prices, not TFP, were the major force behind the rise in inequality in the 1980s. We also find that although increased trade pressure has raised technical change, its effect on wage inequality was not quantitatively significant.
Handle: RePEc:nbr:nberwo:6978
Template-Type: ReDIF-Paper 1.0
Title: Inflation and Welfare: Comment on Robert Lucas
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 6979
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6979
File-URL: http://www.nber.org/papers/w6979.pdf
File-Format: application/pdf
Publication-Status: published as CESifo Discussion Paper Nr.179, 1999
Publication-Status: Published in A. Leijonhufvud(ed.), "Monetary Theory as a Basis for Monetary Policy," MacMillan, 2001.
Abstract: The paper argues that Lucas overestimates the Friedman-Bailey type of welfare cost of inflation and neglects other important welfare effects. With an alternative interpretation of the non-observability of low interest rates than the one Lucas gave and the introduction of taxes that reduce the opportunity cost of money holding, the welfare cost shrinks to one third of Lucas' estimate. The neglected welfare effects of inflation include an adverse Baumol-Tobin effect on growth and international capital movements, historical cost accounting for tax purposes, uncertainty about the price level and the relationship between inflation, relative prices and structural change.
Handle: RePEc:nbr:nberwo:6979
Template-Type: ReDIF-Paper 1.0
Title: Aging and the Growth of Long-Term Care
Classification-JEL: I1
Author-Name: Darius Lakdawalla
Author-Person: pla295
Author-Name: Tomas Philipson
Author-Person: pph37
Note: AG EH
Number: 6980
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6980
File-URL: http://www.nber.org/papers/w6980.pdf
File-Format: application/pdf
Publication-Status: published as Lakdawalla, Darius and Tomas Philipson. "The Rise in Old-Age Longevity and the Market for Long-Term Care" American Economic Review: Volume 92, Issue 1, March 2002
Abstract: This paper analyzes how markets for old-age care respond to the aging of populations. We consider how the biological forces, which govern the stocks of frail and healthy persons in a population, interact with economic forces, which govern the demand for and supply of care. We argue that aging many times may lower the demand for market care by increasing the supply of family-provided care, which substitutes for market care. By providing healthy spouses, aging may increase the supply of family care-givers. Unexpectedly, this implies that relative growth in healthy elderly males may contract the long-term care market, while relative growth in healthy elderly females may expand that market. We examine these implications empirically using individual, county, and national-level evidence on the US market for long-term care and find substantial support for them, particularly the negative output effect of growth in elderly males. We then decompose the per capita growth in long-term care output over the last three decades into the component accounted for by improvements in health and that accounted for by relative growth among elderly males. The novel effects of unbalanced gender growth among the elderly appear important in explaining the net decline in US per-capita output over the last 30 years, a decline which seems remarkable given the simultaneous rise in demand subsidies for long-term care, declining fertility rates, rising female labor-force participation, and the deregulation of entry barriers to the nursing home industry.
Handle: RePEc:nbr:nberwo:6980
Template-Type: ReDIF-Paper 1.0
Title: U.S. Wages in General Equilibrium: The Effects of Prices, Technology, and Factor Supplies, 1963-1991
Classification-JEL: F1; J3
Author-Name: James Harrigan
Author-Person: pha151
Author-Name: Rita Balaban
Note: ITI
Number: 6981
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6981
File-URL: http://www.nber.org/papers/w6981.pdf
File-Format: application/pdf
Abstract: Wage inequality in the United States has increased, and many suspect that the main causes are changes in technology, international competition, and factor supplies. Our empirical model estimates the general equilibrium relationship between wages and technology, prices, and factor supplies. The model is based on the neoclassical theory of production, and is implemented by assuming that GDP is a function of prices, technology levels, and supplies of capital and different types of labor. We find that relative factor supply and relative price changes are both important in explaining the growing return to skill. In particular, we find that capital accumulation and the fall in the price of traded goods served to increase the return to education.
Handle: RePEc:nbr:nberwo:6981
Template-Type: ReDIF-Paper 1.0
Title: Do Unemployment Insurance Recipients Actively Seek Work? Randomized Trials in Four U.S. States
Classification-JEL: C93; J65
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: David Ashmore
Author-Name: Olivier Deschenes
Author-Person: pde468
Note: LS PE
Number: 6982
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6982
File-URL: http://www.nber.org/papers/w6982.pdf
File-Format: application/pdf
Publication-Status: published as Ashenfelter, Orley, David Ashmore and Olivier Deschenes. "Do Unemployment Insurance Recipients Actively Seek Work? Evidence From Randomized Trials In Four U.S. States," Journal of Econometrics, 2005, v125(1-2,Mar-Apr), 53-75.
Abstract: In the last two decades, U.S. policies have moved from the use of incentives to the use of sanctions to promote work effort in social programs. Surprisingly, except for anecdotes, there is very little systematic evidence of the extent to which sanctions applied to the abusive use of social entitlements result in greater work effort. In this paper we report the results of randomized trials designed to measure whether stricter enforcement and verification of work search behavior alone decreases unemployment (UI) claims and benefits. These experiments were designed to explicitly test claims based on non-experimental data failure of claimants to actively seek work. Our results provide no support for the view that the failure to actively seek work has been a cause of overpayment in the UI system.
Handle: RePEc:nbr:nberwo:6982
Template-Type: ReDIF-Paper 1.0
Title: The Pre-Program Earnings Dip and the Determinants of Participation in a Social Program: Implications for Simple Program Evaluation Strategies
Classification-JEL: J24
Author-Name: James J. Heckman
Author-Name: Jeffrey A. Smith
Author-Person: psm73
Note: LS PE
Number: 6983
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6983
File-URL: http://www.nber.org/papers/w6983.pdf
File-Format: application/pdf
Publication-Status: published as Economic Journal, Vol. 109, no. 457 (1999): 313-348.
Abstract: The key to estimating the impact of a program is constructing the counterfactual outcome representing what would have happened in its absence. This problem becomes more complicated when agents self-select into the program rather than being exogenously assigned to it. This paper uses data from a major social experiment to identify what would have happened to the earnings of self-selected participants in a job training program had they not participated in it. We investigate the implications of these earnings patterns for the validity of widely-used before-after and difference-in-differences estimators. Motivated by the failure of these estimators to produce credible estimates, we investigate the determinants of program participation. We find that labor force status dynamics, rather than earnings or employment dynamics, drive the participation process. Our evidence suggests that training programs often function as a form of job search. Methods that control only for earnings dynamics, like the conventional difference-in-differences estimator, do not adequately capture the underlying differences between participants and non-participants. We use the estimated probabilities of participation in both matching estimators and a nonparametric, conditional version of the differences-in-differences estimator and produce large reductions in the selection bias in non-experimental estimates of the effect of training on earnings.
Handle: RePEc:nbr:nberwo:6983
Template-Type: ReDIF-Paper 1.0
Title: Innovation and Market Value
Classification-JEL: G12; O30
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Note: IO PR
Number: 6984
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6984
File-URL: http://www.nber.org/papers/w6984.pdf
File-Format: application/pdf
Publication-Status: published as Productivity, Innovation and Economic Performance, Barrell, Ray, Geoffrey Mason and Mary O'Mahoney, eds., Cambridge: Cambridge University Press, 2000.
Abstract: Recent research on financial market valuation of the knowledge assets of publicly traded firms is surveyed. The motivation for using a market value equation to price knowledge assets is discussed and the theory behind this equation is briefly presented. Then the empirical literature that relates Tobin's q or the market to book value ratio to R&D and patent measures is surveyed and new results based on United States data through 1995 are presented. The conclusion is that the market value of the modern manufacturing corporation is strongly related to its knowledge assets, and that patent measures contain information about this value above and beyond that conveyed by the usual R&D measures.
Handle: RePEc:nbr:nberwo:6984
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Local Labor Markets
Classification-JEL: F31; F3
Author-Name: Linda Goldberg
Author-Person: pgo256
Author-Name: Joseph Tracy
Author-Person: ptr23
Note: ITI LS
Number: 6985
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6985
File-URL: http://www.nber.org/papers/w6985.pdf
File-Format: application/pdf
Publication-Status: published as The Impact of International Trade On Wages, Feenstra, Robert, ed.: Chicago: The University of Chicago Press and NBER, 2000.
Publication-Status: published as Exchange Rates and Local Labor Markets, Linda Goldberg, Joseph Tracy. in The Impact of International Trade on Wages, Feenstra. 2000
Abstract: We document the consequences of real exchange rate movements for the employment, hours, and hourly earnings of workers in manufacturing industries across individual states. Exchange rates have statistically significant wage and employment implications in these local labor markets. The importance and size of these dollar-induced effects vary considerably across industries and are more pronounced in some U.S. regions. In addition to the importance of exchange rate shocks, we confirm prior research results showing that relatively strong local conditions drive up wage in local industries, while anticipated future (positive) local shocks reduce current wages.
Handle: RePEc:nbr:nberwo:6985
Template-Type: ReDIF-Paper 1.0
Title: Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy Under Incomplete Information
Classification-JEL: F13; D82
Author-Name: Dobrin R. Kolev
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: ITI
Number: 6986
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6986
File-URL: http://www.nber.org/papers/w6986.pdf
File-Format: application/pdf
Publication-Status: published as Kolev, Dobrin R. and Thomas J. Prusa. "Dumping And Double Crossing: The (In)Effectiveness Of Cost-Based Trade Policy," International Economic Review, 2002, v43(3,Aug), 895-918.
Abstract: We argue that the rise of antidumping protection and the proliferation of voluntary export restraints are fundamentally inter-related. We show that both can be explained by a cost-based definition of dumping when the domestic government has incomplete information about the foreign firm's costs. Given that its costs are only imperfectly observed and knowing the government's desire to offer greater protection against competitively priced imports, efficient foreign firms will voluntarily restrain their exports prior to the antidumping investigation. In turn, the VER distorts the government's perception of the foreign firm's efficiency and often leads to undesirably high duties regardless of the foreign firm's efficiency. The clumsy way that duties are levied benefits domestic firms, which explains the popularity of cost-based complaints.
Handle: RePEc:nbr:nberwo:6986
Template-Type: ReDIF-Paper 1.0
Title: Durable Goods Cycles
Classification-JEL: E21; E32
Author-Name: Andrew Caplin
Author-Person: pca77
Author-Name: John Leahy
Author-Person: ple189
Note: EFG
Number: 6987
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6987
File-URL: http://www.nber.org/papers/w6987.pdf
File-Format: application/pdf
Abstract: We show that a straight forward approximation of the distribution of durable goods holdings gives rise to a tractable equilibrium (S,s) model of durable demand. We analyze both competitive and monopoly supply. We show that equilibrium interactions lead to elongated impulse responses in demand, to procyclical markups in response to demand shocks, and to countercyclical markups in response to cost shocks.
Handle: RePEc:nbr:nberwo:6987
Template-Type: ReDIF-Paper 1.0
Title: A Contribution to the Theory of Welfare Comparisons
Author-Name: Martin L. Weitzman
Note: PE
Number: 6988
Creation-Date: 1999-02
Order-URL: http://www.nber.org/papers/w6988
File-URL: http://www.nber.org/papers/w6988.pdf
File-Format: application/pdf
Publication-Status: published as Weitzman, Martin L. "A Contribution To The Theory Of Welfare Accounting," Scandinavian Journal of Economics, 2001, v103(1,Mar), 1-23.
Abstract: Using only information based on current directly-observable market behavior, the paper shows how to make rigorous dynamic welfare comparisons among economies or economic situations having arbitrarily-different endowments and technologies, but sharing a common dynamic preference ordering. The correct answers to seemingly complicated questions, which intrinsically involve comparing wealth-like measures of dynamic well-being, can be translated isomorphically into a simple-minded story told in the familiar language of old-fashioned static consumer-welfare theory.
Handle: RePEc:nbr:nberwo:6988
Template-Type: ReDIF-Paper 1.0
Title: Distributional Impacts of Proposed Changes to the Social Security System
Classification-JEL: H2; I3
Author-Name: Julia Lynn Coronado
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Thomas Glass
Note: PE
Number: 6989
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6989
File-URL: http://www.nber.org/papers/w6989.pdf
File-Format: application/pdf
Publication-Status: published as Distributional Impacts of Proposed Changes to the Social Security System, Julia Lynn Coronado, Don Fullerton, Thomas Glass. in Tax Policy and the Economy, Volume 13, Poterba. 1999
Abstract: In this paper we assess the degree to which the current social security system redistributes income from rich to poor. We then estimate the impact of various proposed changes to social security on the overall redistributive effect of the system. Our analysis takes a steady state approach in which we assume participants work their entire lives and retire under a given system. Redistribution is measured on a lifetime basis using estimated earnings profiles for a sample of people taken from the PSID. We account for differential mortality, not only by gender and race, but also be lifetime income. Our results indicate that the current social security system redistributes less than is generally perceived, mainly because people with higher lifetime income live longer and therefore draw benefits longer. Remaining progressivity is reduced and even reversed by an increase in the assumed discount rate, since regressive taxes become more important relative to later progressive benefits. We find that many of the proposed changes to social security have surprising little effect on the redistribution inherent in the system.
Handle: RePEc:nbr:nberwo:6989
Template-Type: ReDIF-Paper 1.0
Title: How Trade Patterns and Technology Flows Affect Productivity Growth
Classification-JEL: O3; F12
Author-Name: Wolfgang Keller
Author-Person: pke8
Note: ITI PR
Number: 6990
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6990
File-URL: http://www.nber.org/papers/w6990.pdf
File-Format: application/pdf
Publication-Status: published as Wolfgang Keller. "Do Trade Patterns and Technology Flows Affect Productivity Growth?" World Bank Economic Review, Jan 2000; 14: 17 - 47.
Abstract: This paper examines the evidence on technology diffusion through trade in differentiated intermediate goods. Because intermediates are invented through costly research and development (R&D) investments, employing imported intermediates implies an implicit sharing of the technology that was created in other countries. The model predicts that the import patterns of countries matters for productivity, because a country that imports primarily from technological leaders receives more technology embodied in intermediate goods than another that imports primarily from follower countries. I try to quantify the importance of trade patterns in determining technology flows that affect productivity by using industry level data for machinery goods imports and productivity in eight OECD countries between 1970-91. First evidence that these countries benefit more from domestic R&D than from R&D of the average foreign country. Second, conditional on technology diffusion from domestic R&D composition of a country matters, but only if it is strongly biased towards or away from technological leaders. Third, I estimate that differences in technology inflows related to the countries' patterns of imports explain about 20% of the total variation in the countries' productivity growth. The implications of these findings for developing countries are discussed.
Handle: RePEc:nbr:nberwo:6990
Template-Type: ReDIF-Paper 1.0
Title: The Social Security Trust Fund, the Riskless Interest Rate, and Capital Accumulation
Classification-JEL: E6; H3
Author-Name: Andrew B. Abel
Author-Person: pab10
Note: AG AP EFG PE
Number: 6991
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6991
File-URL: http://www.nber.org/papers/w6991.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John and Martin Feldstein (eds.) Risk Aspects of Investment-Based Social Security Reform. Chicago: University of Chicago Press, 2000.
Publication-Status: published as The Social Security Trust Fund, the Riskless Interest Rate, and Capital Accumulation, Andrew B. Abel. in Risk Aspects of Investment-Based Social Security Reform, Campbell and Feldstein. 2001
Abstract: This paper develops a tractable stochastic overlapping generations model to analyze the equilibrium equity premium and growth rate of the capital stock in the presence of a defined-benefit Social Security system. If the Social Security Trust Fund increases the share of its portfolio held in risky capital, the equilibrium equity premium falls in the following period and along a constant growth path. This change in the portfolio of the Social Security Trust Fund will increase the growth rate of capital in the following period, and, if a certain sufficient condition is satisfied, will increase the growth rate of the capital stock along a constant growth path. Calibration of the model indicates that it can match the historical average equity premium and the historical average growth rate of the capital stock using plausible values of the preference parameters. In addition, the sufficient condition for the growth rate of the capital stock to increase along a constant growth path is satisfied. Quantitatively, the effects on the riskless interest rate and the growth rate of capital are small.
Handle: RePEc:nbr:nberwo:6991
Template-Type: ReDIF-Paper 1.0
Title: The Optimal Choice of Exchange-Rate Regime: Price-Setting Rules and Internationalized Production
Classification-JEL: F40; F20
Author-Name: Michael B. Devereux
Author-Person: pde32
Author-Name: Charles Engel
Author-Person: pen14
Note: IFM
Number: 6992
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6992
File-URL: http://www.nber.org/papers/w6992.pdf
File-Format: application/pdf
Publication-Status: published as Blomstrom, Magnus and Linda Goldberg (eds.) Topics in Empirical International Economics: Festschrift in Honor of Robert Lipsey. Chicago: University of Chicago Press and NBER, 2001.
Publication-Status: published as The Optimal Choice of Exchange Rate Regime: Price-Setting Rules and Internationalized Production, Michael B. Devereux, Charles Engel. in Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, Blomstrom and Goldberg. 2001
Abstract: We investigate the choice of exchange-rate regime fixed or floating in a dynamic, intertemporal general equilibrium framework. Our framework extends Devereux and Engel (1998) by investigating the implications of internationalized production. We examine the role of price-setting -- whether prices are set in the currency of producers or the currency of consumers in determining the optimality of exchange-rate regimes in an environment of uncertainty created by monetary shocks. We find that when prices are set in producers' currencies, floating exchange rates are preferred when the country is large enough, or not too risk averse. On the other hand, floating exchange rates are always preferred when prices are set in consumers' currencies because floating exchange rates allow domestic consumption to be insulated from foreign monetary shocks. The gains from floating exchange rates are greater when there is internationalized production in this case.
Handle: RePEc:nbr:nberwo:6992
Template-Type: ReDIF-Paper 1.0
Title: The Economic Theory of Public Enforcement of Law
Classification-JEL: K42
Author-Name: A. Mitchell Polinsky
Author-Person: ppo94
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 6993
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6993
File-URL: http://www.nber.org/papers/w6993.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Literature, Vol. 38, no. 1 (March 2000): 45-76.
Abstract: This article surveys the theory of the public enforcement of law -- the use of public agents (inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. We first present the basic elements of the theory, focusing on the probability of imposition of sanctions, the magnitude and form of sanctions, and the rule of liability. We then examine a variety of extensions of the central theory, concerning accidental harms, costs of imposing fines, errors, general enforcement, marginal deterrence, the principal-agent relationship, settlements, self-reporting, repeat offenders, imperfect knowledge about the probability and magnitude of fines, and incapacitation.
Handle: RePEc:nbr:nberwo:6993
Template-Type: ReDIF-Paper 1.0
Title: Global Diversification, Growth and Welfare with Imperfectly Integrated Markets for Goods
Classification-JEL: F36; F41
Author-Name: Bernard Dumas
Author-Person: pdu519
Author-Name: Raman Uppal
Note: IFM
Number: 6994
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6994
File-URL: http://www.nber.org/papers/w6994.pdf
File-Format: application/pdf
Publication-Status: published as Dumas, B. and R. Uppal. "Global Diversification, Growth, And Welfare With Imperfectly Integrated Markets For Goods," Review of Financial Studies, 2001, v14(1,Spring), 277-305.
Abstract: In this article, we examine the effect of the imperfect mobility of goods on international risk sharing and, through that, on the investment in risky projects, welfare and growth. We find that the welfare gain of financial market openness is not monotonic with respect to investors' risk aversion and the aggregate volatility of output growth. Our main result is that the welfare gain from integration is not drastically reduced by the presence of goods market imperfections, modeled as a cost of transferring goods from one country to the other. Hence, financial market integration may be a worthwhile goal to pursue even at a time when full goods mobility has not been achieved.
Handle: RePEc:nbr:nberwo:6994
Template-Type: ReDIF-Paper 1.0
Title: Demographic Change and Public Assistance Expenditures
Classification-JEL: I38; H53
Author-Name: Robert A. Moffitt
Author-Person: pmo48
Note: PE
Number: 6995
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6995
File-URL: http://www.nber.org/papers/w6995.pdf
File-Format: application/pdf
Abstract: Growth in overall real welfare expenditures per capita has been a noted trend in the last thirty years in the U.S. The influence of demographic forces in contributing to this growth is considered in this paper. It is found that the growth of female-headed families is the strongest and dominant force in contributing to trends in real AFDC expenditures per capita over the long run. The influence of demographic growth is especially strong for the black population. For the Food Stamp and Medicaid programs, increases in participation rates, on the other hand, have been more important. Projections of future trends in the age, race, and sex composition of the U.S. population show that expenditures in none of these programs is likely to respond to such basic demographic trends, however.
Handle: RePEc:nbr:nberwo:6995
Template-Type: ReDIF-Paper 1.0
Title: Minimum Wages and Employment in France and the United States
Classification-JEL: J31; J23
Author-Name: John M. Abowd
Author-Person: pab175
Author-Name: Francis Kramarz
Author-Person: pkr29
Author-Name: David N. Margolis
Note: LS
Number: 6996
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6996
File-URL: http://www.nber.org/papers/w6996.pdf
File-Format: application/pdf
Publication-Status: published as John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 427-472 National Bureau of Economic Research, Inc.
Abstract: We use longitudinal individual wage and employment data in France and the United States to investigate the effect of changes in the real minimum wage on an individual's employment status. We find that movements in both French and American real minimum wages are associated with mild employment effects in general and very strong effects on workers employed at the minimum wage. In the French case, a 1% increase in the real minimum wage decreases the future employment probability of a man (respectively, a woman) currently employed at the minimum wage by 1.3% (1.0%). In the United States, a decrease in the real minimum wage of 1% increases the probability that a man (woman) employed at the minimum wage came from unemployment in the previous year by 0.4% (1.6%).
Handle: RePEc:nbr:nberwo:6996
Template-Type: ReDIF-Paper 1.0
Title: Why are Racial and Ethnic Wage Gaps Larger for Men than for Women? Exploring the Role of Segregation
Classification-JEL: J15; J16
Author-Name: Kimberly Bayard
Author-Name: Judith Hellerstein
Author-Person: phe270
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Kenneth Troske
Author-Person: ptr38
Note: LS
Number: 6997
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6997
File-URL: http://www.nber.org/papers/w6997.pdf
File-Format: application/pdf
Abstract: We examine the possible sources of the larger racial and ethnic wage gaps for men than for women in the U.S. Specifically, using a newly created employer-employee matched data set containing workers in essentially all occupations, industries, and regions, we examine whether these wage differences can be accounted for by differences between men and women in the patterns of racial and ethnic segregation within occupation, industry, establishments, and occupation-establishment cells. To the best of our knowledge, this is the first paper to examine segregation by race and ethnicity at the level of establishment and job cell. Our results indicate that greater segregation between Hispanic men and white men than between Hispanic women and white women accounts for essentially all of the higher Hispanic-white wage gap for men. In addition, our estimates indicate that greater segregation between black and white men than between black and white women accounts for a sizable share (one-third to one-half) of the higher black-white wage gap for men. Our results imply that segregation is an important contributor to the lower wages paid to black and Hispanic men than to white men with similar individual characteristics. Our results also suggest that equal pay types of laws may offer some scope for reducing the black-white wage differential for men the Hispanic-white wage differential for men.
Handle: RePEc:nbr:nberwo:6997
Template-Type: ReDIF-Paper 1.0
Title: Financial Incentives for Increasing Work and Income Among Low-Income Families
Classification-JEL: I38; J22
Author-Name: Rebecca M. Blank
Author-Person: pbl56
Author-Name: David Card
Author-Person: pca271
Author-Name: Philip K. Robins
Author-Person: pro189
Note: LS
Number: 6998
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6998
File-URL: http://www.nber.org/papers/w6998.pdf
File-Format: application/pdf
Publication-Status: published as Finding Jobs: Work and Welfare Reform, Blank, Rebecca and David Card,eds., New York: Russell Sage, 2000.
Abstract: This paper investigates the impact of financial incentive programs, which have become an increasingly common component of welfare programs. We review experimental evidence from several such programs. Financial incentive programs appear to increase work and raise income (lower poverty), but cost somewhat more than alternative welfare programs. In particular, windfall beneficiaries -- those who would have been working anyway -- can raise costs by participating in the program. Several existing programs limit this effect by targeting long-term welfare recipients or by limiting benefits to full-time workers. At the same time, because financial incentive programs transfer support to working low-income families, the increase in costs due to windfall beneficiaries makes these programs more effective at alleviating poverty and raising incomes. Evidence also indicates that combining financial incentive programs with job search and job support services can increase both employment and income gains. Non-experimental evidence from the Earned Income Tax Credit (EITC) and from state Temporary Assistance to Needy Families (TANF) programs with enhanced earnings disregards also suggests that these programs increase employment, and this evidence is consistent with the experimental evidence on the impact of financial incentive programs.
Handle: RePEc:nbr:nberwo:6998
Template-Type: ReDIF-Paper 1.0
Title: Is the Impact of Health Shocks Cushioned by Socioeconomic Status? The Case of Low Birthweight
Classification-JEL: I12
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Rosemary Hyson
Note: CH
Number: 6999
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w6999
File-URL: http://www.nber.org/papers/w6999.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89, no. 2 (May 1999): 245-250.
Abstract: This paper examines the long-term effects of low birthweight (LBW) on educational attainments, labor market outcomes, and health status using data from the National Child Development Study. The study has followed the cohort of children born in Great Britain during one week in 1958 through age 33. We pay particular attentionto possible interactions between LBS and socio-economic status (SES), asking to what extent the deleterious effects of LBW are mitigated by higher SES. We find that LBW has significant long-term effects on self-reported health status, educational attainments, and labor market outcomes. However, there is little evidence of variation in the effects of LBW by SES. An important exception is that high SES women of LBW are less likely to report that they are in poor or fair health than other LBW women.
Handle: RePEc:nbr:nberwo:6999
Template-Type: ReDIF-Paper 1.0
Title: Trade, Insecurity, and Home Bias: An Empirical Investigation
Classification-JEL: F1; D23
Author-Name: James E. Anderson
Author-Person: pan2
Author-Name: Douglas Marcouiller
Author-Person: pma51
Note: ITI
Number: 7000
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7000
File-URL: http://www.nber.org/papers/w7000.pdf
File-Format: application/pdf
Publication-Status: published as Anderson, James E. and Douglas Marcouiller. "Insecurity And The Pattern Of Trade: An Empirical Investigation," Review of Economics and Statistics, 2002, v84(2,May), 342-352.
Abstract: Corruption and imperfect contract enforcement dramatically reduce trade. This paper estimates the reduction, using a structural model of import demand in which transactions costs impose a price markup on traded goods. We find that inadequate institutions constrain trade far more than tariffs do. We also find that omitting indexes of institutional quality from the model leads to an underestimate of home bias. Using a broad sample of countries, we find that the traded goods expenditure share declines significantly as income per capita rises, other things equal. Cross-country variation in the effectiveness of institutions offers a simple explanation of the observed global pattern of trade, in which high-income, capital-abundant countries trade disproportionately with one another.
Handle: RePEc:nbr:nberwo:7000
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Effect of Unearned Income on Labor Supply, Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players
Author-Name: Guido W. Imbens
Author-Person: pim4
Author-Name: Donald B. Rubin
Author-Name: Bruce Sacerdote
Note: LS PE
Number: 7001
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7001
File-URL: http://www.nber.org/papers/w7001.pdf
File-Format: application/pdf
Publication-Status: published as Imbens, Guido W., Donald B. Rubin and Bruce I. Sacerdote. "Estimating The Effect Of Unearned Income On Labor Earnings, Savings, And Consumption: Evidence From A Survey Of Lottery Players," American Economic Review, 2001, v91(4,Sep), 778-794.
Abstract: Knowledge of the effect of unearned income on economic behavior of individuals in general, and on labor supply in particular, is of great importance to policy makers. Estimation of income effects, however, is a difficult problem because income is not randomly assigned and exogenous changes in income are difficult to identify. Here we exploit the randomized assignment of large amounts of money over long periods of time through lotteries. We carried out a survey of people who played the lottery in the mid-eighties and estimate the effect of lottery winnings on their subsequent earnings, labor supply, consumption, and savings. We find that winning a modest prize ($15,000 per year for twenty years) does not affect labor supply or earnings substantially. Winning such a prize does not considerably reduce savings. Winning a much larger prize ($80,000 rather than $15,000 per year) reduces labor supply as measured by hours, as well as participation and social security earnings; elasticities for hours and earnings are around -0.20 and for participation around -0.14. Winning a large versus modest amount also leads to increased expenditures on cars and larger home values, although mortgages values appear to increase by approximately the same amount. Winning $80,000 increases overall savings, although savings in retirement accounts are not significantly affected. The results do not vary much by gender, age, or prior employment status. There is some evidence that for those with zero earnings prior to winning the lottery there is a positive effect of winning a small prize on subsequent labor market participation.
Handle: RePEc:nbr:nberwo:7001
Template-Type: ReDIF-Paper 1.0
Title: Alternative and Part-Time Employment Arrangements as a Response to Job Loss
Classification-JEL: J30
Author-Name: Henry S. Farber
Note: LS
Number: 7002
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7002
File-URL: http://www.nber.org/papers/w7002.pdf
File-Format: application/pdf
Publication-Status: published as Henry S. Farber, 1999. "Alternative and Part‐Time Employment Arrangements as a Response to Job Loss," Journal of Labor Economics, vol 17(S4), pages S142-S169.
Abstract: I examine the extent to which workers who lose jobs find work in alternative employment arrangements including temporary work and independent contracting and find part-time work, both voluntary and involuntary. The analysis is based on data from the Displaced Worker Supplements (DWS) and the February 1994 and 1996 Current Population Surveys (CPS) which I match to the Contingent and Alternative Employment Arrangements Supplements (CAEAS) to the February CPSs in the subsequent years (1995 and 1997 respectively). I find that job losers are significantly more likely than non-losers to be in temporary jobs (including on-call work and contract work). I also find evidence that the likelihood of temporary employment falls with time since job loss. With regard to part-time employment, I find that involuntary part-time employment is an important part of the employment experience subsequent to job loss and that the likelihood of involuntary part-time employment falls with time since job loss, particularly for full-time job losers. Thus that temporary and involuntary part-time jobs are part of a transitional process subsequent to job loss leading to regular full-time employment.
Handle: RePEc:nbr:nberwo:7002
Template-Type: ReDIF-Paper 1.0
Title: New Evidence on Sex Segregation and Sex Differences in Wages from Matched Employee-Employer Data
Author-Name: Kimberly Bayard
Author-Name: Judith Hellerstein
Author-Person: phe270
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Kenneth Troske
Author-Person: ptr38
Note: LS
Number: 7003
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7003
File-URL: http://www.nber.org/papers/w7003.pdf
File-Format: application/pdf
Publication-Status: published as Kimberly Bayard & Judith Hellerstein & David Neumark & Kenneth Troske, 2003. "New Evidence on Sex Segregation and Sex Differences in Wages from Matched Employee-Employer Data," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 887-922, October.
Abstract: We assemble a new matched employer-employee data set covering essentially all industries and occupations across all regions of the U.S. We use this data set to re-examine the question of the relative contributions to the overall sex gap in wages of sex segregation vs. wage differences by sex within occupation, industry, establishment, and occupation-establishment cells. This new data set is especially useful because earlier research on this topic relied on data sets that covered only a narrow range of industries, occupations, or regions. Our results indicate that a sizable fraction of the sex gap in wages is accounted for by the segregation of women into lower-paying occupations, industries, establishments, and occupations within establishments. Nonetheless, a substantial part of the sex gap in wages remains attributable to the individual's sex. This latter finding contrasts sharply with the conclusions of previous research (especially Groshen, 1991), which indicated that sex segregation accounted for essentially all of the sex wage gap. Further research into the sources of within-establishment within-occupation sex wage differences is therefore much more important than previously thought.
Handle: RePEc:nbr:nberwo:7003
Template-Type: ReDIF-Paper 1.0
Title: Reserve Requirements on Sovereign Debt in the Presence of Moral Hazard -- on Debtors or Creditors?
Classification-JEL: F15; F34
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Stephen J. Turnovsky
Author-Person: ptu5
Note: ITI
Number: 7004
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7004
File-URL: http://www.nber.org/papers/w7004.pdf
File-Format: application/pdf
Publication-Status: published as Aizenman, Joshua and Stephen J. Turnovsky. "Reserve Requirements On Sovereign Debt In The Presence Of Moral Hazard - On Debtors Or Creditors?," Economic Journal, 2002, v112(476,Jan), 107-132.
Abstract: This paper characterizes the effects of reserve requirements on financial loans in the presence of moral hazard on the lender side (i.e., the anticipation that the taxpayer will bailout lending banks if large default will occur) and sovereign risk on the borrower side. The impacts of such reserve requirements on the equilibrium degree of default risk and borrowing are analyzed, and their welfare implications for both the borrowing and the lending nations discussed. More generous bailouts financed by the high income block encourage borrowing and increase the probability of default. We show that the introduction of a reserve requirement in either country reduces the risk of default and raises the welfare of both the high income block and the emerging market economies. In these circumstances, the lender's optimal reserve requirement is shown to increase with the expected bailout. Such a policy induces the lender to internalize the expected tax payer cost of the bailout. Thus a more generous bailout that is accompanied by an optimal adjustment in the lender's reserve requirements exactly neutralizes its effects on welfare, leaving welfare in both countries unchanged. Unlike the case of the lender, the effect of the more generous bailout on the borrower's optimal reserve requirement is ambiguous. The imposition of the reserve requirement may also improve the availability of information about the debt exposure of the emerging market economies, which by itself will reduce the optimal lender's reserve requirements, and may prevent drying up' the market for sovereign debt.
Handle: RePEc:nbr:nberwo:7004
Template-Type: ReDIF-Paper 1.0
Title: The Role of Real Annuities and Indexed Bonds in an Individual Accounts Retirement Program
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: James M. Poterba
Author-Person: ppo19
Note: PE AG
Number: 7005
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7005
File-URL: http://www.nber.org/papers/w7005.pdf
File-Format: application/pdf
Publication-Status: published as The Role of Real Annuities and Indexed Bonds in an Individual Accounts Retirement Program, Jeffrey R. Brown, Olivia S. Mitchell, James M. Poterba. in Risk Aspects of Investment-Based Social Security Reform, Campbell and Feldstein. 2001
Abstract: We explore four issues concerning annuitization options that retirees might use in the decumulation phase of an individual accounts' retirement saving system. First, we investigate the operation of both real and nominal annuity individual annuity markets in the United Kingdom. The widespread availability of real annuities in the U.K. dispels the argument that private insurance markets could not, or would not, provide real annuities to retirees. Second, we consider the current structure of two inflation-linked insurance products available in the United States, only one of which proves to be a real annuity. Third, we evaluate the potential of assets such as stocks, bonds, and bills, to provide retiree protection from inflation. Because equity real returns have been high over the last seven decades, a retiree who received income linked to equity returns would have fared very well on average. Nevertheless we cast doubt on the inflation insurance' aspect of equity, since this is mainly due to stocks' high average return, and not because stock returns move in tandem with inflation. Finally, we use a simulation model to assess potential retiree willingness to pay for real, nominal, and variable payout equity-linked annuities. For plausible degrees of risk aversion, inflation protection appears to have only modest value. People would be expected to value a variable payout equity-linked annuity more highly than a real annuity because the additional real returns associated with common stocks more than compensate for the volatility of prospective payouts. These finding are germane to concerns raised in connection with Social Security reform plans that include individual accounts.
Handle: RePEc:nbr:nberwo:7005
Template-Type: ReDIF-Paper 1.0
Title: Measuring Labor's Share
Classification-JEL: J3
Author-Name: Alan Krueger
Author-Person: pkr63
Note: LS
Number: 7006
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7006
File-URL: http://www.nber.org/papers/w7006.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Papers and Proceedings, Vol. 89, no. 2 (May 1999): 45-51.
Abstract: This paper considers conceptual and practical issues that arise in measuring labor's share of national income. Most importantly: How are workers defined? How is compensation defined? The current definition of labor compensation used the Bureau of Economic Analysis (BEA) includes the salary of business owners and payments to retired workers in labor compensation. An alternative series to the BEA's standard series is presented. In addition, a simple method for decomposing labor compensation into a component due to raw labor' and a component due to human capital is presented. Raw labor's share of national income is estimated using Census and CPS data. The share of national income attributable to raw labor increased from 9.6 percent to 13 percent between 1939 and 1959, remained at 12-13 percent between 1959 and 1979, and fell to 5 percent by 1996.
Handle: RePEc:nbr:nberwo:7006
Template-Type: ReDIF-Paper 1.0
Title: The Location and Allocation of Assets in Pension and Conventional Savings Accounts
Classification-JEL: G11
Author-Name: John B. Shoven
Note: AG PE
Number: 7007
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7007
File-URL: http://www.nber.org/papers/w7007.pdf
File-Format: application/pdf
Publication-Status: published as Shoven, John B. and Clemens Sialm. "Asset Location In Tax-Deferred And Conventional Savings Accounts," Journal of Public Economics, 2004, v88(1-2,Jan), 23-38.
Abstract: This paper addresses two important parts of the problem of saving for retirement. They are (1) if assets are to be held in both conventional (and hence taxable) accounts and pension accounts, which assets should be held in each? and, (2) if the investor is substantially risk averse, what is the optimal mix of stocks and bonds for retirement saving? It is shown that the conventional wisdom of first placing heavily taxed corporate bonds in the pension account (and holding equity mutual funds outside the account) is the wrong asset location strategy for most people and most circumstances. It is also shown that even very risk averse retirement savers should allocate more than half of their portfolio to stocks if asset returns have the same means, variances, and covariances as have been observed over the past seventy years.
Handle: RePEc:nbr:nberwo:7007
Template-Type: ReDIF-Paper 1.0
Title: Measuring Bubble Expectations and Investor Confidence
Classification-JEL: F12
Author-Name: Robert J. Shiller
Author-Person: psh69
Note: ITI
Number: 7008
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7008
File-URL: http://www.nber.org/papers/w7008.pdf
File-Format: application/pdf
Publication-Status: published as Shiller, Robert J. "Measuring Bubble Expectations and Investor Confidence." Journal of Psychology and Financial Markets 1, 1 (2000): 49–60.
Abstract: This paper presents evidence on attitude changes among investors in the US stock market. Two basic attitudes are explored: bubble expectations and investor confidence. Semiannual time-series indicators of these attitudes are presented for US stock market institutional investors based on questionnaire survey results 1989 1998, from surveys that I have derived in collaboration with Fumiko Kon-Ya and Yoshiro Tsutsui. Five different time-series indicators of whether there is among investors an expectation of a speculative bubble, an unstable situation with expectations for increase in the short run only, are produced. Four different time-series indicators of whether there is an expectation of a negative speculative bubble are presented. Four different time-series indicators of investor confidence, that nothing can go wrong, are produced. Time-series variation for these indicators is significant, and cross correlations are generally positive. A bubble expectations index, a negative-bubble expectations index, and an investor confidence index are derived from these indicators. Behavior of the indicators and indexes through time is examined, and the indexes are compared with other economic variables. A notable finding is a degree of high-frequency fluctuation, semester to semester, in the indexes.
Handle: RePEc:nbr:nberwo:7008
Template-Type: ReDIF-Paper 1.0
Title: Conditioning Variables and the Cross-Section of Stock Returns
Classification-JEL: G1; G0
Author-Name: Wayne E. Ferson
Author-Person: pfe32
Author-Name: Campbell R. Harvey
Author-Person: pha102
Note: AP
Number: 7009
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7009
File-URL: http://www.nber.org/papers/w7009.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 54 (1999): 1325-1360.
Abstract: Previous studies have identified predetermined variables that have some power to explain the time series of stock and bond returns. This paper shows that loadings on the same variables also provide significant cross-sectional explanatory power for stock portfolio returns. These loadings are important, over and the above the variables advocated by Fama and French (1993) in their three factor model,' and also the four factors of Elton, Gruber and Blake (1995). The explanatory power of the loadings on lagged variables is robust to various portfolio grouping procedures and other considerations. The lagged variables reveal information about the cross-section of expected returns that is not captured by popular asset pricing factors. These results carry implications for risk analysis, performance measurement, cost-of-capital calculations and other applications.
Handle: RePEc:nbr:nberwo:7009
Template-Type: ReDIF-Paper 1.0
Title: Theory and History Behind Business Cycles: Are the 1990s the Onset of a Golden Age?
Classification-JEL: E3; E30
Author-Name: Victor Zarnowitz
Note: EFG
Number: 7010
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7010
File-URL: http://www.nber.org/papers/w7010.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, Vol. 13, no. 2 (Spring 1999): 69-90.
Abstract: The disputes over the prospects for the current U.S. expansion reopen the issue of the causes of business cycles. A recurrent concern about the present is that expectations of business profits and market returns may be outrunning the economy's potential to deliver. The theory presented in this paper ties together profits, investment, credit, stock prices, inflation and interest rates. I discuss new estimates of profit and investment functions with important roles for growth of demand and productivity, price and cost levels, risk perception, credit volume and credit difficulties. The relationships among these endogenous variables are viewed as constituting an enduring core of business cycles, the exogenous shocks and policy effects as more transitory and peripheral. The U.S. upswing of the past three years provides a vivid example of how profits, investment, and an exuberant stock market can reinforce each other. Long business expansions benefit society in several ways but they generate imbalances and are difficult to sustain. Recent events in Asia demonstrate how investment-driven booms can give way to a protracted stagnation with tendencies toward deflation and underconsumption or to severe depressions. After a deterioration in the 1970s and early 1980s, U.S. business cycles moderated again, as in the first two post-WWII decades. But globally recessions became more frequent and more severe in the second half of the postwar era. The arguments in favor a new Golden Age are generally not persuasive.
Handle: RePEc:nbr:nberwo:7010
Template-Type: ReDIF-Paper 1.0
Title: Robust Estimation of the Joint Consumption / Asset Demand Decision
Classification-JEL: C20; F21
Author-Name: Marjorie Flavin
Note: EFG
Number: 7011
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7011
File-URL: http://www.nber.org/papers/w7011.pdf
File-Format: application/pdf
Abstract: The paper proposes an instrumental variables version of the Huber estimator as an alternative to the IV-Krasker Welsch estimator. The IV-Huber estimator is analytically and computationally much simpler than IV-Krasker Welsch. In the context of an empirical study of the importance of borrowing constraints on consumption, the paper reports the results for the following estimators: 1) conventional (non-robust) IV, 2) conventional IV after the subjective rejection of outliers, 3) conventional IV after trimming, 4) IV-Huber, and 5) IV-Krasker-Welsch. In the presence of a heavy-tailed error distribution, both the IV-Krasker Welsch and the IV-Huber estimators provide substantial improvements in efficiency over conventional IV. Further, the informal robust procedure of using conventional IV after trimming does not match the efficiency gains of the formal robust methods. The empirical results indicate that households exhibit incomplete smoothing of consumption, with about 20-50% of predictable movements in income being buffered by asset stocks. When saving is disaggregated by type of asset, the results provide some evidence of borrowing constraints: households which are not subject to a liquidity constraint use financial assets as their primary means of buffering income fluctuations, while constrained households use purchases of durable goods almost exclusively as the vehicle for consumption smoothing.
Handle: RePEc:nbr:nberwo:7011
Template-Type: ReDIF-Paper 1.0
Title: Search and Deliberation in International Exchange: Learning from Multinational Trade About Lags, Distance Effects, and Home Bias
Classification-JEL: F14; F15
Author-Name: Subramanian Rangan
Author-Name: Robert Z. Lawrence
Author-Person: pla608
Note: ITI
Number: 7012
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7012
File-URL: http://www.nber.org/papers/w7012.pdf
File-Format: application/pdf
Abstract: This paper compares the responses of intra- and extra-firm trade to exchange rate changes. It does so both to inform the debate on whether these responses are qualitatively different and to improve understanding of the microfoundations of features of trade behavior such as long adjustment lags, the large impact of distance, and the presence of significant home bias. We argue that the informational problems posed by search (acts identifying potential exchange partners) and deliberation (acts assessing their reliability and trustworthiness) play a key role in explaining these features and suggest that multinationals should have advantages in overcoming these problems. Indeed we find that the responses of multinationals to exchange rate changes are both larger and more rapid.
Handle: RePEc:nbr:nberwo:7012
Template-Type: ReDIF-Paper 1.0
Title: Unskilled Migration: A Burden or a Boon for the Welfare State
Classification-JEL: F22; H1
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Note: IFM
Number: 7013
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7013
File-URL: http://www.nber.org/papers/w7013.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf and Efraim Sadka. "Unskilled Migration: A Burden Or A Boon For The Welfare State?," Scandinavian Journal of Economics, 2000, v102(3,Sep), 463-379.
Abstract: In a static setup, migration of unskilled labor may be resisted by the entire native-born population because, being relatively low earners, migrants are net beneficiaries of the fiscal system. However, the paper shows that with a pay-as-you-go pension, an important pillar of the welfare state, the dynamics are such that migration is beneficial to low and high income groups and the old and the young, provided that the economy has a good access to the world capital markets. This overall gain holds even though the migrants are net consumers of the pension system; they give to it less than they take from it. The pro-migration feature of the dynamic model is however weakened and possibly overturned when access to the world capital market is limited. In the case of low elasticity of substitution between capital and labor, earnings of native-born may be significantly affected, and the factor price effects can dwarf the effects of the migrants' giving to or taking from the welfare state on the native-born population.
Handle: RePEc:nbr:nberwo:7013
Template-Type: ReDIF-Paper 1.0
Title: Devaluation Risk and the Syndrome of Exchange-Rate-Based Stabilizations
Classification-JEL: F31; F32
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Author-Name: Martin Uribe
Note: IFM
Number: 7014
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7014
File-URL: http://www.nber.org/papers/w7014.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy, Vol. 53 (2000),forthcoming.
Abstract: This paper shows that the risk of devaluation can be an important factor accounting for the stylized facts of exchange-rate-based stabilizations. This conclusion follows from studying the quantitative implications of a two-sector equilibrium business cycle model of a small open economy calibrated to Mexico's 1987-1994 stabilization plan. In the model a time-variant interest rate differential that acts as a stochastic tax on money demand, labor supply, investment, and saving. Under incomplete markets, this tax induces endogenous state-contingent wealth effects via fiscal adjustment and suboptimal investment. Devaluation risk entails large welfare costs in this environment.
Handle: RePEc:nbr:nberwo:7014
Template-Type: ReDIF-Paper 1.0
Title: Asset Allocation and Risk Allocation: Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities?
Classification-JEL: G11
Author-Name: Thomas E. MaCurdy
Author-Name: John B. Shoven
Note: AG PE
Number: 7015
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7015
File-URL: http://www.nber.org/papers/w7015.pdf
File-Format: application/pdf
Abstract: This paper examines the economics of investing the central trust fund of Social Security in private securities. We note that switching from a policy of having the trust fund invest solely in special issue Treasury bonds to one where some of the portfolio holds common stocks amounts to an asset swap. Such an asset swap does not increase national saving, wealth or GDP. We also show that it is far from a sure thing in terms of improving the finances of the Social Security system. The asset swap is deemed successful if the stock portfolio generates sufficient cash to pay off the interest and principal of the bonds and still have money left over. It is deemed a failure otherwise. By using historical data and a bootstrap statistical technique, we estimate that the exchange of ten or twenty year bonds for a stock portfolio would worsen social security's finances roughly twenty to twenty-five percent of the time. Further, failures are autocorrelated meaning that if the strategy fails one year it is extremely likely to fail the next. Such high failure rates imply that the defined benefit structure of benefits becomes less credible with stocks in the trust fund.
Handle: RePEc:nbr:nberwo:7015
Template-Type: ReDIF-Paper 1.0
Title: The Transition to Investment-Based Social Security when Portfolio Returns and Capital Profitability are Uncertain
Classification-JEL: H55
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Elena Ranguelova
Author-Name: Andrew Samwick
Author-Person: psa395
Note: AG PE
Number: 7016
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7016
File-URL: http://www.nber.org/papers/w7016.pdf
File-Format: application/pdf
Publication-Status: published as Risk Aspects of Investment Based Social Security Reform, Campbell, John and Martin Feldstein, eds., Chicago: University of Chicago Press, 1999,forthcoming.
Publication-Status: published as The Transition to Investment-Based Social Security When Portfolio Returns and Capital Profitability Are Uncertain, Martin Feldstein, Elena Ranguelova, Andrew Samwick. in Risk Aspects of Investment-Based Social Security Reform, Campbell and Feldstein. 2001
Abstract: In this paper we study the transition from a pay-as-you-go system of Social Security pensions to an investment-based system in an economy in which portfolio returns and capital profitability are both uncertain. The paper extends earlier studies by Feldstein and Samwick that modeled the transition process in a nonstochastic environment and by Feldstein and Ranguelova that examined the implication of portfolio risk after the transition to an investment-based system has been completed. We analyze transitions to a mixed system that maintains the current 12.4 percent pay-as-you-go tax rate as well as to a system that is completely investment-based. We model intergenerational guarantees and assess the risk of such guarantees to taxpayers. We find that transitions to either a completely investment-based system or a mixed system that maintains current law benefits can be done with little additional saving in the early years (a maximum of three percent) and substantially lower combinations of taxes and saving deposits in the later years. The extra risk to retirees and/or taxpayers is relatively small, making the investment-based plans preferable to a pure pay-as-you-go system for reasonable degrees of risk aversion.
Handle: RePEc:nbr:nberwo:7016
Template-Type: ReDIF-Paper 1.0
Title: Taylor Rules in a Limited Participation Model
Classification-JEL: E1; E4
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Christopher J. Gust
Author-Person: pgu329
Note: ME EFG
Number: 7017
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7017
File-URL: http://www.nber.org/papers/w7017.pdf
File-Format: application/pdf
Publication-Status: Published as "Sticky Price and Limited Participation Models of Money: A Comparison", European Economic Review, Vol. 41, no. 6 (June 1997): 1201-12 49.
Abstract: We use the limited participation model of money as a laboratory for studying the operating characteristics of Taylor rules for setting the rate of interest. Rules are evaluated according to their ability to protect the economy from bad outcomes such as the burst of inflation observed in the 1970s. Based on our analysis, we argue for a rule which: (i) raises the nominal interest rate more than one-for-one with a rise in inflation; and (ii) does not change the interest rate in response to a change in output relative to trend.
Handle: RePEc:nbr:nberwo:7017
Template-Type: ReDIF-Paper 1.0
Title: Patterns of Skill Premia
Classification-JEL: O14; O33
Author-Name: Daron Acemoglu
Author-Person: pac16
Note: LS
Number: 7018
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7018
File-URL: http://www.nber.org/papers/w7018.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daaron. "Patterns Of Skill Premia," Review of Economic Studies, 2003, v70(2,Apr), 231-251.
Abstract: In this paper, I develop a model to analyze how skill premia differ over time and across countries, and use this model to study the impact of international trade on wage inequality. Skill premia are determined by technology and the relative supply of skills. An increase in the relative supply of skills, holding technology constant, reduces the skill premium. Among countries sharing the same technology, those with greater supplies will therefore have lower skill premia. An increase in the supply of skills over time, however, induces a change in technology, increasing the demand for skills. As a result, the relationship between relative supplies and skill premia over time may be increasing. Similarly, across countries developing their own technologies, there need not be a decreasing relationship between relative supply and skill premia. Holding technology constant, an increase in the volume of international trade increases the skill premium in countries where skills are abundant, and reduces it in skill-scarce countries. Trade also induces skill-biased technical change, creating a powerful force towards higher skill premia in both skill-abundant and skill-scarce countries. As a result, trade opening can cause a rise in inequality in the U.S. and the LDCs, and thanks to the induced skill-biased technical change, this can happen without the usual intervening mechanism of standard trade models, a rise in the relative prices of skill-intensive goods in the U.S.. I also show that an increase in the volume of trade, while increasing skill premia in skill-scarce countries and the technological leader, the U.S., may actually reduce skill premia in medium skill
Handle: RePEc:nbr:nberwo:7018
Template-Type: ReDIF-Paper 1.0
Title: Inferring Relative Factor Price Changes from Quantitative Data
Author-Name: Robert E. Baldwin
Note: ITI
Number: 7019
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7019
File-URL: http://www.nber.org/papers/w7019.pdf
File-Format: application/pdf
Publication-Status: published as Blomstom, Magnus and Linda Goldberg (eds.) Topics in Empirical International Research: A Festschrift in Honor of Robert E. Lipsey. Chicago: University of Chicago Press, 2001.
Publication-Status: published as Inferring Relative Factor Price Changes from Quantitative Data, Robert E. Baldwin. in Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, Blomstrom and Goldberg. 2001
Abstract: This paper considers the appropriateness of using such quantitative measures as changes in the factor content of trade and the behavior of factor proportions within versus among industries to draw inferences about changes in relative factor prices. The conclusion reached is that only under special assumptions are such linkages justified. Using these special assumptions of Cobb-Douglas or CES production functions and preferences, a final section of the paper presents empirical estimates of how trade may have affected the U.S. wage gap between more educated and less educated workers in recent years.
Handle: RePEc:nbr:nberwo:7019
Template-Type: ReDIF-Paper 1.0
Title: Valuing the Reload Features of Executive Stock Options
Classification-JEL: C80; D84
Author-Name: Steven Huddart
Author-Name: Ravi Jagannathan
Author-Person: pja91
Author-Name: Jane Saly
Note: CF AP
Number: 7020
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7020
File-URL: http://www.nber.org/papers/w7020.pdf
File-Format: application/pdf
Publication-Status: published as Accounting Horizons, Vol. 13, no. 3 (September 1999): 219-240.
Abstract: Under Statement of Financial Accounting Standards No. 123, the grant date value of executive stock options excludes the value of any reload feature because, at the time of writing the standard in 1995, the Financial Accounting Standards Board believed it was not feasible to value a reload feature at the grant date. We show how the Binomial Option Pricing Model can be used to determine the grant date value of such options. Ignoring the reload feature can substantially understate the value of the option: the reload feature increases the value of an otherwise similar option by 24 percent in the example we consider. In view of the potential significance of the reload feature and the versatility of the Binomial Option Pricing Model, the Financial Accounting Standards Board may wish to reconsider the accounting for options with a reload feature.
Handle: RePEc:nbr:nberwo:7020
Template-Type: ReDIF-Paper 1.0
Title: Globalization of Equity Markets and the Cost of Capital
Author-Name: Rene M. Stulz
Note: AP CF
Number: 7021
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7021
File-URL: http://www.nber.org/papers/w7021.pdf
File-Format: application/pdf
Publication-Status: Published as "Globalization of Capital Markets and the Cost of Capital: The Case of Nestle", JACF, Vol. 8, no. 3 (Fall 1995): 30-38.
Abstract: This paper examines the impact of globalization on the cost of equity capital. We argue that the cost of equity capital decreases because of globalization for two important reasons. First, the expected return that investors require to invest in equity to compensate them for the risk they bear generally falls. Second, the agency costs which make it harder and more expensive for firms to raise funds become less important. The existing empirical evidence is consistent with the theoretical prediction that globalization decreases the cost of capital, but the documented effects are lower than theory leads us to expect. We discuss various reasons for why this is the case.
Handle: RePEc:nbr:nberwo:7021
Template-Type: ReDIF-Paper 1.0
Title: Innovation in Israel 1968-97: A Comparative Analysis Using Patent Data
Classification-JEL: O3; O34
Author-Name: Manuel Trajtenberg
Author-Person: ptr35
Note: PR
Number: 7022
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7022
File-URL: http://www.nber.org/papers/w7022.pdf
File-Format: application/pdf
Publication-Status: published as Trajtenberg, Manuel. "Innovation In Israel 1968-1997: A Comparative Analysis Using Patent Data," Research Policy, 2001, v30(3,Mar), 363-389.
Abstract: The israeli high tech sector is widely regarded as a hotbed of cutting-edge technologies, and as the growth engine of the israeli economy in the nineties and beyond. In this paper we present a close-up portrait of innovation in Israel for the past 30 years, with the aid of highly detailed patent data. We use for that purpose all israeli patents taken in the US (over 7,000), as well as US patents and patents from other countries for comparative purposes. The time path of israeli patenting reveals big jumps in the mid eighties and then again in the early nineties, reflecting underlying shocks' in policy and in the availability of relevant inputs. Israeli ranks high in terms of patents per capita, compared to the G7, the Asian Tigers' and a group of countries with similar GDP per capita. Finland is strikingly similar, Taiwan's patenting has grown extremely fast and is now on par with Israel, South Korea is rapidly closing the gap. The technological composition of israeli innovations reflects quite well world-wide technological trends, except that Computers and Communications, the fastest growing field in the US, has grown even faster in Israel. The weak side resides in the composition of israeli assignees, the actual owners of the intellectual property rights: just 35% of israeli patents were assigned to israeli corporations, a much lower percentage than in most other countries. Relatively large shares went to foreign assignees, to Universities and the Government, and to private inventors. On the other hand israeli patents are of good quality' in terms of citations received (and getting better over time): US patents command on average more citations, but not in Computers and Communications or in Biotechnology, and Israeli patents are significantly better than those of the reference group of countries.
Handle: RePEc:nbr:nberwo:7022
Template-Type: ReDIF-Paper 1.0
Title: Forecasting Inflation
Classification-JEL: E31; C32
Author-Name: James H. Stock
Author-Person: pst148
Author-Name: Mark W. Watson
Author-Person: pwa582
Note: EFG ME
Number: 7023
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7023
File-URL: http://www.nber.org/papers/w7023.pdf
File-Format: application/pdf
Publication-Status: published as Stock, James and Mark W. Watson. "Forecasting Inflation," Journal of Monetary Economics, 1999, v44(2,Oct), 293-335.
Abstract: This paper investigates forecasts of U.S. inflation at the 12-month horizon. The starting point is the conventional unemployment rate Phillips curve, which is examined in a simulated out of sample forecasting framework. Inflation forecasts produced by the Phillips curve generally have been more accurate than forecasts based on other macroeconomic variables, including interest rates, money and commodity prices. These forecasts can however be improved upon using a generalized Phillips curve based on measures of real aggregate activity other than unemployment, especially a new index of aggregate activity based on 61 real economic indicators.
Handle: RePEc:nbr:nberwo:7023
Template-Type: ReDIF-Paper 1.0
Title: Network Effects and Diffusion in Pharmaceutical Markets: Antiulcer Drugs
Classification-JEL: D12; L65
Author-Name: Ernst R. Berndt
Author-Name: Robert S. Pindyck
Author-Person: ppi130
Author-Name: Pierre Azoulay
Note: EH PR
Number: 7024
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7024
File-URL: http://www.nber.org/papers/w7024.pdf
File-Format: application/pdf
Abstract: We examine the role of network effects in the demand for pharmaceuticals at both the brand level and for a therapeutic class of drugs. These effects emerge when use of a drug by others conveys information about its efficacy and safety to patients and physicians. This can lead to herd behavior where a particular drug -- not necessarily the most efficacious or safest -- can come to dominate the market despite the availability of close substitutes, and can also affect the rate of market diffusion. Using data for H2-antagonist antiulcer drugs, we examine two aspects of these effects. First, we use hedonic price procedures to estimate how the aggregate usage of a drug affects brand valuation. Second, we estimate discrete-time diffusion models at both the industry and brand levels to measure the impact on rates of diffusion and market saturation.
Handle: RePEc:nbr:nberwo:7024
Template-Type: ReDIF-Paper 1.0
Title: The Concentration of Job Destruction
Classification-JEL: E24
Author-Name: Robert E. Hall
Note: EFG
Number: 7025
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7025
File-URL: http://www.nber.org/papers/w7025.pdf
File-Format: application/pdf
Abstract: A time series is concentrated if the expectation of its current value is a negative function of a moving average of past values up to all but the most recent past. Job destruction has the property of concentration in a model of heterogeneous jobs because an adverse shock destroys jobs in plants close to the margin of shutdown. Until other plants drift close to that margin, there are fewer plants that are vulnerable to another adverse shock. Concentration is easy to spot in the autocorrelations of a time series, which will be negative except for the first few lags. A simple model generates data displaying concentration. Data on job destruction and employment change for U.S. manufacturing show unambiguous evidence of concentration. According to the simple model, job creation is more persistent and thus less concentrated than is destruction, a property reflected in the data as well.
Handle: RePEc:nbr:nberwo:7025
Template-Type: ReDIF-Paper 1.0
Title: Pricing to Market, Staggered Contracts, and Real Exchange Rate Persistence
Classification-JEL: F41; F31
Author-Name: Paul R. Bergin
Author-Person: pbe249
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Note: ITI
Number: 7026
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7026
File-URL: http://www.nber.org/papers/w7026.pdf
File-Format: application/pdf
Publication-Status: published as Bergin, Paul R. & Feenstra, Robert C., 2001. "Pricing-to-market, staggered contracts, and real exchange rate persistence," Journal of International Economics, Elsevier, vol. 54(2), pages 333-359, August.
Abstract: This paper offers an explanation for the persistence observed in real exchange rate movements. The model combines pricing to market behavior with sticky prices generated by staggered contracts. A translog preference structure is sued to enhance both features. The paper finds that openness limits the degree of endogenous persistence. Nevertheless, the model under reasonable parameter values can replicate the serial correlation of real exchange rate data. Further, significant exchange rate data. Further, significant exchange rate volatility can be generated, and this is amplified by the presence of endogenous persistence
Handle: RePEc:nbr:nberwo:7026
Template-Type: ReDIF-Paper 1.0
Title: Maximum Likelihood in the Frequency Domain: A Time to Build Example
Classification-JEL: E2; E22
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Robert J. Vigfusson
Author-Person: pvi18
Note: EFG
Number: 7027
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7027
File-URL: http://www.nber.org/papers/w7027.pdf
File-Format: application/pdf
Publication-Status: published as Christiano, Lawrence J. and Robert J. Vigfusson. "Maximum Likelihood In The Frequency Domain: The Importance Of Time-To-Plan," Journal of Monetary Economics, 2003, v50(4,May), 789-815.
Abstract: A well known result is that the Gaussian log-likelihood can be expressed as the sum over different frequency components. This implies that the likelihood ratio statistic has a similar linear decomposition. We exploit these observations to devise diagnostic methods that are useful for interpreting maximum likelihood parameter estimates and likelihood ratio tests. We apply the methods to the estimation and testing of two real business cycle models. The standard real business cycle model is rejected in favor of an alternative in which capital investment requires a planning period
Handle: RePEc:nbr:nberwo:7027
Template-Type: ReDIF-Paper 1.0
Title: Using Employee Level Data in a Firm Level Econometric Study
Classification-JEL: O33
Author-Name: Jacques Mairesse
Author-Person: pma712
Author-Name: Nathalie Greenan
Author-Person: pgr420
Note: PR
Number: 7028
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7028
File-URL: http://www.nber.org/papers/w7028.pdf
File-Format: application/pdf
Publication-Status: published as Haltiwanger, John C. (ed.) The creation and analysis of employer-employee matched data, Contributions to Economic Analysis, vol. 241. Amsterdam; New York and Oxford: Elsevier Science, North-Holland, 1999.
Abstract: In this paper, we make the general point that econometric studies of the firm can be effectively and substantially enriched by using information collected from employees, even if only a few of them are surveyed per firm. Though variables measured on the basis of the answers of very few employees per firm are subject to very important sampling errors, they can be usefully included in a model specified at the firm level. In the first part of the paper, we show that in estimating parameters of interest in a regression model of the firm, the biases arising from the sampling errors in the employee based variables can be assessed, as long as we have a large enough sub-sample of firms with at least two or with more (randomly chosen) surveyed employees. As an illustration in the second part of the paper, we consider the estimation of the relationship between the firm average wage (directly obtained from the firm accounts) and estimates of the proportion of female workers based on the gender of one, two or three surveyed employees per firm. As a test, we compare the estimates that we find in this way with those using the employees), which we could also directly obtain at the firm level from a firm survey. The analysis is performed on two linked employer-employee samples of about 2500 firms in the French manufacturing and services industries in 1987 and 1993, with one, two or three surveyed employees per firm (for respectively 75%, 15% and 10% of the firms).
Handle: RePEc:nbr:nberwo:7028
Template-Type: ReDIF-Paper 1.0
Title: Investing Retirement Wealth: A Life-Cycle Model
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Joao F. Cocco
Author-Name: Francisco J. Gomes
Author-Person: pgo69
Author-Name: Pascal J. Maenhout
Note: AP EFG ME
Number: 7029
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7029
File-URL: http://www.nber.org/papers/w7029.pdf
File-Format: application/pdf
Publication-Status: published as Risk Assets of Investment-Based Social Security Reform, Feldstein, Martin,and John Y. Campbell, eds., NBER, Chicago: The University of Chicago Press 2000, forthcoming.
Publication-Status: published as The Effect of Multi-Industry Employment on the Industrial Distribution of Wages, Lazare Teper. in An Appraisal of the 1950 Census Income Data, Wealth. 1958
Abstract: If household portfolios are constrained by borrowing and short-sales restrictions asset markets, then alternative retirement savings systems may affect household welfare by relaxing these constraints. This paper uses a calibrated partial-equilibrium model of optimal life-cycle portfolio choice to explore the empirical relevance of these issues. In a benchmark case, we find ex-ante welfare gains equivalent to a 3.7% increase in consumption from the investment of half of retirement wealth in the equity market. The main channel through which these gains are realized is that the higher average return on equities permits a lower Social Security tax rate on younger households, which helps households smooth their consumption over the life cycle. There is a smaller welfare gain of 0.5% of consumption when Social Security tax rates are held constant. We also find that realistic heterogeneity of risk aversion and labor income risk can strongly affect optimal portfolio choice over the life cycle, which provides one argument for a privatized Social Security system with an element of personal portfolio choice.
Handle: RePEc:nbr:nberwo:7029
Template-Type: ReDIF-Paper 1.0
Title: Social Security and Demographic Uncertainty: The Risk Sharing Properties of Alternative Policies
Author-Name: Henning Bohn
Author-Person: pbo25
Note: PE
Number: 7030
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7030
File-URL: http://www.nber.org/papers/w7030.pdf
File-Format: application/pdf
Publication-Status: Published as "Will Social Security and Medicare Remain Viable as the U.S. Population is Aging?", Carnegie-Rochester Conference Series on Public Policy, Vol. 50, no. 1 (June 1999): 1-53.
Publication-Status: published as Social Security and Demographic Uncertainty: The Risk-Sharing Properties of Alternative Policies, Henning Bohn. in Risk Aspects of Investment-Based Social Security Reform, Campbell and Feldstein. 2001
Abstract: As the U.S. population ages, the growing retiree-worker ratio increases the burden of public retirement systems. Is it efficient to maintain a defined benefit social security system? Should PAYGO benefits be reduced and private retirement savings be encouraged? The paper examines these questions in a neoclassical growth model with overlapping generations and demographic uncertainty. In case of shocks to the birth rate, I find that a defined-benefits social security system is more efficient ex-ante than a defined-contribution or privatized system. This is because small cohorts generally enjoy favorable wage and interest rate movements. They are in the labor force when the capital- labor ratio is high and they earn capital income when the capital-labor ratio is low. A defined benefit system helps to offset the effect of these factor price movements by imposing higher taxes on small cohorts. Neither defined-benefits nor its main alternative are fully efficient, however, because they all fail to adjust current retiree benefits in response to anticipated future demographic changes. In case of changes in life-expectancy, the efficient policy response depends on the predictability of deaths at the individual level and on the availability of annuities. Reduced benefits can be efficient if annuities markets are missing and the mortality change is such that accidental bequests decline, but not otherwise.
Handle: RePEc:nbr:nberwo:7030
Template-Type: ReDIF-Paper 1.0
Title: The Risk of Social Security Benefit Rule Changes: Some International Evidence
Author-Name: John McHale
Author-Person: pmc145
Note: AG PE
Number: 7031
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7031
File-URL: http://www.nber.org/papers/w7031.pdf
File-Format: application/pdf
Publication-Status: published as The Risk of Social Security Benefit-Rule Changes: Some International Evidence, John McHale. in Risk Aspects of Investment-Based Social Security Reform, Campbell and Feldstein. 2001
Abstract: Against a background of projections of sharply increasing elderly dependency rates, workers in the major industrial economies are apprehensive that their social security benefit entitlements will be cut before or after they retire, leaving them with inadequate retirement income. This paper looks at recent benefit rule changes in the G7 countries to see what can be learned about such political risk in PAYG pension systems. From this small sample, I find that projections of rising costs under current rules are inducing reforms, and that these reforms often have a major impact on the present discounted value of promised benefits for middle-aged and younger workers. Usually, however, the benefits of the retired and those nearing retirement are protected. The phasing in of benefit cuts raises the question as to why younger workers are willing to take significant cuts in their implicit wealth while protecting the currently old. One possible answer is explored through a simple model: these workers fear even larger cuts in their benefits if the tax burden on future workers rises too high.
Handle: RePEc:nbr:nberwo:7031
Template-Type: ReDIF-Paper 1.0
Title: Pairs Trading: Performance of a Relative Value Arbitrage Rule
Author-Name: Evan G. Gatev
Author-Name: William N. Goetzmann
Author-Person: pgo59
Author-Name: K. Geert Rouwenhorst
Author-Person: pro146
Note: AP
Number: 7032
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7032
File-URL: http://www.nber.org/papers/w7032.pdf
File-Format: application/pdf
Publication-Status: published as Evan Gatev & William N. Goetzmann & K. Geert Rouwenhorst, 2006. "Pairs Trading: Performance of a Relative-Value Arbitrage Rule," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 19(3), pages 797-827.
Abstract: We test a Wall Street investment strategy known as pairs trading' with daily data over the period 1962 through 1997. Stocks are matched into pairs according to minimum distance in historical normalized price space. We test the profitability of several trading rules with six-month trading periods over the 1962-1997 period, and find average annualized excess returns of up to 12 percent for a number of self-financing portfolios of top pairs. Part of these profits may be due to market microstructure effects. Nevertheless, our historical trading profits exceed a conservative estimate of transaction costs through most of the period. We bootstrap random pairs in order to distinguish pairs trading from pure mean-reversion strategies. The bootstrap results suggest that the pairs' effect differs from previously documented mean reversion profits.
Handle: RePEc:nbr:nberwo:7032
Template-Type: ReDIF-Paper 1.0
Title: Index Funds and Stock Market Growth
Author-Name: William N. Goetzmann
Author-Person: pgo59
Author-Name: Massimo Massa
Note: AP
Number: 7033
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7033
File-URL: http://www.nber.org/papers/w7033.pdf
File-Format: application/pdf
Publication-Status: published as William N. Goetzmann & Massimo Massa, 2003. "Index Funds and Stock Market Growth," Journal of Business, University of Chicago Press, vol. 76(1), pages 1-28, January.
Abstract: In the present paper we analyze the relationship between index funds and asset prices. In particular, our analysis of daily index fund flows indicates a strong contemporaneous correlation between fund inflows and S&P market returns. We also document a strong negative correlation between fund out flows and S&P market returns with the exception of outflows from a fund with very high initial investment requirement. These effects may be interpreted in two ways. Either investor supply and demand affects S&P market prices, or investors condition their demand and supply on intra-day market fluctuations. To sort out these effects, we examine trailing investor reaction to market moves. Our results suggest the market reacts to daily demand. However, only negative reactions appear due to past returns. We investigate whether index investor demand shocks are permanent or temporary by examining the related behavior of the S&P futures index. Clear evidence supports the hypothesis that they are permanent. This result may help explain the unusual recent relative performance of the S&P 500 index. Using the average market-timing newsletter recommendation over the period, we find that investors appear to react to expert' advice about the market. Bullish newsletter sentiment is associated with greater inflows, although outflows are not well explained by newsletter advice. Dispersion in advice is associated with lower inflows. We find a high correlation among a number of variables used as a proxy for investor disagreement.
Handle: RePEc:nbr:nberwo:7033
Template-Type: ReDIF-Paper 1.0
Title: The Usual Excess-Burden Approximation Usually Doesn't Come Close
Classification-JEL: H21; D61
Author-Name: Lawrence H. Goulder
Author-Name: Roberton C. Williams III
Author-Person: pwi38
Note: PE
Number: 7034
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7034
File-URL: http://www.nber.org/papers/w7034.pdf
File-Format: application/pdf
Publication-Status: published as Goulder, Lawrence and Roberton C. Williams III. "The Substantial Bias from Ignoring General Equilibrium Effects in Estimating Excess Burden, and a Practical Solution." Journal of Political Economy 111 (2003): 898-927.
Abstract: This paper shows that the usual excess-burden triangle' formula performs poorly when used to assess the excess burden from taxes on intermediate inputs or consumer goods, and derives a practical alternative to this formula. We use an analytically tractable general equilibrium model to reveal how interactions with pre-existing taxes in other markets critically affect the excess burden of new taxes on intermediate inputs or consumer goods. The usual excess-burden formula ignores these interactions, and consequently yields highly inaccurate assessments of excess burden. Prior economic theory implicitly acknowledges the relevance of general-equilibrium interactions to excess burden, but does not indicate which interactions are most important or reveal the fundamental (first-order) contribution of these interactions. Moreover, prior studies do not offer a practical alternative to the usual excess-burden approximation. This paper helps fill the gap between theory and practice. First, it shows analytically that the importance of the interaction with a given pre-existing tax is roughly proportional to the amount of revenue raised by that tax. Second, the paper derives a practical alternative formula for approximating the excess burden from a commodity tax. Finally, it performs numerical simulations to illustrate the significance of adopting our alternative to the usual approximation formula. For realistic parameter values and a wide range of assumed rates for prior taxes, the usual formula captures less than half of the excess burden of taxes on commodities. When the rate of the new tax is small,' this formula captures less than five percent of the true excess burden. In contrast, the alternative approximation formula derived here yields estimates that are consistently within five percent of the actual excess burden.
Handle: RePEc:nbr:nberwo:7034
Template-Type: ReDIF-Paper 1.0
Title: A New Measure of Horizontal Equity
Classification-JEL: D63; H22
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Kevin A. Hassett
Author-Person: pha378
Note: PE
Number: 7035
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7035
File-URL: http://www.nber.org/papers/w7035.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, Alan J. and Kevin A. Hassett. "A New Measure Of Horizontal Equity," American Economic Review, 2002, v92(4,Sep), 1116-1125.
Abstract: In this paper, we propose a new measure of horizontal equity that overcomes many of the shortcomings of previous proposed measures. Our starting point is the observation that a well-behaved social welfare function need not evaluate global' (vertical equity) differences in after-tax income using the same weights it applies to local' (horizontal equity) differences, even though this constraint has been applied in the past. Following work on the structure of individual preferences, we show that a social welfare function can imply different preferences toward horizontal and vertical equity. Adopting the general approach to the measurement of inequality developed by Atkinson (1970), we use such a social welfare function to derive measures of inequality that are decomposable into components naturally interpreted as indices of horizontal and vertical equity. In particular, the former index measures deviations from the fundamental principle that equals be treated equally. Finally, we apply our new measure to two tax-return data sets, evaluating the degree to which the horizontal equity of the US personal income tax has changed over time, and how horizontal equity would be altered by one version of recent proposals to do away with the so-called marriage penalty.'
Handle: RePEc:nbr:nberwo:7035
Template-Type: ReDIF-Paper 1.0
Title: Uncertainty and the Design of Long-Run Fiscal Policy
Classification-JEL: E62; H62
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Kevin A. Hassett
Author-Person: pha378
Note: PE EFG
Number: 7036
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7036
File-URL: http://www.nber.org/papers/w7036.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, A. J. and K. A. Hassett. "Fiscal Policy And Uncertainty," International Finance, 2002, v5(2,Summer), 229-249.
Publication-Status: published as Auerbach, A. and R. Lee (eds.)Demographic Change and Fiscal Policy. Cambridge: Cambridge University Press, 2008.
Abstract: This paper explores optimal fiscal policy in an overlapping-generations general-equilibrium model under uncertainty and the impact on optimal policy of the introduction of a type of policy stickiness intended to account for the stylized fact that major reforms happen infrequently. In general, our analysis suggests not only that action should not be delayed, but further that action should actually be accelerated. The added realism of restrictions on the frequency of policy changes alters this result in two ways. The prospect of being unable to set policy in the future occasions even more precautionary saving today, if the government acts. However, the government may also choose not to set policy, and its inaction range is very asymmetric. Because the impact of its policies on the current elderly cannot be reversed in the future, the government is much more likely to choose inaction when fiscal tightening is called for. Thus, the optimal policy response over time might best be characterized by great caution in general, but punctuated by occasional periods of apparent irresponsibility.
Handle: RePEc:nbr:nberwo:7036
Template-Type: ReDIF-Paper 1.0
Title: Economic Epidemiology and Infectious Diseases
Classification-JEL: I1
Author-Name: Tomas Philipson
Author-Person: pph37
Note: EH
Number: 7037
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7037
File-URL: http://www.nber.org/papers/w7037.pdf
File-Format: application/pdf
Publication-Status: published as Handbook of Health Economics, Culyer and Newhouse, eds.,: North-Holland, 2000, forthcoming.
Abstract: Infectious disease is currently the main cause of mortality in the world and has been even more important historically. This paper reviews recent research in economic epidemiology. Specifically, it discusses the occurrence of infectious diseases and the effects of public health interventions designed to control them. Several key points include: differences in the predictions regarding short- and long-run disease occurrence between rational and epidemiological epidemics, the nonstandard effects of interventions when epidemics are rational, the desirability and possibility of eradicating infectious diseases, as well as the components of the welfare loss induced by infectious diseases.
Handle: RePEc:nbr:nberwo:7037
Template-Type: ReDIF-Paper 1.0
Title: Inequality, Growth, and Investment
Classification-JEL: O4; I3
Author-Name: Robert J. Barro
Author-Person: pba251
Note: EFG
Number: 7038
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7038
File-URL: http://www.nber.org/papers/w7038.pdf
File-Format: application/pdf
Publication-Status: published as Hassett, K.A. and R.G. Hubbard (eds.) Inequality and Tax Policy. AEI Press, 2001.
Abstract: Evidence from a broad panel of countries shows little overall relation between income inequality and rates of growth and investment. However, for growth, higher inequality tends to retard growth in poor countries and encourage growth in richer places. The Kuznets curve-whereby inequality first increases and later decreases during the process of economic development-emerges as a clear empirical regularity. However does not explain the bulk of variations in inequality across countries or over time.
Handle: RePEc:nbr:nberwo:7038
Template-Type: ReDIF-Paper 1.0
Title: On Portfolio Optimization: Forecasting Covariances and Choosing the Risk Model
Classification-JEL: G11; G12
Author-Name: Louis K.C. Chan
Author-Name: Jason Karceski
Author-Name: Josef Lakonishok
Note: AP
Number: 7039
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7039
File-URL: http://www.nber.org/papers/w7039.pdf
File-Format: application/pdf
Publication-Status: published as The Review of Financial Studies (Winter 1999).
Abstract: We evaluate the performance of different models for the covariance structure of stock returns, focusing on their use for optimal portfolio selection. Comparisons are based on forecasts of future covariances as well as the out-of-sample volatility of optimized portfolios from each model. A few factors capture the general covariance structure but adding more factors does not improve forecast power. Portfolio optimization helps for risk control, but the different covariance models yield similar results. Using a tracking error volatility criterion, larger differences appear, with particularly favorable results for a heuristic approach based on matching the benchmark's attributes.
Handle: RePEc:nbr:nberwo:7039
Template-Type: ReDIF-Paper 1.0
Title: Foreign-Affiliate Activity and U.S. Skill Upgrading
Classification-JEL: F21; F23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Matthew J. Slaughter
Note: ITI
Number: 7040
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7040
File-URL: http://www.nber.org/papers/w7040.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. and Matthew J. Slaughter. "Foreign-Affiliate Activity And U.S. Skill Upgrading," Review of Economics and Statistics, 2001, v83(2,May), 362-376.
Abstract: There has been little analysis of the impact of inward foreign direct investment (FDI) on U.S. wage inequality, even though the presence of foreign-owned affiliates in the United States has arguably grown more rapidly in significance for the U.S. economy than trade flows. Using data across U.S. manufacturing from 1977 to 1994, this paper tests whether inward flows of FDI contributed to within-industry shifts in U.S. relative labor demand toward more-skilled labor. We generally find that inward FDI has not contributed to U.S. within-industry skill upgrading; in fact, the wave of Japanese greenfield investments in the 1980s was significantly correlated with lower, not higher, relative demand for skilled labor. This finding is consistent with recent models of multinational enterprises in which foreign affiliates focus on activities less skilled-labor intensive than the activities of their parent firms. It also suggests that if inward FDI brought new technologies into the United States, the induced technological change was not biased towards skilled labor.
Handle: RePEc:nbr:nberwo:7040
Template-Type: ReDIF-Paper 1.0
Title: Generational Accounting and Immigration in the United States
Classification-JEL: H6; J1
Author-Name: Alan J. Auerbach
Author-Person: pau33
Author-Name: Philip Oreopoulos
Author-Person: por38
Note: PE
Number: 7041
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7041
File-URL: http://www.nber.org/papers/w7041.pdf
File-Format: application/pdf
Publication-Status: Published as "Tax Policy and Business Fixed Investment in the United States", Journal of Public Economics, Vol. 47, no. 2 (1992): 141-170.
Abstract: In recent years, the renewed strength of immigration to the United States has sparked a debate about the economic effects of immigration. A central issue in this debate has been the fiscal impact of immigrants. Most research in this area has adopted a static, cross-section approach in assessing the net impact of immigrants on the economy's fiscal position. However, a dynamic approach is important because of the age dependency of many government tax and expenditure programs, and necessary to take the descendents of immigrants into account. This paper reconsiders the fiscal impact of immigrants over time, using the technique of generational accounting. We may summarize our results with three findings: 1. Because new immigrants represent a larger fraction of future generations than of present ones, shifting the burden onto future generations also shifts it, relatively, onto new immigrants. Thus, if the entire fiscal imbalance currently estimated for the United States is placed on future generations, then the presence of new immigrants reduces the burden borne by natives. 2. When a policy of fiscal responsibility' is followed, whether there is a fiscal gain from immigration depends on the extent to which government purchases rise with the immigrant population. 3. The impact of immigration on fiscal balance is extremely small relative to the size of the overall imbalance itself. Thus, immigration should be viewed neither as a major source of the existing imbalance, nor as a potential solution to it.
Handle: RePEc:nbr:nberwo:7041
Template-Type: ReDIF-Paper 1.0
Title: The Role of Bank Restructuring in Recovering from Crises: Mexico 1995-98
Author-Name: Anne Krueger
Author-Name: Aaron Tornell
Author-Person: pto157
Note: IFM
Number: 7042
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7042
File-URL: http://www.nber.org/papers/w7042.pdf
File-Format: application/pdf
Abstract: In this paper we analyze the evolution of the Mexican economy between 1995 and 1998. The remarkable quick recovery seen in aggregate activity has not been uniform across the economy. The tradable sector has grown strongly, while the non-tradable sector has recuperated only sluggishly. This asymmetric response is intimately linked with the severe credit crunch that Mexico has experienced since 1995. Although fresh domestic bank lending dried up, tradable firms obtained financing in the international capital market. This was not the case in the non-tradable sector. A phenomenon that has gone hand in hand with the credit crunch is the steady increase in the share of non-performing loans. We analyze the reasons for this increase, the rationale for the partial bailout policy adopted in 1995, and we investigate why this policy stance did not solve the banking problem. An important lesson is that non-performing loans are unlikely to disappear on their own, even under a high GDP growth scenario. Furthermore, the existence of non-performing loans presents an obstacle for the banking system to adequately perform its functions. This raises the question of whether an alternative strategy under which all non-performing loans were recognized at once and the fiscal costs were all paid up-front would have been preferable.
Handle: RePEc:nbr:nberwo:7042
Template-Type: ReDIF-Paper 1.0
Title: Ownership versus Environment: Why are Public Sector Firms Inefficient?
Classification-JEL: L33; D24
Author-Name: Ann P. Bartel
Author-Name: Ann E. Harrison
Author-Person: pha441
Note: IFM ITI PR
Number: 7043
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7043
File-URL: http://www.nber.org/papers/w7043.pdf
File-Format: application/pdf
Publication-Status: published as Ann P. Bartel & Ann E. Harrison, 2005. "Ownership Versus Environment: Disentangling the Sources of Public-Sector Inefficiency," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 135-147, 02.
Abstract: In this paper we disentangle the sources of public sector inefficiency using 1982-1995 panel data on manufacturing firms in Indonesia. We consider two leading hypotheses: (1) public sector enterprises are inefficient due to monitoring problems and (2) public sector enterprises are inefficient because of the environment in which they operate, as measured by the soft budget constraint. The two models are nested in a production function framework and the empirical results provide support for the second hypothesis. Public sector enterprises are inefficient because of their access to soft loans; public sector ownership has no independent impact on productivity growth. The finding that ownership per se does not matter, but environment does, holds when we control for fixed effects and when we allow for the endogeneity of government loans. Interestingly, private sector firms with access to government loans did not perform more poorly than other private sector enterprises. Another dimension of the environment, i.e. import penetration, also matters; public sector enterprises that have been shielded from import competition are inferior performers.
Handle: RePEc:nbr:nberwo:7043
Template-Type: ReDIF-Paper 1.0
Title: The Business Cycles of Balance-of-Payment Crises: A Revision of Mundellan Framework
Classification-JEL: F41; F31
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Author-Name: Martin Uribe
Note: IFM
Number: 7045
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7045
File-URL: http://www.nber.org/papers/w7045.pdf
File-Format: application/pdf
Publication-Status: published as Money, Capital Mobility and Trade: Essays in Honor of Robert A. Mundell, Calvo, G., R. Dorubusch and M. Obstfeld, eds., Cambridge: MIT Press, 2000, forthcoming.
Abstract: In his seminal 1960 article Robert Mundell proposed a model of balance-of-payments crises in which confidence in the continuation of a currency peg depended on the observed holdings of central bank foreign reserves. We examine the implications of a reformulation of this view from the perspective of an equilibrium business cycle model in which the probability of devaluation is an endogenous variable conditioned on foreign reserves. The model explains some business cycle regularities of exchange-rate-based stabilizations while also producing devaluation probabilities that capture some features of devaluation probabilities estimated in the data. The analysis aims to explain both the real effects and the collapse of temporary fixed-exchange-rate regimes in an unified framework, and provides an economic interpretation for the evidence that foreign reserves are a robust leading indicator of currency crises.
Handle: RePEc:nbr:nberwo:7045
Template-Type: ReDIF-Paper 1.0
Title: Household Production and the Excess Sensitivity of Consumption to Current Income
Classification-JEL: D13; E10
Author-Name: Marianne Baxter
Author-Person: pba102
Author-Name: Urban J. Jermann
Author-Person: pje4
Note: EFG
Number: 7046
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7046
File-URL: http://www.nber.org/papers/w7046.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 89, no. 5 (September 1999): 902-920.
Abstract: Empirical research on the permanent income hypothesis (PIH) has found that consumption growth is excessively sensitive to predictable changes in income. This finding is interpreted as strong evidence against the PIH. We propose an explanation for apparent excess sensitivity that is based on a quantitative equilibrium version of Becker's (1965) model of household production in which permanent income consumers respond to shifts in sectoral wages and prices by substituting work effort and consumption across home and market sectors. Although the PIH is true, this mechanism generates apparent excess sensitivity because market consumption responds to predictable income growth.
Handle: RePEc:nbr:nberwo:7046
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Smoking
Classification-JEL: I18
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Author-Name: Kenneth E. Warner
Note: EH
Number: 7047
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7047
File-URL: http://www.nber.org/papers/w7047.pdf
File-Format: application/pdf
Publication-Status: published as Chaloupka, Frank J. & Warner, Kenneth E., 2000. "The economics of smoking," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 29, pages 1539-1627 Elsevier.
Abstract: While the tobacco industry is among the most substantial and successful economic enterprises, tobacco consumption kills more people than any other product. Economic analysis of tobacco product markets, particularly for cigarettes, has contributed considerable insight to debates about the industry's importance and appropriate public policy roles in grappling with health consequences of tobacco. The most significant example is the rapidly expanding and increasingly sophisticated body of research on the effects of price increases on cigarette consumption. Because excise tax is a component of price, the resultant literature has been prominent in legislative debates about taxation as a tool to discourage smoking, and has contributed theory and empirical evidence to the growing interest in modeling demand for addictive products. This chapter examines the research and several equity and efficiency concerns accompanying cigarette taxation debates. It includes economic analysis of other tobacco control policies, such as advertising restrictions, prominent in tobacco control debates. Research addressing the validity of tobacco-industry arguments that its contributions to employment, tax revenues, and trade balances are vital to economic health in states and nations is also considered, as it is the industry's principal weapon in the battle against policy measures to reduce tobacco consumption.
Handle: RePEc:nbr:nberwo:7047
Template-Type: ReDIF-Paper 1.0
Title: Mortality Risk and Consumption by Couples
Classification-JEL: D9; E21
Author-Name: Michael D. Hurd
Author-Person: phu137
Note: AG
Number: 7048
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7048
File-URL: http://www.nber.org/papers/w7048.pdf
File-Format: application/pdf
Publication-Status: Published as "Mortality Risk and Bequests", Econometrica, Vol. 57, no. 4(1989): 779-814.
Abstract: This paper proposes and analyzes a life-cycle model of consumption by couples. The model is considerably more complicated than the standard model for singles because it has to account for the welfare of a surviving spouse. The determinants of consumption are the survival paths of each spouse, bequeathable wealth, the flow of annuities both before and after the death of one of the spouses, a motive for bequeathing at the death of the surviving spouse, and the parameters of the utility functions of the couple and of each spouse if widowed. The analysis shows how consumption and the rate of change of bequeathable wealth react to variations in these determinants, and it compares the consumption level of a single person to a couple. Summaries of wealth change and consumption in panel data are given which offer general support for the life-cycle model.
Handle: RePEc:nbr:nberwo:7048
Template-Type: ReDIF-Paper 1.0
Title: Mutual Funds and Institutional Investments: What is the Most Efficient Way to Set Up Individual Accounts in a Social Security System?
Author-Name: Estelle James
Author-Name: Gary Ferrier
Author-Name: James Smalhout
Author-Name: Dimitri Vittas
Note: PE AG
Number: 7049
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7049
File-URL: http://www.nber.org/papers/w7049.pdf
File-Format: application/pdf
Publication-Status: published as Estelle James & Gary Ferrier & James H. Smalhout & Dimitri Vittas, 2000. "Mutual Funds and Institutional Investments -- What Is the Most Efficient Way to Set Up Individual Accounts in a Social Security System?," NBER Chapters, in: Administrative Aspects of Investment-Based Social Security Reform, pages 77-136 National Bureau of Economic Research, Inc.
Abstract: One of the biggest criticisms leveled at defined contribution individual account (IA) components of social security systems is that they are too expensive. This paper investigates the cost-effectiveness of three options for constructing funded social security pillars: 1) IA's invested in the retail market with relatively open choice, 2) IA's invested in the institutional market with constrained choice among investment companies, and 3) a centralized fund without individual accounts or differentiated investments across individuals. Our questions: What is the most cost-effective way to organize a mandatory IA system, how does the cost of an efficient IA system compare with that of a single centralized fund, and are the cost differentials large enough to outweigh the other important considerations? Our answers, based on empirical evidence about mutual and institutional funds in the U.S.: The retail market (option 1) allows individual investors to benefit from scale economies in asset management, but at the cost of high marketing expenses that are needed to attract and aggregate small sums of money into large pools. In contrast, a centralized fund (option 3) can be much cheaper because it achieves scale economies without high marketing costs, but gives workers no choice and hence is subject to political manipulation and misallocation of capital. Mandatory IA systems can be structured to get the best of both worlds: to obtain scale economies in asset management without incurring high marketing costs or sacrificing worker choice. To accomplish this requires centralized collections, a modest level of investor service and constrained choice. The system of constrained choice described in this paper (option 2) is much cheaper than the retail market and only slightly more expensive than a single centralized fund. We estimate that it will cost only .14-.18% of assets annually. These large administrative cost savings imply a Pareto improvement so long as choice is not constrained too much.'
Handle: RePEc:nbr:nberwo:7049
Template-Type: ReDIF-Paper 1.0
Title: Administrative Costs and Equilibrium Charges with Individual Accounts
Author-Name: Peter Diamond
Author-Person: pdi24
Note: PE
Number: 7050
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7050
File-URL: http://www.nber.org/papers/w7050.pdf
File-Format: application/pdf
Publication-Status: published as Administrative Costs and Equilibrium Charges with Individual Accounts, Peter A. Diamond. in Administrative Aspects of Investment-Based Social Security Reform, Shoven. 2000
Abstract: There are many individual account proposals. For government-organized accounts, the government arranges for both record-keeping and investment management. For privately-organized accounts, individuals directly select private firms to do these tasks. The government spreads the costs of government-organized accounts among accounts, outside sources of revenue, employers and workers. With privately-organized accounts, equilibrium prices reflect selling costs as well as administrative costs. Thus, government-organized accounts are organized on a group basis while privately-organized accounts are organized on an individual basis. In financial and insurance markets generally, the group and individual markets function very differently and yield different pricing structures. The paper describes a low cost/low services government-organized plan and estimates that it might cost $40-50 per worker per year. The nature of equilibrium with privately-organized accounts is discussed, with the conclusion that the costs would be very high compared to the cost of government organization.
Handle: RePEc:nbr:nberwo:7050
Template-Type: ReDIF-Paper 1.0
Title: Any Non-Individualistic Social Welfare Function Violates the Pareto Principle
Classification-JEL: D63; H43
Author-Name: Louis Kaplow
Author-Person: pka44
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE PE
Number: 7051
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7051
File-URL: http://www.nber.org/papers/w7051.pdf
File-Format: application/pdf
Publication-Status: published as Kaplow, Louis and Steven Shavell. "Any Non-Welfarist Method Of Policy Assessment Violates The Pareto Principle," Journal of Political Economy, 2001, v109(2,Apr), 281-286.
Abstract: The public at large, many policymakers, and some economists hold views of social welfare that attach some importance to factors other than individuals' utilities. This note shows that any such non-individualistic notion of social welfare conflicts with the Pareto principle.
Handle: RePEc:nbr:nberwo:7051
Template-Type: ReDIF-Paper 1.0
Title: Economics and Mental Health
Classification-JEL: I10
Author-Name: Richard G. Frank
Author-Name: Thomas G. McGuire
Note: EH
Number: 7052
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7052
File-URL: http://www.nber.org/papers/w7052.pdf
File-Format: application/pdf
Publication-Status: published as Frank, Richard G. & McGuire, Thomas G., 2000. "Economics and mental health," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 16, pages 893-954 Elsevier.
Publication-Status: published as Richard G. Frank, 1990. "Mental health economics," Administration and Policy in Mental Health, vol 17(3), pages 189-191.
Abstract: This paper is concerned with the economics of mental health. We argue that mental health economics is like health economics only more so: uncertainty and variation in treatments are greater; the assumption of patient self-interested behavior is more dubious; response to financial incentives such as insurance is exacerbated; the social consequences and external costs of illness are formidable. We elaborate on these statements and consider their implications throughout the chapter. Special characteristics' of mental illness and persons with mental illness are identified and related to observations on institutions paying for and providing mental health services. We show that adverse selection and moral hazard appear to hit mental health markets with special force. We discuss the emergence of new institutions within managed care that address long-standing problems in the sector. Finally, we trace the shifting role of government in this sector of the health economy.
Handle: RePEc:nbr:nberwo:7052
Template-Type: ReDIF-Paper 1.0
Title: Starting Small in an Unfamiliar Environment
Classification-JEL: D20; F10
Author-Name: James E. Rauch
Author-Person: pra166
Author-Name: Joel Watson
Author-Person: pwa36
Note: ITI
Number: 7053
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7053
File-URL: http://www.nber.org/papers/w7053.pdf
File-Format: application/pdf
Publication-Status: published as Rauch, James E. & Watson, Joel, 2003. "Starting small in an unfamiliar environment," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 1021-1042, September.
Abstract: Motivated by a characteristic way in which firms in developed countries make their decisions regarding cooperation with potential partners from less developed countries, we design a simple model of a DC firm's search for an LDC partner/supplier and the subsequent relationship between the two parties. Matched firms can start small' with a trial order or pilot project of variable size in order to gain information about the ability of the LDC firm to successfully carry out a large project. We derive results relating whether and how the parties start small to the characteristics of the large project and to the matching environment. Among other results, we show how risk and search cost are associated with the propensity to start small and we establish a connection between starting small and the expected longevity of successful partnerships. We also address methods of contract enforcement and demonstrate the relationship between starting small and monitoring.
Handle: RePEc:nbr:nberwo:7053
Template-Type: ReDIF-Paper 1.0
Title: Does Border Enforcement Protect U.S. Workers from Illegal Immigration?
Classification-JEL: D20; F10
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Raymond Robertson
Author-Person: pro310
Author-Name: Antonio Spilimbergo
Author-Person: psp16
Note: ITI LS
Number: 7054
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7054
File-URL: http://www.nber.org/papers/w7054.pdf
File-Format: application/pdf
Publication-Status: published as Hanson, Gordon H., Raymond Robertson and Antnio Spilimbergo. "Does Border Enforcement Protect U.S. Workers From Illegal Immigrations?," Review of Economics and Statistics, 2002, v84(1,Feb), 73-92.
Abstract: In this paper, we examine the impact of government enforcement of the U.S.-Mexican border on wages in the border regions of the United States and Mexico. The U.S. Border Patrol polices U.S. boundaries, seeking to apprehend any individual attempting to enter the United States illegally. These efforts are concentrated on the Mexican border, as most illegal immigrants embark from a Mexican border city and choose a U.S. border state as their final destination. We examine labor markets in southern California, southwestern Texas, and Mexican cities on the U.S.-Mexico border. For each region, we have high-frequency time-series data on wages and on the number of person hours that the U.S. Border Patrol spends policing border areas. For a range of empirical specifications and definitions of regional labor markets, we find little impact of border enforcement on wages in U.S. border cities and a moderate negative impact of border enforcement on wages in Mexican border cities. These findings are consistent with two hypothesis: (1) border enforcement has a minimal impact on illegal immigration, or (2) immigration from Mexico has a minimal impact on wages in U.S. border cities.
Handle: RePEc:nbr:nberwo:7054
Template-Type: ReDIF-Paper 1.0
Title: Economic Tracking Portfolios
Classification-JEL: E17; E44
Author-Name: Owen Lamont
Note: AP ME
Number: 7055
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7055
File-URL: http://www.nber.org/papers/w7055.pdf
File-Format: application/pdf
Publication-Status: published as Lamont, Owen A. "Economic Tracking Portfolios," Journal of Econometrics, 2001, v105(1,Nov), 161-184.
Abstract: An economic tracking portfolio is a portfolio of assets with returns that track an economic variable. Monthly returns on stocks and bonds are useful in forecasting post-war US output, consumption, labor income, inflation, stock returns, bond returns, and Treasury bill returns. These forecasting relationships define portfolios that track market expectations about future economic variables. Using tracking portfolio returns as instruments for future economic variables substantially raises the estimated sensitivity of asset prices to news about future economic variables. Out-of-sample results show that tracking portfolios are useful in forecasting macroeconomic variables and hedging economic risk.
Handle: RePEc:nbr:nberwo:7055
Template-Type: ReDIF-Paper 1.0
Title: International Asset Allocation with Time-Varying Correlations
Classification-JEL: C12; C13
Author-Name: Andrew Ang
Author-Person: pan374
Author-Name: Geert Bekaert
Author-Person: pbe52
Note: IFM
Number: 7056
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7056
File-URL: http://www.nber.org/papers/w7056.pdf
File-Format: application/pdf
Publication-Status: published as Ang, A. and G. Bekaert. "International Asset Allocation With Regime Shifts," Review of Financial Studies, 2002, v15(4), 1137-1187.
Abstract: It is widely believed that correlations between international equity markets tend to increase in highly volatile bear markets. This has led some to doubt the benefits of international diversification. This article solves the dynamic portfolio choice problem of a US investor faced with a time-varying investment opportunity set which may be characterized by correlations and volatilities that increase in bad times. We model the state dependance of US, UK, and German equity returns using a regime-switching model and find evidence for the existence of a high volatility regime, in which returns are more highly correlated and have lower means. Solving the dynamic asset allocation problem for a CCRA investor, we show international diversification is still valuable with regime changes. Currency hedging imparts further benefit. The costs of ignoring the regimes are small for moderate levels of risk aversion, and the intertemporal hedging demands induced by time-varying correlations are negligible.
Handle: RePEc:nbr:nberwo:7056
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Flows and Fragility of Business Enterprises
Classification-JEL: E32; E44
Author-Name: Wouter den Haan
Author-Person: pde12
Author-Name: Garey Ramey
Author-Person: pra338
Author-Name: Joel Watson
Author-Person: pwa36
Note: EFG
Number: 7057
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7057
File-URL: http://www.nber.org/papers/w7057.pdf
File-Format: application/pdf
Publication-Status: published as Den Haan, Wouter J., Garey Ramey and Joel Watson. "Liquidity Flows And Fragility Of Business Enterprises," Journal of Monetary Economics, 2003, v50(6,Sep), 1215-1241.
Abstract: This paper considers the efficiency of financial intermediation and the propagation of business cycle shocks in a model of long-term relationships between entrepreneurs and lenders lenders may be constrained in their short-run access to liquidity. When liquidity is low, relationships are subject to breakups that lead to loss of joint surplus. Liquidity outflows cause damage to financial structure by breaking up relationships, and damage persists due to frictions in the formation of new relationships. Feedbacks between aggregate investment and the structure of intermediation greatly magnify the effects of shocks. For large shocks, financial collapse may become inescapable in the absence of external intervention.
Handle: RePEc:nbr:nberwo:7057
Template-Type: ReDIF-Paper 1.0
Title: Child Care and Mothers' Employment Decisions
Classification-JEL: J13
Author-Name: Patricia M. Anderson
Author-Name: Philip B. Levine
Author-Person: ple553
Note: CH LS
Number: 7058
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7058
File-URL: http://www.nber.org/papers/w7058.pdf
File-Format: application/pdf
Publication-Status: published as Finding Jobs: Work and Welfare Reform, Card, David and Rebecca Blank,eds., New York: Russell Sage, 2000.
Abstract: Rising female labor force participation and recent changes to the welfare system have increased the importance of child care for all women and, particularly, the less-skilled. This paper focuses on the child care decisions of women who differ by their skill level and the role that costs play in their work decision. After reviewing government child-care programs targeted at less-skilled women, we present a descriptive analysis of current utilization and child care costs. We emphasize differences across skill groups, showing that the least-skilled women both use less costly paid care and are more likely to use unpaid care. We then survey the existing evidence regarding the responsiveness of female labor supply to child care costs, reviewing both econometric studies and demonstration projects that include child care components. To investigate variation in the response to child care cost across skill levels, we implement models similar to this past literature. We conclude that while the overall elasticity of labor force participation with respect to the market price of child care is between -0.05 and -0.35, this elasticity is larger for the least skilled women and declines with skill. Throughout the paper, we reflect upon the implications of our analysis for welfare reform.
Handle: RePEc:nbr:nberwo:7058
Template-Type: ReDIF-Paper 1.0
Title: Can Taxes on Cars and on Gasoline Mimic an Unavailable Tax on Emissions?
Classification-JEL: D62; H23
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Sarah West
Author-Person: pwe92
Note: PE EEE
Number: 7059
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7059
File-URL: http://www.nber.org/papers/w7059.pdf
File-Format: application/pdf
Publication-Status: published as Fullerton, Don and Sarah E. West. "Can Taxes On Cars And On Gasoline Mimic An Unavailable Tax On Emissions?," Journal of Environmental Economics and Management, 2002, v43(1,Jan), 135-157.
Abstract: A tax on vehicle emissions can efficiently induce all of the cheapest forms of abatement. Consumers could drive less, buy a smaller car with better gas mileage, use cleaner gasoline, and repair pollution control equipment (PCE). However, the technology is not yet available to measure and tax each car's total emissions. We thus investigate alternative instruments. In a simple model with identical consumers, we show conditions under which the same efficiency can be attained by the combination of a tax on gas, a tax on engine size , and a subsidy to PCE. In a model with heterogeneous consumers, the same efficiency can again be obtained, but only if each person's gasoline tax rate can be made to depend on the characteristics of the car. We solve for these first-best tax rates. Assuming that tax rates must be uniform across consumers, we then characterize second-best tax rates on gasoline and on characteristics.
Handle: RePEc:nbr:nberwo:7059
Template-Type: ReDIF-Paper 1.0
Title: Money and Interest Rates with Endogeneously Segmented Markets
Classification-JEL: E43; E52
Author-Name: Fernando Alvarez
Author-Name: Andrew Atkeson
Author-Person: pat52
Author-Name: Patrick J. Kehoe
Author-Person: pke4
Note: EFG
Number: 7060
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7060
File-URL: http://www.nber.org/papers/w7060.pdf
File-Format: application/pdf
Publication-Status: published as Alvarez, Fernanco, Andre Atkeson and Patrick J. Kehoe. "Money, Interest Rates, And Exchange Rates With Endogenously Segmented Markets," Journal of Political Economy, 2002, v110(1,Mar), 73-112.
Abstract: This paper analyses the effects of open market operations on interest rates in a model in which agents must pay a fixed cost to exchange assets and cash. Asset markets are endogenously segmented in that some agents choose to pay the fixed cost and some do not. When the fixed cost is zero, the model reduces to the standard one in which persistent money injections increase interest rates, flatten the yield curve, and lead to a downward-sloping yield curve on average. In contrast sufficiently segmented, then persistent money injections decrease nominal interest rates, steepen or even twist the yield curve, and lead to an upward-sloping yield curve on average.
Handle: RePEc:nbr:nberwo:7060
Template-Type: ReDIF-Paper 1.0
Title: Taxation and Saving
Classification-JEL: H20
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Note: PE
Number: 7061
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7061
File-URL: http://www.nber.org/papers/w7061.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas, 2002. "Taxation and saving," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 18, pages 1173-1249 Elsevier.
Abstract: In this survey, I summarize and evaluate the extant literature concerning taxation and personal saving. I describe the theoretical models that economists have used to depict saving decisions, and I explore the positive and normative implications of these models. The central positive question is whether and to what extent specific public policies raise or lower the rate of saving. The central normative question is whether and to what extent it is desirable to tax the economic returns to saving. I also examine empirical evidence on the saving effects of various tax policies. This evidence includes econometric studies of the generic relation between saving and the after-tax rate of return, as well as analyses of responses to the economic incentives that are imbedded in tax-deferred retirement accounts. Finally, I also discuss several indirect channels through which tax policy may affect household saving by altering the behavior of third parties, such as employers.
Handle: RePEc:nbr:nberwo:7061
Template-Type: ReDIF-Paper 1.0
Title: The Patent Paradox Revisited: Determinants of Patenting in the US Semiconductor Industry, 1980-94
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Rose Marie Ham
Note: PR IO
Number: 7062
Creation-Date: 1999-03
Order-URL: http://www.nber.org/papers/w7062
File-URL: http://www.nber.org/papers/w7062.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Bronwyn H & Ziedonis, Rosemarie Ham, 2001. "The Patent Paradox Revisited: An Empirical Study of Patenting in the U.S. Semiconductor Industry, 1979-1995," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 101-28, Spring.
Abstract: This paper examines the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation. Recent evidence suggests that semiconductor firms do not rely heavily on patents, despite the strengthening of US patent rights in the early 1980s. Yet the propensity of semiconductor firms to patent has risen dramatically over the past decade. This paper explores this apparent paradox by analyzing the patenting activities of almost 100 US semiconductor firms during 1980-94. The results suggest that stronger patents may have facilitated entry by firms in niche product markets, while spawning patent portfolio races' among capital-intensive firms.
Handle: RePEc:nbr:nberwo:7062
Template-Type: ReDIF-Paper 1.0
Title: Technology (and Policy) Shocks in Models of Endogenous Growth
Author-Name: Larry E. Jones
Author-Person: pjo88
Author-Name: Rodolfo E. Manuelli
Author-Name: Ennio Stacchetti
Note: EFG
Number: 7063
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7063
File-URL: http://www.nber.org/papers/w7063.pdf
File-Format: application/pdf
Publication-Status: published as With Peter E. Rossi, published as "Optimal Taxation in Models of Endogenous Growth", Journal of Political Economy, Vol. 101, no. 3 (1993): 485-517.
Abstract: Is there a trade-off between fluctuations and growth? The empirical evidence is mixed, with some studies (Kormendi and Meguire (1985)) finding a positive relationship, while others (Ramey and Ramey (1995)) finding the a negative one. Our objective in this paper is to understand how fundamental uncertainty can affect the long run growth rate, and what are the factors that determine the nature (positive or negative) of the relationship. Qualitatively, we show that the relationship between volatility in fundamentals and policies and mean growth can be either positive or negative. We identify the curvature of the utility function as a key parameter that determines the sign of the relationship. Quantitatively, we find that when we move from a world of perfect certainty to one with uncertainty that resembles the average uncertainty in a large sample of countries, growth rates increase somewhere between 0.17% and 0.80%, with 0.20% being a reasonable' estimate. Even though these are nontrivial changes, they are not large enough be themselves to account for the large differences in mean growth rates observed in the data. However, we find that differences in the curvature of preferences have very substantial effects on the estimated variability of stationary objects like the consumption/output ratio and hours worked. For this reason, we expect that the models considered in this paper will provide the basis of sharp estimates of the curvature parameter.
Handle: RePEc:nbr:nberwo:7063
Template-Type: ReDIF-Paper 1.0
Title: Privatizing R&D: Patent Policy and the Commercialization of National Laboratory Technologies
Author-Name: Adam B. Jaffe
Author-Person: pja49
Author-Name: Josh Lerner
Author-Person: ple60
Note: PR
Number: 7064
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7064
File-URL: http://www.nber.org/papers/w7064.pdf
File-Format: application/pdf
Publication-Status: published as "Reinventing Public R&D: Patent Law and Technology Transfer from Federal Laboratories", Rand Journal of Economics, 32 (Spring 2001) 167-198.
Abstract: Despite their magnitude and potential economic impact, federal R&D expenditures outside of research universities have been little scrutinized by economists. This paper examines whether the series of initiatives since 1980 that have sought to encourage the patenting and technology transfer at the national laboratories have had a significant impact, and how the features of these facilities affected their success in commercialization. Employing both case studies of and databases about the U.S. Department of Energy's laboratories, we challenge much of the conventional wisdom. The policy changes of the 1980s had a substantial impact on the patenting activity by the national laboratories, which have gradually reached parity in patents per R&D dollar with research universities. Using citation data, we show that, unlike universities, the quality of the laboratory patents has remained constant or even increased as their numbers have grown. The cross-sectional patterns are generally consistent with theoretical suggestions regarding the impact and determinants of the decision to privatize government functions.
Handle: RePEc:nbr:nberwo:7064
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Bequests in Pensions and Social Security
Classification-JEL: H55
Author-Name: Martin Feldstein
Author-Person: pfe112
Author-Name: Elena Ranguelova
Note: AG PE
Number: 7065
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7065
File-URL: http://www.nber.org/papers/w7065.pdf
File-Format: application/pdf
Publication-Status: published as The Economics of Bequests in Pensions and Social Security, Martin S. Feldstein, Elena Ranguelova. in The Distributional Aspects of Social Security and Social Security Reform, Feldstein and Liebman. 2002
Abstract: Experience in private pension plans and recent policy discussions about investment-based reforms of Social Security suggest that some form of bequest is likely to be part of any such reform that is enacted. This paper provides a first examination of the potential magnitudes of such bequests and of their effect on retirement annuities and asset accumulation. The most likely form of bequest, the preretirement bequest' made when employees die before normal retirement age, reduces the funds available for post-retirement annuities by about 16 percent or, equivalently, requires a one-sixth increase in the Personal Retirement Account saving rate to maintain the same level of post-retirement annuities. We also analyze a variety of post-retirement bequest options. The least costly option that we consider is adding a ten-year-certain' feature to the life annuity, thereby providing a bequest whenever the retiree dies before age 77. This would reduce annuities, relative to providing only preretirement bequests, by about 6 percent. The most costly option that we consider would provide a bequest equal to the remaining actuarial value of the PRA annuity at the time of death and would require reducing all annuities by about 23 percent unless the PRA saving rate is raised. We analyze the size distribution of bequests that would result under different bequest rules and consider the implications for aggregate capital accumulation.
Handle: RePEc:nbr:nberwo:7065
Template-Type: ReDIF-Paper 1.0
Title: Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms
Author-Name: Mariko Sakakibara
Author-Name: Lee Branstetter
Author-Person: pbr854
Note: PR
Number: 7066
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7066
File-URL: http://www.nber.org/papers/w7066.pdf
File-Format: application/pdf
Publication-Status: published as Sakakibara, Mariko and Lee Branstetter. "Do Stronger Patents Reduce More Innovation? Evidence From The 1998 Japanese Patent Law Reforms," Rand Journal of Economics, 2001, v32(1,Spring), 77-100.
Abstract: Does an expansion of patent scope induce more innovative effort by firms? This article provides evidence on this question by examining firm responses to the Japanese patent reforms of 1988. Interviews with practitioners suggest the reforms significantly expanded the scope of patent rights in Japan, but that the average response in terms of additional R&D effort and innovative output was quite modest. Interviews also suggest that firm organizational structure is an important determinant of the level of response. Econometric analysis using Japanese and U.S. patent data on 307 Japanese firms confirms that the magnitude of the response is quite small.
Handle: RePEc:nbr:nberwo:7066
Template-Type: ReDIF-Paper 1.0
Title: On the Foreign-Exchange Risk Premium in Sticky-Price General Equilibrium Models
Classification-JEL: F3; F4
Author-Name: Charles Engel
Author-Person: pen14
Note: AP IFM
Number: 7067
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7067
File-URL: http://www.nber.org/papers/w7067.pdf
File-Format: application/pdf
Publication-Status: published as Isard, Peter, Assaf Razin and Andrew Rose (eds.) International Finance and Financial Crises: Essays in Honor of Robert P. Flood, Jr. Kluwer Academic Publishers, 1999.
Publication-Status: published as International Tax and Public Finance, Vol. 6 (1999): 491-505.
Abstract: This paper investigates the behavior of the foreign exchange risk premium in two recent two-country intertemporal-optimizing general equilibrium models with sticky nominal prices: Obstfeld-Rogoff (1998) and Devereux-Engel (1998). The foreign exchange risk premium in any general equilibrium model arises from the correlation of the exchange rate with consumption. In flexible price models, that requires correlation of monetary and output supply shocks. In sticky-price models, the correlation arises endogenously because monetary shocks cause output and consumption to change. The size of the risk premium depends on how prices are set (in producers' currencies versus consumers' currencies), and on the form of the money demand function. In some cases, the risk premium generated by the model is quite large.
Handle: RePEc:nbr:nberwo:7067
Template-Type: ReDIF-Paper 1.0
Title: Legal Monopoly: Patents and Antitrust Litigation in U.S. Manufacturing, 1970-1998
Author-Name: B. Zorina Khan
Note: PR IO
Number: 7068
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7068
File-URL: http://www.nber.org/papers/w7068.pdf
File-Format: application/pdf
Abstract: This paper presents an empirical analysis of the relationship between patenting, innovation, and federal antitrust enforcement towards firms in the manufacturing sector. I examine whether the likelihood of antitrust litigation is influenced by patent histories and R&D expenditures, after controlling for other firm-specific variables including size and likelihood of antitrust charges for medium and large firms. Smaller firms with faster sales growth are also more likely to be charged with antitrust violations.
Handle: RePEc:nbr:nberwo:7068
Template-Type: ReDIF-Paper 1.0
Title: Bayesian Performance Evaluation
Classification-JEL: G11; G14
Author-Name: Klaas Baks
Author-Name: Andrew Metrick
Author-Person: pme99
Author-Name: Jessica Wachter
Author-Person: pwa346
Note: AP
Number: 7069
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7069
File-URL: http://www.nber.org/papers/w7069.pdf
File-Format: application/pdf
Publication-Status: published as Newly titled "Should Investors Avoid All Actively Managed Mutual Funds? A Study in Bayesian Performance Evaluation", Journal of Finance (February 2001).
Abstract: This paper proposes a Bayesian method of performance evaluation for investment managers. We begin with a flexible set of prior beliefs that can be elicited without any reference to probability distributions or their parameters. We then combine these prior beliefs with a general multi-factor model and derive an analytical solution for the posterior expectation of alpha', the intercept term from the model. This solution can be computed using only a few extra steps beyond maximum likelihood estimation and does not require a comprehensive or bias-free database. We then apply our methodology to a sample of domestic diversified equity mutual funds and ask what prior beliefs would imply zero investment in active managers?' To justify such a zero-investment strategy, we find that a mean-variance investor would need to believe that less than 1 out of every 100,000 managers has an expected alpha greater than 25 basis points per month. Overall, our analysis suggests that even when the average manager is expected to underperform passive benchmarks, it requires very strong prior beliefs to imply zero investment in managers with the best past performance.
Handle: RePEc:nbr:nberwo:7069
Template-Type: ReDIF-Paper 1.0
Title: Innovation Fertility and Patent Design
Author-Name: Hugo A. Hopenhayn
Author-Person: pho217
Author-Name: Matthew F. Mitchell
Author-Person: pmi30
Note: PR
Number: 7070
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7070
File-URL: http://www.nber.org/papers/w7070.pdf
File-Format: application/pdf
Abstract: It may be advantageous to provide a variety of kinds of patent protection to heterogenous innovations. Innovations which benefit society largely through their use as building blocks to future inventions may require a different scope of protection in order to be encouraged. We model the problem of designing an optimal patent menu (scope and length) when the fertility of an innovation in generating more innovations cannot be observed. The menu of patent scope can be implemented with mandated buyout fees. Evidence of heterogeneous fertility and patent obsolescence, keys to the model, are presented using patent data from the US.
Handle: RePEc:nbr:nberwo:7070
Template-Type: ReDIF-Paper 1.0
Title: Multilateral Trade Negotiations, Bilateral Opportunism and the Rules of GATT
Classification-JEL: F02; F13
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 7071
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7071
File-URL: http://www.nber.org/papers/w7071.pdf
File-Format: application/pdf
Publication-Status: published as Bagwell, Kyle & Staiger, Robert W., 2004. "Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO," Journal of International Economics, Elsevier, vol. 63(1), pages 1-29, May.
Abstract: Trade negotiations occur through time and between the governments of many countries. An important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party. In the absence of rules that govern the bilateral negotiation, we first show that the potential for opportunistic bilateral agreements is indeed severe. We next identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation. The reciprocal market access' rule ensures that the market access of a non-participating country is unaltered, and we show that this rule eliminates the potential for opportunistic bilateral negotiations. This rule, however, has practical limitations, and so we next consider the negotiation rules that are prominent in GATT practice and discussion. Our main finding is that the two central rules of GATT -- non-discrimination (MFN) and reciprocity -- effectively mimic the reciprocal market access rule, and therefore offer a practical means through which to protect non-participant welfare and thereby eliminate the potential for opportunistic bilateral negotiations.
Handle: RePEc:nbr:nberwo:7071
Template-Type: ReDIF-Paper 1.0
Title: Volatile Policy and Private Information: The Case of Monetary Policy
Author-Name: Larry E. Jones
Author-Person: pjo88
Author-Name: Rodolfo E. Manuelli
Note: EFG
Number: 7072
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7072
File-URL: http://www.nber.org/papers/w7072.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Larry E. and Rodolfo E. Manuelli. "Volatile Policy And Private Information: The Case Of Monetary Shocks," Journal of Economic Theory, 2001, v99(1/2,Jul/Aug), 265-326.
Abstract: In this paper we study how volatility in monetary policy affects economic performance in the presence of endogenously chosen information structures. To isolate the effects produced by the interaction of uncertainty in monetary policy and (possibly) asymmetric information, we consider a model in which in the absence of either one of these features the equilibrium would be efficient. The equilibria that we find, with volatility and asymmetry of information, are inefficient for two reasons: first, in some cases, economic agents fail to trade, even though it is always efficient to do so; second, to capture the rents associated with being informed, agents spend resources acquiring socially useless information. Thus, in addition to the more standard effects of volatile inflation, our model calls attention to two types of costs associated with monetary uncertainty: the cost of not trading, and the cost of allocating resources to wasteful activities. The model implies that if monetary policy is not volatile all agents are symmetrically informed and hence, the outcome is efficient. Alternatively, making policy transparent,' i.e guaranteeing that all agents share the same information, serves the same purpose.
Handle: RePEc:nbr:nberwo:7072
Template-Type: ReDIF-Paper 1.0
Title: Area Economic Conditions and the Labor Market Outcomes of Young Men in the 1990s Expansion
Classification-JEL: J31; J15
Author-Name: Richard B. Freeman
Author-Person: pfr23
Author-Name: William M. Rodgers III
Note: LS
Number: 7073
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7073
File-URL: http://www.nber.org/papers/w7073.pdf
File-Format: application/pdf
Publication-Status: published as Cherry, Robert and William M. Rodgers III (eds.) Prosperity for All? The Economic Boom and African Americans. NY: Russell Sage Foundation, 2000.
Abstract: The current expansion has shattered the length of the previous longest peace-time boom and brought unemployment rates below four percent in 44 percent of metropolitan areas. We estimate the expansion's impact on the labor market outcomes of less-educated men. We find that young men, especially young African American men in tight labor markets experienced a boost in employment and earnings. Adult men had no gains, and their earnings barely changed even in areas with unemployment rates below 4 percent. Youths have higher earnings and employment in low crime states and poorer labor market outcomes in states where incarcerations are high.
Handle: RePEc:nbr:nberwo:7073
Template-Type: ReDIF-Paper 1.0
Title: The Rybczynski Theorem, Factor-Price Equalization, and Immigration: Evidence from U.S. States
Classification-JEL: F16; F22
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Matthew J. Slaughter
Note: ITI LS
Number: 7074
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7074
File-URL: http://www.nber.org/papers/w7074.pdf
File-Format: application/pdf
Abstract: Recent literature on the labor-market effects of U.S. immigration tends to find little correlation between regional immigrant inflows and changes in relative regional wages. In this paper we examine whether immigration, or endowment shocks more generally, altered U.S. regional output mixes as predicted by the Rybczynski Theorem of Heckscher-Ohlin (HO) trade theory. This theorem describes how regions can absorb endowment shocks via changes in output mix without any changes in relative regional factor prices. Treating U.S. states as HO regions, we search for evidence of regional output-mix effects using a new data set that combines state endowments, outputs, and employment in 1980 and 1990. We have two main findings. First, state output-mix changes broadly match state endowment changes. Second, variation in state unit factor requirements is consistent with relative factor-price equalization (FPE) across states, which is a sufficient condition for our output-mix hypothesis to hold. Overall, these findings suggest that states absorb regional endowment shocks through mechanisms other than changes in relative regional factor prices.
Handle: RePEc:nbr:nberwo:7074
Template-Type: ReDIF-Paper 1.0
Title: Do Investors Forecast Fat Firms? Evidence from the Gold Mining Industry
Author-Name: Severin Borenstein
Author-Person: pbo78
Author-Name: Joseph Farrell
Author-Person: pfa35
Note: AP IO
Number: 7075
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7075
File-URL: http://www.nber.org/papers/w7075.pdf
File-Format: application/pdf
Publication-Status: published as Borenstein, Severin and Joe Farrell. "Do Investors Forecast Fat Firms? Evidence from the Gold Mining Industry." Rand Journal of Economics 38 (Autumn 2007).
Abstract: Conventional economic theory assumes that firms always minimize costs given the output they produce. News articles and interviews with executives, however, indicate that firms from time to time engage in cost-cutting exercises. One popular belief is that firms cut costs when they are in economic distress, and grow fat when they are relatively wealthy. We explore this hypothesis by studying the response of the stock market values of gold mining companies to changes in gold prices. The value of a cost-minimizing, profit-maximizing firm is convex in the price of a competitively supplied input or output, but we find that the stock values of many gold mining companies are concave in the price of gold. We show that this is consistent with fat accumulation when a firm grows wealthy. We then address a number of potential alternative explanations and discuss where fat in these companies might reside.
Handle: RePEc:nbr:nberwo:7075
Template-Type: ReDIF-Paper 1.0
Title: The Adoption of Offset Presses in the Daily Newspaper Industry in the United States
Author-Name: David Genesove
Author-Person: pge30
Note: IO PR
Number: 7076
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7076
File-URL: http://www.nber.org/papers/w7076.pdf
File-Format: application/pdf
Abstract: This paper shows that the move to offset printing from letterpress in the U.S. daily newspaper publishing industry was determined, in part, by the structure of the local market. Although in monopoly markets, low circulation papers were quicker to adopt than high circulation papers, the ranking was reversed within duopoly markets. In such markets, the smaller firms adopted four years later than the larger one did. This result is partially consistent with preemption models of adoption. Hazard analysis further shows that in markets in which one firm has exited, the remaining duopolist is less likely to adopt than otherwise, consistent with preemption, and at odds with a declining industry explanation. Further analysis shows that the adoption was determined, at least in part, at the firm rather than the newspaper level, although, on the whole, newspaper chains adopted neither earlier nor later than non-chain newspapers. Ceteris paribus, adoption occurred more quickly in non-industrial states.
Handle: RePEc:nbr:nberwo:7076
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Stance and the Real Exchange: Some Empirical Estimates
Author-Name: Richard Clarida
Author-Person: pcl69
Author-Name: Joe Prendergast
Note: IFM
Number: 7077
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7077
File-URL: http://www.nber.org/papers/w7077.pdf
File-Format: application/pdf
Abstract: This paper presents some empirical results on the dynamic relationship between fiscal policy and the real exchange rate in the G3 countries since advent of floating exchange rates. This subject is of some interest given the recent shift to fiscal surpluses in the US, the annual announcement of yet another fiscal stimulus package in Japan, and Maastricht limits on fiscal deficits in Germany and the rest of Euroland. To the extent that the foreign exchange market anticipates that fiscal contractions will follow expansions,' as would be required by the government's intertemporal budget constraint when holding constant the present value of tax collections, it is possible that the exchange rate response to any contemporaneous index of fiscal stance will depend upon exactly what stage the government's fiscal cycle' is (thought to be) in. We find a similarity across the G3 countries in their estimated dynamic responses to a fiscal shock. At first, and for several years thereafter, the real exchange rate appreciates in response to an expansionary fiscal shock. However, eventually, the process is reversed; the real exchange rate overshoots and actually depreciates relative to its initial prevailing before the fiscal shock.
Handle: RePEc:nbr:nberwo:7077
Template-Type: ReDIF-Paper 1.0
Title: The Human Capital Model of the Demand for Health
Classification-JEL: I10
Author-Name: Michael Grossman
Author-Person: pgr107
Note: EH
Number: 7078
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7078
File-URL: http://www.nber.org/papers/w7078.pdf
File-Format: application/pdf
Publication-Status: published as Newhouse, Joseph P. and Anthony J. Culyer (eds.) Handbook of Health Economics. Amsterdam: North-Holland, 2000.
Abstract: This paper contains a detailed treatment of the human capital model of the demand for health. Theoretical predictions are discussed, and theoretical extensions are reviewed. Empirical research that tests the predictions of the model or studies causality between years of formal schooling completed and good health is surveyed. The model views health as a durable capital stock that yields an output of healthy time. Individuals inherit an initial amount of this stock that depreciates with age and can be increased by investment. The household production function model of consumer behavior is employed to account for the gap between health as an output and medical care as one of many inputs into its production. In this framework the shadow price' of health depends on many variables besides the price of medical care. It is shown that the shadow price rises with age if the rate of depreciation on the stock of health rises over the life cycle and falls with education if more educated people are more efficient producers of health. An important result is that, under certain conditions, an increase in the shadow price may simultaneously reduce the quantity of health demanded and increase the quantities of health inputs demanded.
Handle: RePEc:nbr:nberwo:7078
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Factor Demand Models and Productivity Analysis
Classification-JEL: C5; D2
Author-Name: M. Ishaq Nadiri
Author-Name: Ingmar R. Prucha
Author-Person: ppr355
Note: PR
Number: 7079
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7079
File-URL: http://www.nber.org/papers/w7079.pdf
File-Format: application/pdf
Publication-Status: published as Dynamic Factor Demand Models and Productivity Analysis, M. Ishaq Nadiri, Ingmar Prucha. in New Developments in Productivity Analysis, Hulten, Dean, and Harper. 2001
Abstract: In this paper we discuss recent advances in modeling and estimating dynamic factor demand models, and review the use of such models in analyzing the production structure, the determinants of variable and quasi-fixed factors, and productivity growth. The paper also discusses the traditional approach to productivity analysis based on the Divisia index number methodology. Both approaches may be seen as being complementary. The conventional index number approach will measure the rate of technical change correctly if certain assumptions about the underlying technology of the firm and output and input markets hold. The approach is appealing in that it can be easily implemented. However, if the underlying assumptions do not hold, then the conventional index number approach will, in general, yield biased estimates of technical change. The econometric approach based on general dynamic factor demand models allows for a careful testing of various features of a postulated model. Furthermore it not only provides a framework to estimate technical change, but can also yield a rich set of critical information on the structure of production, the dynamics of investment in physical and R&D capital, the effects of spillovers, the depreciation rate of capital, the impact of taxes, expectations, etc. The paper provides both a review of recent methodology developed for the specification and estimation of dynamic factor demand models, as well as a review of recent applications. The paper also explores in terms of a Monte Carlo study how estimates of important characteristics of the production process can be affected by model misspecification. The study suggests that characteristics of the production structure such as scale and technical change are sensitive to model misspecification, and that adopting a simple specification for reasons of convenience may result in serious biases.
Handle: RePEc:nbr:nberwo:7079
Template-Type: ReDIF-Paper 1.0
Title: Mergers, Station Entry, and Programming Variety in Radio Broadcasting
Classification-JEL: L1; L8
Author-Name: Steven T. Berry
Author-Person: pbe18
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: IO LE
Number: 7080
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7080
File-URL: http://www.nber.org/papers/w7080.pdf
File-Format: application/pdf
Publication-Status: Published as "Free Entry and Social Inefficiency in Radio Broadcasting", RAND Journal of Economics, Vol. 30, no. 3 (Autumn 1999): 397-420.
Abstract: Free entry into markets with decreasing average costs and differentiated products can result in an inefficient number of firms and suboptimal product variety. Because new firms and products draw their customers in part from existing products, concentration can affect incentives to enter as well as how to position products. This paper examines how product variety in the radio industry is affected by changes in ownership structure. While it is in general difficult to measure the effect of concentration on other factors such as the number of products and the extent of product variety, the 1996 Telecommunications Act substantially relaxed local radio ownership restrictions, giving rise to a major and exogenous consolidation wave. Between 1993 and 1997 the average Herfindahl index in major US media markets increased by almost 65 percent. Using a panel data set on 243 U.S. radio broadcast markets in 1993 and 1997, we find that concentration reduces entry and increases product variety. Our results are consistent with spatial preemption. Jointly owned stations broadcasting from the same market are more likely than unrelated stations - and more likely than jointly owned stations in different markets - to broadcast in similar formats.
Handle: RePEc:nbr:nberwo:7080
Template-Type: ReDIF-Paper 1.0
Title: Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence
Classification-JEL: O57; F13
Author-Name: Francisco Rodriguez
Author-Name: Dani Rodrik
Author-Person: pro60
Note: ITI
Number: 7081
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7081
File-URL: http://www.nber.org/papers/w7081.pdf
File-Format: application/pdf
Publication-Status: published as Bernanke, Ben and Kenneth S. Rogoff (eds.) NBER Macroeconomics Annual 2000, Volume 15. Cambrodge, MA: The MIT Press, 2001.
Publication-Status: published as Francisco Rodríguez & Dani Rodrik, 2000. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER/Macroeconomics Annual, vol 15(1), pages 261-325.
Abstract: Do countries with lower policy-induced barriers to international trade grow faster, once other relevant country characteristics are controlled for? There exists a large empirical literature providing an affirmative answer to this question. We argue that methodological problems with the empirical strategies employed in this literature leave the results open to diverse interpretations. In many cases, the indicators of openness' used by researchers are poor measures of trade barriers or are highly correlated with other sources of bad economic performance. In other cases, the methods used to ascertain the link between trade policy and growth have serious shortcomings. Papers that we review include Dollar (1992), Ben-David (1993), Sachs and Warner (1995), and Edwards (1998). We find little evidence that open trade policies--in the sense of lower tariff and non-tariff barriers to trade--are significantly associated with economic growth.
Handle: RePEc:nbr:nberwo:7081
Template-Type: ReDIF-Paper 1.0
Title: Do Higher Salaries Buy Better Teachers?
Classification-JEL: I2; J4
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: John F. Kain
Author-Name: Steven G. Rivkin
Author-Person: pri265
Note: CH
Number: 7082
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7082
File-URL: http://www.nber.org/papers/w7082.pdf
File-Format: application/pdf
Abstract: Important policy decisions rest on the relationship between teacher salaries and the quality of teachers, but the evidence about the strength of any such relationship is thin. This paper relies upon the matched panel data of the UTD Texas School Project to investigate how shifts in salary schedules affect the composition of teachers within a district. The panel data permit separation of shifts in salary schedules from movement along given schedules, and thus the analysis is much more closely related to existing policy proposals. In analyses both of teacher mobility and of student performance, teacher salaries are shown to have a modest impact. Teacher mobility is more affected by characteristics of the students (income, race, and achievement) than by salary schedules. Salaries are also weakly related to performance on teacher certification tests appearing to be relevant only in districts doing high levels of hiring, but preliminary examination shows that the certification tests are not significantly related to student achievement. The only significant relationship between salaries and student achievement holds (implausibly) for existing experienced teachers and not for new hires or for probationary teachers.
Handle: RePEc:nbr:nberwo:7082
Template-Type: ReDIF-Paper 1.0
Title: The Public Critique of Welfare Economics: An Exploration
Classification-JEL: H11; D60
Author-Name: Timothy Besley
Author-Person: pbe46
Author-Name: Stephen Coate
Author-Person: pco66
Note: PE
Number: 7083
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7083
File-URL: http://www.nber.org/papers/w7083.pdf
File-Format: application/pdf
Publication-Status: published as Besley, Timothy & Coate, Stephen, 2003. " On the Public Choice Critique of Welfare Economics," Public Choice, Springer, vol. 114(3-4), pages 253-73, March.
Abstract: The welfare economic method for analyzing the case for government intervention is often criticized for ignoring the political determination of policies. While many economists accept the thrust of this critique, exactly when and how political determination interferes with a welfare economic analysis is not well understood. This paper explores the logic of the critique in a specific context, demonstrating how political determination of policy affects the case for government intervention. We show that one form of intervention is likely to have an impact on others through the political process. These spillover effects may even provide a justification for interventions that the welfare economic approach would reject.
Handle: RePEc:nbr:nberwo:7083
Template-Type: ReDIF-Paper 1.0
Title: Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Analysis
Classification-JEL: H72; D60
Author-Name: Timothy Besley
Author-Person: pbe46
Author-Name: Stephen Coate
Author-Person: pco66
Note: PE
Number: 7084
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7084
File-URL: http://www.nber.org/papers/w7084.pdf
File-Format: application/pdf
Publication-Status: published as Besley, Timothy and Stephen Coate. "Centralized Versus Decentralized Provision Of Local Public Goods: A Political Economy Approach," Journal of Public Economics, 2003, v87(12,Dec), 2611-2637.
Abstract: This paper takes a fresh look at the trade-off between centralized and decentralized provision of local public goods. The point of departure is to model a centralized system as one in which public spending is financed by general taxation, but districts can receive different levels of local public goods. In a world of benevolent governments, the disadvantages of centralization stressed in the existing literature disappear, suggesting that the case for decentralization must be driven by political economy considerations. Our political economy analysis assumes that under decentralization public goods are selected by locally elected representatives, while under a centralized system policy choices are determined by a legislature consisting of elected representatives from each district. We then study the role of taste heterogeneity, spillovers and legislative behavior in determining the case for centralization.
Handle: RePEc:nbr:nberwo:7084
Template-Type: ReDIF-Paper 1.0
Title: Hostility in Takeovers: In the Eyes of the Beholder?
Classification-JEL: G34
Author-Name: G. William Schwert
Author-Person: psc116
Note: AP
Number: 7085
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7085
File-URL: http://www.nber.org/papers/w7085.pdf
File-Format: application/pdf
Publication-Status: published as Schwert, G. William. "Hostility In Takeovers: In The Eyes Of The Beholder?," Journal of Finance, 2000, v55(6,Dec), 2599-2640.
Abstract: This paper examines whether hostile takeovers can be distinguished from friendly takeovers, empirically, based on accounting and stock performance data. Much has been made of this distinction in both the popular and the academic literature, where gains from hostile takeovers are typically attributed to the value of replacing incumbent managers and the gains from friendly takeovers are typically attributed to strategic synergies. Alternatively, hostility could reflect just a perceptual distinction arising from different patterns of public disclosure, where negotiated outcomes are the rule and transactions tend to be characterized as friendly when bargaining remains undisclosed throughout, and hostile when the public becomes aware of the negotiation before its resolution. Empirical tests show that most deals described as hostile in the press are not distinguishable from friendly deals in economic terms, and that negotiations are publicized earlier in hostile transactions.
Handle: RePEc:nbr:nberwo:7085
Template-Type: ReDIF-Paper 1.0
Title: Damages and Injunctions in the Protection of Proprietary Research Tools
Classification-JEL: K0
Author-Name: Mark Schankerman
Author-Name: Suzanne Scotchmer
Author-Person: psc49
Note: PR LE
Number: 7086
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7086
File-URL: http://www.nber.org/papers/w7086.pdf
File-Format: application/pdf
Publication-Status: published as Schankerman, Mark & Scotchmer, Suzanne, 2001. "Damages and Injunctions in Protecting Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 199-220, Spring.
Abstract: Profit on proprietary research tools is determined partly by the remedies for infringement, such as damages and injunctions. We investigate how damages under a liability rule and the opportunity for injunctions under a property rule can affect the incentives to develop research tools. We show that the prevailing legal doctrine of damages under liability rule, called lost profit or reasonable royalty, suffers from a logical circularity which leads to an indeterminacy in permissible damages. This can create insufficient incentives to develop research tools. Incentives can be improved either by a property rule with injunctions or by a liability rule under the doctrine of unjust enrichment.
Handle: RePEc:nbr:nberwo:7086
Template-Type: ReDIF-Paper 1.0
Title: Recent Developments in Monetary Policy Analysis: The Roles of Theory and Evidence
Classification-JEL: E50; E60
Author-Name: Bennett T. McCallum
Note: ME EFG
Number: 7088
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7088
File-URL: http://www.nber.org/papers/w7088.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Methodology, Vol. 6, no. 2 (July 1999): 171-198
Publication-Status: published as Federal Reserve Bank of Richmond - Economic Quarterly, Vol. 88, no. 1 (Winter 2002): 67-96
Abstract: Both academic thinking about monetary economics and the practice of monetary policy have changed dramatically since 1971-1973, when the rational expectations revolution was beginning and the Bretton Woods system was crumbling. The present paper considers whether the various changes that have taken place were influenced primarily by economic theory or by empirical evidence-or by a combination of the two. Monetary economics, like macroeconomics more generally, passed through the rational expectations period into one dominated by real business cycle (RBC) analysis, which denies monetary policy any significant role in the generation or the dampening of cyclical fluctuations in crucial real variables. Recently, however, the analysis of monetary policy by both academic and central bank economists has been increasingly conducted in small quantitative structural models that combine the optimizing aspect of RBC analysis with various assumptions implying real effects of monetary policy actions due to slow adjustment of nominal prices. These models therefore attempt to combine rather strict theoretical discipline with features that permit an enhanced degree of empirical veracity. It is apparent, accordingly, that both theoretical and empirical analysis have been essential in bringing about alterations in monetary policy analysis between 1971-1973 and 1998.
Handle: RePEc:nbr:nberwo:7088
Template-Type: ReDIF-Paper 1.0
Title: Pricing Heart Attack Treatments
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Mark McClellan
Author-Name: Joseph P. Newhouse
Author-Name: Dahlia Remler
Note: AG EH PR
Number: 7089
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7089
File-URL: http://www.nber.org/papers/w7089.pdf
File-Format: application/pdf
Publication-Status: Published as "Are Medical Prices Declining? Evidence for Heart Attack Treatments", Quarterly Journal of Economics, Vol. 113, no. 4 (November 1998): 991-1024
Publication-Status: published as Pricing Heart Attack Treatments, David M. Cutler, Mark B. McClellan, Joseph P. Newhouse, Dahlia K. Remler. in Medical Care Output and Productivity, Cutler and Berndt. 2001
Abstract: In this paper, we estimate price indices for heart attack treatments, demonstrating the techniques that are currently used in official price indices and presenting some alternatives. We consider two types of price indices, a Service Price Index, which prices specific treatments provided, and a Cost of Living Index, which prices the health outcomes of patients. Both indices are complicated by price measurement issues: list prices and transactions prices are fundamentally different in the medical care field. The development of new or modified medical treatments further complicates the comparison of like' goods over time. And the Cost of Living Index is hampered by the need to determine how much of health improvement results from medical treatments in comparison to other factors. We describe methods to address each of these obstacles. We conclude that whereas traditional price indices when applied to heart attack treatments are rising at roughly 3 percent per year above general inflation, a corrected service price index is rising at perhaps 1 to 2 percent per year above general inflation, and the cost of living index is falling by 1 to 2 percent per year relative to general inflation. We discuss the implications of these results for official price index calculations.
Handle: RePEc:nbr:nberwo:7089
Template-Type: ReDIF-Paper 1.0
Title: Business Cycles in International Historical Perspective
Classification-JEL: E32; F41
Author-Name: Susanto Basu
Author-Person: pba274
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE EFG ME IFM
Number: 7090
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7090
File-URL: http://www.nber.org/papers/w7090.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, Vol. 13, no. 2 (Spring 1999): 45-68.
Abstract: This paper examines business cycles theoretically and empirically, with a quantitative study based on experience over the long run and in a cross section of countries. Several major questions in business cycle theory are explored. Theoretical concerns indicate that the properties of business cycle models depend not only on important structural aspects of the model such as money neutrality, labor market structure, and price adjustment, but also on the closure of the model in international markets. Econometric considerations suggest that more information about the country-specific versus universal features of cycles could be gleaned from the study of panel data. A review of business cycle properties in a sample of over a dozen countries is considered in light of these issues.
Handle: RePEc:nbr:nberwo:7090
Template-Type: ReDIF-Paper 1.0
Title: Latin America and East Asia in the Context of an Insurance Model of Currency Crises
Classification-JEL: F31; F34
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Michael P. Dooley
Author-Person: pdo13
Author-Name: Sona Shrestha
Note: IFM
Number: 7091
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7091
File-URL: http://www.nber.org/papers/w7091.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, Vol. 13 (Spring 1999): 45-68. Journal of International Money and Finance, Vol. 18, no. 4 (August 1999): 659-681.
Abstract: This paper focuses on the 1995 Latin American and 1997 East Asian crises using an insurance-based model of financial crises. First the model of Dooley (forthcoming) is described. Second, some empirical evidence for an insurance model is presented. The key variables in this approach include the ratio of foreign exchange reserves to bank loans (domestic credit) extended to the private sector, the ability of the private sector to appropriate government assets, and appropriation as measured by capital flight. We argue that the insurance model is consistent with the observed evolution of these variables in the recent crises in Latin America and Asia. Finally, we examine the statistical evidence in favor of the model using panel regressions. We find that the econometric results are consistent with the insurance model, and tend to support this approach over some competing explanations.
Handle: RePEc:nbr:nberwo:7091
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Vouchers
Classification-JEL: H00; H80
Author-Name: David F. Bradford
Author-Name: Daniel N. Shaviro
Note: PE
Number: 7092
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7092
File-URL: http://www.nber.org/papers/w7092.pdf
File-Format: application/pdf
Publication-Status: published as Steuerle, C. Eugene, et al. (eds.) Vouchers and the provision of public services. Washington, D.C.: Brookings Institution Press; Washington, D.C.: Committee for Economic Development, 2000.
Abstract: This paper aims to provide a swift tour of the economic issues presented by vouchers and thus to fill an apparent gap in the literature for a basic survey of the subject. Among the issues it considers are: factors determining a voucher's cash-equivalence; reasons (such as paternalism, externalities, and distribution) for giving beneficiaries non-cash-equivalent vouchers rather than cash; optimal tax issues involved in the design of vouchers and the choice between vouchers and other delivery mechanisms, including factors determining the optimal marginal reimbursement rate (MRR) in a voucher program, and the similarity between this question and that of determining optimal marginal tax rates (MTRs) under the income tax; the incentive effects of voucher eligibility criteria, such as income or asset tests; factors determining the allocative and price effects of vouchers, both in the short run when unexpectedly enacted and at equilibrium; and factors relevant to the choice between private and public supply that may often overlap with the decision whether to adopt a voucher program.
Handle: RePEc:nbr:nberwo:7092
Template-Type: ReDIF-Paper 1.0
Title: Does "Grease Money" Speed Up the Wheels of Commerce?
Classification-JEL: O12; F20
Author-Name: Daniel Kaufmann
Author-Person: pka480
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: ITI
Number: 7093
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7093
File-URL: http://www.nber.org/papers/w7093.pdf
File-Format: application/pdf
Publication-Status: published as Daniel Kaufmann & Shang-Jin Wei, 2000. "Does 'Grease Money' Speed Up the Wheels of Commerce?," IMF Working Papers, vol 00(64).
Abstract: In an environment in which bureaucratic burden and delay are exogenous, an individual firm may find bribes helpful to reduce the effective red tape it faces. The efficient grease' hypothesis asserts therefore that corruption can improve economic efficiency and that fighting bribery would be counter-productive. This need not be the case. In a general equilibrium in which regulatory burden and delay can be endogenously chosen by rent-seeking bureaucrats, the effective (not just nominal) red tape and bribery may be positively correlated across firms. Using data from three worldwide firm-level surveys, we examine the relationship between bribe payment, management time wasted with bureaucrats, and cost of capital. Contrary to the efficient grease' theory, we find that firms that pay more bribes are also likely to spend more, not less, management time with bureaucrats negotiating regulations, and face higher, not lower, cost of capital.
Handle: RePEc:nbr:nberwo:7093
Template-Type: ReDIF-Paper 1.0
Title: Sectoral Job Creation and Destruction Responses to Oil Price Changes
Author-Name: Steven J. Davis
Author-Person: pda15
Author-Name: John Haltiwanger
Author-Person: pha231
Note: EFG LS PR EEE
Number: 7095
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7095
File-URL: http://www.nber.org/papers/w7095.pdf
File-Format: application/pdf
Publication-Status: published as Davis, Steven J. and John Haltiwanger. "Sectoral Job Creation And Destruction Responses To Oil Prices Changes," Journal of Monetary Economics, 2001, v48(3,Dec), 465-512.
Abstract: We study the effects of oil price changes and other shocks on the creation and destruction of U.S. manufacturing jobs from 1972 to 1988. We find that oil shocks account for about 20-25 percent of the cyclical variability in employment growth under our identifying assumptions, twice as much as monetary shocks. Employment growth shows a sharply asymmetric response to oil price ups and downs, in contrast to the prediction of standard equilibrium business cycle models. The two-year employment response to an oil price increase rises (in magnitude) with capital intensity, energy intensity, and product durability. Job destruction shows much greater short-run sensitivity to oil and monetary shocks than job creation in every sector with the clear exception of young, small plants. Oil shocks also generate important reallocative effects. For example, we estimate that job reallocation rose by 11 percent of employment over 3-4 years in response to the 1973 oil shock. More than 80 percent of this response reflects greater job reallocation activity within manufacturing.
Handle: RePEc:nbr:nberwo:7095
Template-Type: ReDIF-Paper 1.0
Title: Incentives to Settle Under Joint and Several Liability
Classification-JEL: K41; Q28
Author-Name: Howard F. Chang
Author-Name: Hilary Sigman
Author-Person: psi55
Note: PE
Number: 7096
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7096
File-URL: http://www.nber.org/papers/w7096.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Legal Studies, Vol. 29, no. 1 (January 2000): 205-236.
Abstract: Congress may soon restrict joint and several liability for cleanup of contaminated sites under Superfund. We explore whether this change would discourage settlements and is therefore likely to increase the program's already high litigation costs. Recent theoretical research by Kornhauser and Revesz finds that joint and several liability may either encourage or discourage settlement, depending upon the correlation of outcomes at trial across defendants. We extend their two-defendant model to a richer framework with N defendants. This extension allows us to test the theoretical model empirically using data on Superfund litigation. We find that joint and several liability does not discourage settlements and may even encourage them. Our results support the model's predictions about the effects of several variables, such as the degree of correlation in trial outcomes.
Handle: RePEc:nbr:nberwo:7096
Template-Type: ReDIF-Paper 1.0
Title: Political Economics and Public Finance
Classification-JEL: D7; E6
Author-Name: Torsten Persson
Author-Person: ppe28
Author-Name: Guido Tabellini
Author-Person: pta37
Note: PE
Number: 7097
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7097
File-URL: http://www.nber.org/papers/w7097.pdf
File-Format: application/pdf
Publication-Status: published as Auerbach, A. and M. Feldstein (eds.) Handbook of Public Economics. Amsterdam, The Netherlands: Elsevier, 2002.
Abstract: Observed fiscal policy varies greatly across time and countries. How can we explain this variation across time and countries? This paper surveys the recent literature that has tried to answer this question. We adopt a unified approach in portraying public policy as the equilibrium outcome of an explicitly specified political process. We divide the material into three parts. In Part I, we focus on median-voter equilibria that apply to policy issues where disagreement between voters is likely to be one-dimensional. We thus study the general redistributive programs which are typical of the modern welfare state: redistribution between rich and poor, young and old, employed and unemployed, resident of different regions, and labor and capital. In Part II we study special interest politics. Here the policy problem is multi-dimensional and we focus on specific political mechanisms: we study legislative bargaining, lobbying, and electoral competition, as well as the possible interactions between these different forms of political activity. Finally, Part III deals with a set of questions that can be brought under the label of comparative politics. Here we deal with policy choice under alternative political constitutions; we model the rationale for separation of powers and contrast the stylized features of congressional and parliamentary political systems, focusing on their implications for rent extraction by politicians, redistribution and public goods provision.
Handle: RePEc:nbr:nberwo:7097
Template-Type: ReDIF-Paper 1.0
Title: How Effective are Fiscal Incentives for R&D? A New Review of the Evidence
Classification-JEL: H32; O31
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: John van Reenen
Author-Person: pva45
Note: PE PR
Number: 7098
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7098
File-URL: http://www.nber.org/papers/w7098.pdf
File-Format: application/pdf
Publication-Status: published as Research Policy, Vol. 29 (May 2000).
Abstract: This paper surveys the econometric evidence on the effectiveness of fiscal incentives for R&D. We describe the effects of tax systems in OECD countries on the user cost of R&D - the current position, changes over time and across different firms in different countries. We describe and criticize the methodologies used to evaluate the effect of the tax system on R&D behavior and the results from different studies. In the current (imperfect) state of knowledge we conclude that a dollar in tax credit for R&D stimulates a dollar of additional R&D.
Handle: RePEc:nbr:nberwo:7098
Template-Type: ReDIF-Paper 1.0
Title: When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services
Classification-JEL: H11; I00
Author-Name: Rebecca M. Blank
Author-Person: pbl56
Note: PE LS CH
Number: 7099
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7099
File-URL: http://www.nber.org/papers/w7099.pdf
File-Format: application/pdf
Publication-Status: published as Economic Journal, Vol. 110, no. 462 (March 2000): C34-C49.
Abstract: The privatization of social services is being increasingly discussed. The social services market is characterized by multiple market failures, including informational asymmetries, agency problems, externalities, and distributional concerns. Consumers may care as much or more about quality of services than about price. If quality is readily observable, the government can regulate private providers to assure standards are met. But when standards are difficult to observe or when the recipient is not the agent who makes the decisions, government ownership may be preferable. This paper categorizes the market situations in which the government provision of social services is likely to be most versus least attractive.
Handle: RePEc:nbr:nberwo:7099
Template-Type: ReDIF-Paper 1.0
Title: Trade and Foreign Direct Investment in China: A Political Economy Approach
Classification-JEL: F13; F21
Author-Name: Lee G. Branstetter
Author-Person: pbr854
Author-Name: Robert C. Feenstra
Author-Person: pfe116
Note: ITI
Number: 7100
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7100
File-URL: http://www.nber.org/papers/w7100.pdf
File-Format: application/pdf
Publication-Status: published as Branstetter, Lee G. & Feenstra, Robert C., 2002. "Trade and foreign direct investment in China: a political economy approach," Journal of International Economics, Elsevier, vol. 58(2), pages 335-358, December.
Abstract: We view the political process in China as trading off the social benefits of increased trade and foreign direct investment, against the losses incurred by state-owned enterprises due to such liberalization. A model drawing on Grossman and Helpman (1994, 1996) is used to derive an empirically estimable government objective function. The key structural parameters of this model are estimated using province-level data on foreign direct investment and trade flows in China, over the years 1984-1995. We find that the weight applied to consumer welfare is between one-fifth and one-twelfth of the weight applied to the output of state-owned enterprises. We find that governmental preferences have shifted over time, but even in recent periods the weight on consumer welfare is only one-half of the weight on state-owned enterprises. This suggests that China may find it politically difficult to follow through with liberalizing its trade and investment regimes, such as under its WTO accession proposal.
Handle: RePEc:nbr:nberwo:7100
Template-Type: ReDIF-Paper 1.0
Title: Do the Cognitive Skills of School Dropouts Matter in the Labor Market?
Author-Name: John H. Tyler
Author-Person: pty2
Author-Name: Richard J. Murnane
Author-Person: pmu87
Author-Name: John B. Willett
Note: LS
Number: 7101
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7101
File-URL: http://www.nber.org/papers/w7101.pdf
File-Format: application/pdf
Publication-Status: published as Tyler, John H., Richard J. Murnane and John B. Willett. "Do The Cognitive Skills Of School Dropouts Matter In The Labor Market?," Journal of Human Resources, 2000, v35(4,Fall), 7480754.
Abstract: Does the U.S. labor market reward cognitive skill differences among high school dropouts, the members of the labor force with the least educational attainments? This paper reports the results of an exploration of this question, using a new data set that provides information on the universe of dropouts who last attempted the GED exams in Florida and New York between 1984 and 1990. The design of the sample reduces variation in unmeasured variables such as motivation that are correlated with cognitive skills. We examine the labor market returns to basic cognitive skills as measured by GED test scores. We explore whether the returns differ by gender and race. The results indicate quite large earnings returns to cognitive skills for both male and female dropouts, and for white and non-white dropouts. The earnings payoff to skills increases with age.
Handle: RePEc:nbr:nberwo:7101
Template-Type: ReDIF-Paper 1.0
Title: Social Security Investment in Equities I: Linear Case
Classification-JEL: H55; E66
Author-Name: Peter Diamond
Author-Person: pdi24
Author-Name: Jean Geanakoplos
Note: EFG
Number: 7103
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7103
File-URL: http://www.nber.org/papers/w7103.pdf
File-Format: application/pdf
Publication-Status: published as Diamond, Peter and John Geanakoplos. "Social Security Investment In Equities," American Economic Review, 2003, v93(4,Sep), 1047-1074.
Abstract: Social Security trust fund portfolio diversification to include some equities reduces the equity premium by raising the safe real interest rate. This requires changes in taxes. Under the hypothesis of constant marginal returns to risky investments, trust fund diversification lowers the price of land, increases aggregate investment, and raises the sum of household utilities, suitably weighted. It makes workers who do not own equities on their own better off, though it may hurt some others since changed taxes and asset values redistribute wealth across contemporaneous households and across generations. In our companion paper we reconsider the effects of diversification when there are decreasing marginal returns to safe and risky investment. Our analysis uses a two-period overlapping generations general equilibrium model with two types of agents, savers and workers who do not save. The latter represent approximately half of all workers who hold no equities whatsoever.
Handle: RePEc:nbr:nberwo:7103
Template-Type: ReDIF-Paper 1.0
Title: Noise Trading and Exchange Rate Regimes
Classification-JEL: F33; G15
Author-Name: Olivier Jeanne
Author-Person: pje59
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM
Number: 7104
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7104
File-URL: http://www.nber.org/papers/w7104.pdf
File-Format: application/pdf
Publication-Status: published as Olivier Jeanne & Andrew K. Rose, 2002. "Noise Trading And Exchange Rate Regimes," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 537-569, May.
Abstract: Both the literature and new empirical evidence show that exchange rate regimes differ primarily by the noisiness of the exchange rate, not be measurable macroeconomic fundamentals. This motivates a theoretical analysis of exchange rate regimes with noise traders. The presence of noise traders can lead to multiple equilibria in the foreign exchange market. The entry of noise traders both create and share the risk associated with exchange rate volatility. In such circumstances, monetary policy can be used to lower exchange rate volatility without altering macroeconomic fundamentals.
Handle: RePEc:nbr:nberwo:7104
Template-Type: ReDIF-Paper 1.0
Title: Transform Analysis and Asset Pricing for Affine Jump-Diffusions
Classification-JEL: G1
Author-Name: Darrell Duffie
Author-Person: pdu341
Author-Name: Jun Pan
Author-Person: ppa1004
Author-Name: Kenneth Singleton
Author-Person: psi735
Note: AP
Number: 7105
Creation-Date: 1999-04
Order-URL: http://www.nber.org/papers/w7105
File-URL: http://www.nber.org/papers/w7105.pdf
File-Format: application/pdf
Publication-Status: published as Duffie, Darrell, Jun Pan and Kenneth Singleton. "Transform Analysis And Asset Pricing For Affine Jump-Diffusions," Econometrica, 2000, v68(6,Nov), 1343-1376.
Abstract: In the setting of affine' jump-diffusion state processes, this paper provides an analytical treatment of a class of transforms, including various Laplace and Fourier transforms as special cases, that allow an analytical treatment of a range of valuation and econometric problems. Example applications include fixed-income pricing models, with a role for intensityy-based models of default, as well as a wide range of option-pricing applications. An illustrative example examines the implications of stochastic volatility and jumps for option valuation. This example highlights the impact on option 'smirks' of the joint distribution of jumps in volatility and jumps in the underlying asset price, through both amplitude as well as jump timing.
Handle: RePEc:nbr:nberwo:7105
Template-Type: ReDIF-Paper 1.0
Title: Reconsidering Contractual Liability and the Incentive to Reveal Information
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Author-Name: Steven Shavell
Author-Person: psh42
Note: LE
Number: 7106
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7106
File-URL: http://www.nber.org/papers/w7106.pdf
File-Format: application/pdf
Publication-Status: published as "Reconsidering Contractual Liability and the Incentive to Reveal Information" Stanford Law Review, Vol. 51, No. 6, pp. 1615-1627 (1999).
Abstract: In an earlier work, we analyzed how the legal rules governing contractual liability affect the transfer of information between the parties to the contract. In particular, we showed how limitations on contractual liability might lead high valuation buyers to reveal their valuation of performance, and we identified the circumstances under which such limitations on liability are and are not socially desirable. In an article forthcoming in the Stanford Law Review, Barry Adler develops a critique of our analysis, as well as that of Ayres and Gertner, who independently argued that contractual rules can beneficially facilitate information transfers. We reconsider here the subject of contractual liability and the revelation of information and respond to Adler's critique. We find Adler's model to be a natural extension of ours rather than a departure from it. Our reexamination leads to the conclusion that the informational effects that our work analyzed are important to take into account in designing contract rules.
Handle: RePEc:nbr:nberwo:7106
Template-Type: ReDIF-Paper 1.0
Title: Inventive Activity and the Market for Technology in the United States, 1840-1920
Author-Name: Naomi R. Lamoreaux
Author-Name: Kenneth L. Sokoloff
Note: DAE PR
Number: 7107
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7107
File-URL: http://www.nber.org/papers/w7107.pdf
File-Format: application/pdf
Abstract: The growth of the U.S. economy over the nineteenth century was characterized by a sharp acceleration in the rate of inventive activity and a dramatic rise in the relative importance of highly specialized inventors as generators of new technological knowledge. Relying on evidence compiled from patent records, we argue that the evolution of a market for technology played a central role in these developments. Across both individuals and geographic areas, the expansion of opportunities to trade in patent rights was closely associated with increases in specialization at invention, as well as advances in rates of invention more generally. The patent system is often celebrated for the stimulus to invention provided by granting limited monopoly rights to inventors for the use of their discoveries, but its specification of tradable assets in technology has also been important.
Handle: RePEc:nbr:nberwo:7107
Template-Type: ReDIF-Paper 1.0
Title: Do Corrupt Governments Receive Less Foreign Aid?
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Beatrice Weder
Author-Person: pwe114
Note: PE
Number: 7108
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7108
File-URL: http://www.nber.org/papers/w7108.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto and Beatrice Weder. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, 2002, v92(4,Sep), 1126-1137.
Abstract: Critics of foreign aid programs argue that these funds often support corrupt governments and inefficient bureaucracies. Supporters argue that foreign aid can be used to reward good governments. This paper documents that there is no evidence that less corrupt governments receive more foreign aid. On the contrary, according to some measures of corruption, more corrupt governments receive more aid. Also, we could not find any evidence that an increase in foreign aid reduces corruption. In summary, the answer to the question posed in the title is 'no.'
Handle: RePEc:nbr:nberwo:7108
Template-Type: ReDIF-Paper 1.0
Title: Power Couples: Changes in the Locational Choice of the College Educated, 1940-1990
Classification-JEL: J1; R2
Author-Name: Dora L. Costa
Author-Person: pco358
Author-Name: Matthew E. Kahn
Author-Person: pka41
Note: DAE LS
Number: 7109
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7109
File-URL: http://www.nber.org/papers/w7109.pdf
File-Format: application/pdf
Publication-Status: published as Costa, Dora L. and Matthew E. Kahn. "Power Couples: Changes In The Location Choice Of The College Educated," Quarterly Journal of Economics, 2000, v115(4,Nov), 1287-1315.
Abstract: The rise of the dual career household is a recent phenomenon spurred by the increase in married women's labor force participation rates and educational attainment rates. Compared to traditional households these households must solve a colocation problem. This paper documents trends in locational choice between large and small metropolitan areas and non-metropolitan areas by household type from 1940 to 1990. We find that college educated couples are increasingly concentrated in large metropolitan areas and attribute at least half of this increase to the growing severity of the colocation problem. We also find that the relative returns for a college-educated couple of being in a large relative to a small city have increased across decades. Our results suggest that because skilled professionals are increasingly bundled with an equally skilled spouse, smaller cities may experience reduced inflows of human capital relative to the past and therefore become poorer. We examine how the relationship between rankings of university graduate programs and city size has changed between 1970 and 1990 to provide suggestive evidence on the importance of city size to firms' ability to attract the best workers.
Handle: RePEc:nbr:nberwo:7109
Template-Type: ReDIF-Paper 1.0
Title: Government as a Discriminating Monopolist in the Financial Market: The Case of China
Classification-JEL: G28; H25
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: Wei Li
Author-Person: pli922
Note: PE
Number: 7110
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7110
File-URL: http://www.nber.org/papers/w7110.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Roger H. and Wei Li. "Government As A Discriminating Monopolist In The Financial Market: The Case Of China," Journal of Public Economics, 2003, v87(2,Feb), 283-312.
Abstract: To date, China has maintained a variety of restrictions on its financial markets. In addition to imposing capital controls and regulating interest rates, the government controls both the set of firms that can sell equity on the domestic or foreign stock markets, and the amount they can sell. China is unique in that foreigners pay much less than domestic investors for intrinsically identical shares. In this paper, we show that these characteristics of the Chinese financial market are consistent with a government choosing regulations to maximize a standard type of social welfare function. The observed policy of charging much higher prices for equity sold to domestic than to foreign investors can simply reflect the more inelastic demand for equity by domestic investors. Under certain conditions, these regulations are equivalent to income taxes on business and interest income. The pattern of tax rates is not qualitatively different from those commonly observed elsewhere, particularly in other countries with capital controls. Given the ease with which firms and individuals can evade income taxes, however, indirect taxation through restrictions on the financial market may serve as an effective alternative.
Handle: RePEc:nbr:nberwo:7110
Template-Type: ReDIF-Paper 1.0
Title: Equity and Resources: An Analysis of Education Finance Systems
Classification-JEL: H4; I2
Author-Name: Raquel Fernandez
Author-Person: pfe17
Author-Name: Richard Rogerson
Author-Person: pro53
Note: PE
Number: 7111
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7111
File-URL: http://www.nber.org/papers/w7111.pdf
File-Format: application/pdf
Publication-Status: published as Fernandez, Raquel and Richard Rogerson. "Equity And Resources: An Analysis Of Education Finance Systems," Journal of Political Economy, 2003, v111(4,Aug), 858-897.
Abstract: Over the last few decades many US states have made large changes to their systems of financing K-12 education with the explicit objective of providing more equitable educational opportunities. There has been relatively little accompanying analysis, however, examining how these changes might affect the total sum of resources dedicated to education and whether indeed increased equality is a likely outcome. We analyze five different education finance systems: local, State, foundation, power equalizing with recapture (PER) and power equalizing without recapture (PEN). We find that finance systems can have very large effects on both resources devoted to education and equity. Our calibration suggests that total spending on education may differ by as much as 25% across systems. The trade-off between equity and resources, however, is not monotone. Although spending in a local system is typically greater than that in either the State system or PER, total spending is typically highest for the foundation and PEN systems, both of which reduce inequality of educational resources substantially relative to a local system. We also rank systems in welfare terms by carrying out an expected utility calculation. We find that PER consistently ranks best, though it provides fewer resources to education than the foundation and PEN systems, and falls well short of the state system in terms of equity. Additionally, we find that the PER system is remarkably popular among these alternative finance systems--we prove analytically that for an important subset of preferences PER will win in majority voting comparisons with each of the other systems.
Handle: RePEc:nbr:nberwo:7111
Template-Type: ReDIF-Paper 1.0
Title: Antitrust and Competition in Health Care Markets
Classification-JEL: I11; L40
Author-Name: Martin Gaynor
Author-Person: pga1
Author-Name: William B. Vogt
Author-Person: pvo14
Note: EH
Number: 7112
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7112
File-URL: http://www.nber.org/papers/w7112.pdf
File-Format: application/pdf
Publication-Status: published as With Deborah Haas-Wilson, published as "Change, Consolidation, and Competition in Health Care Markets", Journal of Economic Perspectives, Vol. 13, no. 1 (Winter 1999): 141-164.
Publication-Status: published as Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487 Elsevier.
Abstract: In this paper we review issues relating to antitrust and competition in health care markets. The paper begins with a brief review of antitrust legislation. We then discuss whether and how health care is different from other industries in ways that might affect the optimality of competition. The paper then focuses on the main areas in which antitrust has been applied to health care: hospital mergers, monopsony, and foreclosure. In each of these sections we review the relevant antitrust cases, discuss the issues that have arisen in those cases, and then review the relevant economics literature and suggest some new methods for analyzing these issues.
Handle: RePEc:nbr:nberwo:7112
Template-Type: ReDIF-Paper 1.0
Title: Lending Booms, Reserves, and the Sustainability of Short-Term Debt: Inferences from the Pricing of Syndicated Bank Loans
Classification-JEL: F3
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Ashoka Mody
Note: IFM ME
Number: 7113
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7113
File-URL: http://www.nber.org/papers/w7113.pdf
File-Format: application/pdf
Publication-Status: published as Eichengreen, Barry and Ashoka Mody. "Lending Booms, Reserves And The Sustainability Of Short-Term Debt: Inferences From The Pricing Of Syndicated Bank Loans," Journal of Development Economics, 2000, v63(1,Oct), 5-44.
Abstract: This paper analyzes the determinants of spreads on syndicated bank lending to emerging markets, treating the loan-extension and pricing decisions as jointly determined. Compared to the bond market, our findings highlight the role of international banks in providing credit to smaller borrowers about whom information is least complete and, more generally, support the interpretation of bank finance as dominating that segment of international financial markets characterized by the most pronounced information asymmetries. Domestic lending booms and low reserves in relation to short-term debt have been priced in the expected manner by international banks. The high level of short-term debt in East Asia was supported by high growth rates but was characterized by a knife-edge quality.
Handle: RePEc:nbr:nberwo:7113
Template-Type: ReDIF-Paper 1.0
Title: State Drug Control and Illicit Drug Participation
Classification-JEL: I1
Author-Name: Henry Saffer
Author-Person: psa935
Author-Name: Frank Chaloupka
Author-Person: pch236
Note: EH
Number: 7114
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7114
File-URL: http://www.nber.org/papers/w7114.pdf
File-Format: application/pdf
Publication-Status: published as H Saffer & FJ Chaloupka & D Dave, 2001. "State Drug Control Spending And Illicit Drug Participation," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 150-161, 04.
Abstract: The purpose of this paper is to estimate the effect of state criminal justice expenditures and state public health expenditures on deterring illicit drug use. The empirical model is based on a demand and supply model of drug markets. The effect of a given expenditure on criminal justice or public health programs is dependent on the magnitude of the resulting shifts in the two functions and the demand price elasticity. A reduced form of the demand and supply model is also estimated. The data employed come from the 1990 and 1991 National Household Surveys on Drug Abuse (NHSDA). Data on state and local spending for drug related criminal justice and drug related public health programs were merged with the NHSDA. The main findings from the regression results are that drug control spending reduces drug use. However, the results suggest for marijuana users, the marginal cost of drug control exceeds the social benefits of drug control. This may not be the case for users of other illicit drugs. Spending for drug enforcement by police and drug treatment are found most effective in deterring drug use. However, spending for correctional facilities is never significant which suggests that a more efficient method of reducing drug use might be to reduce correctional facilities spending and increase spending on treatment.
Handle: RePEc:nbr:nberwo:7114
Template-Type: ReDIF-Paper 1.0
Title: Understanding the "Problem of Economic Development": The Role of Factor Mobility and International Taxation
Classification-JEL: F2; H2
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Chi-Wa Yuen
Note: IFM PE
Number: 7115
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7115
File-URL: http://www.nber.org/papers/w7115.pdf
File-Format: application/pdf
Publication-Status: published as Razin, Assaf and Chi-Wa Yuen. "Understanding The 'Problem Of Economic Development:' The Role Of Factor Mobility And International Taxation," Journal of Applied Economics, 1999, v2(1,May), 131-167.
Abstract: The problem of economic development,' as Lucas (1988) states it, is the problem of accounting for the observed diversity in levels and rates of growth of per capita income across countries and across time. We study conditions under which capital mobility and labor mobility (two seemingly income-equalizing forces) may interact with cross-country differences in income tax rates and income tax principles (two seemingly income-diverging forces) to generate such diversity. As a corollary, we also examine when countries with different initial endowments may finally converge in their income levels.
Handle: RePEc:nbr:nberwo:7115
Template-Type: ReDIF-Paper 1.0
Title: Microfoundations and Macro Implications of Indivisible Labor
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Note: ME PE
Number: 7116
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7116
File-URL: http://www.nber.org/papers/w7116.pdf
File-Format: application/pdf
Publication-Status: published as Mulligan, Casey B. "Aggregate Implications Of Indivisible Labor," Advances in Macroeconomics, 2001, v1(1), Article 4.
Abstract: I show that the indivisible labor' models of Diamond and Mirrlees (1978, 1986), Hansen (1985), Rogerson (1988), Christiano and Eichenbaum (1992), and many others are, when aggregated across persons with the same marginal utility of income, equivalent to the divisible labor model of Lucas and Rapping (1969); any data on aggregate hours and earnings generated by the divisible (indivisible) model can be generated by some parameterization of the indivisible (divisible) model. The same is true when macro' data is obtained by aggregating over time and across people. This equivalence means that the indivisibility of labor per se does not have implications for macroeconomics. Nor does indivisibility have aggregate' normative implications. I then build a micro model of the bunching of work in continuous time as the consequence of fixed costs and fatigue effects.' Only in a special case does the micro model has as its reduced form the indivisible labor model. In other cases, the bunching of work in time may have unique macro implications. Indivisible and bunching models of labor are shown to have implications for public finance.
Handle: RePEc:nbr:nberwo:7116
Template-Type: ReDIF-Paper 1.0
Title: Gerontocracy, Retirement, and Social Security
Classification-JEL: H55; D78
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: AG PE
Number: 7117
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7117
File-URL: http://www.nber.org/papers/w7117.pdf
File-Format: application/pdf
Abstract: Why are the old politically successful? We build a simple interest group model in which political pressure is time-intensive, showing that in the political competitive equilibrium each group lobbies for government policies that lower their own value of time but that the old do so to a greater extent and as a result are net gainers from the political process. What distinguishes the elderly from other political groups (and what makes them more successful) is that they have lower labor productivity and/or that we are all likely to become elderly at some point, while we are relatively unlikely to change gender, race, sexual orientation, or even occupation. The model has a variety of implications for the design of social security programs, which we test using data from the Social Security Administration. For example, the model predicts that social security programs with retirement incentives are larger and that the old are more single-minded' in their politics, implications which we verify using cross-country government finance data and cross-country political participation surveys. Finally, we show that the forced savings programs intended to reform' the social security system may increase the amount of intergenerational redistribution. As a model for evaluating policy reforms, ours has the attractive feature that reforms must be time consistent from a political point of view rather than a public interest point of view.
Handle: RePEc:nbr:nberwo:7117
Template-Type: ReDIF-Paper 1.0
Title: Social Security in Theory and Practice (I): Facts and Political Theories
Classification-JEL: H55; D78
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: AG PE
Number: 7118
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7118
File-URL: http://www.nber.org/papers/w7118.pdf
File-Format: application/pdf
Abstract: 166 countries have some kind of public old age pension. What economic forces create and sustain old age Social Security as a public program? We document some of the internationally and historically common features of Social Security programs including explicit and implicit taxes on labor supply, pay-as-you-go features, intergenerational redistribution, benefits which are increasing functions of lifetime earnings and not means-tested. We partition theories of Social Security into three groups: political', efficiency' and narrative' theories. We explore three political theories in this paper: the majority rational voting model (with its two versions: the elderly as the leaders of a winning coalition with the poor' and the once and for all election' model), the time-intensive model of political competition' and the taxpayer protection model'. Each of the explanations is compared with the international and historical facts. A companion paper explores the efficiency' and narrative' theories and derives implications of all the theories for replacing the typical pay-as-you-go system with a forced savings plan.
Handle: RePEc:nbr:nberwo:7118
Template-Type: ReDIF-Paper 1.0
Title: Social Security in Theory and Practice (II): Efficiency Theories, Narrative Theories, and Implications for Reform
Classification-JEL: H55; D78
Author-Name: Casey B. Mulligan
Author-Person: pmu64
Author-Name: Xavier Sala-i-Martin
Author-Person: psa510
Note: AG PE
Number: 7119
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7119
File-URL: http://www.nber.org/papers/w7119.pdf
File-Format: application/pdf
Abstract: 166 countries have some kind of public old age pension. What economic forces create and sustain old age Social Security as a public program? Mulligan and Sala-i-Martin (1999) document several of the internationally and historically common features of social security programs, and explore political' theories of Social Security. This paper discusses the efficiency theories,' which view creation of the SS program as a full or partial solution to some market failure. Efficiency explanations of social security include the SS as welfare for the elderly', the retirement increases productivity to optimally manage human capital externalities', optimal retirement insurance', the prodigal father problem', the misguided Keynesian', the optimal longevity insurance', the government economizing transaction costs' and the return on human capital investment'. We also analyze four narrative' theories of social security: the chain letter theory', the lump of labor theory', the monopoly capitalism theory', and the Sub-but-Nearly-Optimal policy response to private pensions theory'. The political and efficiency explanations are compared with the international and historical facts and used to derive implications for replacing the typical pay-as-you-go system with a forced savings plan. Most of the explanations suggest that forced savings does not increase welfare, and may decrease it.
Handle: RePEc:nbr:nberwo:7119
Template-Type: ReDIF-Paper 1.0
Title: Urban Development in the United States, 1690-1990
Classification-JEL: R11; N70
Author-Name: Sukkoo Kim
Note: DAE
Number: 7120
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7120
File-URL: http://www.nber.org/papers/w7120.pdf
File-Format: application/pdf
Publication-Status: published as Kim, Sukko. "Urban Development In The United States, 1690-1990," Southern Economic Journal, 2000, v66(4,Apr), 855-880.
Abstract: The United States transformed itself from a rural to an urban society over the last three centuries. After a century of unremarkable growth, the pace of urbanization was historically unprecedented between the nineteenth and early twentieth centuries. In the twentieth century, the urban population continued to increase but in a much more dispersed manner as the suburban population increased. Throughout these developments, cities also exhibited considerable variation in their population sizes. This paper find that the pace and pattern of U.S. urban development are explained by changes in regional comparative advantage and in economies in transportation and local public goods, which in turn were determined by the changes in the economic structures of cities. This paper also finds that cities varied considerably in size because the larger cities reduced market transaction costs associated with coordinating greater geographic division of labor.
Handle: RePEc:nbr:nberwo:7120
Template-Type: ReDIF-Paper 1.0
Title: Education and Social Capital
Classification-JEL: I2; J0
Author-Name: John F. Helliwell
Author-Person: phe368
Author-Name: Robert D. Putnam
Note: LE
Number: 7121
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7121
File-URL: http://www.nber.org/papers/w7121.pdf
File-Format: application/pdf
Publication-Status: published as John F. Helliwell & Robert D. Putnam, 2007. "Education and Social Capital," Eastern Economic Journal, Eastern Economic Association, vol. 33(1), pages 1-19, Winter.
Abstract: Education is usually the most important predictor of political and social engagement. Over the last half century, educational levels in the United States have risen sharply, yet levels of political and social participation have not. Norman Nie, Jane Junn, and Kenneth Stehlik-Barry (NJS-B) have offered an elegant resolution to this paradox based on a distinction between the relative education having positive effects on participation. Using a broad range of evidence, including the data used by NJS-B, this paper shows that increases in average education levels improve trust and do not reduce participation levels. The contrast with the NJS-B participation results is found to be due to the definition of the educational environment. We use a changing regional comparison group, theoretically preferable to NJS-B's static national measure. Our results point to a more optimistic conclusion about the consequences of increases in average education levels, while leaving open the puzzle of sluggish participation.
Handle: RePEc:nbr:nberwo:7121
Template-Type: ReDIF-Paper 1.0
Title: Age and the Quality of Work: The Case of Modern American Painters
Classification-JEL: J24
Author-Name: David W. Galenson
Author-Name: Bruce A. Weinberg
Author-Person: pwe74
Note: LS
Number: 7122
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7122
File-URL: http://www.nber.org/papers/w7122.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. and Bruce A. Weinberg. "Age And The Quality Of Work: The Case Of Modern American Painters," Journal of Political Economy, 2000, v108(4,Aug), 761-777.
Abstract: Psychologists have found that the age at which successful practitioners typically do their best work varies across professions, but they have not considered whether these peak ages change over time, as economic models suggest they might. Using auction records, we estimate the relationship between artists' ages and the value of their paintings for two successive cohorts of modern American painters. We find that a substantial decline occurred over time in the age at which these artists produced their most valuable - and most important - work, and argue that this was caused by a shift in the nature of the demand for modern art during the 1950s.
Handle: RePEc:nbr:nberwo:7122
Template-Type: ReDIF-Paper 1.0
Title: Blockholder Identity, Equity Ownership Structures, and Hostile Takeovers
Classification-JEL: G3
Author-Name: Gary Gorton
Author-Person: pgo458
Author-Name: Matthias Kahl
Note: CF
Number: 7123
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7123
File-URL: http://www.nber.org/papers/w7123.pdf
File-Format: application/pdf
Abstract: We determine firms' equity ownership structures and provide a theory of hostile takeovers by distinguishing the roles of two types of blockholders: rich investors and institutional investors. We also distinguish the roles of two types of stock markets: the block market and the market with small investors. Rich investors have their own money at stake while institutional investors are run by professional managers and hence face agency conflicts. Because rich investors face no agency problems they are better at monitoring managers. If their wealth is insufficient to control all corporations, then agency-cost free' capital is scarce. We investigate the allocation of this scarce resource. A hostile takeover is the consequence of a state-contingent allocation of agency-cost free capital. We show that only rich investors engage in hostile takeovers. Institutional investors instead are either permanent blockholding monitors or facilitate takeovers by selling blocks to rich investors. Even though all firms are ex ante identical, some may rely on the takeover mechanism while others rely on permanent institutional monitoring. We characterize the ownership structure of firms showing, in particular, that (ex ante) identical firms can have different ownership structures. Some can have initially dispersed ownership while others have an institutional blockholder.
Handle: RePEc:nbr:nberwo:7123
Template-Type: ReDIF-Paper 1.0
Title: Executive Compensation: Six Questions that Need Answering
Classification-JEL: J33; G3
Author-Name: John M. Abowd
Author-Person: pab175
Author-Name: David S. Kaplan
Author-Person: pka253
Note: LS
Number: 7124
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7124
File-URL: http://www.nber.org/papers/w7124.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, Vol. 13, no. 4 (Fall 1999): 145-168.
Abstract: In this article, we focus on how recent research advances can be used to address the following six questions: (1) How much does executive compensation cost the firm? (2) How much is executive compensation worth to the recipient? (3) How well does executive compensation work? (4) What are the effects of executive compensation? (5) How much executive compensation is enough? (6) Could executive compensation be improved? We stress the formal link between executive pay and performance that is provided by stock options and equivalent forms of long term compensation. We compare executive compensation in 12 OECD countries for the period from 1984-1996. There are good reasons why the answers to the first two questions are different. Executive compensation research should be very careful to distinguish the concepts of employer cost and the value to the executive. Agency theory remains the only viable candidate for answering the question about how executive compensation works but the empirical research to date cannot explain very much about the structure of the optimal contract. For this reason, it is also hard to answer the questions about the effects of executive compensation and the adequacy of the amounts of executive compensation, although it is clear that companies can provide both too little and too much contingent compensation, in the context of agency theory. We suggest two fertile areas for research regarding the improvement of executive compensation.
Handle: RePEc:nbr:nberwo:7124
Template-Type: ReDIF-Paper 1.0
Title: Was Expansionary Monetary Policy Feasible During the Great Contraction? An Examination of the Gold Standard Constraint
Classification-JEL: E5; F3
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Ehsan U. Choudhri
Author-Person: pch482
Author-Name: Anna J. Schwartz
Note: ME
Number: 7125
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7125
File-URL: http://www.nber.org/papers/w7125.pdf
File-Format: application/pdf
Publication-Status: published as Bordo, Michael D. & Choudhri, Ehsan U. & Schwartz, Anna J., 2002. "Was Expansionary Monetary Policy Feasible during the Great Contraction? An Examination of the Gold Standard Constraint," Explorations in Economic History, Elsevier, vol. 39(1), pages 1-28, January.
Abstract: The recent consensus view, that the gold standard was the leading cause of the worldwide Great Depression 1929-33, stems from two propositions: (1) Under the gold standard, deflationary shocks were transmitted between countries and, (2) for most countries, continued adherence to gold prevented monetary authorities from offsetting banking panics and blocked their recoveries. In this paper we contend that the second proposition applies only to small open economies with limited gold reserves. This was not the case for the US, the largest country in the world, holding massive gold reserves. The US was not constrained from using expansionary policy to offset banking panics, deflation, and declining economic activity. Simulations, based on a model of a large open economy, indicate that expansionary open market operations by the Federal Reserve at two critical junctures (October 1930 to February 1931; September 1931 through January 1932) would have been successful in averting the banking panics that occurred, without endangering convertibility. Indeed had expansionary open market purchases been conducted in 1930, the contraction would not have led to the international crises that followed.
Handle: RePEc:nbr:nberwo:7125
Template-Type: ReDIF-Paper 1.0
Title: The Returns to Skill in the United States across the Twentieth Century
Classification-JEL: J2; N3
Author-Name: Claudia Goldin
Author-Person: pgo601
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: LS DAE
Number: 7126
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7126
File-URL: http://www.nber.org/papers/w7126.pdf
File-Format: application/pdf
Publication-Status: Published as "Amercia's Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century", Journal of Economic History, Vol. 58, no. 2 (June 1998): 345-374. Published as "Egalitarianism and the Returns to Education During the Great
Publication-Status: published as Transformation of American Education", Journal of Political Economy, Vol. 107, no. 6, part 2 (December 1999): S65-S94.
Abstract: Economic inequality is higher today than it has been since 1939, as measured by both the wage structure and wealth inequality. But the comparison between 1939 and 1999 is largely made out of necessity; the 1940 U.S. population census was the first to inquire of wage and salary income and education. We address what the returns to skill were prior to 1940 and piece together the first century-long history of skill premiums, the dispersion of the wage structure, and returns to formal schooling. We use the 1915 Iowa State Census, a remarkable and unique document, as well as several less-obscure but untapped reports. Using all of these sources, we find that the wage structure narrowed at several moments in the first half of the 20th century, not just in the 1940s, both coinciding with major economic disruptions brought about by war. The returns to education were in fact higher in 1914 than in 1939, and the enormous expansion in secondary schooling beginning in the 1910s was a contributing factor to the decrease in educational returns. Inequality and the returns to education across the entire century, therefore, first declined before their more recent and steep ascent.
Handle: RePEc:nbr:nberwo:7126
Template-Type: ReDIF-Paper 1.0
Title: Learning and Forgetting: The Dynamics of Aircraft Production
Classification-JEL: L62; I11
Author-Name: C. Lanier Benkard
Note: PR
Number: 7127
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7127
File-URL: http://www.nber.org/papers/w7127.pdf
File-Format: application/pdf
Publication-Status: published as Benkard, C. Lanier. "Learning And Forgetting: The Dynamics Of Aircraft Production," American Economic Review, 2000, v90(4,Sep), 1034-1054.
Abstract: This paper introduces a new cost dataset for a commercial aircraft firm and uses this data to analyze the dynamics of learning in commercial aircraft production. This dataset is found to be inconsistent with the simple learning hypothesis, and particularly the prediction that a firm's unit cost must decline with its cumulative production. Instead, strong support is found for the hypothesis of organizational forgetting, a more general learning model where unit costs are similarly dependent on a firm's past production experience, but where that experience depreciates over time. Additionally, it is found that some, but not all, of a firm's production experience transfers from one generation of an aircraft to the next. This evidence adds to our understanding of productivity in industries with learning and thus has implications to many fields of economics.
Handle: RePEc:nbr:nberwo:7127
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Non-employment and Unemployment Durations in East Germany
Classification-JEL: J6; J3
Author-Name: Jennifer Hunt
Author-Person: phu9
Note: LS
Number: 7128
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7128
File-URL: http://www.nber.org/papers/w7128.pdf
File-Format: application/pdf
Publication-Status: published as Hunt, Jennifer. "Convergence And Determinants Of Non-Employment Durations In Eastern And Western Germany," Journal of Population Economics, 2004, v17(2,Jun), 249-266.
Abstract: Following monetary union with the west in June 1990, the employment rate for east German 18-54 year olds fell from 89% to 73% in six years, and the decline for women was considerably larger. This employment fall is possibly the worst of any European transition economy, yet one might have expected the east German transition to have been the most successful. I seek insight into the problem by examining the determinants of transitions between non-employment (or unemployment) and employment, using the 1990-1996 survey years of the German Socio- Economic Panel. Individuals over fifty and women have much longer non-employment durations, but the presence of children, and hence child care, does not appear to be important. More skilled individuals, as measured by their education and 1990 wage, have shorter non-employment spells. I also present results for employment duration. The most important similarity between the duration of non-employment and employment is the influence of the 1990 wage, which is consistent with the theory that trade-union wage rises for the less-skilled reduced employment. The most important difference is that the addition of covariates, particularly the 1990 wage, explains most of the gender gap in employment duration but little in non-employment duration.
Handle: RePEc:nbr:nberwo:7128
Template-Type: ReDIF-Paper 1.0
Title: Alcohol Regulation and Violence on College Campuses
Classification-JEL: I10
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Sara Markowitz
Author-Person: pma138
Note: EH
Number: 7129
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7129
File-URL: http://www.nber.org/papers/w7129.pdf
File-Format: application/pdf
Publication-Status: published as "The Economic Analysis of Substance Use and Abuse: The Experience of Developed Countries and Lessons for Developing Countries," edited by Michael Grossman and Chee-Ruey Hsieh, Edward Elgar Limited, United Kingdom, 2001.
Abstract: This study focuses on the effects of variations in alcoholic beverage prices among states of the United States on violence on college campuses. The principal hypothesis tested is that the incidence of violence is negatively related to the price of alcohol. This hypothesis is derived from two well established relationships: the positive relationship between alcohol and violence and the negative relationship between the use of alcohol and its price. The data employed in the study are the 1989, 1990, and 1991 Core Alcohol and Drug Surveys of College Students. They contain almost 120,000 college students from approximately 200 colleges and universities throughout the United States and have measures of alcohol use and the adverse consequences of its use. These adverse consequences include the following indicators of violence: getting in trouble with the police, residence hall, or other college authorities; damaging property or pulling a fire alarm; getting into an argument or a fight; and taking advantage of another person sexually or having been taken advantage of sexually. The principal finding is that the incidence of each of these four acts of violence is inversely related to the price of beer in the state in which the student attends college.
Handle: RePEc:nbr:nberwo:7129
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Alcohol Prohibition on Alcohol Consumption
Classification-JEL: I1; J1
Author-Name: Jeffrey A. Miron
Author-Person: pmi250
Note: EH
Number: 7130
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7130
File-URL: http://www.nber.org/papers/w7130.pdf
File-Format: application/pdf
Publication-Status: published as Dills, Angela K. & Jacobson, Mireille & Miron, Jeffrey A., 2005. "The effect of alcohol prohibition on alcohol consumption: evidence from drunkenness arrests," Economics Letters, Elsevier, vol. 86(2), pages 279-284, February.
Abstract: This paper examines the impact of Prohibition on alcohol consumption. Since data on both the price and quantity of alcohol are unavailable during the Prohibition period, it is not possible to estimate Prohibition's impact on either the supply or demand for alcohol. Assuming the existence of a reasonable proxy for alcohol consumption, however, it is possible to estimate the net impact of Prohibition on the equilibrium quantity of alcohol consumed. I estimate this effect under a range of assumptions about the nature of preferences, taking into account other possible determinants of alcohol consumption and the proxy series. The overall conclusion of the paper is that Prohibition exerted a modest and possibly even a positive effect on alcohol consumption. One possible interpretation of the results is that the demand for alcohol is relatively inelastic, although many earlier studies find substantial elasticity in the demand for alcohol. Another possible interpretation is that Prohibition created a forbidden fruit effect that increased preferences for alcohol, tending to offset the depressing effects of increased prices on demand. Still a third possibility is that Prohibition failed to raise alcohol prices substantially, perhaps because black markets suppliers face low marginal costs of evading government regulations and taxes. Existing data provide some support for this last possibility.
Handle: RePEc:nbr:nberwo:7130
Template-Type: ReDIF-Paper 1.0
Title: Evaluating the Effect of an Antidiscrimination Law Using a Regression-Discontinuity Design
Classification-JEL: C14; C51
Author-Name: Jinyong Hahn
Author-Person: pha1189
Author-Name: Petra Todd
Author-Name: Wilbert Van der Klaauw
Author-Person: pva186
Note: LS
Number: 7131
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7131
File-URL: http://www.nber.org/papers/w7131.pdf
File-Format: application/pdf
Abstract: The regression discontinuity (RD) data design is a quasi-experimental design with the defining characteristic that the probability of receiving treatment changes discontinuously as a function of one or more individual characteristics. This data design occasionally arises in economic and other applications but is only infrequently exploited in evaluating the effects of a treatment. We consider the problem of identification and estimation of treatment effects under a RD data design. We offer an interpretation of the IV or so-called Wald estimator as a regression discontinuity estimator. We propose nonparametric estimators of treatment effects and present their asymptotic distribution theory. Then we apply the estimation method to evaluate the effect of EEOC-coverage on minority employment in small U.S. firms.
Handle: RePEc:nbr:nberwo:7131
Template-Type: ReDIF-Paper 1.0
Title: Tax and Education Policy in a Heterogeneous Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?
Classification-JEL: D31; I22
Author-Name: Roland Benabou
Author-Person: pbe27
Note: EFG PE
Number: 7132
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7132
File-URL: http://www.nber.org/papers/w7132.pdf
File-Format: application/pdf
Publication-Status: published as Benabou, Roland. "Tax And Education Policy In A Heterogeneous-Agent Economy: What Levels Of Redistribution Maximize Growth And Efficiency," Econometrica, 2002, v70(2,Mar), 481-517.
Abstract: This paper studies the effects of progressive income taxes and education finance in a dynamic heterogeneous agent economy. Such redistributive policies entail distortions to labor supply and savings, but also serve as partial substitutes for missing credit and insurance markets. The resulting tradeoffs for growth and efficiency are explored, both theoretically and quantitatively, in a model which yields complete analytical solutions. Progressive education finance always leads to higher income growth than taxes and transfers, but at the cost of lower insurance. Overall efficiency is assessed using a new measure which properly reflects aggregate resources and idiosyncratic risks but, unlike a standard social welfare function, does not reward equality per se. Simulations using empirical parameter estimates show that the efficiency costs and benefits of redistribution are generally of the same order of magnitude, resulting in reasonable values for the optimal rates. Aggregate income and aggregate welfare provide only very crude lower and upper bounds around the true efficiency tradeoff.
Handle: RePEc:nbr:nberwo:7132
Template-Type: ReDIF-Paper 1.0
Title: Offshore Investment Funds: Monsters in Emerging Markets?
Classification-JEL: F21; F3
Author-Name: Woochan Kim
Author-Person: pki10
Author-Name: Shang-Jin Wei
Author-Person: pwe20
Note: IFM
Number: 7133
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7133
File-URL: http://www.nber.org/papers/w7133.pdf
File-Format: application/pdf
Publication-Status: published as Kim, Woodchan and Shang-Jin Wei. "Offshore Investment Funds: Monsters In Emerging Markets?," Journal of Development Economics, 2002, v68(1,Jun), 205-224.
Abstract: The 1997-99 financial crises in the emerging markets have brought to the foreground the concern about offshore investment funds and their possible role in exacerbating volatility in the markets they invest in. Offshore investment funds are alleged to engage in trading behaviors that are different from their onshore counterparts. Because their behavior is less moderated by tax consequences, and because they may be subject to less supervision and regulation, the offshore funds may trade more intensely. They could also pursue more aggressively certain trading strategies such as positive feedback trading or herding that could contribute to greater volatility in the market. Using a unique data set, we compare the trading behavior in Korea by offshore funds with that of their onshore counterparts registered in the United States and the United Kingdom. There are a number of interesting findings. First there is indeed evidence suggesting that the offshore funds trade more intensely than their onshore counterparts. Second, however, there is no evidence that the offshore funds engage in positive feedback trading. In contrast, there is strong evidence that the funds from the US and UK do so. Third, while offshore funds herd, they do so significantly less than the offshore funds from the US or UK. In sum, the offshore funds are not especially worrisome monsters.
Handle: RePEc:nbr:nberwo:7133
Template-Type: ReDIF-Paper 1.0
Title: Capital Flows in Asia
Author-Name: Takatoshi Ito
Note: IFM
Number: 7134
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7134
File-URL: http://www.nber.org/papers/w7134.pdf
File-Format: application/pdf
Publication-Status: published as Capital Flows in Asia, Takatoshi Ito. in Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, Edwards. 2000
Abstract: This paper characterizes the capital flows in Asia before and after the Asian currency crisis of 1997. Differences in foreign direct investment, portfolio investment, and bank lending are emphasized. There are common factors and idiosyncratic factors to the role of capital flows in the currency crises in different countries, especially Thailand, Indonesia, and Korea where IMF programs were needed. Some lessons from the currency crises are also drawn. Some representative models that explain a currency crisis are suggested, and lessons are very different depending on models that are believed to be applicable.
Handle: RePEc:nbr:nberwo:7134
Template-Type: ReDIF-Paper 1.0
Title: Exporting and Productivity
Classification-JEL: F10; F43
Author-Name: Andrew B. Bernard
Author-Name: J. Bradford Jensen
Author-Person: pje75
Note: ITI PR
Number: 7135
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7135
File-URL: http://www.nber.org/papers/w7135.pdf
File-Format: application/pdf
Publication-Status: published as Andrew B. Bernard, 2004. "Exporting and Productivity in the USA," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 343-357, Autumn.
Abstract: Exporting is often touted as a way to increase economic growth. This paper examines whether exporting has played any role in increasing productivity growth in U.S. manufacturing. Contemporaneous levels of exports and productivity are indeed positively correlated across manufacturing industries. However, tests on industry data show causality from productivity to exporting but not the reverse. While exporting plants have substantially higher productivity levels, we find no evidence that exporting increases plant productivity growth rates. However, within the same industry, exporters do grow faster than non-exporters in terms of both shipments and employment. We show that exporting is associated with the reallocation of resources from less efficient to more efficient plants. In the aggregate, these reallocation effects are quite large, making up over 40% of total factor productivity growth in the manufacturing sector. Half of this reallocation to more productive plants occurs within industries and the direction of the reallocation is towards exporting plants. The positive contribution of exporters even shows up in import-competing industries and non-tradable sectors. The overall contribution of exporters to manufacturing productivity growth far exceeds their shares of employment and output.
Handle: RePEc:nbr:nberwo:7135
Template-Type: ReDIF-Paper 1.0
Title: Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence
Classification-JEL: L20; J23
Author-Name: Timothy F. Bresnahan
Author-Person: pbr34
Author-Name: Erik Brynjolfsson
Author-Person: pbr87
Author-Name: Lorin M. Hitt
Author-Person: phi98
Note: IO PR
Number: 7136
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7136
File-URL: http://www.nber.org/papers/w7136.pdf
File-Format: application/pdf
Publication-Status: published as Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 339-376, February.
Abstract: Recently, the relative demand for skilled labor has increased dramatically. We investigate one of the causes, skill-biased technical change. Advances in information technology (IT) are among the most powerful forces bearing on the economy. Employers who use IT often make complementary innovations in their organizations and in the services they offer. Our hypothesis is that these co-inventions by IT users change the mix of skills that employers demand. Specifically, we test the hypothesis that it is a cluster of complementary changes involving IT, workplace organization and services that is the key skill-biased technical change. We examine new firm-level data linking several indicators of IT use, workplace organization, and the demand for skilled labor. In both a short-run factor demand framework and a production function framework, we find evidence for complementarity. IT use is complementary to a new workplace organization which includes broader job responsibilities for line workers, more decentralized decision-making, and more self-managing teams. In turn, both IT and that new organization are complements with worker skill, measured in a variety of ways. Further, the managers in our survey believe that IT increases skill requirements and autonomy among workers in their firms. Taken together, the results highlight the roles of both IT and IT-enabled organizational change as important components of the skill-biased technical change.
Handle: RePEc:nbr:nberwo:7136
Template-Type: ReDIF-Paper 1.0
Title: The Nominal Rigidity of Apartment Rents
Classification-JEL: L16; E30
Author-Name: David Genesove
Author-Person: pge30
Note: IO
Number: 7137
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7137
File-URL: http://www.nber.org/papers/w7137.pdf
File-Format: application/pdf
Publication-Status: published as Genesove, David. "The Nominal Rigidity Of Apartment Rents," Review of Economics and Statistics, 2003, v85(4,Nov), 844-853.
Abstract: This paper contributes to the empirical literature on price stickiness by documenting a high rate of nominal rigidity among apartment rents in the U.S. between 1974-1981. 29 percent of units had no change in nominal rent from year to year. Nominal rigidity was much higher among units whose tenants continued from the previous year, than those in which the tenant turned over. This suggests that the previous year's nominal price was used as a focal point in bargaining. Most of the nominal rigidity among units that turned over can be ascribed to grid pricing, while most of the incidence among the units that did not turn over can not be thus explained, and probably reflects downward rigidity instead. Units in single-unit and small buildings were much more likely to display nominal rigidity.
Handle: RePEc:nbr:nberwo:7137
Template-Type: ReDIF-Paper 1.0
Title: The Retirement Behavior of Married Couples: Evidence from the Spouse's Allowance
Classification-JEL: H55; J22
Author-Name: Michael Baker
Author-Person: pba400
Note: AG PE
Number: 7138
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7138
File-URL: http://www.nber.org/papers/w7138.pdf
File-Format: application/pdf
Publication-Status: published as "The Retirement Behavior of Married Couples: Evidence fromthe Spouse's Allowance", Journal of Human Resources, Vol. 37, Winter 2002, 1-34.
Abstract: I examine the effects of the introduction of the Spouse's Allowance to the Canadian Income Security (IS) system on the retirement behavior of couples. This program was effectively targeted at females in couples attempting to live on a single pension. It allowed qualifying spouses to receive the age related benefits of the IS system at age 60, up to five years earlier than other members of the population. This policy intervention provides an excellent opportunity to investigate how income security programs affect the timing of retirement, and how programs targeted at one spouse can affect the behavior of the other. The results indicate that the introduction of the Allowance is associated with a relative increase in the labor force rates of 6 to 7 percentage points among males in eligible couples. Eligible females did not share the rising employment rates over the 1970s experienced by their counterparts (of the same age) who were not eligible for the Spouse's Allowance.
Handle: RePEc:nbr:nberwo:7138
Template-Type: ReDIF-Paper 1.0
Title: Common Fundamentals in the Tequila and Asian Crises
Classification-JEL: E44; F32
Author-Name: Aaron Tornell
Author-Person: pto157
Note: IFM
Number: 7139
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7139
File-URL: http://www.nber.org/papers/w7139.pdf
File-Format: application/pdf
Abstract: The cross-country variation in the severity of the crisis was largely determined by three fundamentals: the strength of the banking system, the real appreciation, and the international liquidity of the country. We also find that the rule that links fundamentals to the crisis severity has been the same in both the Tequila and Asian crises.
Handle: RePEc:nbr:nberwo:7139
Template-Type: ReDIF-Paper 1.0
Title: Mortality, Education, Income, and Inequality among American Cohorts
Classification-JEL: I1
Author-Name: Angus Deaton
Author-Person: pde30
Author-Name: Christina Paxson
Author-Person: ppa335
Note: EH AG
Number: 7140
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7140
File-URL: http://www.nber.org/papers/w7140.pdf
File-Format: application/pdf
Publication-Status: published as Wise, David A. (ed.) The Economics of Aging, Vol. 8. Chicago: Universityof Chicago Press for NBER, 2001.
Publication-Status: published as Mortality, Education, Income, and Inequality among American Cohorts, Angus S. Deaton, Christina Paxson. in Themes in the Economics of Aging, Wise. 2001
Abstract: People whose family income was less than $5,000 in 1980 could expect to live about 25 percent fewer years than people whose family income was greater than $50,000. We explore this finding using both individual data and a panel of aggregate birth cohorts observed from 1975 to 1995. We assume that health status is determined by social status, defined as income relative to the mean income of a reference group. When reference groups are not observed, health is a function of income whose slope (the gradient) depends on the ratio of within to between-group inequality. We derive results on how this relationship changes at different levels of aggregation. Our results on individuals show that income reduces the risk of death, and does so even controlling for education. Only some of the effect of income can plausibly be attributed to the reduction in earnings of those about to die. The panel of cohorts also shows a strongly protective effect of income, but there is evidence that cyclical increases in income may raise mortality, even when the long-run effects of income are in the opposite direction. There is no evidence that recent increases in inequality raised mortality beyond what it would otherwise have been.
Handle: RePEc:nbr:nberwo:7140
Template-Type: ReDIF-Paper 1.0
Title: Inequalities in Income and Inequalities in Health
Classification-JEL: I1
Author-Name: Angus Deaton
Author-Person: pde30
Note: AG EH
Number: 7141
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7141
File-URL: http://www.nber.org/papers/w7141.pdf
File-Format: application/pdf
Publication-Status: published as Welch, Finis (ed.) The causes and consequences of increasing inequality. Chicago: Chicago University Press, 2001.
Abstract: What is inequality in health? Are economists' standard tools for measuring income inequality relevant or useful for measuring it? Does income protect health and does income inequality endanger it? I discuss two different concepts of health inequality and relate each of them to the literature on the inequality in income. I propose a model in which each individual's health is related to his or her status within a reference group as measured by income relative to the group mean. Income inequality, whether within groups or between them, has no effect on average health. Even so, the slope of the relationship between health and income, the gradient,' depends on the ratio of between- to within-group inequality. The model is extended to allow income inequality to play a direct role in determining health status. Empirical evidence on cross-country income inequality and life-expectancy within the OECD, and on time series for the U.S., Britain, and Japan, provides little support for the idea that inequality is a health hazard at the national level. Birth cohorts in the US between 1981 and 1993 show no relationship between mortality and income inequality. However, there is a well-defined health gradient in these data, and its slope increases with cohort income inequality.
Handle: RePEc:nbr:nberwo:7141
Template-Type: ReDIF-Paper 1.0
Title: The Self-Enforcing Provisions of Oil and Gas Unit Operating Agreements: Theory and Evidence
Classification-JEL: K00; L00
Author-Name: Gary D. Libecap
Author-Person: pli409
Author-Name: James L. Smith
Author-Person: psm28
Note: IO EEE
Number: 7142
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7142
File-URL: http://www.nber.org/papers/w7142.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Law, Economics and Organization, Vol. 12, no. 2 (1999): 526-548.
Abstract: This paper extends the existing theory and empirical investigation of unitization contracts. It highlights the importance of incentive-compatibility and self-enforcement and the bargaining problems faced in achieving viable, long-term contracts. We argue that only if the parties to a unitization contract have unit production shares that are the same as their cost shares will the contract be incentive compatible. Using a data base of sixty unit operating agreements, we measure the industry's actual behavior against the principles of production from a common pool. Our survey of units that have only one production phase and that are relatively homogeneous reveals that such equal sharing rules are always found and they appear to encourage the parties to behave optimally. In more complex units with multiple production phases and/or separate concentrations of oil and gas (gas caps) we find deviations from the theoretical ideal. In the case of multi-phase units, we find equal cost and production shares within phases, but not across phases. A pre-set trigger for shifting from one production phase to the next helps to maintain optimal behavior. For gas cap units, however, we generally do not find the equal sharing rule. Conflicts and rent dissipation follow as illustrated by the case of the Prudhoe Bay Unit. The paper describes the desirable contract rules for avoiding moral hazard. It also shows how the effects of those rules can be replicated in difficult situations.
Handle: RePEc:nbr:nberwo:7142
Template-Type: ReDIF-Paper 1.0
Title: Hedging and Financial Fragility in Fixed Exchange Rate Regimes
Classification-JEL: F31; F41
Author-Name: Craig Burnside
Author-Person: pbu20
Author-Name: Martin Eichenbaum
Author-Person: pei4
Author-Name: Sergio Rebelo
Note: EFG IFM ME
Number: 7143
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7143
File-URL: http://www.nber.org/papers/w7143.pdf
File-Format: application/pdf
Publication-Status: published as Burnside, Craig, Martin Eichenbaum and Sergio Rebelo. "Hedging And Financial Fragility In Fixed Exchange Rate Regimes," European Economic Review, 2001, v45(7,Jun), 1151-1193.
Abstract: Currency crises that coincide with banking crises tend to share four elements. First, governments provide guarantees to domestic and foreign bank creditors. Second, banks do not hedge their exchange rate risk. Third, there is a lending boom before the crises. Finally, when the currency/banking collapse occurs, interest rates rise and there is a persistent decline in output. This paper proposes an explanation for these regularities. We show that government guarantees lower interest rates and generate an economic boom. They also lead to a more fragile banking system; banks choose not to hedge exchange rate risk. When the fixed exchange rate is abandoned in favor of a crawling peg, banks go bankrupt, the domestic interest rate rises, real wages fall, and output declines.
Handle: RePEc:nbr:nberwo:7143
Template-Type: ReDIF-Paper 1.0
Title: Dispersion and Volatility in Stock Returns: An Empirical Investigation
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: Martin Lettau
Author-Person: ple572
Note: AP
Number: 7144
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7144
File-URL: http://www.nber.org/papers/w7144.pdf
File-Format: application/pdf
Abstract: This paper studies three different measures of monthly stock market volatility: the time-series volatility of daily market returns within the month; the cross-sectional volatility or 'dispersion' of daily returns on industry portfolios, relative to the market, within the month; and the dispersion of daily returns on individual firms, relative to their industries, within the month. Over the period 1962-97 there has been a noticeable increase in firm-level volatility relative to market volatility. All the volatility measures move together in a countercyclical fashion. While market volatility tends to lead the other volatility series, industry-level volatility is a particularly important leading indicator for the business cycle.
Handle: RePEc:nbr:nberwo:7144
Template-Type: ReDIF-Paper 1.0
Title: Capital Goods Prices, Global Capital Markets and Accumulation: 1870-1950
Classification-JEL: E22; F21
Author-Name: William J. Collins
Author-Person: pco315
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: EFG ITI DAE
Number: 7145
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7145
File-URL: http://www.nber.org/papers/w7145.pdf
File-Format: application/pdf
Publication-Status: published as Collins, William J. and Jeffrey G. Williamson. "Capital-Goods Prices And Investment, 1879-1950," Journal of Economic History, 2001, v61(1,Mar), 59-94.
Abstract: Conventional wisdom has it that global financial markets were as well integrated in the 1890s as in the 1990s, but that it took several post-war decades to regenerate the connections that existed before 1914. This view has emerged from a variety of tests for world financial capital market integration ranging from the correlation of saving and investment aggregates to the dispersion of security prices and real interest rates. Presumably, we care about global capital market integration because it can have an impact on accumulation performance and the global distribution of the capital stock. Oddly enough, however, the relative price of capital goods, an important component of the user cost of capital, has never been incorporated into studies of capital market integration and almost never in comparative studies of pre-1950 economic growth. This could be an important omission. This paper explores the issue with a panel data base 1870-1950 for eleven OECD countries. It turns out that capital goods prices have been central to accumulation, and therefore to growth and convergence. They have also been as important to the evolution of global capital markets as have been interest rates and other financial costs.
Handle: RePEc:nbr:nberwo:7145
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Globalization on Pre-Industrial, Technologically Quiescent Economies
Classification-JEL: N1; O4
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: ITI EFG DAE
Number: 7146
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7146
File-URL: http://www.nber.org/papers/w7146.pdf
File-Format: application/pdf
Publication-Status: published as as "Land, Labor, and Globalization in the Third World, 1870-1940" The Journal of Economic History, Vol. 62, No. 1, Mar., 2002
Abstract: This paper uses a new pre-1940 Third World data base documenting real wages and relative factor prices to explore their determinants. There are three possibilities: external price shocks, factor endowment changes, and technological change. As the paper's title suggests, technological change is an unlikely explanation. The paper lays out an explicit econometric agenda for the future, although more casual empiricism suggests that external price shocks were doing most of the work, and declining-transport-cost-induced commodity price convergence in particular. Real wages in Asia, the Middle East, and Latin America never showed any signs of catching up with the European industrial leaders prior to 1914 hold their own. The ratio of wages to land rents, on the other hand, declined up to World War I and so did the ratio of wages to GDP per capita. The trend reversed thereafter. These relative factor price movements help sharpen our understanding of the sources of growth (or lack of it) in Asia and Latin America prior to 1940. They also offer strong hints about changes in income distribution there.
Handle: RePEc:nbr:nberwo:7146
Template-Type: ReDIF-Paper 1.0
Title: The Science of Monetary Policy: A New Keynesian Perspective
Classification-JEL: E0; E5
Author-Name: Richard Clarida
Author-Person: pcl69
Author-Name: Jordi Gali
Author-Person: pga43
Author-Name: Mark Gertler
Author-Person: pge11
Note: EFG ME
Number: 7147
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7147
File-URL: http://www.nber.org/papers/w7147.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Literature, Vol. 37, no. 2 (December 1999): 1661-1707.
Abstract: This paper reviews the recent literature on monetary policy rules. We exploit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. We also characterize the gains from making a credible commitment to fight inflation. In contrast to conventional wisdom, we show that gains from commitment may emerge even if the central bank is not trying to inadvisedly push output above its natural level. We also consider the implications of frictions such as imperfect information.
Handle: RePEc:nbr:nberwo:7147
Template-Type: ReDIF-Paper 1.0
Title: American Living Standards: Evidence from Recreational Expenditures
Classification-JEL: D12; D63
Author-Name: Dora L. Costa
Author-Person: pco358
Note: DAE
Number: 7148
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7148
File-URL: http://www.nber.org/papers/w7148.pdf
File-Format: application/pdf
Abstract: I use consumer expenditure surveys from 1888-1890, 1917-1919, 1935-1936, 1972-1973, and 1991 to determine whether trends in real income per capita are consistent with trends in recreational budget shares and to establish trends in inequality in recreational expenditures. I find that changes in real total expenditures per capita are likely to underestimate the increase in living standards, particularly during times of innovation in consumer goods and reductions in hours such as in the 1920s and the 1970s and 1980s. Real per capita total expenditures fell by 1.2 percent per year between 1919 and 1935 and rose by 1.8 percent per year between 1972 and 1991. In contrast, trends in recreational expenditure shares imply that between 1919 and 1935 real per capita total expenditures rose by 1.2 percent per year and between 1972 and 1991 by 3.6 percent per year. The bias in conventional measures of per capita real total expenditures may therefore have been 2.4 percentage points per year between 1919 and 1935 and 1.8 percentage points per year between 1972 and 1991. I also find that lower income households experienced a larger increase in living standards than higher income households, perhaps because of decreases in the work hours of lower relative to higher income workers, technological change that lowered the price of recreational goods and created new products that increased demand for recreation, and increased public provision of recreational goods.
Handle: RePEc:nbr:nberwo:7148
Template-Type: ReDIF-Paper 1.0
Title: Patterns of Trade in the Market for Used Durables: Theory and Evidence
Classification-JEL: D42; L62
Author-Name: Robert H. Porter
Author-Person: ppo97
Author-Name: Peter Sattler
Note: IO
Number: 7149
Creation-Date: 1999-05
Order-URL: http://www.nber.org/papers/w7149
File-URL: http://www.nber.org/papers/w7149.pdf
File-Format: application/pdf
Publication-Status: published as With Kenneth Hendricks, published as "Bidding Behaviour in OCS Drainage Auctions: Theory and Evidence", European Economic Review, Vol. 37, nos. 2/3 (1993): 320-328.
Abstract: The consumption value of a durable good diminishes as it ages due to physical deterioration and consumers' preference for the new. We develop a model of consumer specialization and trade in the market for used durables based on imperfect substitutability. Imperfect substitutability across vintages is reflected in a declining market price over time. Heterogeneous consumers maximize utility by specializing in durables of differing ages. Consumers must trade to acquire their preferred vintage each period. When there are transaction costs in the secondhand market, the volume of trade due to specialization increases with imperfect substitutability. We examine the determinants of vehicle ownership transfers in Illinois, a measure of trade volume. Observed patterns of trade across automobile model years are consistent with our model, and inconsistent with a model of adverse selection.
Handle: RePEc:nbr:nberwo:7149
Template-Type: ReDIF-Paper 1.0
Title: Capital Mobility, Distributive Conflict, and International Tax Coordination
Classification-JEL: F21; F42
Author-Name: Dani Rodrik
Author-Person: pro60
Author-Name: Tanguy van Ypersele
Note: IFM ITI PE
Number: 7150
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7150
File-URL: http://www.nber.org/papers/w7150.pdf
File-Format: application/pdf
Publication-Status: published as Rodrik, Dani and Tanguy Van Ypersele. "Capital Mobility, Distributive Conflict And International Tax Coordination," Journal of International Economics, 2001, v54(1,Jun), 57-73.
Abstract: Basic economic theory identifies a number of efficiency gains that derive from international capital mobility. But just as free trade in goods, there is no guarantee that capital mobility makes everyone better off. Consequently, capital mobility may be politically unsustainable even though it enhances efficiency. This paper discusses how such a dilemma might arise, and suggests that international tax coordination might serve as a way out under some circumstances.
Handle: RePEc:nbr:nberwo:7150
Template-Type: ReDIF-Paper 1.0
Title: Legal Structure, Financial Structure, and the Monetary Policy Transmission Mechanism
Classification-JEL: E5; G3
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Note: ME
Number: 7151
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7151
File-URL: http://www.nber.org/papers/w7151.pdf
File-Format: application/pdf
Publication-Status: published as Economic Policy Review of the Federal Reserve Bank of New York, Vol. 5,no. 2 (July 1999): 9-28.
Abstract: Among the many challenges facing the new Eurosystem is the possibility that the regions of the euro area will respond differently to interest rate changes. In this essay, I provide evidence that differences in financial structure are the proximate cause for these national asymmetries in the monetary policy transmission mechanism, and that these differences in financial structure are a result of differences in legal structure. My conclusion is that unless legal structures are harmonized across Europe, the financial structures and monetary transmission mechanisms of the European union countries will remain diverse.
Handle: RePEc:nbr:nberwo:7151
Template-Type: ReDIF-Paper 1.0
Title: The Equilibrium Degree of Transparency and Control in Monetary Policy
Classification-JEL: E52; E58
Author-Name: Jon Faust
Author-Person: pfa9
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: ME
Number: 7152
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7152
File-URL: http://www.nber.org/papers/w7152.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit, and Banking, Vol. 34, no. 2 (May 2002): 520-539
Abstract: We examine a central bank's endogenous choice of degree of control and degree of transparency, under both commitment and discretion. Under commitment, we find that the deliberate choice of sloppy control is far less likely under a standard central-bank loss function than reported for a less standard loss function by Cukierman and Meltzer. Under discretion, maximum degree of control is the only equilibrium. With regard to the degree of transparency, under commitment, a sufficiently patient bank with sufficiently low average inflation bias will always choose minimum transparency. Under discretion, both minimum and maximum transparency are equilibria. We argue that discretion is the more realistic assumption for the choice of control and that commitment is more realistic for the choice of transparency. A maximum feasible degree of control with a minimum degree of transparency is then a likely outcome. The Bundesbank and the Federal Reserve System are, arguably, examples of this outcome.
Handle: RePEc:nbr:nberwo:7152
Template-Type: ReDIF-Paper 1.0
Title: Regional Contagion and the Globalization of Securities Markets
Classification-JEL: F30; F34
Author-Name: Guillermo A. Calvo
Author-Person: pca694
Author-Name: Enrique G. Mendoza
Author-Person: pme30
Note: ITI
Number: 7153
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7153
File-URL: http://www.nber.org/papers/w7153.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 51 (June 2000): 79-114.
Abstract: This paper argues that the globalization of securities markets may promote contagion among investors by weakening incentives for gathering costly country-specific information and by strengthening incentives for imitating arbitrary market portfolios. In the presence of short-selling constraints, the utility gain of gathering information at a fixed cost converges to a constant level and may diminish as securities markets grow. Moreover, if a portfolio manager's marginal cost for yielding below-market returns exceeds the marginal gain for above-market returns, there is a range of optimal portfolios in which all investors imitate arbitrary market portfolios and this range widens as the market grows. Numerical simulations suggest that these frictions can have significant quantitative implications and they may induce large capital flows in emerging markets.
Handle: RePEc:nbr:nberwo:7153
Template-Type: ReDIF-Paper 1.0
Title: In Search of Substitution Between Foreign Production and Exports
Classification-JEL: F21; F23
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Note: ITI
Number: 7154
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7154
File-URL: http://www.nber.org/papers/w7154.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. "In Search Of Substitution Between Foreign Production And Exports," Journal of International Economics, 2001, v53(1,Feb), 81-104.
Abstract: Are foreign production and exports substitutes or complements? The continuing globalization of production makes the question of the relationship between trade and foreign direct investment ever more important. Standard theory of the multinational corporation (MNC) assumes substitution, while previous empirical work examining the relationship has generally found strong evidence of complementarity. This study examines product-level data, which more closely fits the assumption of a single-product firm often used in MNC theory, and finds substantial evidence for both a substitution and a complementarity effect between affiliate production and exports with Japanese automobile parts for the U.S. market. I also test for and find evidence of substitution using product-level data on a set of Japanese-produced final consumer goods. Thus, product-level data allows one to separately identify substitution from complementarity effects (here from vertical production relationships), rather than try to infer them from estimates using more aggregate data. In this sense, the paper highlights the importance of matching the level of data aggregation with the hypotheses being tested. This is particularly true at a time when there is an increasing proliferation of available microeconomic data in the field of international economics.
Handle: RePEc:nbr:nberwo:7154
Template-Type: ReDIF-Paper 1.0
Title: Participation in Heterogeneous Communities
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Eliana La Ferrara
Author-Person: pla68
Note: PE
Number: 7155
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7155
File-URL: http://www.nber.org/papers/w7155.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto and Elliana La Ferrara. "Participation In Heterogeneous Communities," Quarterly Journal of Economics, 2000, v115(3,Aug), 847-904.
Abstract: This paper studies both theoretically and empirically the determinants of group formation and of the degree of participation when the population is heterogeneous, both in terms of income and race or ethnicity. We are especially interested in whether and how much the degree of heterogeneity in communities influences the amount of participation in different types of groups. Using survey data on group membership and data on US localities, we find that, after controlling for many individual characteristics, participation in social activities is significantly lower in more unequal and in more racially or ethnically fragmented localities. We also find that those individuals who express views against racial mixing are less prone to participate in the groups the more racially heterogeneous their community is.
Handle: RePEc:nbr:nberwo:7155
Template-Type: ReDIF-Paper 1.0
Title: How Offshore Financial Competition Disciplines Exit Resistence by Incentive-Conflicted Bank Regulators
Classification-JEL: G21; G28
Author-Name: Edward J. Kane
Author-Person: pka853
Note: CF
Number: 7156
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7156
File-URL: http://www.nber.org/papers/w7156.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Services Research, Vol. 16, no. 2-3 (1999): 265-291.
Abstract: This paper studies the impact of technological change and regulatory competition on governmental efforts to generate rents for banks in two stylized regulatory environments. In the first environment, incentive-conflicted regulators attempt to create rents by restricting the size and scope of individual banking organizations. In the second, rents come from efforts to supply deposit guarantees to troubled banks. In both cases, innovations in financial technology and in competing domestic and offshore regulatory arrangements make the costs of delivering rents to banks more transparent to taxpayers and encourage customers to push rent-dependent banking systems into crisis. This analysis portrays the banking crises that have roiled world markets in recent years as information-producing events that identify and discredit inefficient strategies of regulating banking markets.
Handle: RePEc:nbr:nberwo:7156
Template-Type: ReDIF-Paper 1.0
Title: An International Dynamic Asset Pricing Model
Classification-JEL: G0; F3
Author-Name: Robert J. Hodrick
Author-Person: pho115
Author-Name: David Tat-Chee Ng
Author-Person: png43
Author-Name: Paul Sengmueller
Note: AP IFM
Number: 7157
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7157
File-URL: http://www.nber.org/papers/w7157.pdf
File-Format: application/pdf
Publication-Status: published as International Tax and Public Finance, Vol. 6, no. 4 (November 1999): 597-620
Abstract: We examine the ability of a dynamic asset-pricing model to explain the returns on G7-country stock market indices. We extend Campbell's (1996) asset-pricing model to investigate international equity returns. We also utilize and evaluate recent evidence on the predictability of stock returns. We find some evidence for the role of hedging demands in explaining stock returns and compare the predictions of the dynamic model to those from the static CAPM. Both models fail in their predictions of average returns on portfolios of high book-to-market stocks across countries.
Handle: RePEc:nbr:nberwo:7157
Template-Type: ReDIF-Paper 1.0
Title: Conflicts and Common Interests in Committees
Classification-JEL: D00; J00
Author-Name: Hao Li
Author-Name: Sherwin Rosen
Author-Name: Wing Suen
Author-Person: psu33
Note: LS IO
Number: 7158
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7158
File-URL: http://www.nber.org/papers/w7158.pdf
File-Format: application/pdf
Publication-Status: published as Li, Hao, Sherwin Rosen and Wing Suen. "Conflicts And Common Interests In Committees," American Economic Review, 2001, v91(5,Dec), 1478-1497.
Abstract: Committees improve decisions by pooling independent information of members, but promote manipulation, obfuscation, and exaggeration of private evidence when members have conflicting preferences. We study how self-interest mediates these conflicting forces. When members' preferences differ, no person ever submits a report that allows perfect inference of his private information. Instead, equilibrium strategies are many-to-one mappings that transform continuous data into ordered ranks: voting procedures are the equilibrium methods of achieving a consensus in committees. Voting necessarily coarsens the transmission of information among members, but is necessary to control conflicts of interest. The degree of coarseness of the equilibrium voting procedure is determined by the extent of conflicting preferences. Though self-interests necessarily reduce the efficient use of information in committees, real information sharing occurs nonetheless. Committees make better decisions on behalf of the average' (Pareto weighted) member than would any individual on the basis of own information. Committees are viable, though imperfect ways of making decisions when information is dispersed among members.
Handle: RePEc:nbr:nberwo:7158
Template-Type: ReDIF-Paper 1.0
Title: Profitability of Momentum Strategies: An Evaluation of Alternative Explanations
Classification-JEL: G12
Author-Name: Narasimhan Jegadeesh
Author-Name: Sheridan Titman
Author-Person: pti51
Note: AP CF
Number: 7159
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7159
File-URL: http://www.nber.org/papers/w7159.pdf
File-Format: application/pdf
Publication-Status: published as Jegadeesh, Narasimhan and Sheridan Titman. "Profitability Of Momentum Strategies: An Evaluation Of Alternative Explanations," Journal of Finance, 2001, v56(2,Apr), 699-720.
Abstract: This paper evaluates various explanations for the profitability of momentum strategies documented in Jegadeesh and Titman (1993). The evidence indicates that momentum profits have continued in the 1990's suggesting that the original results were not a product of data snooping bias. The paper also examines the predictions of recent behavioral models that propose that momentum profits are due to delayed overreactions which are eventually reversed. Our evidence provides support for the behavioral models, but this support should be tempered with caution. Although we find no evidence of significant return reversals in the 2 to 3 years following the following formation date, there are significant return reversals 4 to 5 years after the formation date. Our analysis of post-hiding period returns sharply rejects a claim in the literature that the observed momentum profits can be explained completely by the cross-sectional dispersion in expected returns.
Handle: RePEc:nbr:nberwo:7159
Template-Type: ReDIF-Paper 1.0
Title: Designing Indexed Units of Account
Classification-JEL: E42
Author-Name: Robert J. Shiller
Author-Person: psh69
Note: EFG ME
Number: 7160
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7160
File-URL: http://www.nber.org/papers/w7160.pdf
File-Format: application/pdf
Publication-Status: published as Klein, Lawrence R. (ed.) Long-Run Growth and Short-Run Stabilization: Essays in Memory of Albert Ando. Cheltenham, U.K. and Northampton, MA: Elgar, 2006.
Abstract: An indexed unit of account is a unit of measurement defined using an index such as a consumer price index so that prices defined in terms of these units will automatically adjust to changing economic conditions. Evidence on sticky prices and money illusion, and evidence from countries (notably Chile) that have created indexed units of account, suggests that creating such units is an important policy option for governments in countries with unstable price levels. A model is given that shows the dynamics of money prices when prices are expressed in the units. Results from the model suggest some design elements for an indexed unit of account: institutions to promote broad use of the unit for pricing, and a formal policy to increase the frequency of index computation when the price level becomes more volatile.
Handle: RePEc:nbr:nberwo:7160
Template-Type: ReDIF-Paper 1.0
Title: Central Bank Credibility: Why Do We Care? How Do We Build It?
Classification-JEL: E5
Author-Name: Alan S. Blinder
Author-Person: pbl41
Note: EFG ME
Number: 7161
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7161
File-URL: http://www.nber.org/papers/w7161.pdf
File-Format: application/pdf
Publication-Status: published as Blinder, A. S. "Central-Bank Credibility: Why Do We Care? How Do We Build It?," American Economic Review, 2000, v90(5,Dec), 1421-1431.
Abstract: Central bank credibility plays a pivotal role in much of the modern literature on monetary policy, yet it is difficult to measure or even assess objectively. A survey of central bankers was conducted to determine their attitudes on two important issues: why credibility matters, and how credibility can be built. The central bankers' answers are compared with the responses of NBER-affiliated macro and monetary economists. The two groups agree much more than they disagree. They are particularly united in their evaluations of ways to make a central bank credible -- assigning high ratings to the central bank's track record and low ratings to theoretical ideas like precommitment and incentive-compatible contracts.
Handle: RePEc:nbr:nberwo:7161
Template-Type: ReDIF-Paper 1.0
Title: Asset Pricing Models: Implications for Expected Returns and Portfolio Selection
Classification-JEL: G1
Author-Name: A. Craig MacKinlay
Author-Name: Lubos Pastor
Author-Person: ppa276
Note: AP
Number: 7162
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7162
File-URL: http://www.nber.org/papers/w7162.pdf
File-Format: application/pdf
Publication-Status: published as MacKinlay, A. Craig and L. Pastor. "Asset Pricing Models: Implications For Expected Returns And Portfolio Selection," Review of Financial Studies, 2000, v13(4,Winter), 883-916.
Abstract: Implications of factor-based asset pricing models for estimation of expected returns and for portfolio selection are investigated. In the presence of model mispricing due to a missing risk factor, the mispricing and the residual covariance matrix are linked together. Imposing a strong form of this link leads to expected return estimates that are more precise and more stable over time than unrestricted estimates. Optimal portfolio weights that incorporate the link when no factors are observable are proportional to expected return estimates, effectively using an identity matrix as a covariance matrix. The resulting portfolios perform well both in simulations and in out-of-sample comparisons.
Handle: RePEc:nbr:nberwo:7162
Template-Type: ReDIF-Paper 1.0
Title: Multinational Firms: Reconciling Theory and Evidence
Classification-JEL: F12; F23
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Keith E. Maskus
Author-Person: pma232
Note: ITI
Number: 7163
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7163
File-URL: http://www.nber.org/papers/w7163.pdf
File-Format: application/pdf
Publication-Status: published as With Robert C. Feenstra and William Zeile, published as "Accounting for Growth with New Inputs: Theory and Evidence", American Economic Review, Vol. 82, no. 2 (1992): 418-421.
Publication-Status: published as Multinational Firms: Reconciling Theory and Evidence, James R. Markusen, Keith E. Maskus. in Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, Blomstrom and Goldberg. 2001
Abstract: An important component of Robert Lipsey's work has been his research on multinational firms, and his careful documentation of their behavior in terms of production and intra-firm trade. In this paper, we extend recent theory referred to as the knowledge-capital model', which simultaneously generates motives for both horizontal and vertical multinational production. We use this model to derive predictions about foreign affiliates' pattern of production for local markets versus production for exports as functions of country characteristics such as market sizes, size differences, and relative endowment differences. These predictions are then taken to data on affiliate production and trade. Results confirm several hypotheses. The ratio of production for export sales to production for local sale by affiliates of foreign multinationals depends negatively on market size, investment and trade costs in the host country, and positively on the relative skilled-labor abundance of the parent country (skilled-labor scarcity of the host country).
Handle: RePEc:nbr:nberwo:7163
Template-Type: ReDIF-Paper 1.0
Title: Discriminating Among Alternative Theories of the Multinational Enterprise
Classification-JEL: F12; F23
Author-Name: James R. Markusen
Author-Person: pma528
Author-Name: Keith E. Maskus
Author-Person: pma232
Note: ITI
Number: 7164
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7164
File-URL: http://www.nber.org/papers/w7164.pdf
File-Format: application/pdf
Publication-Status: published as Topics in Empirical International Economics, Blomstrom, M. and L.Goldberg,eds., Chicago: University of Chicago Press, 2000, forthcoming.
Publication-Status: published as Markusen, J. R. and K. E. Maskus. "Discriminating Among Alternative Theories Of The Multinational Enterprise," Review of International Economics, 2002, v10(4,Nov), 695-707.
Publication-Status: published as Multinational Firms: Reconciling Theory and Evidence, James R. Markusen, Keith E. Maskus. in Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, Blomstrom and Goldberg. 2001
Abstract: Recent theoretical developments have incorporated endogenous multinational firms into the general-equilibrium model of trade. One simple taxonomy separates the theory into vertical' models in which firms geographically separate activities by stages of production and horizontal' models of multi-plant firms which duplicate roughly the same activities in many countries. We refer to a hybrid of these two as the 'knowledge capital model'. In this paper, we nest these three models within an unrestricted model. Econometric tests give strong support to the horizontal model and overwhelming reject the vertical model.
Handle: RePEc:nbr:nberwo:7164
Template-Type: ReDIF-Paper 1.0
Title: Sticky Prices, Coordination and Collusion
Classification-JEL: D43; E12
Author-Name: John C. Driscoll
Author-Person: pdr1
Author-Name: Harumi Ito
Note: ME
Number: 7165
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7165
File-URL: http://www.nber.org/papers/w7165.pdf
File-Format: application/pdf
Publication-Status: published as Driscoll, John C. and Harumi Ito. "Sticky Prices, Coordination And Enforcement," Topics in Macroeconomics, 2003, v3, Article 10.
Abstract: New Keynesian models of price setting under monopolistic competition involve two kinds of inefficiency: the price level is too high because firms ignore an aggregate demand externality, and when there are costs of changing prices, price stickiness may be an equilibrium response to changes in nominal money even when all agents would be better off if all adjusted prices. This paper models the consequences of allowing firms to coordinate, enforcing the coordination by punishing deviators; this is equivalent to modeling firms as an implicit cartel playing a punishment game. We show that coordination can partially or fully eliminate the first kind of inefficiency, depending on the magnitude of the punishment, but cannot always remove the second. The response of prices to a monetary shock will depend on the magnitude of the punishment, and may be asymmetric. Implications for the welfare cost of fluctuations also differ from the standard monopolistic competition case.
Handle: RePEc:nbr:nberwo:7165
Template-Type: ReDIF-Paper 1.0
Title: The Benefits of Reducing Gun Violence: Evidence from Contingent-Valuation Survey Data
Classification-JEL: D8; J17
Author-Name: Jens Ludwig
Author-Name: Philip J. Cook
Author-Person: pco30
Note: EH
Number: 7166
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7166
File-URL: http://www.nber.org/papers/w7166.pdf
File-Format: application/pdf
Publication-Status: published as Ludwig, Jens and Philip J. Cook. "The Benefits Of Reducing Gun Violence: Evidence From Contingent-Valuation Survey Data," Journal of Risk and Uncertainty, 2001, v22(3,May), 207-226.
Abstract: This paper presents the first attempt to estimate the benefits of reducing crime using the contingent-valuation (CV) method. We focus on gun violence, a crime of growing policy concern in America. Our data come from a national survey in which we ask respondents referendum-type questions that elicit their willingness-to-pay (WTP) to reduce gun violence by 30 percent. We estimate that the public's WTP to reduce gun violence by 30 percent equals $23.8 billion, or $750,000 per injury. Our estimate implies a statistical value of life ($4.05 to $6.25 million) that is quite consistent with those derived from other methods.
Handle: RePEc:nbr:nberwo:7166
Template-Type: ReDIF-Paper 1.0
Title: Dress for Success -- Does Primping Pay?
Classification-JEL: J19; J70
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Author-Name: Xin Meng
Author-Person: pme170
Author-Name: Junsen Zhang
Author-Person: pzh194
Note: LS
Number: 7167
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7167
File-URL: http://www.nber.org/papers/w7167.pdf
File-Format: application/pdf
Publication-Status: published as Labour Economics, Vol. 9, no. 3 (July 2002): 361-373
Abstract: A unique survey of Shanghai residents in 1996 that combined labor-market information, appraisals of respondents' beauty, and household expenditures allows us to examine the relative magnitudes of the investment and consumption components of women's spending on beauty-enhancing goods and services. We find that beauty raises women's earnings (and to a lesser extent, men's) adjusted for a wide range of controls. Additional spending on clothing and cosmetics has a generally positive but decreasing marginal impact on a woman's perceived beauty. The relative sizes of these effects demonstrate that such purchases pay back at most 10 percent of each unit of expenditure in the form of higher earnings. Most such spending represents consumption.
Handle: RePEc:nbr:nberwo:7167
Template-Type: ReDIF-Paper 1.0
Title: Selection Effects in the Market for Individual Annuities: New Evidence from the United Kingdom
Classification-JEL: H5; J2
Author-Name: Amy Finkelstein
Author-Person: pfi264
Author-Name: James Poterba
Author-Person: ppo19
Note: AG PE
Number: 7168
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7168
File-URL: http://www.nber.org/papers/w7168.pdf
File-Format: application/pdf
Publication-Status: published as Finkelstein, Amy and James Poterba. "Selection Effects In The United Kingdom Individual Annuities Market," Economic Journal, 2002, v112(476,Jan), 28-50.
Abstract: This paper presents new evidence on the importance of adverse selection in individual annuity markets. It focuses on the individual annuity market in the United Kingdom, which provides an excellent empirical setting for studying selection effects. In addition to a voluntary annuity market, the U.K. also has a compulsory annuity market in which individuals in some types of retirement plans are effectively required to purchase retirement annuities. Two empirical regularities support standard models of adverse selection. First, annuitants as a group are longer-lived than randomly selected individuals in the population at large. The expected present value of the annuity payout stream from a typical voluntary annuity is thirteen percent higher for a typical 65-year-old male voluntary annuitant than for a typical 65-year-old male in the U.K. population. This is simply the result of differential mortality between the annuitant population and the population at large. Selection effects are more pronounced in the voluntary than in the compulsory annuity market, but even compulsory annuitants are not a random sample from the U.K. population. In the compulsory annuity market, the cost of adverse selection is between one third and one half of that in the voluntary annuity market. Second, annuitants select across different types of annuity products with different payout profiles, even within the compulsory market. The expected present values of payouts from inflation-indexed annuities and from nominal escalating annuities are lower than those from nominal annuities. This is consistent with longer-lived individuals choosing annuity products with greater payouts in the distant future. We find some puzzling evidence, however, in the relative pricing of nominal escalating annuities and inflation-indexed annuities. In addition to providing evidence on adverse selection, the U.K. annuity market can also be used to study how the price of an insurance product is related to the quantity of insurance purchased. Prices per annuity unit are lower for larger annuity policies than for smaller policies. Some theoretical models of insurance demand, which suggest that poorer risks should purchase more insurance and do not consider the fixed costs of issuing annuity or insurance policies, are inconsistent with this result.
Handle: RePEc:nbr:nberwo:7168
Template-Type: ReDIF-Paper 1.0
Title: New Facts in Finance
Classification-JEL: G00
Author-Name: John H. Cochrane
Author-Person: pco57
Note: AP EFG
Number: 7169
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7169
File-URL: http://www.nber.org/papers/w7169.pdf
File-Format: application/pdf
Publication-Status: published as Economic Perspectives, Federal Reserve Bank of Chicago, Vol. 23, no. 3 (1999): 36-58
Abstract: The last 15 years have seen a revolution in the way financial economists understand the world around us. We once thought that stock and bond returns were essentially unpredictable. Now we recognize that stock and bond returns have a substantial predictable component at long horizons. We once thought the capital asset pricing model (CAPM) provided a good description of why average returns on some stocks, portfolios, funds or strategies were higher than others. Now we recognize that the average returns of many investment opportunities cannot be explained by the CAPM, and multifactor models' have supplanted the CAPM to explain them. We once thought that long-term interest rates reflected expectations of future short term rates and that interest rate differentials across countries reflected expectations of exchange-rate depreciation. Now, we see time-varying risk premia in bond and foreign exchange markets as well as in stock markets. Once, we thought that mutual fund average returns were well explained by the CAPM. Now, we recognize ``value'' and other high return strategies in funds, and slight persistence in fund performance. In this article, I survey these new facts. I show how they are related. Each case uses price variables to infer market expectations of future returns; each case notices that an offsetting adjustment (to dividends, interest rates, or exchange rates) seems to be absent or sluggish. Each case suggests that financial markets offer rewards in the form of average returns for holding risks related to recessions and financial distress, in addition to the risks represented by overall market movements.
Handle: RePEc:nbr:nberwo:7169
Template-Type: ReDIF-Paper 1.0
Title: Portfolio Advice for a Multifactor World
Classification-JEL: G00
Author-Name: John H. Cochrane
Author-Person: pco57
Note: AP EFG
Number: 7170
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7170
File-URL: http://www.nber.org/papers/w7170.pdf
File-Format: application/pdf
Publication-Status: published as Economic Perspectives, Federal Reserve Bank of Chicago, Vol. 23, no. 3(1999): 59-78.
Abstract: Asset returns, it turns out, do not follow the Capital Asset Pricing Model, and are somewhat predictable over time. I survey and interpret the large body of recent work that adapts traditional portfolio theory to answer, what should an investor do about these new facts in finance? I survey the extension of the famous 2 - fund' theorem to an N-fund'' theorem in which investors either hedge or assume the additional, non-market, sources of priced risk; I survey the burgeoning literature on time-varying portfolio rules and the Bayesian literature that advocates a great deal of caution. In a survey, I emphasize the risk-sharing nature of asset markets, I note the likelihood that many supposed anomalies will not last, and I emphasize the fact that the average investor must hold the market so portfolio decisions must be driven by differences between an investor and the average investor.
Handle: RePEc:nbr:nberwo:7170
Template-Type: ReDIF-Paper 1.0
Title: The Employment Effects of Recent Minimum Wage Increases: Evidence from a Pre-specified Research Design
Classification-JEL: J38
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 7171
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7171
File-URL: http://www.nber.org/papers/w7171.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David. "The Employment Effects Of Minimum Wages: Evidence From A Prespecified Research Design," Industrial Relations, 2001, v40(1,Jan), 121-144.
Abstract: This paper presents evidence on the employment effects of recent minimum wage increases from a pre-specified research design that entailed committing to a detailed set of statistical analyses prior to 'going to' the data. Despite the limited data to which the pre-specified research design can be applied, evidence of disemployment effects of minimum wages is often found where we would most expect it--for younger, less-skilled workers.
Handle: RePEc:nbr:nberwo:7171
Template-Type: ReDIF-Paper 1.0
Title: Who Benefits from Obtaining a GED? Evidence from High School and Beyond
Classification-JEL: I21; J24
Author-Name: Richard J. Murnane
Author-Person: pmu87
Author-Name: John B. Willett
Author-Name: John H. Tyler
Author-Person: pty2
Note: LS CH
Number: 7172
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7172
File-URL: http://www.nber.org/papers/w7172.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, Vol. 82, no. 1 (February 2000): 23-37.
Abstract: This paper examines the value of the GED credential and the conventional high school diploma in explaining the earnings of 27-year-old males in the early 1990s. The data base is the High School & Beyond sophomore cohort. We replicate the basic findings of prior studies that implicitly assume the labor market value of the GED credential does not depend on the skills with which dropouts left school. We show that these average effects mask a more complicated pattern. Obtaining a GED is associated with higher earnings at age 27 for those male dropouts who had very weak cognitive skills as tenth graders, but not for those who had stronger cognitive skills as tenth graders.
Handle: RePEc:nbr:nberwo:7172
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Fiscal Incentives on Student Disability Rates
Classification-JEL: H7
Author-Name: Julie Berry Cullen
Author-Person: pcu44
Note: CH PE
Number: 7173
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7173
File-URL: http://www.nber.org/papers/w7173.pdf
File-Format: application/pdf
Publication-Status: published as Cullen, Julie Berry. "The Impact Of Fiscal Incentives On Student Disability Rates," Journal of Public Economics, 2003, v87(7-8,Aug), 1557-1589.
Abstract: Student disability rates have grown by over 50 percent over the past two decades and are continuing to rise. Policy discussion has linked this trend to state funding formulas that reward local school districts for identifying additional students with special needs. However, there is little empirical evidence on the role of these fiscal parameters in explaining student disability rates, or, more generally, on the responsiveness of local program take-up rates to intergovernmental fiscal incentives. In order to estimate the elasticity of student disability rates with respect to the generosity of state reimbursements, I use variation in the state aid generated by serving a disabled student across local school districts in Texas from 1991-92 through 1996-97. The take-up response is identified from sharp changes in the relative treatment of districts of differing wealth that arise from court-mandated changes in the structure of school finance equalization. My central estimates imply that fiscal incentives can explain over 35 percent of the recent growth in student disability rates in Texas. The magnitude of the institutional response varies by district size and enrollment concentration, student race/ethnicity composition, and the level of fiscal constraint.
Handle: RePEc:nbr:nberwo:7173
Template-Type: ReDIF-Paper 1.0
Title: Employer Provided Pension Data in the NLS Mature Women's Survey and in the Health and Retirement Study
Classification-JEL: D31; J14
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: LS AG
Number: 7174
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7174
File-URL: http://www.nber.org/papers/w7174.pdf
File-Format: application/pdf
Publication-Status: Published as "Retirement Measures in the Health and Retirement Study", The Journal of Human Resources, Vol. 30 (1995, Supp): 57-83.
Publication-Status: Published as "Effects of Pensions on Savings: Analysis with Data from the Health and Retirement Study", Carnegie-Rochester Conference Series on Public Policy, Vol. 50, no. 1 (June 1999): 271-324.
Publication-Status: published as “Employer Provided Pension Data in the NLS Mature Women’s Survey and in the Health and Retirement Study,” with Thomas Steinmeier, Research In Labor Economics, 2000, vol. 19, pp. 215-252.
Abstract: We compute pension wealth from employer provided pension plan descriptions matched to respondent surveys to the National Longitudinal Survey of Mature Women (NLS-MW) and the Health and Retirement Study (HRS). These calculations provide detailed information on the level and distribution of pension wealth and a variety of incentives from pensions. Differences between the pensions of men and women are largely explained by differences in earnings. However, there also are differences in the shapes of the pension accrual profiles of defined benefit plans that are likely to reflect the lower tenure of women. Pension coverage is lower in the NLS-MW than in the HRS. As a result, pension wealth is lower in the NLS-MW than in the HRS. But the difference in coverage is not due to the effects of pension matching. Pension values for covered respondents are similar between the NLS-MW and HRS surveys. Systematic differences between the surveys in the rate at which pensions were matched do not have a major effect on findings as to the levels and distributions of pension wealth between the surveys.
Handle: RePEc:nbr:nberwo:7174
Template-Type: ReDIF-Paper 1.0
Title: Corporate Focusing and Internal Capital Markets
Author-Name: Frederik P. Schlingemann
Author-Person: psc684
Author-Name: Rene M. Stulz
Author-Name: Ralph A. Walkling
Note: CF
Number: 7175
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7175
File-URL: http://www.nber.org/papers/w7175.pdf
File-Format: application/pdf
Abstract: A sample of firms that focus by divesting at least one segment allows us to investigate the characteristics of segments divested as well as the nature of focusing firms. We find that firms are more likely to divest segments unrelated to the core activities of the firm and that the probability that a segment is divested is inversely related to its relative size within the firm. In fact, a segment's relative size is the variable that has the most explanatory power in predicting which segment a firm divests. We argue that this is consistent with the importance of asset market liquidity as a determinant of the divestiture decision. Financial constraints play an important role in determining which firms focus, which segments these firms divest, and in the market's reaction to divestiture announcements. Focusing firms perform less well and invest significantly less than heir non-focusing counterparts.
Handle: RePEc:nbr:nberwo:7175
Template-Type: ReDIF-Paper 1.0
Title: The Anatomy of Health Insurance
Classification-JEL: I1
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Richard J. Zeckhauser
Author-Person: pze7
Note: AG PE EH
Number: 7176
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7176
File-URL: http://www.nber.org/papers/w7176.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643 Elsevier.
Abstract: This article describes the anatomy of health insurance. It begins by considering the optimal design of health insurance policies. Such policies must make tradeoffs appropriately between risk sharing on the one hand and agency problems such as moral hazard (the incentive of people to seek more care when they are insured) and supplier-induced demand (the incentive of physicians to provide more care when they are well reimbursed) on the other. Optimal coinsurance arrangements make patients pay for care up to the point where the marginal gains from less risk sharing are just offset by the marginal benefits from less wasteful care being provided. Empirical evidence shows that both moral hazard and demand-inducement are quantitatively important. Coinsurance based on expenditure is a crude control mechanism. Moreover, it places no direct incentives on physicians, who are responsible for most expenditure decisions. To place such incentives on physicians is the goal of supply-side cost containment measures, such as utilization review and capitation. This goal motivates the surge in managed care in the United States, which unites the functions of insurance and provision, and allows for active management of the care that is delivered. The analysis then turns to the operation of health insurance markets. Economists generally favor choice in health insurance for the same reasons they favor choice in other markets: choice allows people to opt for the plan that is best for them and encourages plans to provide services efficiently. But choice in health insurance is a mixed blessing because of adverse selection -- the tendency for the sick to choose more generous insurance than the healthy. When sick and healthy enroll in different plans, plans disproportionately composed of poor risks have to charge more than they would if they insured an average mix of people. The resulting high premiums create two adverse effects: they discourage those who are healthier but would prefer generous care from enrolling in those plans (because the premiums are so high), and they encourage plans to adopt measures that deter the sick from enrolling (to reduce their overall costs). The welfare losses from adverse selection are large in practice. Added to them are further losses from having premiums vary with observable health status. Because insurance is contracted for annually, people are denied a valuable form of intertemporal insurance -- the right to buy health coverage at average rates in the future should they get sick today. As the ability to predict future health status increases, the lack of intertemporal insurance will become more problematic. The article concludes by relating health insurance to the central goal of medical care expenditures - better health. Studies to date are not clear on which approaches to health insurance promote health in the most cost-efficient manner. Resolving this question is the central policy concern in health economics.
Handle: RePEc:nbr:nberwo:7176
Template-Type: ReDIF-Paper 1.0
Title: Monetary Policy Issues for the Eurosystem
Classification-JEL: E42; E52
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: IFM ME
Number: 7177
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7177
File-URL: http://www.nber.org/papers/w7177.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy, Vol. 51 (December 1999): 79-136
Publication-Status: published as Lars E.O. Svensson, 1999. "Monetary policy issues for the Eurosystem," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: The paper discusses the choice between inflation targeting and monetary targeting as a strategy for the Eurosystem, the actual strategy the Eurosystem announced in the fall of 1998, the framework for policy decisions appropriate for achieving the goals of the Eurosystem, the role of exchange rate management in the EMU, and the accountability and transparency of the Eurosystem. The choice between inflation targeting and monetary targeting is, in effect, a choice between high and low transparency. Inflation targeting and monetary targeting, in practice, imply similar policy decisions, but monetary targeting implies that policy decisions are explained in terms of money-growth developments that are not essential for policy. The Eurosystem has specified an operational inflation target, although in a somewhat ambiguous way. More importantly, its announced monetary strategy is deficient, since it proposes a prominent role for an essentially irrelevant money-growth indicator in analysis and communication, but will keep secret the inflation forecast that will, in practice, be the decisive input in policy decisions. Exchange rate policy is controlled by the Council of finance ministers in the EMU; this is a major inconsistency in the Maastricht Treaty and a possible threat to the independence of the Eurosystem. The European Parliament may have a crucial role in ensuring the accountability of the Eurosystem; the minimum transparency needed for effective outside monitoring and evaluation of the Eurosystem's policy decisions seem to require published inflation forecasts and, most likely, published minutes and voting records of the Governing Council.
Handle: RePEc:nbr:nberwo:7177
Template-Type: ReDIF-Paper 1.0
Title: Eurosystem Monetary Targeting: Lessons from U.S. Data
Classification-JEL: E42; E52
Author-Name: Glenn D. Rudebusch
Author-Person: pru10
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: ME
Number: 7179
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7179
File-URL: http://www.nber.org/papers/w7179.pdf
File-Format: application/pdf
Publication-Status: published as Rudebusch, Glenn D. and Lars E. O. Svensson. "Eurosystem Monetary Targeting: Lessons From U.S. Data," European Economic Review, 2002, v46(3,Mar), 417-442.
Abstract: Using a small empirical model of inflation, output, and money estimated on U.S. data, we compare the relative performance of monetary targeting and inflation targeting. The results show that monetary targeting would be quite inefficient, with both higher inflation and output variability. This is true even with a deterministic money demand formulation. In this framework, there is thus no support for the prominent role given to money growth in the Eurosystem's monetary policy strategy.
Handle: RePEc:nbr:nberwo:7179
Template-Type: ReDIF-Paper 1.0
Title: The Stock Market and Capital Accumulation
Author-Name: Robert E. Hall
Note: EFG PR
Number: 7180
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7180
File-URL: http://www.nber.org/papers/w7180.pdf
File-Format: application/pdf
Publication-Status: published as American Economic Review, Vol. 91, no. 5 (December 2001): 1185-1202
Publication-Status: published as Robert E. Hall, 2000. "The stock market and capital accumulation," Proceedings, Federal Reserve Bank of San Francisco, issue Apr.
Abstract: If firms purchase capital up to the point where there is no further marginal benefit, and the firms' securities are equal in value to the capital, then the market value of securities measures the quantity of capital. I explore the implications of this hypothesis using data from U.S. non-farm, non-financial corporations over the past 50 years. The hypothesis implies that corporations have formed large amounts of intangible capital, especially in the past decade. The resources for expanding capital have come from the output of the existing capital. An endogenous growth model can explain the basic facts about corporate performance, with only a modest increase in the productivity of capital in the 1990s.
Handle: RePEc:nbr:nberwo:7180
Template-Type: ReDIF-Paper 1.0
Title: Reorganization
Author-Name: Robert E. Hall
Note: EFG PR
Number: 7181
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7181
File-URL: http://www.nber.org/papers/w7181.pdf
File-Format: application/pdf
Publication-Status: published as Hall, Robert E., 2000. "Reorganization," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 52(1), pages 1-22, June.
Abstract: One of the productive activities engaging the work force is reorganizing. When factors of production are better matched, productivity is higher. The probabilistic matching model of Diamond, Mortensen, and others provides a way to make the idea of reorganization precise. Because the flow of organizational effort generates benefits lasting well into the future, it is appropriate to think of organizational capital. Unemployment-job seeking-is one of the inputs to organization. The flow of organizational effort represented by unemployment is analogous to the flow of physical investment. When an adverse technology shock causes job destruction, the economy substitutes the formation of new organizational capital for the flow of output. An increase in the interest rate can cause intertemporal substitution toward lower job destruction and less reorganization, but this effect may not come into play for a brief unexpected increase, and may be overwhelmed by intertemporal substitution in physical capital.
Handle: RePEc:nbr:nberwo:7181
Template-Type: ReDIF-Paper 1.0
Title: Trends in Self-Employment Among White and Black Men: 1910-1990
Classification-JEL: J0; J4
Author-Name: Robert W. Fairlie
Author-Person: pfa338
Author-Name: Bruce D. Meyer
Author-Person: pme273
Note: LS
Number: 7182
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7182
File-URL: http://www.nber.org/papers/w7182.pdf
File-Format: application/pdf
Publication-Status: published as Fairlie, Robert W. and Bruce D. Meyer. "Trends In Self-Employment Among White And Black Men During The Twentieth Century," Journal of Human Resources, 2000, v35(4,Fall), 643-669.
Abstract: We examine trends in self-employment among white and black men from 1910 to 1990 using Census and CPS microdata. Self-employment rates fell over most of the century and then started to rise after 1970. For white men, we find that the decline was due to declining rates within industries, but was counterbalanced somewhat by a shift in employment towards high self-employment industries. Recently, the increase in self-employment was caused by an end to the within industry decline and the continuing shift in employment towards high self-employment industries. We find that the trends in self-employment average returns do not easily explain the decline in self-employment from 1950 to 1970, nor the increase from 1970 to 1990. We also find that changes in tax rates, social security benefits, and immigration patterns do not explain the recent upturn in self-employment. For black men, we find that the self-employment rate remained at a level of roughly one-third the white rate from 1910 to 1990. The large and constant gap between the black and the white rates is not due to blacks being concentrated in low self-employment rate industries, but is consistent with job opportunities outside of self-employment increasing relative to those in self-employment. However, more recently the relative earnings of blacks in self-employment rose more than relative earnings for whites the near constancy of the relative self-employment rates more surprising. We also find that absent continuing forces holding down black self-employment, a simple inter-generational model of self-employment suggests that black and white rates would converge quickly.
Handle: RePEc:nbr:nberwo:7182
Template-Type: ReDIF-Paper 1.0
Title: Simulating the Transmission of Wealth Inequity via Bequests
Classification-JEL: D31
Author-Name: Jagadeesh Gokhale
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: James Sefton
Author-Name: Martin Weale
Author-Person: pwe195
Note: AG PE
Number: 7183
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7183
File-URL: http://www.nber.org/papers/w7183.pdf
File-Format: application/pdf
Publication-Status: published as Gokhale, Jagadeesh, Laurence J. Kotlikoff, James Sefton and Martin Weale. "Simulating The Transmission Of Wealth Inequality Via Bequests," Journal of Public Economics, 2001, v79(1,Jan), 93-128.
Abstract: This paper develops, calibrates, and simulates a dynamic 88-period OLG model to study the intergenerational transmission of U.S. wealth inequality via bequests. The model features marriage, realistic fertility patterns, random death, assortative mating based on skills, heterogeneous skill endowments, heterogeneous rates of return, skill inheritability, progressive income taxation, and resource annuitization via social security. All bequests arise from imperfect annuitization. Nonetheless, the model generates a realistic ration of aggregate wealth to aggregate labor income, a realistic bequest flow relative to the stock of wealth, and a realistic wealth distribution at retirement. Skill differences, assortative mating, social security, and the time preference are the primary determinants of wealth inequality. Bequests do propagate wealth inequality, but only in the presence of social security, which disproportionately disinherits the lifetime poor. Intergenerational wealth immobility, also considered here, is primarily determined by the inheritance of skills from one's parents and the magnification of the impact of this inheritance by marital sorting.
Handle: RePEc:nbr:nberwo:7183
Template-Type: ReDIF-Paper 1.0
Title: Minimum Wages and On-the-job Training
Classification-JEL: J24; J31
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Jorn-Steffen Pischke
Author-Person: ppi29
Note: LS
Number: 7184
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7184
File-URL: http://www.nber.org/papers/w7184.pdf
File-Format: application/pdf
Publication-Status: published as "Minimum Wages and On-the-job Training," Research in Labor Economics 22, 2003, 159-202.
Abstract: Becker's theory of human capital predicts that minimum wages should reduce training investments for affected workers, because they prevent these workers from taking wage cuts necessary to finance training. We show that when the assumption of perfectly competitive labor markets underlying this theory is relaxed, minimum wages can increase training of affected workers, by inducing firms to train their unskilled employees. More generally, a minimum wage increases training for constrained workers, while reducing it for those taking wage cuts to finance their training. We provide new estimates on the impact of the state and federal increases in the minimum wage between 1987 and 1992 of the training of low wage workers. We find no evidence that minimum wages reduce training. These results are consistent with our model, but difficult to reconcile with the standard theory of human capital.
Handle: RePEc:nbr:nberwo:7184
Template-Type: ReDIF-Paper 1.0
Title: Information and Competition in U.S. Forest Service Timber Auctions
Classification-JEL: D44; D81
Author-Name: Susan Athey
Author-Person: pat6
Author-Name: Jonathan Levin
Author-Person: ple318
Note: IO
Number: 7185
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7185
File-URL: http://www.nber.org/papers/w7185.pdf
File-Format: application/pdf
Publication-Status: published as Athey, Susan and Jonathan Levin. "Information And Competition In U.S. Forest Service Timber Auctions," Journal of Political Economy, 2001, v109(2,Apr), 375-417.
Abstract: This paper studies the bidding behavior of firms in U.S. Forest Service timber auctions in 1976--1990. When conducting timber auctions, the Forest Service publicly announces its estimates of the tract characteristics before the auction, and each bidder additionally has an opportunity to inspect the tract and form its own private estimates. We build a model that incorporates both differential information and the fact that bids placed in timber auctions are multidimensional. The theory predicts that bidders will strategically distort their bids based on their private information, a practice known as 'skewed bidding.' Using a dataset that includes both the public ex ante Forest Service estimates and the ex post realizations of the tract characteristics, we test our model and provide evidence that bidders do possess private information. Our results suggest that private information affects Forest Service revenue and creates allocational inefficiency. Finally, we establish that risk aversion plays an important role in bidding behavior.
Handle: RePEc:nbr:nberwo:7185
Template-Type: ReDIF-Paper 1.0
Title: Was Adherence to the Gold Standard a "Good Housekeeping Seal of Approval" During the Interwar Period?
Classification-JEL: N2
Author-Name: Michael Bordo
Author-Person: pbo243
Author-Name: Michael Edelstein
Note: DAE ME
Number: 7186
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7186
File-URL: http://www.nber.org/papers/w7186.pdf
File-Format: application/pdf
Publication-Status: published as Engerman, Stanley L., Philip T. Hoffman, Jean-Laurent Rosenthal, and Kenneth Sokoloff (eds.) Finance, Intermediaries, and Economic Development. New York: Cambridge University Press, 2003.
Abstract: World War I dramatically altered the world's financial landscape. Most countries left the gold standard, and New York replaced London as the major lender in world capital markets. This paper discusses how the gold exchange standard was reconstructed in the 1920s. We show that the U.S. capital market viewed returning to the gold standard as a signal of financial rectitude, what we have referred to in other work as a 'Good Housekeeping Seal of Approval.' When countries returned to gold, especially when they did so at the prewar parity, they were rewarded with the ability to borrow at substantially lower interest rates. Other signals of financial rectitude, such as small fiscal deficits, apparently carried little weight with lenders.
Handle: RePEc:nbr:nberwo:7186
Template-Type: ReDIF-Paper 1.0
Title: California Banking in the Nineteenth Century: The Art and Method of the Bank of A. Levy
Classification-JEL: N2; G2
Author-Name: Eugene N. White
Author-Person: pwh5
Note: DAE
Number: 7187
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7187
File-URL: http://www.nber.org/papers/w7187.pdf
File-Format: application/pdf
Publication-Status: published as White, Eugene N. "California Banking in the Nineteenth Century: The Art and Method of the Bank of A. Levy." Business History Review 75, 2 (Summer 2001): 297-324.
Abstract: An 1890s loan book of the Bank A. Levy permits a detailed examination of the lending operations of a private bank in California during the National Banking Era (1864-1914). This period has been intensively analyzed at the macroeconomic level, but there are few microeconomic studies of banks. This unregulated bank was well integrated into national money markets and lent to a broad cross section of the community. Although the bank appeared to adhere to the real bills doctrine, it provided medium term uncollateralized financing to business. The bank priced risk carefully, offering rates equal to the lowest in the country to its best customers while charging extraordinarily high rates to borrowers deemed risky. In the absence of modern accounting, close scrutiny of borrowers' businesses and personal lives overcame the asymmetry of information between borrower and lender, enabling the bank to fulfill a special intermediary role.
Handle: RePEc:nbr:nberwo:7187
Template-Type: ReDIF-Paper 1.0
Title: The Employment, Earnings, and Income of Less Skilled Workers Over the Business Cycle
Classification-JEL: J2; I3
Author-Name: Hilary Hoynes
Author-Person: pho278
Note: LS
Number: 7188
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7188
File-URL: http://www.nber.org/papers/w7188.pdf
File-Format: application/pdf
Publication-Status: published as Blank, Rebecca and David Card (eds.) Finding Jobs: Work and Welfare Reform. Russell Sage Foundation, 2002.
Abstract: In this paper, I examine the effect of business cycles on the employment, earnings, and income of persons in different demographic groups. I classify individuals by sex, education, and race. The analysis uses data from the Current Population Survey's Outgoing Rotation Group file, covering the period 1979-1992, and March Annual Demographic files (ADF) covering the period 1975-1997. Many different individual and family outcome measures are considered including: employment to population ratios, weekly earnings, hourly earnings, annual hours, annual earnings, family earnings, family transfer income, and total family income. The regression model is specified such that the key parameters measure how the labor market outcomes of less skilled workers vary with the business cycle relative to the variability for high skill groups. The analysis uses variation across MSAs in the timing and severity of shocks. The results consistently show that individuals with lower education levels, nonwhites, and low skill women experience greater cyclical fluctuation than high skill men. These results are the most striking when examining comprehensive measures of labor force activity such as the likelihood of full-time year around work. Government transfers and the earnings of other family members decrease the differences between groups, as business cycles have more skill-group neutral effects on family income than individual earnings. The paper examines the stability of these results by comparing evidence across the 1982 and 1992 recessions. The evidence suggests that the 1992 recession led to more uniform effects across skill groups than earlier cycles.
Handle: RePEc:nbr:nberwo:7188
Template-Type: ReDIF-Paper 1.0
Title: Ethnic Chinese Networks in International Trade
Author-Name: James E. Rauch
Author-Person: pra166
Author-Name: Vitor Trindade
Author-Person: ptr67
Note: ITI
Number: 7189
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7189
File-URL: http://www.nber.org/papers/w7189.pdf
File-Format: application/pdf
Publication-Status: published as "Ethnic Chinese Networks in International Trade" , Review of Economics and Statistics, Vol. 84 (February 2002): 116-130.
Abstract: Ethnic Chinese networks, as proxied by the product of ethnic Chinese population shares, are found in 1980 and 1990 to have increased bilateral trade both within Southeast Asia and for other country pairs. Their effects within Southeast Asia are much greater for differentiated than for homogeneous products, while for other country pairs their effects are neither economically nor statistically significantly different across commodity groups. We interpret these and other, complementary findings as showing that (1) where ethnic Chinese communities are relatively large fractions of their countries' populations and have relatively numerous direct connections across international borders, they facilitate international trade primarily by helping to match international buyers and sellers in characteristics space, and (2) ethnic Chinese communities that are small fractions of their countries' populations are close-knit and facilitate international trade mainly by enforcing community sanctions that deter opportunistic behavior. The smallest estimated increase in bilateral trade in differentiated products within Southeast Asia attributable to ethnic Chinese networks exceeds 150 percent, suggesting that the informal trade barriers these networks help to overcome are economically important.
Handle: RePEc:nbr:nberwo:7189
Template-Type: ReDIF-Paper 1.0
Title: Education for Growth in Sweden and the World
Author-Name: Alan B. Krueger
Author-Person: pkr63
Author-Name: Mikael Lindahl
Author-Person: pli213
Note: LS CH
Number: 7190
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7190
File-URL: http://www.nber.org/papers/w7190.pdf
File-Format: application/pdf
Publication-Status: published as Swedish Economic Policy Review, Vol. 6, no. 2 (Autumn 1999): 289-339.
Abstract: This paper tries to reconcile evidence on the effect of schooling on income and on GDP growth from the microeconometric and empirical macro growth literatures. Much microeconometric evidence suggests that education is an important causal determinant of income for individuals within countries as diverse as Sweden and the United States. At a national level, however, recent studies have found that increases in educational attainment are unrelated to economic growth. This finding is shown to be a spurious result of the extremely high rate of measurement error in first-differenced cross-country education data. After accounting for measurement error, the effect of changes in educational attainment on income growth in cross-country data is at least as great as microeconometric estimates of the rate of return to years of schooling. We also investigate another finding of the macro growth literature -- that economic growth depends positively on the initial stock of human capital. We find that the effect of the initial level of education on growth is sensitive to the econometric assumptions that are imposed on the data (e.g., constant-coefficient assumption), as well as to the other covariates included in the model. Perhaps most importantly, we find that the initial level of education does not appear to have a significant effect on economic growth among OECD countries. The conclusion comments on policy implications for Sweden based on the human capital literature.
Handle: RePEc:nbr:nberwo:7190
Template-Type: ReDIF-Paper 1.0
Title: Private Pensions, Mortality Risk, and the Decision to Annuitize
Classification-JEL: J26; J14
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Note: AG PE
Number: 7191
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7191
File-URL: http://www.nber.org/papers/w7191.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Jeffrey R. "Private Pensions, Mortality Risk, And The Decision To Annuitize," Journal of Public Economics, 2001, v82(1,Oct), 29-62.
Abstract: This paper examines household decisions about whether or not to annuitize retirement resources. A life-cycle model of consumption, implemented with the use of dynamic programming techniques, is used to construct a utility-based measure of annuity value for individuals and couples in the Health and Retirement Survey. Variation in the calculated annuity equivalent wealth' arises from differences in mortality risk, marital status, risk aversion, and the presence of pre-existing annuities such as Social Security. I find that a one-percentage point increase in the annuity equivalent wealth leads to nearly a one-percentage point increase in the ex ante probability of annuitizing balances in defined contribution pension plans. However, because much of the variation in the expected annuity decision is left unexplained by the life-cycle model, other factors are also analyzed. Health status and an individual's time horizon for financial decision making are significant determinants of the decision. There is no evidence that bequest motives are an important factor in making marginal annuity decisions.
Handle: RePEc:nbr:nberwo:7191
Template-Type: ReDIF-Paper 1.0
Title: Asset Location in Tax-Deferred and Conventional Savings Accounts
Classification-JEL: G11; G23
Author-Name: John B. Shoven
Author-Name: Clemens Sialm
Author-Person: psi59
Note: AG AP PE
Number: 7192
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7192
File-URL: http://www.nber.org/papers/w7192.pdf
File-Format: application/pdf
Publication-Status: published as Shoven, John B. and Clemens Sialm. "Asset Location In Tax-Deferred And Conventional Savings Accounts," Journal of Public Economics, 2004, v88(1-2,Jan), 23-38.
Abstract: The optimal allocation of assets among different asset classes (such as stocks and bonds) has received considerable attention in financial theory and practice. On the other hand, investors have not been given much guidance about which assets should be located in tax-deferred retirement accounts and which in conventional savings accounts. This paper derives optimal asset allocations (which assets to hold) and asset locations (where to hold them) for a risk-averse investor saving for retirement. Locating assets optimally can significantly improve the risk-adjusted performance of retirement savings.
Handle: RePEc:nbr:nberwo:7192
Template-Type: ReDIF-Paper 1.0
Title: Are the Elderly Really Over-Annuitized? New Evidence on Life Insurance and Bequests
Classification-JEL: J14; H55
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Note: AG PE
Number: 7193
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7193
File-URL: http://www.nber.org/papers/w7193.pdf
File-Format: application/pdf
Publication-Status: published as Are the Elderly Really Over-Annuitized? New Evidence on Life Insurance and Bequests , Jeffrey Brown. in Themes in the Economics of Aging, Wise. 2001
Abstract: This paper provides evidence against the hypothesis that elderly individuals with strong bequest motives purchase term life insurance to offset mandatory annuitization by the existing Social Security system. Using new data on elderly households, this study is able to examine ownership of pure term life insurance separately from whole life, or cash-value, policies. This is an important distinction in the Annuity Offset Model' because the central implication is that term insurance is purchased in order to undo' excessive government annuitization in the form of Social Security, while whole life policies among the elderly primarily consist of tax deferred savings. Evidence is presented that many households simultaneously choose to hold privately purchased annuities and term life insurance, a choice that is inconsistent with the notion that these individuals are over-annuitized. Results also indicate that the hypothesized positive relationship between term insurance ownership and Social Security benefits does not hold once one analyzes term separately from cash value policies. Previous empirical results appear to have been overly favorable to the Annuity Offset Model due to the inability to adequately account for the strong correlation between whole life insurance ownership and Social Security benefits, a correlation that can be attributed to tax-deferred savings and attempts to protect human capital during one's younger working life. Because these findings suggest that households are not seeking to undo' Social Security for bequest reasons, these results have implications for the current debate over annuitization options in an individual accounts retirement system.
Handle: RePEc:nbr:nberwo:7193
Template-Type: ReDIF-Paper 1.0
Title: Impacts of the Indonesian Economic Crisis: Price Changes and the Poor
Author-Name: James Levinsohn
Author-Person: ple386
Author-Name: Steven Berry
Author-Person: pbe18
Author-Name: Jed Friedman
Author-Person: pfr136
Note: IFM ITI
Number: 7194
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7194
File-URL: http://www.nber.org/papers/w7194.pdf
File-Format: application/pdf
Publication-Status: published as Impacts of the Indonesian Economic Crisis.Price Changes and the Poor, James A. Levinsohn, Steven T. Berry, Jed Friedman. in Managing Currency Crises in Emerging Markets, Dooley and Frankel. 2003
Abstract: The recent financial crisis in Indonesia has resulted in dramatic price increases. Using very recent data, we investigate whether these price increases have impacted the cost-of-living of poor households in a disproportionately harsh way. We find that the poor have indeed been hit hardest. Just how hard the poor have been hit, though, depends crucially on where the household lives, whether the household is in a rural or urban area, and just how the cost-of-living index is computed. What is clear is that the notion that the very poor are so poor as to be insulated from international shocks is simply wrong. Rather, in the Indonesian case, the very poor appear the most vulnerable.
Handle: RePEc:nbr:nberwo:7194
Template-Type: ReDIF-Paper 1.0
Title: Is Globalization Today Really Different than Globalization a Hunderd Years Ago?
Classification-JEL: F13; F21
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Douglas A. Irwin
Author-Person: pir25
Note: DAE IFM ITI
Number: 7195
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7195
File-URL: http://www.nber.org/papers/w7195.pdf
File-Format: application/pdf
Publication-Status: published as Collins, Susan and Robert Lawrence (eds.) Brookings Trade Policy Forum. Washington, DC: Brookings Institution, 1999.
Publication-Status: published as Shorter version in Austrian Economic Papers, Vol. 1 & 2 (2000).
Abstract: This paper pursues the comparison of economic integration today and pre 1914 for trade as well as finance, primarily for the United States but also with reference to the wider world. We establish the outlines of international integration a century ago and analyze the institutional and informational impediments that prevented the late nineteenth century world from achieving the same degree of integration as today. We conclude that the world today is different: commercial and financial integration before World War I was more limited. Given that integration today is even more pervasive than a hundred years ago, it is surprising that trade tensions and financial instability have not been worse in recent years. In the conclusion we point to the institutional innovations that have taken place in the past century as an explanation. This in turn suggests the way forward for national governments and multilaterals.
Handle: RePEc:nbr:nberwo:7195
Template-Type: ReDIF-Paper 1.0
Title: International Trade and Factor Mobility: An Empirical Investigation
Classification-JEL: F31; F3
Author-Name: Linda S. Goldberg
Author-Person: pgo256
Author-Name: Michael W. Klein
Author-Person: pkl9
Note: IFM ITI
Number: 7196
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7196
File-URL: http://www.nber.org/papers/w7196.pdf
File-Format: application/pdf
Publication-Status: published as Festschrift in Honor of Robert Mundell, Calvo, G., R. Dornbusch, and M. Obstfeld, eds., Cambridge: MIT Press, 2000.
Abstract: Foreign Direct Investment (FDI) has been growing rapidly, at a pace far exceeding the growth in international trade. Thus, a full understanding of the relationship between trade in goods and FDI is important for obtaining a complete picture of the extent and sources of international linkages. We investigate whether FDI serves as a complement to trade or a substitute for trade based on the effects identified by the Rybczynski theorem whereby an increase in a factor of production used intensively in one sector affects production both in that sector and in other sectors. Using detailed data on bilateral capital and trade flows between the United States and individual Latin American countries, we examine the linkages between FDI into particular sectors of Latin American economies and the net exports of those and other manufacturing sectors. We find that FDI from the United States can lead to significant, and varied, shifts in the composition of activity in many Latin American countries and across many manufacturing industries.
Handle: RePEc:nbr:nberwo:7196
Template-Type: ReDIF-Paper 1.0
Title: Monopsonistic Discrimination and the Gender-Wage Gap
Classification-JEL: J16; J31
Author-Name: Erling Barth
Author-Name: Harald Dale-Olsen
Note: LS
Number: 7197
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7197
File-URL: http://www.nber.org/papers/w7197.pdf
File-Format: application/pdf
Publication-Status: published as Barth, Erling & Dale-Olsen, Harald, 2009. "Monopsonistic discrimination, worker turnover, and the gender wage gap," Labour Economics, Elsevier, vol. 16(5), pages 589-597, October.
Abstract: Models of worker flows have revitalized the idea of monopsony in the labor market. We apply such a model to gender differences. We argue that monopsonistic discrimination may be a substantial factor behind the overall gender wage gap, in particular with respect to differences arising between occupations and establishments. Using matched employer-employee data from Norway, we investigate the wage structure within and between establishments, and present novel evidence that the establishments' excess turnover of employees is sensitive to the wage premium of men, but not to the wage premium of women. Furthermore, we show that male turnover is more wage-elastic than female turnover.
Handle: RePEc:nbr:nberwo:7197
Template-Type: ReDIF-Paper 1.0
Title: Advances in Cost-Effectiveness Analysis of Health Interventions
Classification-JEL: D61; H43
Author-Name: Alan M. Garber
Note: EH
Number: 7198
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7198
File-URL: http://www.nber.org/papers/w7198.pdf
File-Format: application/pdf
Publication-Status: published as Garber, Alan M., 2000. "Advances in cost-effectiveness analysis of health interventions," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 4, pages 181-221 Elsevier.
Abstract: The growing application of cost-effectiveness (CE) analysis and controversies about its methods has led to a need to explore its welfare economic foundations. Examination of its welfare theoretic foundations can provide a rationale for selecting specific standards for the application of CE analysis while deepening our understanding of the implications of alternative methodological approaches. In this paper, I explore conditions under which decision making based on CE analysis, carried out a specific way, leads to a distribution of resources that has desirable social welfare properties. The first section describes the basics of CE analysis and how it can be applied to aid decisions about the allocation of health resources. The paper then turns to the potential welfare economic foundations of CE analysis, and addresses specific issues in carrying out CE analysis, such as which costs to include, whose perspective matters in the analysis, and how health outcomes are measured. It demonstrates how a welfare economic foundation can help resolve ambiguities and uncertainties about the application of CE analysis. The paper also discusses the limitations of such an approach, which indeed reflect limitations of CE analysis as an analytic framework. Finally, it addresses unresolved issues such as the difficulties in using the results of CE analysis to make health policy at the societal or group level.
Handle: RePEc:nbr:nberwo:7198
Template-Type: ReDIF-Paper 1.0
Title: Joint Life Annuities and Annuity Demand by Married Couples
Classification-JEL: H55; J14
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: James M. Poterba
Author-Person: ppo19
Note: AG
Number: 7199
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7199
File-URL: http://www.nber.org/papers/w7199.pdf
File-Format: application/pdf
Publication-Status: published as Brown, Jeffrey R. and James M. Poterba. "Joint Life Annuities And Annuity Demand By Married Couples," Journal of Risk and Insurance, 2000, v67(4,Dec), 527-553.
Abstract: This paper explores the value of purchasing joint life annuities for married couples. It describes the existing market for joint life annuities, and summarizes the range of annuity products that are currently available to couples. It then considers the value that married couples would place on access to an actuarially fair annuity market, and defines a measure of willingness-to-pay for annuities. This calculation differs from the analogous one for a single individual for two reasons. First, joint-and-survivor life tables differ from individual life tables. The life expectancy of the second-to-die in a married couple is substantially greater than that for a single individual. Second, joint life annuities provide time-varying payouts, because survivor benefit options permit the payout when both members of a couple are alive to differ from that when one member has died. The paper develops a new annuity valuation model and applies it to evaluate a married couple's utility gain from annuitization. The findings suggest that previous estimates of the utility gain from annuitization, which applied to individuals, overstate the benefits of annuitization for married couples. Since most potential annuity buyers are married, these findings may help to explain the limited size of the private market for single premium annuities.
Handle: RePEc:nbr:nberwo:7199
Template-Type: ReDIF-Paper 1.0
Title: The Labor Supply Effects of the Social Security Earnings Test
Classification-JEL: J14; H55
Author-Name: Leora Friedberg
Note: AG PE
Number: 7200
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7200
File-URL: http://www.nber.org/papers/w7200.pdf
File-Format: application/pdf
Publication-Status: published as Review of Economics and Statistics, Vol. 82, no. 1 (February 2000): 48-63.
Abstract: The Social Security earnings test reduces benefits at a 33-50% rate once earnings pass a threshold amount - among the highest marginal tax rates in the economy. Previous research dismissed the importance of the earnings test but failed to take advantage of three changes in the earnings test rules in order to identify its impact. Each change applied to some age groups and not others - which make them useful for identifying the effect of tax rules on the labor supply of working beneficiaries. Beneficiaries in the Current Population Survey satisfy the strongest prediction: many keep their earnings just below the exempt amount, and this bunching shifts with the earnings test rule changes. The rule changes are then incorporated into an econometric model of labor supply to identify income and substitution elasticities. The resulting elasticity estimates suggest considerable deadweight loss suffered by working beneficiaries. Simulations predict a substantial boost to labor supply from eliminating the earnings test, and at a minimal fiscal cost. However, a slight decrease in labor supply is predicted from the recently legislated increase in the exempt amount.
Handle: RePEc:nbr:nberwo:7200
Template-Type: ReDIF-Paper 1.0
Title: Stakes and Stars: The Effect of Intellectual Human Capital on the Level and Variability of High-Tech Firms' Market Values
Classification-JEL: O31; G12
Author-Name: Michael R. Darby
Author-Name: Qiao Liu
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Note: PR
Number: 7201
Creation-Date: 1999-06
Order-URL: http://www.nber.org/papers/w7201
File-URL: http://www.nber.org/papers/w7201.pdf
File-Format: application/pdf
Publication-Status: published as Darby, Michael R., Qiao Liu and Lynne G. Zucker. "High Stakes In High Technology: High-Tech Market Values As Options," Economic Inquiry, 2004, v42(3,Jul), 351-369.
Abstract: High-tech firms are built much more on the intellectual capital of key personnel than on physical assets, and firms built around the best scientists are most likely to be successful in commercializing breakthrough technologies. As a result, such firms are expected to have higher market values than similar firms less well endowed. In this paper we develop and implement an option-pricing based technique for valuing these and similar intangible assets by examining the effect of ties to star scientists on the market value of new biotech firms. Since firms with more star ties are likely to have a greater probability per unit time of making a commercially valurable R&D breakthrough, we argue and confirm empirically that both the value of the firm and the likelihood of jumps in the value are increasing in the number of star ties. These effects can be financially as well as statistically significant: for two firms with mean values for other variables, the predicted increase in market value of a firm with one article written by a star as or with a firm employee is 7.3% or 16 million 1984 dollars compared to a firm with no articles.
Handle: RePEc:nbr:nberwo:7201
Template-Type: ReDIF-Paper 1.0
Title: Reserve Uncertainty and the Supply of International Credit
Classification-JEL: F2; F3
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Nancy Marion
Author-Person: pma1464
Note: IFM
Number: 7202
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7202
File-URL: http://www.nber.org/papers/w7202.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Money, Credit and Banking, Vol. 34, no. 3, part 1 (August 2002): 631-649
Abstract: This paper examines how increased uncertainty about an emerging market's international reserves affects the willingness of foreign investors to supply international credits. We illustrate the relevance of this concern for South Korea during the recent financial crisis. Using available information about Korea's reserves at the onset of the crisis, we show that 'usable' reserves turned out to be much lower than what a reasonable forecast would have predicted. We then develop a model of an emerging-market economy where there is sovereign risk and moral hazard is a problem because agents expect the emerging market to bail out creditors with its reserves. We show that reserve uncertainty has a non-linear effect on the supply of credit. When the expected reserve position of an emerging market is large relative to the potential bailout in bad states of nature, reserve volatility does not matter. However, the same amount of reserve volatility can cause a large reduction in the supply of international credit if the emerging market's foreign debt is large enough or if the collapse of output forces the private sector to downgrade its priors about repayment possibilities. In addition, reserve volatility can reduce international credit if investors become more pessimistic about the emerging market's reserve position.
Handle: RePEc:nbr:nberwo:7202
Template-Type: ReDIF-Paper 1.0
Title: A Rent-Protection Theory of Corporate Ownership and Control
Classification-JEL: G3; K22
Author-Name: Lucian Arye Bebchuk
Author-Person: pbe72
Note: LE
Number: 7203
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7203
File-URL: http://www.nber.org/papers/w7203.pdf
File-Format: application/pdf
Abstract: This paper develops a rent-protection theory of corporate ownership structure - and in particular, of the choice between concentrated and dispersed ownership of corporate shares and votes. The paper analyzes the decision of a company's initial owner whether to maintain a lock on control when the company goes public. This decision is shown to be very much influenced by the size that private benefits of control are expected to have. Most importantly, when private benefits of control are large - and when control is thus valuable enough - leaving control up for grabs would attract attempts by rivals to grab control and thereby capture these private benefits; in such circumstances, to preclude a control grab, the initial owner might elect to maintain a lock on control. Furthermore, when private benefits of control are large, maintaining a lock on control would enable the company's initial shareholders to capture a larger fraction of the surplus from value-producing transfers of control. Both results suggest that, in countries in which private benefits of control are large, publicly traded companies will tend to have a controlling shareholder. It is also shown that separation of cash flow rights and voting rights will tend to be used in conjunction with a controlling shareholder structure but not with a dispersed ownership structure. Finally, the paper analyzes why companies might make control partially contestable, as many US companies currently do by adopting antitakeover arrangements. The results of the paper are consistent with the available evidence, can explain the observed patterns of corporate ownership, and yield testable predictions for future empirical work. The analysis also implies that a corporate law system that effectively limits private benefits of control can produce more efficient choices of ownership structure.
Handle: RePEc:nbr:nberwo:7203
Template-Type: ReDIF-Paper 1.0
Title: The Value of Reductions in Child Injury Mortality in the U.S.
Classification-JEL: I1
Author-Name: Sherry Glied
Note: EH
Number: 7204
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7204
File-URL: http://www.nber.org/papers/w7204.pdf
File-Format: application/pdf
Publication-Status: published as CRIW-NBER Conference Volume Medical Care Output and Productivity, Cutler, David, ed., 2000, forthcoming.
Publication-Status: published as The Value of Reductions in Child Injury Mortality in the United States, Sherry A. Glied. in Medical Care Output and Productivity, Cutler and Berndt. 2001
Abstract: Child injury mortality rates have declined steadily over time and across causes of death. This paper investigates alternative explanations for this decline and evaluates their value. I assess changes in children's living circumstances, changes in the professional child injury knowledge base, changes in the information imparted to parents, and changes in the regulation of childhood behavior and, in the context of a model of health production, explore how each of these changes might have been expected to affect child safety. These hypotheses are then tested empirically using data from the National Mortality Detail Files on the number of child deaths by age, cause, and state and combine this information with data from the Current Population Survey on the characteristics of children and their families by state. I find that changes in children's living circumstances can explain little, if any of the change in child health. I find limited evidence that regulatory interventions intended to change behavior have been important. I find substantial evidence suggesting that changes in the knowledge available to parents about child health have become increasingly important, while parents' time has become less important in producing health. These results provide a first effort in understanding the dramatic reduction in child injury mortality. They also illustrate how the development of scientific information, a public good, is translated into private outcomes, and can generate growing inequality in those outcomes.
Handle: RePEc:nbr:nberwo:7204
Template-Type: ReDIF-Paper 1.0
Title: Managed Care
Classification-JEL: I1; L10
Author-Name: Sherry Glied
Note: EH
Number: 7205
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7205
File-URL: http://www.nber.org/papers/w7205.pdf
File-Format: application/pdf
Publication-Status: published as Chapter in Handbook of Health Economics, Elsevier Science, 2000,forthcoming.
Publication-Status: published as Glied, Sherry and Joshua Graff Zivin. "How Do Doctors Behave When Some (But Not All) Of Their Patients Are In Managed Care?," Journal of Health Economics, 2002, v21(2,Mar), 337-353.
Abstract: By 1993, over 70% of all Americans with health insurance were enrolled in some form of managed care plan. The term managed care encompasses a diverse array of institutional arrangements, which combine various sets of mechanisms, that, in turn, have changed over time. The chapter reviews these mechanims, which, in addition to the methods employed by traditional insurance plans, include the selection and organization of providers, the choice of payment methods (including capitation and salary payment), and the monitoring of service utilization. Managed care has a long history. For an extended period, this form of organization was discouraged by a hostile regulatory environment. Since the early 1980s, however, managed care has grown dramatically. Neither theoretical nor empirical research have yet provided an explanation for this pattern of growth. The growth of managed care may be due to this organizational form's relative success in responding to underlying market failures in the health care system - asymmetric information about health risks, moral hazard, limited information on quality, and limited industry competitiveness. The chapter next explores managed care's response to each of these problems. The chapter then turns to empirical research on managed care. Managed care plans appear to attract a population that is somewhat lower cost than that enrolled in conventional insurance. This complicates analysis of the effect of managed care on utilization. Nonetheless, many studies suggest that managed care plans reduce the rate of health care utilization somewhat. Less evidence exists on their effect on overall health care costs and cost growth.
Handle: RePEc:nbr:nberwo:7205
Template-Type: ReDIF-Paper 1.0
Title: Privatizing the Privatized
Classification-JEL: D23; H11
Author-Name: Aaron Tornell
Author-Person: pto157
Note: IFM
Number: 7206
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7206
File-URL: http://www.nber.org/papers/w7206.pdf
File-Format: application/pdf
Publication-Status: published as Krueger, Anne O. (ed.) Economic policy reform: The second stage. Chicago and London: University of Chicago Press, 2000.
Abstract: In the first part of this paper we argue that three reforms must be implemented if privatization is to increase efficiency. First, establishing unitary control rights within the firm. Second, making privatized firms face hard budget constraints. Third, establishing a non-corruptible judicial system and transparent bankruptcy procedures. The question arises as to what course of action should be undertaken when these reforms have not been undertaken and privatizers have only a small window of opportunity? Either they privatize hastily today, or not at all. Should they go ahead with privatization and hope that the newly privatized firms will create the demand for good laws? In the case of behemoths, the answer is not clear cut. Privatization without prior implementation of the three reforms mentioned above will simply replace government bureaucrats with private mafias (i.e., private groups with the power to extract fiscal transfers). These private mafias might behave more voraciously than the bureaucrats they are replacing, reducing aggregate efficiency and further hindering the growth of the competitive private sector. In the second part we address the more traditional issues of auction design and of restructuring and regulation of monopolies with network externalities.
Handle: RePEc:nbr:nberwo:7206
Template-Type: ReDIF-Paper 1.0
Title: Fiscal Policy, Profits, and Investment
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Silvia Ardagna
Author-Name: Roberto Perotti
Author-Person: ppe66
Author-Name: Fabio Schiantarelli
Author-Person: psc8
Note: ME PE
Number: 7207
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7207
File-URL: http://www.nber.org/papers/w7207.pdf
File-Format: application/pdf
Publication-Status: published as Alesina, Alberto, Silva Ardagna, Roberto Perotti and Fabio Schiantarelli. "Fiscal Policy, Profits, And Investment," American Economic Review, 2002, v92(3,Jun), 571-589.
Abstract: This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. In particular, we investigate how different types of fiscal policy affect profits and , as a result, investment. We find a sizable negative effect of public spending -- and in particular of its public wage component -- on business investment. This result is consistent with models in which government employment creates wage pressure for the private sector. Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than the effect of taxes. Our results have important implications for the so called 'Non-Keynesian' (i.e. expansionary) effects of fiscal adjustments.
Handle: RePEc:nbr:nberwo:7207
Template-Type: ReDIF-Paper 1.0
Title: What Determines Firm Size?
Classification-JEL: D23; G30
Author-Name: Krishna B. Kumar
Author-Person: pku33
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Author-Name: Luigi Zingales
Note: CF
Number: 7208
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7208
File-URL: http://www.nber.org/papers/w7208.pdf
File-Format: application/pdf
Abstract: Motivated by theories of the firm, which we classify as technological' or organizational,' we analyze the determinants of firm size across industries and across countries in a sample of 15 European countries. We find that, on average, firms facing larger markets are larger. At the industry level, we find firms in the utility sector are large, perhaps because they enjoy a natural, or officially sanctioned, monopoly. Capital intensive industries, high wage industries, and industries that do a lot of R&D have larger firms, as do industries that require little external financing. At the country level, the most salient findings are that countries with efficient judicial systems have larger firms, and, correcting for institutional development, there is little evidence that richer countries have larger firms. Interestingly, institutional development, such as greater judicial efficiency, seems to be correlated with lower dispersion in firm size within an industry. The effects of interactions (between an industry's characteristics and a country's environment) on size are perhaps the most novel results in the paper, and are best able to discriminate between theories. As the judicial system improves, the difference in size between firms in capital intensive industries and firms in industries that use little physical capital diminishes, a finding consistent with size of firms in industries dependent on external finance is larger in countries with better financial markets, suggesting that financial constraints limit average firm size.
Handle: RePEc:nbr:nberwo:7208
Template-Type: ReDIF-Paper 1.0
Title: Sample Selection in the Estimation of Air Bag and Seat Belt Effectiveness
Classification-JEL: C20; R40
Author-Name: Steven D. Levitt
Author-Person: ple59
Author-Name: Jack Porter
Note: LE PE
Number: 7210
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7210
File-URL: http://www.nber.org/papers/w7210.pdf
File-Format: application/pdf
Publication-Status: published as Levitt, Steven D. and Jack Porter. "Sample Selection In The Estimation Of Air Bag And Seat Belt Effectiveness," Review of Economics and Statistics, 2001, v83(4,Nov), 603-615.
Abstract: Measurement of seat belt and air bag effectiveness is complicated by the fact that systematic data are collected only for crashes in which a fatality occurs. These data suffer from sample selection since seat belt and air bag usage influences survival rates which in turn determine whether a crash is included in the sample. Past researchers either ignored sample selection or adopted indirect estimation methods subject to other important biases. We propose a simple, but novel, solution to the selection problem: limiting the sample to crashes in which someone in a different vehicle dies. Under relatively weak conditions, consistent estimates can be obtained from this restricted sample. Empirically, we find seat belts to be more effective in saving lives than most previous estimates. Air bags, however, appear to be less effective than generally thought. If our coefficients can be generalized to all crashes, the cost per life saved with seat belts is approximately $30,000, compared to $1.6 million for air bags.
Handle: RePEc:nbr:nberwo:7210
Template-Type: ReDIF-Paper 1.0
Title: Political Contagion in Currency Crises
Classification-JEL: F30
Author-Name: Allan Drazen
Author-Person: pdr25
Note: IFM
Number: 7211
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7211
File-URL: http://www.nber.org/papers/w7211.pdf
File-Format: application/pdf
Publication-Status: published as Political Contagion in Currency Crises, Allan Drazen. in Currency Crises, Krugman. 2000
Abstract: Existing models of contagious currency crises are summarized and surveyed, and it is argued that more weight should be put on political factors. Towards this end, the concept of political contagion introduced, whereby contagion in speculative attacks across currencies arises solely because of political objectives of countries. A specific model of membership' contagion is presented. The desire to be part of a political-economic union, where maintaining a fixed exchange rate is a condition for membership and where the value of membership depends positively on who else is a member, is shown to give rise to potential contagion. We then present evidence suggesting that political contagion may have been important in the 1992-3 EMS crisis.
Handle: RePEc:nbr:nberwo:7211
Template-Type: ReDIF-Paper 1.0
Title: Revealing Comparative Advantage: Chaotic or Coherent Patterns Across Time and Sector and U.S. Trading Partner?
Classification-JEL: F17; F1
Author-Name: J. David Richardson
Author-Name: Chi Zhang
Note: ITI
Number: 7212
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7212
File-URL: http://www.nber.org/papers/w7212.pdf
File-Format: application/pdf
Publication-Status: published as J. David Richardson & Chi Zhang, 2001. "Revealing Comparative Advantage: Chaotic or Coherent Patterns across Time and Sector and U.S. Trading Partner?," NBER Chapters, in: Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, pages 195-232 National Bureau of Economic Research, Inc.
Abstract: We map United States comparative advantage between 1980 and 1995, by trading partner and region, using Balassa's export-based index of Revealed Comparative Advantage (RCA). We find: temporally stable and ubiquitous US comparative advantage in differentiated producer goods (except disadvantage in Japan); somewhat less stable and less sweeping US disadvantage in standardized producer goods; chaotic and diverse patterns of US RCA in consumer goods (especially in the Chinese market). Our most significant findings are surprisingly sharp geographical differences in patterns of US RCA and surprisingly small differences across sub-sectors of 1, 2, and 3-digit SITC classifications - regional, but not sectoral, niche' specialization. The high overall variability across regions in RCA indexes seems unrelated to obvious explanations such as proximity or lingual/historical ties to the US. In producer goods, RCA variability across regions correlates somewhat better with accounts of trade diversion and of regional preferences for and discrimination against US exports. We find only scant evidence of high or increasing variability across disaggregated commodity sub-groups in US RCA indexes. Such variability is often the prediction of theories of comparative advantage that are based on vertical specialization, product differentiation, or scale and agglomeration economies.
Handle: RePEc:nbr:nberwo:7212
Template-Type: ReDIF-Paper 1.0
Title: A Multifactor, Nonlinear, Continuous-Time Model of Interest Rate Volatility
Classification-JEL: G00
Author-Name: Jacob Boudoukh
Author-Name: Matthew Richardson
Author-Name: Richard Stanton
Author-Name: Robert F. Whitelaw
Note: AP
Number: 7213
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7213
File-URL: http://www.nber.org/papers/w7213.pdf
File-Format: application/pdf
Abstract: This paper presents a general, nonlinear version of existing multifactor models, such as Longstaff and Schwartz (1992). The novel aspect of our approach is that rather than choosing the model parameterization out of thin air,' our processes are generated from the data using approximation methods for multifactor continuous-time Markov processes. In applying this technique to the short- and long-end of the term structure for a general two-factor diffusion process for interest rates, a major finding is that the volatility of interest rates is increasing in the level of interest rates only for sharply upward sloping term structures. In fact, the slope of the term structure plays a larger role in determining the magnitude of the diffusion coefficient. As an application, we analyze the model's implications for the term structure of term premiums.
Handle: RePEc:nbr:nberwo:7213
Template-Type: ReDIF-Paper 1.0
Title: Behavioralize This! International Evidence on Autocorrelation Patterns of Stock Index and Futures Returns
Classification-JEL: G00
Author-Name: Dong-Hyun Ahn
Author-Name: Jacob Boudoukh
Author-Name: Matthew Richardson
Author-Name: Robert F. Whitelaw
Note: AP
Number: 7214
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7214
File-URL: http://www.nber.org/papers/w7214.pdf
File-Format: application/pdf
Publication-Status: published as Ahn, D. H., J. Boudoukh, M. Richardson and R. F. Whitelaw. "Partial Adjustment Or Stale Prices? Implications From Stock Index And Futures Return Autocorrelations," Review of Financial Studies, 2002, v15(2,Mar), 655-689.
Abstract: This paper investigates the relation between returns on stock indices and their corresponding futures contracts in order to evaluate potential explanations for the pervasive yet anomalous evidence of positive, short-horizon portfolio autocorrelations. Using a simple theoretical framework, we generate empirical implications for both microstructure and behavioral models. These implications are then tested using futures data on 24 contracts across 15 countries. The major findings are (I) return autocorrelations of indices tend to be positive even though their corresponding futures contracts have autocorrelations close to zero, (ii) these autocorrelation differences between spot and futures markets are maintained even under conditions favorable for spot-futures arbitrage, and (iii) these autocorrelation differences are most prevalent during low volume periods. These results point us towards a market microstructure-based explanation for short-horizon autocorrelations and away from explanations based on current popular behavioral models.
Handle: RePEc:nbr:nberwo:7214
Template-Type: ReDIF-Paper 1.0
Title: On Mutual Fund Investment Styles
Classification-JEL: G11; G23
Author-Name: Louis K.C. Chan
Author-Name: Hsiu-Lang Chen
Author-Name: Josef Lakonishok
Note: AP
Number: 7215
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7215
File-URL: http://www.nber.org/papers/w7215.pdf
File-Format: application/pdf
Publication-Status: published as Louis K. C. Chan & Hsiu-Lang Chen & Josef Lakonishok, 2002. "On Mutual Fund Investment Styles," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 15(5), pages 1407-1437.
Abstract: We provide an exploratory investigation of mutual funds' investment styles. Funds' styles tend to cluster around a broad market benchmark. When funds deviate from the benchmark they are more likely to favor growth stocks with good past performance. There is some consistency in styles, although funds with poor past performance are more likely to change styles. Some evidence suggests that growth funds have better style-adjusted performance than value funds. The results are not sensitive to style identification procedure, but an approach based on fund portfolio characteristics performs better in predicting future fund returns.
Handle: RePEc:nbr:nberwo:7215
Template-Type: ReDIF-Paper 1.0
Title: What is Social Capital? The Determinants of Trust and Trustworthiness
Classification-JEL: C9; D7
Author-Name: Edward L. Glaeser
Author-Person: pgl9
Author-Name: David Laibson
Author-Person: pla164
Author-Name: Jose A. Scheinkman
Author-Person: psc26
Author-Name: Christine L. Soutter
Note: LS
Number: 7216
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7216
File-URL: http://www.nber.org/papers/w7216.pdf
File-Format: application/pdf
Publication-Status: published as "Measuring Trust," Edward L. Glaeser, David Laibson, Jose A. Scheinkman, and Christine L. Soutter, Quarterly Journal of Economics, 65, August 2000, pp . 811-846.
Abstract: Using a sample of Harvard undergraduates, we analyze trust and social capital in two experiments. Trusting behavior and trustworthiness rise with social connection; differences in race and nationality reduce the level of trustworthiness. Certain individuals appear to be persistently more trusting, but these people do not say they are more trusting in surveys. Survey questions about trust predict trustworthiness not trust. Only children are less trustworthy. People behave in a more trustworthy manner towards higher status individuals, and therefore status increases earnings in the experiment. As such, high status persons can be said to have more social capital.
Handle: RePEc:nbr:nberwo:7216
Template-Type: ReDIF-Paper 1.0
Title: Education and Income in the Early 20th Century: Evidence from the Prairies
Classification-JEL: J2; N3
Author-Name: Claudia Goldin
Author-Person: pgo601
Author-Name: Lawrence F. Katz
Author-Person: pka266
Note: LS DAE
Number: 7217
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7217
File-URL: http://www.nber.org/papers/w7217.pdf
File-Format: application/pdf
Publication-Status: published as Goldin, Claudia and Lawrence Katz. "Education And Income In The Early Twentieth Century: Evidence From The Prairies," Journal of Economic History, 2000, v60(3,Sep), 782-818.
Abstract: We present the first estimates of the returns to years of schooling before 1940 using a large sample of men and women, employed in a variety of sectors and occupations, from the Iowa State Census of 1915. We find that the returns to a year of high school, and to a year of college, were substantial in 1915 - about 11 percent for all males and in excess of 12 percent for young males. Some of the return to years of high school and college arose because more education allowed individuals to enter lucrative white-collar jobs. But we also find sizable educational wage differentials within the white- and blue-collar sectors. Returns to education above the 'common school' grades were substantial even within the agricultural sector. Given the high overall rate of return to secondary schooling, it is no wonder that the 'high school movement' took root in America around 1910, even in agricultural areas such as Iowa. Census data for 1940, 1950, and 1960 are used to show that returns to years of schooling were greater in 1915 than in 1940. We conclude that the return to education decreased sometime between 1915 and 1940 and then declined again during the 1940s.
Handle: RePEc:nbr:nberwo:7217
Template-Type: ReDIF-Paper 1.0
Title: Job Destruction and the Experiences of Displaced Workers
Classification-JEL: J31; J64
Author-Name: Wouter J. den Haan
Author-Person: pde12
Author-Name: Garey Ramey
Author-Person: pra338
Author-Name: Joel Watson
Author-Person: pwa36
Note: EFG
Number: 7218
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7218
File-URL: http://www.nber.org/papers/w7218.pdf
File-Format: application/pdf
Publication-Status: published as den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 2000. "Job destruction and the experiences of displaced workers," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 52(1), pages 87-128, June.
Abstract: This paper evaluates a class of endogenous job destruction models based on how well they explain the observed experiences of displaced workers. We show that pure reallocation models in which relationship-specific productivity drifts downward over time are difficult to reconcile with the evidence on postdisplacement wages and displacement rates. Pure reallocation models with upward drift can explain the evidence, but implausibly large and persistent negative productivity shocks are required to generate displacements. Combining upward drift with outside benefits or moral hazard as additional motives for displacement makes it possible to explain the evidence with much smaller shocks. Propagation of aggregate shocks, welfare implications of displacement, upgrade of relationships in lieu of displacement, and learning effects are also discussed.
Handle: RePEc:nbr:nberwo:7218
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of Emerging Market Equity Flows
Classification-JEL: F3; G1
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Campbell R. Harvey
Author-Person: pha102
Author-Name: Robin L. Lumsdaine
Note: AP IFM
Number: 7219
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7219
File-URL: http://www.nber.org/papers/w7219.pdf
File-Format: application/pdf
Publication-Status: published as Bekaert, G. & Harvey, C. R. & Lumsdaine, R. L., 2002. "The dynamics of emerging market equity flows," Journal of International Money and Finance, Elsevier, vol. 21(3), pages 295-350, June.
Abstract: We study the interrelationship between capital flows, returns, dividend yields and world interest rates in 20 emerging markets. We estimate a vector autoregressionn with these variables to measure the degree to which lower interest rates contribute to increased capital flows and shocks in flows affect the cost of capital among other dynamic relations. We precede the VAR analysis by a detailed examination of endogenous break points in capital flows and the other variables. These structural breaks are traced to the liberalization of emerging equity markets. Our evidence of structural breaks call into question past research which estimates VAR models over the full sample. After a liberalization, we find that equity flows increase by 1.4% of market capitalization. We also show that shocks in equity flows initially increase returns which is consistent with a price pressure hypothesis. While the effect is diminished over time, there also appears to be a permenant impact. This is consistent with our finding that our proxy for the cost of capital, dividend yields, decreases. Finally, our analysis of the transitition dynamics from pre-liberalization to post-liberalization suggests that when capital leaves, it leaves faster than it came in. These results may help us understand the dynamics of the recent crises in Latin America and East Asia.
Handle: RePEc:nbr:nberwo:7219
Template-Type: ReDIF-Paper 1.0
Title: Prospect Theory and Asset Prices
Classification-JEL: G12
Author-Name: Nicholas Barberis
Author-Name: Ming Huang
Author-Person: phu425
Author-Name: Tano Santos
Note: AP
Number: 7220
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7220
File-URL: http://www.nber.org/papers/w7220.pdf
File-Format: application/pdf
Publication-Status: published as Barberis, Nicholas, Ming Huang and Tano Santos. "Prospect Theory And Asset Prices," Quarterly Journal of Economics, 2001, v116(1,Feb), 1-53.
Abstract: We propose a new framework for pricing assets, derived in part from the traditional consumption-based approach, but which also incorporates two long-standing ideas in psychology: prospect theory, and evidence on how prior outcomes affect risky choice. Consistent with prospect theory, the investor in our model derives utility not only from consumption levels but also from changes in the value of his financial wealth. He is much more sensitive to reductions in wealth than to increases, the ``loss-aversion'' feature of prospect utility. Moreover consistent with experimental evidence, the utility he receives from gains and losses in wealth depends on his prior investment outcomes; prior gains cushion subsequent losses -- the so-called 'house-money' effect -- while prior losses intensify the pain of subsequent shortfalls. We study asset prices in the presence of agents with preferences of this type, and find that our model reproduces the high mean, volatility, and predictability of stock returns. The key to our results is that the agent's risk-aversion changes over time as a function of his investment performance. This makes prices much more volatile than underlying dividends and together with the investor's loss-aversion, leads to large equity premia. Our results obtain with reasonable values for all parameters.
Handle: RePEc:nbr:nberwo:7220
Template-Type: ReDIF-Paper 1.0
Title: Health Care Capital Financing Agencies: The Intergovernmental Roles of Quasi-Government Authorities and the Impact on the Cost of Capital
Classification-JEL: I10; I11
Author-Name: Alec Ian Gershberg
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Fred Goldman
Note: EH PE
Number: 7221
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7221
File-URL: http://www.nber.org/papers/w7221.pdf
File-Format: application/pdf
Publication-Status: published as A. Gershberg, M. Grossman & F. Goldman. "Health Care Capital Financing Agencies: The Intergovernmental Roles of Quasi-Government Authorities and the Impact on the Cost of Capital," Public Budgeting and Finance, Vol. 20, No. 1, March: 2000.
Abstract: During the decade 1983-1992, approximately 1.4 trillion dollars of municipal bonds were sold in 87 thousand separate issues, primarily to finance capital projects for education, electric power, transportation, health care, housing and other public and private purpose activities. Approximately two-thirds of these financings were originated by financing authorities, quasi-government agencies which are the creation of state legislatures. Despite the growing role played by quasi-public authorities in capital finance, their impacts have not been studied systematically. We first describe the issuers of tax-exempt debt in the health sector and then derive measures for describing the mix of issuers between state and local levels, and between both government and quasi-government sectors. We present abbreviated test results of the impact that different mixes have on the cost of capital. First, competition is good: using a Herfindahl index analysis we show that states with less concentrated issuers have a lower cost of capital than those with a more concentrated market, including state-level finance monopolies. On the other hand, we cannot assert unequivocally that market deconcentration in and of itself should be a goal. For instance, there are economies of scale in the health care finance industry that allow larger (often state-level) issuers to lower the cost of capital.
Handle: RePEc:nbr:nberwo:7221
Template-Type: ReDIF-Paper 1.0
Title: Product Differentiation and the Use of Information Technology: New Evidence from the Trucking Industry
Classification-JEL: D21; L21
Author-Name: Atreya Chakraborty
Author-Person: pch70
Author-Name: Mark Kazarosian
Author-Person: pka431
Note: PR
Number: 7222
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7222
File-URL: http://www.nber.org/papers/w7222.pdf
File-Format: application/pdf
Publication-Status: published as Chakraborty, Atreya and Mark Kazarosian. "Marketing Strategy And The Use Of Information Technology: New Evidence From The Trucking Industry," Research in Transport Economics, 2001, v6, 71-96.
Abstract: Since the mid-1980s many authors have investigated the influence of information technology (IT) on productivity. Until recently there has been no clear evidence that productivity increases as a result of IT spending. This productivity paradox is partly due to the difficulty in correctly identifying outputs, particularly in the service sector such as the trucking industry. Products are often differentiated by quality attributes of the service provided, rather than merely the physical content of the good delivered by motor carriers. A carrier's primary marketing objective, e.g. on-time-performance vs. lowest rate carrier, are precisely what differentiates a trucking firm's service. This paper uses cross-sectional data to show that the use of increasingly sophisticated IT by trucking firms varies depending upon marketing objectives. Our empirical results imply that in order to measure the impact of IT on productivity it is crucial to account for how the firm differentiates its product. We conclude that the productivity paradox can be alleviated if measures of output incorporate firms' marketing objectives.
Handle: RePEc:nbr:nberwo:7222
Template-Type: ReDIF-Paper 1.0
Title: The Stock Market Valuation of Research and Development Expenditures
Classification-JEL: G12; G14
Author-Name: Louis K.C. Chan
Author-Name: Josef Lakonishok
Author-Name: Theodore Sougiannis
Note: AP
Number: 7223
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7223
File-URL: http://www.nber.org/papers/w7223.pdf
File-Format: application/pdf
Publication-Status: published as Louis K. C. Chan, 2001. "The Stock Market Valuation of Research and Development Expenditures," Journal of Finance, American Finance Association, vol. 56(6), pages 2431-2456, December.
Abstract: We examine whether stock prices fully reflect the value of firms' intangible assets, focusing on research and development (R&D). Since intangible assets are not reported on financial statements under current U.S. accounting standards and R&D spending is expensed, the valuation problem may be especially challenging. Nonetheless we find that historically the stock returns of firms doing R&D on average matches the returns on firms with no R&D. For companies engaged in R&D, high R&D intensity has a distinctive effect on returns for two groups of stocks. Within the set of growth stocks, R&D-intensive stocks tend to out-perform stocks with little or no R&D. Companies with high R&D relative to equity market value (who tend to have poor past returns) show strong signs of mis-pricing. In both cases the market apparently fails to give sufficient credit for firms' R&D investments. Our exploratory investigation of the effects of advertising on returns yields similar results. We also provide evidence that R&D intensity is positively associated with return volatility, everything else equal. Insofar as the association reflects investors' lack of information about firms' R&D activity, increased accounting disclosure may be beneficial.
Handle: RePEc:nbr:nberwo:7223
Template-Type: ReDIF-Paper 1.0
Title: Explaining Inequality the World Round: Cohort Size, Kuznets Curves, andOpenness
Classification-JEL: O1; J1
Author-Name: Matthew Higgins
Author-Person: phi220
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI LS
Number: 7224
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7224
File-URL: http://www.nber.org/papers/w7224.pdf
File-Format: application/pdf
Publication-Status: published as Higgins, Matthew and Jeffrey G. Williamson. “Explaining Inequality the World Round: Cohort Size, Kuznets Curves, and Openness." Southeast Asian Studies 40, 3 (December 2002): 268-302.
Abstract: Klaus Deininger and Lyn Squire have recently produced an inequality data base for a panel of countries from the 1960s to the 1990s. We use these data to decompose the sources of inequality into three central parts: the demographic or cohort size effect; the so-called Kuznets Curve or demand effects; and the commitment to globalization or policy effects. We also control for education supply, the so-called natural resource curse and other variables suggested by the literature. While the Kuznets Curve comes out of hiding when the inequality relationship is conditioned by the other two, cohort size seems to be the most important force at work. We resolve the apparent conflict between this macro finding on cohort size and the contrary implications of recent research based on micro data.
Handle: RePEc:nbr:nberwo:7224
Template-Type: ReDIF-Paper 1.0
Title: The Supply of Quality in Child Care Centers
Classification-JEL: J13; L2
Author-Name: David M. Blau
Author-Person: pbl13
Author-Name: H. Naci Mocan
Author-Person: pmo270
Note: CH
Number: 7225
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7225
File-URL: http://www.nber.org/papers/w7225.pdf
File-Format: application/pdf
Publication-Status: Published as "The Supply of Quality in Child Care Centers" in the Review of Economics and Statistics; August 2002, 84(3): 483-496.
Abstract: We use data from a sample of day care centers to estimate the relationships between cost and the quality of the child care service provided, and between revenue and quality. We use a measure of child care quality derived from an instrument designed by developmental psychologists. This measure of quality has been found to be positively associated with child development. Taking the estimated cost-quality and revenue-quality relationships as given, we then estimate the objective functions of the firms and compute the supply function for quality. The results indicate that (1) the estimated cost function is inconsistent with the implications of cost-minimization; (2) for-profit firms operate at a positive level of marginal cost, but non-profit firms operate at zero or negative marginal cost; (3) revenue is positively but weakly associated with quality; and (4) the supply of quality is inelastic, with point estimates of the supply elasticity of .04-.05 for both for-profit and non-profit firms. Implications of the results for child care policy are discussed.
Handle: RePEc:nbr:nberwo:7225
Template-Type: ReDIF-Paper 1.0
Title: Testing for Structural Breaks in the Evaluation of Programs
Classification-JEL: C22; K42
Author-Name: Anne Morrison Piehl
Author-Person: ppi106
Author-Name: Suzanne J. Cooper
Author-Name: Anthony A. Braga
Author-Name: David M. Kennedy
Note: LS CH
Number: 7226
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7226
File-URL: http://www.nber.org/papers/w7226.pdf
File-Format: application/pdf
Publication-Status: published as Piehl, Anne Morrison, Suzanne J. Cooper, Anthony A. Braga and David M. Kennedy. "Testing For Structural Breaks In The Evaluation Of Programs," Review of Economics and Statistics, 2003, v85(3,Aug), 550-558.
Abstract: A standard methodology in program evaluation is to use time series variation to compare pre- and post-program outcomes. However, when the timing of a break in a statistical relationship can be determined only by looking at the data, then the usual distribution of the test statistic which assumes exogenous timing of the break is no longer valid. Tests for parameter instability provide a flexible framework for testing a range of hypotheses commonly posed in program evaluation. These tests help pinpoint the timing of maximal break and provide a valid test of statistical significance. These tests are particularly useful when the start date of the intervention and any effect is unclear and possibly endogenous due to implementation lags. A test of parameter instability is applied to the evaluation of the Boston Gun Project, a comprehensive effort to reduce youth homicide in Boston in the mid 1990s. The dynamics of gang violence meant that no parts of the city could be used as reasonable comparison sites, and thus time series analysis is the only feasible means of evaluating the program impact. The statistical procedure identifies a statistically significant discontinuity in youth homicide incidents shortly after the intervention was unveiled. The intervention was associated with about a 60 percent decline in youth homicide.
Handle: RePEc:nbr:nberwo:7226
Template-Type: ReDIF-Paper 1.0
Title: The Impact of US News and World Report College Rankings on Admission Outcomes and Pricing Decisions at Selective Private Institutions
Classification-JEL: I12
Author-Name: James Monks
Author-Person: pmo862
Author-Name: Ronald G. Ehrenberg
Author-Person: peh2
Note: LS CH
Number: 7227
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7227
File-URL: http://www.nber.org/papers/w7227.pdf
File-Format: application/pdf
Publication-Status: published as "U.S. News and World Report's College Rankings: Why Do They Matter," Change, Vol. 31, no. 6 (November/December 1999): 42-51.
Abstract: Despite the widespread popularity of the U.S. News & World Report College rankings there has been no empirical analysis of the impact of these rankings on applications, admissions, and enrollment decisions, as well as on institutions' pricing policies. Our analyses indicate that a less favorable rank leads an institution to accept a greater percentage of its applicants, a smaller percentage of its admitted applicants matriculate, and the resulting entering class is of lower quality, as measured by its average SAT scores. While tuition levels are not responsive to less favorable rankings, institutions offer less visible price discounts in the form of slightly lower levels of expected self-help (loans and employment opportunities) and significantly more generous levels of grant aid. These decreases in net tuition are an attempt to attract additional students from their declining applicant pool.
Handle: RePEc:nbr:nberwo:7227
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates in Emerging Economies: What Do We Know? What Do We Need to Know?
Classification-JEL: F31; F33
Author-Name: Sebastian Edwards
Author-Person: ped3
Author-Name: Miguel A. Savastano
Note: IFM
Number: 7228
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7228
File-URL: http://www.nber.org/papers/w7228.pdf
File-Format: application/pdf
Publication-Status: published as "Floating Exchange Rates in Less-Developed Countries: A Monetary Analysis of the Peruvian Experience, 1950-54", Journal of Money, Credit and Banking, Vol. 15, no. 1 (1983): 73-81.
Abstract: Exchange rates have been at the center of economic debates in emerging economies. Issues related to the feasibility of flexible exchange rates, the relationship between exchange rate volatility and growth, and the role of exchange rate overvaluation in recent crises, among other, have been extensively discussed during the last few years. In this paper we address some of the most important exchange rate-related issues in emerging economies. In particular, we deal with: (a) the merits of alternative exchange rate regimes: (b) the extent to which purchasing power parity holds in the long run in these countries; and (c) models to assess real exchange rate overvaluation. We also discuss future areas for research on exchange rates in the emerging nations.
Handle: RePEc:nbr:nberwo:7228
Template-Type: ReDIF-Paper 1.0
Title: Union Success in Representation Elections: Why Does Unit Size Matter?
Classification-JEL: J50; J51
Author-Name: Henry S. Farber
Note: LS
Number: 7229
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7229
File-URL: http://www.nber.org/papers/w7229.pdf
File-Format: application/pdf
Publication-Status: published as Farber, Henry S. "Union Success In Representation Elections: Why Does Unit Size Matter?," International Labor Relations Review, 2001, v54(2,Jan), 329-348.
Abstract: I establish four facts regarding the pattern of NLRB supervised representation election activity over the past 45 years: 1) the quantity of election activity has fallen sharply and discontinuously since the mid-70's after increasing between the mid-1950's and the mid-1970's; 2) union success in elections held has declined less sharply, though continuously, over the entire period; 3) it has always been the case that unions have been less likely to win NLRB-supervised representation elections in large units than in small units; and 4) the size-gap in union success rates has widened substantially over the last forty years. I develop a simple optimizing model of the union decision to hold a representation election that can account for the first three facts. I provide a pair of competing explanations for the fourth fact: one based on differential behavior by employers of different sizes and one purely statistical. I then develop and estimate three empirical models of election outcomes using data on NLRB elections over the 1952-98 time period in order to determine whether the simple statistical model can account for the size pattern of union win rates over time. I conclude that systematic union selection of targets for organization combined with the purely statistical factors can largely account for observed patterns.
Handle: RePEc:nbr:nberwo:7229
Template-Type: ReDIF-Paper 1.0
Title: Accounting for Heterogeneity, Diversity, and General Equilibriumin Evaluating Social Programs
Classification-JEL: C31
Author-Name: James J. Heckman
Note: LS PE
Number: 7230
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7230
File-URL: http://www.nber.org/papers/w7230.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James. "Accounting For Heterogeneity, Diversity And General Equilibrium In Evaluating Social Programmes," Economic Journal, 2001, v111(475,Nov), 654-699.
Abstract: This paper considers the problem of policy evaluation in a modern society with heterogeneous agents and diverse groups with conflicting interests. Several different approaches to the policy evaluation problem are compared including the approach adopted in modern welfare economics, the classical representative agent approach adopted in macroecononomics and the microeconomic treatment effect approach. A new approach to the policy evaluation problem is developed and applied that combines and extends the best features of these earlier approaches.Evidence on the importance of heterogeneity is presented. Using an empirically based dynamic general equilibrium model of skill formation with heterogeneous agents, the benefits of the more comprehensive approach to policy evaluation are examined in the context of examining the impact of tax reform on skill formation and the political economy aspects of such reform. A parallel analysis of tution policy is presented.
Handle: RePEc:nbr:nberwo:7230
Template-Type: ReDIF-Paper 1.0
Title: The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks' Balance Sheets
Classification-JEL: E51; E52
Author-Name: Carlo A. Favero
Author-Person: pfa12
Author-Name: Francesco Giavazzi
Author-Person: pgi18
Author-Name: Luca Flabbi
Author-Person: pfl26
Note: IFM ME
Number: 7231
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7231
File-URL: http://www.nber.org/papers/w7231.pdf
File-Format: application/pdf
Abstract: Available studies on asymmetries in the monetary transmission mechanism within Europe are invariably based on macro-economic evidence: such evidence is abundant but often contradictory. This paper takes a different route by using micro-economic data. We use the information contained in the balance sheets of individual banks (available from the BankScope database) to implement a case-study on the response of banks in France, Germany, Italy and Spain to a monetary tightening. The episode we study occurred during 1992, when monetary conditions were tightened throughout Europe. Evidence on such tightening is provided by the uniform squeeze in liquidity, which affected all banks in our sample. We study the first link in the transmission chain by analysing the response of bank loans to the monetary tightening. Our experiment provides evidence on the importance of the Europe and thus on one possibly important source of asymmetries in the monetary transmission mechanism. We do not find evidence of a significant response of bank loans to the monetary tightening, which occurred during 1992, in any of the four European countries we have considered. However we find significant differences both across countries and across banks of different dimensions in the factors that allow them to shield the supply of loans from the squeeze in liquidity.
Handle: RePEc:nbr:nberwo:7231
Template-Type: ReDIF-Paper 1.0
Title: Crisis Prevention: Lessons from Mexico and East Asia
Classification-JEL: F32; F34
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 7233
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7233
File-URL: http://www.nber.org/papers/w7233.pdf
File-Format: application/pdf
Publication-Status: published as Harwood, A., R.E. Litan, and M. Pomerleano (eds.) Financial Markets and Development: The Crisis in Emerging Markets. Washington, D.C.: World Bank, 1999.
Abstract: This paper provides a comparative analysis of the East Asian and Mexican crises, and draws lessons for the emerging economies. Although much of the discussion concentrates on East Asia and Mexico, I also draw on the history of some previous crisis episodes. I argue that in spite of the efforts to understand the anatomy of currency crises, there are still a large number of controversial and unresolved issues. More to the point, I argue that some of the lessons extracted from these crises are based on a misreading of the historical record. As a result, some of the policy implications that have emerged from this debate are, to say the least, questionable. In particular, I make two points: First, I argue that, in general, current account ratios have limited usefulness in determining a country's financial health. Although I fall short of taking the position that the current account is completely irrelevant, I do argue that a rigid interpretation of current account ratios may be highly misleading. Second, I argue that the rapidly growing popularity of controls on capital inflows as a device for reducing external vulnerability is rooted in a misreading of the recent history of external crises.
Handle: RePEc:nbr:nberwo:7233
Template-Type: ReDIF-Paper 1.0
Title: Expectations, Credibility, and Time-Consistent Monetary Policy
Classification-JEL: E31; E52
Author-Name: Peter N. Ireland
Author-Person: pir1
Note: ME
Number: 7234
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7234
File-URL: http://www.nber.org/papers/w7234.pdf
File-Format: application/pdf
Publication-Status: published as Ireland, Peter N., 2000. "Expectations, Credibility, And Time-Consistent Monetary Policy," Macroeconomic Dynamics, Cambridge University Press, vol. 4(04), pages 448-466, December.
Abstract: This paper addresses the problem of multiple equilibria in a model of time-consistent monetary policy. It suggests that this problem originates in the assumption that agents have rational expectations and proposes several alternative restrictions on expectations that allow the monetary authority to build credibility for a disinflationary policy by demonstrating that it will stick to the policy even if it imposes short-run costs on the economy. Starting with these restrictions, the paper derives conditions that guarantee the uniqueness of the model's steady state; monetary policy in this unique steady state involves the constant deflation advocated by Milton Friedman.
Handle: RePEc:nbr:nberwo:7234
Template-Type: ReDIF-Paper 1.0
Title: Estimating Returns to Schooling When Schooling is Misreported
Classification-JEL: C1; I2
Author-Name: Thomas J. Kane
Author-Name: Cecilia Elena Rouse
Author-Name: Douglas Staiger
Author-Person: pst466
Note: LS CH
Number: 7235
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7235
File-URL: http://www.nber.org/papers/w7235.pdf
File-Format: application/pdf
Abstract: We propose a general method of moments technique to identify measurement error in self-reported and transcript-reported schooling using differences in wages, test scores, and other covariates to discern the relative verity of each measure. We also explore the implications of such reporting errors for both OLS and IV estimates of the returns to schooling. The results cast a new light on two common findings in the extensive literature on the returns to schooling: sheepskin effects' and the recent IV estimates, relying on natural experiments' to identify the payoff to schooling. First, respondents tend to self-report degree attainment much more accurately than they report educational attainment not corresponding with degree attainment. For instance, we estimate that more than 90 percent of those with associate's or bachelor's degrees accurately report degree attainment, while only slightly over half of those with 1 or 2 years of college credits accurately report their educational attainment. As a result, OLS estimates tend to understate returns per year of schooling and overstate degree effects. Second, because the measurement error in educational attainment is non-classical, IV estimates also tend to be biased, although the magnitude of the bias depends upon the nature of the measurement error in the region of educational attainment affected by the instrument.
Handle: RePEc:nbr:nberwo:7235
Template-Type: ReDIF-Paper 1.0
Title: The Extent and Consequences of Downward Nominal Wage Rigidity
Classification-JEL: E24; E31
Author-Name: Joseph G. Altonji
Author-Person: pal266
Author-Name: Paul J. Devereux
Author-Person: pde187
Note: LS
Number: 7236
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7236
File-URL: http://www.nber.org/papers/w7236.pdf
File-Format: application/pdf
Publication-Status: published as Polachek, Solomon W. (ed.) Worker well-being, Research in Labor Economics, vol. 19. Amsterdam. New York and Tokyo: Elsevier Science, JAI, 2000.
Abstract: Using the Panel Study of Income Dynamics, we find that true wage changes have many fewer nominal cuts and more nominal freezes than reported nominal wage changes. The data overwhelmingly rejects a model of flexible wage changes and provides some evidence against a model of perfect downward rigidity in favor of a more general model. The more general model incorporates downward rigidity but specifies that nominal wage cuts may occur when large cuts would occur in the absence of wage rigidity. However, the results of the general model imply that nominal wage cuts are rare. We also analyze the personnel files of a large corporation and find cuts in base pay are rare and almost always associated with changes in full time status or a switch between compensation schemes involving incentives. Our evidence on the consequences of nominal wage rigidity is mixed. We find modest support for the hypothesis that workers who are overpaid because of nominal wage rigidity are less likely to quit.
Handle: RePEc:nbr:nberwo:7236
Template-Type: ReDIF-Paper 1.0
Title: Explaining the Poor Performance of Consumption-Based Asset Pricing Models
Classification-JEL: G00
Author-Name: John Y. Campbell
Author-Person: pca54
Author-Name: John H. Cochrane
Author-Person: pco57
Note: AP EFG
Number: 7237
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7237
File-URL: http://www.nber.org/papers/w7237.pdf
File-Format: application/pdf
Publication-Status: published as Campbell, John Y. and John H. Cochrane. "Explaining The Poor Performance Of Consumption-Based Asset Pricing Models," Journal of Finance, 2000, v55(6,Dec), 2863-2878.
Abstract: The poor performance of consumption-based asset pricing models relative to traditional portfolio-based asset pricing models is one of the great disappointments of the empirical asset pricing literature. We show that the external habit-formation model economy of Campbell and Cochrane (1999) can explain this puzzle. Though artificial data from that economy conform to a consumption-based model by construction, the CAPM and its extensions are much better approximate models than is the standard power utility specification of the consumption-based model. Conditioning information is the central reason for this result. The model economy has one shock, so when returns are measured at sufficiently high frequency the consumption-based model and the CAPM are equivalent and perfect conditional asset pricing models. However, the model economy also produces time-varying expected returns, tracked by the dividend-price ratio. Portfolio-based models capture some of this variation in state variables, which a state-independent function of consumption cannot capture, and so portfolio-based models are better approximate unconditional asset pricing models.
Handle: RePEc:nbr:nberwo:7237
Template-Type: ReDIF-Paper 1.0
Title: Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate
Classification-JEL: E2; D1
Author-Name: Jonathan A. Parker
Author-Person: ppa21
Note: EFG
Number: 7238
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7238
File-URL: http://www.nber.org/papers/w7238.pdf
File-Format: application/pdf
Publication-Status: published as Spendthrift in America? On Two Decades of Decline in the US Saving Rate, Jonathan A. Parker. in NBER Macroeconomics Annual 1999, Volume 14, Bernanke and Rotemberg. 2000
Publication-Status: published as Jonathan A. Parker, 1999. "Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate," NBER/Macroeconomics Annual, vol 14(1), pages 317-370.
Abstract: During the past two decades, the personal saving rate in the United States has fallen from eight percent to below zero. This paper demonstrates that this change represents a major shift in the allocation of newly produced goods. The share of GDP that households consume rose by 6 percentage points since 1980. This increase occurred concurrently with a reduction in the growth rate of real consumption spending per person, high real rates of return, and an increasing ratio of aggregate wealth to income. Despite this last fact, wealth changes can explain little of the boom in consumption spending. The largest increases in national wealth post-date the consumption boom and households with different wealth levels have similar increases in consumption. The paper also finds that the changing age distribution of the U.S. population does not explain the consumption boom. While it may be that new wealthier cohorts are driving this boom, the preponderance of evidence suggest rather that the rising consumption to income ratio is due to a common time effect. The main findings of the paper are consistent with either an increase in the discount rate or with a general belief in better economic times in the future. Alternatively, the low rates of saving could be due to a combination of factors such as the increase in intergenerational transfers from the Social Security system raising the consumption of the elderly and an increase in access to credit and expanded financial instruments raising the consumption of the young.
Handle: RePEc:nbr:nberwo:7238
Template-Type: ReDIF-Paper 1.0
Title: A Model of Multiple Districts and Private Schools: The Role of Mobility, Targeting, and Private School Vouchers
Classification-JEL: I22; H73
Author-Name: Thomas J. Nechyba
Author-Person: pne28
Note: PE
Number: 7239
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7239
File-URL: http://www.nber.org/papers/w7239.pdf
File-Format: application/pdf
Publication-Status: published as Nechyba, Thomas J. "Mobility, Targeting, And Private-School Vouchers," American Economic Review, 2000, v90(1,Mar), 130-146.
Abstract: This paper presents a multi-district model that can be calibrated to data reflecting housing market conditions, public school finance mechanisms and private school markets. Simulations are undertaken to investigate the impact of private school vouchers. Households that differ in both their income and in the ability level of their children choose between school districts, between neighborhoods within their school district, and between the local public school or a menu of private school alternatives. Local public school quality within a district is endogenously determined by a combination of the average peer quality of public school attending children as well as local property and state income tax supported spending. Financial support (above a required state minimum) is set by local majority rule. Finally, there exists the potential for a private school market composed of competitive schools that face production technologies similar to those of public schools but that set tuition and admissions policies to maximize profits. In this model, it is demonstrated that school district targeted vouchers are similar in their impact to non-targeted vouchers but vastly different from vouchers targeted to low income households. Furthermore, strong migration effects are shown to significantly improve the likely equity consequences of voucher programs.
Handle: RePEc:nbr:nberwo:7239
Template-Type: ReDIF-Paper 1.0
Title: Social Approval, Values, and AFDC: A Re-Examination of the Illegitimacy Debate
Classification-JEL: I38
Author-Name: Thomas J. Nechyba
Author-Person: pne28
Note: PE CH
Number: 7240
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7240
File-URL: http://www.nber.org/papers/w7240.pdf
File-Format: application/pdf
Publication-Status: published as Nechyba, Thomas J. "Social Approval, Values, And AFDC: A Reexamination Of The Illegitimacy Debate," Journal of Political Economy, 2001, v109(3,Jun), 637-672.
Abstract: Empirical attempts to link teenage out-of-wedlock births to the incentive structure of Aid to Families with Dependent Children (AFDC) have met with mixed results. This has suggested to many researchers that, while the AFDC program contains incentives for poor women to have children out-of-wedlock, these incentives cannot be the primary culprit responsible for current levels of out-of-wedlock births. This paper presents a model that is consistent with the stylized facts and the empirical evidence but establishes a mechanism through which AFDC could in fact be the primary reason for observed levels of illegitimacy. The model is standard with one exception: How much utility individuals are able to obtain from having a child depends on the level of social approval' that is associated with having out-of-wedlock children. This social approval is a function of the fraction of individuals in all previous generations who chose to have children out-of-wedlock, where the effect of each generation diminishes with time. While the model is successful in replicating the stylized facts on AFDC and illegitimacy and establishes a link between the two through a government induced change in values,' it also demonstrates that welfare reform aimed at reducing the incentives for poor women to have out-of-wedlock births may not be as effective as policy makers who believe in a causal link between AFDC and illegitimacy might suspect.
Handle: RePEc:nbr:nberwo:7240
Template-Type: ReDIF-Paper 1.0
Title: Characteristics of TQM: Evidence from the RIT/USA Today Quality Cup Competition
Author-Name: Joshua G. Rosett
Author-Name: Richard N. Rosett
Note: PR
Number: 7241
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7241
File-URL: http://www.nber.org/papers/w7241.pdf
File-Format: application/pdf
Abstract: This paper reports the results of a field study examining the use of TQM at 15 firms. The sample is drawn from winners and finalists of the RIT/USA Today Quality Cup. The authors interviewed 75 employees (5 per firm) including 14 executives, 44 middle managers, and 17 front line workers. The interviews elicited information on the motives for adopting TQM, the role of leadership, the use of monitoring, the use of rhetoric, the extent and type of training, the basis for employee evaluation, compensation, and promotion, the use of teams, reallocation of authority, and the results of the TQM program. We use the data to provide a description of how TQM works in practice, including factors that determine patterns of use across firms. A major result is that team-based problem solving is used about twice as frequently as devolution of authority in our sample. We attribute this result to the higher costs of monitoring and corporate change associated with devolution relative to problem solving.
Handle: RePEc:nbr:nberwo:7241
Template-Type: ReDIF-Paper 1.0
Title: Violating the Law of One Price: Should We Make a Federal Case Out of It?
Classification-JEL: E3; E4
Author-Name: Charles Engel
Author-Person: pen14
Author-Name: John H. Rogers
Author-Person: pro248
Note: IFM
Number: 7242
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7242
File-URL: http://www.nber.org/papers/w7242.pdf
File-Format: application/pdf
Publication-Status: published as Engel, Charles & Rogers, John H, 2001. "Violating the Law of One Price: Should We Make a Federal Case Out of It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 1-15, February.
Abstract: We use new disaggregated data on consumer prices to determine why there is variability in prices of similar goods across U.S. cities. We address questions similar to those that have arisen in the international context: is this variability purely a result of market segmentation or do sticky nominal prices play a role? We also examine how the degree of tradability of a good influences price variability. Surprisingly, we find that variability is larger for traded-goods. We attribute this finding to greater price stickiness for non-traded goods. Distance between cities accounts for a significant amount of the variation in prices between pairs of cities. But we also find that nominal price stickiness plays an even more significant role.
Handle: RePEc:nbr:nberwo:7242
Template-Type: ReDIF-Paper 1.0
Title: Worklife Determinants of Retirement Income Differentials Between Men and Women
Classification-JEL: J6; J16
Author-Name: Phillip J. Levine
Author-Person: ple553
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: John W. Phillips
Note: LS AG
Number: 7243
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7243
File-URL: http://www.nber.org/papers/w7243.pdf
File-Format: application/pdf
Publication-Status: Published as "The Benefit of Additional High-School Math and Science Classes for Young Men and Women", JBES, Vol. 13, no. 2 (1995): 137-149.
Abstract: Women enter retirement having spent fewer years in market work, earned less over their lifetimes, and worked in different jobs than men of the same age. This study examines whether these differences in work-life experiences help explain why many women end up with lower levels of retirement income in old age. We use the Health and Retirement Study (HRS), which provides information on labor market histories along with the ability to predict retirement income from employer pensions, social security benefits, and investment returns. We document differences in anticipated retirement income by sex that exist largely between nonmarried men and women. Multivariate models show that 85 percent of this retirement income gap can be attributed to differences in lifetime labor market earnings, years worked, and occupational segregation by sex. Our results suggest that as women's work-life experiences become more congruent with men's over time, the gap in retirement income between men and women may shrink.
Handle: RePEc:nbr:nberwo:7243
Template-Type: ReDIF-Paper 1.0
Title: Tax Structure and Government Behavior: Implications for Tax Policy
Classification-JEL: H21; D78
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: John D. Wilson
Note: PE
Number: 7244
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7244
File-URL: http://www.nber.org/papers/w7244.pdf
File-Format: application/pdf
Abstract: Changes in tax policy can affect all aspects of the economy. Not only do firms and individuals change behavior, creating efficiency costs, but government expenditure choices can also change. Unless these expenditure choices had been optimal' previously, changes in response to a tax reform affect welfare and should be taken into account when designing tax policy. This paper develops a specific model of government behavior and then explores the implications of government, as well as private, behavioral responses for tax policy. In particular, we assume that government officials favor expenditure (or regulatory) choices that increase the government's budget. As a result, higher tax rates on a particular activity encourage government behavior that aids the growth of this activity. This response enables tax policy to redirect government activity in desirable directions, but it also makes Pigovian taxes on negative externalities less effective.
Handle: RePEc:nbr:nberwo:7244
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Traps: How to Avoid Them and How to Escape Them
Classification-JEL: B22; E41
Author-Name: Willem H. Buiter
Author-Person: pbu137
Author-Name: Nikolaos Panigirtzoglou
Note: IFM ME
Number: 7245
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7245
File-URL: http://www.nber.org/papers/w7245.pdf
File-Format: application/pdf
Publication-Status: published as Reflections on Economics and Econometrics, Essays in Honour of Martin Fase, edited by Wim F.V. Vanthoor and Joke Mooij, 2001, pp. 13-58, De Nederlandsche Bank NV, Amsterdam.
Abstract: The paper considers ways of avoiding a liquidity trap and ways of getting out of one. Unless lower short nominal interest rates are associated with significantly lower interest volatility, a lower average rate of inflation, which will be associated with lower expected nominal interest rates, increases the odds that the zero nominal interest rate floor will become a binding constraint. The empirical evidence on this issue is mixed. Once in a liquidity trap, there are two means of escape. The first is to use expansionary fiscal policy. The second is to lower the zero nominal interest rate floor. This second option involves paying negative interest on government 'bearer bonds' -- coin and currency, that is 'taxing money', as advocated by Gesell. This would also reduce the likelihood of ending up in a liquidity trap. Taxing currency amounts to having periodic 'currency reforms', that is, compulsory conversions of 'old' currency into 'new' currency, say by stamping currency. The terms of the conversion can be set to achieve any positive or negative interest rate on currency. There are likely to be significant shoe leather costs associated with such schemes. The policy question then becomes how much shoe leather it takes to fill an output gap? Finally the paper develops a simple analytical model showing how the economy can get into a liquidity trap and how Gesell money is one way of avoiding it or escaping from it.
Handle: RePEc:nbr:nberwo:7245
Template-Type: ReDIF-Paper 1.0
Title: Explaining the Cross-Section of Stock Returns in Japan: Factors or Characteristics?
Classification-JEL: G1; F3
Author-Name: Kent Daniel
Author-Name: Sheridan Titman
Author-Person: pti51
Author-Name: K.C. John Wei
Note: AP
Number: 7246
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7246
File-URL: http://www.nber.org/papers/w7246.pdf
File-Format: application/pdf
Publication-Status: published as Daniel, Kent, Sheridan Titman and K. C. John Wei. "Explaining The Cross-Section Of Stock Returns In Japan: Factors Or Characteristics?," Journal of Finance, 2001, v56(2,Apr), 743-766.
Abstract: Japanese stock returns are even more closely related to their book-to-market ratios than are their U.S. counterparts, and thus provide a good setting for testing whether the return premia associated with these characteristics arise because the characteristics are proxies for covariance with priced factors. Our tests, which replicate the Daniel and Titman (1997) tests on a Japanese sample, reject the Fama and French (1993) three-factor model but fails to reject the characteristic model.
Handle: RePEc:nbr:nberwo:7246
Template-Type: ReDIF-Paper 1.0
Title: Japan's Big Bang and the Transformation of Financial Markets
Classification-JEL: G1; F3
Author-Name: Takatoshi Ito
Author-Name: Michael Melvin
Author-Person: pme60
Note: AP IFM
Number: 7247
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7247
File-URL: http://www.nber.org/papers/w7247.pdf
File-Format: application/pdf
Publication-Status: published as Blomstrom, M., B. Gangnes, S. La Croix (eds.) Japan’s New Economy. Oxford University Press, January 2001.
Abstract: A first step in the 'big bang' markets was the deregulation of the foreign exchange market on April 1, 1998. This paper examines how the bid-ask spread and conditional volatility in the yen/dollar foreign exchange market changed around the time of the deregulation. Intra-day data are analyzed with the following results: (1) Holding constant the effects of volume and volatility, the deregulation was associated with a convergence of Japanese quoted spreads toward those of other banks. (2) Modeling the persistence in volatility reveals that deregulation lowered conditional volatility.
Handle: RePEc:nbr:nberwo:7247
Template-Type: ReDIF-Paper 1.0
Title: Local Academic Science Driving Organizational Change: The Adoption of Biotechnology by Japanese Firms
Classification-JEL: O31; L11
Author-Name: Michael R. Darby
Author-Name: Lynne G. Zucker
Author-Person: pzu2
Note: PR
Number: 7248
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7248
File-URL: http://www.nber.org/papers/w7248.pdf
File-Format: application/pdf
Publication-Status: published as Michael R. Darby and Lynne G. Zucker, “Change or Die: The Adoption of Biotechnology in the Japanese and U.S. Pharmaceutical Industries,” Comparative Studies of Technological Evolution, 2001, 7: 85-125.
Abstract: The local academic science base plays a dominant role in determining where and when biotechnology is adopted by existing firms or -- much more frequently -- exploited by new entrants in the U.S. In Japan this new dominant technology has almost exclusively been introduced through organizational change in existing firms. We show that for the U.S. and global pharmaceutical business -- biotechnology's most important application -- the performance enhancement associated with this organizational change is necessary for incumbent firms to remain competitive and, ultimately, to survive. Japan's sharply higher organizational change/new entry ratio compared to the U.S. during the biotech revolution is related 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. Both local science base and pre-existing economic activity explained where and when Japanese firms adopted biotechnology, with the latter playing a somewhat larger role. De nova entry was determined similarly as if entry and organizational change are alternative ways of exploiting the scientific base with relative frequency reflecting underlying institutions. While similar processes are at work in Japan and America, stars in Japan induce entry or transformation of significantly fewer firms 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.
Handle: RePEc:nbr:nberwo:7248
Template-Type: ReDIF-Paper 1.0
Title: The Dynamics of Educational Attainment for Blacks, Hispanics, and Whites
Classification-JEL: I12
Author-Name: Stephen V. Cameron
Author-Name: James J. Heckman
Note: LS CH PE
Number: 7249
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7249
File-URL: http://www.nber.org/papers/w7249.pdf
File-Format: application/pdf
Publication-Status: published as Cameron, Stephen V. and James J. Heckman. "The Dynamics Of Educational Attainment For Black Hispanic, And White Males," Journal of Political Economy, 2001, v109(3,Jun), 455-499.
Abstract: This paper estimates a dynamic model of schooling attainment to investigate the sources of discrepancy by race and ethnicity in college attendance. When the returns to college education rose, college enrollment of whites responded much more quickly than that of minorities. Parental income is a strong predictor of this response. However, using NLSY data, we find that it is the long-run factors associated with parental background and income and not short-term credit constraints facing college students that account for the differential response by race and ethnicity to the new labor market for skilled labor. Policies aimed at improving these long-term factors are far more likely to be successful in eliminating college attendance differentials than are short-term tuition reduction policies.
Handle: RePEc:nbr:nberwo:7249
Template-Type: ReDIF-Paper 1.0
Title: The Japanese Banking Crisis: Where Did It Come From and How Will It End?
Classification-JEL: G2; L8
Author-Name: Takeo Hoshi
Author-Person: pho107
Author-Name: Anil Kashyap
Author-Person: pka35
Note: CF
Number: 7250
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7250
File-URL: http://www.nber.org/papers/w7250.pdf
File-Format: application/pdf
Publication-Status: published as The Japanese Banking Crisis: Where Did It Come From and How Will It End?, Takeo Hoshi, Anil Kashyap. in NBER Macroeconomics Annual 1999, Volume 14, Bernanke and Rotemberg. 2000
Abstract: We argue that the deregulation leading up to the Big Bang has played a major role in the current banking problems. This deregulation allowed large corporations to quickly switch from depending on banks to relying on capital market financing. We present evidence showing that large Japanese borrowers, particularly manufacturing firms, have already become almost as independent of banks as comparable U.S. firms. The deregulation was much less favorable for savers and consequently they mostly continued turning their money over to the banks. However, banks were also constrained. They were not given authorization to move out of traditional activities into new lines of business. These developments together meant that the banks retained assets and had to search for new borrowers. Their new lending primarily flowed to small businesses and became much more tied to property than in the past. These loans have not fared well during the 1990s. We discuss the size of the current bad loans problem and conclude that it is quite large (on the order of 7% of GDP). Looking ahead, we argue that the Big Bang will correct the aforementioned regulatory imbalances. This will mean that banks will have to fight to retain deposits. More importantly, we expect even more firms to migrate to capital market financing. Using the U.S. borrowing patterns as a guide, we present estimates showing that this impending shift implies a massive contraction in the size of the Japanese banking sector.
Handle: RePEc:nbr:nberwo:7250
Template-Type: ReDIF-Paper 1.0
Title: Determinants of the Japan Premium: Actions Speak Louder Than Words
Classification-JEL: F33; F34
Author-Name: Joe Peek
Author-Person: ppe90
Author-Name: Eric S. Rosengren
Note: ME
Number: 7251
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7251
File-URL: http://www.nber.org/papers/w7251.pdf
File-Format: application/pdf
Publication-Status: published as Peek, Joe & Rosengren, Eric S., 2001. "Determinants of the Japan premium: actions speak louder than words," Journal of International Economics, Elsevier, vol. 53(2), pages 283-305, April.
Abstract: Since August 1995, Japanese banks have had to pay a premium on Eurodollar and Euroyen interbank loans relative to their U.S. and U.K. competitors. This so-called Japan premium' provides a market indicator of investor anxiety about the ability of Japanese banks to repay loans. We examine the determinants of the Japan premium and find that government announcements not associated with concrete actions had little impact. On the other hand, announcements of concrete actions by the Japanese government, such as injections of funds into the banking system, tended to have an effect on the size of the Japan premium.
Handle: RePEc:nbr:nberwo:7251
Template-Type: ReDIF-Paper 1.0
Title: Tax Policy and Consumer Spending: Evidence from Japanese Fiscal Experiments
Classification-JEL: E21; H31
Author-Name: Katsunori Watanabe
Author-Name: Takayuki Watanabe
Author-Name: Tsutomu Watanabe
Note: PE
Number: 7252
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7252
File-URL: http://www.nber.org/papers/w7252.pdf
File-Format: application/pdf
Publication-Status: published as Watanabe, Katsunori, Takayuki Watanabe and Tsutomu Watanabe. "Tax Policy And Consumer Spending: Evidence From Japanese Fiscal Experiments," Journal of International Economics, 2001, v53(2,Apr), 261-281.
Abstract: This paper studies the extent to which the impact of tax policy on consumer spending differs between temporary and permanent, as well as anticipated and unanticipated tax changes. To discriminate between them, we use institutional information such as legal distinction between temporary and permanent tax changes, as well as timing of policy announcement and implementation. We find that the impact of temporary changes is significantly smaller than the impact of permanent changes. We also find that more than 80 per cent of Japanese consumers, including those who distinguish between temporary and permanent tax changes, respond to tax changes at the time of their implementation and not at the time of a policy announcement. We suggest an interpretation that these consumers follow a near-rational decision rule.
Handle: RePEc:nbr:nberwo:7252
Template-Type: ReDIF-Paper 1.0
Title: Are All Banking Crises Alike? The Japanese Experience in International Comparison
Classification-JEL: E44; G21
Author-Name: Michael Hutchison
Author-Person: phu149
Author-Name: Kathleen McDill
Note: ME
Number: 7253
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7253
File-URL: http://www.nber.org/papers/w7253.pdf
File-Format: application/pdf
Publication-Status: published as Hutchison, Michael and Kathleen McDill. "Are All Banking Crises Alike? The Japanese Experience In International Comparison," Journal of the Japanese and International Economies, 1999, v13(3,Sep), 155-180.
Abstract: This paper examines episodes of banking sector distress for a large sample of developed and developing countries, highlighting the experience of Japan. By a host of criteria, Japan appeared to be in a stronger position than most countries at the onset of banking problems low inflation, appreciating currency, balanced government budget, and large external surpluses. However, Japan followed a clear international boom-and-bust pattern in terms of real output growth, credit growth and stock price movements. We estimate a multivariate probit model that links the likelihood of banking problems to a set of macroeconomic variables and institutional characteristics. The model predicts a high probability of banking sector distress in Japan in the early 1990s. In particular, the likelihood of an episode of banking distress rose in line with the sharp drop in asset prices, deepening recession and 'moral hazard' problem (financial liberalization combined with explicit deposit insurance). The Japanese case is also noteworthy by the long duration of the banking crisis, the length of the coincident recession and general malaise over the economy, the slow regulatory response, and the long delay in the commitment of public funds to re-capitalize the banking sector.
Handle: RePEc:nbr:nberwo:7253
Template-Type: ReDIF-Paper 1.0
Title: Distortionary Taxation, Excessive Price Sensitivity, and Japanese Land Prices
Classification-JEL: G12; G19
Author-Name: Kiyohiko G. Nishimura
Author-Name: Fukujyu Yamazaki
Author-Name: Takako Idee
Author-Name: Toshiaki Watanabe
Note: PE
Number: 7254
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7254
File-URL: http://www.nber.org/papers/w7254.pdf
File-Format: application/pdf
Abstract: Japan has experienced turbulent behavior of land prices after World War II, especially after 1985. This paper first examines the explanatory power of a simple present-value model and shows its limitation. We then investigate two additional (not mutually exclusive) factors affecting the Japanese land price behavior: distortionary inheritance and capital-gains taxation, and excessive price sensitivity due to the non-Walrasian structure of the land market. Empirical results show that distortionary taxation is a major culprit of high residential land price, and that the non-Walrasian price behavior magnifies the effect of underlying change in the market fundamentals.
Handle: RePEc:nbr:nberwo:7254
Template-Type: ReDIF-Paper 1.0
Title: None
Author-Name:
Number: 7255
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7255
Abstract: This paper number accidentally skipped in the early days of working paper publishing. No paper ever existed for this number.
Handle: RePEc:nbr:nberwo:7255
Template-Type: ReDIF-Paper 1.0
Title: Assessing the Impact of Organizational Practices on the Productivity of University Technology Transfer Offices: An Exploratory Study
Classification-JEL: D23; L31
Author-Name: Donald Siegel
Author-Name: David Waldman
Author-Name: Albert Link
Author-Person: pli161
Note: PR
Number: 7256
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7256
File-URL: http://www.nber.org/papers/w7256.pdf
File-Format: application/pdf
Publication-Status: published as Siegel, Donald S. & Waldman, David & Link, Albert, 2003. "Assessing the impact of organizational practices on the relative productivity of university technology transfer offices: an exploratory study," Research Policy, Elsevier, vol. 32(1), pages 27-48, January.
Abstract: We present quantitative and qualitative evidence (field research) on university technology transfer offices (TTOs). These offices negotiate licensing agreements with firms to commercialize university-based technologies. A stochastic frontier production function framework is used to assess the relative productivity of 113 university TTOs. Our field research provided a useful reality check on the specification of the econometric model. The empirical findings imply that licensing activity is characterized by constant returns to scale. Environmental and institutional factors appear to explain some of the variation in TTO efficiency. Relative productivity may also depend on organizational practices in university management of intellectual property, which potentially attenuate palpable differences in the motives, incentives, and organizational cultures of the parties to licensing agreements. Unfortunately, there are no existing data on such practices, so we rely on inductive, qualitative methods to identify them. We present detailed information on our use of these methods. This information may be useful to economists who are contemplating fieldwork. Based on 55 interviews of managers/entrepreneurs and administrators at five research universities, we conclude that the most critical organizational factors are likely to be reward systems for faculty, TTO staffing and compensation practices, and actions taken by administrators to extirpate informational and cultural barriers between universities and firms.
Handle: RePEc:nbr:nberwo:7256
Template-Type: ReDIF-Paper 1.0
Title: The Band Pass Filter
Classification-JEL: E3; C1
Author-Name: Lawrence J. Christiano
Author-Person: pch45
Author-Name: Terry J. Fitzgerald
Note: EFG
Number: 7257
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7257
File-URL: http://www.nber.org/papers/w7257.pdf
File-Format: application/pdf
Publication-Status: published as Christiano, Lawrence J. and Terry J. Fitzgerald. "The Band Pass Filter," International Economic Review, 2003, v44(2,May), 435-465.
Abstract: The `ideal' band pass filter can be used to isolate the component of a time series that lies within a particular band of frequencies. However, applying this filter requires a dataset of infinite length. In practice, some sort of approximation is needed. Using projections, we derive approximations that are optimal when the time series representations underlying the raw data have a unit root, or are stationary about a trend. We identify one approximation which, though it is only optimal for one particular time series representation, nevertheless works well for standard macroeconomic time series. To illustrate the use of this approximation, we use it to characterize the change in the nature of the Phillips curve and the money-inflation relation before and after the 1960s. We find that there is surprisingly little change in the Phillips curve and substantial change in money growth-inflation relation.
Handle: RePEc:nbr:nberwo:7257
Template-Type: ReDIF-Paper 1.0
Title: Is There Monopsony in the Labor Market? Evidence from a Natural Experiment
Classification-JEL: J42; I11
Author-Name: Douglas Staiger
Author-Person: pst466
Author-Name: Joanne Spetz
Author-Name: Ciaran Phibbs
Note: EH
Number: 7258
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7258
File-URL: http://www.nber.org/papers/w7258.pdf
File-Format: application/pdf
Publication-Status: published as Douglas O. Staiger & Joanne Spetz & Ciaran S. Phibbs, 2010. "Is There Monopsony in the Labor Market? Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 211-236, 04.
Abstract: A variety of recent theoretical and empirical advances have renewed interest in monopsonistic models of the labor market. However, there is little direct empirical support for these models, even in labor markets that are textbook examples of monopsony. We use an exogenous change in wages at Veterans Affairs hospitals as a natural experiment to investigate the extent of monopsony in the nurse labor market. In contrast to much of the prior literature, we estimate that labor supply to individual hospitals is quite inelastic, with short-run elasticity around 0.1. We also find that non-VA hospitals responded to the VA wage change by changing their own wages.
Handle: RePEc:nbr:nberwo:7258
Template-Type: ReDIF-Paper 1.0
Title: A Tax on Output of the Polluting Industry is Not a Tax on Pollution: The Importance of Hitting the Target
Author-Name: Don Fullerton
Author-Person: pfu10
Author-Name: Inkee Hong
Author-Name: Gilbert E. Metcalf
Note: PE EEE
Number: 7259
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7259
File-URL: http://www.nber.org/papers/w7259.pdf
File-Format: application/pdf
Publication-Status: published as Distributional and Behavioral Effects of Environmental Policy, Carraro, C.and G. Metcalf, eds., Chicago: University of Chicago Press, 2000,forthcoming.
Publication-Status: published as A Tax on Output of the Polluting Industry Is Not a Tax on Pollution: The Importance of Hitting the Target, Don Fullerton, Inkee Hong, Gilbert E. Metcalf. in Behavioral and Distributional Effects of Environmental Policy, Carraro and Metcalf. 2001
Abstract: We explore the effects of environmental taxes that imprecisely target pollution. A review of actual policies indicates few (if any) examples of a true tax on pollution. More typically, environmental taxes target an input or output that is correlated with pollution. We construct a simple analytical general equilibrium model to calculate the optimum tax rate on the input of the polluting industry, in terms of key behavioral parameters, and we compare this imprecisely-targeted tax to an ideal tax on pollution. Finally, we consider incremental tax reforms such as a change in either tax from some pre-existing level. Using a utility-based money-metric measure of welfare, we examine the losses that arise from not taxing pollution directly. With no existing tax, under our plausible parameters, the welfare gain from an output tax is less that half the gain from an emissions tax.
Handle: RePEc:nbr:nberwo:7259
Template-Type: ReDIF-Paper 1.0
Title: Quality Certification and the Economics of Contract Software Development A Study of the Indian Software Industry
Author-Name: Ashish Arora
Author-Person: par15
Author-Name: Jai Asundi
Note: PR
Number: 7260
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7260
File-URL: http://www.nber.org/papers/w7260.pdf
File-Format: application/pdf
Abstract: A significant amount of software development is being outsourced to countries such as India. Many Indian software firms have applied for and received quality certifications like the ISO9001, and the number of quality certified software firms has steadily increased. Despite its growing popularity among Indian software developers, there is very little systematic evidence on the relationship of ISO certification to organizational performance. Using data on 95 Indian software firms and their US clients, we develop a stylized model of a firm that develops software for others to articulate the different ways in which ISO certification can affect firm profits. We conclude that ISO certification enhances firm growth. The results provide partial support for the proposition that ISO certification also enhances revenue for a given size, suggesting that firms are receiving a higher price per unit of output. In turn, this is consistent with the notion that ISO certification also enhances the quality of output. Our field studies confirm that although most firms see ISO certification as a marketing ploy, some of them do proceed to institute more systematic and better-defined processes for software development.
Handle: RePEc:nbr:nberwo:7260
Template-Type: ReDIF-Paper 1.0
Title: Optimal Monetary Policy Inertia
Classification-JEL: E52
Author-Name: Michael Woodford
Author-Person: pwo3
Note: EFG ME
Number: 7261
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7261
File-URL: http://www.nber.org/papers/w7261.pdf
File-Format: application/pdf
Publication-Status: published as The Manchester School, Vol. 67, Supplement S1 (1999): 1-35
Publication-Status: published as Michael Woodford, 1999. "Optimal monetary policy inertia," Proceedings, Federal Reserve Bank of San Francisco.
Abstract: This paper considers the desirability of the observed tendency of central banks to adjust interest rates only gradually in response to changes in economic conditions. It shows, in the context of a simple model of optimizing private-sector behavior, that such inertial policy can be optimal. The reason is that small but persistent changes in short-term interest rates in response to shocks allow a larger effect of monetary policy on long rates and hence upon aggregate demand, for a given degree of overall interest-rate variability. The paper also considers two ways of achieving the desirable degree of inertia in the equilibrium responses to shocks. One is by assignment of a loss function that penalizes squared interest-rate changes (despite the fact that interest-rate changes do not affect the true social objective) to a central bank that is then expected to use discretion in the pursuit of the goal. The second is through commitment to an explicit instrument rule, a generalization of the Taylor rule' in which the funds rate is an increasing function of the lagged funds rate, as in estimated Fed reaction functions.
Handle: RePEc:nbr:nberwo:7261
Template-Type: ReDIF-Paper 1.0
Title: Determinants of Smoking Cessation: An Analysis of Young Adult Men and Women
Classification-JEL: I1
Author-Name: John A. Tauras
Author-Person: pta136
Author-Name: Frank J. Chaloupka
Author-Person: pch236
Note: EH
Number: 7262
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7262
File-URL: http://www.nber.org/papers/w7262.pdf
File-Format: application/pdf
Publication-Status: published as Grossman, Michael and Chee-Ruey Hsieh (eds.) Economic analysis of substance use and abuse: The experience of developed countries and lessons for developing countries, Academia Studies in Asian Economies. Cheltenham, U.K. and Northampton, MA: Elgar, 2001.
Abstract: Substantial econometric efforts have been devoted to examining the impacts prices and tobacco control policies have on smoking propensity and intensity. However, little is known about the effects prices, smoking restrictions, and other influences have on smoking cessation. This paper uses longitudinal data from the Monitoring the Future Surveys, augmented with cigarette price and policy-related measures to estimate smoking cessation equations for young adult males and females separately. The estimates clearly indicate that increases in cigarette prices would lead a significant number of young adults to quit smoking. In addition, policies restricting smoking in private worksites increase the probability of smoking cessation among employed young adult females.
Handle: RePEc:nbr:nberwo:7262
Template-Type: ReDIF-Paper 1.0
Title: Can Capital Mobility be Destabilizing?
Classification-JEL: F3; F4
Author-Name: Qinglai Meng
Author-Name: Andres Velasco
Note: IFM
Number: 7263
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7263
File-URL: http://www.nber.org/papers/w7263.pdf
File-Format: application/pdf
Abstract: In a standard two-sector neoclassical model with distortions, capital mobility can render the steady state indeterminate, in the sense that there exist infinitely many convergent paths. In the closed economy with no international capital mobility, the utility function must be linear or close to it for indeterminacy to occur, while in the open economy the shape of the utility function makes no difference. The reason is that in the no mobility case changes in aggregate investment must be matched by changes in aggregate consumption, while in the case of full capital mobility they can simply be financed by borrowing abroad. The paper provides some theoretical underpinnings to the concerns that de-regulating the capital account may be destabilizing.
Handle: RePEc:nbr:nberwo:7263
Template-Type: ReDIF-Paper 1.0
Title: Trade and Growth: Import-Led or Export-Led? Evidence From Japan and Korea
Author-Name: Robert Z. Lawrence
Author-Person: pla608
Author-Name: David E. Weinstein
Author-Person: pwe34
Note: ITI
Number: 7264
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7264
File-URL: http://www.nber.org/papers/w7264.pdf
File-Format: application/pdf
Publication-Status: published as Stiglitz, Joseph E. and Shahid Yusuf (eds.) Rethinking the East Asia Miracle. Oxford University Press and the World Bank, 2001.
Abstract: It is commonly argued that Japanese trade protection has enabled the nurturing and development internationally competitive firms. The results in our paper suggest that when it comes to TFP growth, this view of Japan is seriously erroneous. We find that lower tariffs and higher import volumes would have been particularly beneficial for Japan during the period 1964 to 1973. Our results also lead us to question whether Japanese exports were a particularly important source of productivity growth. Our findings on Japan suggest that the salutary impact of imports stems more from their contribution to competition than to intermediate inputs. Furthermore our results indicate a reason for why imports are important. Greater imports of competing products spur innovation. Our results suggest that competitive pressures and potentially learning from foreign rivals are important conduits for growth. These channels are even more important as industries converge with the market leader. This suggests that further liberalization by Japan and other East Asian countries may result in future dynamic gains. Our results thus call the views of both the World Bank and the revisionists into question and provide support for those who advocate more liberal trade policies.
Handle: RePEc:nbr:nberwo:7264
Template-Type: ReDIF-Paper 1.0
Title: International Institutions for Reducing Global Financial Instability
Classification-JEL: F02; F33
Author-Name: Kenneth Rogoff
Author-Person: pro164
Note: IFM
Number: 7265
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7265
File-URL: http://www.nber.org/papers/w7265.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, Vol. 13, no. 4 (Fall 1999): 21-42.
Abstract: This paper asks how recent developments in research on banking and sovereign lending can help inform the debate on choosing a new international financial architecture. A broad range of plans is considered, including a global lender of last resort facility, an international bankruptcy court, an international debt insurance corporation, and unilateral controls on capital flows.
Handle: RePEc:nbr:nberwo:7265
Template-Type: ReDIF-Paper 1.0
Title: Is Hospital Competition Socially Wasteful?
Author-Name: Daniel P. Kessler
Author-Name: Mark B. McClellan
Note: EH
Number: 7266
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7266
File-URL: http://www.nber.org/papers/w7266.pdf
File-Format: application/pdf
Publication-Status: published as Kessler, Daniel P. and Mark B. McClellan. "Is Hospital Competition Socially Wasteful?," Quarterly Journal of Economics, 2000, v115(2,May), 577-615.
Abstract: We study the consequences of hospital competition for Medicare beneficiaries' heart attack care from 1985 to 1994. We examine how relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets, and how hospital competition interacts with the influence of managed care organizations to affect the key determinants of social welfare expenditures on treatment and patient health outcomes. In the 1980s, the welfare effects of competition were ambiguous; but in the 1990s, competition unambiguously improves social welfare. Increasing HMO enrollment over the sample period partially explains the dramatic change in the impact of hospital competition.
Handle: RePEc:nbr:nberwo:7266
Template-Type: ReDIF-Paper 1.0
Title: No Contagion, Only Interdependence: Measuring Stock Market Co-movements
Classification-JEL: F30; F40
Author-Name: Kristin Forbes
Author-Person: pfo1
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: AP IFM
Number: 7267
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7267
File-URL: http://www.nber.org/papers/w7267.pdf
File-Format: application/pdf
Publication-Status: published as Forbes, Kristin J. and Roberto Rigobon. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, 2002, v57(5,Oct), 2223-2261.
Abstract: This paper examines stock market co-movements. It begins with a discussion of several conceptual issues involved in measuring these movements and how to test for contagion. Standard tests examine if cross-market correlation in stock market returns increase during a period of crisis. The measure of cross-market correlations central to this standard analysis, however, is biased. The unadjusted correlation coefficient is conditional on market movements over the time period under consideration, so that during a period of turmoil when stock market volatility increases, standard estimates of cross-market correlations will be biased upward. It is straightforward to adjust the correlation coefficient to correct for this bias. The remainder of the paper applies these concepts to test for stock market contagion during the 1997 East Asian crises, the 1994 Mexican peso collapse, and the 1987 U.S. stock market crash. In each of these cases, tests based on the unadjusted correlation coefficients find evidence of contagion in several countries, while tests based on the adjusted coefficients find virtually no contagion. This suggests that high market co-movements during these periods were a continuation of strong cross-market linkages. In other words, during these three crises there was no contagion, only interdependence.
Handle: RePEc:nbr:nberwo:7267
Template-Type: ReDIF-Paper 1.0
Title: Taxing Retirement Income: Nonqualified Annuities and Distributions from Qualified Accounts
Classification-JEL: H24; H55
Author-Name: Jeffrey R. Brown
Author-Person: pbr264
Author-Name: Olivia S. Mitchell
Author-Person: pmi73
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Mark J. Warshawsky
Note: AG PE
Number: 7268
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7268
File-URL: http://www.nber.org/papers/w7268.pdf
File-Format: application/pdf
Publication-Status: published as National Tax Journal, Vol. 52, no. 3 (September 1999): 563-592.
Abstract: This paper explores the current tax treatment of non-qualified immediate annuities and distributions from tax-qualified retirement plans in the United States. First, we describe how immediate annuities held outside retirement accounts are taxed. We conclude that the current income tax treatment of annuities does not substantially alter the incentive to purchase an annuity rather than a taxable bond. We nevertheless find differences across different individuals in the effective tax burden on annuity contracts. Second, we examine an alternative method of taxing annuities that would avoid changing the fraction of the annuity payment that is included in taxable income as the annuitant ages, but would still raise the same expected present discounted value of revenues as the current income tax rule. We find that a shift to a constant inclusion ratio increases the utility of annuitants, and that this increase is greater for more risk averse individuals. Third, we examine how payouts from qualified accounts are taxed, focusing on both annuity payouts and minimum distribution requirements that constrain the feasible time path of nonannuitized payouts. We describe briefly the origins and workings of the minimum distribution rules and we also provide evidence on the fraction of retirement assets potentially affected by these rules.
Handle: RePEc:nbr:nberwo:7268
Template-Type: ReDIF-Paper 1.0
Title: An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output
Classification-JEL: E62; E32
Author-Name: Olivier Blanchard
Author-Person: pbl2
Author-Name: Roberto Perotti
Author-Person: ppe66
Note: EFG ME
Number: 7269
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7269
File-URL: http://www.nber.org/papers/w7269.pdf
File-Format: application/pdf
Publication-Status: published as Blanchard, Olivier and Robert Perotti. "An Empirical Characterization Of The Dynamic Effects Of Changes In Government Spending And Taxes On Output," Quarterly Journal of Economics, 2002, v107(4,Nov), 1329-1368.
Abstract: This paper characterizes the dynamic effects of shocks in government spending and taxes on economic activity in the United States in the post-war period. It does so by using a mixed structural VAR/event study approach. Identification is achieved by using institutional information about the tax and transfer systems and the timing of tax collections to identify the automatic response of taxes and spending to activity, and, by implication, to infer fiscal shocks. The results consistently show positive government spending shocks as having a positive effect on output, and positive tax shocks as having a negative effect. The multipliers for both spending and tax shocks are typically small. Turning to the effects of taxes and spending on the components of GDP, one of the results has a distinctly non-standard flavor: Both increases in taxes and increases in government spending have a strong negative effect on investment spending.
Handle: RePEc:nbr:nberwo:7269
Template-Type: ReDIF-Paper 1.0
Title: ABC at Insteel Industries
Author-Name: V.G. Narayanan
Author-Name: Ratna G. Sarkar
Note: PR
Number: 7270
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7270
File-URL: http://www.nber.org/papers/w7270.pdf
File-Format: application/pdf
Abstract: In this paper, we seek to provide empirical documentation of the effect of Activity-Based Costing (ABC) information on product and customer-related decisions made by managers in a company. Proponents of ABC argue that when an entity implements ABC, it reaps at least two important benefits: process improvements that promote more efficient use of resources and hence reduce costs, and a set of overhead cost numbers that, relative to traditional volume-based methods of costing, better represent the consumption of shared resources by the firm's products, and enable the firm to target a more profitable mix of products and customers. While there is much anecdotal evidence about the efficacy of ABC and ABM (Activity Based Management), there has been no systematic, statistical investigation of whether ABC really influences managerial decisions. An ABC analysis may not have any impact on a firm for two reasons. (1) It may not reveal any new information to the managers who intuitively know already what an ABC system formally captures. (2) Key managers may reject the ABC numbers and be unwilling to weather the organizational change and upheaval often required for effective ABM. In this study, we conduct a statistical analysis of firm-level data in order to shed light on whether ABC provides new information to managers and whether ABM significantly impacts product and customer-related decisions. We supplement this analysis with interviews with top managers in the company on whether and to what extent the ABC analysis influenced managerial decision making. We do not find much support for the hypothesis that product prices reflect all costs even when a company does not have ABC information. We find that after the ABC analysis, Insteel displayed a higher propensity to discontinue or increase prices of products that were found unprofitable in the ABC study and to discontinue customers that were found unprofitable in the ABC. The changes to the portfolio of customers served were similar but not as striking as the product mix and pricing decisions. This finding is consistent with senior managers' intuition that product level decisions can be made faster than customer level decisions.
Handle: RePEc:nbr:nberwo:7270
Template-Type: ReDIF-Paper 1.0
Title: Consumption Over the Life Cycle
Classification-JEL: C61; D91
Author-Name: Pierre-Olivier Gourinchas
Author-Person: pgo28
Author-Name: Jonathan A. Parker
Author-Person: ppa21
Note: IFM EFG
Number: 7271
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7271
File-URL: http://www.nber.org/papers/w7271.pdf
File-Format: application/pdf
Publication-Status: published as Gourinchas, Pierre-Olivier and Jonathan A. Parker. "Consumption Over The Life Cycle," Econometrica, 2002, v70(1,Jan), 47-89.
Abstract: This paper employs a synthetic cohort technique and Consumer Expenditure Survey data to construct average age-profiles of consumption and income over the working lives of typical households across different education and occupation groups. Using these profiles, we estimate a structural model of optimal life-cycle consumption expenditures in the presence of realistic labor income uncertainty. The model fits the profiles quite well. In addition to providing tight estimates of the discount rate and risk aversion, we find that consumer behavior changes strikingly over the life-cycle. Young consumers behave as buffer-stock agents. Around age 40, the typical household starts accumulating liquid assets for retirement, and its behavior mimics more closely that of a certainty equivalent consumer. This change in behavior is mostly driven by the life-cycle profile of expected income. Our methodology provides a natural decomposition of saving into its precautionary and retirement components.
Handle: RePEc:nbr:nberwo:7271
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Crises in Emerging Markets: Theory and Policy
Classification-JEL: F3; F4
Author-Name: Roberto Chang
Author-Person: pch80
Author-Name: Andres Velasco
Note: IFM
Number: 7272
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7272
File-URL: http://www.nber.org/papers/w7272.pdf
File-Format: application/pdf
Publication-Status: published as Liquidity Crises in Emerging Markets: Theory and Policy, Roberto Chang, Andrés Velasco. in NBER Macroeconomics Annual 1999, Volume 14, Bernanke and Rotemberg. 2000
Publication-Status: published as Roberto Chang & Andrés Velasco, 1999. "Liquidity Crises in Emerging Markets: Theory and Policy," NBER/Macroeconomics Annual, vol 14(1), pages 11-58.
Abstract: We build a model of financial sector illiquidity in an open economy. Illiquidity defined as a situation in which a country's consolidated financial system has potential short-term obligations in foreign currency that exceed the amount of foreign currency it can have access to on short notice can be associated with self fulfilling bank and/or currency crises. We focus on the policy implications of the model, and study the role of capital inflows and the maturity of external debt, the way in which real exchange rate depreciation can transmit and magnify the effects of bank illiquidity, options for financial regulation, the role of debt and deficits, and the implications of adopting different exchange rate regimes.
Handle: RePEc:nbr:nberwo:7272
Template-Type: ReDIF-Paper 1.0
Title: The Competition Between Competition Rules
Classification-JEL: H7; D43
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 7273
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7273
File-URL: http://www.nber.org/papers/w7273.pdf
File-Format: application/pdf
Abstract: Open borders imply systems competition. This paper studies the implications of systems competition for the national competition rules. It is shown that an equilibrium where all countries retain their antitrust laws does not exist, since abolishing this law makes it possible for a single country to establish a cartel that successfully appropriates foreign business profits. Instead of such an equilibrium, a deregulation race is likely to emerge in which all but the last country repeal their antitrust laws. The deregulation race results in a chain of Stackelberg leadership positions taken over by national cartels that renders lower profits and higher consumer rents than would have been the case with harmonization of the antitrust laws.
Handle: RePEc:nbr:nberwo:7273
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Direct Foreign Investment on Local Communities
Classification-JEL: F23; J21
Author-Name: David N. Figlio
Author-Person: pfi57
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Note: ITI
Number: 7274
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7274
File-URL: http://www.nber.org/papers/w7274.pdf
File-Format: application/pdf
Publication-Status: published as Figlio, David N. and Bruce A. Blonigen. "The Effects Of Foreign Direct Investment On Local Communities," Journal of Urban Economics, 2000, v48(2,Sep), 338-363.
Abstract: The large increase in direct foreign investment (DFI) into the United States in the late 1980s has generated considerable research on why these flows occurred and where these foreign firms located. However, very little has been done to evaluate the impact these foreign firms have on the local communities in which they locate. As a first step in addressing this topic, we use detailed county-level panel data from South Carolina across 5 year intervals from 1980 through 1995 to investigate the effect of foreign manufacturing firms on local labor markets and on the level and distribution of local government budgets. We find that manufacturing employment by foreign firms has a substantial impact on industry wages and county budgets which is significantly different from domestic manufacturing employment. With respect to wages, we find that while increased manufacturing employment generally increases county wages in an average two-digit industry, this effect is more than seven times larger when the employment growth comes from a foreign firm, rather than a domestic one. On the budget side, we find that foreign employment leads to larger declines in per capita revenues and expenditures at the county level, and to significant redistribution of county expenditures away from public school funding and toward transportation and public safety.
Handle: RePEc:nbr:nberwo:7274
Template-Type: ReDIF-Paper 1.0
Title: Size and Growth of Japanese Plants in the United States
Classification-JEL: F23; L11
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: KaSaundra Tomlin
Note: ITI
Number: 7275
Creation-Date: 1999-07
Order-URL: http://www.nber.org/papers/w7275
File-URL: http://www.nber.org/papers/w7275.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. and KaSaundra Tomlin. "Size And Growth Of Japanese Plants In The United States," International Journal of Industrial Organization, 2001, v19(5,May), 931-952.
Abstract: Using a unique database on all Japanese manufacturing plants in the United States, we examine the relationship between plant size and growth for these foreign-owned plants. These plants average sizes are three times larger than comparable U.S. plants and experienced 30 percent growth from 1987 through 1990, while U.S. average plant sizes declined over the same period. Our estimates strongly reject Gibrat's Law for these plants, and suggest that smaller plants grow faster. We also find learning affects plant-level growth. Newer plants grow quicker and previous investments by the parent firm mean slower growth, particularly for automobile-related plants. Both are consistent with inexperienced firms growing faster as they learn.
Handle: RePEc:nbr:nberwo:7275
Template-Type: ReDIF-Paper 1.0
Title: Price Stability as a Target for Monetary Policy: Defining and Maintaining Price Stability
Classification-JEL: E42; E52
Author-Name: Lars E.O. Svensson
Author-Person: psv2
Note: IFM ME
Number: 7276
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7276
File-URL: http://www.nber.org/papers/w7276.pdf
File-Format: application/pdf
Publication-Status: published as Svensson, Lars E. O. "Price-Level Targeting Versus Inflation Targeting: A Free Lunch?," Journal of Money, Credit and Banking, 1999, v31(3,Aug), Part 1, 277-295.
Publication-Status: published as The Monetary Transmission Process, Recent Developments and Lessons for Europe. London: MacMillan, 2001.
Abstract: This paper discusses how price stability can be defined and how price stability can be maintained in practice. Some lessons for the Eurosystem are also considered. With regard to defining price stability, the choice between price-level stability and low (including zero) inflation and the decisions about the price index, the quantitative target and the role of output stabilization are examined. With regard to maintaining price stability, three main alternatives are considered, namely a commitment to a simple instrument rule (like a Taylor rule), forecast targeting (like inflation-forecast targeting) and intermediate targeting (like money-growth targeting). A simple instrument rule does not provide a substitute for a systematic framework for monetary policy decisions. Such a framework is instead provided by forecast targeting. Forecast targeting can incorporate judgmental adjustments, extra-model information, and different indicators (including indicators of risks to price stability'). By extending mean forecast targeting to distribution forecast targeting, nonlinearity, nonadditive uncertainty and model uncertainty can be incorporated. Eurosystem arguments in favor of its money-growth indicator and against inflation-forecast targeting are scrutinized and found unconvincing.
Handle: RePEc:nbr:nberwo:7276
Template-Type: ReDIF-Paper 1.0
Title: Race and Home Ownership, 1900 to 1990
Classification-JEL: N32; R21
Author-Name: William J. Collins
Author-Person: pco315
Author-Name: Robert A. Margo
Author-Person: pma319
Note: DAE
Number: 7277
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7277
File-URL: http://www.nber.org/papers/w7277.pdf
File-Format: application/pdf
Publication-Status: published as Collins, William J. and Robert A. Margo. "Race And Home Ownership: A Century-Long View," Explorations in Economic History, 2001, v38(1,Jan), 68-92.
Abstract: The historical evolution of racial differences in income in the 20th century United States has been examined intensively by economists, but the evolution of racial differences in wealth has been examined far less. This paper uses IPUMS data to study trends in racial differences in home ownership since 1900. At the turn of the century approximately 20 percent of black adult males (ages 20 to 64) owned their homes, compared with 46 percent of white men, a gap of 26 percentage points. By 1990, the black home ownership rate had increased to 52 percent and the racial gap had fallen to 19.5 percentage points. All of the long-term rise in the rate of black home ownership, and almost all of the corresponding long-term decline in the racial gap, occurred after 1940, with the majority of both changes concentrated in the 1960 to 1980 period. We also use the IPUMS to study trends in race differences in the incidence of mortgages, and in the value of owner-occupied housing.
Handle: RePEc:nbr:nberwo:7277
Template-Type: ReDIF-Paper 1.0
Title: Tradable Deficit Permits: Efficient Implementation of the Stability Pacin the European Monetary Union
Author-Name: Alessandra Casella
Author-Person: pca496
Note: IFM ITI
Number: 7278
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7278
File-URL: http://www.nber.org/papers/w7278.pdf
File-Format: application/pdf
Publication-Status: published as Economic Policy, Vol. 29 (October 1999): 323-361.
Abstract: Borrowing from the experience of environmental markets, this paper proposes a system of tradable deficit permits as an efficient mechanism for implementing fiscal constraints in the European Monetary Union: having chosen an aggregate target for the Union and an initial distribution of permits, EMU countries could be allowed to trade rights to deficit creation. The scheme exploits countries' incentives to minimize their costs, is transparent, flexible in accommodating idiosyncratic shocks and allows for adjustments in case of Europe-wide recessions. In addition, it need not treat all countries identically and can be designed to penalize countries with higher debt to GDP ratios. Finally, the scheme rewards countries for reducing their deficit below the initial allowance, lending credibility to the Stability Pact's goal of a balanced budget in the medium run.
Handle: RePEc:nbr:nberwo:7278
Template-Type: ReDIF-Paper 1.0
Title: The Concentration of Medical Spending: An Update
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Ellen Meara
Note: EH
Number: 7279
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7279
File-URL: http://www.nber.org/papers/w7279.pdf
File-Format: application/pdf
Publication-Status: published as The Concentration of Medical Spending: An Update, David M. Cutler, Ellen Meara. in Themes in the Economics of Aging, Wise. 2001
Abstract: In the last two decades, Medicare spending has doubled in real terms despite the fact that the health of Medicare beneficiaries improved over this period. The goals of this paper are to document how trends in spending by age have changed among elderly Medicare beneficiaries in the last decade and to reconcile the decline in disability rates with rapid increases in spending among the elderly. First, we conclude that the trend of disproportionate spending growth among the oldest old has continued between 1985 and 1995. Spending among the younger elderly, those 65-69 rose by two percent annually in real per person terms. In contrast, spending for those over age 85 rose by 4 percent. Second we show that the reasons for the large increase in spending on the oldest elderly relative to the younger elderly is the rapid increase in the use of post-acute services such as home health care and skilled nursing care. Spending on post-acute care for the very old has risen 20 percent per year in the last decade.
Handle: RePEc:nbr:nberwo:7279
Template-Type: ReDIF-Paper 1.0
Title: The U.S. Patent System in Transition: Policy Innovation and the Innovation Process
Classification-JEL: O3
Author-Name: Adam B. Jaffe
Author-Person: pja49
Note: PR
Number: 7280
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7280
File-URL: http://www.nber.org/papers/w7280.pdf
File-Format: application/pdf
Publication-Status: published as Jaffe, Adam B. "The US Patent System In Transition: Policy Innovation And The Innovation Process," Research Policy, 2000, v29(4-5,Apr), 531-557.
Abstract: This paper surveys the major changes in patent policy and practice that have occurred in the last two decades in the U.S., and reviews the existing analyses by economists that attempt to measure the impacts these changes have had on the processes of technological change. It also reviews the broader theoretical and empirical literature that bears on the expected effects of changes in patent policy. Despite the significance of the policy changes and the wide availability of detailed data relating to patenting, robust conclusions regarding the empirical consequences for technological innovation of changes in patent policy are few. Possible reasons for these limited results are discussed, and possible avenues for future research are suggested.
Handle: RePEc:nbr:nberwo:7280
Template-Type: ReDIF-Paper 1.0
Title: Efficiency Effects on the U.S. Economy from Wireless Taxation
Classification-JEL: H22; L51
Author-Name: Jerry Hausman
Author-Person: pha893
Note: PE
Number: 7281
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7281
File-URL: http://www.nber.org/papers/w7281.pdf
File-Format: application/pdf
Publication-Status: published as Hausman, Jerry. "Efficiency Effects On The U.S. Economy From Wireless Taxation," National Tax Journal, 2000, v53(3,Sep), Part 2, 733-942.
Abstract: This paper measures for the first time the economic efficiency effects of the taxation of wireless services, which are taxed by federal, state, and local governments at relatively high rates in the range of 14%-25%. The paper concludes such taxes are a much greater drain on the economy than their direct costs. The taxes identified in this paper cost the economy $2.56 billion more than the $4.79 billion they raise in tax revenues. These taxes are raised from wireless consumers and thereby suppress demand for service, imposing an efficiency loss on the economy of $0.53 for every $1 currently raised in taxes. Prospective taxes will impose an efficiency loss of $0.72-$1.14 per additional dollar of tax revenue raised.
Handle: RePEc:nbr:nberwo:7281
Template-Type: ReDIF-Paper 1.0
Title: The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence
Classification-JEL: E29; J60
Author-Name: Olivier Blanchard
Author-Person: pbl2
Author-Name: Justin Wolfers
Author-Person: pwo9
Note: EFG ME
Number: 7282
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7282
File-URL: http://www.nber.org/papers/w7282.pdf
File-Format: application/pdf
Publication-Status: published as Economic Journal, Vol. 110 (March 2000): 1-33.
Abstract: Two key facts about European unemployment must be explained: the rise in unemployment since the 1960s, and the heterogeneity of individual country experiences. While adverse shocks can potentially explain much of the rise in unemployment, there is insufficient heterogeneity in these shocks to explain cross-country differences. Alternatively, while explanations focusing on labor market institutions explain cross-country differences explain current heterogeneity well, many of these institutions pre-date the rise in unemployment. Based on a panel of institutions and shocks for 20 OECD nations since 1960, we find that the interaction between shocks and institutions is crucial to explaining both stylized facts. We test two specifications, and each offers significant support for our interactions hypothesis. The first speculation assumes that there are common but unobservable shocks across countries, and that these shocks have a larger and more persistent effect in countries with poor labor market institutions. The second constructs series for the macro shocks, and again finds evidence that the same size shock has differential effects on unemployment when labor market institutions differ. We interpret this as suggesting that institutions determine the relevance of the unemployed to wage-setting, thereby determining the evolution of equilibrium unemployment rates following a shock.
Handle: RePEc:nbr:nberwo:7282
Template-Type: ReDIF-Paper 1.0
Title: Too Much of a Good Thing? The Economics of Investment in R&D
Classification-JEL: O31; O41
Author-Name: Charles I. Jones
Author-Person: pjo24
Author-Name: John C. Williams
Author-Person: pwi23
Note: EFG PR
Number: 7283
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7283
File-URL: http://www.nber.org/papers/w7283.pdf
File-Format: application/pdf
Publication-Status: published as Jones, Charles I. and John C. Williams. "Too Much Of A Good Thing? The Economics Of Investment In R&D," Journal of Economic Growth, 2000, v5(1,Mar), 65-85.
Abstract: Research and development (R&D) is a key determinant of long run productivity and welfare. A central issue is whether a decentralized economy undertakes too little or too much R&D. We develop an endogenous growth model that incorporates parametrically four important distortions to R&D: the surplus appropriability problem, knowledge spillovers, creative destruction, and congestion externalities. We show that our model is consistent with the available evidence on R&D, growth, and markups. Calibrating the model to micro and macro data, we find that the decentralized economy typically underinvests in R&D relative to what is socially optimal. The only exceptions to this conclusion occur when both the congestion externality is extremely strong and the equilibrium real interest rate is very high. These results are robust to reasonable variations in model parameters.
Handle: RePEc:nbr:nberwo:7283
Template-Type: ReDIF-Paper 1.0
Title: Comparing Asset Pricing Models: An Investment Perspective
Classification-JEL: G11; G12
Author-Name: Lubos Pastor
Author-Person: ppa276
Author-Name: Robert F. Stambaugh
Author-Person: pst282
Note: AP
Number: 7284
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7284
File-URL: http://www.nber.org/papers/w7284.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Financial Economics, Vol. 56 (2000): 335-381.
Abstract: We investigate the portfolio choices of mean-variance-optimizing investors who use sample evidence to update prior beliefs centered on either risk-based or characteristic-based pricing models. With dogmatic beliefs in such models and an unconstrained ratio of position size to capital, optimal portfolios can differ across models to economically significant degrees. The differences are substantially reduced by modest uncertainty about the models' pricing abilities. When the ratio of position size to capital is subject to realistic constraints, the differences in portfolios across models become even less important, nonexistent in some cases.
Handle: RePEc:nbr:nberwo:7284
Template-Type: ReDIF-Paper 1.0
Title: Organizational Change in French Manufacturing: What Do We Learn From Firm Representatives and From Their Employees?
Author-Name: Nathalie Greenan
Author-Person: pgr420
Author-Name: Jacques Mairesse
Author-Person: pma712
Note: PR
Number: 7285
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7285
File-URL: http://www.nber.org/papers/w7285.pdf
File-Format: application/pdf
Abstract: In this paper, we use a French matched employer-employee survey, the COI survey, conducted in 1997, to describe the general features of organizational change in manufacturing firms with more than 50 employees. In a first section, we explore the methodological issues associated with the building up of a statistical measure of organizational change, we describe the COI survey and we present the set of firm level and employee level variables that we have selected to investigate organizational change. In a second section, we present the results of two correspondence analysis, one conducted on a sample of 1462 firms from the COI survey and the other one conducted on the sample of 2049 blue collar workers affiliated to those firms. On one hand, using the firm level section of the survey, we show that all types of new organizational practices are positively correlated with one another. On the other hand, at the blue collar level, three main dimensions discriminate between jobs: the intensity of involvement in information processing and decision, the intensity of constraints weighing on the content and rhythm of work and the orientation of information and production flows: either pushed by colleagues or pulled by the market. We also find that blue collars cannot develop a high level of involvement in information processing and decisions and have at the same time their work rhythm fixed by heavy technical constraints whereas high time pressure imposed on work rhythm by the market is positively correlated with such an involvement. Finally, if we correlate firm level and worker level variables, we find that an increase in the use of 'employee involvement' and 'quality' practices by the firm is positively correlated both with a higher level of blue collars' involvement in information processing and decision and with a higher level of technical constraints, production flows being pushed by colleagues rather than pulled by the market. The mapping of firm level responses stemming from our first correspondence analysis has been used to select 4 firms in different areas of the statistical universe and belonging to the with executives from these firms and plant visit are used to check the quality of our statistical data and to better understand our descriptive results.
Handle: RePEc:nbr:nberwo:7285
Template-Type: ReDIF-Paper 1.0
Title: The Market for Catastrophe Risk: A Clinical Examination
Classification-JEL: G22
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Note: AP
Number: 7286
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7286
File-URL: http://www.nber.org/papers/w7286.pdf
File-Format: application/pdf
Publication-Status: published as Froot, Kenneth A. "The Market For Catastrophe Risk: A Clinical Examination," Journal of Financial Economics, 2001, v60(2-3,May), 529-571.
Abstract: This paper examines the market for catastrophe event risk -- i.e., financial claims that are linked to losses associated with natural hazards, such as hurricanes and earthquakes. This market is in transition as new approaches for transferring risk are being explored. The paper studies several recent transactions by USAA which use reinsurance capacity from capital markets rather than only from reinsurers. We identify two puzzles concerning the cat protection purchased in these transactions: there is no coverage for the largest, most severe events; and premiums appear well above actuarial value. We demonstrate that both features deviate from what theory would predict, yet are characteristic of many transactions, not simply those of USAA. We then explore a number of possible explanations for the facts. The most compelling are combinations of capital market imperfections and market power on the part of reinsurers. Conclusions for broader capital market and risk management issues are discussed.
Handle: RePEc:nbr:nberwo:7286
Template-Type: ReDIF-Paper 1.0
Title: The Evolving Market for Catastrophic Event Risk
Classification-JEL: G22
Author-Name: Kenneth A. Froot
Author-Person: pfr60
Note: AP
Number: 7287
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7287
File-URL: http://www.nber.org/papers/w7287.pdf
File-Format: application/pdf
Publication-Status: published as Froot, Kenneth. “The Evolving Market for Catastrophe Event Risk." Risk Management and Insurance Review 2, 3 (Fall 1999): 1-28.
Publication-Status: published as Figlewski, S. and R. Levich (eds.) Risk Management: The State of the Art. Kluwer Academic Publishers, 2001.
Abstract: This paper discusses the recent changes in the market for catastrophe risk. These risks have traditionally been distributed through the insurance and reinsurance systems. However, because insurance companies tend to share relatively small amounts of their cat exposures and because insurance companies' capital is threatened by large event, these risks are now being shared partly through the capital markets. In looking to likely future developments, the paper enumerates five key ingredients that successfully structured cat instruments are likely to share: retentions should be substantial; layers of protection should not be too high; dollar amounts of risk transfer should not be too small; loss triggers should be beyond cendent control; and loss triggers should be symmetrically transparent.
Handle: RePEc:nbr:nberwo:7287
Template-Type: ReDIF-Paper 1.0
Title: Policies to Foster Human Capital
Classification-JEL: D33
Author-Name: James J. Heckman
Note: LS PE CH
Number: 7288
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7288
File-URL: http://www.nber.org/papers/w7288.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J., 2000. "Policies to foster human capital," Research in Economics, Elsevier, Elsevier, vol. 54(1), pages 3-56, March.
Publication-Status: published as James Heckman, 2011. "Policies to foster human capital," Educational Studies, Higher School of Economics, issue 3, pages 73-137.
Abstract: This paper considers the sources of skill formation in a modern economy and emphasizes the importance of both cognitive and noncognitive skills in producing economic and social success and the importance of both formal academic institutions and families and firms as sources of learning. Skill formation is a dynamic process with strong synergistic components. Skill begets skill. Early investment promotes later investment. Noncognitive skills and motivation are important determinants of success and these can be improved more successfully and at later ages than basic cognitive skills. Methods currently used to evaluate educational interventions ignore these noncogntive skills and therefore substantially understate the benefits of early intervention programs and mentoring and teenage motivation programs. At current levels of investment, American society underinvests in the very young and overinvests in mature adults with low skills.
Handle: RePEc:nbr:nberwo:7288
Template-Type: ReDIF-Paper 1.0
Title: Are There Returns to the Wages of Young Men from Working While in School?
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: Lixin Xu
Author-Name: Marta Tienda
Author-Name: Avner Ahituv
Note: CH
Number: 7289
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7289
File-URL: http://www.nber.org/papers/w7289.pdf
File-Format: application/pdf
Publication-Status: published as Hotz, V. Joseph, Lixin Colin Xu, Marta Tienda and Avner Ahituv. "Are There Returns To The Wages Of Young Men From Working While In School?," Review of Economics and Statistics, 2002, v84(2,May), 221-236.
Abstract: This paper examines the impacts of work experience acquired while youth were in high school (and college) on young men's wage rates during the 1980s and 1990s. Previous studies have found evidence of sizeable and persistent rates of return to working while enrolled in school, especially high school, on subsequent wage growth. Such findings may represent causal effects of having acquired work experience while still enrolled in school, but they may also be the result of failure to fully account for individual differences in young adults' capacities to acquire such skills and be productive in the work force later in life. We re-examine the robustness of previous attempts to control for unobserved heterogeneity and selectivity. We explore more general methods for dealing with dynamic forms of selection by explicitly modeling the educational and work choices of young men from age 13 through their late twenties. Using data on young men from the 1979 National Longitudinal Survey of Youth (NLSY79), we find that the estimated returns to working while in high school or college are dramatically diminished in magnitude and statistical significance when one uses these dynamic selection methods. As such, our results indicate a decided lack of robustness to the inference about the effects of working while in school that has been drawn from previous work.
Handle: RePEc:nbr:nberwo:7289
Template-Type: ReDIF-Paper 1.0
Title: Are Whites Still "Fleeing"? Racial Patterns and Enrollment Shifts in Urban Public Schools, 1987-1996
Classification-JEL: R2; I2
Author-Name: Charles T. Clotfelter
Author-Person: pcl34
Note: PE
Number: 7290
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7290
File-URL: http://www.nber.org/papers/w7290.pdf
File-Format: application/pdf
Publication-Status: published as Clotfelter, Charles T. "Are Whites Still Fleeing? Racial Patterns And Enrollment Shifts In Urban Public Schools, 1987-1996," Journal of Policy Analysis and Management, 2001, v20(2,Spring), 199-221.
Abstract: The effect of interracial contact in public schools on the enrollment of whites has been an important concern in assessments of desegregation since the 1970s. It has been feared that 'white flight' -- meaning exit from or avoidance of racially mixed public schools -- could undermine the racial contact that desegregation policy seeks to enhance. This study examines this question using recent data. It also expands coverage from large urban districts to entire metropolitan areas, paying attention to the spatial context within which enrollment decisions are made. To do so, it examines data for 1987 and 1996 on racial composition and enrollment in all schools and school districts in 238 metropolitan areas. The study finds that white losses appear to be spurred both by interracial contact in districts where their children attend school and by the opportunities available in metropolitan areas for reducing that contact. Implications for metropolitan segregation are examined.
Handle: RePEc:nbr:nberwo:7290
Template-Type: ReDIF-Paper 1.0
Title: Health Insurance and Less Skilled Workers
Classification-JEL: J33; I11
Author-Name: Janet Currie
Author-Person: pcu13
Author-Name: Aaron Yelowitz
Author-Person: pye2
Note: EH LS
Number: 7291
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7291
File-URL: http://www.nber.org/papers/w7291.pdf
File-Format: application/pdf
Publication-Status: published as Card, David and Rebecca Blank (eds.) Finding Jobs: Work and Welfare Reform. New York: Russell Sage, 2000.
Abstract: We begin this research with the belief that low and declining levels of private-employer sponsored health insurance were a continuing problem, especially among less skilled workers. Our analysis, however, paints a more complex picture. Using data from the March CPS, the SIP, and CPS benefits surveys, we find that while many less skilled workers remain uncovered, the decline in private employer-sponsored health insurance coverage has slowed recently and may even have reversed. Neither crowdout nor a deterioration in the quality of jobs available to the less skilled seems likely to fully explain these time-series trends in health insurance coverage. A simple explanation that has been largely overlooked is that rising health care costs have driven much of the reduction in private insurance coverage, but it is more difficult to test this hypothesis given the available data.
Handle: RePEc:nbr:nberwo:7291
Template-Type: ReDIF-Paper 1.0
Title: Domestic Policies, National Sovereignty and International Economic Institutions
Classification-JEL: F02; F13
Author-Name: Kyle Bagwell
Author-Person: pba409
Author-Name: Robert W. Staiger
Author-Person: pst85
Note: ITI
Number: 7293
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7293
File-URL: http://www.nber.org/papers/w7293.pdf
File-Format: application/pdf
Publication-Status: published as Bagwell, Kyle and Robert W. Staiger. "Domestic Policies, National Sovereignty, And International Economic Institutions," Quarterly Journal of Economics, 2001, v116(2,May), 519-562.
Abstract: To what extent must nations cede control over their economic and social policies if global efficiency is to be achieved in an interdependent world? This question is at the center of the debate over the future role of GATT (and its successor, the WTO) in the realm of labor and environmental standards. Current GATT rules reflect the primacy of market access concerns in GATT practice, and this orientation is seen increasingly as unfriendly to labor and environmental causes. Fundamental changes to GATT are being considered as a result, changes that would expand the scope of GATT negotiations to include labor and environmental policies, and would lead to a significant loss of sovereignty for national governments. In this paper we establish that there is no need for the WTO to expand the scope of its negotiations in this way. We show instead that the market access focus of current GATT rules is well-equipped to handle the problems associated with choices over labor and environmental standards, and that with relatively modest changes that grant governments more sovereignty, not less, these rules can in principle deliver globally efficient outcomes.
Handle: RePEc:nbr:nberwo:7293
Template-Type: ReDIF-Paper 1.0
Title: Measuring the Effects of Arbitration on Wage Levels: The Case of Police Officers
Classification-JEL: J31; J52
Author-Name: Orley Ashenfelter
Author-Person: pas9
Author-Name: Dean Hyslop
Author-Person: phy11
Note: LS
Number: 7294
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7294
File-URL: http://www.nber.org/papers/w7294.pdf
File-Format: application/pdf
Publication-Status: published as Orley Ashenfelter & Dean Hyslop, 2001. "Measuring the effect of arbitration on wage levels: The case of police officers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 54(2), pages 316-328, January.
Abstract: In this paper we provide an empirical evaluation of the effect that the provision of an arbitration statute has on the wage levels of police officers. We analyze the effect of arbitration on wages by comparing wage levels across political jurisdictions and over time using a sample of states. Two complementary data sources are used: panel data on state level wages of police officers, and individual level data on police officers from Decennial Censuses. The empirical results from both data sets are remarkably consistent and provide no robust evidence that the presence of arbitration statues has a consistent effect on overall wage levels. On average, the effect of arbitration is approximately zero, although there is substantial heterogeneity in the estimated effects across states.
Handle: RePEc:nbr:nberwo:7294
Template-Type: ReDIF-Paper 1.0
Title: Have Employment Reductions Become Good News for Shareholders? The Effect of Job Loss Announcements on Stock Prices, 1970-97
Classification-JEL: G14; J63
Author-Name: Henry S. Farber
Author-Name: Kevin F. Hallock
Author-Person: pha176
Note: LS
Number: 7295
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7295
File-URL: http://www.nber.org/papers/w7295.pdf
File-Format: application/pdf
Abstract: We study the reaction of stock prices to announcements of reductions in force (RIFs) using a sample of nearly 3878 such announcements in 1176 large firms during the 1970-97 period collected from the Wall Street Journal Index. We note that, although there has been a dramatic secular increase in news stories related to job loss, the total number of actual announcements fro the firms in our sample follows the business cycle quite closely. We then examine changes over time in standard summary statistics (means, meridians, fraction negative) of the distribution of stock market reactions as well as changes over time in kernel density estimates of this distribution. We find clear evidence that the distribution of stock market reactions has shifted to the right (became less negative) over time. One possible explanation for this change is that, over the last three decades, RIFs designed to improve efficiency have become more common relative to RIFs designed to cope with reductions in product demand. We find that, although this explanation shows some promise, most of the decline in the negative stock price reaction remains unexplained.
Handle: RePEc:nbr:nberwo:7295
Template-Type: ReDIF-Paper 1.0
Title: The Government as Litigant: Further Tests of the Case Selection Model
Classification-JEL: K41
Author-Name: Theodore Eisenberg
Author-Name: Henry S. Farber
Note: LS
Number: 7296
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7296
File-URL: http://www.nber.org/papers/w7296.pdf
File-Format: application/pdf
Publication-Status: published as Theodore Eisenberg & Henry Farber, 2003. "The Government as Litigant: Further Tests of the Case Selection Model," American Law and Economics Review, Oxford University Press, vol. 5(1), pages 94-133.
Abstract: We develop a model of the plaintiff's decision to file a law suit that has implications for how differences between the federal government and private litigants and litigation translate into differences in trial rates and plaintiff win rates at trial. Our case selection model generates a set of predictions for relative trial rates and plaintiff win rates depending on the type of case and whether the government is defendant or plaintiff. In order to test the model, we use data on about 350,000 cases filed in federal district court between 1979 and 1997 in the areas of personal injury and job discrimination where the federal government and private parties work under roughly similar legal rules. We find broad support for the predictions of the model.
Handle: RePEc:nbr:nberwo:7296
Template-Type: ReDIF-Paper 1.0
Title: An Industry-Adjusted Index of State Environmental Compliance Costs
Author-Name: Arik Levinson
Author-Person: ple135
Note: PE
Number: 7297
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7297
File-URL: http://www.nber.org/papers/w7297.pdf
File-Format: application/pdf
Publication-Status: published as An Industry-Adjusted Index of State Environmental Compliance Costs, Arik Levinson. in Behavioral and Distributional Effects of Environmental Policy, Carraro and Metcalf. 2001
Abstract: This paper describes a new, industry-adjusted index of state environmental compliance costs from 1977 to 1994. The index has two principal advantages: it controls for states' industrial compositions, and it can be calculated for 17 years, thus facilitating comparisons both among states and within states over time. Several notable facts emerge. First, differences in states' industrial compositions play a large role in determining their environmental compliance costs. Second, after controlling for industrial composition, the variance across states in compliance costs declined steadily between 1977 and 1994. Third, this cost index is negatively correlated with subjective indices of state environmental efforts compiled by various environmental organizations. In sum, the cost index described here provides some new data on historical trends in state regulatory differences, differs from the conventional wisdom regarding states' relative environmental efforts, and provides a useful tool for researchers exploring the effects of compliance costs on economic activity.
Handle: RePEc:nbr:nberwo:7297
Template-Type: ReDIF-Paper 1.0
Title: Green Taxes and Administrative Costs: The Case of Carbon Taxation
Author-Name: Sjak Smulders
Author-Name: Herman R.J. Vollebergh
Note: PE
Number: 7298
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7298
File-URL: http://www.nber.org/papers/w7298.pdf
File-Format: application/pdf
Publication-Status: published as Green Taxes and Administrative Costs: The Case of Carbon Taxation, Sjak Smulders, Herman R. J. Vollebergh. in Behavioral and Distributional Effects of Environmental Policy, Carraro and Metcalf. 2001
Abstract: This paper explores the trade-off between incentive effects and administrative costs associated with the implementation of various environmental tax instruments, with special reference to carbon taxes. In a simple model, we show under what conditions it is optimal to use input rather than emission taxes to internalize environmental externalities. Mixed tax regimes are also studied. If linkage of emissions to inputs is close, if abatement possibilities are costly, and if administrative costs of emission taxes are high, emission taxes should not be introduced. It is shown that these conditions directly apply to current tax policies toward CO2 emissions in several European countries that harness pre-existing energy taxes. First, there is a one-to-one correspondence between carbon content of energy and CO2 emissions. Second, only few possibilities exist to abate CO2 emissions separately. Third, energy excises allow to save on administrative costs. Broadening the carbon tax base by removing certain widely-used exemptions for energy production (and possibly adding emission taxes or abatement subsidies for selected industries) is likely to increase incentives for carbon reduction without significant additional administrative costs.
Handle: RePEc:nbr:nberwo:7298
Template-Type: ReDIF-Paper 1.0
Title: A Cross-National Analysis of the Effects of Minimum Wages on Youth Employment
Classification-JEL: J23; J38
Author-Name: David Neumark
Author-Person: pne16
Author-Name: William Wascher
Note: LS CH
Number: 7299
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7299
File-URL: http://www.nber.org/papers/w7299.pdf
File-Format: application/pdf
Publication-Status: published as Neumark, David and William Wascher. "Minimum Wages, Labor Market Institutions, And Youth Employment: A Cross-National Analysis," Industrial and Labor Relations Review, 2004, v57(2,Jan), 223-248.
Abstract: We estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising sixteen OECD countries for the period 1975-1997. We pay particular attention to the impact of cross-country differences in minimum wage systems and in other labor market institutions and policies that may either reduce or amplify the effects of minimum wages. Overall, our results generally are consistent with the view that minimum wages cause employment losses among youth. However, the evidence also suggests that the employment effects of minimum wages vary considerably across countries. Disemployment effects of minimum wages appear to be smaller when there are subminimum wages for youths, while, in the longer run at least, minimum wages set by collective bargaining may entail more deleterious employment effects. We also find that government policies restricting employers' ability to adjust nonpecuniary characteristics of jobs (such as hours restrictions or work rules) tend to exacerbate the negative effects of minimum wages on youth employment, while countries with active labor market policies designed to bring non-employed individuals into the work force tend to exhibit smaller disemployment effects from minimum wages.
Handle: RePEc:nbr:nberwo:7299
Template-Type: ReDIF-Paper 1.0
Title: Economic Imperialism
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS
Number: 7300
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7300
File-URL: http://www.nber.org/papers/w7300.pdf
File-Format: application/pdf
Publication-Status: published as Lazear, Edward P. "Economic Imperialism," Quarterly Journal of Economics, 2000, v115(1,Feb), 99-146.
Abstract: Economics is not only a social science, it is a genuine science. Like the physical sciences, economics uses a methodology that produces refutable implications and tests these implications using solid statistical techniques. In particular, economics stresses three factors that distinguish it from other social sciences. Economists use the construct of rational individuals who engage in maximizing behavior. Economic models adhere strictly to the importance of equilibrium as part of any theory. Finally, a focus on efficiency leads economists to ask questions that other social sciences ignore. These ingredients have allowed economics to invade intellectual territory that was previously deemed to be outside the discipline's realm.
Handle: RePEc:nbr:nberwo:7300
Template-Type: ReDIF-Paper 1.0
Title: The Effects of Environmental Policy on the Performance of Environmental RIVs
Author-Name: Yannis Katsoulacos
Author-Name: Alistair Ulph
Author-Name: David Ulph
Note: PE
Number: 7301
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7301
File-URL: http://www.nber.org/papers/w7301.pdf
File-Format: application/pdf
Abstract: Much of the potential impact of environmental policy is though to come from the incentives it gives firms to develop and introduce new environmental products and processes. Almost all the literature on this issue has focused on the impact of environmental policy on the amount environmental R&D that firms undertake, assuming that such R&D is undertaken independently or non-cooperatively. It is now widely recognized that there are considerable potential benefits from having firms undertake R&D cooperatively through research joint ventures (RJVs). In this paper we analyze the impact of environmental policy on the performance of environmental RJVs and underage an explicit welfare comparison of this performance against the counterfactual of a non-cooperative equilibrium. The framework we adopt is that developed by Katsoulacos and Ulph (1998) which identifies three stages in the innovative process -- research design, R&D; information sharing -- and endogenises each of these inter-related decisions in both the cooperative and non-cooperative equilibria. The case we examine is that in which governments cannot commit to environmental policy, so all these decisions have to taken anticipating the environmental policy that will finally be imposed. We show that RJVs are welfare enhancing when the levels of environmental damage caused by pollution are low. In this case RJVs fully share information and internalize the associated externality. However when the level of damage is high, it turns out that firms anticipate tougher environmental policy when they share information then when they do not, and so do not share information. This distorts the RJV's R&D decisions in ways that make the non-cooperative equilibrium welfare enhancing.
Handle: RePEc:nbr:nberwo:7301
Template-Type: ReDIF-Paper 1.0
Title: The Fallacy of the Fiscal Theory of the Price Level
Author-Name: Willem H. Buiter
Author-Person: pbu137
Note: IFM ME
Number: 7302
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7302
File-URL: http://www.nber.org/papers/w7302.pdf
File-Format: application/pdf
Publication-Status: published as Buiter, W. H. "The Fiscal Theory Of The Price Level: A Critique," Economic Journal, 2002, v112(481,Jul), 459-480.
Abstract: It is not common for an entire scholarly literature to be based on a fallacy, that is, 'on faulty reasoning; misleading or unsound argument'. The 'fiscal theory of the price level', recently re-developed by Woodford, Cochrane, Sims and others, is an example of a fatally flawed research programme. The source of the fallacy is an economic misspecification. The proponents of the fiscal theory of the price level do not accept the fundamental proposition that the government's intertemporal budget constraint is a constraint on the government's instruments that must be satisfied for all admissible values of the economy-wide endogenous variables. Instead they require it to be satisfied only in equilibrium. This economic misspecification has implications for the mathematical or logical properties of the equilibria supported by models purporting to demonstrate the properties of the fiscal approach. These include: overdetermined (internally inconsistent) equilibria; anomalies like the apparent ability to price things that do not exist; the need for arbitrary restrictions on the exogenous and predetermined variables in the government's budget constraint; and anomalous behaviour of the equilibrium' price sequences, including behaviour that will ultimately violate physical resource constraints. The issue is of more than academic interest. Policy conclusions could be drawn from the fiscal theory of the price level that would be harmful if they influenced the actual behaviour of the fiscal and monetary authorities. The fiscal theory of the price level implies that a government could exogenously fix its real spending, revenue and seigniorage plans, and that the general price level would adjust the real value of its contractual nominal debt obligations so as to ensure government solvency. When reality dawns, the result could be painful fiscal tightening, government default, or unplanned recourse to the inflation tax.
Handle: RePEc:nbr:nberwo:7302
Template-Type: ReDIF-Paper 1.0
Title: Incomplete Contracts and Industrial Organization
Classification-JEL: D23; D43
Author-Name: Gene M. Grossman
Author-Person: pgr21
Author-Name: Elhanan Helpman
Author-Person: phe205
Note: IO
Number: 7303
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7303
File-URL: http://www.nber.org/papers/w7303.pdf
File-Format: application/pdf
Abstract: We develop an equilibrium model of industrial structure in which the organization of firms is endogenous. Differentiated consumer products can be produced either by vertically integrated firms or by pairs of specialized companies. Production of each variety of consumer good requires a unique, specialized component. Vertically integrated firms can manufacture the components they need in the quantity and type that maximizes profits, but they face a relatively high cost of governance. Specialized firms can produce at lower cost, but input suppliers face a potential hold-up problem. We study the equilibrium mode of organization when inputs are fully or partially specialized. We consider how the degree of competition in the market and other parameters affect the equilibrium choices, and how the equilibrium compares with the efficient allocation.
Handle: RePEc:nbr:nberwo:7303
Template-Type: ReDIF-Paper 1.0
Title: The Crisis of Germany's Pension Insurance System and How It Can Be Resolved
Classification-JEL: H55
Author-Name: Hans-Werner Sinn
Author-Person: psi146
Note: PE
Number: 7304
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7304
File-URL: http://www.nber.org/papers/w7304.pdf
File-Format: application/pdf
Publication-Status: published as Cnossen, Sijbren and Hans-Werner Sinn (eds.) Public finance and public policy in the new century, CESifo Seminar Series. Cambridge and London: MIT Press, 2003.
Abstract: The paper discusses the options for a reform of the German pension system using a model developed at CES for the German Council of economic advisors to the Federal Ministry of Economics and Research. It is argued that the German pay-as-you-go-system is efficient in a present value sense but will nevertheless need the support of a funded system to avoid a financial crisis. The paper investigates the possibility of introducing obligatory private savings at a variable rate where the time path of the savings rate is chosen so as to stabilize the sum of this rate and the pay-as-you-go contribution rate, given the time path of pensions as defined in the present system.
Handle: RePEc:nbr:nberwo:7304
Template-Type: ReDIF-Paper 1.0
Title: The Environmental Regime in Developing Countries
Author-Name: Raghbendra Jha
Author-Name: John Whalley
Author-Person: pwh8
Note: PE
Number: 7305
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7305
File-URL: http://www.nber.org/papers/w7305.pdf
File-Format: application/pdf
Publication-Status: published as The Environmental Regime in Developing Countries, Raghbendra Jha, John Whalley. in Behavioral and Distributional Effects of Environmental Policy, Carraro and Metcalf. 2001
Abstract: This paper discusses the environmental externalities that are commonly found in the developing world (the environmental regime) along with the policy responses, if any, commonly used to deal with these. Included are the effects of industrial emissions, air and water quality impacts of untreated waste (industrial and human waste), congestion effects of traffic, soil erosion, and open access resource problems (including forests). We note the tendency in much literature of the last few years to equate environmental problems in developing countries with pollutants (or emissions). The paper argues that to discuss environmental problems in developing countries (or to compare with developed countries) without reference to degradation as well as pollutants is incomplete; the effects of the former are large and pervasive, and their severity and interaction with economic process often differs sharply from that of pollutants. The paper concludes with a discussion of how environmental policy in developing countries differs from that found in developed countries in light of our focus on degradation effects.
Handle: RePEc:nbr:nberwo:7305
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Young Workers on the Aggregate Labor Market
Classification-JEL: E24; J41
Author-Name: Robert Shimer
Author-Person: psh9
Note: EFG LS
Number: 7306
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7306
File-URL: http://www.nber.org/papers/w7306.pdf
File-Format: application/pdf
Publication-Status: published as Shimer, Robert. "The Impact Of Young Workers On The Aggregate Labor Market," Quarterly Journal of Economics, 2001, v116(3,Aug), 969-1007.
Abstract: This paper estimates the response of the unemployment rate and labor force participation rate to exogenous variation in the youth share of the working age population, using cross-state variation in lagged birth rates as an instrumental variable. A one percent increase in the youth share reduces the unemployment rate of young workers by more than one percent, and of older workers by more than two percent, holding conditions in other states constant. It raises the labor force participation rate by about a third of a percent for young workers, and by much less for older workers, again ceteris paribus. These results are consistent with increasing returns to scale ('thick market externalities') in the labor market. Young workers are frequently mismatched in their employment, and firms create jobs to take advantage of this mismatch. Data on gross job creation and destruction in manufacturing support this theory. I also reconcile these results with existing evidence on the labor market impact of young workers.
Handle: RePEc:nbr:nberwo:7306
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Employer-Provided Health Insurance on Dynamic Employment Transitions
Classification-JEL: J6; I1
Author-Name: Donna B. Gilleskie
Author-Name: Byron F. Lutz
Note: EH
Number: 7307
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7307
File-URL: http://www.nber.org/papers/w7307.pdf
File-Format: application/pdf
Publication-Status: published as Gilleskie, Donna and Bryon Lutz. "The Impact Of Employer-Provided Health Insurance On Dynamic Employment Transitions," Journal of Human Resources, 2002, v37(1,Winter), 129-162.
Abstract: We estimate the impact of employer-provided health insurance (EPHI) on the job mobility of males over time using a dynamic empirical model that accounts for unobserved heterogeneity. Previous studies of job-lock reach different conclusions about possible distortions in labor mobility stemming from an employment-based health insurance system: a few authors find no evidence of job-lock, while most find reductions in the mobility of insured workers of between 20 and 40%. WE use data from the National Longitudinal Survey of Youth which describes the health insurance an individual holds, as well as whether he is offered insurance by his employer. This additional information allows us to model the latent individual characteristics that are correlated with the offer of EPHI, the acceptance of EPHI, and employment transitions. Our results provide an estimate of job-lock unbiased through correlation with positive job characteristics and individual specific turnover propensity. We find no evidence of job-lock among married males, and produce small estimates of job-lock among unmarried males of between 10 and 15%.
Handle: RePEc:nbr:nberwo:7307
Template-Type: ReDIF-Paper 1.0
Title: Costs of Air Quality Regulation
Author-Name: Randy A. Becker
Author-Person: pbe157
Author-Name: J. Vernon Henderson
Author-Person: phe30
Note: PE
Number: 7308
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7308
File-URL: http://www.nber.org/papers/w7308.pdf
File-Format: application/pdf
Publication-Status: Published as "Effects of Air Quality Regulation", American Economic Review, Vol. 86, no. 4 (September 1996): 789-813.
Publication-Status: published as Camaro, C.,and G. Metcalf (eds.) Distributional and Behavioral Effects of Environmental Policy. Chicago: University of Chicago Press, 2001.
Publication-Status: published as Costs of Air Quality Regulation, Randy A. Becker, J. Vernon Henderson. in Behavioral and Distributional Effects of Environmental Policy, Carraro and Metcalf. 2001
Abstract: This paper explores some costs associated with environmental regulation. We focus on regulation pertaining to ground-level ozone (O3) and its effects on two manufacturing industries -- industrial organic chemicals (SIC 2865-9) and miscellaneous plastic products (SIC 308). Both are major emitters of volatile organic compounds (VOC) and nitrogen oxides (Nox), the chemical precursors to ozone. Using plant-level data from the Census Bureau's Longitudinal Research Database (LRD), we examine the effects of regulation on the timing and magnitudes of investments by firms and on the impact it has had on their operating costs. As an alternative way to assess costs, we also employ plant-level data from the Pollution Abatement Costs and Expenditures (PACE) survey. Analyses employing average total cost functions reveal that plants' production costs are indeed higher in (heavily-regulated) non-attainment areas relative to (less-regulated) attainment areas. This is particularly true for younger plants, consistent with the notion that regulation is most burdensome for new (rather than existing) plants. Cost estimates using PACE data generally reveal lower costs. We also find that new heavily-regulated plants start our much larger than less-regulated plants, but then do not invest as much. Among other things, this highlights the substantial fixed costs involved in obtaining expansion permits. We also discuss reasons why plants may restrict their size.
Handle: RePEc:nbr:nberwo:7308
Template-Type: ReDIF-Paper 1.0
Title: Wages and the Allocation of Hours and Effort
Classification-JEL: E3
Author-Name: Mark Bils
Author-Person: pbi148
Author-Name: Yongsung Chang
Author-Person: pch20
Note: EFG
Number: 7309
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7309
File-URL: http://www.nber.org/papers/w7309.pdf
File-Format: application/pdf
Publication-Status: published as Bils, Mark and Youngsung Chang. "Cyclical Movements In Hours And Efforts Under Sticky Wages," International Economic Journal, 2002, v15(2,Summer), 1-26.
Abstract: We examine the impact of wage stickiness when employment has an effort as well as hours dimension. Despite wages being predetermined, the labor market clears through the effort margin. We compare this model quantitatively to models with flexible and sticky wages, but no effort margin. Allowing for responses in effort dramatically improves the ability of a sticky-wage model to mimic U.S. business cycles. The model produces fluctuations in hours that are intermediate to the standard flexible-wage and sticky-wage models; but output and consumption behave much like in the flexible-wage economy. Consequently, welfare costs of wage stickiness are potentially much, much smaller if one entertains an effort dimension.
Handle: RePEc:nbr:nberwo:7309
Template-Type: ReDIF-Paper 1.0
Title: What Inventory Behavior Tells Us About Business Cycles
Classification-JEL: E3
Author-Name: Mark Bils
Author-Person: pbi148
Author-Name: James A. Kahn
Author-Person: pka18
Note: EFG
Number: 7310
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7310
File-URL: http://www.nber.org/papers/w7310.pdf
File-Format: application/pdf
Publication-Status: published as Bils, Mark and James A. Kahn. "What Inventory Behavior Tells Us About Business Cycles," American Economic Review, 2000, v90(3,Jun), 458-481.
Abstract: Manufacturers' finished goods inventories move less than shipments over the business cycle. We argue that this requires marginal cost to be more procyclical than is conventionally measured. We construct, for six manufacturing industries, alternative measures of marginal cost that attribute high-frequency productivity shocks to procyclical work effort, and find that they are much more successful in accounting for inventory behavior. The difference is attributable to cyclicality in the shadow price of labor, not to diminishing returns in fact, parametric evidence suggests that the short-run slope of marginal cost is close to zero for five of the six industries. Moreover, while our measures of marginal cost are procyclical relative to output price, they are too persistent for intertemporal substitution to be important. We conclude that countercyclical markups are chiefly responsible for the sluggish response of inventory stocks over the cycle.
Handle: RePEc:nbr:nberwo:7310
Template-Type: ReDIF-Paper 1.0
Title: Understanding How Price Responds to Costs and Production
Classification-JEL: E3
Author-Name: Mark Bils
Author-Person: pbi148
Author-Name: Yongsung Chang
Author-Person: pch20
Note: EFG
Number: 7311
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7311
File-URL: http://www.nber.org/papers/w7311.pdf
File-Format: application/pdf
Publication-Status: published as Carnegie-Rochester Conference Series on Public Policy, Vol. 52, no. 1 (June 2000): 33-77
Abstract: The importance of sticky prices in business cycle fluctuations has been debated for many years. But we argue, based on a large empirical literature from the 1950's and 60's, that it is necessary to distinguish the response of price to an increase in factor prices from its response to an increase in marginal cost generated by an expansion in production. Consistent with that earlier literature, we find for 450 U.S. manufacturing industries that prices do respond more to increases in costs driven by changes in factor prices than to increases in marginal cost precipitated by expansions in output. We explore two models that can potentially explain these findings. Both break the link between price and marginal cost, thereby generating what one might naively interpret as average-cost pricing. The first is driven by firms pricing to limit entry. The second is driven by firms pricing to limit non-price competition within their market.
Handle: RePEc:nbr:nberwo:7311
Template-Type: ReDIF-Paper 1.0
Title: The Choice of Structural Model in Trade-Wages Decompositions
Classification-JEL: F00; F1
Author-Name: Lisandro Abrego
Author-Name: John Whalley
Author-Person: pwh8
Note: ITI
Number: 7312
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7312
File-URL: http://www.nber.org/papers/w7312.pdf
File-Format: application/pdf
Publication-Status: published as Abrego, Lisandro & Whalley, John, 2000. "The Choice of Structural Model in Trade-Wages Decompositions," Review of International Economics, Blackwell Publishing, vol. 8(3), pages 462-77, August.
Abstract: This paper explores the use of structural models as an alternative to reduced form methods when decomposing observed joint trade and technology driven wage changes into components attributable to each source. Conventional mobile factors Heckscher-Ohlin models typically reveal problems of specialisation unless price changes accompanying trade shocks are small, and can also produce wide ranges for the decomposition for parameterisations consistent with the joint change. A differentiated goods model which generalises Heckscher-Ohlin removes problems of specialisation and concentrates the range of decompositions more narrowly, but introduces larger demand side responses to trade shocks which greatly reduce the effect of trade. The conclusion offered is that the choice of structural model matters for decomposing observed wage changes into trade and technology components, and that reduced-form methods which do not discriminate between alternative structural models may not be that informative for such decompositions.
Handle: RePEc:nbr:nberwo:7312
Template-Type: ReDIF-Paper 1.0
Title: New Directions for Stochastic Open Economy Models
Classification-JEL: F3; F4
Author-Name: Maurice Obstfeld
Author-Person: pob13
Author-Name: Kenneth Rogoff
Author-Person: pro164
Note: IFM ME
Number: 7313
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7313
File-URL: http://www.nber.org/papers/w7313.pdf
File-Format: application/pdf
Publication-Status: published as Journal of International Economics, Vol. 50, no. 1 (February 2000): 117-153
Abstract: The paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages. Explicit solution of the wage-setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare, expected output, and the expected terms of trade. Despite the potential interplay between imperfections due to sticky wages and monopoly, the optimal monetary policy rule has a closed-form solution. To motivate our model, we show that observed correlations between terms of trade and exchange rates are more consistent with our traditional assumptions about nominal rigidities than with a popular alternative based on local-currency pricing.
Handle: RePEc:nbr:nberwo:7313
Template-Type: ReDIF-Paper 1.0
Title: Pre-Retirement Cashouts and Foregone Retirement Saving: Implications for 401(k) Asset Accumulation
Classification-JEL: J26
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: 7314
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7314
File-URL: http://www.nber.org/papers/w7314.pdf
File-Format: application/pdf
Publication-Status: published as Preretirement Cashouts and Foregone Retirement Saving: Implications for 401(k) Asset Accumulation , James M. Poterba, Steven F. Venti. in Themes in the Economics of Aging, Wise. 2001
Abstract: This paper presents new evidence on the potential importance of 401(K) assets in contributing to the retirement resources of future retirees. We use data on past 401(k) participation rates by age and imcome decile, along with information on average 401(k) contribution rates, to project the future 401(k) contribution trajectories of households that are currently headed by individuals between the ages of 29 and 39. We allow for the possibility of pre-retirmenet withdrawal of 401(k) assets when individuals experience employment transistion. By combining data from the Health and Retirement Survye on the likelihood of 'cashing out' a 401(k) account conditional on a job change, with data from other sources on the probability of job change, it is possible to estimate the prospective pre-retirement 'leakage' from 401(k) accounts. Our central findings are that for households reaching retirement age between 2025 and 2035, 401(k) balances are likely to be a much more important factor in financial preparation for retirement than they are today. We estimate that average 401(k) balances in 2025 will be between five and ten times as large as they are today, and would represent one-half to twice Social Security wealth (depending on investment allocation and based on current Social Security provisions). For persons retiring in 2035 we estimate that 401(k) balances will be three-quarters to two and one-half times Social Security wealth. Moreover, we find that pre-retirement withdrawals have a small effect on the balance in 401(k) accounts. We estimate that these withdrawals typically reduce average 401(k) assets at age 65 by about five percent. This is largely because most households who are eligible for a lump sum distribution when they change jobs choose to keep their accumulated 401(k) assets in the retirement saving system. These households either leave their assets in their previous employer's 401(k) plan, or they roll the assets over to another retirement saving account, such as a new 401(k) or an Individual Retirement Account. Most of those who do withdraw assets have very small accumulated balances. By comparison, the expense ratio charged by the financial institutions administering 401(k) accounts has a larger effect on retirement resources than the possibility of pre-retirement withdrawal.
Handle: RePEc:nbr:nberwo:7314
Template-Type: ReDIF-Paper 1.0
Title: Political Economy, Sectoral Shocks, and Border Enforcement
Classification-JEL: F2
Author-Name: Gordon H. Hanson
Author-Person: pha80
Author-Name: Antonio Splimbergo
Author-Person: psp16
Note: ITI
Number: 7315
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7315
File-URL: http://www.nber.org/papers/w7315.pdf
File-Format: application/pdf
Publication-Status: published as Gordon H. Hanson & Antonio Spilimbergo, 2001. "Political economy, sectoral shocks, and border enforcement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 612-638, August.
Abstract: In this paper, we examine the correlation between sectoral shocks and border enforcement in the United States. Enforcement of national borders is the main policy instrument the U.S. government uses to combat illegal immigration. The motivation for the exercise is to see whether border enforcement falls following positive shocks to sectors that are intensive in the use of undocumented labor, as would be consistent with political economy models of how enforcement policy against illegal immigration is determined. The main finding is that border enforcement is negatively correlated with lagged relative price changes in the apparel, fruits and vegetables, and slaughtered livestock industries and with housing starts in the western United States. This suggests that authorities relax border enforcement when the demand for undocumented workers is high.
Handle: RePEc:nbr:nberwo:7315
Template-Type: ReDIF-Paper 1.0
Title: An Efficiency Approach to the Evaluation of Policy Changes
Classification-JEL: D61; D63
Author-Name: Stephen Coate
Author-Person: pco66
Note: PE
Number: 7316
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7316
File-URL: http://www.nber.org/papers/w7316.pdf
File-Format: application/pdf
Publication-Status: published as Coate, Stephen, 2000. "An Efficiency Approach to the Evaluation of Policy Changes," Economic Journal, Royal Economic Society, vol. 110(463), pages 437-55, April.
Abstract: This paper describes an efficiency approach to the evaluation of policy changes. Rather than comparing the utility allocations that arise before and after a policy change is introduced, this approach evaluates a policy change by comparing it with other possible changes which might be made from the status quo. The main merit of the approach is that it is founded on the Pareto criterion rather than on a distributional value judgement. The paper provides a precise statement of the approach and applies it to a number of examples. Some objections to the approach are also anticipated and discussed.
Handle: RePEc:nbr:nberwo:7316
Template-Type: ReDIF-Paper 1.0
Title: Order Flow and Exchange Rate Dynamics
Classification-JEL: F31; G15
Author-Name: Martin D.D. Evans
Author-Person: pev5
Author-Name: Richard K. Lyons
Author-Person: ply9
Note: AP IFM
Number: 7317
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7317
File-URL: http://www.nber.org/papers/w7317.pdf
File-Format: application/pdf
Publication-Status: published as Evans, Martin D. D. and Richard K. Lyons. "Order Flow And Exchange Rate Dynamics," Journal of Political Economy, 2002, v110(1,Feb), 170-180.
Abstract: Macroeconomic models of nominal exchange rates perform poorly. In sample, R2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a na‹ve random walk. This paper presents a model of a new kind. Instead of relying exclusively on macroeconomic determinants, the model includes a determinant from the field of microstructure-order flow. Order flow is the proximate determinant of price in all microstructure models. This is a radically different approach to exchange rate determination. It is also strikingly successful in accounting for realized rates. Our model of daily exchange-rate changes produces R2 statistics above 50 percent. Out of sample, our model produces significantly better short-horizon forecasts than a random walk. For the DM/$ spot market as a whole, we find that $1 billion of net dollar purchases increases the DM price of a dollar by about 1 pfennig.
Handle: RePEc:nbr:nberwo:7317
Template-Type: ReDIF-Paper 1.0
Title: Delays in Claiming Social Security Benefits
Classification-JEL: H3; H5
Author-Name: Courtney Coile
Author-Person: pco557
Author-Name: Peter Diamond
Author-Person: pdi24
Author-Name: Jonathan Gruber
Author-Person: pgr20
Author-Name: Alain Jousten
Author-Person: pjo61
Note: AG LS PE
Number: 7318
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7318
File-URL: http://www.nber.org/papers/w7318.pdf
File-Format: application/pdf
Publication-Status: published as Coile, Courtney, Peter Diamond, Jonathan Gruber and Alan Jousten. "Delays In Claiming Social Security Benefits," Journal of Public Economics, 2002, v84(3,Jun), 357-385.
Abstract: This paper focuses on Social Security benefit claiming behavior, a take-up decision that has been ignored in the previous literature. Using financial calculations and simulations based on an expected utility maximization model, we show that delaying benefit claim for a period of time after retirement is optimal in a wide variety of cases and that gains from delay may be significant. We find that approximately 10% of men retiring before their 62nd birthday delay claiming for at least one year after eligibility. We estimate hazard and probit models using data from the New Beneficiary Data System to test four cross-sectional predictions. While the data suggest that too few men delay, we find that the pattern of delays by early retirees is generally consistent with the hypotheses generated by our theoretical model.
Handle: RePEc:nbr:nberwo:7318
Template-Type: ReDIF-Paper 1.0
Title: Bankers on Boards: Monitoring, Conflicts of Interest, and Lender Liability
Classification-JEL: G21; G28
Author-Name: Randall S. Kroszner
Author-Name: Philip E. Strahan
Note: CF IO LE ME
Number: 7319
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7319
File-URL: http://www.nber.org/papers/w7319.pdf
File-Format: application/pdf
Publication-Status: published as Kroszner, Randall S. & Strahan, Philip E., 2001. "Bankers on boards: *1: monitoring, conflicts of interest, and lender liability," Journal of Financial Economics, Elsevier, vol. 62(3), pages 415-452, December.
Abstract: This paper investigates what factors determine whether a commercial banker is on the board of a non-financial firm. We consider the tradeoff between the benefits of direct bank monitoring to the firm and the costs of active bank involvement in firm management. Given the different payoff structures to debt and equity, lenders and shareholders may have conflicting interests in running the firm. In addition, the U.S. legal doctrines of 'equitable subordination' and 'lender liability' could generate high costs for banks which have a representative on the board of a client firm that experiences financial distress. Consistent with high potential costs of active bank involvement, we find that bankers tend to be represented on the boards of large stable firms with high proportions of tangible ('collateralizable') assets and low reliance on short-term financing. The protection of shareholder versus creditor rights under the U.S. bankruptcy doctrines may reduce the role that banks play in corporate governance and the management of financial distress, in contrast to Germany and Japan. We conclude with implications for the current bank regulatory reform debate, such as whether to permit banks to own equity in non-financial firms that, in turn, could allow them to mitigate the conflict.
Handle: RePEc:nbr:nberwo:7319
Template-Type: ReDIF-Paper 1.0
Title: Pensions and Retiree Health Benefits in Household Wealth: Changes from 1969 to 1992
Classification-JEL: D31; E21
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG
Number: 7320
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7320
File-URL: http://www.nber.org/papers/w7320.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Human Resources, Vol. 35, no. 1 (Winter 2000): 30-50.
Abstract: By 1992, pensions and retiree health insurance represented one quarter of the wealth of families on the verge of retirement. Our simulations suggest that between 1969 and 1992, abstracting from the effects of changes in wages and years of covered work on pension benefit amounts, changing pension coverage and changing pension plan provisions would have raised the total wealth of each household in the Health and Retirement Study by $67,000 in 1992 dollars, raising wealth from employer provided pension benefits per household by 150 percent in real terms. Changes in retiree health benefits, which have only about 7 percent of the value of pensions, experienced similar real growth, increasing in value by $3,700 in 1992 dollars. Most of the increase in pension values and in the value of retiree health insurance plans was due to improvements in real benefits among covered workers. All classes of wealth holders enjoyed increased wealth from employer provided retirement plans, but those in the top half of the wealth distribution enjoyed increases that were much larger in absolute terms and also were larger in relation to their total wealth than were the increases experienced by those in the bottom half of the wealth distribution.
Handle: RePEc:nbr:nberwo:7320
Template-Type: ReDIF-Paper 1.0
Title: Comparing the Economic and Conventional Approaches to Financial Planning
Classification-JEL: D31
Author-Name: Jagadeesh Gokhale
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Author-Name: Mark J. Warshawsky
Note: AG
Number: 7321
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7321
File-URL: http://www.nber.org/papers/w7321.pdf
File-Format: application/pdf
Publication-Status: published as Kotlikoff, Laurence J. (ed.) Essays on Saving, Bequests, Altruism, and Life-Cycle Planning. MIT Press, 2001.
Abstract: The conventional approach to retirement and life insurance planning, which is used throughout the financial planning industry, differs markedly from the economic approach. The conventional approach asks households to specify how much they want to spend before retirement, after retirement, and in the event of an untimely death of the head or spouse. It then determines the amounts of saving and life insurance needed to achieve these targets. The economic approach is based on the life-cycle model of saving. Its goal is to smooth households' living standards over their life cycles and to ensure comparable living standards for potential survivors. In the economic approach, spending targets are endogenous. They are derived by calculating the most the household can afford to consume in the present given that it wants to preserve that living standard in the future. Although spending targets under the conventional approach can be adjusted in an iterative process to approximate those derived under the economic approach, there are practical limits to doing so. This is particularly the case for households experiencing changing demographics or facing borrowing constraints. This paper illustrates the different saving and insurance recommendations provided by economic financial planning software and the practical application of traditional financial planning software. The two software programs are Economic Security Planner (ESPlanner), developed by Economic Security Planning, Inc., and Quicken Financial Planner (QFP), developed by Intuit. Each program is run on 24 cases, 20 of which are stylized and 4 of which are actual households. The two software programs recommend dramatically different levels of saving or life insurance in each of the 24 cases. The different saving recommendations primarily reflect ESPlanner's adjustment for household demographics and borrowing constraints. The different life insurance recommendations reflect these same factors as well as ESPlanner's accounting for contingent household plans and for Social Security's survivor benefits. The less detailed tax and Social Security retirement benefit calculations used in our implementation of QFP also explain some of the differences between the two programs.
Handle: RePEc:nbr:nberwo:7321
Template-Type: ReDIF-Paper 1.0
Title: Estimating the Payoff to Attending a More Selective College: An Application of Selection on Observables and Unobservables
Classification-JEL: J24
Author-Name: Stacy Berg Dale
Author-Name: Alan B. Krueger
Author-Person: pkr63
Note: CH LS
Number: 7322
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7322
File-URL: http://www.nber.org/papers/w7322.pdf
File-Format: application/pdf
Publication-Status: published as Dale, Stacy Berg and Alan B. Krueger. "Estimating The Payoff Of Attending A More Selective College: An Application Of Selection On Observables And Unobservables," Quarterly Journal of Economics, 2002, v107(4,Nov), 1491-1527.
Abstract: There are many estimates of the effect of college quality on students' subsequent earnings. One difficulty interpreting past estimates, however, is that elite colleges admit students, in part, based on characteristics that are related to their earnings capacity. Since some of these characteristics are unobserved by researchers who later estimate wage equations, it is difficult to parse out the effect of attending a selective college from the students' pre-college characteristics. This paper uses information on the set of colleges at which students were accepted and rejected to remove the effect of unobserved characteristics that influence college admission. Specifically, we match students in the newly colleted College and Beyond (C&B) Data Set who were admitted to and rejected from a similar set of institutions, and estimate fixed effects models. As another approach to adjust for selection bias, we control for the average SAT score of the schools to which students applied using both the C&B and National Longitudinal Survey of the High School Class of 1972. We find that students who attended more selective colleges do not earn more than other students who were accepted and rejected by comparable schools but attended less selective colleges. However, the average tuition charged by the school is significantly related to the students' subsequent earnings. Indeed, we find a substantial internal rate of return from attending a more costly college. Lastly, the payoff to attending an elite college appears to be greater for students from more disadvantaged family backgrounds.
Handle: RePEc:nbr:nberwo:7322
Template-Type: ReDIF-Paper 1.0
Title: Assessing Affirmative Action
Classification-JEL: J15; J16
Author-Name: Harry Holzer
Author-Person: pho162
Author-Name: David Neumark
Author-Person: pne16
Note: LS
Number: 7323
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7323
File-URL: http://www.nber.org/papers/w7323.pdf
File-Format: application/pdf
Publication-Status: published as Holzer, Harry and David Neumark. "Assessing Affirmative Action," Journal of Economic Literature, 2000, v38(3,Sep), 483-568.
Abstract: Although the debate over Affirmative Action is both high-profile and high-intensity, neither side's position is based on a well-established set of research findings. Economics provides an extensive, well-known literature on which to draw regarding the existence and extent of labor market discrimination against women and minorities, although views may often conflict, and a less extensive but also well-known literature on the effects of Affirmative Action on the employment of women or minorities. However, research by economists provides much less evidence and even less of a consensus on the question of whether Affirmative Action improves or impedes efficiency or performance, which is perhaps the key economic issue in the debate over Affirmative Action. This review focuses on all of these issues regarding Affirmative Action, but the major focus is on the efficiency/performance question. All in all, the evidence suggests to us that it may be possible to generate Affirmative Action programs that entail relatively little sacrifice of efficiency. Most importantly, there is at this juncture very little compelling evidence of deleterious efficiency effects of Affirmative Action. This does not imply that such costs do not exist, nor that the studies we review have captured the overall welfare effects of Affirmative Action. It does imply, though, that the empirical case against Affirmative Action on the grounds of efficiency is weak at best.
Handle: RePEc:nbr:nberwo:7323
Template-Type: ReDIF-Paper 1.0
Title: Comparing Hospital Quality at For-Profit and Not-for-Profit Hospitals
Classification-JEL: I10; L31
Author-Name: Mark McClellan
Author-Name: Douglas Staiger
Author-Person: pst466
Note: AG EH
Number: 7324
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7324
File-URL: http://www.nber.org/papers/w7324.pdf
File-Format: application/pdf
Publication-Status: published as The Changing Hospital Industry: Comparing Not-for-Profit and For-Profit Institutions, Cutler, David M., pp.93-112, (Chicago: The University of Chicago Press, 2000).
Publication-Status: published as Comparing Hospital Quality at For-Profit and Not- for-Profit Hospitals, Mark B. McClellan, Douglas O. Staiger. in The Changing Hospital Industry: Comparing Not-for-Profit and For-Profit Institutions, Cutler. 2000
Abstract: Do not-for-profit hospitals provide better care than for-profit hospitals? We compare patient outcomes in for-profit and not-for-profit hospitals between 1984 and 1994 using a new method for estimating differences across hospitals that yields far more accurate estimates of hospital quality than previously available. We find that, on average, for-profit hospitals have higher mortality among elderly patients with heart disease, and that this difference has grown over the last decade. However, much of the difference appears to be associated with the location of for-profit hospitals. Within specific markets, for-profit ownership appears if anything to be associated with better quality care. Moreover, the small average difference in mortality between for-profit and not-for-profit hospitals masks an enormous amount of variation in mortality within each of these ownership types. Overall, these results suggest that factors other than for-profit status per se may be the main determinants of quality of care in hospitals.
Handle: RePEc:nbr:nberwo:7324
Template-Type: ReDIF-Paper 1.0
Title: Stock Repurchases in Canada: Performance and Strategic Trading
Classification-JEL: G14; G32
Author-Name: David Ikenberry
Author-Name: Josef Lakonishok
Author-Name: Theo Vermaelen
Author-Person: pve70
Note: AP
Number: 7325
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7325
File-URL: http://www.nber.org/papers/w7325.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance (October 2000).
Abstract: During the 1980s, U.S. firms that announced stock repurchase programs earned favorable long-run returns. Recently, concerns have been raised regarding the robustness of these findings. This comes at a time of explosive worldwide growth in the adoption of repurchase programs. This study provides out-of-sample evidence for 1,060 Canadian repurchase programs announced between 1989 and 1997. As in the U.S., the Canadian stock market seems to discount the information contained in repurchase announcements. Value stocks announcing repurchase programs have particularly favorable returns. Canadian law requires companies to report how many shares they repurchase on a monthly basis. We find that managers are sensitive to mispricing as completion rates are higher in cases where undervaluation may be a more important factor. Moreover, trades are linked to price movements; managers buy more shares when prices fall and reduce their buying when prices rise.
Handle: RePEc:nbr:nberwo:7325
Template-Type: ReDIF-Paper 1.0
Title: The Economics of Residential Solid Waste Management
Classification-JEL: H71; Q28
Author-Name: Thomas C. Kinnaman
Author-Name: Don Fullterton
Author-Person: pfu10
Note: PE
Number: 7326
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7326
File-URL: http://www.nber.org/papers/w7326.pdf
File-Format: application/pdf
Publication-Status: published as Folmer, H. and T. Tietenberg (eds.) The International Yearbook of Environmental and Resource Economics 2000/2001. Cheltenham, UK: Edward Elgar, 2000.
Abstract: This paper provides a broad overview of recent trends in solid waste and recycling, related public policy issues, and the economics literature devoted to these topics. Public attention to solid waste and recycling has increased dramatically over the past decade both in the United States and in Europe. In response, economists have developed models to help policy makers choose the efficient mix of policy levers to regulate solid waste and recycling activities. Economists have also employed different kinds of data to estimate the factors that contribute to the generation of residential solid waste and recycling and to estimate the effectiveness of many of the policy options employed.
Handle: RePEc:nbr:nberwo:7326
Template-Type: ReDIF-Paper 1.0
Title: The Quality of Health Care Providers
Classification-JEL: I10; L15
Author-Name: Mark McClellan
Author-Name: Douglas Staiger
Author-Person: pst466
Note: AG EH
Number: 7327
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7327
File-URL: http://www.nber.org/papers/w7327.pdf
File-Format: application/pdf
Publication-Status: published as Mark McClellan & Douglas Staiger, 2000. "Comparing the Quality of Health Care Providers," NBER Chapters, in: Frontiers in Health Policy Research, Volume 3, pages 113-136 National Bureau of Economic Research, Inc.
Publication-Status: published as McClellan, Mark and Douglas Staiger. "Comparing The Quality Of Health Care Providers," Forum for Health Economics and Policy, 2000, v3, Article 6.
Abstract: Obtaining better information on the quality of health care providers is one of the most pressing issues in health policy today. In this paper we (1) develop a new method for measuring quality of care that overcomes the key limitations of available quality measures, and (2) apply this method to estimating the quality of hospital care for elderly patients with heart disease. Our approach optimally combines information from all available current and past quality indicators in order to more accurately estimate and forecast each provider's quality level. For patients with heart disease, the method is able to predict and forecast differences in patient outcomes across hospitals remarkably well - far better than existing methods. Our approach also provides an empirical basis for choosing among potential quality indicators. In particular, we find that differences across hospitals in short-term mortality rates following a heart attack, adjusted for patient demographics, are excellent indicators of quality of care: They vary dramatically across hospitals, are persistent over time, are highly correlated with alternative quality indicators, and are highly correlated with mortality rates that adjust more extensively for patient severity. Thus, comparing quality of care across providers may be far more feasible than many now believe.
Handle: RePEc:nbr:nberwo:7327
Template-Type: ReDIF-Paper 1.0
Title: The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy
Classification-JEL: E31; F41
Author-Name: John DiNardo
Author-Person: pdi178
Author-Name: Mark P. Moore
Note: LS
Number: 7328
Creation-Date: 1999-08
Order-URL: http://www.nber.org/papers/w7328
File-URL: http://www.nber.org/papers/w7328.pdf
File-Format: application/pdf
Abstract: Expanding on an approach suggested by Ashenfelter (1984), we extend the Phillips curve to an open economy and exploit panel data to estimate the textbook 'expectations augmented' Phillips curve with a market-based and observable measure of inflation expectations. We develop this measure using assumptions common in economic analysis of open economies. Using quarterly data from 9 OECD countries and the simplest econometric specification, we estimate the Phillips curve with the same functional form for the 1970s, 1980s, and 1990s. Our analysis suggests that although changing expectations played a role in creating the empirical failure of the Phillips Curve in the 1970s, supply shocks were at least as important.
Handle: RePEc:nbr:nberwo:7328
Template-Type: ReDIF-Paper 1.0
Title: Evidence on Learning and Network Externalities in the Diffusion of Home Computers
Classification-JEL: L6
Author-Name: Austan Goolsbee
Author-Person: pgo49
Author-Name: Peter J. Klenow
Note: IO
Number: 7329
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7329
File-URL: http://www.nber.org/papers/w7329.pdf
File-Format: application/pdf
Publication-Status: published as Goolsbee, Austan and Peter J. Klenow. "Evidence On Learning And Network Externalities In The Diffusion Of Home Computers," Journal of Law and Economics, 2002, v45(2,Oct), 317-343.
Abstract: In this paper we examine the importance of local spillovers such as network externalities and learning from others in the diffusion of home computers using data on 110,000 U.S. households in 1997. Controlling for many individual characteristics, we find that people are more likely to buy their first home computer in areas where a high fraction of households already own computers or when a large share of their friends and family own computers. Further results suggest that these patterns are unlikely to be explained by city-specific unobserved traits. Looked at in more detail, the spillovers appear to come from experienced and intensive computer users. They are not associated with the use of any particular type of software but do seem to be highly tied to the use of e-mail and the Internet, consistent with computers being part of a local information and communications network.
Handle: RePEc:nbr:nberwo:7329
Template-Type: ReDIF-Paper 1.0
Title: Time-Varying Betas and Asymmetric Effect of News: Empirical Analysis of Blue Chip Stocks
Classification-JEL: G14
Author-Name: Young-Hye Cho
Author-Name: Robert F. Engle
Note: AP
Number: 7330
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7330
File-URL: http://www.nber.org/papers/w7330.pdf
File-Format: application/pdf
Abstract: We investigate whether or not a beta increases with bad news and decreases with good news, just as does volatility. Using daily returns for nine stocks in a double beta model with EGARCH specifications, we show that news asymmetrically affects the betas of individual stocks. We find that betas depend on two source of news: market shocks and idiosyncratic shocks. Some stock betas depend on both while others depend on one. We categorize each stock return as belonging to one of three beta process models, a joint, an idiosyncratic, and a market model based on the role of market shocks and idiosyncratic shocks. Our conclusions differ from those of Brown, Nelson, and Sunnier (1995) who worked with monthly aggregated data in a bivariate EGARCH model. We believe that stock price aggregation in this previous research resulted in a loss of cross sectional variation and consequently lead to weak results. If the asymmetric effect is more readily apparent in daily data, then this may again explain previous researchers' inability to detect asymmetric effects. Our findings shed light on the controversy as to whether abnormalities in stock returns result from overreaction to information or from changes in expected returns in an efficient market. Finding an asymmetric effect in betas leads us to conclude that abnormalities can, at least partially, be explained by changes in expected returns through a change in beta.
Handle: RePEc:nbr:nberwo:7330
Template-Type: ReDIF-Paper 1.0
Title: Modeling the Impacts of Market Activity on Bid-Ask Spreads in the Option Market
Classification-JEL: G14
Author-Name: Young-Hye Cho
Author-Name: Robert F. Engle
Note: AP
Number: 7331
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7331
File-URL: http://www.nber.org/papers/w7331.pdf
File-Format: application/pdf
Abstract: In this paper, we examine the impact of market activity on the percentage bid-ask spreads of S&P 100 index options using transactions data. We propose a new market microstructure theory which we call derivative hedge theory, in which option market percentage spreads will be inversely related to the option market maker's ability to hedge his positions in the underlying market, as measured by the liquidity of the latter market. In a perfect hedge world, spreads arise from the illiquidity of the underlying market, rather than from inventory risk or informed trading in the option market itself. We find option market volume is not a significant determinant of option market spreads. This finding leads us to question the use of volume as a measure of liquidity and supports the derivative hedge theory. Option market spreads are positively related to spreads in the underlying market, again supporting our theory. However, option market duration does affect option market spreads, with very slow and very fast option markets both leading to bigger spreads. The fast market result would be predicted by the asymmetric information theory. Inventory model predicts big spreads in slow markets. Neither result would be observed if the underlying securities market provided a perfect hedge. We interpret these mixed results as meaning that the option market maker is able to only imperfectly hedge his positions in the underlying securities market. Our result of insignificant options volume casts doubt on the price discovery argument between stock and option market (Easley, O'Hara, and Srinivas (1998)). Asymmetric information costs in either market are naturally passed to the other market maker's hedgeing and therefore it is unimportant where the informed traders trade.
Handle: RePEc:nbr:nberwo:7331
Template-Type: ReDIF-Paper 1.0
Title: The Changing Distribution of Job Satisfaction
Classification-JEL: J30
Author-Name: Daniel S. Hamermesh
Author-Person: pha78
Note: LS
Number: 7332
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7332
File-URL: http://www.nber.org/papers/w7332.pdf
File-Format: application/pdf
Publication-Status: published as Hamermesh, Daniel S. "The Changing Distribution Of Job Satisfaction," Journal of Human Resources, 2001, v36(1,Winter), 1-30.
Abstract: The distribution of job satisfaction widened across cohorts of young men in the United States between 1978 and 1988, and between 1978 and 1996, in ways correlated with changing wage inequality. Satisfaction among workers in upper earnings quantiles rose relative to that of workers in lower quantiles. An identical phenomenon is observed among men in West Germany in response to a sharp increase in the relative earnings of high-wage men in the mid-1990s. Several hypotheses about the determinants of satisfaction are presented and examined using both cross-section data on these cohorts and panel data from the NLSY and the German SOEP. The evidence is most consistent with workers regret about the returns to their investment in skills affecting their satisfaction. Job satisfaction is especially responsive to surprises in the returns to observable skills, less so to surprises in the returns to unobservables; and the effects of earnings shocks on job satisfaction dissipate over time.
Handle: RePEc:nbr:nberwo:7332
Template-Type: ReDIF-Paper 1.0
Title: Causal Parameters and Policy Analysis in Economcs: A Twentieth Century Retrospective
Classification-JEL: C10
Author-Name: James L. Heckman
Note: LS PE ME
Number: 7333
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7333
File-URL: http://www.nber.org/papers/w7333.pdf
File-Format: application/pdf
Publication-Status: published as Heckman, James J. "Causal Parameters And Policy Analysis In Economics: A Twentieth Century Retrospective," Quarterly Journal of Economics, 2000, v115(1,Feb), 45-97.
Abstract: The major contributions of twentieth century econometrics to knowledge were the definition of causal parameters when agents are constrained by resources and markets and causes are interrelated, the analysis of what is required to recover causal parameters from data (the identification problem), and clarification of the role of causal parameters in policy evaluation and in forecasting the effects of policies never previously experienced. This paper summarizes the development of those ideas by the Cowles Commission, the response to their work by structural econometricians and VAR econometricians, and the response to structural and VAR econometrics by calibrators, advocates of natural and social experiments, and by nonparametric econometricians and statisticians.
Handle: RePEc:nbr:nberwo:7333
Template-Type: ReDIF-Paper 1.0
Title: Performance Incentives Within Firms: The Effect of Managerial Responsibility
Classification-JEL: G3; J3
Author-Name: Rajesh K. Aggarwal
Author-Person: pag94
Author-Name: Andrew A. Samwick
Author-Person: psa395
Note: CF LS
Number: 7334
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7334
File-URL: http://www.nber.org/papers/w7334.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Finance, Vol. 58, no. 4 (August 2003): 1613-1649
Abstract: Empirical research on executive compensation has focused almost exclusively on the incentives provided to chief executive officers. However, firms are run by teams of managers, and a theory of the firm should also explain the distribution of incentives and responsibilities for other members of the top management team. An extension of the standard principal-agent model to allow for multiple signals of effort predicts that executives who have other, more precise signals of their effort than firm performance will have compensation that is less sensitive to the overall performance of the firm. We test this prediction in a comprehensive panel dataset of executives at large corporations by comparing executives with explicit divisional responsibilities to those with broad oversight authority over the firm and to CEOs. Controlling for executive fixed effects and the level of compensation, we find that CEOs have pay-performance incentives that are $5.85 per thousand dollar increase in shareholder wealth higher than the pay-performance incentives of executives with divisional responsibility. Executives with oversight authority have pay-performance incentives that are $1.26 per thousand higher than those of executives with divisional responsibility. The aggregate pay-performance sensitivity of the top management team is quite substantial, at $30.24 per thousand dollar increase in shareholder wealth for the median firm in our sample. Our work sheds light on the alignment of responsibility and incentives within firms and suggests that the principal-agent model provides an appropriate characterization of the internal organization of the firm.
Handle: RePEc:nbr:nberwo:7334
Template-Type: ReDIF-Paper 1.0
Title: Empire-Builders and Shirkers: Investment, Firm Performance, and Managerial Incentives
Classification-JEL: G3; J3
Author-Name: Rajesh K. Aggarwal
Author-Person: pag94
Author-Name: Andrew A. Samwick
Author-Person: psa395
Note: CF IO
Number: 7335
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7335
File-URL: http://www.nber.org/papers/w7335.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Corporate Finance, Vol. 12, no. 3 (June 2006): 489-515
Abstract: Do firms systematically over- or underinvest as a result of agency problems? We develop a contracting model between shareholders and managers in which managers have private benefits or private costs of investment. Managers overinvest when they have private benefits and underinvest when they have private costs. Optimal incentive contracts mitigate the over- or underinvestment problem. We derive comparative static predictions for the equilibrium relationships between incentives from compensation, investment, and firm performance for both cases. The relationship between firm performance and managerial incentives, in isolation, is insufficient to identify whether managers have private benefits or private costs of investment. In order to identify whether managers have private benefits or costs, we estimate the joint relationships between incentives and firm performance and between incentives and investment. Our empirical results show that both firm performance and investment are increasing in managerial incentives. These results are consistent with managers having private costs of investment. We find no support for overinvestment based on private benefits.
Handle: RePEc:nbr:nberwo:7335
Template-Type: ReDIF-Paper 1.0
Title: The Determinants of Cross-Border Equity Flows
Classification-JEL: F3; F21
Author-Name: Richard Portes
Author-Person: ppo132
Author-Name: Helene Rey
Author-Person: pre8
Note: IFM ITI
Number: 7336
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7336
File-URL: http://www.nber.org/papers/w7336.pdf
File-Format: application/pdf
Publication-Status: published as Portes, Richard and Helene Rey. "The Determinants Of Cross-Border Equity Flows," Journal of International Economics, 2005, v65(2,Mar), 269-296.
Abstract: We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information heavily determines the pattern of international transactions. Our model integrates elements of the finance literature on portfolio composition and the international macroeconomics and asset trade literature. Gross asset flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. The resulting augmented gravity' equation has equity market capitalisation representing market size and distance proxying some informational asymmetries, as well as a variable representing openness of each economy. But other variables explicitly represent information transmission (telephone call traffic and multinational bank branches), an information asymmetry between domestic and foreign investors (degree of insider trading), and the efficiency of transactions ( financial market sophistication'). This equation accounts for almost 70% of the variance of the transaction flows. Dummy variables (adjacency, language, currency or trade bloc, and a major financial centre' effect) do not improve the results, nor does a variable representing destination country stock market returns. The key role of informational asymmetries is confirmed. Our information transmission variables also substantially improve standard gravity equations for trade in goods.
Handle: RePEc:nbr:nberwo:7336
Template-Type: ReDIF-Paper 1.0
Title: The Market Microstructure of Central Bank Intervention
Classification-JEL: F31; G14
Author-Name: Kathryn M. Dominguez
Author-Person: pdo227
Note: IFM AP
Number: 7337
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7337
File-URL: http://www.nber.org/papers/w7337.pdf
File-Format: application/pdf
Publication-Status: published as "The Market Microstructure of Central Bank Intervention", Journal of International Economics, 59, pp. 25-45, January 2003
Abstract: One of the great unknowns in international finance is the process by which new information influences exchange rate behavior. This paper focuses on one important source of information to the foreign exchange markets, the intervention operations of the G-3 central banks. Previous studies using daily and weekly foreign exchange rate data suggest that central bank intervention operations can influence both the level and variance of exchange rates, but little is known about how exactly traders learn of these operations and whether intra-daily market conditions influence the effectiveness of central bank interventions. This paper uses high-frequency data to examine the relationship between the efficacy of intervention operations and the 'state of the market' at the moment that the operation is made public to traders. The results indicate that some traders know that a central bank is intervening at least one hour prior to the public release of the information in newswire reports. Also, the evidence suggests that the timing of intervention operations matter interventions that occur during heavy trading volume and that are closely timed to scheduled macro announcements are the most likely to have large effects. Finally, post-intervention mean reversion in both exchange rate returns and volatility indicate that dealer inventories are affected by market reactions to intervention news.
Handle: RePEc:nbr:nberwo:7337
Template-Type: ReDIF-Paper 1.0
Title: No Single Currency Regime is Right for All Countries or At All Times
Classification-JEL: F3
Author-Name: Jeffrey A. Frankel
Author-Person: pfr12
Note: IFM
Number: 7338
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7338
File-URL: http://www.nber.org/papers/w7338.pdf
File-Format: application/pdf
Publication-Status: published as Essays in International Finance, no. 215 (December 1998), Princeton: Princeton University Press.
Abstract: This essay considers some prescriptions that are currently popular regarding exchange rate regimes: a general movement toward floating, a general movement toward fixing, or a general movement toward either extreme and away from the middle. The whole spectrum from fixed to floating is covered (including basket pegs, crawling pegs, and bands), with special attention to currency boards and dollarization. One overall theme is that the appropriate exchange rate regime varies depending on the specific circumstances of the country in question (which includes the classic optimum currency area criteria, as well as some newer criteria related to credibility) and depending on the circumstances of the time period in question (which includes the problem of successful exit strategies). Latin American interest rates are seen to be more sensitive to US interest rates when the country has a loose dollar peg than when it has a tight peg. It is also argued that such relevant country characteristics as income correlations and openness can vary over time, and that the optimum currency area criterion is accordingly endogenous.
Handle: RePEc:nbr:nberwo:7338
Template-Type: ReDIF-Paper 1.0
Title: Incentive Effects of Social Security Under an Uncertain Disability Option
Author-Name: Axel Boersch-Supan
Note: AG PE
Number: 7339
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7339
File-URL: http://www.nber.org/papers/w7339.pdf
File-Format: application/pdf
Publication-Status: published as Borsch-Supan, Axel. "Incentive Effects Of Social Security On Labor Force Participation: Evidence In Germany And Across Europe," Journal of Public Economics, 2000, v78(1-2,Oct), 25-49.
Publication-Status: published as Wise, David, (ed.) Themes in the economics of aging, NBER Conference Report series. Chicago and London: University of Chicago Press, 2001.
Publication-Status: published as Incentive Effects of Social Security under an Uncertain Disability Option, Axel H. Boersch-Supan. in Themes in the Economics of Aging, Wise. 2001
Abstract: Incentive effects of pension systems are usually estimated under the assumption that the institutional environment provides a single optimal 'pathway' for retirement. However, many countries provide competing pathways which may include several early retirement options in addition to normal retirement. Moreover, early retirement options often comprise special provisions for disabled and unemployed workers that can be strategically manipulated by the employer and the employee while ultimate eligibility for such provisions is uncertain in advance. This paper shows that ignoring the endogeneity and/or uncertainty in the relevant institutional setting can severely bias the estimates of incentive effects. Ignoring the endogeneity leads to overestimated incentive effects that unduly exaggerate the 'pull' view of early retirement. In turn, when the uncertain option set is specified too generously, incentive effects are underestimated. The paper proposes several estimates to bound the true incentive effects of social security on early retirement, and applies them to the German public pension system.
Handle: RePEc:nbr:nberwo:7339
Template-Type: ReDIF-Paper 1.0
Title: Import Diversion under European Antidumping Policy
Classification-JEL: F13; L5
Author-Name: Hylke Vandenbussche
Author-Name: Jozef Konings
Author-Person: pko61
Author-Name: Linda Springael
Note: ITI
Number: 7340
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7340
File-URL: http://www.nber.org/papers/w7340.pdf
File-Format: application/pdf
Publication-Status: published as Konings, Jozef, Hylke Vandenbussche, and Linda Springael. "Import Diversion under European Antidumping Policy." Journal of Industry, Competition and Trade 1, 3 (September 2001): 283-299.
Abstract: This paper is the first to study empirically the effects of European antidumping actions on import diversion from importers 'named' in an antidumping investigation, and potentially subject to protectionist measures, to countries not named' in the investigation. For this purpose we use a unique data set at the 8-digit product level. The amount of import diversion can be regarded as an indication of the effectiveness of antidumping policy which is used to protect the home industry from foreign imports. We find that -- in contrast to the US -- trade diversion in the European Union caused by antidumping actions is rather limited. This result holds even after controlling for selection-bias in the antidumping investigation procedure. We offer a number of explanations for the difference between Europe and the US regarding trade diversion.
Handle: RePEc:nbr:nberwo:7340
Template-Type: ReDIF-Paper 1.0
Title: CAViaR: Conditional Value at Risk by Quantile Regression
Classification-JEL: C14
Author-Name: Robert F. Engle
Author-Name: Simone Manganelli
Author-Person: pma142
Note: AP
Number: 7341
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7341
File-URL: http://www.nber.org/papers/w7341.pdf
File-Format: application/pdf
Publication-Status: published as Robert F. Engle & Simone Manganelli, 2004. "CAViaR: Conditional Autoregressive Value at Risk by Regression Quantiles," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 367-381, October.
Abstract: Value at Risk has become the standard measure of market risk employed by financial institutions for both internal and regulatory purposes. Despite its conceptual simplicity, its measurement is a very challenging statistical problem and none of the methodologies developed so far give satisfactory solutions. Interpreting Value at Risk as a quantile of future portfolio values conditional on current information, we propose a new approach to quantile estimation which does not require any of the extreme assumptions invoked by existing methodologies (such as normality or i.i.d. returns). The Conditional Value at Risk or CAViaR model moves the focus of attention from the distribution of returns directly to the behavior of the quantile. We postulate a variety of dynamic processes for updating the quantile and use regression quantile estimation to determine the parameters of the updating process. Tests of model adequacy utilize the criterion that each period the probability of exceeding the VaR must be independent of all the past information. We use a differential evolutionary genetic algorithm to optimize an objective function which is non-differentiable and hence cannot be optimized using traditional algorithms. Applications to simulated and real data provide empirical support to our methodology and illustrate the ability of these algorithms to adapt to new risk environments.
Handle: RePEc:nbr:nberwo:7341
Template-Type: ReDIF-Paper 1.0
Title: Congressional Vote Options
Classification-JEL: C7; D7
Author-Name: David C. King
Author-Name: Richard J. Zeckhauser
Author-Person: pze7
Note: PE
Number: 7342
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7342
File-URL: http://www.nber.org/papers/w7342.pdf
File-Format: application/pdf
Publication-Status: published as King, David C. and Richard J. Zeckhauser. "Congressional Vote Options." Legislative Studies Quarterly 28, 3 (August 2003): 387-411.
Abstract: Among political practitioners, there is conventional wisdom about the outcomes of critical and salient legislative votes. 'This vote,' we hear, ' will either win by a little or lose by a lot.' Real-world examples suggest coalition leaders purchase 'hip-pocket' votes and "if you need me" pledges, which are converted to favorable votes when they will yield a victory. When the outcome is uncertain, such a process -- securing commitments in advance and calling them in if necessary -- is advantageous relative to traditional vote buying. Excess votes are not bought, nor are votes purchased for a losing effort. In effect, the leader secures options on votes. Given uncertainty, buying vote options yields two outcomes in conceivably winnable situations, one a narrow victory, the other a substantial loss. Such a distribution of outcomes is not explicable in a traditional vote-buying framework. We look for evidence of this pattern -- the tracings of 'if you need me pledges' -- by examining all Congressional Quarterly key votes from 1975 through 1998. On these critical and salient votes, narrow victories are much more frequent than narrow losses. Furthermore, when leaders lose key votes, as predicted, they lose by bigger margins than when they win. Finally, we discuss leadership strategies for keeping 'narrow wins' from unraveling into 'big losses.'
Handle: RePEc:nbr:nberwo:7342
Template-Type: ReDIF-Paper 1.0
Title: Work, Welfare, and Child Maltreatment
Classification-JEL: I3
Author-Name: Christina Paxson
Author-Person: ppa335
Author-Name: Jane Waldfogel
Note: CH
Number: 7343
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7343
File-URL: http://www.nber.org/papers/w7343.pdf
File-Format: application/pdf
Publication-Status: published as Paxson, Christina and Jane Waldfogel. "Work, Welfare, And Child Maltreatment," Journal of Labor Economics, 2002, v20(3,Jul), 435-474.
Abstract: This paper examines how child maltreatment is affected by the economic circumstances of parents. 'Child maltreatment' encompasses a wide range of behaviors that adversely affect children. It includes neglect, physical abuse, sexual abuse, and other forms of abuse or neglect. Using state-level panel data on the numbers of reports and substantiated cases of maltreatment, we examine whether socioeconomic factors play different roles for these different types of maltreatment. A key finding is that the economic circumstances of parents matter: increases in the fractions of children with absent fathers and working mothers are related to increases in many of the measures of maltreatment, as are increases in the share of families with two non-working parents, and those with incomes below 75 percent of the poverty line. We also examine the links between family structure, welfare benefits, and child maltreatment. Welfare programs affect the incentives of women and men to work and to live in single or dual-parent families. By changing the family structure and work behavior of parents as well as their incomes, welfare reforms can be expected to affect the incidence of child maltreatment. Although is too early to accurately determine what the effects of the recent reforms will be, our analysis indicates that: 1) consistent with other research, the characteristics of state's welfare systems have affected the work behavior and structure of families during the 1977-1996 time period; 2) decreases in a state's welfare benefit levels are associated with large increases in child neglect, and with small decreases in physical abuse.
Handle: RePEc:nbr:nberwo:7343
Template-Type: ReDIF-Paper 1.0
Title: Self-Employment, Family Background, and Race
Classification-JEL: J24; J15
Author-Name: Michael Hout
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: LS
Number: 7344
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7344
File-URL: http://www.nber.org/papers/w7344.pdf
File-Format: application/pdf
Publication-Status: published as Hout, Michael and Harvey Rosen. "Self-Employment, Family Background, And Race," Journal of Human Resources, 2000, v35(4,Fall), 670-692.
Abstract: We focus on the intergenerational transmission of the propensity to be self-employed. Our emphasis is on the role of family background, and in particular, on what we call the intergenerational pick-up rate with respect to self-employment, the probability that a person with a self-employed parent will become self-employed him or herself. We use the General Social Survey, a data source with rich information on individuals' family histories, to investigate how family background affects self-employment probabilities and to document how racial and ethnic groups differ with respect to the intergenerational pick-up rate. We confirm earlier findings that father's self-employment status is an important determinant of offspring's self-employment outcomes. New results include: 1) The impact of paternal self-employment differs by race. 2) Even independent of father's occupation, family structure plays a role. 3) Blacks have lower self-employment rates than whites in part because they have different family structures; still, within each family type, blacks have lower self-employment rates. 4) Extrapolating current patterns into the future, there is no indication that black and white self-employment rates will converge any time soon. 5) The relatively high self-employment rates of immigrants carry into the next generation, but not beyond that. 6) Male immigrants who have self-employed fathers re no more likely to be self-employed than other immigrants.
Handle: RePEc:nbr:nberwo:7344
Template-Type: ReDIF-Paper 1.0
Title: The Quality of Ideas: Measuring Innovation with Multiple Indicators
Classification-JEL: O31; O32
Author-Name: Jean O. Lanjouw
Author-Name: Mark Schankerman
Note: PR
Number: 7345
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7345
File-URL: http://www.nber.org/papers/w7345.pdf
File-Format: application/pdf
Publication-Status: published as Lanjouw, Jean O. and Mark Schankerman. "Patent Quality And Research Productivity: Measuring Innovation With Multiple Indicators," Economic Journal, 2004, v114(495,Apr), 441-465.
Abstract: We model early expectations about the value and technological importance ('quality') of a patented innovation as a latent variable common to a set of four indicators: the number of patent claims, forward citations, backward citations and family size. The model is estimated for four technology areas using a sample of about 8000 U.S. patents applied for during 1960-91. We measure how much noise' each individual indicator contains and construct a more informative, composite measure of quality. The variance in quality', conditional on the four indicators, is just one-third of the unconditional variance. We show the variance reduction generated by subsets of indicators, and find forward citations to be particularly important. Our measure of quality is significantly related to subsequent decisions to renew a patent and to litigate infringements. Using patent and R&D data for 100 U.S. manufacturing firms, we find that adjusting for quality removes much of the apparent decline in research productivity (patent counts per R&D) observed at the aggregate level.
Handle: RePEc:nbr:nberwo:7345
Template-Type: ReDIF-Paper 1.0
Title: Stock and Bond Pricing in an Affine Economy
Classification-JEL: G12
Author-Name: Geert Bekaert
Author-Person: pbe52
Author-Name: Steven R. Grenadier
Note: AP
Number: 7346
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7346
File-URL: http://www.nber.org/papers/w7346.pdf
File-Format: application/pdf
Abstract: This article provides a stochastic valuation framework for bond and stock returns that builds on three different pricing traditions: affine models of the term structure, present-value pricing of equities, and consumption-based asset pricing. Our model provides a more general application of the affine framework in that both bonds and equities are priced in a consistent fashion. This pricing consistency implies that term structure variables help price stocks while stock price fundamentals help price the term structure. We illustrate our model by considering three examples that are similar in spirit to well-known pricing models that fall within our general framework: a Mehra and Prescott (1985) economy, a present value model similar to Campbell and Shiller (1988b), and a model with stochastic risk aversion similar to Campbell and Cochrane (1998). The empirical performance of our models is explored, with a particular emphasis on return predictability.
Handle: RePEc:nbr:nberwo:7346
Template-Type: ReDIF-Paper 1.0
Title: How Wide is the Scope of Hold-Up-Based Theories? Contractual Form and Market Thickness in Trucking
Classification-JEL: L22; L42
Author-Name: Thomas N. Hubbard
Note: IO
Number: 7347
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7347
File-URL: http://www.nber.org/papers/w7347.pdf
File-Format: application/pdf
Publication-Status: published as Hubbard, Thomas N. "Contractual Form And Market Thickness In Trucking," Rand Journal of Economics, 2001, v32(2,Sumer), 369-386.
Abstract: How far do the contractual implications of hold-up-based theories (Klein, Crawford, and Alchian (1978), Williamson (1979, 1985)) extend? I investigate this in the context of trucking. Quasi-rents in trucking are generally smaller than in the contexts studied in the previous empirical literature. They vary with hauls' distance and the thickness of local markets. I find that doubling the thickness of the market increases the likelihood that simple spot arrangements govern transactions by about 30% for long hauls. I find weaker evidence of relationships between local market thickness and contractual form for short hauls -- hauls for which quasi-rents are particularly small. Contracts' role as protectors of quasi-rents becomes less important as quasi-rents decrease, but exists over a surprisingly large range.
Handle: RePEc:nbr:nberwo:7347
Template-Type: ReDIF-Paper 1.0
Title: The Wealth of the Unemployed: Adequacy and Implications for Unemployment Insurance
Classification-JEL: J6; H3
Author-Name: Jonathan Gruber
Author-Person: pgr20
Note: LS PE
Number: 7348
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7348
File-URL: http://www.nber.org/papers/w7348.pdf
File-Format: application/pdf
Publication-Status: published as Jonathan Gruber, 2001. "The Wealth of the unemployed," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(1), pages 79-94, October.
Abstract: While there has been considerable discussion of the adequacy of unemployment insurance (UI) benefits as a form of income replacement, there is little evidence on the other resources that the unemployed have to finance their unemployment spells. In this paper I focus on focus on one form of resources, own wealth holdings. I find that the median worker has financial assets sufficient to finance roughly two-thirds of the income loss from an unemployment spell, but that there is tremendous heterogeneity in wealth holdings; almost one-third of workers can't even replace 10% of their income loss. Most strikingly, ex-ante wealth holdings decline precipitously with realized unemployment durations, both absolutely and (especially) relative to ex-post income loss, suggesting that adequacy could be increased if UI benefits were targeted to those with longer spells. I also find strong evidence that individuals who are eligible for more generous UI draw down their wealth more slowly during unemployment spells. This demonstrates that wealth is used as a consumption smoothing device alongside UI to cope with the income loss from unemployment.
Handle: RePEc:nbr:nberwo:7348
Template-Type: ReDIF-Paper 1.0
Title: Educational Production
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS PE
Number: 7349
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7349
File-URL: http://www.nber.org/papers/w7349.pdf
File-Format: application/pdf
Publication-Status: published as Edward P. Lazear, 2001. "Educational Production," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 777-803, August.
Abstract: The literature on class size yields a number of findings. First, class size effects are difficult to find except when using data where class size variations are truly exogenous. Second, Catholic schools have large classes and better performance. Third, to the extent that class size matters, it is more important for disadvantaged children. Special education classes are smaller than advanced placement classes. Fourth, when many children have joined a class recently, the joiners and their classmates do worse. The theory presented below reconciles all of these facts by recognizing that classroom teaching is a public good where congestion effects are potentially important. Because the optimal class size is larger for behaved-students, the observed relation of educational output to class size is small or even positive. However, increasing class size to ranges away from equilibrium levels will adversely affect educational output. The theory argues for a particular non-linear relation of educational output to class size and is consistent with observed variations in class size by grade level, student and teacher characteristics. Class sizes are more significant in small classes than large ones. There is a special function that maps the substitution of discipline for class size, which may explain why Catholic schools, with large classes, out-perform public schools. The same technology also implies that class size effects are larger for problem children than for well-behaved children. Private schools, which charge a positive price and compete with free public schools, attract better students. This selection may help explain why Catholic schools out-perform public schools even though expulsion rates are lower in Catholic schools than in public ones. Teachers may prefer smaller class size than students or parents either because wages do not reflect working conditions fully or because teachers as a group can raise the demand for their services by lowering class size. The theory provides a measurable and operational way to define school quality that can be tested empirically. Finally, because public schools that operate in a centralized environment do not capture the returns to their successes, public school incentives differ from those of private schools.
Handle: RePEc:nbr:nberwo:7349
Template-Type: ReDIF-Paper 1.0
Title: The Morning After: Explaining the Slowdown in Japanese Growth in the 1990s
Classification-JEL: E32; E44
Author-Name: Tamim Bayoumi
Author-Person: pba366
Note: EFG IFM
Number: 7350
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7350
File-URL: http://www.nber.org/papers/w7350.pdf
File-Format: application/pdf
Publication-Status: published as Bayoumi, Tamim. "The Morning After: Explaining The Slowdown In Japanese Growth In The 1990s," Journal of International Economics, 2001, v53(2,Apr), 241-259.
Abstract: This paper uses a VAR to investigate four possible explanations of the extended slump in Japanese economic activity over the 1990s: the absence of bold and consistent fiscal stimulus; the limited room for expansionary monetary policy due to a liquidity trap; overinvestment and debt overhang; and disruption of financial intermediation. The results indicate that all of these factors played a role, but that the major explanation is disruption in financial intermediation, largely operating through the impact of changes in domestic asset prices on bank lending.
Handle: RePEc:nbr:nberwo:7350
Template-Type: ReDIF-Paper 1.0
Title: Causes of the Long Stagnation of Japan During the 1990s: Financial or Real?
Classification-JEL: E22; E30
Author-Name: Taizo Motonishi
Author-Person: pmo166
Author-Name: Hirshi Yoshikawa
Note: EFG
Number: 7351
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7351
File-URL: http://www.nber.org/papers/w7351.pdf
File-Format: application/pdf
Publication-Status: published as Motonishi, Taizo and Hiroshi Yoshikawa. "Causes Of The Long Stagnation Of Japan During The 1990s: Financial Or Real?," Journal of the Japanese and International Economies, 1999, v13(3,Sep), 181-200.
Abstract: Corporate investment is the most important factor to explain the long stagnation of Japan during the 1990's. Using the Bank of Japan diffusion indices of real profitability' and banks' willingness to lend', we estimate investment functions for four groups of firms: large/small and manufacturing/non-manufacturing. Our results suggest that for large firms, financing constraints are not significant whereas the converse is true for small firms. A fall of investment during 1992-94 is largely explained by real factors. However, the credit crunch occurred beginning 1997 and it lowered the growth rate of GDP by 1.6%.
Handle: RePEc:nbr:nberwo:7351
Template-Type: ReDIF-Paper 1.0
Title: Productivity Gains from Unemployment Insurance
Classification-JEL: E24; J64
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Robert Shimer
Author-Person: psh9
Note: LS PE EFG
Number: 7352
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7352
File-URL: http://www.nber.org/papers/w7352.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, Daron and Robert Shimer. "Productivity Gains From Unemployment Insurance," European Economic Review, 2000, v44(7,Jun), 1195-1224.
Abstract: This paper argues that unemployment insurance increases labor productivity by encouraging workers to seek higher productivity jobs, and by encouraging firms to create those jobs. We use a quantitative general equilibrium model to investigate whether this effect is comparable in magnitude to the standard moral hazard effects of unemployment insurance. Our model economy captures the behavior of the U.S. labor market for high school graduates quite well. When unemployment insurance becomes more generous starting from the current U.S. levels, there is an increase in unemployment similar in magnitude to the micro-estimates, but because the composition of jobs also changes, total output and welfare increase as well.
Handle: RePEc:nbr:nberwo:7352
Template-Type: ReDIF-Paper 1.0
Title: Welfare Dynamics Under Time Limits
Classification-JEL: I30; I38
Author-Name: Jeff Grogger
Author-Person: pgr125
Author-Name: Charles Michalopoulos
Author-Person: pmi91
Note: LS PE CH
Number: 7353
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7353
File-URL: http://www.nber.org/papers/w7353.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 111, no. 3 (June 2003): 530-554
Abstract: Among the most important changes brought about by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) is the imposition of time limits. In this paper, we analyze a simple model in which a potential welfare recipient chooses how to allocate her time-limited endowment of benefits so as to maximize her expected lifetime utility. Not surprisingly, the model reveals that time limits provide an incentive for the consumer to conserve, or bank, her benefits. More interesting is the prediction that these incentives to conserve one's benefits vary inversely with the age of the youngest child in one's family. This implies that the reduction in welfare payments that results from PRWORA will fall disproportionately on families with young children. We estimate age group-specific effects of time limits and test the prediction of the model using data from a welfare reform demonstration in Florida. Subject to some assumptions that are necessary to distinguish the effects of time limits from the effects of other provisions of the demonstration, we find that time limits indeed reduce welfare use by the greatest amount among the families with the youngest children. Moreover, time limits have substantial effects on welfare utilization, reducing monthly utilization probabilities by 19 percent. Time limits lead families to exit the welfare rolls well before they exhaust their benefits, suggesting that welfare mothers are rational in the sense of being forward-looking.
Handle: RePEc:nbr:nberwo:7353
Template-Type: ReDIF-Paper 1.0
Title: On the Measurement of the International Propagation of Shocks
Classification-JEL: F30; C32
Author-Name: Roberto Rigobon
Author-Person: pri12
Note: IFM
Number: 7354
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7354
File-URL: http://www.nber.org/papers/w7354.pdf
File-Format: application/pdf
Publication-Status: published as Rigobon, Roberto, 2003. "On the measurement of the international propagation of shocks: is the transmission stable?," Journal of International Economics, Elsevier, vol. 61(2), pages 261-283, December.
Abstract: In this paper I offer an alternative identification assumption that allows one to test for changing patterns regarding the international propagation of shocks when endogenous variables, omitted variables, and heteroskedasticity are present in the data. Using this methodology, I demonstrate that the propagation mechanisms of 36 stock markets remained relatively stable throughout the last three major international crises which have been associated with 'contagion' (i.e., Mexico 1994, Hong Kong 1997, and Russia 1998). These findings cast considerable doubt upon theories that suggest that the propagation of shocks is crisis contingent, and driven by endogenous liquidity issues, multiple equilibria, and political contagion. Rather, these findings would seem to support theories that identify such matters as trade, learning, and aggregate shocks as the primary transmission mechanisms in this process.
Handle: RePEc:nbr:nberwo:7354
Template-Type: ReDIF-Paper 1.0
Title: The Cost of Recessions Revisited: A Reverse-Liquidationist View
Classification-JEL: E24; E32
Author-Name: Ricardo J. Caballero
Author-Person: pca44
Author-Name: Mohamad L. Hammour
Note: EFG
Number: 7355
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7355
File-URL: http://www.nber.org/papers/w7355.pdf
File-Format: application/pdf
Publication-Status: published as Caballero, Ricardo J. and Mohamad L. Hammour. "The Cost Of Recessions Revisited: A Reverse-Liquidationist View," Review of Economic Studies, 2005, v72(251,Apr), 313-341.
Abstract: The observation that liquidations are concentrated in recessions has long been the subject of controversy. One view holds that liquidations are beneficial in that they result in increased restructuring. Another view holds that liquidations are privately inefficient and essentially wasteful. This paper proposes an alternative perspective. Based on a combination of theory and empirical evidence on gross job flows and on financial and labor market rents, we find that, cumulatively, recessions result in reduced restructuring, and that this is likely to be socially costly once we consider inefficiencies on both the creation and destruction margins.
Handle: RePEc:nbr:nberwo:7355
Template-Type: ReDIF-Paper 1.0
Title: Competition and the Cost of Capital Revisited: Special Authorities and Underwriters in the Market for Tax-emempt Hospital Bonds
Classification-JEL: I10; I11
Author-Name: Alec Ian Gershberg
Author-Name: Michael Grossman
Author-Person: pgr107
Author-Name: Fred Goldman
Note: EH
Number: 7356
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7356
File-URL: http://www.nber.org/papers/w7356.pdf
File-Format: application/pdf
Publication-Status: published as A. Gershberg, M. Grossman & F. Goldman "Competition and the Cost of Capital Revisited: Special Authorities and Underwriters in the Market for Tax-exempt Hospital Bonds," National Tax Journal, Vol. 54, No. 2, June 2001: 255-280.
Abstract: We explore the effects of two kinds of competition on the cost of capital in the tax-exempt bond market: (1) competition amongst underwriters and (2) competition amongst issuers (most of which are quasi-public special authorities sanctioned by state governments). The first kind of competition--essentially, competitive versus negotiated bidding processes--has received considerable attention in the literature. The second kind of competition, the number of potential issuers available to a beneficiary of a bond issue, has received far less attention and is related to the level of decentralization of the market for issuing bonds. Studies of the effects of competition have often used small samples of bond issues--often in one or a few states and for one or a few years--to reach their conclusions. Using a national database covering fourteen years, we find that both kinds of competition lower interest rates, at least in the hospital sector.
Handle: RePEc:nbr:nberwo:7356
Template-Type: ReDIF-Paper 1.0
Title: Foreign Production by U.S. Firms and Parent Firm Employment
Classification-JEL: F23; J23
Author-Name: Robert E. Lipsey
Author-Person: pli259
Note: ITI
Number: 7357
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7357
File-URL: http://www.nber.org/papers/w7357.pdf
File-Format: application/pdf
Publication-Status: published as Lipsey, Robert E. and Jean-Louis Mucchielli (eds.) Multinational Firms and Impacts on Employment, Trade, and Technology. London: Routledge, 2002.
Abstract: Despite the persistent fears that production abroad by U.S. multinationals reduces employment at home, there has, in fact, been almost no aggregate shift of production or employment to foreign countries. Some continuing shifts to foreign locations by U.S. manufacturing firms have been largely offset by shifts into the United States by foreign manufacturing multinationals. An analysis of individual firm data indicates that higher levels of production in developing countries by a firm are associated with lower employment at home for a given level of production. The reason is that U.S. multinationals tend to allocate their more labor-intensive production to developing country affiliates and retain more capital-intensive and skill-intensive operations in the United States.
Handle: RePEc:nbr:nberwo:7357
Template-Type: ReDIF-Paper 1.0
Title: Marshall's Economies
Classification-JEL: R00; O30
Author-Name: Vernon Henderson
Author-Person: phe30
Note: EFG PE
Number: 7358
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7358
File-URL: http://www.nber.org/papers/w7358.pdf
File-Format: application/pdf
Abstract: This paper estimates the nature and magnitude of the local externalities from own industry scale, as envisioned by Marshall. Census panel data on individual plants in high-tech and machinery industries across up to 487 countries are utilized, to quantify the direct effects of local external environment on plant productivity. Careful attention is paid to endogeneity issues in estimation. Magnitudes of scale externalities for corporate versus single plant firms are estimated and the sources of externalities (employment, numbers of plants, numbers of births, etc.) and extent (within the county versus extending to the rest of the MSA) are investigated. The paper asks in addition whether externalities are static or dynamic, a key issue in thinking about urban growth and industrial mobility; and whether they are dependent just on local own industry activity or also on overall local urban scale and/or diversity, a key issue in analyzing industrial composition and development of cities. The paper relates the findings on externalities for different industries to the extent of agglomeration and the degree of mobility of those industries across cities.
Handle: RePEc:nbr:nberwo:7358
Template-Type: ReDIF-Paper 1.0
Title: The Diffusion of Science-Driven Drug Discovery: Organizational Change in Pharmaceutical Research
Classification-JEL: D21; L23
Author-Name: Iain Cockburn
Author-Person: pco166
Author-Name: Rebecca Henderson
Author-Name: Scott Stern
Note: PR IO
Number: 7359
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7359
File-URL: http://www.nber.org/papers/w7359.pdf
File-Format: application/pdf
Abstract: Recent work linking the adoption of key organizational practices to productivity raises an important question: if adoption increases productivity so dramatically, why does adoption across an industry take so long? This paper explores this question in the context of one particularly interesting practice, the adoption of science driven drug discovery by the modern pharmaceutical industry. Over the past two decades, the established pharmaceutical industry has slowly shifted towards a more science-oriented drug discovery: (a) adopters experienced substantially higher rates of R&D after the late 1970s and (b) the rate of adoption across the industry was extremely slow. Motivated by the apparent contradiction between large boosts in performance and slow rates of adoption, this paper characterizes the sources of differences in rates of adoption between 1980 and 1993. The principal finding is that adoption of a science-oriented research approach was a function of initial conditions, or subject to 'state dependence': some firms simply began the sample period at a much higher level of science orientation. Moreover, while these effects attenuated over time, our empirical results suggest that it took more than ten years before adoption was unrelated to initial conditions. In addition, consistent with theories developed in the context of technology adoption, we find that relative diffusion rates depend on the product market positioning of firms. More surprisingly, adoption rates are seperately driven by the composition of sales within the firm. This latter finding suggests the potential importance of differences among firms in terms of the internal structure of power and attention, an area which has received only a small amount of theoretical attention.
Handle: RePEc:nbr:nberwo:7359
Template-Type: ReDIF-Paper 1.0
Title: Estate Taxes, Life Insurance, and Small Business
Classification-JEL: H20; G22
Author-Name: Douglas Holtz-Eakin
Author-Name: John W. Phillips
Author-Name: Harvey S. Rosen
Author-Person: pro55
Note: PE
Number: 7360
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7360
File-URL: http://www.nber.org/papers/w7360.pdf
File-Format: application/pdf
Publication-Status: published as Holtz-Eakin, Douglas, John W. R. Phillips and Harvey S. Rosen. "Estate Taxes, Life Insurance, And Small Business," Review of Economics and Statistics, 2001, v83(1,Feb), 52-63.
Abstract: One criticism of the estate tax is that it prevents the owners of family businesses from passing their enterprises to their children. The problem is that it may be difficult to pay estate taxes without liquidating the business. A natural question is why individuals with such concerns do not purchase enough life insurance to meet their estate tax liabilities. This paper examines whether and how people use life insurance to deal with the estate tax. We find that, other things being the same, business owners purchase more life insurance than other individuals. However, on the margin, their insurance purchases are less responsive to estate tax considerations and they are less likely to have the wherewithal to meet estate tax liabilities out of liquid assets plus insurance.
Handle: RePEc:nbr:nberwo:7360
Template-Type: ReDIF-Paper 1.0
Title: Banks, the IMF, and the Asian Crisis
Classification-JEL: F34; F36
Author-Name: Bong-Chan Kho
Author-Name: Rene M. Stulz
Note: IFM
Number: 7361
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7361
File-URL: http://www.nber.org/papers/w7361.pdf
File-Format: application/pdf
Publication-Status: published as Pacific-Basin Finance Journal, Vol. 8, no. 2 (May 2000): 177-216
Abstract: This paper examines the impact of the Asian crisis on bank stocks across four Western countries and six Asian countries. In the second half of 1997, Western banks experienced positive returns. In contrast East Asian bank indices incurred losses in excess of 60% in each of the crisis countries. Most of this poor performance is explained by the exposure of the banks to general stock market movements in their countries. Currency exposures affected banks adversely beyond their stock market impact only in Indonesia and the Philippines. Except for the Korean program, IMF programs had little effect on bank values. The announcement of the Korean program increased shareholder wealth at the U.S. banks with the highest reported exposure in Korea by about 7% and had a favorable effect on bank shareholder wealth in all the countries in our sample but one. There is no evidence that the Korean IMF program had a positive impact on banks without exposure to Korea and hence our results do not support the argument that such programs reduce systemic risk.
Handle: RePEc:nbr:nberwo:7361
Template-Type: ReDIF-Paper 1.0
Title: Social Security's Treatment of Postwar Americans: How Bad Can It Get?
Classification-JEL: H55
Author-Name: Jagadeesh Gokhale
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: AG PE
Number: 7362
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7362
File-URL: http://www.nber.org/papers/w7362.pdf
File-Format: application/pdf
Publication-Status: published as Social Security's Treatment of Postwar Americans. How Bad Can It Get?, Jagadeesh Gokhale, Laurence J. Kotlikoff. in The Distributional Aspects of Social Security and Social Security Reform, Feldstein and Liebman. 2002
Abstract: As currently legislated, the U.S. Social Security System represents a bad deal for postwar Americans. Of every dollar postwar Americans have earned or will earn over their lifetimes, over 5 cents will be lost to the Old Age Survivor Insurance System (OASI) in the form of payroll taxes paid in excess of benefits received. This lifetime net tax rate can also be understood by comparing the rate of return postwar contributors receive from OASI and the return they can earn on the market. The OASI return -- 1.86 percent -- is less than half the return currently being paid on inflation-indexed long-term government bonds, and the OASI return is much riskier. Of course, Social Security is an insurance as well as a net tax system. But, viewed as an insurance company, the insurance OASI sells (or, rather, forces households to buy) is no bargain. The load charged averages 66 cents per dollar of premium. These findings, developed in an extensive micro simulation study by Caldwell, et al. (1999), assume that current law can be maintained through time. But Social Security faces a staggering long-term funding problem. Meeting the system's promised benefit payments on an ongoing basis requires raising the OASDI 10.8 tax rate immediately and permanently by two fifths! How bad can Social Security's treatment of postwar Americans get once adjustments are made to save' the system? This paper examines that question using the machinery developed in Caldwell, et al. Specifically, it considers Social Security's treatment of postwar Americans under alternative tax increases and benefit cuts that would help bring the system's finances into present value balance. The alternatives include immediate tax increases, eliminating the ceiling on taxable payroll, immediate and sustained benefit cuts, increasing the system's normal retirement ages beyond those currently legislated, switching from wage to price indexing in calculating benefits, and limiting the price indexation of benefits. The choice among these and other alternatives have important consequences for which postwar generations and which members of those generations will be forced to pay for the system's long-term financing problems.
Handle: RePEc:nbr:nberwo:7362
Template-Type: ReDIF-Paper 1.0
Title: Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers
Classification-JEL: H24; I38
Author-Name: Bruce D. Meyer
Author-Person: pme273
Author-Name: Dan T. Rosenbaum
Author-Person: pro561
Note: LS PE CH
Number: 7363
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7363
File-URL: http://www.nber.org/papers/w7363.pdf
File-Format: application/pdf
Publication-Status: published as Meyer, Bruce D. and Dan T. Rosenbaum. "Welfare, The Earned Income Tax Credit, And The Labor Supply Of Single Mothers," Quarterly Journal of Economics, 2001, v116(3,Aug), 1063-1114.
Abstract: During 1984-96, welfare and tax policy changed dramatically. The Earned Income Tax Credit was expanded, welfare benefits were cut, welfare time limits were added and cases were terminated, Medicaid for the working poor was expanded, training programs were redirected, and subsidized or free child care was expanded. Many of the program changes were intended to encourage low income women to work. During this same time period there were unprecedented increases in the employment and hours of single mothers, particularly those with young children. In this paper, we first document these large changes in policies and employment. We then examine if the policy changes are the reason for the large increases in single mothers' labor supply. We find evidence that a large share of the increase in work by single mothers can be attributed to the EITC, with smaller shares for welfare benefit reductions, welfare waivers, changes in training programs, and child care expansions. We also find that most of these policies increased hours worked. Our results indicate that financial incentives through the tax and welfare systems have substantial effects on single mothers' labor supply decisions.
Handle: RePEc:nbr:nberwo:7363
Template-Type: ReDIF-Paper 1.0
Title: Short-Term Capital Flows
Classification-JEL: F3; F4
Author-Name: Dani Rodrik
Author-Person: pro60
Author-Name: Andres Velasco
Note: IFM
Number: 7364
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7364
File-URL: http://www.nber.org/papers/w7364.pdf
File-Format: application/pdf
Publication-Status: published as Pleskovic, Boris and Joseph E. Stiglitz. Annual World Bank Conference on Development Economics. Washington, D.C.: World Bank, 2000.
Abstract: We provide a conceptual and empirical framework for evaluating the effects of short-term capital flows. A simple model of the joint determination of the maturity and cost of external borrowing highlights the role played by self-fulfilling crises. The model also specifies the circumstances under which short-term debt accumulation is socially excessive. The empirical analysis shows that the short-term debt to reserves ratio is a robust predictor of financial crises, and that greater short-term exposure is associated with more severe crises when capital flows reverse. Higher levels of M2/GDP and per-capita income are associated with shorter-term maturities of external debt. The level of international trade does not seem to have any relationship with levels of short-term indebtedness, which suggests that trade credit plays an insignificant role in driving short-term capital flows. Our policy analysis focuses on ways in which potential illiquidity can be avoided.
Handle: RePEc:nbr:nberwo:7364
Template-Type: ReDIF-Paper 1.0
Title: The Future of EMU: What Does the History of Monetary Unions Tell Us?
Classification-JEL: E42; N20
Author-Name: Michael D. Bordo
Author-Person: pbo243
Author-Name: Lars Jonung
Note: ME DAE
Number: 7365
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7365
File-URL: http://www.nber.org/papers/w7365.pdf
File-Format: application/pdf
Publication-Status: published as Capie, Forrest and Geoffrey Wood (eds). Monetary Unions. London: MacMillan, 2003.
Abstract: The creation of EMU and the ECB has triggered a discussion of the future of EMU. Independent observers have pointed to a number of shortcomings or hazard areas' in the construction of EMU, such as the absence of a central lender of last resort function for EMU, the lack of a central authority supervising the financial systems of EMU, unclear and inconsistent policy guidelines for the ECB, the absence of central co-ordination of fiscal policies within EMU, unduly strict criteria for domestic debt and deficits, as set out in the Maastricht rules, in the face of asymmetric shocks, and Euroland as not an optimal' currency area. Do these 'flaws' represent major threats to the future of EMU? Or will they be successfully resolved by the European policy authorities, leading to a lasting and prosperous EMU? We provide answers to these questions by examining the historical record of monetary unions. We try to extract the key conditions for establishing and for maintaining monetary unions intact. Our main lesson from the history of monetary unions is that political factors will be the central determinants of the future of EMU. The 'economic' shortcomings of EMU will likely be overcome as long as political unity prevails within EMU.
Handle: RePEc:nbr:nberwo:7365
Template-Type: ReDIF-Paper 1.0
Title: Do Taxpayers Bunch at Kink Points?
Classification-JEL: H31
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 7366
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7366
File-URL: http://www.nber.org/papers/w7366.pdf
File-Format: application/pdf
Publication-Status: published as Emmanuel Saez, 2010. "Do Taxpayers Bunch at Kink Points?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 180-212, August.
Abstract: This paper investigates whether taxpayers bunch at the kink points of the US income tax schedule (i.e. where marginal rates jump) using tax returns data. Clear evidence of bunching is found only at the first kink point (where marginal rates jump from 0 to 15%). Evidence for other kink points is weak or null. Evidence of bunching is stronger for itemizers than for non-itemizers. Theoretical models of behavioral responses to taxation show that bunching is proportional to the compensated elasticity of income with respect to tax rates. These models are used to perform simulations of bunching and calibrate the key parameters (the behavioral elasticity and the extent to which taxpayers control their income) to the empirical income distributions. Except for low income earners, the behavioral elasticity consistent with the empirical results is small.
Handle: RePEc:nbr:nberwo:7366
Template-Type: ReDIF-Paper 1.0
Title: The Effect of Marginal Tax Rates on Income: A Panel Study of 'Bracket Creep'
Classification-JEL: H31; J22
Author-Name: Emmanuel Saez
Author-Person: psa117
Note: PE
Number: 7367
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7367
File-URL: http://www.nber.org/papers/w7367.pdf
File-Format: application/pdf
Publication-Status: published as Saez, Emmanuel. "The Effect Of Marginal Tax Rates On Income: A Panel Study Of 'Bracket Creep'," Journal of Public Economics, 2003, v87(5-6,May), 1231-1258.
Abstract: This paper uses a panel of individual tax returns and the `bracket creep' as source of tax rate variation to construct instrumental variables estimates of the sensitivity of income to changes in tax rates. From 1979 to 1981, the US income tax schedule was fixed in nominal terms while inflation was high (around 10%). This produced a real change in tax rate schedules. Taxpayers near the top-end of a tax bracket were more likely to creep to a higher bracket and thus experience a rise in marginal rates the following year than the other taxpayers. Compensated elasticities can be estimated by comparing the differences in changes in income between taxpayers close to the top-end of a tax bracket to the other taxpayers. These estimates, based on comparisons between very similar groups, are robust to underlying changes in the income distribution, such as a rise in inequality. The elasticities found are higher than those derived in labor supply studies but smaller than those found previously with the same kind of tax returns data.
Handle: RePEc:nbr:nberwo:7367
Template-Type: ReDIF-Paper 1.0
Title: What People Don't Know About Their Pensions and Social Security: An Analysis Using Linked Data from the Health and Retirement Study
Classification-JEL: D31; E21
Author-Name: Alan L. Gustman
Author-Person: pgu327
Author-Name: Thomas L. Steinmeier
Note: AG LS PE ME
Number: 7368
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7368
File-URL: http://www.nber.org/papers/w7368.pdf
File-Format: application/pdf
Publication-Status: published as Alan L. Gustman and Thomas L. Steinmeier. “What People Don’t Know About Their Pensions and Social Security”. In William G. Gale, John B. Shoven and Mark J. Warshawsky, editors, Private Pensions and Public Policies. 2004. Washington: D.C., Brookings Institution, pp. 57-125.
Abstract: Pension plan descriptions from respondents to the 1992 Health and Retirement Study are compared with descriptions obtained from their employers. Earnings histories reported by respondents are compared with earnings histories from the Social Security Administration. The probability of linking employer pension data, which is two thirds for current jobs, and of obtaining permission to link an earnings history, which is over 70 percent, are not well explained by respondent characteristics. Half of respondents with linked pension data correctly identify plan type, and fewer than half identify, within one year, dates of eligibility for early and normal retirement benefits. Benefit reduction rates are essentially not reported. Respondents do better in reporting pension values, but the unexplained variation is still considerable. In contrast, respondent reported values, together with other observables, account for 80 percent of the variation in pension values and 75 percent of the variation in covered earnings measured from linked records. Thus prospects are good for imputing plan values, but not for imputing the location or size of early retirement incentives. Our findings raise questions about how well respondents understand complex pension and Social Security rules.
Handle: RePEc:nbr:nberwo:7368
Template-Type: ReDIF-Paper 1.0
Title: Environmental Compliance Costs and Foreign Direct Investment Inflows to U.S. States
Classification-JEL: F2; H73
Author-Name: Wolfgang Keller
Author-Person: pke8
Author-Name: Arik Levinson
Author-Person: ple135
Note: ITI PE
Number: 7369
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7369
File-URL: http://www.nber.org/papers/w7369.pdf
File-Format: application/pdf
Publication-Status: published as Keller, Wolfgang and Arik Levinson. "Pollution Abatement Costs And Foreign Direct Investment Inflows To U.S. States," Review of Economics and Statistics, 2002, v84(4,Nov), 691-703.
Abstract: This paper estimates the extent to which changing environmental standards have altered patterns of international investment. Our analysis goes beyond the existing literature in three ways. First, we avoid comparing regulations in different countries by using data on inward foreign direct investment (FDI) to the U.S. and on differences in the regulatory stringency of U.S. states. This approach has the advantage that data on environmental stringency in U.S. states are more comparable than that for different countries, and that U.S. states are more similar than countries in other difficult-to-measure dimensions. Second, our measure of environmental stringency accounts for differences in states' industrial compositions for earlier studies. Third, we employ a panel of annual measures of relative regulatory stringency from 1977 to 1994, allowing us to control for unobserved state characteristics that may be correlated with both FDI and compliance costs. We find some evidence of small deterrent effects of environmental regulations in particularly pollution-intensive industries large or widespread effects. While the broad conclusions are consistent with the existing literature, this paper does address three important concerns with that literature.
Handle: RePEc:nbr:nberwo:7369
Template-Type: ReDIF-Paper 1.0
Title: Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records
Classification-JEL: J31; D31
Author-Name: Michael Baker
Author-Person: pba400
Author-Name: Gary Solon
Author-Person: pso215
Note: LS
Number: 7370
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7370
File-URL: http://www.nber.org/papers/w7370.pdf
File-Format: application/pdf
Publication-Status: published as Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Logitudinal Income Tax Records", Journal of Labor Economics, Vol. 21, April 2003, 289-321.
Abstract: Several recent studies have found that earnings inequality in Canada has grown considerably since the late 1970's. Using an extraordinary data base drawn from longitudinal income tax records, we decompose this growth in earnings inequality into its persistent and transitory components. We find that the growth in earnings inequality reflects both an increase in long-run inequality and an increase in earnings instability. The large size of our earnings panel allows us to estimate and test richer models of earnings dynamics than could be supported by the relatively small panel surveys used in U.S. research. The Canadian data strongly reject several restrictions commonly imposed in the U.S. literature, and they also suggest that imposing these evidently false restrictions may lead to distorted inferences about earnings dynamics and inequality trends.
Handle: RePEc:nbr:nberwo:7370
Template-Type: ReDIF-Paper 1.0
Title: Occupational Gender Composition and Wages in Canada: 1987-1988
Classification-JEL: J16; J30
Author-Name: Michael Baker
Author-Person: pba400
Author-Name: Nicole M. Fortin
Author-Person: pfo101
Note: LS
Number: 7371
Creation-Date: 1999-09
Order-URL: http://www.nber.org/papers/w7371
File-URL: http://www.nber.org/papers/w7371.pdf
File-Format: application/pdf
Publication-Status: published as "Occupational Gender Composition and Wages in Canada: 1987-1988", Canadian Journal of Economics, Vol. 34, May 2001, 345-376.
Abstract: The relationship between occupational gender composition and wages is the basis of pay equity/comparable worth legislation. A number of previous studies have examined this relationship in US data, identifying some of the determinants of low wages in ``female jobs'' well as important limitations of public policy in this area. There is little evidence, however, from other jurisdictions. This omission is particularly disturbing in the case of Canada, which now has some of the most extensive pay equity legislation in the world. In this paper we provide a comprehensive picture, circa the late 1980's, of the occupational gender segregation in Canada and its consequences for wages. The sample period precedes many provincial pay equity initiatives and thus the results should provide a baseline for the evaluation of this legislation. We find that the estimated wage penalties in female jobs in Canada are generally much smaller than the estimates for the United States. Although there is some heterogeneity across worker groups on average, the link between female wages and gender composition is small and not statistically significant.
Handle: RePEc:nbr:nberwo:7371
Template-Type: ReDIF-Paper 1.0
Title: The Adequacy of Life Insurance: Evidence from the Health and Retirement Survey
Classification-JEL: G22
Author-Name: B. Douglas Bernheim
Author-Person: pbe81
Author-Name: Lorenzo Forni
Author-Person: pfo73
Author-Name: Jagadeesh Gokhale
Author-Name: Laurence J. Kotlikoff
Author-Person: pko44
Note: AG PE
Number: 7372
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7372
File-URL: http://www.nber.org/papers/w7372.pdf
File-Format: application/pdf
Publication-Status: published as Bernheim, B. Douglas, Lorenzo Forni, Jagadeesh Gokhale and Lawrence J. Kotlikoff. "The Mismatch Between Life Insurance Holdings And Financial Vulnerabilities: Evidence From The Health And Retirement Study," American Economic Review, 2003, v93(1,Mar), 354-365.
Abstract: This study examines the adequacy of life insurance among married American couples approaching retirement. It improves upon previous work in two ways. First, it is based on recent, high quality data (the 1992 Health and Retirement Survey with matched Social Security earnings histories). Second, it employs new financial planning software to evaluate the life insurance needs of each household. This software embodies an elaborate life- cycle planning model that accounts for a broad array of demographic, economic, and financial characteristics. We find that a sizable minority of couples in the HRS sample are significantly underinsured. Almost one third of wives and more than 10 percent of husbands would have suffered living standard reductions of 20 percent or more had their spouses died in 1992. Underinsurance tends to be more common among low income households, couples with asymmetric earnings, younger households, couples with dependent children, and non-whites. In general, households with greater vulnerabilities do not appear to compensate adequately for these vulnerabilities through greater life insurance holdings. Among some groups, the frequency of underinsurance exceeds two-thirds, and the frequency of severe underinsurance (a reduction in living standard of 40 percent or greater) exceeds one-quarter.
Handle: RePEc:nbr:nberwo:7372
Template-Type: ReDIF-Paper 1.0
Title: Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence
Classification-JEL: O30; O38
Author-Name: Paul A. David
Author-Person: pda76
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Andrew A. Toole
Note: PR
Number: 7373
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7373
File-URL: http://www.nber.org/papers/w7373.pdf
File-Format: application/pdf
Publication-Status: published as Research Policy, Vol. 29 (May 2000).
Abstract: Is public R&D spending complementary and thus "additional" to private R&D spending, or does it substitute for and tend to "crowd out" private R&D? Conflicting answers are given to this question. We survey the body of available economectric evidence accumulated over the past 35 years. A framework for analysis of the problem i is developed to help organize and summarize the findings of econometric studies based on time series and cross-section data from various levels of aggregation (laboratory, firm, industry, country). The findings overall are ambivalent and the existing literature as as a whole is subject to the criticim that the nature of the "experiment(s)" that the investigators envisage is not adequately specified. We conclude by offering suggestions for improving future empirical research on this issue.
Handle: RePEc:nbr:nberwo:7373
Template-Type: ReDIF-Paper 1.0
Title: Do "High Performance" Work Practices Improve Establishment-Level Outcomes?
Classification-JEL: M11; M12
Author-Name: David Neumark
Author-Person: pne16
Author-Name: Peter Cappelli
Note: LS PR
Number: 7374
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7374
File-URL: http://www.nber.org/papers/w7374.pdf
File-Format: application/pdf
Publication-Status: published as Peter Cappelli & David Neumark, 2001. "Do "high-performance" work practices improve establishment-level outcomes?," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 54(4), pages 737-775, July.
Abstract: Interest in the potential effects of different systems for organizing work and managing employees on the performance of organizations has a long history in the social sciences. The interest in economics, arguably more recent, reflects a general concern about the sources of competitiveness in organizations. A number of methodological problems have confronted previous attempts to examine the relationship between work practices and the performance of firms. Among the most intractable has been a concern about establishing causation given heterogeneity biases in what have typically been cross-sectional data. The results from prior literature are suggestive of important productivity effects but remain inconclusive. To address the major methodological problems we use a national probability sample of establishments, measures of work practices and performance that are comparable across organizations, and most importantly a unique longitudinal design incorporating data from a period prior to the advent of high performance work practices. Our results suggest that work practices that transfer power to employees, often described as statistical case is weak. However, we also find that these work practices on average raise labor costs per employee. The net result is no apparent effect on efficiency, a measure that combines labor costs and labor productivity. While these results do not appear to be consistent with the view that such practices are good for employers, neither do they suggest that such practices harm employers. They are, however, consistent with the view that these practices raise average compensation and hence may be good for employees. Overall, then, the evidence suggests that firms can choose raise employee compensation without necessarily harming their competitiveness.
Handle: RePEc:nbr:nberwo:7374
Template-Type: ReDIF-Paper 1.0
Title: Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run
Classification-JEL: O40; E10
Author-Name: Charles I. Jones
Author-Person: pjo24
Note: EFG
Number: 7375
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7375
File-URL: http://www.nber.org/papers/w7375.pdf
File-Format: application/pdf
Publication-Status: published as Advances in Macroeconomics (The B.E. Journal of Macroeconomics) Vol. 1: Iss. 2, Article 1 (June 2001): 1-45
Abstract: This paper studies a growth model that is able to match several key facts of economic history. For thousands of years, the average standard of living seems to have risen very little, despite increases in the level of technology and large increases in the level of the population. Then, after thousands of years of little change, the level of per capita consumption increased dramatically in less than two centuries. Quantitative analysis of the model highlights two factors central to understanding this history. The first is a virtuous circle: more people produce more ideas, which in turn makes additional population growth possible. The second is an improvement in institutions that promote innovation, such as property rights: the simulated economy indicates that the single most important factor in the transition to modern growth has been the increase in the fraction of output pain to compensate inventors for the fruits of their labor.
Handle: RePEc:nbr:nberwo:7375
Template-Type: ReDIF-Paper 1.0
Title: Differences of Opinion, Rational Arbitrage and Market Crashes
Classification-JEL: G12; G14
Author-Name: Harrison Hong
Author-Person: pho390
Author-Name: Jeremy C. Stein
Author-Person: pst43
Note: AP
Number: 7376
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7376
File-URL: http://www.nber.org/papers/w7376.pdf
File-Format: application/pdf
Publication-Status: published as Hong, Harrison and Jeremy C. Stein. "Differences Of Opinion, Short-Sales Constraints, And Market Crashes," Review of Financial Studies, 2003, v16(2,Summer), 487-525.
Abstract: We develop a theory of stock-market crashes based on differences of opinion among investors. Because of short-sales constraints, bearish investors do not initially participate in the market and their information is not revealed in prices. However, if other, previously-bullish investors have a change of heart and bail out of market, the originally-more-bearish group may become the marginal "support buyers", and hence more will be learned about their signals. Thus accumulated hidden information tends to come out during market declines. The model helps explain a variety of stylized facts, including: 1) large movements in prices unaccompanied by significant news about fundamentals; 2) negative skewness in the distribution of market returns; and 3) increased correlation among stocks in a falling market. In addition, the model makes a distinctive out-of-sample prediction: that negative skewness will be most pronounced conditional on high trading volume.
Handle: RePEc:nbr:nberwo:7376
Template-Type: ReDIF-Paper 1.0
Title: Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets
Classification-JEL: G12
Author-Name: George Chacko
Author-Name: Luis M. Viceira
Author-Person: pvi31
Note: AP
Number: 7377
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7377
File-URL: http://www.nber.org/papers/w7377.pdf
File-Format: application/pdf
Publication-Status: published as George Chacko & Luis M. Viceira, 2005. "Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 18(4), pages 1369-1402.
Abstract: This paper analyzes optimal portfolio choice and consumption with stochastic volatility in incomplete markets. Using the Duffie-Epstein (1992) formulation of recursive utility in continuous time, it shows that the optimal portfolio demand for stocks under stochastic volatility varies strongly with the investor's coefficient of relative risk aversion, but only slightly with her elasticity of intertemporal substitution; by contrast, optimal consumption relative to wealth depends on both preference parameters. This paper also shows that stochastic variation in volatility produces an optimal intertemporal hedging demand for stocks which is negative when changes in volatility are instantaneously negatively correlated with excess stock returns and investors have coefficients of relative risk aversion larger than one. The absolute size of this demand increases with the size of this correlation, and also with the persistence of shocks to volatility. An application to the US stock market shows that empirically this correlation is negative and large, which implies a negative hedging demand for stocks. This application also shows that only low frequency shocks to volatility exhibit enough persistence to generate sizable hedging demands by long-term, risk averse investors. A comparative statics exercise shows that the size of hedging demands is considerably more sensitive to changes in persistence than to changes in correlation.
Handle: RePEc:nbr:nberwo:7377
Template-Type: ReDIF-Paper 1.0
Title: Antidumping Investigations and the Pass-Through of Exchange Rates and Antidumping Duties
Classification-JEL: F13; F31
Author-Name: Bruce A. Blonigen
Author-Person: pbl165
Author-Name: Stephen E. Haynes
Note: ITI
Number: 7378
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7378
File-URL: http://www.nber.org/papers/w7378.pdf
File-Format: application/pdf
Publication-Status: published as Blonigen, Bruce A. and Stephen E. Haynes. "Antidumping Investigations And The Pass-Through Of Antidumping Duties And Exchange Rates," American Economic Review, 2002, v92(4,Sep), 1044-1061.
Abstract: We present a model that shows that exchange rate pass-through is likely to be substantially altered when firms face antidumping (AD) duties and that optimal pass-through of AD duties may be up to 200 percent. We examine both pass-through issues using monthly prices across 345 U.S.- imported Canadian iron and steel products from 1989 through 1995, some of which received duties in U.S. AD cases filed in 1992. We find that exchange rate pass-through rise dramatically after products received AD duties, with no such change for closely-related products not subject to final AD duties. This result has important implications for previous studies that have pooled AD and non-AD products. We also find that pass-through of the final AD duties is 160 percent, which is consistent with our model's predictions.
Handle: RePEc:nbr:nberwo:7378
Template-Type: ReDIF-Paper 1.0
Title: The Future of Health Economics
Classification-JEL: I10
Author-Name: Victor R. Fuchs
Author-Person: pfu157
Note: EH
Number: 7379
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7379
File-URL: http://www.nber.org/papers/w7379.pdf
File-Format: application/pdf
Publication-Status: published as Fuchs, Victor R. "The Future Of Health Economics," Journal of Health Economics, 2000, v19(2,Mar), 141-157.
Abstract: This paper discusses health economics as a behavioral science and as input into health policy and health services research. I illustrate the dual role with data on publications and citations of two leading health economics journals and three leading American health economists. Five important, relatively new topics in economics are commended to health economists who focus on economics as a behavioral science. This is followed by suggestions for health economists in their role of providing input to health policy and health services research. I discuss the strengths and weaknesses of economics, the role of values, and the potential for interdisciplinary and multidisciplinary research. The fourth section presents reasons why I believe the strong demand for health economics will continue, and the paper concludes with a sermon addressed primarily to recent entrants to the field.
Handle: RePEc:nbr:nberwo:7379
Template-Type: ReDIF-Paper 1.0
Title: Anticipated and Actual Bequests
Author-Name: Michael D. Hurd
Author-Person: phu137
Author-Name: James P. Smith
Author-Person: psm28
Note: AG
Number: 7380
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7380
File-URL: http://www.nber.org/papers/w7380.pdf
File-Format: application/pdf
Publication-Status: published as Anticipated and Actual Bequests , Michael D. Hurd, James P. Smith. in Themes in the Economics of Aging, Wise. 2001
Abstract: This paper uses data on anticipated bequests from two waves of the Health and Retirement Study and the Asset and Health Dynamics of the Oldest Old (AHEAD), and on actual bequests from AHEAD. Actual bequests were measured in exit interviews given by proxy respondents for 774 AHEAD respondents who died between waves 1 and 2. Because the exit interview is representative of the elderly population, the distribution of estate values is quite different from that obtained from estate records, which represent just a wealthy subset of the population. Anticipated bequests were measured by the subjective probability of leaving bequests. Between waves 1 and 2, increases in bequest probabilities were associated with increases in the subjective probability of surviving, increments in household wealth, and widowing while out-of-pocket medical expenses reduced the likelihood of a bequest. By comparing bequest probabilities with baseline wealth we were able to test a main prediction of the life-cycle model, that individuals will dissave at advanced old-age. The AHEAD respondents anticipate substantial dissaving before they die.
Handle: RePEc:nbr:nberwo:7380
Template-Type: ReDIF-Paper 1.0
Title: New Trends in Pension Benefit and Retirement Provisions
Classification-JEL: G2; J14
Author-Name: Olivia Mitchell
Author-Person: pmi73
Note: AG LS
Number: 7381
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7381
File-URL: http://www.nber.org/papers/w7381.pdf
File-Format: application/pdf
Publication-Status: published as Mitchell, Olivia S. et al. (eds.) Benefits for the workplace of the future, Pension Research Council Publications. Philadelphia: University of Pennsylvania Press, 2003.
Abstract: This study illustrates and interprets changes in pension plan retirement formulas and benefit provisions over the last two decades, using extensive information on private sector pension plans gathered by the U.S. Department of Labor since 1980. Data generated from the Employee Benefits Survey (EBS) of medium and large firms shows that pension provisions have changed a great deal in companies that have traditionally been the most consistent providers of employer-sponsored retirement benefits in the US. In the defined benefit environment, vesting rules were loosened somewhat; plans have eased access to normal retirement; and pension benefit formulas have moved toward final rather than career earnings, with increased weight on straight-time pay. In addition, these plans became more integrated with social security, but the form of this integration has changed substantially. Defined benefit pension replacement rates appear to have fallen over time, though the time series is not complete. In addition, benefit caps remain in place, generally by limiting years of service in the formula; disability benefit provisions have also become more stringent; and it is increasingly possible to take a lump sum from one's defined benefit pension. The defined contribution environment has also seen substantial change, as documented in the BLS series. Participation and vesting rules appear most lenient for workers in 401(k) plans; most employees must contribute to their plans, generally as a function of earnings; and employee access to pension fund assets appears to be on the upswing over time. Participants in these plans have also gained access to diversified stock and bond funds, with fewer permitted to invest in own-employer stock, common stock funds and guaranteed insurance contracts. We conclude with a discussion of how future data collection efforts could be improved.
Handle: RePEc:nbr:nberwo:7381
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rate Pass-Through and the Welfare Effects of the Euro
Classification-JEL: F3; F4
Author-Name: Michael B. Devereux
Author-Person: pde32
Author-Name: Charles Engel
Author-Person: pen14
Author-Name: Cedric Tille
Author-Person: pti5
Note: IFM
Number: 7382
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7382
File-URL: http://www.nber.org/papers/w7382.pdf
File-Format: application/pdf
Publication-Status: published as Devereux, Michael B., Charles Engel and Cedric Tille. "Exchange Rate Pass-Through And The Welfare Effects Of The Euro," International Economic Review, 2003, v44(1,Feb), 223-242.
Abstract: This paper explores the implications of the European single currency within a simple sticky price intertemporal model. The main issue we focus on is how the euro may alter the responsiveness of consumer prices to exchange rate changes. Our central conjectures is that the acceptance of the euro will lead European prices to become more insulated from exchange-rate volatility, much the way U.S. consumer prices already are. We show that this has profound consequences for both the volatility and levels of macroeconomic aggregates in both the U.S. and Europe. We find that European welfare is enhanced, and, more surprisingly U.S. shares in Europe's good fortune. Alternative assumptions about how pricing behavior will change lead to different conclusions, but in all cases we can derive specific implications for expected levels and volatility of macroeconomic varialbes.
Handle: RePEc:nbr:nberwo:7382
Template-Type: ReDIF-Paper 1.0
Title: The Effectiveness of Workplace Drug Prevention Policies: Does 'Zero Tolerance' Work?
Classification-JEL: I18; J28
Author-Name: Stephen L. Mehay
Author-Name: Rosalie Liccardo Pacula
Author-Person: ppa1299
Note: CH EH
Number: 7383
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7383
File-URL: http://www.nber.org/papers/w7383.pdf
File-Format: application/pdf
Abstract: Workplace drug testing programs are becoming increasingly more common although there is little research demonstrating that they have any effect on drug use by employees. This paper analyzes the deterrence effect of a particularly aggressive workplace drug- testing policy implemented by the military in 1981. The military's policy incorporates random drug testing of current employees and zero tolerance. Using data from various years of the Department of Defense's Worldwide Survey of Health Related Behaviors and the NHSDA, we find illicit drug prevalence rates among military personnel are significantly lower than civilian rates in years after the implementation of the program but not before, suggesting a sizeable deterrence effect. These basic findings are replicated with data from the NLSY. The NLSY are also used to explore sensitivity of the deterrence effect to the probability of detection and severity of punishment, which varied across military branches during the first few years of the program's implementation.
Handle: RePEc:nbr:nberwo:7383
Template-Type: ReDIF-Paper 1.0
Title: Capital Account Liberalization, Financial Depth and Economic Growth
Classification-JEL: F36; F43
Author-Name: Michael W. Klein
Author-Person: pkl9
Author-Name: Giovanni Olivei
Author-Person: pol108
Note: IFM
Number: 7384
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7384
File-URL: http://www.nber.org/papers/w7384.pdf
File-Format: application/pdf
Publication-Status: published as Klein, Michael W. and Giovanni P. Olivei. "Capital Account Liberalization, Financial Depth, and Economic Growth." Journal of International Money and Finance 27, 6 (October 2008): 861-75.
Abstract: We show a statistically significant and economically relevant effect of open capital accounts on financial deepness and economic growth in a cross-section of countries over the period 1986 to 1995. Countries with open capital accounts over some or all of this period had a significantly greater increase in financial depth than countries with continuing capital account restrictions, and they also enjoyed greater economic growth. There results, however, are largely driven by the developed countries in the sample. The observed failure of capital account liberalization to promote financial deepness among developing countries suggests potentially important policy implications concerning the desirability of liberalizing the capital account.
Handle: RePEc:nbr:nberwo:7384
Template-Type: ReDIF-Paper 1.0
Title: Enter at Your Own Risk: HMO Participation and Enrollment in the MedicareRisk Market
Classification-JEL: I1; L1
Author-Name: Jean Abraham
Author-Name: Ashish Arora
Author-Person: par15
Author-Name: Martin Gaynor
Author-Person: pga1
Author-Name: Douglas Wholey
Note: EH
Number: 7385
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7385
File-URL: http://www.nber.org/papers/w7385.pdf
File-Format: application/pdf
Publication-Status: published as Abraham, Jean, Ashish Arora, Martin Gaynor and Douglas Wholey. "Enter At Your Own Risk: HMO Participation And Enrollment In The Medicare Risk Market," Economic Inquiry, 2000, v38(3,Jul), 385-401.
Abstract: We examine HMO participation and enrollment in the Medicare risk market for the years 1990 to 1995. We develop a profit- maximization model of HMO behavior, which explicitly considers potential linkages between an HMO's production decision in the commercial enrollee market and its participation and production decisions in the Medicare risk market. Our results suggest that the payment rate is a primary determinant of HMO participation, while the price of a supplemental Medicare insurance policy positively affects HMO Medicare enrollment. We also find empirical support for the existence of complementarities in the joint production of an HMO's commercial and Medicare products.
Handle: RePEc:nbr:nberwo:7385
Template-Type: ReDIF-Paper 1.0
Title: Internal Versus External Convertibility and Developing-Country FinancialCrises: Lessons from the Argentine Bank Bailout of the 1930's
Classification-JEL: E42; E51
Author-Name: Gerardo della Paolera
Author-Person: pde864
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM ME
Number: 7386
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7386
File-URL: http://www.nber.org/papers/w7386.pdf
File-Format: application/pdf
Publication-Status: published as Gerardo della Paolera & Alan M. Taylor, 2001. "Bailing Out: Internal versus External Convertibility," NBER Chapters, in: Straining at the Anchor: The Argentine Currency Board and the Search for Macroeconomic Stability, 1880-1935, pages 165-187 National Bureau of Economic Research, Inc.
Publication-Status: published as Paolera, Gerardo Della and Alan M. Taylor. "Internal Versus External Convertibility And Emerging-market Crises: Lessons From Argentine History," Explorations in Economic History, 2002, v39(4,Oct), 357-398.
Abstract: Argentina's money and banking system was hit hard by the Great Depression. The banking sector was awash with bad assets that built up in the 1920's. Gold convertibility was suspended in December 1929, even before the crisis seriously damaged the core economies. Commonly, these events are seen as being driven by external real shocks associated with the World Depression, despite the puzzle of the timing. We argue for an alternative, or complementary, explanation of the crisis that focuses on the inside-outside money relationship in a system of fractional-reserve banking and gold-standard rules. This internal explanation for the crisis involves no timing puzzle. The tension between internal and external convertibility can be felt when banks fall into bad times, and an internal drain can feed an external drain. Such was the case after financial fragility appeared in the 1914-27 suspension. Resumption in 1928 was probably unsustainable due to the problems of the financial system, and a dynamic model illustrates the point well. The resolution of the crisis required lender-of-last-resort actions by the state, discharged at first by the state bank issuing rediscounts to private banks. When the state bank became insolvent, the currency board started bailing out the system using high-powered money. Thus came about the demise of the currency board and the creation of a central bank in 1935, an institution that had no pretense of a nominal- anchor commitment device and no ceiling on lender-of-last-resort actions-innovations with painful long-run consequences for inflation performance and financial-sector health. As one of its first substantive actions, the central bank engineered a bailout of the banking system at a massive social cost. The parallels with recent developing-country crises are remarkable, and the implications for the institutional design of monetary and banking systems are considered.
Handle: RePEc:nbr:nberwo:7386
Template-Type: ReDIF-Paper 1.0
Title: Redistribution Through Public Employment: The Case of Italy
Author-Name: Alberto Alesina
Author-Person: pal207
Author-Name: Stephan Danninger
Author-Person: pda278
Author-Name: Massimo Rostagno
Author-Person: pro107
Note: PE
Number: 7387
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7387
File-URL: http://www.nber.org/papers/w7387.pdf
File-Format: application/pdf
Publication-Status: published as Albert Alesina & Stephan Danninger & Massimo Rostagno, 2001. "Redistribution Through Public Employment: The Case of Italy," IMF Staff Papers, Palgrave Macmillan Journals, vol. 48(3), pages 2.
Abstract: This paper examines the regional distribution of public employment in Italy. It documents two sets of facts. This first is the use of public employment as a subsidy from the North to the less wealthy South. We calculate that about half of the wage bill in the South of Italy can be identified as a subsidy. Both the size of public employment and the level of wages are used as a redistributive device. The second set of facts concerns the effects of a subsidized public employment on individuals' attitudes toward job search, education, 'risk taking' activities etc. Public employment discourages the development of market activities in the South.
Handle: RePEc:nbr:nberwo:7387
Template-Type: ReDIF-Paper 1.0
Title: On the Design of Hierarchies: Coordination Versus Specialization
Classification-JEL: D2; L2
Author-Name: Oliver Hart
Author-Person: pha222
Author-Name: John Moore
Author-Person: pmo265
Note: CF
Number: 7388
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7388
File-URL: http://www.nber.org/papers/w7388.pdf
File-Format: application/pdf
Publication-Status: published as Oliver Hart & John Moore, 2005. "On the Design of Hierarchies: Coordination versus Specialization," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 675-702, August.
Abstract: We develop a model of hierarchies based on the allocation of authority. A firm's owners have ultimate authority over a firm's decisions, but they have limited time or capacity to exercise this authority. Hence owners must delegate authority to subordinates. However, these subordinates also have limited time or capacity and so further delegation must occur. We analyze the optimal chain of command given that different agents have different tasks: some agents are engaged in coordination and others in specialization. Our theory throws light on the nature of hierarchy, the optimal degree of decentralization, and the boundaries of the firm.
Handle: RePEc:nbr:nberwo:7388
Template-Type: ReDIF-Paper 1.0
Title: Uncertainty and the Disappearance of International Credit
Classification-JEL: F2; F3
Author-Name: Joshua Aizenman
Author-Person: pai8
Author-Name: Nancy P. Marion
Author-Person: pma1464
Note: IFM
Number: 7389
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7389
File-URL: http://www.nber.org/papers/w7389.pdf
File-Format: application/pdf
Publication-Status: published as Proceedings, Federal Reserve Bank of San Francisco, 1999 Pacific Basin Conference, September 23-24, 1999
Publication-Status: published as as chapter 5 in "Financial Crises in Emerging Markets," edited by Reuven Glick, Ramon Moreno, and Mark M. Spiegel, (Cambridge: Cambridge University Press, 2001): p. 167-190
Abstract: We show that increased uncertainty about the size of an emerging market's external debt has a nonlinear and potentially large adverse effect on the supply of international credit offered to them. We also show that if international creditors are first- order risk averse, attaching greater weight to utility derived from bad outcomes than from good ones, a moderate increase in uncertainty about debt overhang or about other relevant factors affecting repayment prospects-- can cause the supply of credit to dry up completely. We therefore offer one possible explanation for why emerging markets may find themselves suddenly cut off from international capital markets.
Handle: RePEc:nbr:nberwo:7389
Template-Type: ReDIF-Paper 1.0
Title: The Technology of Birth: Is it Worth it?
Classification-JEL: I1
Author-Name: David M. Cutler
Author-Person: pcu64
Author-Name: Ellen Meara
Note: EH
Number: 7390
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7390
File-URL: http://www.nber.org/papers/w7390.pdf
File-Format: application/pdf
Publication-Status: published as Cutler, David M. and Ellen Meara. "The Technology Of Birth: Is It Worth It?," Forum for Health Economics and Policy, 2000, v3, Article 3.
Publication-Status: published as The Technology of Birth: Is It Worth It?, David M. Cutler, Ellen Meara. in Frontiers in Health Policy Research, Volume 3, Garber. 2000
Abstract: We evaluate the costs and benefits of increased medical spending for low birth weight infants. Lifetime spending on low birth weight babies increased by roughly $40,000 per birth between 1950 and 1990. The health improvements resulting from this have been substantial. Infant mortality rates fell by 72 percent over this time period, largely due to improved care for premature births. Considering both length and quality of life, we estimate the rate of return for care of low birth weight infants at over 500 percent. Although prenatal care and influenza shots are more cost effective than neonatal care, this is significantly more cost effective than other recent innovations such as coronary artery bypass surgery, treatment of severe hypertension, or routine pap smears for women aged 20-74. We conclude that the answer to the question posed in this paper is a resounding 'Yes'.
Handle: RePEc:nbr:nberwo:7390
Template-Type: ReDIF-Paper 1.0
Title: Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated Product Markets
Classification-JEL: L13; L82
Author-Name: Joel Waldfogel
Author-Person: pwa46
Note: IO LE
Number: 7391
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7391
File-URL: http://www.nber.org/papers/w7391.pdf
File-Format: application/pdf
Publication-Status: published as Waldfogel, Joel. "Preference Externalities: An Empirical Study Of Who Benefits Whom In Differentiated-Product Markets," Rand Journal of Economics, 2003, v34(3,Autumn), 557-568.
Abstract: Theory predicts that in markets with increasing returns, the number of differentiated products and resulting consumer satisfaction grow in market size. We document this phenomenon across 246 US radio markets. By a mechanism that we term 'preference externalities', an increase in the size of the market brings forth additional products valued by others with similar tastes. But who benefits whom? We examine the patterns of and mechanisms for preference externalities between black and white and between Hispanic and non-Hispanic radio listeners, and among listeners of different age groups. The patterns are striking: while preference externalities are large and positive within groups, they are small and possibly negative across groups. For example, while black-targeted station entry and the black listening share increase in black population, they are unaffected (or possibly reduced) by the size of the white population. Consequently, small groups receive less variety from the market. Forces that increase the size of the market, such as emerging satellite and Internet technologies, may increase the satisfaction of individuals whose preferences do not match their fellow local residents'.
Handle: RePEc:nbr:nberwo:7391
Template-Type: ReDIF-Paper 1.0
Title: Taxation and Household Portfolio Composition: U.S. Evidence from the 1980s and 1990s
Classification-JEL: H24; G11
Author-Name: James M. Poterba
Author-Person: ppo19
Author-Name: Andrew Samwick
Author-Person: psa395
Note: AG AP PE
Number: 7392
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7392
File-URL: http://www.nber.org/papers/w7392.pdf
File-Format: application/pdf
Publication-Status: published as Poterba, James M. and Andrew A. Samwick. "Taxation And Household Portfolio Composition: US Evidence From The 1980s And 1990s," Journal of Public Economics, 2003, v87(1,Jan), 5-38.
Abstract: This paper explores the relationship between household marginal income tax rates, the set of assets that households own, and the portfolio shares accounted for by each of these assets. It analyzes data from the 1983, 1989, 1992, and 1995 Surveys of Consumer Finances and develops a new algorithm for imputing federal marginal tax rates to households in these surveys. The empirical findings suggest that a household's marginal tax rate has an important effect its asset allocation decisions. The probability that a household owns tax-advantaged assets is strongly related to its tax rate on ordinary income. In addition, the amount of investment through tax-deferred accounts such as 401(k) plans and IRAs is an increasing function of the household's marginal tax rate. Holdings of corporate stock, which is taxed less heavily than interest bearing assets, and of tax-exempt bonds are also increasing in the household's marginal tax rate. Holdings of heavily taxed assets, such as corporate bonds and interest-bearing accounts, decline as a share of wealth as a household's marginal tax rate increases.
Handle: RePEc:nbr:nberwo:7392
Template-Type: ReDIF-Paper 1.0
Title: Theoretical Issues Pertaining to Monetary Unions
Classification-JEL: F33; E63
Author-Name: Bennett T. McCallum
Note: EFG IFM ME
Number: 7393
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7393
File-URL: http://www.nber.org/papers/w7393.pdf
File-Format: application/pdf
Publication-Status: published as Capie, F.H. and G.E. Wood. Monetary Unions: Theory, History, and Public Choice. London: Routledge, 2003.
Abstract: The optimal currency area (OCA) concept is central to the economic analysis of monetary unions, as it clearly identifies the relevant optimizing tradeoff: extension of the area over which a single currency is used enhances allocative efficiency but reduces the possibility of tailoring monetary policy to the needs of different areas. Empirical work has verified the importance of various features of economies that make them strong or weak candidates for a common currency arrangement, but existing studies do not permit actual quantification of costs and benefits. Thus the OCA concept remains less than fully operational. A second relevant body of theory is that pertaining to currency crises. Formal models clarify various points concerning speculative attacks on fixed exchange rates, and show how abrupt reserve losses and depreciations can occur rationally at times when no major shocks are hitting the system. These models support the notion that a fixed (but adjustable) exchange- rate regime is not a viable option for most nations, given high mobility of financial capital. Also discussed is the recently- developed fiscal theory of price level determination, which if valid would have major implications for monetary-fiscal arrangements in currency unions. This theory does not contend that fiscal behavior drives an accommodative monetary authority, but rather that the price level roughly mimics the pattern of the government bond stock rather than base money when their paths differ drastically. An example is exposited in which there are two rational expectations solutions for an economy with a constant money supply: a traditional solution in which the price level is also constant and a fiscalist solution in which the price level and bond stock both explode as time passes. These solutions represent competing hypotheses about the behavior of actual economies; the paper suggests that the former is more likely to prevail in actuality.
Handle: RePEc:nbr:nberwo:7393
Template-Type: ReDIF-Paper 1.0
Title: Latin America and Foreign Capital in the Twentieth Century: Economics, Politics, and Institutional Change
Classification-JEL: E60; F41
Author-Name: Alan M. Taylor
Author-Person: pta46
Note: DAE IFM ITI
Number: 7394
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7394
File-URL: http://www.nber.org/papers/w7394.pdf
File-Format: application/pdf
Publication-Status: published as Haber, Stephen H. (ed.) Institutions and Latin American Economic Growth. Stanford, CA: Hoover Institution Press, 2000.
Abstract: Latin America began the twentieth century as a relatively poor region on the periphery of the world economy. One cause of a low level of income per person was capital scarcity. Long run growth via capital deepening requires either the mobilization of domestic capital through savings, or large inflows of foreign capital. Latin America's capital inflows were large by global standards at the century's turn, and even up to the 1930s. But after the 1930s, Latin America was not so favored by foreign capital as compared with other peripheral regions for example, the Asian economies. The Great Depression is conventionally depicted as a turning point in Latin America for commercial policy and protectionism, thus marking the onset of import substitution and a long-run increase in barriers in international goods markets. However, this paper argues that policy responses in the 1930s, and subsequent decades of relative economic retardation, can be better understood as the cause and effect of the creation of long-run barriers in international capital markets. To support this notion, I discuss the quantitative extent of these barriers and their effects on economic growth. As for causality, I argue that the political economy of institutional changes in the 1930s in the periphery might be understood in similar terms to those economic historians have used to discuss the macroeconomic crisis in the core. Such a political-economy model might thus have universal (rather than core-specific) use. It might predict the 'reactive' and 'passive' responses by periphery countries to external shocks, and the persistence of such shocks in the postwar period. In conclusion, I touch on the important implications of these ideas for the current situation in Latin America, where recent policy reforms aim to undo the last sixty years of isolation and reintegrate Latin America into the global economy.
Handle: RePEc:nbr:nberwo:7394
Template-Type: ReDIF-Paper 1.0
Title: Analysis of the Monetary Transmission Mechanism: Methodological Issues
Classification-JEL: E30; E50
Author-Name: Bennett T. McCallum
Note: ME
Number: 7395
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7395
File-URL: http://www.nber.org/papers/w7395.pdf
File-Format: application/pdf
Publication-Status: published as With Marvin S. Goodfriend, published as "Theoretical Analysis of the Demandfor Money", FRBR, Vol. 74, no. 1 (1988): 16-24.
Abstract: This paper argues that, in studying the monetary policy transmission process, more emphasis should be given to the systematic portion of policy behavior and correspondingly less to random shocks basically because shocks account for a very small fraction of policy-instrument variability. Analysis of the effects of the systematic part of policy requires structural modelling, rather than VAR procedures, because the latter do not give rise to behavioral relationships that can plausibly be regarded as policy-invariant. By use of an illustrative open- economy structural model based on optimizing analysis, and considering variants, the paper characterizes the effects of policy parameter settings by means of impulse response functions and root-mean-square statistics for target errors. Different models give different answers to questions about the effects of systematic policy, so procedures for scrutinizing model specification are essential. In this regard, it is argued that vector autocorrelation functions, augmented by variance statistics for each of a model's variables, seem more promising than impulse response functions because the latter require shock identification, which is inherently a difficult process.
Handle: RePEc:nbr:nberwo:7395
Template-Type: ReDIF-Paper 1.0
Title: The Diversification Discount: Cash Flows vs. Returns
Classification-JEL: G12; G34
Author-Name: Owen Lamont
Author-Name: Christopher Polk
Author-Person: ppo238
Note: AP CF ME
Number: 7396
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7396
File-URL: http://www.nber.org/papers/w7396.pdf
File-Format: application/pdf
Publication-Status: published as Lamont, Owen A. and Christopher Polk. "The Diversification Discount: Cash Flows Versus Returns," Journal of Finance, 2001, v56(5,Oct), 1693-1721.
Abstract: Diversified firms have different values than comparable portfolios of single-segment firms. These value differences must be due to differences in either future cash flows or future returns. Expected security returns on diversified firms vary systematically with relative value. Discount firms have significantly higher subsequent returns than premium firms. Slightly more than half of the cross-sectional variation in excess values is due to variation in expected future cash flows, with the remainder due to variation in expected future returns and to covariation between cash flow and returns.
Handle: RePEc:nbr:nberwo:7396
Template-Type: ReDIF-Paper 1.0
Title: Teenage Childbearing and Its Life Cycle Consequences: Exploiting a Natural Experiment
Author-Name: V. Joseph Hotz
Author-Person: pho4
Author-Name: Seth G. Sanders
Author-Name: Susan Williams McElroy
Note: CH
Number: 7397
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7397
File-URL: http://www.nber.org/papers/w7397.pdf
File-Format: application/pdf
Publication-Status: published as McElroy, S. and S. Sanders. “Teenage Childbearing and Its Life Cycle Consequences: Exploiting a Very Natural Experiment." Journal of Human Resources 40, 3 (Summer 2005): 683-715.
Abstract: In this paper, we exploit a 'natural experiment' associated with human reproduction to identify the effect of teen childbearing on subsequent educational attainment, family structure, labor market outcomes and financial self-sufficiency. In particular, we exploit the fact that a substantial fraction of women who become pregnant experience a miscarriage (spontaneous abortion) and thus do not have a birth. If miscarriages were purely random and if miscarriages were the only way, other than by live births, that a pregnancy ended, then women, who had a miscarriage as a teen, would constitute an ideal control group with which to contrast teenage mothers. Exploiting this natural experiment, we devise an Instrumental Variables (IV) estimators for the consequences of teen mothers not delaying their childbearing, using data from the National Longitudinal Survey of Youth, 1979 (NLSY79). Our major finding is that many of the negative consequences of not delaying childbearing until adulthood are much smaller than has been estimated in previous studies. While we do find adverse consequences of teenage childbearing immediately following a teen mother's first birth, these negative consequences appear short- lived. By the time a teen mother reachers her late twenties, she appears to have only slightly more children, is only slightly more likely to be single mother, and has no lower levels of educational attainment than if she had delayed her childbearing to adulthood. In fact, by this age teen mothers appear to be better off in some aspects of their lives. Teenage childbearing appears to raise levels of labor supply, accumulated work experience and labor market earnings and appears to reduce the chances of living in poverty and participating in the associated social welfare programs. These estimated effects imply that the cost of teenage childbearing to U.S. taxpayers is negligible. In particular, our estimates imply that the widely held view that teenage childbearing imposes a substantial cost on government is an artifact of the failure to appropriately account for pre- existing socioeconomic differences between teen mothers and other women when estimating the causal effects of early childbearing. While teen mothers are very likely to live in poverty and experience other forms of adversity, our results imply that little of this would be changed just by getting teen mothers to delay their childbearing into adulthood.
Handle: RePEc:nbr:nberwo:7397
Template-Type: ReDIF-Paper 1.0
Title: Capital Controls and Financial Crises
Classification-JEL: F21; F23
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: ITI
Number: 7398
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7398
File-URL: http://www.nber.org/papers/w7398.pdf
File-Format: application/pdf
Abstract: The purpose of this paper is to explain the reluctance of developing countries to open up their capital market to foreigners, and the conditions inducing an emerging market economy to switch its policies. We consider an economy characterized initially by a one-sided openness to the capital market domestic agents can borrow internationally, but foreign agents cannot hold domestic equity. We identify conditions under which the emerging market's capitalists would oppose financial reform. This would be the case if 'green field' investment by multinationals would bid up real wages, reducing thereby the rents of domestic capitalists. A financial crisis that raises the domestic interest rate and causes a real exchange rate depreciation may induce the emerging market's capitalists to support opening up the economy to FDI. This attitude switch is more likely to occur the greater the debt overhang, the lower the borrowing constraint, and the weaker the market power of foreign entrepreneurs. Even in these circumstances, the emerging market's capitalists would prefer a partial reform to a comprehensive one -- they would prefer to maintain the restrictions on 'green field' FDI.
Handle: RePEc:nbr:nberwo:7398
Template-Type: ReDIF-Paper 1.0
Title: Does School Quality Matter? Returns to Education and the Characteristics of Schools in South Africa
Classification-JEL: I2; O1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: Motohiro Yogo
Author-Person: pyo20
Note: CH PE
Number: 7399
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7399
File-URL: http://www.nber.org/papers/w7399.pdf
File-Format: application/pdf
Abstract: This paper contributes to what is known about the impact of school quality, by documenting its effect on the incomes of Black South Africans, using data from the 1996 South African census and two national surveys of school quality. South Africa provides an interesting laboratory for studying the impact of school quality on labor market outcomes. Under the Apartheid system, Blacks faced extremely limited residential and school choices, which limits the extent to which results are attributable to the endogeneity of school and residential choice. In addition, Black schools' funding and staffing decisions were made rather arbitrarily by a White government that was at best indifferent to the needs of Black schools. Large differences in pupil/teacher ratios developed between Black schools, differences much larger than those observed in the United States. Using a two-state estimation procedure similar to that employed by Card and Krueger (1992) and by Heckman et al. (1996), we find that the quality of schools in a respondent's magisterial district of origin has a large and significant effect on the rate of return to schooling for Black men. The South African results are notable, moreover, because they are so similar to those estimated by Card and Krueger (1992) for the United States.
Handle: RePEc:nbr:nberwo:7399
Template-Type: ReDIF-Paper 1.0
Title: Excessive FDI Flows Under Asymmetric Information
Classification-JEL: F1; F2
Author-Name: Assaf Razin
Author-Person: pra388
Author-Name: Efraim Sadka
Author-Person: psa492
Author-Name: Chi-Wa Yuen
Note: IFM
Number: 7400
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7400
File-URL: http://www.nber.org/papers/w7400.pdf
File-Format: application/pdf
Publication-Status: published as Assaf Razin & Efraim Sadka & Chi-Wa Yuen, 1999. "Excessive FDI flows under asymmetric information," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
Abstract: In Razin, Sadka and Yuen (1998, 1999a), we explored the policy implications of the home-bias in international portfolio investment as a result of asymmetric information problems in which domestic savers, being 'close' to the domestic market, have an informational advantage over foreign portfolio investors, who are 'far away' from the domestic market. However, FDI is different from foreign portfolio investment, concerning relevant information about domestic firms. Through the stationing of managers from the headquarters of multinational firms in the foreign direct establishments in the destination countries under their control, FDIors can monitor closely the operation of such establishments, thus circumventing these informational problems. Futhermore, FDI investors not only have an informational advantage over foreign portfolio investors, but they are also more informed than domestic savers. Because FDI entails direct control on the acquired domestic firm, which the typical domestic savers with ownership position in the firm do not have. Being 'insiders' the FDIers can 'overcharge' the uninformed domestic savers, the 'outsiders', when multinational subsidiaries shares are traded in the domestic stock market. Anticipating future domestic stock market trade opportunities, in advance, foreign investment becomes excessive. However, unlike the home-bias informational problem, which leads to inadequate foreign portfolio capital inflows, but may be correctable by Pigouvian taxes such as tax on non-resident income, tax on interest income and corporate tax (see Razin, Sadka, and Yuen (1998, 1999a)), excessive FDI flows under the insider-outsider informational problem call for a non-tax corrective policy. First, because they are governed by unobservable variables (such as the productivity level which triggers default, according to the firm contract with its lender). Second, because there exist self- fulfilling expectations equilibria which cannot be efficiently corrected by taxation. The corrective policy tool that is left available is then simply quantity restrictions on FDI.
Handle: RePEc:nbr:nberwo:7400
Template-Type: ReDIF-Paper 1.0
Title: How Hungry is the Selfish Gene?
Classification-JEL: I3; O1
Author-Name: Anne Case
Author-Person: pca108
Author-Name: I-Fen Lin
Author-Name: Sara McLanahan
Note: CH
Number: 7401
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7401
File-URL: http://www.nber.org/papers/w7401.pdf
File-Format: application/pdf
Publication-Status: published as Case, Anne, I-Fen Lin and Sara McLanahan. "How Hungry Is The Selfish Gene?," Economic Journal, 2000, v110(466,Oct), 781-804.
Abstract: We examine resource allocation in step-households, in the United States and South Africa, to test whether child investments vary according to economic and genetic bonds between parent and child. We used 18 years of data from the Panel Study of Income Dynamics, and compare food expenditure by family type, holding constant household size, age composition and income. We find that in those households in which a child is raised by an adoptive, step or foster mother, less is spent on food. We cannot reject the hypothesis that the effect of replacing a biological child with a non- biological child is the same, whether the non-biological child is an adoptive, step or foster child of the mother. In South Africa, where we can disaggregate food consumption more finely, we find that when a child's biological mother is the head or spouse of the head of household, the household spends significantly more on food, in particular on milk and fruit and vegetables, and significantly less on tobacco and alcohol. The genetic tie to the child, and not any anticipated future economic tie, appears to be the tie that binds.
Handle: RePEc:nbr:nberwo:7401
Template-Type: ReDIF-Paper 1.0
Title: Tax Competition and Trade Protection
Classification-JEL: F13; F21
Author-Name: Eckhard Janeba
Author-Person: pja312
Author-Name: John D. Wilson
Note: ITI PE
Number: 7402
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7402
File-URL: http://www.nber.org/papers/w7402.pdf
File-Format: application/pdf
Publication-Status: published as Janeba, Eckhard and Wolfgang Peters, "Tax Evasion, Tax Competition and the Gains from Nondiscrimination: The Case of Interest Taxation in Europe," The Economic Journal, Vol. 109, no. 452 (January 1999): 93-101
Publication-Status: published as Eckhard Janeba & John Douglas Wilson, 1999. "Tax Competition and Trade Protection," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(3/4), pages 459-, July.
Abstract: This paper reconsiders the question of whether tax competition for mobile capital leads to tax rates on capital that are too low or too high from the combined viewpoint of the competing regions (or countries in an economic union). In contrast to standard models of tax competition, both commodity trade and capital mobility is allowed to occur between the competing regions and the rest of the world. A key result of the analysis is that whether the capital taxes are too low or high depends on the degree of external trade protection. When the country's central government is free to set the tariff, tax competition leads to inefficiently low tax rates. But in the absence of a tariff, tax rates can be too high. In particular, regions may choose to subsidize capital in equilibrium as a means of inducing favorable terms-of-trade effects, but the subsidy (i.e., a negative tax) will then be too low because an increase in a single region's subsidy benefits other regions by reducing their relative quantities of subsidized capital. These results are discussed in the context of the European Union's Single Market, where non-EU firms have responded to the 'Fortress of Europe' by increasing foreign direct investment.
Handle: RePEc:nbr:nberwo:7402
Template-Type: ReDIF-Paper 1.0
Title: Investor Protection and Corporate Valuation
Classification-JEL: G32; G31
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopez-de-Silanes
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Robert W. Vishny
Author-Person: pvi218
Note: AP CF
Number: 7403
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7403
File-URL: http://www.nber.org/papers/w7403.pdf
File-Format: application/pdf
Publication-Status: published as Rafael La porta & Florencio Lopez-De-Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, 06.
Abstract: We present a model of the effects of legal protection of minority shareholders and of cash flow ownership by a controlling shareholder on the valuation of firms. We then test this model using a sample of 371 large firms from 27 wealthy economies. Consistent with the model, we find evidence of higher valuation of firms in countries with better protection of minority shareholders, and weaker evidence of the benefits of higher cash flow ownership by controlling shareholders for corporate valuation.
Handle: RePEc:nbr:nberwo:7403
Template-Type: ReDIF-Paper 1.0
Title: On the Spread and Impact of Antidumping
Classification-JEL: F13
Author-Name: Thomas J. Prusa
Author-Person: ppr249
Note: ITI
Number: 7404
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7404
File-URL: http://www.nber.org/papers/w7404.pdf
File-Format: application/pdf
Publication-Status: published as Thomas J. Prusa, 2001. "On the spread and impact of anti-dumping," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 591-611, August.
Abstract: This paper documents two key costs of AD protection. First, once AD has been adopted countries often have a difficult time restraining its use. In recent years 'new' users have accounted for half of the overall world total. Many of the heaviest AD users are countries who did not even have an AD statute a decade ago. Second, I will show that on average AD duties cause the value of imports to fall by 30-50%. I find that trade falls by almost as much for settled cases as those that result in duties. Interestingly, I also find that even for those cases that are rejected imports fall. The spread and impact of AD protection most surely implies that AD will continue to be a key negotiating item in the next WTO round.
Handle: RePEc:nbr:nberwo:7404
Template-Type: ReDIF-Paper 1.0
Title: Economic Conditions, Deterrence and Juvenile Crime: Evidence from Micro Data
Classification-JEL: K42
Author-Name: H. Naci Mocan
Author-Person: pmo270
Author-Name: Daniel I. Rees
Author-Person: pre268
Note: CH
Number: 7405
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7405
File-URL: http://www.nber.org/papers/w7405.pdf
File-Format: application/pdf
Publication-Status: published as H. Naci Mocan & Daniel I. Rees, 2005. "Economic Conditions, Deterrence and Juvenile Crime: Evidence from Micro Data," American Law and Economics Review, Oxford University Press, vol. 7(2), pages 319-349.
Abstract: This is the first paper to test the economic model of crime for juveniles using micro data. It uses a nationally representative sample of 16,478 high school children surveyed in 1995. The sample includes not only detailed information on offenses, but also data on personal, family and neighborhood characteristics as well as deterrence measures. We analyze the determinants of selling drugs, committing assault, robbery, burglary and theft, separately for males and females. We find that an increase in violent crime arrests reduces the probability of selling drugs and assaulting someone for males, and reduces the probability of selling drugs and stealing for females. An increase in local unemployment increases the propensity to commit crimes, as does local poverty. Similarly, family poverty increases the probability to commit robbery, burglary and theft for males, and assault and burglary for females. Local characteristics are more important for females than males. The results also indicate that family supervision has an impact on delinquent behavior. These results show that juveniles do respond to incentives and sanctions as predicted by economic theory. Employment opportunities, increased family income and more strict deterrence are effective tools to reduce juvenile crime.
Handle: RePEc:nbr:nberwo:7405
Template-Type: ReDIF-Paper 1.0
Title: Asset Pricing with Heterogeneous Consumers and Limited Participation: Empirical Evidence
Classification-JEL: G12; D91
Author-Name: Alon Brav
Author-Name: George M. Constantinides
Author-Person: pco144
Author-Name: Christopher C. Geczy
Author-Person: pge340
Note: AP
Number: 7406
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7406
File-URL: http://www.nber.org/papers/w7406.pdf
File-Format: application/pdf
Publication-Status: published as Alon Brav & George M. Constantinides & Christopher C. Geczy, 2002. "Asset Pricing with Heterogeneous Consumers and Limited Participation: Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 793-824, August.
Abstract: The Euler equations of consumption are tested on the household consumption of non-durables and services, reconstructed from the CEX database. The estimated relative risk aversion coefficient of the representative household decreases, and the estimated unexplained mean equity premium decreases, as infra marginal asset holders are eliminated from the sample. These results provide evidence of limited capital market participation. The estimated unexplained mean equity premium decreases when the assumption of complete consumption insurance is relaxed. The estimated correlation between the equity premium and the cross- sectional variance of the households' consumption growth is negative, as required, if the relaxation of market completeness is to contribute towards the explanation of the premium. The overall evidence from asset prices in favor of relaxing the assumption of complete consumption insurance is weak. An extensive Monte Carlo investigation highlights the relationship between the economic implications of limited participation and the resulting statistical properties of commonly used test statistics. The simulation results provide direct evidence relating observation error in consumption and the resulting small-sample of the test statistics.
Handle: RePEc:nbr:nberwo:7406
Template-Type: ReDIF-Paper 1.0
Title: Quantifying Artistic Success: Ranking French Painters - and Paintings - from Impressionism to Cubism
Author-Name: David W. Galenson
Note: LS
Number: 7407
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7407
File-URL: http://www.nber.org/papers/w7407.pdf
File-Format: application/pdf
Publication-Status: published as Galenson, David W. and Bruce A. Weinberg. "Creating Modern Art: The Changing Careers Of Painters In France From Impressionism To Cubism," American Economic Review, 2001, v91(4,Sep), 1063-1071.
Abstract: For 35 leading painters who lived in France during the first century of modern art, this paper uses textbook illustrations as the basis for measuring the importance of both painters and individual paintings. The rankings pose an interesting puzzle: why do some of the greatest artists not produce famous paintings, and why do some relatively minor artists produce some of the most famous individual paintings? The answer may lie in an important difference in approach between experimental and conceptual painters. Experimental artists work incrementally, their innovations appear gradually, and they generally do their best work late in their careers; conceptual artists innovate more suddenly, produce individual breakthrough works, and usually do their best work early in their careers. This paper demonstrates that artistic success can usefully be quantified, and that doing so increases our understanding of the working methods of modern painters.
Handle: RePEc:nbr:nberwo:7407
Template-Type: ReDIF-Paper 1.0
Title: Market Structure and the Persistence of Sectoral Real Exchange Rates
Classification-JEL: F31; F40
Author-Name: Yin-Wong Cheung
Author-Person: pch261
Author-Name: Menzie D. Chinn
Author-Person: pch129
Author-Name: Eiji Fujii
Author-Person: pfu65
Note: IFM
Number: 7408
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7408
File-URL: http://www.nber.org/papers/w7408.pdf
File-Format: application/pdf
Publication-Status: published as Cheung, Yin-Wong and Kon S. Lai, "Mean Reversion in Real Exchange Rates," Economics Letters, Vol. 46, no. 3 (November 1994): 251-256
Publication-Status: published as Cheung, Yin-Wong and Kon S. Lai, "Economic Growth and Stationarity of Real Exchange Rates: Evidence from Some Fast-Growing Asian Countries," Pacific-Basin Finance Journal, Vol. 6, no. 1/2 (May 1998): 61-76
Publication-Status: published as Cheung, Yin-Wong and Kon S. Lai, "On Cross-country Differences in the Persistence of Real Exchange Rates," Journal of International Economics, Vol. 50, no. 2, (April 2000): 375-397
Publication-Status: published as International Journal of Finance & Economics, Vol. 6, no. 2 (April 2002): 95-114
Abstract: We examine the relationship between market structure and the persistence of U.S. dollar-based sectoral real exchange rates for fourteen OECD countries. Our empirical results based on disaggregated data suggest that differences in market structure significantly determine the rates at which deviations from sectoral purchasing power parity decay. Specifically, industries with a larger price-cost margin are found to exhibit slower parity reversion of their sectoral real exchange rates. Further, as the degree of intra-industry trade activity increases, sectoral real exchange rate persistence becomes more pronounced. These findings imply that an imperfectly competitive market structure contributes to the well-documented persistence in real exchange rates.
Handle: RePEc:nbr:nberwo:7408
Template-Type: ReDIF-Paper 1.0
Title: Optimal Portfolio Choice for Long-Horizon Investors with Nontradable Labor Income
Classification-JEL: G11
Author-Name: Luis M. Viceira
Author-Person: pvi31
Note: AP
Number: 7409
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7409
File-URL: http://www.nber.org/papers/w7409.pdf
File-Format: application/pdf
Publication-Status: published as Viceira, Luis M. "Optimal Portfolio Choice For Long-Horizon Investors With Nontradable Labor Income," Journal of Finance, 2001, v56(2,Apr), 433-470.
Abstract: This paper analyzes optimal portfolio decisions of long-horizon investors with undiversifiable labor income risk and exogenous expected retirement and lifetime horizons. It shows that the fraction of savings optimally invested in stocks is unambiguously larger for employed investors than for retired investors when labor income risk is uncorrelated with stock return risk. This result provides support for the popular recommendation by investment advisors that employed investors should invest in stocks a larger proportion of their savings than retired investors. This paper also examines the effect of increasing labor income risk on savings and portfolio choice and finds that, when labor income risk is independent of stock market risk, a mean-preserving increases in the variance of labor income growth increases the investor's willingness to save and reduce her willingness to hold the risky asset in her portfolio. A sensible calibration of the model shows that savings are relatively more responsive to changes in labor income risk than portfolio demands. Positive correlation between labor income innovations and unexpected asset returns also reduces the investor's willingness to hold the risky asset, because of its poor properties as a hedge against unexpected declines in labor income. This paper also provides intuition on the peculiar form of optimal portfolio choice of very young investors predicted by the standard life-cycle model.
Handle: RePEc:nbr:nberwo:7409
Template-Type: ReDIF-Paper 1.0
Title: Do Scientists Pay to Be Scientists?
Classification-JEL: J32; J44
Author-Name: Scott Stern
Note: LS PR
Number: 7410
Creation-Date: 1999-10
Order-URL: http://www.nber.org/papers/w7410
File-URL: http://www.nber.org/papers/w7410.pdf
File-Format: application/pdf
Publication-Status: published as Stern, Scott. "Do Scientists Pay to Be Scientists?" Management Science 50, 6 (June 2004): 835-853.
Abstract: This paper evaluates the relationship between wages and the scientific orientation of R&D organizations. Science-oriented firms allow researchers to publish in the scientific literature and pursue individual research agendas. Adoption of a Science- oriented research approach (i.e., Science) is driven by two distinct forces: a (a Preference effect) and R&D productivity gains arising from earlier access to discoveries (a Productivity effect). The equilibrium relationship between wages and Science reflects the relative salience of these effects: the Preference effect contributes to a negative compensating differential while the Productivity effect raises the possibility of rent-sharing between firms and researchers. In addition, because the value of participating in Science is increasing in the prestige of researchers, Science tends to be adopted by those firms who employ higher-quality researchers. This structural relationship between the adoption of Science and unobserved heterogeneity in researcher ability leads to bias in the context of hedonic wage and productivity regressions which do not account for such effects. This paper exploits a novel field-based empirical approach to substantially overcome this bias. Specifically, prior to accepting a specific job offer, many scientists receive multiple job offers, making it possible to calculate the wage- Science curve for individual scientists, controlling for ability level. The methodology is applied to a sample of postdoctoral biologists. The results suggest a strong negative relationship between wages and Science. For example, firms who allow their employees to publish extract, on average, a 25% wage discount. The results are robust to restricting the sample to non-academic job offers, but the findings depend critically on the inclusion of the researcher fixed effects. The paper's conclusion, then, is that, conditional on scientific ability, scientists do indeed pay to be scientists.
Handle: RePEc:nbr:nberwo:7410
Template-Type: ReDIF-Paper 1.0
Title: The Heckscher-Ohlin Model Between 1400 and 2000: When It Explained Factor Price Convergence, When It Did Not, and Why
Classification-JEL: F14; N7
Author-Name: Kevin H. O'Rourke
Author-Person: por7
Author-Name: Jeffrey G. Williamson
Author-Person: pwi169
Note: DAE ITI
Number: 7411
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7411
File-URL: http://www.nber.org/papers/w7411.pdf
File-Format: application/pdf
Publication-Status: published as Findlay, R., L. Jonung and M. Lundahl (eds.) Bertil Ohlin: A Centennial Celebration 1899-1999. MIT Press, 2002.
Abstract: There are two contrasting views of pre-19th century trade and globalization. First, there are the world history scholars like Andre Gunder Frank who attach globalization 'big bang' significance to the dates 1492 (Christopher Colombus stumbles on the Americas in search of spices) and 1498 (Vasco da Gama makes an end run around Africa and snatches monopoly rents away from the Arab and Venetian spice traders). Such scholars are on the side of Adam Smith who believed that these were the two most important events in recorded history. Second, there is the view that the world economy was fragmented and completely de- globalized before the 19th century. This paper offers a novel way to discriminate between these two competing views and we use it to show that there is no evidence that the Ages of Discovery and Commerce had the economic impact on the global economy that world historians assign to them, while there is plenty of evidence of a very big bang in the 19th century. The test involves a close look at the connections between factor prices, commodity prices and endowments world wide.
Handle: RePEc:nbr:nberwo:7411
Template-Type: ReDIF-Paper 1.0
Title: The Transition to Smoking Cessation: Evidence from Multiple Failure Duration Analysis
Classification-JEL: I18
Author-Name: John A. Tauras
Author-Person: pta136
Note: EH
Number: 7412
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7412
File-URL: http://www.nber.org/papers/w7412.pdf
File-Format: application/pdf
Abstract: While much is known about the impacts prices and tobacco control policies have on smoking participation and frequency of cigarette use, little is known about their impacts on smoking cessation. This paper addresses the dynamics of smoking cessation using longitudinal data on young adults from the Monitoring the Future Surveys. Site-specific prices and several measures of clean indoor air restrictions are added to the survey data. Both parametric and semi-parametric duration models are used to model multiple cessation attempts of young adults. The estimates indicate that increases in the price of cigarettes increase the probability of initial smoking cessation as well as subsequent cessation for those individuals who are unable to remain smoke- free after at least one prior cessation attempt. The average price elasticity of cessation is 0.343. In addition, stronger restrictions on smoking in private worksites and public places other than restaurants increase the probability of young adult smoking cessation.
Handle: RePEc:nbr:nberwo:7412
Template-Type: ReDIF-Paper 1.0
Title: How Effective are Capital Controls?
Classification-JEL: F32; F33
Author-Name: Sebastian Edwards
Author-Person: ped3
Note: IFM
Number: 7413
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7413
File-URL: http://www.nber.org/papers/w7413.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Economic Perspectives, Vol. 13, no. 4 (Fall 1999): 65-84.
Abstract: In the aftermath of the East Asian crisis a number of authors have argued that capital mobility is highly destabilizing, and that emerging countries would benefit from restricting capital flows. In this paper I investigate, from a historical perspective, the effectiveness of capital controls. I deal with Tobin taxes, controls on outflows and controls on inflows. I argue that controls on outflows have seldom worked as expected. They introduce major distortions and breed corruption. Market-based controls on inflows - similar to those implemented by Chile - have the potential for lengthening the maturity of foreign debt. They are not very effective, however, in achieving other objectives, including a higher degree of monetary policy independence.
Handle: RePEc:nbr:nberwo:7413
Template-Type: ReDIF-Paper 1.0
Title: Do Industrial Relations Affect Plant Performance?: The Case of Commercial Aircraft Manufacturing
Classification-JEL: J5; J3
Author-Name: Morris M. Kleiner
Author-Name: Jonathan S. Leonard
Author-Person: ple190
Author-Name: Adam M. Pilarski
Note: LS PR
Number: 7414
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7414
File-URL: http://www.nber.org/papers/w7414.pdf
File-Format: application/pdf
Publication-Status: published as Kleiner, Morris M., Jonathan S. Leonard and Adam M. Pilarski. "How Industrial Relations Affects Plant Performance: The Case Of Commercial Aircraft Manufacturing," International Labor Relations Review, 2002, v55(2,Jan), 195-218.
Abstract: This study analyzes the impact of major industrial relations variables on productivity within a plant that assembles large commercial aircraft. The analysis combines the deep firm- specific knowledge of management and labor typical of the best of traditional industrial relations with formal statistical tests. We use a before and after research design over an 18-year period with monthly data, as well as information from the participants in the industrial relations events. Our approach is unusual in showing that by focusing only on managerial factors or the learning curve, and omitting factors such as union leadership and related labor relations events, estimates may mis-specify impacts on firm performance. Strikes, slowdowns, and tough union leaders influenced the productivity of this plant by both large percentages and absolute dollar amounts during the period they were occurring. In contrast with much of the firm performance literature, we find small initial productivity impacts of movements from traditional adversarial management, which is the norm in this industry, to total quality management (TQM) and back again. How and why TQM is adopted may be just as important as whether it is adopted. Finally, simulations from a counterfactual case show that major industrial relations events like strikes, slowdowns, and the TQM program did not have long term productivity effects, and that the firm we studied returned to pre-event levels of production within one to four months.
Handle: RePEc:nbr:nberwo:7414
Template-Type: ReDIF-Paper 1.0
Title: Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm
Classification-JEL: J2; K4
Author-Name: Andrea Ichino
Author-Person: pic3
Author-Name: Giovanni Maggi
Author-Person: pma1315
Note: LS
Number: 7415
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7415
File-URL: http://www.nber.org/papers/w7415.pdf
File-Format: application/pdf
Publication-Status: published as Ichino, Andrea and Giovanni Maggi. "Work Environment And Individual Background: Explaining Regional Shirking Differentials In A Large Italian Firm," Quarterly Journal of Economics, 2000, v115(3,Aug), 1057-1090.
Abstract: The prevalence of shirking within a large Italian bank appears to be characterized by significant regional differentials. In particular, absenteeism and misconduct episodes are substantially more prevalent in the south. We consider a number of potential explanations for this fact: different individual backgrounds; group-interaction effects; sorting of workers across regions; differences in local attributes; different hiring policies and discrimination against southern workers. Our analysis suggests that individual backgrounds, group-interaction effects and sorting effects contribute to explain the north-south shirking differential. None of the other explanations appears to be of first-order importance.
Handle: RePEc:nbr:nberwo:7415
Template-Type: ReDIF-Paper 1.0
Title: Traders, Market Microstructure and Exchange Rate Dynamics
Classification-JEL: F31; G15
Author-Name: Yin-Wong Cheung
Author-Person: pch261
Author-Name: Menzie D. Chinn
Author-Person: pch129
Note: IFM
Number: 7416
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7416
File-URL: http://www.nber.org/papers/w7416.pdf
File-Format: application/pdf
Publication-Status: published as Cheung, Yin-Wong and Menzie David Chinn. "Currency Traders And Exchange Rate Dynamics: A Survey Of The US Market," Journal of International Money and Finance, 2001, v20(4,Aug), 439-471.
Abstract: We report findings from a survey of United States foreign exchange traders. Our results indicate that: (i) The share of customer business, versus interbank business, has remained fairly constant; (ii) The channels by which transactions take place have changed, as electronically-brokered transactions have risen from 2% to 46% of total, mostly at the expense of transactions undertaken by traditional brokers; (iii) The single most widely- cited reason for deviating from the standard market convention on the bid-ask spread is a thin/hectic market; (iv) Half or more of market respondents believe that large players dominate in the dollar-pound and dollar-Swiss franc markets; and (v) 60% of respondents believe there is low predictability of exchange rates intraday. Even at medium and long run horizons, only a third of traders believe that there is high predictability.
Handle: RePEc:nbr:nberwo:7416
Template-Type: ReDIF-Paper 1.0
Title: Macroeconomic Implications of the Beliefs and Behavior of Foreign Exchange Traders
Classification-JEL: F31; G15
Author-Name: Yin-Wong Cheung
Author-Person: pch261
Author-Name: Menzie D. Chinn
Author-Person: pch129
Note: IFM
Number: 7417
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7417
File-URL: http://www.nber.org/papers/w7417.pdf
File-Format: application/pdf
Abstract: We report findings from a survey of United States foreign exchange traders. Our results indicate that (i) technical trading best characterizes about 30% of traders, with this proportion rising from five years ago; (ii) news about macroeconomic variables is rapidly incorporated into exchange rates; (iii) the importance of individual macroeconomic variables shifts over time, although interest rates always appear to be important, and; (iv) economic fundamentals are perceived to be more important at longer horizons. The short run deviations of exchange rates from their fundamentals are attributed to excess speculation and institutional customer/hedge fund manipulation. Speculation is generally viewed positively, as enhancing market efficiency and liquidity, even though it exacerbates volatility. Central bank intervention does not appear to have a substantial effect, although there is general agreement that it increases volatility. Finally, traders do not view purchasing power parity as a useful concept, even though a significant proportion (40%) believe that it affects exchange rates at horizons of over six months.
Handle: RePEc:nbr:nberwo:7417
Template-Type: ReDIF-Paper 1.0
Title: Exchange Rates and Financial Fragility
Classification-JEL: F3; G0
Author-Name: Barry Eichengreen
Author-Person: pei2
Author-Name: Ricardo Hausmann
Author-Person: pha552
Note: IFM
Number: 7418
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7418
File-URL: http://www.nber.org/papers/w7418.pdf
File-Format: application/pdf
Publication-Status: published as Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
Abstract: In this paper we analyze three views of the relationship between the exchange rate and financial fragility: (1) the moral hazard hypothesis, according to which pegged exchange rates offer implicit insurance against exchange risk and thereby encourage reckless borrowing and lending; (2) the original sin hypothesis, which emphasizes an incompleteness in financial markets which prevents the domestic currency from being used to borrow abroad or to borrow long term even domestically; and (3) the commitment problem hypothesis, which sees financial crises as resulting from neither moral hazard nor original sin but from the weakness of the institutions that address commitment problems. We examine the evidence on these hypotheses and draw out their implications for exchange-rate policy in emerging markets.
Handle: RePEc:nbr:nberwo:7418
Template-Type: ReDIF-Paper 1.0
Title: Output-based Pay: Incentives or Sorting?
Classification-JEL: J3
Author-Name: Edward P. Lazear
Author-Person: pla64
Note: LS
Number: 7419
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7419
File-URL: http://www.nber.org/papers/w7419.pdf
File-Format: application/pdf
Abstract: Variable pay, defined as pay that is tied to some measure of a firm's output, has become more important for executives of the typical American firm. Variable pay is usually touted as a way to provide incentives to managers whose interests may not be perfectly aligned with those of owners. The incentive justification for variable pay has well-known theoretical problems and also appears to be inconsistent with much of the data. Alternative explanations are considered. One that has not received much attention, but that is consistent with may of the facts, is selection. Managers and industry specialists may have information about a firm's prospects that is unavailable to outside investors. In order to induce managers to be truthful about prospects, owners may require managers to 'put their money where their mouths are,' forcing them to extract some of their compensation in the form of variable pay. The selection or sorting explanation is consistent with the low elasticities of pay to output that are commonly observed, with the fact that the elasticity is higher in small and new firms, and with the fact that variable pay is more prevalent in industries with very technical production technologies. It does not explain why some firms give stock options even to very low-level workers.
Handle: RePEc:nbr:nberwo:7419
Template-Type: ReDIF-Paper 1.0
Title: The Future of Monetary Policy: The Central Bank as an Army With Only a Signal Corps
Classification-JEL: E52; E58
Author-Name: Benjamin M. Friedman
Note: EFG ME
Number: 7420
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7420
File-URL: http://www.nber.org/papers/w7420.pdf
File-Format: application/pdf
Publication-Status: published as Benjamin M. Friedman, 1999. "The Future of Monetary Policy: The Central Bank as an Army with Only a Signal Corps?," International Finance, vol 2(3), pages 321-338.
Abstract: The influence of monetary policy over interest rates, and via interest rates over nonfinancial economic activity, stems from the central bank's role as a monopolist over the supply of bank reserves. Several trends already visible in the financial markets of many countries today threaten to weaken or even undermine the relevance of that monopoly, and with it the efficacy of monetary policy. These developments include the erosion of the demand for bank-issued money, the proliferation of nonbank credit, and aspects of the operation of bank clearing mechanisms. What to make of these threats from a public policy perspective in particular, whether to undertake potentially aggressive regulatory measures in an effort to forestall them depends in large part on one's view of the contribution of monetary policy toward successful economic performance
Handle: RePEc:nbr:nberwo:7420
Template-Type: ReDIF-Paper 1.0
Title: Measuring Temporary Labor Outsourcing in U.S. Manufacturing
Classification-JEL: J23; J24
Author-Name: Marcello Estevao
Author-Person: pes27
Author-Name: Saul Lach
Author-Person: pla110
Note: LS PR
Number: 7421
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7421
File-URL: http://www.nber.org/papers/w7421.pdf
File-Format: application/pdf
Abstract: Several analysts claim that firms have been using more flexible work arrangements in order to contain the costly adjustment of labor to changes in economic conditions. In particular, temporary help supply (THS) employment has increased dramatically in the last ten years. However, there is only scant evidence on the industries that are hiring this type of worker. In particular, some anecdotal evidence points to the fact that manufacturing industries have substantially stepped up their demand for THS workers since the mid-1980s. If this is true, not accounting for this flow of workers from the service sector to manufacturing may lead to misleading conclusions about the cyclical and long-term path of manufacturing employment and hours of work. We close this gap by providing several estimates of the number of individuals employed by temporary help supply (THS) firms who worked in the manufacturing sector from 1972 to 1997. One estimate, in particular, is based on a new methodology that uses minimal assumptions to put bounds on the probability that a manufacturing worker is employed by a THS firm. The bounds rely on readily available data on workers' individual characteristics observable in the CPS. We show that manufacturers have been using THS workers more intensively in the 1990s. In addition, the apparent flatness of manufacturing employment in the 1990s can be explained in part by this type of outsourcing from the service sector. Finally, not accounting for THS hours overstated the increase in average annual manufacturing labor productivity by « percentage point during the 1991-1997 period.
Handle: RePEc:nbr:nberwo:7421
Template-Type: ReDIF-Paper 1.0
Title: Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion
Classification-JEL: I22; J24
Author-Name: Susan M. Dynarski
Author-Person: pdy1
Note: CH PE
Number: 7422
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7422
File-URL: http://www.nber.org/papers/w7422.pdf
File-Format: application/pdf
Publication-Status: published as Dynarski, Susan M. "Does Aid Matter? Measuring The Effect Of Student Aid On College Attendance And Completion," American Economic Review, 2003, v93(1,Mar), 279-288.
Abstract: Does student aid increase college attendance or simply subsidize costs for infra-marginal students? Settling the question empirically is a challenge, because aid is correlated with many characteristics that influence educational investment decisions. A shift in financial aid policy that affects some youth but not others can provide an identifying source of variation in aid. In 1982, Congress eliminated the Social Security Student Benefit Program, which at its peak provided grants totaling $3.7 billion a year to one out of ten college students. Using the death of a parent as a proxy for Social Security beneficiary status, I find that offering $1,000 ($1998) of grant aid increases educational attainment by about 0.16 years and the probability of attending college by four percentage points. The elasticities of attendance and completed years of college with respect to schooling costs are 0.7 to 0.8. The evidence suggests that aid has a 'threshold effect': a student who has crossed the hurdle of college entry with the assistance of aid is more likely to continue schooling later in life than one who has never attempted college. This is consistent with a model in which there are fixed costs of college entry. Finally, a cost-benefit analysis indicates that the aid program examined by this paper was a cost-effective use of government resources.
Handle: RePEc:nbr:nberwo:7422
Template-Type: ReDIF-Paper 1.0
Title: The Long-Run Growth in Obesity as a Function of Technological Change
Classification-JEL: I1
Author-Name: Tomas J. Philipson
Author-Person: pph37
Author-Name: Richard A. Posner
Author-Person: ppo25
Note: EH
Number: 7423
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7423
File-URL: http://www.nber.org/papers/w7423.pdf
File-Format: application/pdf
Publication-Status: published as Philipson, T., and R. Posner. “The Long Run Growth of Obesity as a Function of Technological Change." Perspectives in Biology and Medicine 46, 3 (Summer 2003): 87-108.
Abstract: This paper analyzes the factors contributing to the worldwide long-run rise in obesity and the effects of public interventions on its continued growth. The growth of obesity in a population results from an increase in calorie consumption relative to physical activity. Yet in developed countries, obesity has grown with modest rises in calorie consumption and with a substantial increase in both dieting and recreational exercise. We consider the economic incentives that give rise to a growth in obesity by stimulating intake of calories while discouraging the expending of calories on physical activity. We argue that technological change provides a natural interpretation of the long-run growth in obesity despite a rise in dieting and exercise, that it predicts that the effect of income on obesity falls with economic development, and that it implies that the growth in obesity may be self-limiting.
Handle: RePEc:nbr:nberwo:7423
Template-Type: ReDIF-Paper 1.0
Title: New Evidence on Classroom Computers and Pupil Learning
Classification-JEL: H41; I28
Author-Name: Joshua Angrist
Author-Person: pan29
Author-Name: Victor Lavy
Author-Person: pla111
Note: CH LS
Number: 7424
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7424
File-URL: http://www.nber.org/papers/w7424.pdf
File-Format: application/pdf
Publication-Status: published as The Economic Journal, Vol. 112, no. 482 (October 2002): 735-765
Abstract: The question of how technology affects learning has been at the center of recent debates over educational inputs. In 1994, the Israeli State Lottery sponsored the installation of computers in many elementary and middle schools. This program provides an opportunity to estimate the impact of computerization on both the instructional use of computers and on pupils' test scores. Results from a survey of Israeli school-teachers show that the influx of new computers increased teachers' use of computer-aided instruction (CAI) in the 4th grade, with a smaller effect on CAI in 8th grade. CAI does not appear to have had educational benefits that translated into higher test scores. Results for 4th graders show sharply lower Math scores in the group that was awarded computers, with smaller (insignificant) negative effects on verbal scores. Results for 8th graders' test scores are very imprecise, probably reflecting the much weaker first-stage relationship between program funding and the use of CAI in 8th grade. The estimates for 8th grade Math scores are also negative, however.
Handle: RePEc:nbr:nberwo:7424
Template-Type: ReDIF-Paper 1.0
Title: Optimal Monetary Impulse-Response Functions in a Matching Model
Classification-JEL: E30; E40
Author-Name: Brett Katzman
Author-Name: John Kennan
Author-Person: pke13
Author-Name: Neil Wallace
Author-Person: pwa33
Note: EFG
Number: 7425
Creation-Date: 1999-11
Order-URL: http://www.nber.org/papers/w7425
File-URL: http://www.nber.org/papers/w7425.pdf
File-Format: application/pdf
Publication-Status: published as “Output and Price Level Effects of Monetary Uncertainty in a Matching Model,” (with Brett Katzman and Neil Wallace), Journal of Economic Theory, 108(2), February 2003, 217-255.
Abstract: The effects on ex ante optima of a lag in seeing monetary realizations are studied using a matching model of money. The main new ingredient in the model is meetings in which producers have more information than consumers. A consequence is that increases in the amount of money that occur with small enough probability can have negative impact effects on output, because it is optimal to shut down trade in such low probability meetings rather than have lower output when high probability realizations occur. The information lag also produces prices that do not respond much to current monetary realizations.
Handle: RePEc:nbr:nberwo:7425
Template-Type: ReDIF-Paper 1.0
Title: Does Inflation Targeting Increase Output Volatility? An International Comparison of Policymakers' Preferences and Outcomes
Classification-JEL: E52; E58
Author-Name: Stephen G. Cecchetti
Author-Person: pce4
Author-Name: Michael Ehrmann
Author-Person: peh4
Note: ME
Number: 7426
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7426
File-URL: http://www.nber.org/papers/w7426.pdf
File-Format: application/pdf
Publication-Status: published as chapter 9 in "Monetary Policy: Rules and Transmission Mechanisms," edited by Norman Loayza and Klaus Schmidt-Hebbel, Volume 4 of the Central Bank of Chile Series on Central Banking, Analysis and Economic Policy, (2002), pp. 247-274
Abstract: Aggregate shocks that move output and inflation in opposite directions create a tradeoff between output and inflation variability, forcing central bankers to make a choice. Differences in the degree of accommodation of shocks lead to disparate variability outcomes, revealing national central banker's relative weight on output and inflation variability in their preferences. We use estimates of the structure of 23 industrialized and developing economies, including nine that target inflation explicitly, together with the realized output and inflation patterns in those countries, to infer the degree of policymakers' inflation variability aversion. Our results suggest that both countries that introduced inflation targeting, and non-targeting European Union countries approaching monetary union, increased their revealed aversion to inflation variability, and likely suffered most increases in output volatility as a result.
Handle: RePEc:nbr:nberwo:7426
Template-Type: ReDIF-Paper 1.0
Title: The Evolution of the Demand for Temporary Help Supply Employment in the United States
Classification-JEL: J20; J40
Author-Name: Marcello M. Estevao
Author-Person: pes27
Author-Name: Saul Lach
Author-Person: pla110
Note: LS PR
Number: 7427
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7427
File-URL: http://www.nber.org/papers/w7427.pdf
File-Format: application/pdf
Publication-Status: published as Carre, Francoise et al. (eds.) Nonstandard work: The nature and challenges of changing employment arrangements, Industrial Relations Research Association Series. Ithaca and London: Cornell University Press, ILR Press, 2000.
Abstract: The Bureau of Labor Statistics has reported an extraordinary increase in temporary help supply (THS) employment during the late 1980s and the 1990s. However, little is known about the venues where these THS employees actually work. Our estimates indicate that the proportion of THS employees in each major American industry, except the public sector, increased during 1977-97. By 1997, close to 4 percent of the employees in manufacturing and services were THS workers. In the service sector, the increase was accompanied by a large increase in direct hires. In manufacturing, however, it was accompanied by a decline in direct hiring from its peak in 1989 even though output increased substantially in the 1990s. Practically, all of the growth in THS employment is attributed to a change in the hiring behavior of firms, rather than to a disproportional increase in the size of more THS-intensive industries.
Handle: RePEc:nbr:nberwo:7427
Template-Type: ReDIF-Paper 1.0
Title: Investor Protection: Origins, Consequences, and Reform
Classification-JEL: G21; G28
Author-Name: Rafael La Porta
Author-Person: pla273
Author-Name: Florencio Lopez-deSilanes
Author-Person: plo137
Author-Name: Andrei Shleifer
Author-Person: psh93
Author-Name: Robert W. Vishny
Author-Person: pvi218
Note: CF
Number: 7428
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7428
File-URL: http://www.nber.org/papers/w7428.pdf
File-Format: application/pdf
Publication-Status: published as (Published as "Investor Protection and Corporate Governance) Journal of Financial Economics (October 2000).
Abstract: Recent research has documented large differences between countries in ownership concentration in publicly traded firms, in the breadth and depth of capital markets, in dividend policies, and in the access of firms to external finance. We suggest that there is a common element to the explanations of these differences, namely how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. We describe the differences in laws and the effectiveness of their enforcement across countries, discuss the possible origins of these differences, summarize their consequences, and assess potential strategies of corporate governance reform. We argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank-centered and market-centered financial systems.
Handle: RePEc:nbr:nberwo:7428
Template-Type: ReDIF-Paper 1.0
Title: Trade Creation and Trade Diversion Under NAFTA
Classification-JEL: F15
Author-Name: Anne O. Krueger
Note: IFM ITI
Number: 7429
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7429
File-URL: http://www.nber.org/papers/w7429.pdf
File-Format: application/pdf
Abstract: Aggregate and more micro data on trade between the U.S., Canada, and Mexico are used to attempt to assess the early effects of Mexican entry into NAFTA. Although the fraction of Mexican trade with the U.S. and Canada has risen sharply, a number of factors have contributed to this result. Mexican reduction of tariffs and quantitative restrictions and the Mexican alteration of exchange rate policy at the end of l994 were both important. Based on early returns, the impact of NAFTA over its first three years does not appear to have been large relative to the effects of these other events.
Handle: RePEc:nbr:nberwo:7429
Template-Type: ReDIF-Paper 1.0
Title: Liquidity Risk, Liquidity Creation and Financial Fragility: A Theory of Banking
Classification-JEL: G20; G21
Author-Name: Douglas W. Diamond
Author-Person: pdi80
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: CF ME
Number: 7430
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7430
File-URL: http://www.nber.org/papers/w7430.pdf
File-Format: application/pdf
Publication-Status: published as Journal of Political Economy, Vol. 109, no. 2 (April 2001): 287-327
Publication-Status: published as Douglas W. Diamond & Raghuram G. Rajan, 1998. "Liquidity risk, liquidity creation and financial fragility: a theory of banking," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
Abstract: Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they are uncertain about their ability to continue to attract or retain funding. Because borrowers typically cannot repay investors on demand, investors will require a premium or significant control rights when they lend to borrowers directly, as compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise in direct lending. Banks enable depositors to withdraw at low cost, as well as buffer firms from the liquidity needs of their investors. We show the bank has to have a fragile capital structure, subject to bank runs, in order to perform these functions. Far from being an aberration to be regulated away, the funding of illiquid loans by a bank with volatile demand deposits is rationalized in the context of the functions it performs. This model can be used to investigate important issues such as narrow banking and bank capital requirements.
Handle: RePEc:nbr:nberwo:7430
Template-Type: ReDIF-Paper 1.0
Title: A Theory of Bank Capital
Classification-JEL: G20; G21
Author-Name: Douglas W. Diamond
Author-Person: pdi80
Author-Name: Raghuram G. Rajan
Author-Person: pra149
Note: CF ME
Number: 7431
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7431
File-URL: http://www.nber.org/papers/w7431.pdf
File-Format: application/pdf
Publication-Status: published as Diamond, Douglas W. and Raghuram G. Rajan. "A Theory Of Bank Capital," Journal of Finance, 2000, v55(6,Dec), 2431-2465.
Abstract: Banks can create liquidity because their deposits are fragile and prone to runs. Increased uncertainty can make deposits excessively fragile in which case there is a role for outside bank capital. Greater bank capital reduces liquidity creation by the bank but enables the bank to survive more often and avoid distress. A more subtle effect is that banks with different amounts of capital extract different amounts of repayment from borrowers. The optimal bank capital structure trades off the effects of bank capital on liquidity creation, the expected costs of bank distress, and the ease of forcing borrower repayment. The model can account for phenomena such as the decline in average bank capital in the United States over the last two centuries. It points to overlooked side-effects of policies such as regulatory capital requirements and deposit insurance.
Handle: RePEc:nbr:nberwo:7431
Template-Type: ReDIF-Paper 1.0
Title: One Money, One Market: Estimating the Effect of Common Currencies on Trade
Classification-JEL: F33
Author-Name: Andrew K. Rose
Author-Person: pro71
Note: IFM ITI
Number: 7432
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7432
File-URL: http://www.nber.org/papers/w7432.pdf
File-Format: application/pdf
Publication-Status: published as Economic Policy (2000).
Abstract: A gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade. The panel data set used includes bilateral observations for five years spanning 1970 through 1990 for 186 countries. In this data set, there are over one hundred pairings and three hundred observations, in which both countries use the same currency. I find a large positive effect of a currency union on international trade, and a small negative effect of exchange rate volatility, even after controlling for a host of features, including the endogenous nature of the exchange rate regime. These effects are statistically significant and imply that two countries that share the same currency trade three times as much as they would with different currencies. Currency unions like EMU may thus lead to a large increase in international trade, with all that entails.
Handle: RePEc:nbr:nberwo:7432
Template-Type: ReDIF-Paper 1.0
Title: Do Taxes Affect Corporate Debt Policy? Evidence from US Corporate Tax Return Data
Classification-JEL: H25; H52
Author-Name: Roger H. Gordon
Author-Person: pgo95
Author-Name: Young Lee
Note: CF PE
Number: 7433
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7433
File-URL: http://www.nber.org/papers/w7433.pdf
File-Format: application/pdf
Publication-Status: published as Gordon, Roger H. and Young Lee. "Do Taxes Affect Corporate Debt Policy? Evidence From U.S. Corporate Tax Return Data," Journal of Public Economics, 2001, v82(2,Nov), 195-224.
Abstract: Past attempts to measure the impact of taxes on corporate debt policy have focused on larger firms. Given that the top statutory corporate tax rate has varied little in recent years, tax incentives vary among these firms, almost entirely due to current or prospective tax losses. Results are inevitably mixed, given that firms with losses or nondebt tax shields may have different propensities to borrow even ignoring taxes. This paper uses US Statistics of Income balance sheet data on all corporations, to compare the debt policies of firms of different sizes. Given the progressivity in the corporate tax schedule, small firms face very different tax rates than larger firms. Relative tax rates have also changed frequently over time. Our results suggest that taxes have had a strong and statistically significant effect on debt levels. In particular, the difference in corporate tax rates currently faced by the largest vs. the smallest firms (35% vs. 15%) is forecast to induce larger firms to finance an additional 8% of their assets with debt, compared with smaller firms.
Handle: RePEc:nbr:nberwo:7433
Template-Type: ReDIF-Paper 1.0
Title: G3 Exchange Rate Relationships: A Recap of the Record and a Review of Proposals for Change
Author-Name: Richard H. Clarida
Author-Person: pcl69
Note: IFM
Number: 7434
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7434
File-URL: http://www.nber.org/papers/w7434.pdf
File-Format: application/pdf
Publication-Status: published as Group of Thirty Occasional Paper, no. 59 (September 1999).
Abstract: This paper is a recap of G3 exchange rate relationships since the collapse of Bretton Woods and an analysis of recent proposals for changing the way the G3 countries currently conduct exchange rate policy. We seek to understand these proposals in the context of the status quo monetary policies and intervention arrangements that are likely to be pursued by the G3 central banks in the absence of any formal arrangements among their governments to limit exchange rate volatility. The advocates of the proposals for change have made their assessment of the global costs of exchange rate volatility and (their estimates) of exchange rate misalignments, especially as these apply to the emerging economies through their linkages to the global capital markets. In their view, the status quo is unacceptable, and a sustained effort to limit G3 exchange rate fluctuations would deliver benefits to the world economy that would outweigh the value that they place on any loss of monetary autonomy in the G3 that would be required to maintain such a system. The skeptics make a positive, not a normative, judgment that the sorts of proposals that are on the table will not, in practice, get around the impossible trinity' of international finance.
Handle: RePEc:nbr:nberwo:7434
Template-Type: ReDIF-Paper 1.0
Title: The Choice of Organizational Form in Gasoline Retailing and The Costs of Laws Limiting that Choice
Author-Name: Asher Blass
Author-Person: pbl36
Author-Name: Dennis W. Carlton
Author-Person: pca14
Note: IO
Number: 7435
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7435
File-URL: http://www.nber.org/papers/w7435.pdf
File-Format: application/pdf
Publication-Status: published as Blass, Asher A. and Dennis W. Carlton. "The Choice Of Organizational Form In Gasoline Retailing And The Cost Of Laws That Limit Choice," Journal of Law and Economics, 2001, v44(2,Oct), 511-524.
Abstract: This paper uses a new data source to analyze the choice of organizational form of retail gasoline stations. In recent years, gasoline stations have tended to be less likely to be owned and operated by a lessee dealer and more likely to be owned and operated by the refiner. Critics have alleged that company-operated stations are used to drive lessee dealer stations out of business in order to restrict competition. We examine the determinants of organizational form and find them to be based on efficiency not predatory concerns. We estimate the costs of recent laws prohibiting company ownership of gasoline stations.
Handle: RePEc:nbr:nberwo:7435
Template-Type: ReDIF-Paper 1.0
Title: None
Author-Name:
Number: 7436
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7436
Abstract: This paper number accidentally skipped in the early days of working paper publishing. No paper ever existed for this number.
Handle: RePEc:nbr:nberwo:7436
Template-Type: ReDIF-Paper 1.0
Title: Firm-Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years
Classification-JEL: E22; C33
Author-Name: Jacques Mairesse
Author-Person: pma712
Author-Name: Bronwyn H. Hall
Author-Person: pha54
Author-Name: Benoit Mulkay
Author-Person: pmu215
Note: PR
Number: 7437
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7437
File-URL: http://www.nber.org/papers/w7437.pdf
File-Format: application/pdf
Publication-Status: published as Jacques Mairesse & Bronwyn H. Hall & Benoît Mulkay, 1999. "Firm-Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years," Annals of Economics and Statistics, GENES, issue 55-56, pages 27-67.
Abstract: Our two related goals in this paper are the following: Firstly and mainly, we want to examine the effects of major changes in modelling strategy and econometric methodology, over the past twenty years, on estimation of firm-level investment equations using panel data. Secondly, we try to assess whether the differences in the estimated investment equations, as between recent years and ten to twenty years go in the French and U.S. Manufacturing industries, are real' and economically meaningful. Thus our paper consists of a series of comparisons: a simple accelerator-profit specification versus one with error correction, traditional between- and within-firm estimation versus GMM estimation, the investment behavior of French firms versus that of U.S. firms, and investment behavior in recent years versus ten to twenty years ago. Although the important econometric advances of the past twenty years have been far from being as successful as we had hoped for, we do find some significant improvement in the specification, estimation and interpretation of firm investment equations; we also fin some real changes in the investment behavior of French and U.S. firms during these twenty years.
Handle: RePEc:nbr:nberwo:7437
Template-Type: ReDIF-Paper 1.0
Title: The Costs and Consequences of the Napoleonic Reparations
Classification-JEL: F34; N13
Author-Name: Eugene N. White
Author-Person: pwh5
Note: DAE
Number: 7438
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7438
File-URL: http://www.nber.org/papers/w7438.pdf
File-Format: application/pdf
Publication-Status: published as White, Eugene N., 2001. "Making the French pay: The costs and consequences of the Napoleonic reparations," European Review of Economic History, Cambridge University Press, vol. 5(03), pages 337-365, December.
Abstract: Reparations as an instrument of international peace settlements were abandoned after the failure of Germany to pay its post World War I indemnity. However, reparations played a useful role in the construction of earlier peace treaties. This paper examines the payment of reparations by the French after the Napoleonic Wars. By most measures, these reparations were the largest ever fully paid; and they imposed a high cost on the economy in terms of lost output and consumption and diminished capital stock. The incentives to pay were appropriately set and payment permitted France to be accepted once again as an equal among the great powers.
Handle: RePEc:nbr:nberwo:7438
Template-Type: ReDIF-Paper 1.0
Title: A Heuristic Method for Extracting Smooth Trends from Economic Time Series
Classification-JEL: E3; C1
Author-Name: Julio J. Rotemberg
Author-Person: pro30
Note: EFG
Number: 7439
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7439
File-URL: http://www.nber.org/papers/w7439.pdf
File-Format: application/pdf
Abstract: This paper proposes a method for separating economic time series into a smooth component whose mean varies over time (the trend') and a stationary component (the cycle'). The aim is to make the trends as smooth as possible while also producing cycles with plausible properties. While the main justification for the method is intuitive, the method does a good job of separating these two components in some artificial examples where the constructed series are indeed the sum of smooth (possibly stochastic) functions of time and a low order autoregressive process. When the true trends consist of low order polynomials, the proposed method obtains trends that are of similar accuracy than fitted polynomial trends. In other cases, the MSE of the proposed trends is much lower. Similarly, except in quite special cases, the MSE of the proposed trend is considerably smaller than that obtained by the HP filter. VARs that involve the cyclical variables constructed by this method yield accurate representations of the behavior of the underlying cycles of several variables. By contrast, VARs with the series in differences give poor descriptions of the effect of cyclical shocks, even though Dickey-Fuller tests do not reject the hypotheses that the artificial series have unit roots. I apply the method to some well known aggregate time series. The results suggest that real wages in the U.S. are strongly positively correlated with military purchases and that the reduction in the growth of trend GDP in the U.S. started well before 1973.
Handle: RePEc:nbr:nberwo:7439
Template-Type: ReDIF-Paper 1.0
Title: Predictors of Mortality Among the Elderly
Author-Name: Michael Hurd
Author-Person: phu137
Author-Name: Daniel McFadden
Author-Name: Angela Merrill
Note: AG
Number: 7440
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7440
File-URL: http://www.nber.org/papers/w7440.pdf
File-Format: application/pdf
Publication-Status: published as Predictors of Mortality among the Elderly, Michael D. Hurd, Daniel McFadden, Angela Merrill. in Themes in the Economics of Aging, Wise. 2001
Abstract: The objective of this paper is to find the quantitative importance of some predictors of mortality among the population aged 70 or over. The predictors are socio-economic indicators (income, wealth and education), thirteen health indicators including a history of heart attack or cancer, and subjective probabilities of survival. The estimation is based on mortality between waves 1 and 2 of the Asset and Health Dynamics among the Oldest-Old study. We find that the relationship between socio-economic indicators and mortality declines with age 13 health indicators are strong predictors of mortality and that the subjective survival probabilities predict mortality even after controlling for socio-economic indicators and the health conditions.
Handle: RePEc:nbr:nberwo:7440
Template-Type: ReDIF-Paper 1.0
Title: Indian Manufacturing Industry: Elephant or Tiger? New Evidence on the Asian Miracle
Classification-JEL: O47; O11
Author-Name: Charles R. Hulten
Author-Name: Sylaja Srinivasan
Author-Person: psr58
Note: PR
Number: 7441
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7441
File-URL: http://www.nber.org/papers/w7441.pdf
File-Format: application/pdf
Abstract: We estimate the rate of total factor productivity growth in Indian manufacturing industry for the period 1973-1992, and compare the results to those obtained by Young for the East Asian Tigers. We then interpret our results in light of Krugman's hypothesis that, because the Asian Miracle was driven by capital formation under diminishing marginal returns, it is not sustainable. We suggest a reinterpretation of the sustainability problem that recognizes the true role of TFP as a motive force in output growth. Past studies have compared the TFP residual to the growth rate of output and used this ratio as a measure of the importance of TFP as a source of growth. We argue that this is an erroneous way of assessing the role of TFP, because it ignores the additional capital formation made possible by an increase in productivity and therefore understates productivity's true importance. Our estimates suggest that the understatement may be quite large, and that one might better ask if the growth rate of TFP, rather than capital growth, is sustainable.
Handle: RePEc:nbr:nberwo:7441
Template-Type: ReDIF-Paper 1.0
Title: The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession
Classification-JEL: I12; Q25
Author-Name: Kenneth Y. Chay
Author-Person: pch800
Author-Name: Michael Greenstone
Author-Person: pgr38
Note: LS PE
Number: 7442
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7442
File-URL: http://www.nber.org/papers/w7442.pdf
File-Format: application/pdf
Publication-Status: published as The Quarterly Journal of Economics, Vol. 118, no. 3 (August 2003): 1121-1167
Abstract: This study uses sharp, differential air quality changes across sites attributable to geographic variation in the effects of the 1981-82 recession to estimate the relationship between infant mortality and particulates air pollution. It is shown that in the narrow period of 1980-82, there was substantial variation across counties in changes in particulates pollution, and that these differential pollution reductions appear to be orthogonal to changes in a multitude of other factors that may be related to infant mortality. Using the most detailed and comprehensive data available, we find that a 1 mg/m3 reduction in particulates results in about 4-8 fewer infant deaths per 100,000 (a 0.35-0.45 elasticity). The estimated effects are driven almost entirely by fewer deaths occurring within one month and one day of birth, suggesting that fetal exposure to pollution has adverse health consequences. The estimated effects of the pollution reductions on infant birth weight provide evidence consistent with this potential pathophysiologic mechanism. The analysis also reveals a nonlinear relationship between pollution and infant mortality at the county level. Importantly, the estimates are remarkably stable across a variety of specifications. All of these findings are masked in conventional' analyses based on less credible research designs.
Handle: RePEc:nbr:nberwo:7442
Template-Type: ReDIF-Paper 1.0
Title: How Large are the Social Returns to Education? Evidence from Compulsory Schooling Laws
Classification-JEL: I20; J31
Author-Name: Daron Acemoglu
Author-Person: pac16
Author-Name: Joshua Angrist
Author-Person: pan29
Note: EFG LS PE
Number: 7444
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7444
File-URL: http://www.nber.org/papers/w7444.pdf
File-Format: application/pdf
Publication-Status: published as Acemoglu, D. (ed.) Recent Developments in Growth Theory. Edward Elgar Publishing Ltd, 2004.
Publication-Status: published as How Large Are Human Capital Externalities? Evidence from Compulsory Schooling Laws, Daron Acemoglu, Joshua Angrist. in NBER Macroeconomics Annual 2000, Volume 15, Bernanke and Rogoff. 2001
Abstract: Average schooling in US states is highly correlated with state wage levels, even after controlling for the direct effect of schooling on individual wages. We use an instrumental variables strategy to determine whether this relationship is driven by social returns to education. The instrumentals for average schooling are derived from information on the child labor laws and compulsory attendance laws that affected men in our Census samples, while quarter of birth is used as an instrument for individual schooling. This results in precisely estimated private returns to education of about seven percent, and small social returns, typically less than one percent, that are not significantly different from zero.
Handle: RePEc:nbr:nberwo:7444
Template-Type: ReDIF-Paper 1.0
Title: The Share Price Effects of Dividend Taxes and Tax Imputation Credits
Classification-JEL: H3
Author-Name: Trevor S. Harris
Author-Name: R. Glenn Hubbard
Author-Person: phu97
Author-Name: Deen Kemsley
Note: AP PE
Number: 7445
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7445
File-URL: http://www.nber.org/papers/w7445.pdf
File-Format: application/pdf
Publication-Status: published as Harris, Trevor S., R. Glenn Hubbard and Deen Kemsley. "The Share Price Effects Of Dividend Taxes And Tax Imputation Credits," Journal of Public Economics, 2001, v79(3,Mar), 569-596.
Abstract: We examine the hypothesis that dividend taxes are capitalized into share prices by focusing on investors' implicit valuations of retained earnings versus paid-in equity. Retained earnings are distributable as taxable dividends, whereas paid-in equity is distributable as a tax-free return of capital. Consistent with dividend tax capitalization, firm-level results for the United States indicate that accumulated retained earnings are valued less per unit than contributed capital. In addition, differences in dividend tax rates across U.S. tax regimes are associated with predictable differences in the magnitude of the implied tax discount for retained earnings, as are differences in dividend tax rates across Australia, Japan, France, Germany, and the United Kingdom.
Handle: RePEc:nbr:nberwo:7445
Template-Type: ReDIF-Paper 1.0
Title: Financial Sector Inefficiencies and Coordinate Failures: Implications for Crisis Management
Classification-JEL: E44; F36
Author-Name: Pierre-Richard Agenor
Author-Person: pag16
Author-Name: Joshua Aizenman
Author-Person: pai8
Note: IFM
Number: 7446
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7446
File-URL: http://www.nber.org/papers/w7446.pdf
File-Format: application/pdf
Abstract: This paper analyzes the implication of inefficient financial intermediation for crisis management in a country where firms are highly-indebted. The analysis is based on a model in which firms rely on bank credit to finance their working capital needs and lenders face high state verification and enforcement costs of loan contracts. The analysis shows that higher contract enforcement and verification costs, lower expected productivity, or higher volatility, may shift the economy to the wrong side of the debt Laffer curve, with potentially sizable employment and output losses. The main implication of this analysis for the current policy debate on crisis management is East Asia is that dept reduction, in addition to debt rescheduling, may be required as part of the process of reducing financial sector inefficiencies.
Handle: RePEc:nbr:nberwo:7446
Template-Type: ReDIF-Paper 1.0
Title: Coase v. the Coasians
Classification-JEL: D73; D78
Author-Name: Simon Johnson
Author-Person: pjo44
Author-Name: Andrei Shleifer
Author-Person: psh93
Note: CF PE
Number: 7447
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7447
File-URL: http://www.nber.org/papers/w7447.pdf
File-Format: application/pdf
Publication-Status: published as Edward Glaeser & Simon Johnson & Andrei Shleifer, 2001. "Coase Versus The Coasians," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 853-899, August.
Abstract: The Coase theorem implies that, in a world of positive transaction costs, any of a number of strategies, including judicially enforced private contracts, judicially enforced laws, or even government regulation, may be the cheapest way to bring about efficient resource allocation. Unfortunately, some Coasians have ignored the possibility that the last of these strategies may sometimes be the best. This paper compares the regulation of financial markets in Poland and the Czech Republic in the 1990s, when the judicial systems remained underdeveloped in both countries. In Poland, strict enforcement of the securities law by an independent Securities and Exchange Commission was associated with rapid development of the stock market. In the Czech Republic, hands-off regulation was associated with a near collapse of the stock market. These episodes illustrate the centrality of law enforcement in making markets work, and the possible role of regulators in law enforcement.
Handle: RePEc:nbr:nberwo:7447
Template-Type: ReDIF-Paper 1.0
Title: Emerging Financial Markets and Early U.S. Growth
Classification-JEL: E44; G10
Author-Name: Peter L. Rousseau
Author-Person: pro64
Author-Name: Richard Sylla
Note: DAE EFG ME
Number: 7448
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7448
File-URL: http://www.nber.org/papers/w7448.pdf
File-Format: application/pdf
Publication-Status: published as Rousseau, Peter L. and Richard Sylla. "Emerging Financial Markets And Early US Growth," Explorations in Economic History, 2005, v42(1,Jan), 1-26.
Abstract: Studies of early U.S. growth traditionally have emphasized real-sector explanations for an acceleration that by many accounts became detectable between 1815 and 1840. Interestingly, the establishment of the nation's basic financial structure predated by three decades the canals, railroads, and widespread use of water and steam-powered machinery that are thought to have triggered modernization. We argue that this innovative and expanding financial system, by providing debt and equity financing to businesses and governments as new technologies emerged, was central to the nation's early growth and modernization. The analysis includes a set of multivariate time series models that relate measures of banking and equity market activity to measures of investment, imports and business incorporations from 1790 to 1850. The findings offer support for our hypothesis of finance-led' growth in the U.S. case. By implication, the interest today in improving financial systems as a means of fostering sustainable growth is not misplaced.
Handle: RePEc:nbr:nberwo:7448
Template-Type: ReDIF-Paper 1.0
Title: Racial Bias in Motor Vehicle Searches: Theory and Evidence
Classification-JEL: J70; K42
Author-Name: John Knowles
Author-Name: Nicola Persico
Author-Person: ppe261
Author-Name: Petra Todd
Note: LS PE
Number: 7449
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7449
File-URL: http://www.nber.org/papers/w7449.pdf
File-Format: application/pdf
Publication-Status: published as Knowles, John, Nicola Persico and Petra Todd. "Racial Bias In Motor Vehicle Searches: Theory And Evidence," Journal of Political Economy, 2001, v109(1,Feb), 203-229.
Abstract: African- American motorist in the United States are much more likely than white motorists to have their car searched by police checking for illegal drugs and other contraband. The courts are faced with the task of deciding on the basis of traffic-search data whether police behavior reflects a rackial bias. We discuss why a simple test for racial bias commonly applied by the courts is inadequate and develop a model of law enforcement that suggests an alternative test. The model assumes a population with two racial types who also differ along other dimensions relevant to criminal behavior. Using the model, we construct a test for whether racial disparities in motor vehicle searches reflect racial prejudice, or instead are consistent with the behavior of non-prejudiced police maximizing drug interdiction. The test is valid even when the set of characteristics observed by the police is only partially observable by the econometrician. We apply the test to traffic-search data from Maryland and find the observed black-white disparities in search rates to be consistent with the hypothesis of no racial prejudice. Finally, we present a simple analysis of the tradeoff between efficiency of drug interdiction and racial fairness in policing. We show that in some circumstances there is no trade-off; constraining the police to be color-blind may achieve greater efficiency in drug interdiction.
Handle: RePEc:nbr:nberwo:7449
Template-Type: ReDIF-Paper 1.0
Title: Schooling, Inequality, and the Impact of Government
Author-Name: Eric A. Hanushek
Author-Person: pha97
Author-Name: Julie A. Somers
Note: CH LS PE
Number: 7450
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7450
File-URL: http://www.nber.org/papers/w7450.pdf
File-Format: application/pdf
Publication-Status: published as Welch, Finis (ed.) The Causes and Consequences of Increasing Inequality. Chicago: University of Chicago Press, 2001
Abstract: Analyses of income inequality have identified the importance of increased demand for worker skills, but characterizations of worker skills by the amount of schooling attained do not capture important aspects of the widening income distribution and of the stagnating relative wages of black workers. This paper is motivated by the possibility that schooling quality is an important component of the changing income distribution. The central analysis focuses on how governmental schooling policies particularly those related to the level and distribution of school spending affect the distribution of worker quality and of income. The substantial differences in spending across states are not significantly related to the variations in achievement growth across states. Further, the three decade old movement toward reducing the variation in school spending within states appears to have done nothing to reduce subsequent income variations of workers. Thus, the direct government policies toward school spending, as carried out in the past, have not ameliorated inequalities in incomes.
Handle: RePEc:nbr:nberwo:7450
Template-Type: ReDIF-Paper 1.0
Title: Intertemporal Tax Discontinuities
Classification-JEL: H24; G12
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Author-Name: Robert E. Verrecchia
Note: PE
Number: 7451
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7451
File-URL: http://www.nber.org/papers/w7451.pdf
File-Format: application/pdf
Publication-Status: published as Shackelford, Douglas A. and Robert E. Verrecchia. "Intertemporal Tax Discontinuities," Journal of Accounting Research, 2002, v40(1,Mar), 195-222.
Abstract: This paper defines an intertemporal tax discontinuity (ITD) as a circumstance in which different tax rates are applied to gains and losses realized at one point in time versus some other point in time, and studies the effects of ITDs on market behaviors at the time of disclosures of firm performance. The results show that ITDs either depress or amplify trading volume at the time of disclosure, depending upon whether the disclosure is 'good news' or 'bad news,' repectively, and lead to 'overreactions' in price changes independent of the 'news.' We propose empirical tests of one intertemporal tax discontinuity, the spread between short-term capital gains tax rates and long-term capital gains tax rates. We predict that stock responses to disclosures, such as quarterly earnings announcements, increase in the difference between short- term and long-term capital gains tax rates.
Handle: RePEc:nbr:nberwo:7451
Template-Type: ReDIF-Paper 1.0
Title: Going to War and Going to College: Did World War II and the G.I. Bill Increase Educational Attainment for Returning Veterans?
Classification-JEL: I2; J24
Author-Name: John Bound
Author-Person: pbo406
Author-Name: Sarah E. Turner
Author-Person: ptu103
Note: LS
Number: 7452
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7452
File-URL: http://www.nber.org/papers/w7452.pdf
File-Format: application/pdf
Publication-Status: published as Bound, John and Sarah Turner. "Going To War And Going To College: Did World War II And The G.I. Bill Increase Education Attainment For Returning Veterans?," Journal of Labor Economics, 2002, v20(4,Oct), 784-815.
Abstract: The end of World War II brought a flood of returning veterans to America's colleges and universities. Yet, despite widespread rhetoric about the democratization' of higher education that came with this large pool of students, there is little evidence about the question of whether military service, combined with the availability of post-war educational benefits, led these men to increase their investments in education - particularly at the college and university level. This paper uses the structure of the draft during the World War II period and the changing manpower requirements in the armed forces to address the effects of selection in comparisons of the educational attainment of veterans and nonveterans in this era. Using census data, our results indicate that the net effects of military service and the widely available funding for college through the G.I. Bill led to a moderate gain in the postsecondary educational attainment of World War II veterans.
Handle: RePEc:nbr:nberwo:7452
Template-Type: ReDIF-Paper 1.0
Title: The Impact of State Taxes on Self-Insurance
Classification-JEL: H22; H25
Author-Name: Bin Ke
Author-Person: pke128
Author-Name: Kathy Petroni
Author-Name: Douglas A. Shackelford
Author-Person: psh631
Note: PE
Number: 7453
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7453
File-URL: http://www.nber.org/papers/w7453.pdf
File-Format: application/pdf
Publication-Status: published as Ke, Bin, Kathy R. Petroni and Douglas A. Shackelford. "The Impact Of State Taxes On Self-Insurance," Journal of Accounting and Economics, 2000, v30(1,Aug), 99-122.
Abstract: This paper assesses whether insurers' state taxes reduce purchases of property-casualty coverage. Tests are conducted using state aggregates of insurer-level data from publicly-available, annual accounting reports for 1993, 1994, and 1995. A positive relation between self-insurance and state taxes is detected, consistent with consumers opting to self-insure rather than bear the incidence of higher insurer taxes. The primary empirical estimates imply that a 1 percent increase in the state premium tax rate reduces non-automobile insured losses by 0.18 percent to 0.28 percent. These elasticities suggest that for the mean state, a standard deviation increase in the state tax rate (0.5 percent) would lower insured losses by approximately $140 million or 7.5 percent of current coverage. As expected, tax effects vary with the elasticity of demand. When demand is largely inelastic, e.g., automobile liability coverage, taxes do not affect self-insurance.
Handle: RePEc:nbr:nberwo:7453
Template-Type: ReDIF-Paper 1.0
Title: Prevailing Wage Laws and Construction Labor Markets
Author-Name: Daniel P. Kessler
Author-Name: Lawrence Katz
Author-Person: pka266
Note: LE LS
Number: 7454
Creation-Date: 1999-12
Order-URL: http://www.nber.org/papers/w7454
File-URL: http://www.nber.org/papers/w7454.pdf
File-Format: application/pdf
Publication-Status: published as Daniel P. Kessler & Lawrence F. Katz, 2001. "Prevailing wage laws and construction labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(2), pages 259-274, January.
Abstract: Prevailing wage laws, which require that construction workers employed by private contractors on public projects be paid at least the wages and benefits that are "prevailing" for similar work in or near the locality in which the project is located, have been the focus of an extensive policy debate. We find that the relative wages of construction workers decline slightly after the repeal of a state prevailing wage law. However, the small overall impact of law repeal masks substantial differences in outcomes for different groups of construction employees. Repeal is associated with a sizeable reduction in the union wage premium and a significant narrowing of the black/nonblack wage differential for construction workers.
Handle: RePEc:nbr:nberwo:7454